Jaffray v. Greenbaum
| Decision Date | 09 October 1884 |
| Citation | 20 N.W. 775,64 Iowa 492 |
| Parties | JAFFRAY & CO. ET AL. v. GREENBAUM ET AL |
| Court | Iowa Supreme Court |
Appeal from Des Moines District Court.
THE defendants, Greenbaum, Schroder & Co., at the time of the transactions in question, were merchants, and doing business as such in the city of Burlington. The plaintiffs, E. S Jaffray & Co., and Dunham, Buckley & Co., were creditors of Greenbaum, Schroder & Co. As such, they brought their respective actions in attachment against them. Afterwards for the purpose of determining the priority of their liens by attachment over certain mortgages, they joined and brought this action in equity, making Greenbaum, Schroder & Co., and the persons named in the mortgages as trustees, defendants. With this action were consolidated other actions, to-wit, the actions in attachment above mentioned, and an action in equity, brought by Gilbert, Hedge & Co. against Greenbaum Schroder & Co., to assert a lien for rent upon a stock of goods covered by the attachment. In these actions certain persons intervened.
The question presented in the equitable action brought by Gilbert, Hedge & Co., as landlords, is as to the amount that should be allowed them as rent. The attachment liens were held inferior to the mortgage liens, and the attaching creditors appeal. The principal part of the amount claimed by Gilbert, Hedge & Co. as rent was allowed them, and the defendants in that action appeal.
MODIFIED AND AFFIRMED.
Hall & Huston, for E. S. Jaffray & Co. and Dunham, Buckley & Co., appellants.
Newman & Blake and P. Henry Smythe & Son, for Greenbaum, Schroder & Co. et al., defendants in the equitable action brought by Gilbert, Hedge & Co. against them, appellants.
Hedge & Blythe, for Gilbert, Hedge & Co., appellees.
Newman & Blake and P. Henry Smythe & Son, for the trustees in the contested mortgages, appellees.
I.
On the fourteenth day of May, 1879, Greenbaum, Schroder & Co. executed a mortgage or deed of trust upon their stock of goods in Burlington, to secure $ 39,167.74, due to fourteen different creditors who were named therein. The instrument, whatever it is, (which we will call a mortgage, because it is generally so spoken of,) was executed to Max Landauer, J. Freudenthal and E. Raab, and purported to convey the property to them as trustees. Greenbaum, Schroder & Co. also executed a similar mortgage to them upon certain real estate in Burlington, and a similar mortgage upon a stock of goods in Lincoln, Nebraska. The writs of attachment appear to have been levied about a month later. On the twenty-fifth of June, 1879, this action in equity was brought by the attaching creditors. They averred in their petition that the mortgages are fraudulent and void, because made with the intent to hinder and delay the unsecured creditors. They also averred that the several mortgages and instruments were made in contemplation of insolvency, and constituted a general assignment, but that such assignment was void under the statute, because not made for the benefit of all the creditors. They asked for the appointment of a receiver.
The first question argued arises under the averment last above set out. The statute upon which the attaching creditors rely is section 2115 of the Code. It is in these words: "No general assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors shall be valid, unless it be made for the benefit of all his creditors in proportion to the amount of their respective claims." The attaching creditors insist that the mortgages covered substantially all the mortgagor's property, and were given under such circumstances as to preclude the supposition that they were really intended as security. They contend that the mortgagor's real purpose was to virtually turn out the property in payment as far as it would go, and that they had no hope of redeeming, and no intention of trying to redeem. If the facts were as the attaching creditors contend, it might be conceded that the mortgages constituted a general assignment, and that, being such, they cannot, under the statute, be sustained, because their effect, undeniably, was to give a preference to creditors.
But there was evidence tending to show that the mortgages did not cover substantially all the mortgagors' property, and were not designed to; and we think that the evidence is such as to justify us in concluding that such was the fact. But, whether we are correct in this or not, it seems clear to us that the mortgages cannot be regarded as an assignment. We are well satisfied that the mortgagors did not execute them without a hope of redemption, and did not regard them as a mode of making a final disposition of the property under an appearance of giving security. It may be that they were badly insolvent, and that the property mortgaged was insufficient to pay the mortgage debts, yet we think that the mortgagors did not so regard it at the time. The mortgage debts were less than $ 40,000, and the mortgagors had a short time before estimated their assets at $ 73,000, and, even after the execution of the mortgages, they estimated their assets, mostly covered by the mortgages, at $ 48,000. We cannot think that they were intended as an assignment.
The attaching creditors contend, however, that, even if this is so, they should be declared void as a matter of law, because fraudulent upon their face. They provide that the mortgagors shall have the right to retain possession of the property, and carry on their business in the usual retail way for one year, paying the cost and expense of running the business, and keeping up the stock to about what it then was. The mortgages also provided for an extension of the time of indebtedness mentioned, and that no creditor named therein should have any benefit from the mortgages, unless he should expressly accept the conditions thereof.
A mortgage upon a stock of goods which should provide for sales that would exhaust the stock, without any provision for an application of the proceeds on the mortgage debt, might well be declared fraudulent. Such a mortgage could hardly be deemed to have been taken as security, and, if it was not taken as security, the inference would be that it was solely for the debtor's protection by hindering other creditors. But in this case the stock was not to be exhausted, but was to be kept up. The mere fact that there might be profits above what might be necessary to keep up the stock and pay running expenses would not invalidate the mortgage. In Hughes v. Cory, 20 Iowa 399, it was expressly provided in the mortgage that the mortgagor, after keeping up the stock, might retain sixty-seven per cent of the proceeds of sales, but it was held that such provision did not invalidate the mortgage. As to what should be done with any surplus which...
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