Cutter v. Pollock

Decision Date23 July 1894
CourtNorth Dakota Supreme Court

Appeal from District Court, Cass County; McConnell, J.

Action by Henry W. K. Cutter and others against James R. Pollock and others to declare certain property a trust fund to be distributed proportionately among all the creditors of James R. Pollock, who had executed chattel mortgages on such property to certain of his creditors. Pending the action a receiver was appointed. From a judgment for defendants, and directing the fees and expenses of the receiver, which were not settled by the court, to be taxed by the clerk as costs and inserted in the judgment, plaintiffs appeal.

Reversed.

Reversed.

Newman Spalding & Phelps, also Bartlett & Lovell, for appellant.

The record shows that at the time of making the chattel mortgages described in the findings of fact, the defendant Pollock had determined to quit his business and yield dominion of substantially all his estate for the benefit of the creditors mentioned in these mortgages and the court should have so found. Hayne on New Trials § § 239, 240 and cases cited. Gull River Lumber Co. v. School District, 1 N.D. 509, (48 N.W. 427.) If at the time of the execution of the mortgages in question the defendant Pollock had the intention to quit business, and yield dominion over, and surrender substantially all his property for the benefit of the creditors named in the mortgages, then the transaction was an assignment and void under the statute. (Section 4660 Comp. Laws,) and the estate became eo instanti a trust fund to be administered in equity. Straw v. Jenks, 6 Dak 414, 43 N.W. 941; White v. Cotzhausen, 129 U.S. 329, 9 S. C. Rep. 309; Wyman v. Matthews, 53 F. 678, and the holding in these cases has been followed substantially in Marshall v. Livingston Nat. Bank, 28 P. 312; Richardson v. Mississippi Mills, 11 S.W. 960; Colyer v. Wood, 4 So. 840; State v. Dupuy, 11 S.W. 964; Wilkes v. Walker, 23 S.C. 108; 53 Am. Rep. 706; Meinhard v. Strickland, 7 S.E. 838; Farwell v. Cohen, 28 N.E. 35; Winner v. Hoyt, 28 N.W. 380; Bohns v. Carter, 31 N.W. 381; Clapp v. Ditman, 21 F. 15; Perry v. Corby, 21 F. 737; Martin v. Housman, 14 F. 160; Kellogg v. Richardson, 19 F. 70; Clapp v. Nordmeyer, 25 F. 71; Freund v. Yoegerman, 26 F. 812.

The fees and expenses of the receiver are no part of the costs taxable by the clerk. Section 5189, Comp. Laws. The receiver must be paid out of the funds realized. Radford v. Folsom, 55 Ia. 598; Jaffrey v. Raab, 33 N.W. 337.

Pollock & Scott and Chas. A. Pollock, for respondent.

The case of Straw v. Jenks should have no binding force, more than would a decision of any court from a foreign state. The South Dakota court has refused to follow it. Sandwich Mfg. Co. v. Max, 58 N.W. 14. If the intent of the debtor is merely to secure his debt to one or more of his creditors and the conveyance is not intended as an absolute disposition of his property, but he reserves to himself a right therein, the conveyance will be treated as a mortgage, even though the debtor is insolvent at the time and it (the mortgage) covers all his property and but a portion of his debts are secured by it. Cobby on Chat. Morts. 101; Caldwells Bank v. Crittenden, 66 Ia. 237, 23 N.W. 646; Kohn v. Clement, 58 Ia. 589, 12 N.W. 550. A party in failing circumstances may in good faith prefer creditors. Note to 26 Am. Dec. 584. The giving of a chattel mortgage to secure a bona fide debt is not considered an assignment as provided in § 4660 Comp. Laws, and is therefore not in conflict with the provisions prohibiting preferences. Van Patten v. Thompson, 34 N.W. 763; Aulman v. Aulman, 32 N.W. 240; Kohn Bros. v. Clement, 12 N.W. 550; Ingram v. Osborne, 35 N.W. 304; Phillips v. Caldwell, 1 P. 329; Ford v. Nye, 40 Kan. 655; Cundet v. Lahiver, 16 Kan. 527; Waterman v. Silberger, 2 S.W. 578.

