Schuetz v. Int'l Harvester Co. of Am.

• Decision Date: 15 December 1914
• Docket Number: No. 29633.,29633.
• Parties: SCHUETZ v. INTERNATIONAL HARVESTER CO. OF AMERICA.
• Court: Iowa Supreme Court

167 Iowa 634

149 N.W. 855

SCHUETZ

v.INTERNATIONAL HARVESTER CO. OF AMERICA.

No. 29633.

Supreme Court of Iowa.

Dec. 15, 1914.

Appeal from District Court, Polk County; Hugh Brennan, Judge.

Action by a trustee in bankruptcy to recover money distributed to a creditor within four months prior to filing of the petition therein resulted in judgment as prayed. The defendant appeals. Affirmed.George Wambach, Miller & Wallingford, and C. F. Maxwell, all of Des Moines, for appellant.

Clifford V. Cox and R. B. Alberson, both of Des Moines, for appellee.

LADD, C. J.

The issues in this case are the same as those raised in Shuetz, Trustee, v. Moline Plow Co., 147 N. W. 897, except that two additional defenses were interposed, and these only are argued on the present appeal. In October, 1910, Alvin Ogburn was indebted to the Interstate Harvester Company on open account, $2,718.35. Thereafter it sold him a traction engine, husker, and shredder for $1,525, taking one note of $525 and two notes of $500 each. All these notes were secured by a chattel mortgage on the outfit, and the last two were signed by William Ogburn as surety. He also became indebted to the company $27, the price of items purchased. Ogburn was engaged in the implement and harness business at East Peru, and a large part of his stock in trade was destroyed by fire October 30 or 31, 1910. It was insured in several companies, and, on January 26th following, defendant's agent Sproul procured of Ogburn an order in words following:

E. Peru, Ia., 1--26--11.

Anchor Fire Insurance Co.

Standard Fire Insurance Co.

Farmers' Insurance Co.

Gentlemen: Please pay to the International H. Co. of A. $2,718.35 and charge to me on insurance to be pd. on my loss, and this will be your receipt for same.

+---------------------------+
                ¦Yours resply,¦Alvin Ogburn.¦
                +---------------------------+
                

This was deposited with the adjusting agent of the several insurance companies. At that time Sproul claimed not to have been aware of Ogburn's insolvency, but admitted having learned thereof shortly thereafter. By his consent and that of Ogburn, this order was turned over to J. D. Wallingford, who accepted $5,000 from the insurance companies in payment of the loss, and March 3, 1911, thereafter, a meeting of part of the mercantile creditors was had at Wallingford's office, at which it was arranged to distribute the above amount to such creditors, paying pro rata on their respective claims. This was done; defendant receiving $2,793.01 on the total indebtedness of Ogburn to it of $4,270.35. The payments made in pursuance of that arrangement to two of these creditors were held in the case cited to constitute voidable performances, and it is not questioned but that decision should be followed, were it not for the above order and the chattel mortgage securing the notes. The theory of the defendant is that, though it agreed to reduce its claims on open account and notes in the division of the fund in the hands of Wallingford, it did not release the security afforded by the order and chattel mortgage, and, as these were given more than four months prior to the filing of the petition in bankruptcy, section 60 of the Bankruptcy Act of Congress, approved July 1, 1898, as amended (U. S. Comp. St. 1913, § 9644), does not apply.

This conclusion may be conceded if it shall be found that the order and mortgage continued in force. The contention of plaintiff is that these were waived, and that defendant is now estopped from asserting such securities. Prior to the negotiations leading up to and at the meeting of March 3d, the defendant was fully aware of the insolvency of Ogburn, and that bankruptcy proceedings would be instituted, unless the assets of his estate could be distributed in pursuance of an amicable arrangement among his creditors. Were Ogburn adjudged a bankrupt, the order and mortgage likely would be set aside as constituting illegal preferences, and this accounts for the activity of its agent Sproul in bringing about that meeting. The object, by the arrangement then made, was to avoid the expense and litigation incident to bankruptcy proceedings which was recognized by all as the alternative. Undoubtedly the defendant was inclined to let go of as little as possible, and, in consenting to the delivery of the order to Wallingford, insisted on him holding it to protect any interest his company may have had therein, and Wallingford kept it, as he testified, “awaiting subsequent developments and to see what the interests of the parties were and whether or not a settlement could be made.” Later on he testified that, had there been no settlement, he would have turned the money over to a trustee in bankruptcy, as it was the understanding at the meeting of March 3d that in such event bankruptcy proceedings would follow. This was confirmed by Sproul, who related that the order was not mentioned at the meeting of the creditors; that he merely proposed to scale his claims down so as to share the fund pro rata with other mercantile creditors, but did not release the security afforded by the order, and proposed to discharge the surety from the two notes, but retained the chattel security. If this were true, Wallingford certainly knew nothing of it, for in his letter of March 16, 1911, the proposition to the creditors was whether “you will accept 65 per cent. net to you in full face of your claim which is listed with us.” Nor did Ogburn so understand it, for he testified that the understanding at the meeting was that the pro rata share of the insurance money was to be received “in payment in full,” and it was to that he consented and on no other condition. His brother, who was present, denied that Sproul mentioned keeping out the chattel security or referred to any other security, and this was confirmed by Allen, who recalled that Sproul, when asked for the proposition at that meeting, said, among other things, that the mercantile creditors proposed to take the insurance money pro rata on their respective debts and receipt in full to Ogburn, and other creditors would take the property at and near East Peru and satisfy...