Mannen v. Bailey

• Decision Date: 06 May 1893
• Citation: 51 Kan. 442,32 P. 1085
• Parties: A. J. MANNEN, as Sheriff of Wilson County, v. M. BAILEY
• Court: Kansas Supreme Court

32 P. 1085

51 Kan. 442

A. J. MANNEN, as Sheriff of Wilson County, v. M. BAILEY

Supreme Court of Kansas

May 6, 1893

Error from Wilson District Court.

THE nature of the action and the facts are fully stated in the opinion. Plaintiff Bailey had judgment, and defendant Mannen comes to this court.

Judgment affirmed.

J. B Ziegler, for plaintiff in error:

1. An insolvent partnership cannot legally appropriate the firm property by mortgage to the payment of the antecedent debt of one of the members. We find no fault with the opinion of our supreme court as expressed in Woodmansie v. Holcomb, 34 Kan 35, so far as the powers of a solvent partnership are concerned. But when the partnership is confessedly insolvent as in the case at bar, and when the entire assets of the firm, consisting almost wholly of goods purchased on credit, are attempted to be appropriated in payment of the individual debt of one of the members, we urge that a different rule prevails. Berkley v. Tootle, 46 Kan. 335. The case at bar presents a different state of facts, and calls for a different application of the rule relating to appropriation and disposition of partnership property. These mortgages were given in contemplation of insolvency, to give an improper preference. The execution of the deed of assignment was merely a consummation of the scheme. For these reasons, the mortgages should be held void. Bank v. Sprague, 20 N.J.Eq. 13. See, also, Wilson v. Robertson, 21 N.Y. 587; The State v. Day, 34 Cent. L. J. (Ind.) 137; Burtus v. Tisdall, 4 Barb. 571; In re Cook, 3 Biss. 122; Ransom v. Van Deventer, 41 Barb. 307; Collins v. Hood, 4 McLean, 186.

2. There was no consideration to uphold the mortgage in this case. This mortgage was given wholly for the purpose of securing the antecedent debt of C. A. Dunakin; and M. Bailey cannot be held to be a mortgagee in good faith, or a purchaser for value. 2 Am. Lead. Cas., 5th ed., p. 233; McGraw v. Henry, 47 N.W. 345, and cases cited; Edson v. Hudson, 47 id. 347.

3. The mortgage was executed for the purpose and with the intent upon part of the grantors to hinder and delay and defraud their creditors, and M. Bailey had actual knowledge of such fraudulent intent and purpose, and actively participated therein. Wafer v. Harvey County Bank, 46 Kan. 597; Winstead v. Hulme, 32 id. 568; Leser v. Glaser, 32 id. 546.

4. The jury was not warranted in finding any money yet due defendant in error on his note.

5. A mortgage given by insolvents, who at about the same time and as a part of the same transaction execute a deed of assignment, is an unlawful preference, and cannot be upheld against attaching creditors. Under the evidence, the execution of these mortgages and the two deeds of assignment must be held to be a simultaneous and continuous act, and brought about by the active efforts of the mortgagee. Hardware Co. v. Implement Co., 47 Kan. 423.

6. The court erred in its instructions to the jury.

A. S. Lapham, for defendant in error:

1. The claim of plaintiff in error, that "An insolvent partnership cannot legally appropriate the firm property by mortgage to the payment of the antecedent debt of one of its members," is against the weight of authority and late decisions of this court. See Woodmansie v. Holcomb, 34 Kan. 35; Berkley v. Tootle, 46 id. 335; Sigler v. Knox County Bank, 8 Ohio St. 511; Huiskamp v. Wagon Co., 121 U.S. 310; Jewett v. Meech, 101 Ind. 289; George v. Wamsley, 64 Iowa 175; Fisher v. Syfers, 109 Ind. 514; Goudy v. Werbe, 117 id. 164; Purple v. Farrington, 119 id. 164.

2. That the consideration was full and adequate, see Purple v. Farrington, 119 Ind. 164. The cases referred to by plaintiff in error to sustain this claim related only to contests between mortgagees or other lienholders.

3. The third claim of the plaintiff in error is, that the mortgage was executed by the mortgagors to hinder, delay and defraud their creditors, and that M. Bailey had actual knowledge of such fraudulent intent, and actively participated therein. This was the main question submitted to the jury. Their verdict was in favor of M. Bailey, which was approved by the trial court. In such cases, it is a familiar rule that, where there is any sufficient evidence, the verdict will be upheld by the supreme court. The facts in the case of Wafer v. Harvey Co. Bank, 46 Kan. 597, cited by plaintiff in error, were different in every respect from the facts in this. In that case the stock mortgaged to the bank had been obtained by fraudulent means, so found by the jury, and the cashier of the bank had made false statements in regard to the financial condition of the mortgagor.

