Adler v. Claflin

Wright, Ch. J. 1. Practice: question not presented below. It is admitted that one member of a firm may encumber or transfer the entire stock or property of the partnership in security or liqui-dation of the firm debt; but it is insisted (and this is the very question presented by counsel) that in this case the mortgage is fraudulent and void on its face. To the proposition appellees’ counsel very justly responds, that no such position was assumed in the court below. It is but too manifest that defendants claimed that the transaction was void from evidence aliunde, and that at no time during the trial was it suggested that the instrument carried the evidence of its own invalidity upon its face. No instruction presenting this question was asked. It is true the jury were told, at defendant’s request, that in making up their minds as to the intent with which the mortgage was made, they would look to the terms of the contract, as shown by the instrument itself, as well as all the other evidence. But this, instead of favoring appellants, tends to show that the matter was submitted to the jury, and that they did not ask the court at any time, to. pass upon 2. Fraud: mortgage/ or construe the mortgage itself. Waiving, how-everj this vjew 0f the case, we remark that we [91] cannot concur in tbe construction claimed for tbis mortgage. There is no intimation that plaintiffs were not bona fide creditors of the mortgagors. As such, they had a right to secure their debt, and although the effect may have been to postpone and delay other creditors, the transaction would not, upon that ground, be invalid. This is the necessary result in almost every instance, where a debtor makes a mortgage to secure one or more of his creditors. And yet, there being no intention to defraud, to hinder or delay creditors, it would not be pretended that it was void. Nor does the fact, that upon the face of 3. - Possession by mortgator. the instrument it is provided that one of the debtors shall remain in possession of the goods, receiving the proceeds, and paying the same to the banker of the creditor, render the incumbrance void or invalid. The mortgage was duly acknowledged and recorded. Defendants and all the world had constructive notice of its existence. There was no benefit or interest reserved in the mortgagors inconsistent with the tenor or object of the security, nor with the rights of third persons. It is not as though provision was made for the maintenance or support of a wife or child of mortgagor, or the mortgagors themselves. The true construction is, that one of the mortgagors took charge of the property as the trustee or agent of the parties interested, was to attend to its disposition, and the application of the proceeds to the payment of the debt thus secured. That the person thus selected was one of the debtors rather than a third person, did not make the instrument constructively fraudulent. Such selection might legitimately be considered in determining the question of fraud, but it does not make the transaction fraudulent per se. If under our law a valid mortgage may be made of chattels, when the mortgagor retains the actual possession, it would certainly not be invalid if the property should be turned over to one of the debtors to dis [92] pose of, for tbe honest purpose of paying the mortgage debt. Upon this subject see McGarvan v. Haupt, 9 Iowa, 83; Kuhn v. Graves, Id., 303; Torbert v. Hayden, 11 Id., 435; Welhelmi v. Leonard, 13 Id., 331; Fromme v. Jones, Id., 474; 11 Wend., 196. Counsel refer us, among other cases, to Grover v. Wakeman, 11 Wend., 188. That was a general assignment, and is in no just sense analogous to the case before us. The real question decided was, whether the assignment was void, for the reason that it made the preference to creditors depend upon the condition, that those thus preferred should give to the assignors an absolute discharge of their debts. (See conclusion of opinion, 226.) This is not a general assignment, and there is no condition or reservation for the benefit of the mortgagors. There is simply a provision made for the disposition of the mortgaged property, and the payment of the expenses attending such disposition. However jealously courts may look upon such a transaction, when one of the mortgagors is selected as the agent to dispose of the property, we are not prepared to say, in the absence of other evidence showing a fraudulent intent, that the transaction is, upon its face, void. The other cases cited by counsel, will be found equally inapplicable. Affirmed.