Gage v. Parry

• Decision Date: 20 October 1886
• Citation: 69 Iowa 605,29 N.W. 822
• Parties: GAGE AND OTHERS v. PARRY, ASSIGNEE, AND OTHERS.
• Court: Iowa Supreme Court

69 Iowa 605

29 N.W. 822

GAGE AND OTHERS

v.PARRY, ASSIGNEE, AND OTHERS.

Supreme Court of Iowa.

October 20, 1886.

Appeal from Polk circuit court.

The defendants Mary M. Morris and Samuel L. Humphreys were partners, doing business in the city of Des Moines. They were indebted to defendants M. N. Baker, L. H. Jones, and I. J. Harrod, and defendant R. M. Briscoe was surety on a note given by them to a bank. On the twenty-seventh day of June, 1884, they executed to Baker, Jones, and Harrod chattel mortgages to secure the debts they were owing them severally. These mortgages covered their entire stock of merchandise. They also assigned to Briscoe all the accounts growing out of their business. This assignment was made for the purpose of indemnifying him against liability on the note on which he was security. On the same day they also executed a deed of general assignment, by which they conveyed all of their property to defendant R. H. Parry for the benefit of all of their creditors.

The mortgages to Baker, Jones, and Harrod, and the assignment to Briscoe, were all executed at the same time, and the deed of general assignment to Parry was executed at a later hour. Baker and Jones immediately took possession of the mortgaged property under their mortgages, but subsequently surrendered it to Parry, who took possession under the deed of general assignment. The assignment of the book-accounts was not delivered to Briscoe until after the deed of general assignment was executed, but when he received it he took possession of the books, and proceeded to collect the accounts. Plaintiffs are general creditors of Morris & Humphreys, and they subsequently instituted suits against them on their claims. They also sued out writs of attachment, in which they caused Parry, Baker, and Briscoe to be garnished. They then jointly brought this action in equity for the purpose of setting aside the mortgages to Baker, Jones, and Harrod, and the assignment to Briscoe and the general assignment to Parry, and of subjecting the property, and the money collected on the accounts by Briscoe, to the satisfaction of their debts. They allege that said mortgages and assignments were, in effect, a general assignment for the benefit of creditors, and were so intended by Morris & Humphreys, and that such assignment is void, for the reason that it was not made for the benefit of all of the creditors in proportion to the amount of their respective claims. Each of the defendants answered, denying the averments of the petition.

Briscoe also alleges that the assignment of the book-accounts to him was made in pursuance of a parol contract entered into between him and Morris & Humphreys at the time he became surety on said note, by which they agreed to indemnify him against liability thereon. Baker, Jones, and Harrod each filed a cross-petition against plaintiffs and their co-defendants, in which they pleaded their several chattel mortgages, and prayed for the foreclosure of the same, and for judgments against Morris & Humphreys for the amount of their respective debts. Parry also filed a cross-petition against Briscoe, in which he alleged that the book-accounts, and the moneys collected thereon, by Briscoe, were assets of the estate, and that the assignment of the accounts was not delivered until after the execution and delivery of the deed of general assignment, and he prayed that Briscoe be required to account to him therefor, and in answer to the cross-petition of defendant Harrod he alleged that the chattel mortgage under which Harrod claimed was not delivered or accepted until after the execution of the deed of general assignment. The circuit court adjudged that the mortgages to Baker, Jones, and Harrod, and the assignment of the accounts to Briscoe, constituted a general assignment for the benefit of creditors, and that such assignment was void because it was not made for the benefit of all of the creditors. It also adjudged that the deed of general assignment to Parry was valid, and entered judgment against Briscoe, on the cross-petition of the assignee, for the amount of money collected by him on the accounts. It also gave Baker, Jones, and Harrod judgments against Morris & Humphreys for the amount of their respective debts. But plaintiffs were denied relief. Plaintiffs and defendants Baker, Jones, and Harrod appealed.Nourse, Kaufman & Gurnsey, Cummins & Wright, and N. B. Raymond, for plaintiffs.

Mitchell & Dudley, for defendant Baker, and the Assignee.

Phillips & Day, for defendant Briscoe.

Seevers & Sampson, for defendants, Jones and Harrod.

REED, J.

The first question which we will consider is whether the chattel mortgages to Baker, Jones, and Harrod, and the assignment of the accounts to Briscoe, amounted, in effect, to an assignment for the benefit of creditors. If they did, the assignment is clearly invalid, for the reason that it was not made for the benefit of all of the creditors in proportion to the amount of their respective claims. Code, § 2115. As stated above, those instructions were all executed at the same time. They covered all the assets of the firm of Morris & Humphreys, and that firm was insolvent when the instruments were executed. Baker was an employe of the firm, and the indebtedness to him was for money loaned to the firm, and for wages due him. One member of the firm contemplated selling his interest in the business and property of the partnership. Baker knew this, and he demanded that the amount of his debt should be paid or secured before any change should be made, and the mortgage to him was given in obedience to this demand. The indebtedness to Jones was also for borrowed money. He was informed that the firm was about to secure Baker, and he insisted that his debt should also be secured, and the members of the firm accordingly consented to give him a mortgage on the merchandise in the store. Neither Harrod nor Briscoe was present at the time of the transaction, nor did they know that any of the creditors were demanding security for their debts. One Ed. Jones, a relative of Harrod, was present at the time, and knew that Baker and defendant Jones (who is his brother) were demanding security. He had been making an examination into the affairs of the firm, with...