Court Opinion

ID: 9865223
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:27:29.889002+00
Date Added: 2024-06-11T12:37:56.370142
License: Public Domain

*12Mr. Justice Butleb,
dissenting.
For reasons stated in this opinion, the judgment, it seems to me, should be reversed.
Laura A. McMinn sued Mark Harrison, claiming* that she, as mortgagee, has a lien-upon certain money, the proceeds of a sale by him of mortgaged property. The Davis Brothers Drug Company, a general creditor of R. H. and Helen A. McAtee and assignee of the claims of other general creditors, intervened and contested Mrs. McMinn’s claim. The trial court rendered judgment in favor of Harrison and the drug- company and against Mrs. McMinn.
Mrs. McMinn sold a drug store to the McAtees. Part of the purchase price was paid in cash, and the payment of the balance was secured by an instrument which was admitted by all parties and held by the trial court to be a chattel mortgage, and which shall be referred to as such. The mortgag-e was not aeknowledg-ed. It covered the stock of merchandise and the fixtures, and permitted the McAtees to remain in possession and to sell the merchandise in the usual course of trade. With the consent of Mrs. McMinn, the McAtees carried on business in the usual way. Part of the money received from the sales of the merchandise was used to replenish the stock, part was paid on account of the mortgage debt, and part was used by the McAtees to pay their living- expenses. In such circumstances the mortgage is valid between the parties, but void as to innocent purchasers or encumbrancers for value, if there are any such. While the mortgage was still in force the McAtees executed an instrument referred to in the majority opinion as a general assignment to Mark Harrison for the benefit of the creditors of the McAtees. Harrison took possession. Creditors, including Mrs. McMinn, filed their claims with him. Harrison sold the property and distributed part of the proceeds among- the creditors; but he refused to recognize the validity of Mrs. McMinn’s mortgage lien, except as to the fixtures, which he delivered to her. She sold *13the fixtures for $300 and credited that amount on her claim, leaving a balance of $1,421.25 due her. Harrison refused to recognize her mortgage lien on the stock of merchandise, and the trial court held with him.
It is contended that Harrison is an assignee- for the benefit of creditors; that as such he is in the- position of a bona fide creditor for value-, and that, because of the infirmities noted above, the mortgage, though valid between the parties, was void as to Harrison. That contention is unsound.
1. First, consider the case- on the supposition that the instrument is a general assignment for the benefit of creditors. Where such an assignment is made in compliance with the assignment statute (C. L. §6242), title to the assigned property, by virtue of the- express terms of the statute, vests in the- assignee “in trust for the use and benefit of such creditors.” If the instrument involved herein were a statutory assignment for the benefit of creditors, the mortgage would be void as against the assignee and the creditors represented by him. Clark v. Bright, 30 Colo. 199, 69 Pac. 506. But in the present case the statute was not complied with. That would not render the assignment void. It would be valid as a common-law assignment for the benefit of creditors, and would be controlled by the law applicable to such assignments. Damaskus v. McCarty-Johnson Co., 88 Colo. 279, 295 Pac. 490. By the great weight of authority, an assignee in a common-law assignment for the benefit of creditors does not represent the creditors, but only the debtor. He is not in the position of a bona fide purchaser for value. He stands in the shoes of the debtor, and takes only the interest that the debtor had at the time of the- assignment. He succeeds only to such title as the debtor had, and takes no higher or better rights. Whatever claim to the property may be asserted against the debtor may also be asserted against the assignee-. Wells v. Schuster-Hax Nat. Bank, 23 Colo. 534, 48 Pac. 809; Taub v. McClelland-Colt Commission Co., 10 Colo. App. 190, 51 *14Pac. 168; 2 R. C. L. p. 656, et seq.; 5 C. J. p. 1188, et seq.; 11 C. J. p. 577.
The difference between the status of an assignee in a statutory assignment for the benefit of creditors and that of an assignee in a common-law assignment for the benefit of creditors is based upon a substantial reason. A debtor who makes a statutory assignment is released from all liability to his creditors, though the proceeds realized from the sale of the property assigned may be but a small percentage of the assignor’s debts; but in case of a common-law assignment the property is sold and the proceeds are paid pro rata to the creditors, and credited upon the indebtedness, and the assignor continues liable for the balance remaining unpaid. In the former case the assignee stands in the position of an innocent purchaser for value; in the latter he does not.
