Stix v. Sadler

• Decision Date: 14 January 1887
• Citation: 109 Ind. 254,9 N.E. 905
• Parties: Stix and others v. Sadler and others.
• Court: Indiana Supreme Court

109 Ind. 254

9 N.E. 905

Stix and others

v.Sadler and others.

Supreme Court of Indiana.

January 14, 1887.

Appeal from circuit court, Lawrence county.

Dunn & Dunn, for appellants. Cavins & Cavins and Friedley & Pearson, for appellees.

Elliott, C. J.

The creditors of Samuel C. Sadler brought this suit to set aside a chattel mortgage executed by him to his wife, Sarah Q. Sadler. The mortgage was executed, as it appears from the allegations of the appellant's complaint, five days prior to the execution of a deed of general assignment by Samuel C. Sadler to William H. Martin for the benefit of the assignor's creditors. It is charged that the mortgage was executed without consideration, and for the purpose of defrauding the creditors of the mortgagor. The second paragraph of Mrs. Sadler's answer alleges that the mortgage was executed to secure a debt of $2,200 due her from her husband, and that it was executed in good faith, and that the assignment to Martin was made subject to the lien created by it. This answer is certainly good, although, in view of the fact that the general denial was filed, it may have been unnecessary. It is too clear to require discussion that, if the mortgage was executed in good faith, and upon a sufficient consideration, it cannot be set aside by the creditors on the ground of fraud. The cross-complaint sets forth the mortgage, states the consideration for which it was executed, shows that the debt due her is unpaid, and avers that William H. Martin, the assignee of the mortgagor, “for the purpose of executing his trust, and to the end that the property might bring the best price, solicited her to permit him to sell the property; that she assented; that he did sell the property for the sum of $4,650.” The prayer is that the mortgage lien of the cross-complainant may be transferred to the proceeds of the sale of the mortgaged property.

The chief ground taken in support of the assault upon cross-complaint is that it is bad because it does not aver that the mortgagee had taken some steps to enforce the lien of her mortgage. The basis of the argument is asserted to be in the provision of the statute concerning voluntary assignments, which reads thus: “Before the holder of any lien or incumbrance shall be entitled to receive any portion of his debt out of the general fund, he shall proceed to enforce payment of his debt, by sale or otherwise, of the property on which such lien or incumbrance exists.” Rev. St. § 2674. This provision of the statute, it is obvious, does not apply to the case before us, for here the mortgagee is not seeking payment of the mortgage debt out of the general fund. The cross-complainant does not ask that any part of the general fund be appropriated to the payment of her debt, but asks only that the mortgage be enforced against the proceeds of the sale of the mortgaged property, so that the provision of the statute quoted is totally irrelevant.

The third paragraph of the answer to the cross-complaint is founded on an agreement between the assignee and the mortgagee wherein the former agreed to sell the mortgaged property, and account to the latter for the proceeds of the sale. We perceive no taint of wrong or illegality in such an agreement. The assignee, as the representative of the creditors, might, as it appears he did, regard it for the interests of the creditors to himself sell the property, and apply the proceeds to the payment of the lien, and, in assenting to his desire in that particular, the mortgagee did not lose her mortgage security. At all events, her assent did not deprive her of the benefit of her mortgage. It seems too clear to require discussion that the creditors cannot take advantage of their representative's promise, and destroy the mortgage. He stands as their representative, and they cannot, by repudiating his contract, get the avails of a sale which he had promised to pay to the mortgagee, who had given him authority to sell the mortgaged property.

If it were granted that the assignee failed in his duty by omitting to petition the court to sell the property, it would by no means follow that the mortgagee must lose her security. If the representative of the creditors caused them loss by a breach of duty, their recourse would be against him and his sureties; for they cannot, by repudiating his contract, entail loss upon the mortgagee, who trusted him. But it does not appear that any loss resulted from the act of the assignee in selling the property. For aught that appears, it was the best course that could have been taken. A suit to set aside a mortgage is of equitable cognizance, and in this instance there was no error in refusing a trial by jury. Hendricks v. Frank, 86 Ind. 279;Evans v. Nealis, 87 Ind. 262;Quarl v. Abbett, 102 Ind. 233, see page 243; S. C. 1 N. E. Rep. 476.

In arguing the questions which counsel conceive arise on the special findings, much time is devoted to the question of fraud, it being assumed that there was a fraudulent purpose on the...