Ottenberg v. Corner

THAYER, Circuit Judge. Tl.is action was brought by Simon Ot-tenberg, Henry Ottenberg, andl Herman Ottenberg, the appellants, against the Wichita National Hank, W. J. Corner, H. R. Parnum, W. S. Corbett, and W. B. Han :eom, the appellees, to recover from said Wichita National Bank th: value of certain property that had come into the possession of the t ank, and had subsequently been sold by the bank, and converted to it i own use. The bill of complaint alleged, in substance, the following facts: That Simon Ottenberg, Henry Ottenberg, and Herman Ottenberg, who were engaged in business in the city of New York, irider the firm name of Simon Otten-berg & Bros., were general creditors of W. J. Comer, H. R. Par-num, and W. B. Hanscom, three of the appellees above named, who were engaged in business at Wichita, Kan., under the firm name of Corner & Parnum; that on July,2, 1891, the firm of Corner & Par-num was in a failing condition, and insolvent; that said last-mentioned firm on said day executed a chattel mortgage covering its entire stock of merchandise, in favor of the Wichita National Bank, to secure an alleged indebtedness - ‘ said firm to said bank in the sum of |24,584, and at the same time also executed a deed of assignment, whereby said firm conveyed to V. S. Corbett, one of the appellees, all of its property for the benefit of all of its creditors, the property so conveyed being the same /property that was conveyed and described in the aforesaid chattel t ortgage. The bill charged, in substance, that the determination 1: execute both the chattel mortgage and the deed of assignment war. arrived at after a consultation had between the firm of Corner & Parnum and the president of the Wichita National Bank; that the intention to execute the mortgage and the deed of assignment was communicated to said bank by Corner & Parnum before either instrument was in fact executed; that the chattel mortgage and the deed of assignment were executed at the same time, and constituted one í i ansaction, the intent being by such device to give the Wichita Nalional Bank a preference over the other creditors of Corner & Parnum. The bill charged, in substance, that the Wichita Natioi tl Bank had taken possession, under its chattel mortgage, of all the property of Corner & Parnum therein described, and had causo i the same to be sold at public and .private'sale, and had thereby realized a large sum of money, which .it had appropriated to its own uoe; that W. S. Corbett, the assignee named. in the deed of assignment, had been requested to bring an action against the aforesaid bar k to compel it to account for the money and property by it received, and that he had refused to bring such a suit. In view of the .premises, the complainants below, who are now the appellants, prayed (hat an account might be taken of the property that had been appropriated by the Wichita National .Bank under the aforesaid chattel mortgage, and that it be compelled [265] to pay the value thereof to W. S. Corbett, assignee, to the end that it might he distributed pro rata among all the creditors of Corner & Farnum, pursuant to the laws of the state of Kansas, regulating general assignments. The circuit court sustained the validity of the chattel mortgage, but, inasmuch as the proof showed to its satisfaction that the Wichita National Bank had realized out of the properly conveyed to it more than enough to satisfy the mortgage debt, it decreed that the bank pay the excess of money in its hands to a special master appointed for that purpose, to the end that it might be distributed by hjfn pro rata among all the creditors of Corner & Farnum who had proved their demands against the assigned estate. The complainants below have appealed from that decree. One of the questions discussed at considerable length on the hearing of the appeal was whether the assignment that was executed by Corner & Farnum to. W. S. Corbett was a valid assignment, the contention on the part of the appellees being that it was invalid, for the reason that it was not signed by W. B. Hanscom, one of the members of the firm of Comer & Farnum. Since the case has been under advisement in tbis court, the assignment in question has been adjudged to be a good and sufficient conveyance by the supreme court of Kansas in the case of Corbett v. Cannon, 45 Pac. 80, where that was the sole question in controversy. We fully agree with the conclusion announced in that case, and for that reason shall follow the ruling there made, and accept the decision as controlling authority upon the point raised in the case at bar. The appellants, who