The section of our statute refers to preferences attempted to be given in assignments made under the act. Waterman v. Silberger, 2 S.W. 578; Gilbert v. McCorckle, 11 N.E. 298; Sticks v. Sadler, 9 N.E. 905; Magovern v. Richard, 3 S.E. 340; Campbell v. Colorado Coal Co., 10 P. 248; Bank of Montreal v. Potts, Salt & Lumber Co., 51 N.W. 512; Brown v. Grand Rapids Parlor Furniture Co., 58 F. 286; Hushisher v. Higman, 48 N.W. 573; Weber v. Childs, 51 N.W. 543; Dana v. Stanford, 10 Cal. 269; Warner v. Littlefield, 50 N.W. 721; The receivership was found improper and the expenses thereof properly taxed to plaintiff. The costs and expenses of unwarranted proceedings should be paid by the parties instituting such proceedings. High on Receivers § 796, p. 658; Howe v. Jones, 23 N.W. 378; Lammon v. Giles, 13 P. 417; French v. Gifford, 31 Ia. 428.

OPINION

CORLISS, J.

This case involves a question of statutory construction. The contention on the part of the plaintiffs and appellants is that the transaction to which we will refer constituted an assignment for the benefit of creditors containing preferences, and that therefore the transactions are without any other legal effect than to make the property to which they relate a trust fund to be distributed proportionately among all creditors of the owner of such property. The plaintiffs claiming to be creditors of James R. Pollock, commenced this action in equity to have the property referred to declared a trust fund, under the provisions of § 4660, Comp. Laws. That section provides as follows: "An insolvent debtor, may, in good faith, execute an assignment of property to one or more assignees, in trust towards the satisfaction of his creditors, in conformity to the provisions of this title; subject, however, to the provisions of this Code relative to trusts and to fraudulent transfers, and to the restrictions imposed by law upon assignments by special partnerships, by corporations or by other specified classes of persons; provided, moreover, that such assignment shall not be valid if it be upon, or contain any trust or condition by which any creditor is to receive a preference or priority over any other creditor; but in such case the property of the insolvent shall become a trust fund to be administered in equity, in the District Court, and shall inure to the benefit of all of the creditors in proportion to their respective claims or demands." Pollock was a merchant engaged in business at Casselton, in this state. October 2, 1889, he executed three chattel mortgages upon his stock of goods and his store fixtures to secure claims held against him by the defendants Straw, Ellsworth Manufacturing Company, Eveline Pollock, and the Cass County Bank. These mortgages were executed and delivered to these defendants, respectively, and were successively filed for record in the office of the register of deeds of Cass County, N.D., the same day. They were all executed as part of one transaction. The value of the mortgage property was $ 12,000. The debts so secured did not amount to $ 7,000. While it appears from the record that Pollock owned at the time some other property, we will assume for the purposes of this case that these mortgages covered substantially all of his property not exempt from execution. Pollock appears to have been insolvent at this time. A few hours after these mortgages were given and delivered, the mortgagor turned over all the mortgaged property to the mortgagees, who at once proceeded to foreclose the mortgages by advertising the property for sale thereunder. Each contained a provision that the mortgagee might immediately take possession of the mortgaged property. While these foreclosure proceedings were being had, the plaintiff's instituted this action, and had a receiver appointed to take and hold possession of the mortgaged property or its proceeds pending the action. Judgment having been rendered against the plaintiffs, adjudging that the mortgages were valid liens upon the property, and that plaintiffs had no right or interest in the mortgaged property, the plaintiffs have appealed to this court from such judgment.

It is here urged that the facts of this case bring it within the decision of the territorial Supreme Court in Straw v. Jenks, 6 Dak. 414, 43 N.W. 941, and that that decision should be followed by this court. We are by no means satisfied that Pollock, when he executed these mortgages, had considered that he would no longer continue in business, and had decided to yield up dominion of his entire property. But we will again assume a state of facts as favorable to plaintiffs as the record will justify. We will take it for granted that Pollock intended to give these mortgagees a preference, knowing that the consequence of the execution of such mortgages, and the abandonment to the mortgagees of the possession of the mortgaged property, would be to force him to abandon his business. But it is very clear that he did not intend to surrender control over the mortgaged property except so far as was necessary to accomplish the payment of the mortgagees named therein. The mortgages created mere liens. The legal title to the property remained in the mortgagor. After these preferred creditors had been paid, the possession of the remaining property would revert to him; and at all times any of his creditors could have levied upon his interests in the mortgaged property, and sold it to pay such creditors' claim. To assert that a mortgagor who has created a mere lien on property (especially where, as in this case, the value of the property is largely in excess of the claims secured by the mortgage) has parted with all control over the property, is to ignore the character and legal effect of the instrument under which he has surrendered possession. Despite the mortgage, it is still his property. He may sell it. He may mortgage it. It may be seized for...

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  • Reitsch v. McCarty
    • United States
    • United States State Supreme Court of North Dakota
    • September 14, 1916
    ......Pollock, 4 N.D. 210, 25 L.R.A. 377, 50. Am. St. Rep. 644, 59 N.W. 1062; 2 R. C. L. 690. . .          "It. is not every conveyance that has ......

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