Dyson v. St. Paul National Bank
| Decision Date | 05 December 1898 |
| Docket Number | 11,334 - (55) |
| Parties | CHRIS. DYSON v. ST. PAUL NATIONAL BANK and Another |
| Court | Minnesota Supreme Court |
Action in the district court for Ramsey county against James Johnston and John Howe, copartners, to recover $911.22 for work and labor performed. On October 14, 1895, summons in garnishment was served upon the St. Paul National Bank. After disclosure of the garnishee had been taken, the bank was made a party to the action and directed to answer the supplemental complaint against it. Service of the summons upon the original defendants was made by publication, and judgment by default was entered against them and docketed prior to the trial. The case was tried before Bunn, J., without a jury whose findings and decision were as stated in the opinion. From an order denying a motion for a new trial, plaintiff appealed. Affirmed.
Preferential Mortgages by Insolvent Debtor.
Preferential mortgages and securities given by an insolvent debtor, if free from fraud in fact, are valid, except in insolvency proceedings.
Insolvent Partnership -- Mortgage -- Assignment for Benefit of Creditors -- Truitt v. Caldwell Distinguished.
If the members of a copartnership, in good faith, solely to secure their debts to one or more, but not all, of their creditors transfer, by bill of sale or otherwise, the firm property, reserving to themselves the right of redemption, the conveyance is not an assignment for the benefit of creditors, but a mortgage, and a valid security, except in insolvency proceedings, even though the debtors were then insolvent, to the knowledge of the mortgagees, and the transfer covers all of the copartnership assets. Truitt v. Caldwell, 3 Minn. 257 (364), distinguished.
Insolvent Partnership -- Right of Redemption -- Findings Sustained by Evidence.
Held, that the conclusion of law herein, to the effect that such a bill of sale and agreement reserving the right of redemption is a valid mortgage, is sustained by the findings of fact, and that the latter are sustained by the evidence.
Morphy, Ewing & Gilbert, for appellant.
A conveyance absolute in its terms may be adjudged a mortgage, but not on a mere preponderance of proof. The evidence must be clear and strong. Sloan v. Becker, 34 Minn. 491. Parol evidence that a bill of sale, absolute in form, was designed to operate as a mortgage must be clear, unequivocal and convincing. 1 Cobbey, Chat. Mort. § 73; Jones, Chat. Mort. § 24. Evidence of the declaration of the parties, at the time of the transaction, that it should be a mortgage, or should be a sale, is of little or no account. Jones, Chat. Mort. § 24. See also Appolos v. Brady, 49 F. 401, and cases cited by Judge Shiras in discussing this subject. The acts of the parties, and not their words, are the evidence of their intentions, when the rights of third parties are involved. Appolos v. Brady, supra. Plaintiff contends that the bill of sale to the bank was not a mortgage, but an absolute transfer of the property. A mortgage is generally defined to be only a security for the payment of a debt, or performance of some act, the title remaining in the mortgagor until forfeiture or default. It is not a conveyance in trust, but an incumbrance created to pay the debt. 1 Cobbey, Chat. Mort. § 4. Every element of a mortgage is wanting to this instrument. As the title to the property passed to the bank and the interest of Johnston & Howe was not in the property, but in the surplus, if any, after the payment of the stipulated debts, the transaction did not constitute a mortgage. Camp v. Thompson, 25 Minn. 175. See also Butler v. White, 25 Minn. 432. That this instrument cannot be regarded as a mortgage is ruled in Truitt v. Caldwell, 3 Minn. 257 (364), where the facts were nearly identical with the case at bar.
The bill of sale constituted an assignment. Truitt v. Caldwell, supra. A voluntary assignment for the benefit of creditors to a trustee is a transfer by a debtor, without compulsion of law, of some or all of his property to an assignee in trust, to apply the same, or the proceeds thereof, to the payment of some or all of his debts, and to return the surplus, if any, to the debtor. Burrill, Assign. §§ 2, 3. It is more than a security for the payment of debts, it is an appropriation of property to their payment. Vallance v. Miners, 42 Pa. St. 441; McBroom's Appeal, 44 Pa. St. 92; Lawrence v. Neff, 41 Cal. 566; Dana v. Standford, 10 Cal. 269. It passes the legal and equitable title to the property absolutely. Briggs v. Davis, 21 N.Y. 574. No equity of redemption is indicated by the instrument providing for a trust to the assignee in the unemployed balance or surplus. Crow v. Beardsley, 68 Mo. 435; Martin v. Hausman, 14 F. 160; Clapp v. Dittman, 21 F. 15; Weber v. Mick, 131 Ill. 520.