are general creditors of Corner & Farnum, found their right to maintain the present action upon the deed of assignment, and, inasmuch as that instrument must be treated as valid, it becomes necessary to determine whether the chattel mortgage which was executed by Comer & Farnum was also a valid conveyance, and operated to create a lien in favor of the Wichita, National Bank. The appellants contend that the chattel mortgage was void, because the mortgage and the deed of assignment were executed at the same time, and constituted but one transaction, and because they were so executed, as it is claimed, in pursuance of a previous understanding or agreement between Corner & Farnum and the bank to the effect that the two instruments should be thus executed for the purpose of giving the bank a preference over other general creditors of the assignors. The weight of evidence shows, we think, that the execution and delivery of the mortgage, to the mortgagee preceded the execution and delivery of the deed of assignment to the assignee by about two or three hours, so that the two instruments cannot he said to have been executed at the same time. Nevertheless, the execution of the assignment was so closely related to the execution of the mortgage in point of time that it is perhaps fair to infer that Corner & V,-,rn uni had in fact resolved to make an assignment when they executed and delivered the chattel mortgage. It is a much more debatable question, however, whether, as is claimed by the appellants, the firm of Corner & Farnum and the Wichita National Bank did in fact agree that the delivery of the mortgage should be followed im [266] mediately by the execution of a general assignment, and whether the bank did in fact accept the mortgage with that understanding. With reference to this latter issue tibe evidence was somewhat conflicting. The trial court evidently found, in accordance with the bank’s contention, that it demanded security for its debt from Corner & Far-num, and obtained security in compliance witii its demand, and that it was not advised of the mortgagor’s purpose to execute a general assignment until some hours after it had accepted and recorded the chattel mortgage. This finding by the trial court upon a disputed issue of fact, depending, as it does, upon the weight of conflicting , testimony, is entitled to every reasonable presumption in its favor. This court, and the supreme court of the United States as well, have frequently declared that the findings of a chancellor on an issue of fact should be taken as presumptively correct, and that a decree should be permitted to stand, unless some obvious error has intervened in the application of th1 law, or some serious or important mistake has been made in the consideration of the evidence. Warren v. Burt, 12 U. S. App. 591, 600, 7 C. C. A. 105, and 58 Fed. 101; Gaines’ Ex’r v. Granger, 32 U. S. App. 342, 15 C. C. A. 228, and 68 Fed. 69; Paxson v. Brown, 27 U. 13. App. 49, 10 C. C. A. 135, 144, and 61 Fed. 874; Snider v. Dobson, 74 Fed. 757; Tilghman v. Proctor, 125 U. S. 136, 8 Sup. Ct. 894; Camden v. Stuart, 144 U. S. 104, 12 Sup. Ct. 585; Crawford v. Neal, 144 U. S. 585, 596, 12 Sup. Ct. 759; Furrer v. Ferris, 145 U. S. 132, 12 Sup. Ct. 821. It is also well settled that a decree will not !be reversed by an appellate tribunal merely upon a doubt created by conflicting testimony. Philadelphia, W. & B. R. Co. v. Philadelphia & H. D. G. Steam & Towboat Co., 23 How. 209; Morewood v. Enequist, 23 How. 491. Applying these rules to the case at bar, we are unable to say, after an atten.tive examination of the testimony, that the trial court was mistaken in its view of the evidence, and that it erred in finding, as it appears to have found, that the bank was not privy to the alleged scheme whereby the execution of-the chattel mortgage in its favor was to be immediately followed by a deed of assignment. The conclusion wliich the trial court reached on this branch of the case, that the bank simply demanded security for its debt and obtained it, and that it was not a party to, no? in any way concerned in, the subsequent acts of Corner & Farnutn, is not an unreasonable conclusion, when judged in the light of the evidence. The finding of the trial court on this issue is supported by the oral statements of several witnesses, and, so far as we can see. it is not inconsistent with any of the admitted facts or circumstances in the case. For these reasons we think that the presumption which exists in favor of the finding of the trial court has not been overcome, and that such finding should be adopted by this court. It