Court Opinion

ID: 6638093
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:42:58.542802+00
Date Added: 2024-06-11T15:59:08.042594
License: Public Domain

De Witt, J.
E. C. Waters was a debtor. He transferred all his personal property within the jurisdiction of the court to the Livingston National Bank, which was a creditor to the amount of $5,737.09, and which indebtedness Waters was unable to pay, and by reason of which inability he made the transfer of said property. We think that it is clear, from the agreed case, that Waters did this on account of his inability to pay his debts.
What was this transfer — a chattel mortgage or an assignment? It is called a “chattel mortgage” in the instrument and in the language of the agreed case. But we have the whole instrument before us as a part of the agreed case, and we have all the facts, and we are not concluded from inquiring into the nature of the transaction by any inscription that the parties have put thereon.
Upon an examination of the instrument and the facts, do we find the essential characteristics of a chattel mortgage? One of the elements of a mortgage is that it is a security for a debt. It is not a payment of a debt, or a present instant means for the payment of a debt.
The transaction at bar was a transfer at once of all the' debtor’s property within the jurisdiction to a creditor, with instructions to sell the same, at private or public sale, and to apply the proceeds to the payment of a debt of such creditor of $5,737.09, which debt the debtor and creditor made to be due at once. Furthermore, the creditor, after the payment of such debt, is to render the overplus from the proceeds of the sales to the debtor. The court will look through forms, and arrive at the substance. White v. Cotzhausen, 129 U. S. 329, is an instructive case upon this point, and its doctrine in this respect has not been overruled in Union Bank v. Kansas City Bank, 136 U. S. 233, as suggested by counsel. Therefore regarding the transaction at bar, and looking beyond the partial chattel mortgage form and name, we do not find the elements of a mortgage security.
Again, a characteristic of a chattel mortgage is that there should be a defeasance. Is there one here? We find this clause in the mortgage, “ and these presents shall be void if such payment be made [referring to the notes, which are set out *361in full] according to the terms of said respective promissory-notes.” But following this provision, the instrument sets forth: “It is further provided that said second party shall have the immediate possession of all said above described property, and shall have the right, at its option, to immediately declare all of said debts to be due, and is hereby authorized and empowered to sell all and singular the above-described chattels, with all and every of the appurtenances, or any part thereof, at public or private sale, and out of the money arising therefrom to retain the said principal and interest, and the costs of making such sale, and the attorney’s fees, and the overplus, if any there be, to be paid over to the said first party, his heirs or assigns.”
So it appears that there is a defeasance in words. It is upon payment of the notes as provided. But one note was upon its face past due, and the provisions of the instrument make the three other notes due instantly, upon the option of the second party in the instrument, which option that party exercised instantly. Therefore, the whole indebtedness was due at once. The default of the debtor was complete at the time of the transaction as set forth in the agreed case. There was no opportunity for defeasance in the manner suggested in the instrument, for the instrument itself, and the contemporaneous acts of the parties, emasculated the defeasance proposed in the document. Therefore no defeasance was actually contemplated or provided in the transaction.
The instrument called a “chattel mortgage” we find shorn of almost all its essential elements as such, except its label, which latter does not commend itself to our mind with any force. The District Court called this instrument and transaction an assignment,” and applied thereto the provisions of the wage-workers’ law (§ 2050), and held that thereunder the respondent was entitled to a lien for his wages upon the funds in the hands of the appellant arising from the proceeds of the sales of the property.
Appellant bases his argument largely upon a line of cases, some of which are as follows: Dana v. Stanford, 10 Cal. 269; Lawrence v. Neff, 41 Cal. 566; Cowles v. Ricketts, 1 Iowa, 582; Fromme v. Jones, 13 Iowa, 474; Farwell v. Howard, 26 Iowa, *362381; Peck v. Merrill, 26 Vt. 687; McGregor v. Chase, 37 Vt. 225; Gage v. Chesebro, 49 Wis. 486; Vallance v. Miners’ Life Ins. etc. Co. 42 Pa. St. 441; Fecheimer v. Robertson, 53 Ark. 101; Moore v. Meyer, 47 Fed. Rep. 99; Union Bank v. Kansas City Bank, 136 U. S. 223. But those were cases from States where assignments for the benefit of creditors with preferences were forbidden by statute. Instruments and transactions which upon their face were mortgages, or transfers in payment, or confessions of judgment, were sought to be construed as attempted preferential assignments, and were sought to be so construed in order to avoid them by reason of such assignments being prohibited by statute. We have no such statutory prohibition in this State, and, in the case at bar, we are not considering a transaction which appears prima facie to be a mortgage. An instrument, a mortgage on its face, may be a mortgage, and it may be an assignment. A determination may be a difficult and delicate task, depending upon the particular facts of each case, and one case cannot be wholly a precedent for another. But in the case before us the first inspection discloses that the transaction was not a mortgage, and we are not confronted with the difficulty of deciding whether an apparent mortgage should be construed as an assignment. Therefore the transaction at bar was not a chattel mortgage. Again, it was not a delivery of the goods as a payment of the debt, for the bank was to receive the goods, to sell them at private or public sale, collect the proceeds, apply them upon the costs, expenses, and indebtedness, and pay the overplus to Waters.
