Straw v. Jenks
| Decision Date | 10 October 1889 |
| Citation | 43 N.W. 941,6 Dakota 414 |
| Court | North Dakota Supreme Court |
Argued May 27, 1889
APPEAL from the district court, Grand Forks county; Hon. W. B McCONNELL, Judge.
Action by mortgagees to recover damages for conversion of mortgaged property. The alleged conversion consisted in defendant, who was sheriff, levying certain warrants of attachment against the mortgagors upon the mortgaged property, which had been taken possession of by the mortgagees. Defense, that the mortgagors were insolvent, and that the mortgage constituted an assignment for the benefit of creditors, and was void because it preferred the mortgagees, plaintiffs, to the exclusion of other creditors.
Judgment affirmed.
Stone & Sewman, Noyes & Noyes, A. W. Bangs and Moses & Newman, for appellant.
The respondents in any event cannot recover more than the difference between the value of the goods in question, and the judgment obtained against the defendant by the first mortgagee. C. C. 1970; Keith v. Haggart, 33 N.W. 465.
The mortgage was void for the reason it was a transfer in trust, of the entire property of the firm, who were insolvent, for the benefit of a part of their creditors and amounted to an assignment of all their property in trust, for the benefit of a portion of the creditors. Martin v. Haussman, 14 F. 160; Kellogg v. Richardson, 19 id. 72; Clapp v. Dittman, 21 id. 15; Perry v. Corby, 21 id. 737; Kerbs v. Ewing, 22 id. 693; Clapp v. Nordmeyer, 25 id. 72; Freund v. Yaegerman, 26 id. 812; State v. Moss, 27 id. 262; Weil v. Pollock, 30 id. 813; Crow v. Beardsley, 68 Mo. 435; State v. Benoist, 37 id. 501; Sexton v. Anderson, 95 id. 382; Downing v. Kintzing, 2 S. & R. 326; Van Vleet v. Slawson, 47 Barb. 317; Holt v. Bancroft, 30 Ala. 200; Livermore v. McNair, 34 N.J.Eq. 478; Watson v. Bagaley, 12 Pa.St. 164; Miners' National Bank Appeal, 57 id. 193; Burrows v. Lehndorf, 8 Ia. 96; Cole v. Dealham, 13 id. 551; Van Patten v. Burr, 52 id. 518; Heineman v. Hart, 55 Mich. 64; Harkrader v. Lieby, 4 Ohio St. 602; Dickson v. Rawson, 5 id. 224; Englebert v. Blanjot, 2 Whart. 340; Mussey v. Noyes, 26 Vt. 471; Thompson v. Heffner, 11 Bush, 359; Perry v. Holden, 22 Pick. 269; Bonns v. Carter, 20 Neb. 566; Danner v. Brewer, 69 Ala. 191; Winner v. Hoyt, 66 Wis. 227; Page v. Smith, 24 id. 368; Wilks v. Walker, 22 S.C. 108; Fruitt v. Caldwell, 3 Minn. 364; Murphy v. Caldwell, 50 Ala. 461; Owen v. Aris, 26 N. J. Law, 22; Wallace v. Wainright, 87 Pa.St. 263; Johnson's Appeal, 103 id. 378; Taylor v. Taylor, 78 Ky. 470; Gage v. Parry, 69 Ia. 605; Burrill, Assignments (4th Ed.), § 128; Lewin, Trusts, 509; Preston v. Spaulding, 120 Ill. 208; C. C., § 2027; Pen. C., § 637; White v. Cotzhausen, 9 S.Ct. 309.
The mortgage being void as a general assignment, the assets became a trust fund to be distributed in equity among all the creditors; but until taken into the actual custody, they were liable to attachment by a creditor, and he could thus obtain a preference. Van Alstyne v. Cook, 25 N.Y. 489; Innes v. Lansing, 7 Paige, 583.
Bosard & Corlis and Cy. Wellington, for respondents.
If the transaction constituted an assignment it would not avail appellant for it would pass the title, and the property would not be liable to attachment. Fuller v. Hasbrouck, 8 N.W. 697.
In all the cases in which the courts have held the instrument to be an assignment, the statutes rendered an assignment with preferences absolutely void without declaring that the property became a trust fund, as in Bonns v. Carter, 31 N.W. 381; Winner v. Hoyt, 28 id. 387; Wilkes v. Walker, 53 Am. Rep. 706; Page v. Smith, 24 Wis. 368. And in those cases in which the preference was declared invalid by the statute, the creditors did not attempt to raise the question by seizing the property and claiming the preference the statute condemned, but by proceeding in equity to have the property declared a trust fund for the benefit of all the creditors. Martin v. Hausman, 14 F. 160; Clapp v. Dittman, 21 id. 15; Dahlman v. Jacobs, 15 id. 868; Clapp v. Nordmeyer, 25 id. 71; Woonsocket Co. v. Falley, 30 id. 808; Freund v. Yaegerman, 26 id. 812; Holt v. Bancroft, 30 Ala. 193; Preston v. Spalding, 120 Ill. 208, 10 N.E. 903; Hide & L. Nat'l Bank v. Rehm, 18 N.E. 788; White v. Cotzhausen, 9 S.Ct. 309.
