Case ID: iowa_197/html/0533-01.html
Source: Caselaw Access Project
Author: {"author": "Faville, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

O. W. Parker, Trustee, Appellee, v. J. W. Bloomfield, Appellant.
    BANKRUPTCY: Preference — Evidence. Evidence held sufficient to show that a mortgagee, when he took his mortgage, had such knowledge of the insolvency of the mortgagor as to constitute the mortgage an unlawful preference.
    
      Appeal from Story District Court. — H. E. Fry, Judge.
    March 11, 1924.
    Aotion by trustee in bankruptcy, to set aside a chattel mortgage given by the bankrupt to the defendant. The trial court entered a decree in behalf of the plaintiff, and the defendant appeals. —
    Affirmed.
    
      Addison & Smedal and Dale & Earvison, for appellant.
    
      Bert B. Welty, for appellee.
   Faville, J.

Appellant is the owner of a farm in Story County. The bankrupt, DeBartello, was his tenant. The rental lor tbe premises was to be paid in cash, and tbe bankrupt was in arrears to tbe amount of about $3,000. In tbe ebronological order of events surrounding tbe transaction in question, it appears that one Lundy, a merchant, bad sold goods to DeBar-tello, and bad a claim against bim for $258. Lundy endeavored to collect from DeBartello by purchasing a pair of mules for $300 and agreeing to pay $50 in cash. DeBartello informed Lundy that be could not dispose of tbe mules without tbe'con-sent of appellant. At that conversation, Lundy and DeBartello talked at considerable length with regard to DeBartello’s financial condition. Shortly thereafter, Lundy bad an interview with appellant, and informed bim of tbe proposition regarding tbe purchase of tbe mules. Lundy testified that at that conversation he talked over tbe condition of DeBartello’s finances with appellant; that be knew at that time of a number of claims against DeBartello, and says that he told appellant that be did not see how DeBartello could pay out. He asked appellant to release tbe mules, which appellant refused to do. Lundy testified that be told appellant that be (Lundy) “knew DeBartello was broke, ’ ’ and that appellant replied that be knew be was, or that in substance. Just what was said between these parties at that time is a matter of direct conflict in tbe evidence. Appellant denies the conversation as claimed by tbe witness Lundy, but we are satisfied from the record that tbe parties did at tbe time, at least in a general way, discuss tbe financial condition of DeBartello and bis probable ability to pay.

After this conversation with Lundy, appellant went to see DeBartello, and asked bim to execute a chattel mortgage in favor of appellant. DeBartello claims that at that conversation be told appellant that, if appellant tied bim up with a chattel mortgage, be could not pay other people, and that appellant told bim to let tbe other people wait. Thereafter, appellant went to Colo and interviewed a banker to whom DeBartello was also indebted. They bad some discussion with regard to DeBartello and bis financial condition. Tbe banker advised appellant not to take a mortgage on DeBartello’s property, but that, if tbe latter was given a chance, be believed be would work out, and pay bis creditors. It was suggested between tbe banker and appellant that the latter should see Lundy again and ascertain whether be intended to sue DeBartello, and, if he did, that appellant would advise the banker at once. Appellant, however, did not see Lundy again, but the next day employed counsel and started an attachment suit against DeBartello, and had a writ levied upon his property. The following day was Sunday, and appellant again went to Colo and had another conference with his banker in regard to the matter, and on Monday following, another conference was held, at which DeBartello and his wife were present, and at this time the mortgage in question was executed and delivered to appellant, and the attachment suit was dismissed.

We have not attempted to set out the details of the evidence. To do so would unduly lengthen this opinion. The burden rested upon appellee to establish that, at the time of the giving of the chattel mortgage, the maker thereof was in fact insolvent, and that the mortgage was given as a preference, and that the mortgagee had knowledge of such facts as to induce a reasonable belief on his part of the insolvency. Barbour v. Priest, 103 U. S. 293; Boudinot v. Hamann, 117 Iowa 22; Deland v. Miller & Cheney Bank, 119 Iowa 368.

Under the record in this case, it was fairly established that, at the time of the execution of the chattel mortgage, the maker thereof was insolvent. The real question involved in the case is whether or not the evidence is sufficient to charge appellant with knowledge of the insolvency of DeBartello at the time of the taking of the chattel mortgage. From an examination of the record and of all of the facts and circumstances surrounding the transaction as shown therein, we are disposed to acquiesce in the conclusion of the trial court that appellant was chargeable, under the circumstances, with knowledge of the insolvency of the bankrupt at the time of the taking of the chattel mortgage, and that said chattel mortgage constituted a preference, within the terms and provisions of the Bankruptcy Act.

We are persuaded that .the greater weight of the evidence sustains the conclusion of the trial court. The decree appealed from is — Affirmed.

Arthur, C. J., EvaNS and PrestoN, JJ., concur.