South Branch Lumber Co. v. Ott

after stating the case, delivered the opinion of the court.

The single' question in this case is as to the validity of the assignment. Its invalidity is claimed under section 2115 of the Code of Iowa: “ No general assignment by an insolvent, or in contemplation of "insolvency, for the benefit of creditors, shall be valid unless it be made for the benefit of all his creditors in proportion to the amount of their respective claims.”

The rights of the parties are determined by this local statute, and the construction placed thereon by the Supreme Court of

Second, several instruments executed by a debtor, at about the same time, may be considered as parts of one transaction, and in law forming but one instrument; and if, as thus construed, they have the effect of a general assignment with preferences, they are within the denunciation of the statute. Burrows v. Lehndorff, 8 Iowa, 96 ; Cole v. Dealham, 13 Iowa, 551 ; Van Patten v. Burr, 52 Iowa, 518 .

And, third, that although several instruments may be executed by the debtor at about the same time, they do not necessarily create one transaction or are to be considered as one instrument; and whether they do or not, and whether they come within the denunciation of the statute, depend upon the character of the instruments, the circumstances of the case and the intent of the parties. Lampson v. Arnold, 19 Iowa, 479 ; Van Patten v. Burr, 55 Iowa, 224 ; Perry v. Vezina, 63 Iowa, 25 ; Gage v. Parry, 69 Iowa, 605 ; Garrett v. Plow

The case of Vcm Patten v. Burr, in 52 and 55 Iowa, is instructive. In that case the debtor, being insolvent, had executed two chattel mortgages and an assignment, all bearing date November 30, 1878. When first presented to the Supreme Court it came on demurrer to the petition, in which it was alleged that the debtor, “ in contemplation of insolvency, and being then insolvent, made, executed and delivered- in writing a general assignment of his property for the benefit of his creditors, contained in three instruments executed by him,” etc.; and, also, “ that said instruments were intended to and do constitute as a whole a general assignment of his property for the benefit of creditors.” And it was held, under such allegations, that the three instruments were to be treated as one, and together making a general assignment with preferences. The case went back for trial, and upon the testimony it appeared that one of the mortgages was accepted by the mortgagee without any knowledge of the contemplated assignment ; and in 55 Iowa it was held that such mortgage was good.

In Perry v. Vezina, 63 Iowa, 25 , it appeared that a chattel mortgage was executed about three hours before a general assignment; but as it wa.s agreed that, when the mortgage was made, the debtor did not contemplate making the assignment, the latter was held valid. The court said : “But, to justify a court in finding that a mortgage may be taken in connection with some other instrument as constituting an assignment, it should appear that the mortgagor, at the time he made the mortgage, had the intention to make an assignment.” Similar expressions are found in others of the cases cited. Obviously, it is a fair inference from these decisions that, as well said by Judge Love in deciding this case, “the intention of the assignor must be the true and guiding principle of decision.” With what intent did Ott iu this case execute the various instruments prior to the general assignment ? Was he intending a general assignment, and seeking to evade the statute, and to give preferences by other instru

Upon the basis of these rulings interpreting. the scope and effect of this statute, we perceive no error in The conclusions of the Circuit Court. Quite an amount of testimony was offered, for the purpose of showing that the debt of the appellant was fraudulently contracted by Ott. The assumption seems to be, that if this be proved it follows that the assignment was made in violation of the statute, and void; but there is no sequence in these propositions. Even if it were established beyond doubt that Ott, with deliberate purpose to defraud the appellant, contracted this debt, this would not determine the scope or effect of his assignment. It were as reasonable to suppose that, having made the personal gain he designed, his interest ceased, and that he never contemplated an assignment until the very moment of its execution. Indeed, if he were guilty of fraud, in the first instance, it would imply a state,of mind indifferent to all results after the primary purpose of his own profit had been secured.

