grown upon the mortgageor's land, and of all his stock of horses, mules, cattle, and sheep then on the land, or which may afterwards be placed thereon, is not necessarily indicative of fraud. Judge Burks, of the Virginia Court of Appeals, justly remarked, in regard to such a mortgage, that, instead of indicating fraud, "it is rather indicative of an honest purpose in the grantor to dedicate not only what he had, but also what he might make or acquire, to the payment of his debts."

There may be chattels so transient in their existence that they cannot be generally mortgaged. Such are chattels whose only use consists in their consumption. But a mortgage of farm stock, farm produce, and farming tools is clearly not one of this description. In a mortgage of cattle and other farm stock and crops, a provision that "the crops conveyed may be used in getting the stock ready for market," was held not to make the mortgage fraudulent in law. This provision was regarded as being for the benefit of the trust fund, and not for the maker of it. A deed of trust of horses, cattle, farming implements, household and kitchen furniture, growing grain and vegatables, which provided that the grantor should retain possession for three years by paying the interest on the debt secured, is not fraudulent per se. It is true that some of the articles embraced in the mortgage must necessarily be consumed in the use, and could not in themselves directly strengthen the security; but indirectly they would have this effect by ministering to the support of the important and substantial subjects relied on as security.

Although a portion of the goods embraced in a mortgage be of so transitory and perishable a nature that they cannot be the subject of a mortgage, this circumstance does not vitiate the mortgage in respect to the residue.

III. Mortgages of Merchandise with Power of Sale in the Mortgageor.-The foregoing observations upon fraud arising from the mortgageor's continued possession where his mortgage is not recorded, and upon fraud in mortgages

1 Brockenbrough v. Brockenbrough, supra.

of consumable property, form a proper introduction to the subject of fraud in mortgages of merchandise arising from a power of sale retained by the mortgageor. This subject has already been discussed quite fully in this REVIEW, in two articles by James O. Pierce, Esq.,' and one by the writer of the present article; and, therefore, the subject will not be reconsidered any further than to add a few decisions which have appeared since the publication of the author's former article, and a few criticisms upon the article which was published in reply to the author's former article.

2

We have seen, from the statements made in the first part of this paper, that formerly an absolute sale of goods without delivery of possession was deemed fraudulent in law per se, both in England and in most of the American States, but that this doctrine has been overturned in England and in several American States where it had formerly prevailed; so that now the prevailing doctrine is, that a sale without delivery of possession is only prima facie fraudulent, and may be explained to be a bona fide transaction. In several of the States the old rule remains, because it has been enacted by statute, while in others it has been adhered to by the courts because it was too firmly established by the early decisions to be overturned by judicial action; and the courts feel obliged to content themselves with expressions of dissatisfaction, while they strictly confine the rule to the class of cases to which it has already been authoritatively extended. Thus, in Kentucky it was said in one case 3 that the tendency of modern decisions in that as well as in other States has been to leave the question of fraud open to investigation, and to be determined by all the facts which tend to show the actual intention with which the conveyance was executed; and in another case, the doctrine of fraud per se was characterized as arbitrary and inconsistent with the harmony of legal science.5

I

2

2 South. L. Rev. (N. S.) 731; 6 South. L. Rev. (N. S.) 96.

5 South. L. Rev. (N. s.) 617. 3 Enders v. Williams, 1 Metc. 346, 352.

4 Daniel v. Morrison, 6 Dana, 182, 185.

5 Both these observations are repeated and (Sup. Ct. Ky., April, 1880), 1 Ky. L. Rep. 32.

enforced in Vanmeter v. Estill See pp. 95, 97.

The doctrine contended for by the present writer, both in his former paper and in the present, is that a power reserved to a mortgageor to sell the mortgaged goods in the usual course of his trade does not make the mortgage conclusively fraudulent; but that in such case, just as in any other, the question of fraud is a question of fact for the jury to determine from all the circumstances of the case. That is the doctrine supported by the authorities. Under such a power of disposal, the mortgageor could not, if he would, make a valid disposal of the entire property at once. He can only sell in the usual course of business. The power then enables him to give a good title to the purchaser.

