Browne-Chapin Lumber Co. v. Union National Bank

Mr. Chief Justice Craig delivered the opinion of the court: The appellants entered a motion in the Appellate Court to dismiss the appeal, on the ground that the appeal in a case of this character did not lie to the Appellate Court, but to the circuit court. The Appellate Court denied the motion, and that decision is relied upon as error. This court has held in a number of cases that the Appellate Court has jurisdiction of an appeal from a decree or judgment of the county court in a case of this character, and the question may be regarded as settled. See Union Trust Co. v. Trumbull, 137 Ill. 146; Heinzelman v. Schrader, 150 id. 227; Levy v. Chicago Nat. Bank, 158 id. 103. The next question presented by the record is whether the facts proven on the hearing in the county court showed that an assignment for the benefit of creditors had been made. It appears from the evidence that in the spring of 1893 S. B. Barker was engaged in an extensive lumber business. He owned a planing mill and .yard in Chicago carried on under the name of S. B. Barker & Co. He had another yard in Chicago carried on in the name of A. H. Caryl & Co., of which he was the principal owner. He also owned a lumber yard in Kansas City, which was conducted under the name of the Farmers and Mechanics’ Lumber Company. He also owned a large amount of pine and mineral lands. He had a homestead in Chicago valued at $60,000. Barker, during the year 1892 and in the early part of 1893, was a heavy borrower from the Union National Bank of Chicago. In May, 1893, his liability to the bank, directly and indirectly, amounted to near $400,000. In the latter part of May the bank determined to make no further advances to Barker, and undertook to obtain security for the amount he was indebted. On the 27th day of May, 1893, the bank transferred to Mrs. F. M. Perkins two notes against Barker for $105,000, and a $20,000 note against Caryl & Co., in exchange for which she gave her personal obligation to the bank. This was done to avoid taking security for a large amount in the name of the bank. On the 29th of May the officers of the bank met Barker at the office of the bank’s attorney, and informed him that no further extension could be given him and that the debt must be secured. After considerable negotiation an agreement was reached and a paper was executed by Barker to the bank, dated May 29, 1893, conveying all debts, moneys, demands, accounts, choses in action, notes, drafts or other evidences of debt due or owing or belonging to him, under his own name or« that of S. B. Barker & Co., or under the name of the Farmers and Mechanics’ Lumber Company, or any other name under which he had been doing business, together with all books of account or other documents containing or referring to the same or used in his business, in Chicago or elsewhere, and authorizing the bank to take immediate possession of such books and papers, and collect all sums of money due him, by suit or otherwise, the proceeds of such collection, including necessary attorneys’ fees, to be applied by the bank toward the discharge of his indebtedness to it, whether such indebtedness be due or not, whether direct or contingent, whether on open account, overdraft, or as maker, endorser, acceptor or guarantor of any commercial paper now or hereafter held by the bank or otherwise, and whether his liability be several or joint with others, the surplus, after paying in full all expenses of collection and all his debts and liabilities to the bank, to be returned to him. On the same day an assignment under seal, similar in form to the foregoing, was made by A. H. Caryl & Co. to the bank. The following mortgages were also executed: A chattel mortgage by A. H. Caryl & Co., dated May 29, 1893, to F. M. Perkins, covering the lumber yard, implements, etc., at Parkside, in the city of Chicago, to secure the note of the mortgagor for $23,000, dated May 25, 1893, due on demand, which contained the usual clause allowing the mortgagor to retain possession of the property until default be made in payment.of the debt, etc., and authorizing the mortgagee, upon default, or upon feeling unsafe and insecure, or fearing diminution, removal or waste of the property, to take immediate possession and foreclose the mortgage by sale at public auction, on ten days’ notice, or at private sale with or without notice, the proceeds of the sale to be applied in the payment of the debt and the surplus returned to the mortgagor. A chattel mortgage similar in form to the foregoing, dated May 29,1893, from Samuel B. Barker to P. M. Perkins, covering the stock of lumber, wagons, planing mill property, etc., on South Wood street and Blue Island avenue, Chicago, to