Wells v. Langbein

• Citation: 20 F. 183
• Parties: WELLS and another v. LANGBEIN and others.
• Decision Date: 29 April 1884
• Court: U.S. District Court — Northern District of Iowa

20 F. 183

WELLS and another v. LANGBEIN and others.

United States Circuit Court, N.D. Iowa, Eastern Division.

April 29, 1884

Henderson Hurd & Daniels, for plaintiffs.

C. P Brown and Robinson, Powers & Lacy, for garnishees.

SHIRAS J.

The defendants, C. H. Langbein & Bro., were engaged in the mercantile business at Ossian, Iowa, and on the twenty-eighth day of September, 1883, they executed a chattel mortgage on their entire stock of merchandise, together with their store fixtures and books of account, and all the additions to be made to the stock, to secure payment of a promissory note of $916.70, due one Louisa Wight, payable September 28, 1884. And on the same day they executed a second mortgage on the same property to one Ferdinand Langbein, to secure a promissory note of $575, payable January 2, 1885. On the ninth of October, 1883, they executed a third mortgage on the same property to Davis & Madary to secure a note of $248.19, payable October 9, 1884. Each of these mortgages contains the provision that the 'grantors have the right to dispose of the goods in the usual course of trade, provided they keep up the stock.'

Between the twenty-sixth of July and twenty-eighth of September 1883, the plaintiffs sold on credit to C. H. Langbein & Bro. goods to the amount of $518.34, and on the fifteenth of October, 1883, this suit was brought to recover therefor, a writ of attachment being issued, which was served by garnishing M. J. Carter, Louisa Wight, F. Langbein, Davis & Co., and others, service being made October 16, 1883. By agreement, the answer given by M. J. Carter stands as the answer of all the garnishees, and from it it appears that on the tenth of October, 1883, M. H. Carter, as attorney and agent for the several mortgagees named, took possession of the mortgaged property, and has since converted the same into cash, and holds the money thus realized in his possession, claiming that it should be applied in payment of the mortgages above described.

The plaintiffs claim that the mortgages are void as against creditors, and the question for determination is as to the validity of the mortgages as against the attaching creditors. As the mortgages in express terms provide that the mortgagors should remain in possession, with the right to sell the mortgaged property in the usual course of trade, they come within the rule laid down in Robinson v. Elliott, 22 Wall. 513, and Crooks v. Stuart, 2 McCrary 13 S.C. 7 F. 801, wherein it is declared that the reservation of such rights to the mortgagor, upon the face of a mortgage, shows conclusively that it is intended as a shield and protection to the mortgagor, and operates as a fraud upon the rights of the creditors of the mortgagor, and is therefore void.

On behalf of the mortgagees it is claimed that, granting the correctness of the rule recognized in the cases cited, it is not applicable to the present case, for the reason that the mortgagees, through their agent, had taken possession of the property before the writ of attachment in favor of plaintiffs was served by garnishment of the mortgagees and their agent. As already stated, the answer of the garnishee shows that he received possession of the property under the mortgages as agent of the mortgagees. The facts do not present a case wherein all rights under the mortgages were abandoned, and the parties entered into a new and wholly independent arrangement, whereby the goods were placed in the hands of the garnishee as a pledge for the payment of the debts due the parties named as mortgagees. The possession of goods was delivered to the mortgagees for the purpose of fulfilling the conditions of the mortgages, and the possession was held under the terms thereof, and not by virtue of any new contract.

The point to be decided, therefore, is whether the taking possession of the mortgaged property by the mortgagee in pursuance of the terms of the mortgage, before any creditor attacks the validity of the conveyance, will validate a mortgage which contains provisions showing that it is a fraud upon the rights of creditors. Counsel for the mortgagees cite in favor of the affirmative of the proposition the cases of Congreve v. Evetts, 10 Exch. 298; Read v. Wilson, 22 Ill. 379; Brown v. Webb, 20 Ohio, 389.

In Congreve v. Evetts the question was as to the effect of a...