155 U.S. 631 (1895), 75, Davis v. Schwartz

Docket Nº:No. 75
Citation:155 U.S. 631, 15 S.Ct. 237, 39 L.Ed. 289
Party Name:Davis v. Schwartz
Case Date:January 07, 1895
Court:United States Supreme Court
 
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155 U.S. 631 (1895)

15 S.Ct. 237, 39 L.Ed. 289

Davis

v.

Schwartz

No. 75

United States Supreme Court

January 7, 1895

Argued November 12-13, 1894

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES

FOR THE SOUTHERN DISTRICT OF IOWA, EASTERN DIVISION

Syllabus

In a case referred to a master to report the evidence, the facts, and his conclusions of law, there is a presumption of correctness as to his finding of facts similar to that in the case of a finding by a referee, the special verdict of a jury, the findings of a circuit court in a case tried by the court under Rev.Stat. § 469, or in an admiralty cause appealed to this Court.

In Iowa, an insolvent debtor may make a mortgage or other conveyance of his property to one or more of his creditors, with intent to give them preference, and, in the absence of fraud, such mortgage or conveyance will not operate as a general assignment for the benefit of creditors unless intended so to operate.

The fact that the property so conveyed was much in excess of the debts secured by the conveyance is not necessarily indicative of fraud, but in such cases the question of good faith is one of fact, and a mere error of judgment will not be imputed as a fraud.

The different transfers assailed in this suit examined, and, in the light of these rulings, held to be valid.

The different mortgages assailed in this suit were for several and separate interests, and the one to Kent not being of the amount requisite to give this Court jurisdiction, the appeal as to him is dismissed.

[15 S.Ct. 237] This suit was originally begun by a petition filed December 29, 1884, upon the equity side of the Court of Appeals of Lee County, Iowa, by certain creditors who had previously attached the stock in trade at Fort Madison, Iowa, of one John H. Schwartz, to set aside and vacate four chattel mortgages upon such property, and subject the same to the payment of their debts.

Upon the following day, the suit was removed upon the

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petition of the plaintiffs Samuel C. Davis & Co., of St. Louis, and E. S. Jaffray & Co., of New York, to the Circuit Court of the United States for the Southern District of Iowa, in which court the record was filed January 9, 1885. Subsequently, and on January 17, a receiver was appointed who took possession and made an inventory of the property and soon thereafter sold the same for the net sum, after deducting costs and expenses, of about $50,000, which was placed at interest by order of the court and, with the accumulated interest, amounts now to upwards of $66,000, held by the court to abide its order herein.

To this petition of the attaching creditors separate answers were interposed by Catharine Schwartz, John H. Hellman, Frant B. Kent, and the German-American Bank, the four mortgages, wherein each defendant set up his mortgage and notes; and, as these answers also set up certain affirmative facts which could not be met by replication, the petitioners, under leave of the court, filed an amended bill in equity, to which not only Schwartz and the four mortgagees were made parties, but a large number of other attaching creditors, whose interests plaintiffs averred to be inferior and subject to their own liens. Answers were filed to this bill by John H. Schwartz and the four mortgagees. Several of the other attaching creditors also interposed by answer and cross-bill. One Katie Kraft also intervened, setting up [15 S.Ct. 238] a promissory note for $5,000 and claiming the benefit of a mortgage not only upon the stock of goods at Fort Madison, but upon another stock at Chariton, Iowa. A supplemental bill was also filed setting up judgments obtained by the plaintiffs in the actions at law in favor of Samuel C. Davis & Co. in the sum of $14,358.20, and in favor of E. S. Jaffray & Co. in the sum of $6,168.07. Subsequently another amended bill was filed alleging that Catharine Schwartz and Frank B. Kent had caused to be inserted in their respective mortgages a large amount of property owned by Schwartz in Chariton, which property they had seized and converted to their own use. The prayer of the bill was that the mortgagees be required to account for and pay into court the value of the property

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so seized and converted and that it be distributed under the order of the court.

It appeared that this Chariton stock was sold out by the mortgagees, and the proceeds, amounting to some $7,000, placed in the German-American Bank. Of this amount $4,075 was paid over to Catharine Schwartz, and a certificate of deposit for the sum of $2,500 delivered to the bank for the use of Kent.

A large amount of testimony was taken, and finally on January 16, 1889, the case was referred, by consent of parties, to a master "to hear said causes and report to this court his findings of facts and conclusions of law."

The following is a summary of the most important facts: John H. Schwartz, a citizen of Iowa, residing at Fort Madison, had for some years been a retail dry goods and clothing merchant, carrying on his principal business at Fort Madison, with an estimated stock of about $100,000, and with a branch store at Chariton, estimated at about $16,000, and another at Dallas City, Illinois, estimated at $17,000. In addition to this, he owned real estate in Fort Madison valued at $17,000, together with notes and accounts, stock in a ferry company and in a building association, the value of which was somewhat uncertain. There were a mortgage and mechanics' liens upon the real estate to the amount of about $13,000, under which the property was sold, and the values therein involved figure only indirectly in this controversy.

At this time, December 29, 1884, Schwartz was indebted to plaintiffs Samuel C. Davis & Co. to the amount of some $14,000, and to E. S. Jaffray & Co. to the amount of some $6,000, for goods sold, and to a somewhat greater amount to various other creditors in smaller sums. He was also indebted to one of his mortgagees, John H. Hellman, his father-in-law, to the extent of $22,180.37, evidenced by seven promissory notes of different dates, given from time to time during the eight previous years, for money borrowed and put into the business, and was further indebted to the German-American Bank in the sum of $8,168.35; to Catharine Schwartz, his mother, in the sum of $11,306.51 and to Frank B. Kent in the sum of $2,665. His

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total indebtedness appears, then, to have been about $84,000, and his assets about $144,000. Late in December, some $6,000 of his indebtedness to Jaffray & Co. falling due, he wrote to his father-in-law for his endorsement upon a promissory note for that amount. Hellman, desiring to investigate his son-in-law's business before becoming responsible for a further amount, went to Fort Madison, learned the amount of his debts and assets, refused to advance any more money or sign the notes, and advised Schwartz to send for the representatives of Davis & Co. and Jaffray & Co., tell them of his situation and intentions and ask for an extension of time.

Schwartz accordingly telegraphed for these representatives, who arrived at Fort Madison on Saturday morning, December 27, and held a conference with him at his house in the presence of Hellman. Schwartz gave a full account of his debts and assets, and asked for an extension of the Davis and Jaffray claims. Schwartz and Hellman claim that they were given to understand that the extension would be granted, and that the representatives of these firms would return after dinner with the extension notes prepared for Schwartz to sign. There is some dispute as to what was done that day, but, instead of returning to Schwartz, it appears that the two representatives prepared petitions for attachments upon his stock, though the writs were not issued, apparently because they were awaiting indemnity for the surety upon the attachment bond. It seems that Schwartz and Hellman became suspicious at the failure of the representatives of the two firms to return with the extension notes, and on Sunday evening met at the residence of one of their counsel, Casey & Casey at which were present John H. Hellman, John H. Schwartz, H. D. McConn, cashier of the German-American Bank, and Joseph B. Schwartz, a brother. After midnight and before dawn of Monday morning, the 29th, the four chattel mortgages in question were drawn up, taken to the bank, acknowledged before a notary, and delivered to the recorder of deeds, and filed by him about 5 o'clock in the morning.

A demand was immediately made by the mortgagees upon Schwartz for payment. The latter...

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