secure the note or notes of the mortgagor, evidencing his indebtedness to the mortgagee. A chattel mortgage similar in form to the foregoing, dated May 29,1893, from Samuel B. Barker to F. M. Perkins, covering lumber yard, fixtures, etc., of the mortgagor, used by him in carrying on the business at Kansas City, under the name of the Farmers and Mechanics’ Lumber Company, securing the notes of the mortgagor held by said mortgagee. A chattel mortgage similar in form to the foregoing, dated May 11,1893, from Samuel B. Barker to P. M. Perkins, covering lumber in Ontonagon county, Michigan, securing the notes of the mortgagor held by the mortgagee. A chattel mortgage similar in form to the foregoing, dated May 29,1893, from Samuel B. Barker to P. M. Perkins, covering lumber situated at Ashland and Washburne, Wisconsin, securing the payment of the mortgagor’s notes held by the mortgagee. A chattel mortgage similar in form to the foregoing, dated May 29, 1898, from Samuel B. Barker to F. M. Perkins, covering the steamer “Berrien” and securing the payment of the mortgagor’s note held by the mortgagee. Barker turned over his homestead to his wife, but the bank had nothing to do with that transaction. It was in no manner connected with the contract consummated between Barker and the bank. The county court held that the two foregoing transfers of accounts and the five chattel mortgages executed by Samuel B. Barker in law constituted a voluntary assignment for the benefit of creditors. In Weber v. Mick, 131 Ill. 520, in considering the question what constituted an assignment, it was held that a voluntary assignment is an instrument in writing executed by a failing debtor, by which he assigns or transfers to some third person, as assignee, the whole or the bulk of his property, to be by such trustee distributed among the assignor’s creditors in satisfaction of their demands. It differs materially from a mere sale in payment of a debt, and also from a pledge of property in the nature of a mortgage. It was also there held that a fundamental distinction between a mortgage and an assignment is, that a mortgage is a mere security for a debt, the .equity of redemption remaining in the mortgagor, while an assignment is an absolute appropriation of the property to its payment. It does not create a lien, but passes the legal and equitable title to the property absolutely, beyond the control of the assignor. In Walker v. Ross, 150 Ill. 50, a case in its facts quite similar to the one under consideration, after referring to cases it is among other things said (p. 56): “These cases further hold that there must be an absolute transfer of the whole interest of the assignor, legal and equitable, in the property assigned, in trust for the benefit of creditors, and hence that absolute conveyances made directly to the creditor in payment, or any form of lien so given as security for the payment, of a bona fide debt, though having the effect to give him a preference, is not an assignment for the benefit of creditors, within the meaning of the statute.” See, also, Farwell v. Nilsson, 133 Ill. 45; Price v. Laing, 152 id. 380; Young v. Clapp, 147 id. 176. Under the cases cited it is plain that in order to create an assignment, within the meaning of the statute, the property must be conveyed to a trustee or assignee, who is to sell it absolutely, and not on a contingency, and distribute the proceeds among the creditors. The conveyance or assignment must pass the legal and equitable title, with no right of redemption in the debtor. The assignment must be in writing, and the writing create the trust and cut off all equity of redemption. The transaction in question did not contain these requirements. The two writings transferring the accounts to the bank show upon their face that the accounts are transferred as security for the payment of an indebtedness to the bank. After the bank’s debt is paid the surplus goes to the grantor, and not to creditors. The other papers executed on May 29,—the day the transaction was concluded,—were mere chattel mortgages, given as security for certain indebtedness due from Barker to the bank, which the bank had transferred to Mrs. F. M. Perkins to avoid publicity as to the amount of the debt due from Barker to the bank. Where a person owes a debt and desires to secure it, he has the same right to secure the debt by the execution of a mortgage now as he had before the Assignment act became a law of the State, and when a debtor in good faith executes a mortgage to secure a bona fide debt, we are aware of no principle upon which it can be held that the debtor has made a voluntary assignment for the benefit of creditors. The judgment of the Appellate Court will be affirmed. Judgment affirmed.