Court Opinion

ID: 8856497
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:32:15.322538+00
Date Added: 2024-06-11T17:05:40.647126
License: Public Domain

SANBORN, Circuit Judge
(dissenting). May a chattel mortgage upon all their valuable proper! v to secure a pre-existing debt, made by insolvent debtors two hour;- before they made a general assignment, and after they had resol ved to do, so, be sustained under the laws of Kansas, either because the mortgagee pressed the debtor for ■security, or because it did not -now that they intended to make the assignment until after it was nade? In support of an affirmative answer to this question the vase of Waggoner-Gates Milling Co. v. Ziegler-Zaiss Commission Co., 128 Mo. 473, 31 S. W. 28, is cited. It may be that the mortgage in question in this case could have been sustained if it and the assignment had been made in the state of Missouri, and if they were to be construed and governed by the decisions of the supreme com! of that state. But they were not. They were made in the state of Kansas, and their effect and the validity of the chattel mortgage ■ must be determined by the statutes of that state as they have beca interpreted by its highest Judicial tribunal. The statute of Kami is, under which this assignment was made, provides:
“Every voluntary assignment of lands, tenements, goods, chattels, effects and credits, made by a debtor to a iy person, in trust for bis creditors, shall be for the benefit of all the creditors of the assignor, in proportion to their respective claims.” Gen. St. Kan. 1889, c. 6, § 1.
In Waggoner-Gates Milling Co. v. Ziegler-Zaiss Commission Co., supra, the supreme court of the ¡state of Missouri declared that it had been repeatedly held in states 1 ¡aving assignment statutes similar to those in Missouri and Kansas where an insolvent debtor had executed different mortgages on all his property, when he intended at the same time to make, and shortly thereafter did make, an assignment subject to such mortgages for the benefit of all of his creditors, that the mortgages and the assignment were one and the- same transaction, and that the mortgage s were void. Among the decisions which it cited as sustaining this proposition are Wyeth Hardware Co. v. Standard Implement Co., 47 Kan. 423, 28 Pac. 171; Bank v. Sands, 47 Kan. 691, 28 Pac. 618; Jones v. Kellogg, 51 Kan. 263, 33 Pac. 997; Preston v. Spaulding, 120 Ill. 208, 10 N. E. 903; Van Patten v. Burr, 52 Iowa, 518, 3 N. W. 524; Ellison v. Moses, 95 Ala. 221, 11 South. 347; Holt v. Bancroft, 30 Ala. 193; Bank v. Bard, *26959 Hun, 529, 13 N. Y. Supp. 688; Berger v. Varrelmann, 127 N. Y. 281, 27 N. E. 1065; Peed v. Elliott, 134 Ind. 636, 34 N. E. 319; Berry v. Cutts, 42 Me. 445. After citing these decisions, the supreme court of the state of Missouri announced that there were a large number of authorities of equal merit which held to a contrary view, and that among the latter class were those of the state of Missouri. An examination of the cases in the supreme courts of Kansas and Missouri which involve this question has convinced me that this is a correct statement of the standing of the decisions of the highest courts of those states upon this issue. If this be so, this court ought not to be governed, in determining the validity of this chattel mortgage, by the decisions of the supreme court of Missouri, but by those of the highest judicial tribunal of Kansas. Upon this subject the supreme court of the United states said in a recent case:
“The question <>£ the construction and effect of a statute of a state regulating assignments for the benefit of creditors is a question upon which the decisions of the highest court of the suite, establishing a rule of property, are of controlling authority in the courts of the United States. Brashear v. West, 7 Pet 608, 615; Allen v. Massey. 17 Wall. 351; Lloyd v. Fulton, 91. U. S. 479, 485; Sumner v. Hicks, 2 Black. 532. 534; Jaffray v. McGehee, 107 U. S. 361, 365, 2 Sup. Ct. 367; Peters v. Bain, 133 U. S. 670, 686, 10 Sup. Ct. 354; Randolph’s Ex’r v. Quidnick Co., 135 U. S. 457, 10 Sup. Ct. 655. The decision in White v. Cotzhausen, 129 U. S. 329, 9 Sup. Ct. 309, construing a similar statute of Illinois in accordance with the decisions of the supreme court of that state as understood by this court, has, therefore, no bearing upon the case at bar. The fact that similar statutes are allowed different effects in different states is immaterial. As observed by Mr. Justice Field, speaking for this court: ‘The interpretation within the jurisdiction of one state becomes a, part of the law of that state, as much so- as if incorporated into the body of it by the legislature. If, therefore, different interpretations are given in different states to a similar local law, that law, in effect, becomes, by the interpretations, so far as It is a rule for our action, a different law in one state from what it is in the other.’ Christy v. Pridgeon, 4 Wall. 196, 203. See, also, Detroit v. Osborne, 135 U. S. 492, 10 Sup. Ct. 1012.” Chicago Union Bank v. Kansas City Bank, 130 U. S. 223, 235, 10 Sup. Ct. 1017.