is contended, however, by counsel for the appellants, that the chattel mortgage was and is void, even though it be true that the bank was not concerned in the execution of the deed of assignment^ •and was not advised, prior to the delivery of the mortgage, that an •assignment was to be executed. It is urged, in substance, that, although the Wichita National Bank may have acted in good faith in [267] demanding and accepting the chattel mortgage, and without knowledge of the purpose of Comer & Farnum to forthwith execute a deed of assignment, yet, as the members of the firm of Corner & Farnum had both of these conveyances in contemplation at the same time, and executed them on the same day, the chattel mortgage is necessarily void. In support of this contention the following decisions by the supreme court of Kansas are cited and relied upon: Wyeth Hardware Co. v. Standard Implement Co., 47 Kan. 423, 28 Pac. 171; Bank v. Sands. 47 Kan. 591, 28 Pac. 618; Jones v. Kellogg, 51 Kan. 263. 33 Pac. 997. We think, however, that the cases thus cited may be fairly distinguished from the casi; at bar. Tn each of (lie cases to which our attention is directed it appeared that a debtor in failing circumstances, who desired to prefer a particular creditor, of his own volition, and without a previous conference with his creditor, had executed a mortgage in favor of the creditor, and at the same time, as a part of the same transaction, had also executed and delivered a deed of assignment conveying the same property. In each instance the evidence showed that the deed of assignment was delivered to and accepted by tbe assignee before the mortgage then in question had been delivered to the creditor, and before the creditor had elected to accept it, or was even aware of its existence. Upon this state of facts the court held that the mortgages in question were inoperative and void. The facts developed in the case at bar are essentially different:. The chattel mortgage which is now in controversy was executed and delivered to the creditor before the deed of assignment was either executed or delivered, and before it was known to the creditor that an assignment would be made. The mortgage was also executed in compliance with a demand made by the creditor for such security. Tt: became operative, therefore, from the moment it was delivered to the mortgagee, unless it be held that it was invalid when delivered, and never had any legal operation or effect, because, when delivered, the mortgagor entertained a secret intent, not communicated to the mortgagee, to thereafter execute a deed of 'assignment. If such an intent on the part of a mortgagor, when carried into execution, will serve to invalidate a mortgage that was executed two or three hours before the execution of a deed of assignment, then we are unable to see why the existence of such an intent should not have the same effect when an assignment is executed two or three days, or even two or three weeks, subsequent to the execution of a mortgage. The federal bankrupt law' of March 2, 1867 (14 Stat. 517, c. 176, § 35), did invalídale conveyances by way of preference that were made by an insolvent debtor in contemplation of bankruptcy within a certain period, to wit, four months prior to the execution of an assignment; but no such law exists in Kansas, and, in the absence of a statute upon the subject, tbe courts cannot say that a mortgage or other security is void, simply because it was executed a few hours or a few days prior to the execution of an assignment for the general benefit of creditors. We think, therefore, that it matters not how short a time may have intervened between the execution of the mortgage and the deed of assignment, if, as we find the fact to be, the mortgage was [268] executed and delivered, and thereby took effect before the making of the deed of assignment The transactions were separate and distinct, and took place betwee?:. different parities. Waggoner-Gates Milling Co. v. Ziegler-Zaiss Commission Co., 128 Mo. 475, 31 S. W. 28, and cases there cited. Moreover, as we construe the decisions cited from the state of Kansan, it has never yet been held in that -state that a mere intent on flu part of a debtor when he executes a mortgage securing a particulai : reditor, to thereafter execute a deed of assignment, will have the ef'< ;ct of invalidating the former security, although the mortgagee was ignorant of such intent, and was in no sense a party to the execution of the assignment. Entertaining these views, w« conclude that the decree of the .circuit court was for the right party, and it is hereby affirmed.