An attaching creditor cannot raise the question. Waterman v. Silberberg, 2 S.W. 5; Berry v. O'Connor, 21 N.W. 840; Campbell v. Colorado C. & I. Co., 10 P. 248; Atherton & Co. v. Ives, 20 F. 894; Burrill, Assignments; § 165.
The mortgage, neither alone, nor in connection with the other mortgages, was an assignment for the benefit of creditors; and it is in such assignments only that a preference is prohibited. With this exception the policy of this territory is in the line of the common law which permits preferences, there being no fraud in the transaction. § 2021. The assignment in which a preference is void is an assignment executed in conformity with that title, and is an assignment under which the assignee is vested with the legal title to the property, and is required to file an inventory, give a bond, and ultimately account for the discharge of his trust. The cases referred to by appellant, when examined in connection with the statutes under which they arose, present nothing counter to this position. The doctrine deduced from the authorities and which accords with the statutes granting the right to prefer generally, but withholding it in the case of a general assignment, is this: When the debtor recognizes hopeless insolvency, and determines to yield to his creditors control of his entire property, he must allow them all to participate equally; the law declares invalid every device by which he would prevent this. But where he hopes to retrieve his position and expects to continue to exercise control over his property, he may, save as against proceedings in invitum, exclude all, or as many as he sees fit. The parties did not contemplate the abandonment of the business and property, at least, such was not the intention of the mortgagors. That the chattel mortgages did not constitute an assignment within the meaning of the statute prohibiting preferences, see Aulman v. Aulman, 32 N.W. 240; Field v. Fisher, id. 838; Gage v. Parry, 29 id. 822; In re Guyer, id. 826; Ingram v. Osborne, 35 id. 304; Noyes v. Schner, id. 310; Davis v. Scott, 34 id. 353; Southern W. L. Co. v. Haas, 33 id. 657; Van Patten v. Thompson, 34 id. 763; Talbott v. Ewlatt, 7 S.W. 630; Tootle v. Coldwell, 1 P. 329; Waterman v. Silberberg, 2 S.W. 578; Gilbert v. McCorkle, 11 N.E. 296; Lamar v. Poole, 2 S.E. 322; Stix v. Saddler, 9 N.E. 905; Magovern v. Richard, 3 S.E. 340; Caldwell v. Crittenden, 23 N.W. 646; Campbell v. Colorado C. & I. Co., 10 P. 248; Doremus v. O'Hara, 1 Ohio St. 45; Atkinson v. Tomlinson, id. 237; Bates v. Coe, 10 Conn. 280; Henshaw v. Sumner, 23 Pick. 442; Elgin N. W. Co. v. Meyer, 30 F. 659.
The measure of damages is the full amount due on the mortgage, although in excess of the value of the property after deducting the amount due on the first mortgage. The case of Keith v. Haggart, 33 N.W. 465, decided by this court, is distinguishable for two reasons: 1. Only a portion of the mortgaged property was seized. 2. The balance that was not seized was more than sufficient to pay the mortgage debt.
SPENCER, J. (After stating the facts as above.)
This action was brought to recover from the defendant the value of a stock of merchandise alleged to have been by him converted to his own use. The plaintiffs were mortgagees of said property, and in possession thereof at the time of the alleged conversion. The defendant was sheriff, and levied upon such property by virtue of certain writs of attachment to him duly issued against the property of J. K. Johnson & Co., at the suit of certain of their creditors. The mortgage under which plaintiffs claim was executed by said firm of J. K. Johnson & Co. The sufficiency of the attachment proceedings upon their face to justify the sheriff in making levy upon the property of the defendants therein (J. K. Johnson & Co.) is conceded.
In April, 1883, J. K. Johnson and one M. J. Mendelson formed a special partnership for the purpose of conducting a general mercantile business, of which said Johnson was the general and said Mendelson the special partner. This partnership continued until the following September, when it was dissolved, Mendelson withdrawing from the firm. Thereupon said Johnson and one Harvey Boaz formed a partnership, either general or special, and of which it is claimed that Boaz was special partner, under the firm name of Johnson & Co., and consisting of Johnson and Boaz, and taking the stock of merchandise owned by the former firm of Johnson & Co. at an agreed price of $ 15,000; Boaz paying Mendelson $ 10,000 of this sum, and contributing that amount in the goods thus obtained from Mendelson's interest in the original firm, as his part of the capital in the new firm, as the agreement was, and the new firm of J. K. Johnson & Co. giving Mendelson their notes for the residue of his interest in the old firm. The new firm (Johnson and Boaz), under the same name as the old firm, continued the same business, at the same place, with practically the same stock of merchandise, until November 12, 1883. On that day the firm of J. K. Johnson & Co. executed several chattel mortgages, each on all the goods and merchandise of said firm, including the fixtures and furniture in their store, in the aggregate for the sum of $ 37,678.70, to several of the creditors of said firm; the first of which was for $ 10,373.46, to the Citizens' National Bank of Grand Forks; the next for $ 16,718.19, to the plaintiffs herein;...
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