One who purchases of the mortgageor property covered by a mortgage which authorizes him to sell in the ordinary course of business, acquires a good title to it. This is so whether the power to sell be express or only implied; and if there be such a power, it does not matter that the mortgage contains a covenant by the mortgage or not to dispose of any of the goods without the consent in writing of the mortgagee. In a recent case in England, before the Court of Common Pleas,' the grantee in a bill of sale given by way of mortgage sought to recover, in an action of detinue, possession of a cob or pony included in the bill of sale. "The first thing we have to consider," said Lindley, J., speaking for the court, "is the true construction of the bill of sale and the real object of it. It appears that the mortgageor was described as an innkeeper and horse-dealer, and the bill of sale contains an assignment of all and every the household goods and furniture, stock in trade, etc.; also one entire horse called 'Fireaway,' horse called 'Jimmy,' cob called Charley,' and pony called 'Nelly,' light gig, dog-cart, etc., and all goods, chattels, and effects now on the said messuage, and all other the book and other debts and sums of money due and owing to the said Wilkinson, and all other his personal estate. The bill of sale is given as a security for a loan of money, and the object of the 1 Walker v. Clay, 42 L. T. (N. S.) 369 (for May 15, 1880); s. c. 49 L. J.

security is not to paralyze the trade of the grantor, but to enable him to carry on his trade; and the security would be worthless if we were to construe it so as to paralyze his trade. The covenant by the grantor not to remove any of the things comprised in the bill of sale without the consent of the grantee, is not a covenant not to sell at all; for that, to my mind, would be contrary to the intention of the parties, and would destroy the value of the security. The covenant not to remove the chattels must be construed and regarded as a covenant not to remove or dispose of them otherwise than in the ordinary course of trade. Then there is a covenant, 'it shall be lawful for the said mortgageor, his executors and administrators, to hold, make use of, and possess the said premises hereby assigned, or intended so to be, without any hinderance or disturbance of or by the said mortgagee, his executors, administrators, or assigns, provided that the total principal moneys shall not exceed £300.' Taking all these provisions together, the conclusion is arrived at that the grantor is to carry on his business in the ordinary course of trade; but if he is desirous of disposing of anything in any other sense, then he is not to do so without consulting the grantee and obtaining his consent — as if, for instance, he required to move the goods into another house. Here, then, is the case of a horse-dealer who sends a horse for sale in the ordinary course of his business, and a bona fide purchaser for value without notice; and the question is, whether he has obtained a good title as against the mortgagee. It appears to me that this case is quite indistinguishable from the case of the National Mercantile Bank v. Hampson." In the case last mentioned, a bill of sale by way of mortgage was made of the growing crops, goods and chattels and effects which were, or thereafter should be, on a certain farm. In a suit by the mortgagee against a third person for a conversion of twelve quarters of wheat comprised in the bill of sale, the defence was that the plaintiff suffered the mortgageor to have possession, and enabled him to hold himself forth as having the property in

L. R. 5 Q. B. Div. 177; s. c. 49 L. J. (Q. B.) 480.

the wheat; and that the defendant bought it of him in the ordinary course of his business, and without notice that it did not belong to the mortgageor. The Court of Queen's Bench held this defence to be good. "The bill of sale clearly did not disentitle the grantor to sell in the ordinary course of his business. There is an implied license to a trader who gives a bill of this kind, to carry on his trade."

The grantee of the bill of sale might be estopped from disputing the tradesman's right to give title if there were evidence that the latter had made many sales and the holder of the bill had not interfered. The right of a trader to deal with such ought to be secured in the Bills of Sale Act, says Mr. Justice Lindley.

But a trader can sell only in the ordinary course of trade by virtue of an implied license in a bill of sale he has given of his stock in trade to secure money borrowed, arising from a power reserved to hold and use the goods without hinderance by the grantee until default; and where, therefore, he sells fraudulently, and not in the ordinary course of trade, the purchaser acquires no title to the goods as against the mortgagee, though he purchased bona fide and without notice of the fraud. The purchaser bought of one who had no right to sell, for he did not sell in the only way in which he could by law give a title. "It has been suggested," said Lord Coleridge, C. J., delivering the opinion, "that this was a case in which there are two innocent parties, and that the one-namely, the grantee of the bill of sale - who enabled the fraud to be committed must therefore bear the loss. But that doctrine does not apply to this case, in which the property was taken out of the person who professed to sell, and was vested in another by a bill of sale — an instrument known to law and recognized by Parliament."

Where the rule prevails that a power in the mortgageor to sell the mortgaged property makes the mortgage conclu-sively fraudulent, it is held that if the mortgagee knowingly permit the mortgageor to make sales in the ordinary course

I National Mercantile Bank v. Hampson, supra.

2 Taylor v. McKeand, 49 L. J. (C. P. Div.) 563 (May 3, 1880).