Grafe v. Peter Schoenhofen Brewing Co.

Mr. Justice Sears delivered the opinion of the court. But two questions are presented upon this appeal: 1st. In view of the intended general assignment by Bomer, was the giving of the chattel mortgage in question such a preference as is prohibited by the law ? 2d. The mortgage being in part upon stock in trade, and the mortgagee not having reduced to possession before the possession of the assignee, was the mortgage inoperative as to such stock in. trade % It is contended by appellants that the mortgage having been made by Bomer after he had determined upon making a general assignment for the benefit of all his creditors, the mortgage was therefore an attempt to give a preference, which is prohibited. We think that this contention can not be maintained. We regard the controlling fact to be the lack of any knowledge on the part of appellee, or its attorneys, of the intended assignment, when the mortgage was insisted upon by appellee and given by Bomer to secure a bona fide indebtedness. Preston v. Spalding, 120 Ill. 208; Home National Bank v. Sanchez, 131 Ill. 330; Schwartz v. Messinger, 167 Ill. 474. In Home Nat’l Bank v. Sanchez, supra, the court say: “ It is to be observed, as distinctly held in the case first cited, Preston v. Spalding, supra, the statute is not intended to regulate the act of the creditor. He may, notwithstanding the statute, if he does not know that his debtor contemplates making an assignment, take a mortgage, power of attorney to confess judgments, or other security for his debt in good faith, and enforce the same. And if he procures a preference over the assignment by his own diligence and without collusion with the debtor, the subsequent assignment will not affect his security. The law gives the creditor thé advantage he may secure by his superior diligence, where he is guilty of no fraud or of unlawful confederation or collusion to evade the provisions of the statute.” The doctrine is reaffirmed in Schwartz v. Messinger, sitpra. In the case under consideration the appellee had no knowledge whatever of the intended assignment. Nor does this case fall within the class of cases where, without any knowledge of the creditor, the debtor about to make general assignment, of his own volition gives such creditor a preference, unsolicited and unlawful, because it is a part of the act of assigning the insolvent’s estate. Here the giving of the mortgage was not done voluntarily by Homer, but only as the result of the insistence of appellee. H. & L. Bank v. Rehm, 126 Ill. 461, relied upon by appellants, was a case where the creditor at the time of taking the preference was chargeable with knowledge of the debtor’s insolvency and intended assignment. The second question is as to the operation of the mortgage upon the stock in trade thereby conveyed, which remained in the possession of the mortgagee until reduced to the possession of the assignee in the general assignment. If the question were raised as between appellee and a judgment or attaching creditor who had reached this property, viz., the stock in trade, before the mortgagee had taken possession, a different conclusion might result. But here the question must be raised, if at all, by the assignee, or by appellants, who are simple contract creditors. The assignee can not be heard to say that the mortgage does not operate to convey to appellee the stock in trade. Bouton v. Dement 125 Ill. 142; Union Trust Co. v. Trumbull, 137 Ill. 146. Neither can appellants, who are simple contract creditors, dispute the right of appellee to this property under the mortgage. Union Trust Co. v. Trumbull, supra, and cases therein cited. In the case cited the court, say : “ But by ‘ creditors ’ is meant not general creditors or creditors at large; and only such creditors as are armed with an execution or writ of attachment or other process of court are regarded as ‘ creditors,’ in the sense that they are authorized to impeach a conveyance or transfer of property by their debtors for fraud, or question the validity of .an equitable lien on personal property that is good as against such debtors themselves, and their heirs, executors, administrators and voluntary assignees.” The mortgage here was valid, as well upon the stock in trade as upon the fixtures, between appellee and Homer, and hence was valid too, as against the voluntary assignees of Homer and appellants, his simple contract creditors. The decree is affirmed.