Turner Hardware Co. v. Reynolds

Clayton, J. The only question in the case to be decided is, did the transaction had between C. G. Morgan & Co. and the interpleaders constitute an assignment for the benefit of creditors? It being admitted that the instrument, on its face, was a mortgage, unless the parol evidence showed the transaction to be otherwise, it must be sustained. The only witnesses produced at the trial ón this question were F. M. Pope, the agent of Reynolds, Davis & Co., and James Elliott, the agent of D. M. Hailey, the interpleaders, both of whom testified in substance that the transaction was an absolute sale; that the property was taken in satisfaction of the debt; that this was all they were to get on their accounts. And this testimony is in harmony with the fact of their having taken immediate possession, and, after conditions broken, proceeded to sell, otherwise than directed by the mortgage. It is true that this attacks the mortgage, and has the effect of showing the real transaction different from that shown by the instrument, but it would not show an assignment for the benefit of creditors. If true it would simply change the instrument from a mortgage to a bill of sale; or, in other words, it would be the appropriation of the property to pay the debts, and not an appropriation of the property to raise a fund to pay the debts, through the instrumentality of a trustee. The appellant, before being en [52] titled to recover, must not only show that the instrument was not intended to have been a mortgage, but that it was intended to have been an assignment for the benefit of creditors or that on other grounds — the transaction was fraudulent as to other creditors. The law does not consider it a fraud on creditors for a person, although he may be insolvent, to pay his debts by appropriating property for that purpose, if the debt be just, and no more property be appropriated than is sufficient for that purpose; and it makes no difference that it takes all the debtor’s possessions, and thereby has the effect of preferring the particular creditors. Burrill, Assignm. p. 166, § 125. In this case, if we take the instrument on its face, it is a mortgage. If we adopt the parol proof, it is simply an appropriation of the debtor’s property to the payment of his debts. In either case it is not an assignment for the benefit of creditors, nor is the transaction condemned.by law as being fraudulent as to creditors. Let the judgment of the court below be affirmed. Springer, C. J., and Townsend J., concur.