At the time of the execution of the instrument the McAtees owned the property encumbered by the mortgage. That encumbered interest, and that interest only, could pass to Harrison by a common-law assignment. Assuming that the instrument in question is a common-law assignment, the mortgage, being enforceable against the McAtees, is enforceable against Harrison.
2. The Davis Brothers Drug Company and those who assigned their claims to it are mere creditors. They are in no better position to question the validity of the mortgage than an assignee for the benefit of creditors would be. General creditors are not “creditors or third persons,” within the meaning of the Chattel Mortgage Act (C. L. c. 107). Glass & Bryant Mercantile Co. v. Farmers State Bank, 83 Colo. 193, 265 Pac. 682; Bogdon v. Fort, 75 Colo. 231, 225 Pac. 247; Brug v. Herbst, 78 Colo. 128, 239 Pac. 868; Morse v. Morrison, 16 Colo. App. 449, 66 Pac. 169.
3. The fact that Mrs. McMinn filed a claim with Harrison did not constitute a waiver of her mortgage lien or of her preference by virtue thereof, or an estoppel to claim her mortgage preference. Peterson v. Bergman *15Cabinet Mfg. Co., 145 Wash. 664, 261 Pac. 381; note, 55 A. L. R. 993. Nor did the fact that she did not for over one year insist upon her mortgage preference constitute a waiver thereof or estop her from asserting’ her preference.
4. Thus far this opinion has proceeded on the theory that the assumption in the majority opinion that the instrument in question is in effect a general assignment for the benefit of creditors is sound. But that assumption, it is respectfully submitted, is erroneous.
In his petition for a rehearing, counsel for Mrs. Me-Minn says: “In so holding the majority of the* Court has overlooked the express provisions of the instrument under which Harrison took possession, which provides: ‘Ray H. McAtee and Helen A. McAtee * * * hereby irrevocably appoint Mark Harrison our true and lawful attorney, for us and in our name, place and stead, to take possession of * * * all goods, wares and merchandise * * * and to convert into cash either by public or private sale, * * * and to apportion the proceeds ratably among all our creditors * * V The holding of the majority of the Court is directly contrary to the Court’s holding in Kinney v. Mercantile Co., 76 Colo. 136, where this- Court said of a similar instrument: ‘Boulter, a grocer, became insolvent and gave Kinney a power of attorney to * * * sell all his property and distribute the proceeds, pro rata, among his creditors. * * * The plaintiff in error (Kinney) then was a mere agent with authority to sell and his possession and acts were the possession and acts of his principal, Boulter.’ * * * The conclusion is inescapable that the Court has either overlooked or misapprehended the form, language and effect of the instrument involved in the case at bar, or else have overlooked or intends to overrule Kinney v. Mercantile Co., supra. If the latter is intended we submit that the Court should so state, so that the profession will be advised that they may no longer rely on the authority of -that case.”
*16It seems to me that counsel’s point is well taken. The instrument is not an assignment for the benefit of creditors or for any other purpose, but is a mere power of attorney. It does not assign the property or purport to transfer or convey the title to Harrison. Title did not pass to him. Harrison is not an assignee in any sense of the word, but an agent of the McAtees, with power to act for them and in their names. His possession is the possession of the McAtees; his acts are their acts. Kinney v. Yoelin Brothers Mercantile Co., 76 Colo. 136, 230 Pac. 127. The mortgage, being enforceable against the McAtees, necessarily is enforceable against their agent, Harrison.
5. Counsel for Harrison and the drug company contend that there was a compromise agreement whereby Mrs. McMinn was to have the fixtures and waive her claim as to the rest of the property covered by the mortgage, and that she received the fixtures under that agreement. Where a' doubtful or disputed claim to property is asserted in good faith, it is sufficient to support a compromise agreement. Holy Cross Gold Mining & Milling Co. v. Goodwin, 74 Colo. 532, 223 Pac. 58; 5 R. C. L. p. 881. As to whether there was such an agreement, the evidence was in conflict. The court found “that at all times after said assignment all the parties hereto expressly recognized that the plaintiff [Mrs. McMinn] Was the owner of the fixtures therein mentioned.” As Harrison and the drug company, according to the finding of the court, made no claim to the fixtures, and her right thereto was not disputed, there was no basis for a compromise. The agr eement, if made, was without consideration and was void. 5 R. C. L. pp. 881, 882.
The judgment should be reversed.
Mp,. Justice Moore and Mr. Justice Hilliard concur in this opinion.