Both under the Minnesota and Wisconsin laws the bill of sale to the bank is void as to plaintiff, because there is an assignment by insolvent debtors providing for resulting interest to the assignors without paying all creditors, the legal effect of which is to hinder, delay and defraud; the intent thereof being presumed by reason of the parties' acts in the premises. Truitt v. Caldwell, supra; Winner v. Hoyt, 66 Wis. 227. See also Page v. Smith, 24 Wis. 368; Fuller v. McHenry, 83 Wis. 573; Maxwell v. Simonton, 81 Wis. 635; Bugbee v. Lombard, 94 Wis. 326; Woonsocket R. Co. v. Falley, 30 F. 808; King v. Gustafson, 80 Iowa 207; Northern v. Weed, 86 Wis. 212; Strong v. Kalk, 91 Wis. 29; Jameson v. Maxcy, 91 Wis. 563; Dahlman v. Greenwood, 99 Wis. 163; Penzel v. Jett, 54 Ark. 428. The fact that the instrument might not cover all the property of the debtors would not affect the legal consequences of the assignment. Maxwell v. Simonton, supra; Jameson v. Maxcy, supra; Dahlman v. Greenwood, supra; Corn Exchange v. Philadelphia, 11 Phila. 510.
The Wisconsin law must govern. The bill of sale was made by a resident of that state concerning property there, the legal effect of which, according to the laws of that state, was an assignment for the benefit of certain creditors. The court held in McKibbin v. Ellingson, 58 Minn. 205, 211, that no matter where the partial execution, writing, signing, sealing and delivery might be done, it would be deemed executed in that state where the final act to make it go into effect was intended to be done and was done.
Stringer & Seymour, for respondent garnishee.
The transfer to the bank cannot be claimed to operate as an assignment for the benefit of creditors with preferences, as it only covered the property of the firm and did not operate in any manner upon the individual property of its members, one of whom had a large amount. See May v. Walker, 35 Minn. 194; Menzesheimer v. Kennedy, 75 Wis. 411; Cribb v. Hibbard, 77 Wis. 199; Van Patton v. Thompson, 73 Iowa 103. A debtor in failing circumstances may mortgage the whole of his property for the benefit of a portion of his creditors, even though the effect of the transaction is to defeat the collection of his unsecured debts. See Aulman v. Aulman, 71 Iowa 124; Warner v. Littlefield, 89 Mich. 329.
A deed of trust executed by a partnership conveying all its property to a trustee, who is given immediate possession, to secure the payment of debts therein named to the exclusion of others and reserving right of redemption, is a mortgage only. Union Bank v. Kansas City Bank, 136 U.S. 223. See also Younkin v. Collier, 47 F. 571; Roberts v. Press, 97 Iowa 475; Davis v. Hilbourn, 41 Neb. 35; Cutter v. Pollock, 4 N.D. 205. A statute declaring invalid general assignments for the benefit of creditors, unless made for all creditors alike, does not prevent an insolvent debtor from preferring one creditor to another, and does not apply to or invalidate a mortgage made by an insolvent to trustees to secure certain creditors therein named, even though the ultimate effect of the mortgage may be to distribute the whole of the insolvent's estate to such ereditors, in the same manner as if an assignment had been made in the mode prohibited by the statute. Cutter v. Pollock, supra. See also Muchmore v. Budd, 53 N.J.L. 369; Chapman v. Hunt, 14 N.J.Eq. 149; Crow v. Beardsley, 68 Mo. 435; Hargadine v. Henderson, 97 Mo. 375; Manning v. Beck, 129 N.Y. 1; Lake Shore v. Fuller, 110 Pa. St. 156; Cribb v. Hibbard, supra; Menzesheimer v. Kennedy, supra.
The respondent herein, the St. Paul National Bank, was summoned as garnishee, the plaintiff claiming that it had money and other property in its hands and under its control belonging to the principal defendants. It appeared and made disclosure, in which it denied the plaintiff's claim; and thereupon a supplemental complaint against it was filed, to which it made answer.
The case was tried by the court without a jury, resulting in findings of fact and conclusions of law in favor of the respondent; and the plaintiff appealed from an order denying his motion for a new trial.
The material facts found by the trial court, briefly stated, are The defendants on June 12, 1895, were copartners in the lumber business at Amery, in the state of Wisconsin, and each was a resident of that state. They were then insolvent, but believed that sufficient funds would be realized from a previous sale of a portion of their property to pay their debts in full. The respondent did not then know or have reasonable cause to believe them insolvent. On the day named the defendants were indebted to the respondent bank in the sum of $23,000, and they then executed and delivered to the bank an absolute bill of sale (containing a warranty, and an irrevocable power of attorney to receive, collect and recover the personal property thereby sold) of substantially all of their remaining co-partnership...
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