Marshall v. Van De Mark

Allen, J. [308] 1.Assignment not invalidated by synchronous void mortgages. 2. Policy of law to uphold assignments and protect against frauds. [307] It is strenuously insisted for the plaintiffs in error that the two chattel mortgages executed by Mottin Brothers to Van De Mark Brothers were-fraudulent; that there was also a fraudulent retention of property under claims of exemption from [308] execution; and that these are sufficient to poison, contaminate and render void the whole assignment. In the suits in which the attachments were issued under which the Sheriff seized the goods, a motion was made to discharge the attachments on the ground that the charge made in the affidavit for attachment of a fraudulent disposition of their property by Mottin' Brothers was not true. The main ground relied on to sustain the attachments in that case was the $500 mortgage to secure Van Be Mark Brothers for their liability for the $500 attorney’s fee to Mr. Laing. As this fee was mainly for services not then rendered, this Court held in the case of Shellabarger v. Mottin, 47 Kan. 451, that the mortgage was an unlawful withdrawal of that which justly belonged to the bona fide creditors of the debtor, and operated to delay and defraud them ; and that it was sufficient proof of fraud to sustain the attachments. It is now insisted that this mortgage was executed at substantially the same time as the deed of assignment the two were really parts of the same transaction, and that the fraud in the chattel mortgage also attaches to the deed of .assignment and. renders it void. Many authorities are cited to the effect that attempted preferences by chattel mortgages executed at the same time,, or the retention of a part of the estate of the assignor for his own benefit, operate to defeat the assignment and render it void as to creditors. The authorities cited strongly support this position in jurisdictions where the assignee is regarded as the personal.representative of the assignor and is denied the right to assert any.claims to the assigned property which he, himself, would be estopped from asserting ; but this Court has taken a different view of our statute governing as [309] signments for the benefit of creditors, since the passage of the act of 1876 providing for the election of an assignee by the creditors. Even if we construe the findings of fact as counsel for plaintiffs in error ask us, and hold that the mortgages and the deed of assignment constitute but one transaction, it is settled by prior decisions that, though the mortgages are void as attempted preferences, the deed of assignment is valid and conveys the whole property in trust for all the creditors equally. Watkins National Bank v. Sands, 47 Kan. 591; Brigham v. Jones, 48 id. 162. In Chapin v. Jenkins, 50 Kan. 385, it was held that, “where an assignment is made by such mortgagor, the assignee is the representative of all the creditors, and for their benefit may contest the validity of such a mortgage in an action brought thereon by the mortgagee to recover the possession of the mortgaged property.” The same doctrine is reiterated in the cases of Jones v. Kellogg, 51 Kan. 263; Walton v. Eby, 53 id. 257, and Goodman v. Kendall, 56 id. 439. Does the fact that in this case the $500 mortgage was void, not merely as an attempted preference, but as an attempt to pay for services, not yet rendered, out of the assigned estate to all of which existing creditors were justly entitled, present a case differing in principle from those cited? It may be said that this was an attempt by the assignors to secure a benefit to themselves out of the assigned estate ; but the deed of assignment is general in its terms and sufficient to convey the entire estate to the assignee. The mortgage is void.- Being void, it is inoperative ; and we must hold that it does not affect the validity: of the deed of assignment. -The circumstance that these chattel mortgages were given t-o the firm of Van De Mark Brothers, of which the assignee was a [310] member, is commented on as showing a participation by the assignee in an attempted fraud by the assignor. Doubtless a case might be presented of a collusive attempt by the parties to the deed of assignment to actually withdraw the assigned estate from the reach of the process of the court, and deprive the creditors of the benefit of it, which would warrant the court in holding the whole transaction void. But in this case there is nothing showing removal or concealment of any property by the parties to the assignment; and the attempted payment of attorney’s fees out of the assigned estate for services thereafter to be performed, though fraudulent in law as to creditors, does not impress us as such a fraud as ought to be held to.vitiate the assignment. The substance of the whole transaction is that the deed of assignment passed the whole of the assignor’s estate to Van De Mark, as a temporary trustee, for the benefit of all the creditors of Mottin Brothers. The creditors themselves thereafter, under the statute, chose whom they pleased to act as permanent assignee. In this case they chose the same person that was named in the deed of assignment. The title of the assignee to the property is only that of a trustee. It is the creditors who are the real parties beneficially interested .' . in the assignment. Unless it is apparent that they are to be defrauded the assignment should be upheld. The policy of our law is to discourage attacks on assignments made for the benefit of creditors which fairly transfer all the assignor’s property to be disposed of in the manner the statute points out. Even if the creditors make a mistake in the selection of an assignee, or if the assignee prove unfaithful, the beneficiaries of the estate are not without remedy. Where good cause is shown [311] tlie Court may remove the assignee from his trust and appoint another in his stead. Caldwell v. Matthewson, ante, p. 258. In jurisdictions where the assignee is not permitted to allege the fraud of his assignor for the purpose of recovering property fraudulently conveyed or otherwise disposed of by the assignor, the necessity for holding an assignment tainted with fraud void in order to protect the rights of creditors, is apparent; but where the assignee, as in this State, is permitted to recover all property fraudulently transferred, .and to defend against fraudulent mortgages, the necessity ceases, and with it the rule of law based upon it. The claims made by the assignors to certain property as exempt clearly cannot affect the validity of the assignment. Nor does the failure of the assignee to recover property retained by the assignors, the title to which actually passed by the deed of assignment, alter the case in any degree. The creditors have ample remedy for any neglect on his part. The rulings on the introduction of testimony complained of are quite, unimportant, and do not furnish ground for a reversal. The judgment is affirmed. All the Justices concurring.