4. Plaintiff in error claims that the jury were not warranted in finding any money yet due Bailey on his note. The testimony on this was ample to sustain the verdict. Bailey testifies that he received $ 2,081.25. This would still leave $ 918.75 due on the principal of the note, which was nearly $ 100 more than the value of the goods.

5. Plaintiff in error also claims that the execution of the mortgage and deed of assignment were one continuous transaction. The evidence shows that they were entirely separate and independent. The giving of the mortgage and deed were in no sense simultaneous. Bailey v. Manufacturing Co., 32 Kan. 73.

6. On the part of the Dunakins, it was simply the preference of one creditor over another, and that the largest one. As was said by this court in the case of Randall v. Shaw, 28 Kan. 421, "It is well settled that a debtor has the right to prefer one creditor over another, and that the vigilant creditor is entitled to the advantage secured by his watchfulness and attention to his own interests." M. Bailey acted in good faith all the way through; the jury so decided; the trial court approved the verdict, and its judgment should be affirmed.

ALLEN, J. JOHNSTON, J. HORTON, C. J., concurring.

OPINION

ALLEN, J.:

This action was brought by Bailey against Mannen to recover the value of certain goods which had been levied on by Mannen, as sheriff, and which Bailey claimed as mortgagee of the firm of C. A. Dunakin & Co., which was a partnership composed of C. A. Dunakin and A. N. Dunakin. The business of the firm was carried on at Fredonia, under the personal supervision of A. N. Dunakin, under an agreement, by the terms of which C. A. Dunakin was to furnish the capital, and A. N. Dunakin was to have what is denominated a working interest -- to bear half the expenses of conducting it and to receive half the profits. The chattel mortgage under which the plaintiff claims was given to secure a note for $ 3,000, executed by C. A. Dunakin alone. The evidence shows that C. A. Dunakin had borrowed largely from the plaintiff, and been indebted to him for many years; that when the business was first started at Fredonia many goods were supplied by C. A. Dunakin, who also had a store at Chanute. Remittances from sales made at Fredonia were made to C. A. Dunakin, at Chanute, from time to time. The evidence fails to show, definitely, the state of accounts between C. A. Dunakin and the firm of A. N. Dunakin & Co., but C. A. Dunakin estimates a balance due him of about $ 3,000. The chattel mortgage was dated December 19, 1887, and was given to secure a note executed by C. A. Dunakin to Bailey, dated December 28, 1887, payable on demand, with 12 per cent. interest. Bailey immediately took possession of the goods under his chattel mortgage, and proceeded to dispose of the same. On the next day after the mortgage was executed, C. A. Dunakin & Co. made an assignment of all their property. All of the goods described in the chattel mortgage, except those levied on by the sheriff, were disposed of by Bailey's agents. The only testimony with reference to the amount received from the disposal of these goods, and the expenses of selling them, is Bailey's statement as to the net amount received by him and credited on the note. There is evidence tending to show that the goods were fairly worth enough to pay Bailey's claim, after taking out the goods attached by the sheriff.

The principal question in the case arises on the instructions. The court, among other things, instructed the jury as follows:

"You are instructed in the first place that the mortgage of Bailey, which has been read in evidence, is regular upon its face, and that the firm of Dunakin & Co. had the legal right to execute this mortgage to secure the payment of the indebtedness mentioned therein.

"The extent of the interest of the plaintiff in these goods is the amount of the mortgage debt which is yet unpaid, and evidence has been introduced which will indicate to you the amount, but it has been agreed among counsel that, in the event you should find for the plaintiff, that in no event shall the verdict of the jury be for a greater sum than $ 820.55, which the parties have agreed shall be taken as the value of the goods that the sheriff took, and I take it for granted that the balance of the debt of the plaintiff exceeds that sum."

The first claim of the plaintiff in error to which our attention is called is, that an insolvent partnership cannot legally appropriate the firm property by mortgage to the payment of the antecedent debt of one of the members. In support of this proposition, our attention is called to the following cases: Bank v. Sprague, 20 N.J.Eq. 13; Wilson v. Robertson, 21 N.Y. 587; Menagh v Whitwell, 52 id. 146; The State v. Day, 34 Cent. L. J. 137; Burtus v. Tisdall, 4 Barb. 571; In re Cook, 3 Biss. 122, 6 F. Cas. 378; Ransom v. Van Deventer, 41 Barb. 307; Collins v. Hood, 4 McLean 186. We have carefully examined these cases, and find that some of them, particularly the New York cases, go to the length of holding that the appropriation by an insolvent firm of...