The very different effect which similar transactions have, under the opposing decisions of the courts of different states upon the validity of chattel mortgages, executed after the mortgagor has resolved to make a general assignment, and at about the same time that he makes it, is well illustrated by the case just cited, which is based on the decisions in Missouri, and in the case of White v. Cotzhausen, 129 U. S. 329, 9 Sup. Ct. 309, which rests upon the rulings of the supreme court of Illinois. In the former case preferences are sustained that would have been avoided, if they had been given in Illinois, and in the latter case those are avoided that might have been sustained under the decisions in Missouri. Now, the decisions of the supreme court of the state of Kansas upon the question under consideration are in accord with those of the supreme courts of Illinois, Iowa, Maine, and New York. As 1 understand them, they do not rest upon the proposition that preferences made by an insolvent debtor, after he has resolved to make an assignment, are void because he or his preferred creditors intended thereby to binder, delay, or defraud” his other creditors. They rest on the ground that su6h pref-*270.erenoes in themselves constitute a violation of the letter and spirit of that provision of the assignment law which requires the assigned property to he distributed pro raía among all the creditors of the insolvent. This provision is as much violated when preferred creditors are ignorant as when they are aware of the intention of the debtor to immediately follow their preferences with an assignment. It is as much violated when they have urged the insolvent to give them the securities as when he has done so voluntarily. It is as much violated when he gives the preferences, and they accept them in good faith, with the intent that the preferred creditors shall thereby secure the payment of their bona fide claims, as when the debtor- and the creditors intend to delay the unsecured creditors. The question under this statute is not, what was the knowledge or the intent of the secured creditors? It is not whether the debtor or the creditors intended by the preference;- to hinder, delay, or defraud unsecured creditors, but the only question is, did the insolvent debtor contemplate, and intend to make, the assignment, when he was making the preferences? Did he intend to dispose of his property when he entered upon the transaction by the use of the instruments which gave the preferences and the assignment which immediately followed them? As Judge Love well said in deciding in the court below the case of Lumber Co. v. Ott, 142 U. S. 622, 630, 12 Sup. Ct. 318, 321, “The intention of the assignor must be the true and guiding principle of decision.” A careful reading of the opinions of the supreme court of Kansas has led me to the. conclusion that a chattel mortgage in that state cannot be sustained under those decisions either on the ground that the mortgagee was ignorant that the mortgagors-had resolved to make a general assignment when they made the mortgage, or on the ground that the mortgagee had urged them to give the securities. In Wyeth Hardware Co. v. Standard Implement Co., 47 Kan. 423, 28 Pac. 171, and in Bank v. Sands, 47 Kan. 591, 28 Pac. 618, the mortgagors maco the mortgages just before making the assignments. The preferred creditors had no notice or knowledge that the mortgagors intend;!." to make general assignments, and they'had not pressed them for payment of their debts, nor asked for security, and yet the mortgages were set aside by the supreme court of Kansas. That they were not void on the ground that such preferences were made with intent to hinder, delay, or defraud creditors is demonstrated by the fact that the court found in the latter case that the debts secured were actual, that the mortgages and the assignment were made in good faith, and that for this reason an attachment could not be sustained on the ground that the debtor intended to hinder, delay, or defraud his creditors; and yet it held that the mortgages were void, that they gave no preferences, and that the proceeds of the property must be distributed pro rata among all the creditors under the assignment. 47 Kan. 593, 28 Pac. 619. In Jones v. Kellogg, 51 Kan. 263, 274, 33 Pac. 997, 999, the creditors who procured one of the chattel mortgages upon the property of the debtor presented their claim to hi m, and demanded payment of it, or security for it, on November 17, 1886, and the debtor promised to give the security in caise of any trouble. On November 29, 1886, he-*271made a chattel mortgage to secure this claim, and followed it with a general assignment, which he made on the same day. The supreme court of Kansas held that the mortgage was voidable. The opinion discloses the fact that an attempt was made in that case to distinguish it from the cases cited from 47 Kan. and 28 Pac., on the ground suggested in the opinion of the court in this case, namely, that the mortgage was not voluntarily given. The court answered this argument in these words:
“It is claimed by tlie defendants in error, plaintiffs below, that tlie mortgage given to Charles P. Kellogg & Co. was not given by Townley of his own volition, and unsolicited, as were the mortgages mentioned in the cases above cited, but were given because of importunities, demands, and active vigilance on tlie part of Charles P. Kellogg & Co., through their agents, in attempting to collect their claim, or to obtain security thereon, and because of a promise on the part of Townley, the debí or, made several days before the execution of the mortgage, and before tlie assignment was contemplated, to give security upon the claim if trouble should arise. These tilings are not thought by this court to be material, however, for the reason, among others, that no intention was really formed by Townley to execute any mortgage to Charles P. Kellogg & Co. until the intention was also formed by him to execute a general deed of assignment for the benefit of all Ms creditors. When the mortgage was executed, it was not the carrying out of an agreement previously entered into between tlie parties, upon a new and sufficient consideration passing at the time when the agreement was made, and an agreement intended to be fulfilled by one of tlie parties in executing a mortgage to the oilier, but it was simply the carrying out of a.n intention formed at the very time that another intention was also formed, to execute a general deed of assignment. It does not appear that anything was said prior to this time with regard to mortgages, or that any new consideration passed for the mortgages; hence, as before stated, the mortgages must be considered as void.” 51 Kan. 278, 33 Pac. 1000.
In view of these decisions and (lie rule of (he supreme court of the Knifed States that they constitute the law of the state of Kansas, winch the national courts are bound to enforce, I. am of the opinion (hat the chattel mortgage in this ease should be set aside, and the judgment which sustains it should be reversed.