Bailey v. Kansas Manufacturing Co.

The opinion of the court was delivered by Horton, C. J.: If the chattel mortgages therein referred to were executed in good faith, and for a valid consideration, the first conclusion of the trial court cannot be upheld. The several instruments executed by A. Macdonald were not intended to constitute a general assignment for the benefit of creditors, and the findings of fact do not support such a conclusion. It is well settled that an insolvent, as long as he retains a jus clisponendi of his property, may appropriate it to the payment of his debts, and may prefer creditors. He may use all his property this way, or he may so use a part, and malee a general assignment of the remainder. (Lampson v. Arnold, 19 Iowa, 479; Dodd v. Hills, 21 Kas. 707; Randall v. Shaw, 28 id. 419.) It was held in Dodd v. Hills, supra: “The fact that, pending a contemplated assignment for the benefit of creditors, a mortgage was executed in good faith by the debtor to one of his creditors to secure a preexisting debt, which mortgage had long previously been promised by the debtor to such' creditor, does not show that the deed of assignment, subsequently executed, was executed with the intention of hindering, delaying and defrauding creditors; nor does it render such deed of assignment void.” [80] At the time of the execution of the mortgages to Maria Macdonald and to the Gibbs & Sterrett Manufacturing Company, A. Macdonald had the possession of the goods in controversy, and the right to dispose of the same. There is nothing in the assignment act that prohibits the execution of •chattel mortgages, or that prohibits the transfer, by pledge or •otherwise, of any kind of property to a creditor to secure the payment of a debt due to such creditor; nor is the execution of chattel mortgages, or the transfer of property to secure a creditor, against the spirit or intention of the statute regulating voluntary assignments. (Tootle, Hosea & Co. v. Coldwell, 30 Kas. 125.) The case of Van Patten v. Burr, 52 Iowa, 518, to which we are referred, is not fully applicable. In that case the chattel mortgages were executed on the same day with the deed of general assignment, and the petition alleged “that the several instruments were intended to constitute a general assignment for the benefit of creditors.” The decision was rendered upon the demurrer to the petition, and of course all the averments therein were admitted by the demurrer to be true. In this •case the chattel mortgage to Maria Macdonald was drawn up ■on January 18, 1882. This mortgage, and the one to the Gibbs & Sterrett Manufacturing Company, were executed on the afternoon of January 19, 1882. They were filed in the office of the register of deeds on the same day. The deed of .assignment was executed on January 20, 1882, and filed for record at 9 A. m. of that day. It is true that the defendant had agreed to make a general assignment at the time of the execution of the chattel mortgages, and in fact closed his store on the evening of January 19th with the view to an assignment ; yet these facts do not establish that the chattel mortgages and the general assignment were intended to constitute a “single transaction.” Indeed, the findings of fact show they were intended to constitute different and separate transactions. The mortgages were made to different parties; were executed and filed prior to the execution of the assignment. Further than this, however, there are many things stated in the opin [81] ion of Van Patten v. Burr, supra, that are not wholly satisfactory. It is difficult to say upon what principle or for what reason a chattel mortgage, executed in good faith for the benefit of certain creditors upon the same day that the deed of general assignment is executed, must.be considered a “single transaction.” The findings of fact cast a suspicion upon the bona fides of the note executed January 6, 1882, by Macdonald to his wife, and the chattel mortgage securing such note; but there is no finding that the money embraced in the note was intended by the wife as a gift to her husband, or that the note and mortgage were fraudulently executed without consideration ; therefore, as the case now comes to us, we cannot affirm the judgment upon the findings of fact. If the chattel mortgage executed by Macdonald to his wife was given in good faith, and upon a sufficient consideration, in our opinion it is valid, and Bailey is entitled to have ■ the amount secured by the chattel mortgage, paid from the proceeds of the sale of the goods. This conclusion renders it necessary for us to reverse the judgment, and direct a new trial. There is a finding that Macdonald made no express promise to pay the money he received from his wife back to her, excepting after his insolvency. An express promise, however, to repay, is hot necessary to be established in order to make the note a valid one. If the note is evidence of a valid and existing debt, then the chattel mortgage secured by it is also valid and binding. At common law, marriage was a gift to the husband of the wife’s chattels in possession, and of her power over choses in action. If the husband exercised the power conferred, and reduced the choses into possession during coverture, they became absolutely his property, unless he accompanied the reduction into possession with declarations importing his intention to stand as trustee for his wife. The laws of this state recognize the separate property of married women, and protect that property from the husband’s creditors. Of course a wife may give her money or other property to her husband, and he will not be permitted to give it back, [82] when insolvent, “to save something for his wife and family,” if the creditors have any claims against him. While, however, an express promise to repay is not necessary, the circumstances attending the money received by the husband from the wife must prove that they dealt with each other as debtor and creditor. (Steadman v. Wilbur, 7 R. I. 481.) If the money received by Macdonald from his wife was loaned to him, it thereby created a valid indebtedness in her .favor, and she had the right to accept the note and the chattel mortgage. (Monroe v. May, 9 Kas. 466.) On the other hand, the wife cannot be allowed, as against the creditors of her husband, to convert the receipt of the money by him into a debt, if the receipt at the time was intended as a gift to assist him in his business. (Bump on Fraudulent Conveyances, 304.) If the trial court had made its findings upon the matters referred to, we could have have disposed of the case here; but in the absence of a finding whether the money received by the husband was given as a loan or as a gift to assist him in his business, we cannot say that all the facts were found by the trial court. As that court considered the chattel mortgages and the assignment one instrument, it did not, we suppose, deem it necessary to pass upon the question of the bona fieles of the indebtedness of $1,500 embraced in the note and mortgage. The answer expressly alleged that the chattel mortgage was executed without any consideration, and that the wife had notice of this. The reply denied this allegation, and this issue of fact should have been passed upon in the findings. The judgment of the district court will be reversed, and the case will be remanded for a new trial. Vakentine, J., concurring. Hurd, J., not sitting in the case.