Bros. v. Clement

• Decision Date: 08 June 1882
• Citation: 58 Iowa 589,12 N.W. 550
• Parties: H. A. KOHN BROS. AND OTHERS v. CLEMENT, MORTON & CO. AND OTHERS. CLEMENT, MORTON & CO. v. A. G. WAYNICK & CO. AND ANOTHER.
• Court: Iowa Supreme Court

58 Iowa 589

12 N.W. 550

H. A. KOHN BROS. AND OTHERS

v.CLEMENT, MORTON & CO. AND OTHERS.

CLEMENT, MORTON & CO.

v.A. G. WAYNICK & CO. AND ANOTHER.

Supreme Court of Iowa.

Filed June 8, 1882.

Appeal from Adams circuit court.

These causes are submitted together as arising substantially upon the same state of facts, and involving the same questions of law. The first is an action upon an indemnifying bond, and the second is a proceeding in garnishment. Both arise out of an attempt of Clement, Morton & Co. to collect a claim against A. G. Waynick & Co. There was a trial without a jury, and judgment was rendered for Clement, Morton & Co. in both actions. H. A. Kohn Bros. et al., A. G. Waynick & Co., and W. O. Mitchell, garnishee, appeal.Stuart Bros. and W. O. Mitchell, for appellants.

Davis, Wells & Russell, for appellees.

ADAMS, J.

The sole question in the case pertains to the validity of a certain chattel mortgage executed by A. G. Waynick & Co. to H. A. Kohn Bros. et al. Clement, Morton & Co. claimed that it was invalid, as executed with intent to hinder, delay, and defraud them as creditors of A. G. Waynick & Co., and the court so held. The appellants claim that there was no evidence whatever of such intent, and that the judgment is wholly without support. In January, 1879, A. G. Waynick & Co. were doing business as merchants at Corning, and were indebted to a large number of persons from whom they had purchased goods. Their assets consisted of their stock in trade. Among their creditors were Clement, Morton & Co. and the plaintiffs in the first action, H. A. Kohn Bros. et al. While so indebted they executed a mortgage to H. A. Kohn Bros. et al. to secure the several amounts owed to them respectively, and made no provision for the security of Clement, Morton & Co. The latter obtained judgment and levied upon a portion of the goods, and also garnished W. O. Mitchell, who had in his hands the proceeds of a portion of the goods realized upon the foreclosure of the mortgage. The bond in suit in the first action was given to indemnify the sheriff in making the levy.

It is undisputed that a debtor may, if he sees fit, prefer creditors, and a mortgage executed by him to one or more of his creditors, and having the effect to hinder and delay the unsecured creditors, is not necessarily fraudulent. It would be so only when executed with a fraudulent intent on the part of the mortgagor, and when such intent is participated in by the mortgagee. The evidence in this case establishes, we think, an intent on the part of A. G. Waynick & Co. to hinder and delay Clement, Morton & Co. There are several circumstances which we think show quite clearly such intent. At the time the mortgage was executed, Clement, Morton & Co. were about to obtain judgment and execution. The debtors employed an attorney, not to defend in the action, for they did not claim to have a defence, but to enable them to get time. The attorney communicated with all of the other creditors, and obtained the claims of most of them, with authority to have them secured by mortgage, and a mortgage, being the mortgage in question, was executed and recorded with great promptness, and before Clement, Morton & Co. could possibly put their claim in judgment and get execution thereon. A. G. Waynick, one of the mortgagors, testifies that his object was to protect himself and be allowed to go ahead and handle the goods. What precisely Mitchell communicated to the other creditors does not appear. Their testimony was taken and an effort was made to draw out Mitchell's letters, but without success. We may assume, however, that they were notified in substance that some exigency had arisen by reason of which it had become important that they should become secured. We may assume, also, that they knew or should have inferred that Mitchell was employed by A. G. Waynick & Co., who, in causing them to be notified and requested to forward their claims, desired to promote some interest of their own. We have a case, then, where an insolvent debtor offers and executes a mortgage to certain creditors for his own protection, and with the design of hindering and delaying other creditors who were about to obtain judgment and execution, and the creditors thus preferred and made mortgagees had knowledge of the design, or had knowledge of facts from which they should have inferred it. Now, ordinarily, where a vendor makes a sale with a fraudulent intent, and the vendee has knowledge of the fraudulent intent, or of facts which put him upon inquiry, the sale will be deemed fraudulent as to him. There is one exception, and that is where the sale is made in payment...