Aulman v. Aulman

• Decision Date: 07 March 1887
• Citation: 32 N.W. 240,71 Iowa 124
• Parties: AULMAN v. AULMAN ET AL. (Two cases.) GUELICH v. THE SAME
• Court: Iowa Supreme Court

32 N.W. 240

71 Iowa 124

AULMAN v. AULMAN ET AL. (Two cases.) GUELICH v. THE SAME

Supreme Court of Iowa, Des Moines

March 7, 1887

Appeals from Polk Circuit Court.

THESE are actions for the foreclosure of mortgages given by Lorenz Aulman and George Aulman to the plaintiffs. Certain creditors of the mortgagors became parties to the suits by intervention, and they filed cross-bills, in which they claimed that the mortgages were void as to the creditors of the mortgagors. The mortgagees and plaintiffs herein were also creditors of Lorenz and George Aulman; and the suits involve the conflicting claims of creditors to the assets of an insolvent partnership. There were decrees in the court below declaring the mortgages to be void. Plaintiffs appeal.

REVERSED.

Goode & Phillips, for appellants.

Cummins & Wright and Barcroft & Bowen, for appellees.

OPINION

ROTHROCK, J.

I.

Lorenz Aulman and George Aulman were engaged for several years in the foundry business, under the name of the Aulman Engine Works. About the first of December, 1885, they found that they were financially embarrassed and unable to meet the demands of their creditors, and, unless relieved in some way from their embarrassment, they would be compelled to suspend business. They conceived the plan of organizing a joint-stock company and inducing their brother William, and one Schwester, to take stock in the venture, and advance money sufficient to continue the business. This was not accomplished. Lorenz Aulman was the active business manager of the firm, and, knowing that he could not discharge the liabilities, there were given to certain of the creditors of the firm the following instruments: To the plaintiff Theodore Aulman a chattel mortgage upon all the personal property of the grantors, including books of account and notes, and another mortgage to the same party upon certain real estate; one mortgage to Theodore Guelich upon certain real estate; a deed to Lena Rompano of certain real estate, and an assignment to William Aulman of a certain chattel mortgage held by the partnership against another party. These instruments covered all of the property of the partnership, and all the property of the individual members of the firm which was subject to execution or attachment. The instruments above enumerated were all executed on the eleventh day of December, 1885, and filed for record two days afterwards. They were all prepared by the same person, and signed at the same time; and the evidence shows quite satisfactorily that they were all parts of a general design to secure the creditors to whom they were given. The defendants contend that these several instruments constituted a general assignment, and were void because they gave preference to certain of the creditors of the partnership.

It is provided by section 2115 of the Code that "no general assignment of property 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." It is not denied that an insolvent debtor may lawfully make such a disposition of his property as to entitle one or more creditors to a preference over others. This he may do by mortgage, or sale, or conveyance; and the fact that such mortgages, sales and conveyances embrace all of his property does not necessarily constitute the transaction a general assignment.

In Van Patten v. Burr, 52 Iowa 518, 3 N.W. 524, it was held that a number of mortgages to creditors and an assignment may be taken as one transaction, and as constituting a general assignment. That case was determined upon a demurrer to the petition, in which it was alleged that the mortgages and the assignment were all parts of the same transaction, and were intended by the insolvent to operate as a general assignment for the benefit of creditors.

In Fromme v. Jones, 13 Iowa 474; Lampson v. Arnold, 19 Iowa 479; Farwell v. Howard, 26 Iowa 381; Kohn v. Clement, 58 Iowa 589, and Gage v. Parry, 69 Iowa 605, and other cases, this court has held that the execution of mortgages by insolvent debtors, with the bona fide intention of securing particular creditors, does not operate as a general assignment for the benefit of creditors; and some of the cited cases hold that the execution of a general assignment for the benefit of creditors, within a very short time after the execution of the mortgages, cannot be considered part of the same transaction.

In the case of Burrows v. Lehndorff, 8 Iowa 96, where several mortgages and deeds of trust were executed by a party in a state of insolvency, and covering all of his property by which certain creditors were preferred to others,...