Douglass v. Vogeler
| Decision Date | 01 February 1881 |
| Citation | 6 F. 53 |
| Parties | DOUGLASS, Assignee, etc., v. VOGELER. [1] |
| Court | U.S. District Court — Southern District of Ohio |
Long Kramer & Kramer, for assignee.
Butterworth & Vogeler, contra.
SWING D.J.
The petition in this case alleges that Otto Taxis, being insolvent, on the twenty-fifth day of April, 1877, executed to Frederick Vogeler, to whom he was indebted in the sum of $1,500, and who was also liable as indorser for him, a chattel mortgage; that the mortgage was made to secure the sum of $5,000, and was made by said Taxis with intent to give a preference to the said Vogeler, and with intent to defeat the operation of the bankrupt law; and that said Vogeler, at the time the chattel mortgage was made to him, had reasonable cause to believe that Taxis was insolvent, and knew that a fraud upon the bankrupt law was intended. The plaintiff therefore prays that the mortgage may be set aside. The defendant, by his answer, admits the making of the mortgage but denies all the other allegations of the petition, and claims that the mortgage is a valid, subsisting lien.
The case was referred to Register Ball for the taking of testimony and for an opinion therein. The register has reported the testimony and his findings. The register reports that from the evidence in the case Taxis was insolvent when the mortgage was executed, and that Vogeler had reasonable cause to believe he was insolvent, and therefore the mortgage should be set aside; and the cause is now for hearing upon the report of the register and the evidence in the cause.
The defendant claims that the conclusion to which the register arrived is erroneous. He claims that the mortgage was given in substitution of a former mortgage, and for credit and advances made in pursuance of an agreement that the mortgage should be given, and therefore it was valid, although Taxis may have been insolvent, and the defendant may have known that fact.
The evidence in the case shows that in January, 1876, Vogeler loaned to Taxis $3,000, for which he took a chattel mortgage on the fixtures and chattels in a drug store on Broadway, and a bottling establishment in the same place. This loan was for one year, evidenced by a note for $3,000, and two notes for $120 eac, for the semi-annual interest a 8 per cent. It further appears that this mortgage was delivered to Vogeler but was never recorded. When the note became due he paid one-half of it. And it further appears that about the first of April, 1877, Vogeler agreed to assist Taxis to raise money to relieve him from embarrassment by indorsing for him, and that, to secure him, Taxis agreed to give him a mortgage upon the Fifth street store property, and upon the Broadway property, which was already mortgaged.
It further appears from the evidence that on the third day of April, 1877, Vogeler gave to Taxis a note for $600. On the twelfth of April, three notes of Taxis to A. Wolf for $375 each were indorsed by Vogeler; on the sixteenth of April a note for $700; on the twenty-fifth of April a note for $310; and on the fifth day of May, 1877, a note for $500 was given,-- making in all $3,235. It further appears that on the twenty-fifth day of April a chattel mortgage was given, which was filed on the eleventh day of May, 1877. And it further appears that on the twenty-second day of June proceedings in bankruptcy were instituted against Taxis. The proof shows that all the notes except the note for $700 had been paid January 3, 1878, by Vogeler. Although some of them were indorsed or drawn in the firm name of Vogeler's firm, they were paid by him. Whether the $700 note has since been paid the evidence does not disclose.
Upon this statement of facts two questions arise-- First, was the mortgage, as to the liabilities assumed by Vogeler for Taxis, in contravention of the bankrupt law? It has been frequently held that a security taken from an insolvent debtor, for money advanced to him a the time, is not within the inhibition of the bankrupt law. Tiffany v. Boatman's Institution, 18 Wall. 375.
And the same principle will apply to the security for a liability assumed upon which money is raised for the insolvent. But it is said the liability in this case was one which had been assumed prior to the giving of the mortgage, and the mortgage must, therefore, be regarded as a security for a pre-existing debt. The notes and indorsements secured by this mortgage were given before its date:-- the proof shows that one was given upon its date, one after, and the balance before. But the testimony of Vogeler is clear and explicit, that before any of the notes were given it was agreed that they should be secured by a mortgage upon the specific property upon which it was afterwards given; and that before the agreement was made, that he and Taxis consulted an attorney to know whether such an agreement would be legal and was advised that it would be. The attorney testifies that about the middle of April he was advised by Taxis that such was the agreement, and that afterwards they came to him and he drew the mortgage for them. There is not testimony to contradict these statements. They must, therefore, be taken as true,-- that this mortgage was executed in pursuance of an agreement made before the liability of Vogeler was incurred; and it would seem to be the law that a mortgage executed in pursuance of such an agreement is a valid and legal security. Burdock v. Jackson, 15 N.B.R. 318. In re The Jackson Iron manuf'g co. 15 N.B.R. 438, Judge Brown, after a very full review of the American and English cases, says: 'I should feel no hesitation in sustaining a security given in pursuance of a valid promise made a the time of the advance to give specific security, afterwards executed; but to sustain such security given in pursuance of a promise in...
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