It would be unjust, however, to the parties to leave this statement with the inference which might follow, that we consider it established that the debt was fraudulently contracted. The basis of the contention in this respect is in the inaccurate statements furnished by Ott to appellant in reference to his financial condition during the years prior to this assignment. Obviously they were so as to values; but as he named the property, his overestimate of value is not to be adjudged necessarily fraudulent. "We note one matter upon which stress is laid : a quarry, valued by him at $14,000. Notwithstanding the testimony as to its utter'worthlessness, yet he had invested large sums in trying to develop and work it, and was not without hopes of ultimately realizing much from it. He named this quarry as a part of his assets, and gave his estimate of its value. If the lumber company desired further information as to its location, its dondition and its prospects, it could have asked of him, or made itself an independent in

But we do not care to tarry upon this feature of the case. The business'relations between the lumber company and Ott had been running for a series of years. He had purchased from it to an amount exceeding $180,000. His business had averaged about $300,000 a year. His statements, while inaccurate and overestimated as to values, disclosed the property which he possessed, and enabled the lumber company to investigate. But whatever may have'been the-character of the relations between the lumber company and him, the inquiry before us is limited to the assignment; and here five matters are referred to and claimed by the appellant to be so related to it as to be in fact part and parcel of it, and thus together constituting a general assignment with preferences, within the denunciation of the statute. Two of them are chattel mortgages, executed on the 20th’ day of February, 1886, more than two months before the assignmentone to Charles Hill and the • other to Addie Kloppenberg. That these were executed without ány thought of an assignment is clear. At the time there was no threatened interference and no apparent danger of trouble to Ott in his business. The one to Hill was to secure ■ him as an indorser. It is true, that while executed on February 2p and delivered to Hill, it was not recorded until the day before the assignment; and this failure to récord was upon an agreement made by Hill with Ott for fear that such record would precipitate an attack upon the latter by his creditors. On this ’account it was adjudged void by- the Circuit Court, a- question which we cannot consider, as, the amount of the mortgage being less than five thousand dollars, Hill could bring no ap

With respect to' the three other matters, there is more of a question. It appears that on the 12th of April, on receipt of a statement of account, Francis Beidler, the representative of the appellant, came to Davenport to investigate the situation. The outcome of that investigation was not satisfactory. A demand was made for a reduction of the indebtedness. The plain import of the interview was that things could not continue as they had been. Two or three days before the assignment the bank with which Ott had been doing business for a series of years, and which had been discounting his drafts before acceptance, and which was at such time carrying about $11,000 of such drafts, intimated that it must have acceptances before^discounting. His son, who was his principal salesman, his only travelling man, returned from'one of his trips. While ordinarily selling from $18,000 to $20,000, his sales on that trip had practically amounted to nothing. Strikes in the Southwest were .significant of labor troubles, and shadowed the business outlook. With these accumulating facts, evidently

Now, these transactions were but shortly prior to the assignment. They were in a general sense contemporaneous with it. They took place when Ott was conscious of the impending danger of the closing out of his business, and they operated as preferences to these creditors. They were so nearly related in time to the assignment, and made under such circumstances, that if in an action at law and under proper instructions the question had been submitted to a jury whether they were made with a view to an assignment, and to evade the statute, and the verdict had been in the affirmative, it would be difficult to say that such verdict was not warranted by the testimony. All this may be, must be, conceded; yet'over against it are these matters : The positive testimony of Ott, that when he gave- these drafts to Mueller and McClelland, he had not determined upon an assignment. He knew that he was in financial trouble, and considered himself under special obligations as to one at least of these debts. His purpose was simply payment, and that he had a right to make. He supposed he should have to stop business, but in what manner the. close should be brought about; whether by the action of creditors or his own voluntary transfer, was undetermined. was waiting and considering, and only decided upon an assignment on the morning of the 27th. If such was the fact, then, within the rules laid’ down by the Supreme Court of Iowa, these preferences are not to be taken as part and parcel of the assignment, or as' vitiating it.

Further, it may be stated, as- sustaining the conclusions of-the Circuit Court, that the payments made by Ott during the few days before and up to the very time of the assignment were not extraordinary, not differing from the usual course of his business in prior months. McClelland’s and Mueller’s were, only partial* payments, and made in consequence of repeated requests, so that he was not hastening unnecessarily to pay or secure them. And, further, though there was a mortgage on his homestead which he might have paid off, though there was money in the bank which he might have withdrawn and pocketed, he did neither; nor did he act as though intending an assignment, or seeking to benefit himself as much as possible prior thereto. His conduct seems to have been in the utmost good faith; and while these drafts did operate to secure these creditors a portion of- their claims, yét they were not given under such circumstances that the court must conclude that they were in anticipation of an assignment; or find that he was guilty of untruth in his testimony, that, when he made

The decree will be

Affirmed.