If it were unquestioned by the parties to this litigation that the acts narrated were an assignment, what else would or could have been done that was not done? What fact could have brought the transaction more clearly within an assignment in contemplation of the wage-workers’ law? The debtor was unable to pay his debts. By reason -of that inability, he transferred at once all his property within the jurisdiction to the bank. The bank was not to hold it as security, or accept it as payment. It was to sell, collect the proceeds, to pay expenses, to pay the notes, and not await a payment by the debtor, and thus as well to save a solvent indorser on one of the notes; and, after these payments, the bank was to account for any balance *363to the debtor. What further ear-mark of an assignment could be present we fail to discover. We are of the opinion that the transaction was an assignment, within the operation of the wage-workers’ law. An instructive and a well-considered case, and a review of the authorities, we find in the Supreme Court of the late Territory of Dakota. (Straw v. Jenks, 6 Dak. 414. See, also, White v. Cotzhausen, 129 U. S. 329; Richmond v. Mississippi Mills, 52 Ark. 30; Collier v. Wood, 85 Ala. 91; State v. Dupuy, 52 Ark. 48; Wilks v. Walker, 22 S. C. 108; 53 Am. Rep. 706; Ordway v. White, 80 Ala. 244; Meinhard v. Strickland, 29 S. C. 491; Farwell v. Cohen, Ill., June 10, 1891, 28 N. E. Rep. 35.)
But it is objected by the appellant that the transaction cannot be an assignment, because it is to a creditor, who is the beneficiary. Counsel cite, as the definition of an “assignment,” from Bacon’s Abridgment, “ the transferring and setting over to another of some right; title, or interest in things in which a third party, not a party to the assignment, has a concern and interest.” He contends that an assignment cannot be to one of the creditors of the assignor, but that it can be to a third person only for the benefit of creditors. He cites the following language from Dickson v. Rawson, 5 Ohio St. 218: “ Whether it is so in trust (that is, a conveyance under consideration), and the assignee or grantee such trustee, depends upon the question whether, by the terms of the instrument, or by necessary implication, the assignee or grantee is liable to account to the creditors for the property in his hands, and for the manner in which he disposes of it.” But the opinion from which the foregoing is quoted goes on at once to say: “If a court of chancery, at the instance of the creditor, would compel him thus to account, the character of the transaction and his own position are thereby determined; and the statute then steps in, and enlarges the trust, and makes it inure to the benefit of all the creditors, and distributes the fund to all, in proportion to their respective demands.”
So, adapting the language of the Ohio case to the case at bar, the court, “ at the instance of the creditor,” the wage-worker in this case, compels the bank to account, and the character of the transaction is determined, and the wage-workers’ statute steps in and makes the transaction inure to the benefit of the wage-*364worker. The instrument itself does not declare the trust, but the statute and the law construe it into the transaction.
Appellant does not cite authorities to the effect that a creditor may not be the assignee in an assignment for the benefit of creditors, but he argues his conclusion from cases that have held that a particular transfer in controversy to a creditor was not an assignment, but a mortgage, or a payment, or something other than an assignment.
We do not understand that it is the law that one of the creditors may not be an assignee. (Burrill on Assignments, p. 66, and cases cited; also 1 Am. & Eng. Encycl. of Law, p. 851, cases in note 4; also Ordway v. White, Straw v. Jenks, and other cases supra.)
In Flanders v. Murphy, 10 Mont. 398, we have held views of which those now expressed are a confirmation. This second consideration of the application of the wage-workers’ law satisfies us that cases arising thereunder must stand upon their own particular facts. It is a law which is liable to attempts at evasion; not suggesting, however, that the case at bar is such an attempt. But herein, as in Flanders v. Murphy, we are of opinion that the, facts fully warrant the application of the wage-workers’ lien. And so all cases must be decided upon a diligent and patient inquiry into the particular facts.
That statute was enacted for a purpose. Wage-workers were not a well-protected class of creditors. No class contributes more directly to the fund from which the debtor satisfies his creditors; and their contribution extends, usually, to the moment of the crisis between' debtor and creditors. They are the least likely or able to attach their employer, or precipitate his business failure. They are not among the vigilant and oppressive creditors. It would seem that, by reason of these considerations, the law has treated them tenderly; and we must construe that statute so as to secure the accomplishment of its intent. Any other view of the case at bar than the one we have adopted would leave the door wide open for the failing debtor and his pursuing creditor to set at naught the wage-workers’ law by indirection, where they would not attempt to do so directly.
The judgment of the District Court is affirmed.

Affirmed.

Blake, C. J., and Harwood, J., concur. '