Huttig Mfg. Co. v. Edwards

• Decision Date: 27 March 1908
• Docket Number: 2,565,2,570.
• Citation: 160 F. 619
• Parties: HUTTIG MFG. CO. v. EDWARDS. EDWARDS v. HUTTIG MFG. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

160 F. 619

HUTTIG MFG. CO. v. EDWARDS.

EDWARDS v. HUTTIG MFG. CO.

Nos. 2,565, 2,570.

United States Court of Appeals, Eighth Circuit.

March 27, 1908

W. E. Blake (Harold J. Wilson, on the brief), for Edwards, trustee.

John J Seerley (E. M. Warner and C. C. Clark, on the brief), for Huttig Manufacturing Company.

Before SANBORN, HOOK, and ADAMS, Circuit Judges.

HOOK Circuit Judge.

The principal question on these appeals is whether the Huttig Manufacturing Company received a voidable preference when it took a mortgage on all of the property of D. Winter bankrupt. As the mortgage was taken within the prohibited period of four months we proceed to inquire whether Winter was then insolvent, and if so, whether the manufacturing company or its agents acting therein had reasonable cause to believe a preference was intended. The trustee says he was insolvent because, first, he was a member of the firm of E D. Winter & Co., also adjudged bankrupt, and the addition of D. Winter's debts and assets to those of the firm confessedly exhibited a condition of hopeless insolvency; and second, if D. Winter was not a member of the firm his debts exceeded the fair valuation of his property. We are of opinion the second contention is well taken, and therefore need not discuss the first. D. Winter's property consisted exclusively of real estate. His indebtedness arose from lending his credit to his son, E. D. Winter, who conducted the business of E. D. Winter & Co., and from holding himself out as a partner, though he may not have been one in fact. There are some expressions in the testimony mostly if not wholly hearsay, that the real estate of D. Winter, including his homestead, was estimated to be worth from $18,000 to $20,000. The assessed value of all excepting the homestead was $16,000, of the homestead $1,200. The value fixed by sworn appraisers appointed in the bankruptcy proceedings was $15,150, with $3,000 additional for the homestead. All that the trustee could obtain for the property exclusive of the homestead was $12,245.50. The proceeds were brought into court to abide the result of this litigation, and they were insufficient to pay the mortgage claim of the manufacturing company. When the mortgage was given D. Winter owed the manufacturing company $13,391.73, August Carstens $2,000, and the Merchants' National Bank of Burlington, Iowa, $2,700, a total of $18,091.73. He also owed the bank an additional $5,500 on two notes, but they were dated after the mortgage in question, and it was not shown they were renewals of prior notes or when the indebtedness originated. It is contended by the manufacturing company that the $13,391.73 for which it took the mortgage was not D. Winter's debt, and should not be considered in determining his solvency or insolvency. It was for goods sold by the manufacturing company to E. D. Winter & Co., and it is admitted D. Winter guaranteed the debt before it was incurred. The trustee says the guaranty was by a writing in which D. Winter also held himself out as a member of the firm, while the manufacturing company contends the signature of D. Winter to the writing was a forgery by E. D. Winter, his son, and that the guaranty was an oral one. In either event we think the amount of the debt directly affected D. Winter's solvency. A surety or indorser for a bankrupt has been held to be a creditor within the meaning of the bankruptcy law (Kobusch v. Hand (C.C.A.) 156 F. 660; Swarts v. Siegel, 54 C.C.A. 399, 117 F. 13);

and upon the same principle a guarantor liable upon a fixed, liquidated demand as this was, is a debtor to him who holds it, and his liability is to be counted in determining his financial status.

That the guaranty may have been oral and therefore within the statute of frauds of Iowa where the transaction occurred is immaterial. The Iowa statute relates merely to the evidence or proof of the undertaking, and not to its validity. Berryhill v. Jones, 35 Iowa, 335; Merchant v. O'Rourke, 111 Iowa, 351, 82 N.W. 759. In the latter case it was said:

'The statute of frauds does not prohibit an oral contract nor make such an agreement illegal because certain formalities are not complied with, but relates only to the method by which proof may be made in an attempt to enforce it.'

The manufacturing company asserted and D. Winter admitted the validity of the demand against him, and the former is not in position to say the latter was solvent because his property, all of which it took under its mortgage, was sufficient to pay his other creditors. If the mortgage held, the other creditors would get nothing, and the solvency of the debtor would seem quite unsubstantial.

There is another matter affecting the financial condition of D Winter. Some letters were received in evidence to which his name was signed, and which stated he was a member of E. D. Winter & Co. and liable for their debts. One of these letters was to a mercantile agency which made it the basis of commercial reports upon the faith of which Welt & Reddelsheimer sold the firm goods amounting to $914.70. The genuineness of the signature to the letter was attacked, but there were received in evidence before the referee for purposes of comparison admitted writings of D. Winter, and his decision that D. Winter so held himself out as liable, affirmed as it was by the District Court, should not be disturbed. It is altogether probable that D. Winter owed much more, but the debts mentioned rendered him insolvent when he made the mortgage. We are also convinced he knew it. He had previously given his daughter all his household effects and jewels in order, as he said, 'to avoid all trouble for her in the future. ' He was conscious of being...