Court Opinion

ID: 7102268
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:16:57.678325+00
Date Added: 2024-06-11T16:13:27.002590
License: Public Domain

Reed, J.
The first question which we will consider is whether the chattel mortgages to Baker, Jones and Harrod, and the assignment of the accounts to Briscoe, amounted, in effect, to an assignment for the benefit of creditors. If they did. the assignmeiit is clearly invalid, for the reason that it was not made for the benefit of all of the creditors in proportion'to the amount of their respective claims. Code, § 2115. As stated above, those instruments were all executed at the same time. They covered all the assets of the firm of Morris & Humphreys, and that firm was insolvent when the instruments were executed. Baker was an employe of the firm, and the indebtedness to him was for money loaned to the firm, and for wages due him. One member of the firm contemplated selling his interest in the business and property of the partnership. Baker knew this, and he demanded that the amount of liis debt should be paid or secured before any change should be made, and the mortgage to him was given in obedience to this demand. The indebtedness to Jones was also for borrowed money. He was informed that the firm was about to secure Baker, and he insisted that his debt should also be secured, and the members of the firm accordingly consented to give him a mortgage on the merchandise in the store. Neither Harrod nor Briscoe was present at the time of the transaction, nor did *609they know tliat any of the creditors were demanding security for their debts. One Ed. Jones, a relative of ITarrod, was present at the time, and knew that Baker and defendant Jones (who is his brother) were demanding security. He liad been making an examination into the affairs of the firm, with the view of purchasing the interest of the partner who desired to retire, and he appears to have had a better understanding of the condition of the business of the firm than either of the partners had. He also knew of Briscoe’s liability as surety on the note to the bank, and he insisted that Harrod’s debt should be secured, and that Briscoe should be indemnified against his liability on said note; and the mortgage to Harrod, and the assignment of the accounts to Briscoe, were executed in obedience to this demand. He did not have authority from either Harrod or Briscoe to act for them in the matter, nor did he claim to have any such authority. He, however, took possession of the mortgage to Harrod after it was executed, and claims to have taken possession of the property under it.
In determining the legal effect of the instruments, it is important to ascertain the intention with which they were executed. The creditors of Morris & Humphreys had no interest in or lien upon the property of the firm. The jus disponendi was in the members of the partnership. They had the legal right to pay or secure any one or more of their creditors, and their right in this respect was not at all affected by the fact that they were insolvent. Nor does the fact that the whole of their assets was devoted to the payment or security of but a' portion of the debts that they were owing afford any ground of complaint to those creditors whose debts were unsecured. If, then, they executed the instruments with the bona fide intention of securing the mortgagees, and of indemnifying Briscoe against his liability on the note to the bank, the law will not give to their act a different character from that intended. This has been the uniform holding of this court in similar cases. See Fromme v. Jones, 13 Iowa, *610480; Lampson v. Arnold,, 19 Id., 479; Farwell v. Howard, 26 Id., 381; Kohn v. Clement, 58 Id., 589; Cadwell’s Bank v. Crittenden, 66. Id., 237. Without setting out the circumstances attending the execution of the instruments with more particularity than is done above, we deem it sufficient to say that the evidence satisfies us that the only purpose which Morris & Humphreys had in view when they executed the mortgages and assignment was the securing of the debts they were owing to Baker, Jones and Harrod, and the indemnifying of Briscoe against liability on said note. They executed the instruments in obedience to the demands made upon them for security and indemnity, and there is on reason for supposing that they intended any other result than the creation of such security and indemnity.' We think, therefore, that the circuit court erred in holding that the instruments were in legal effect an assignment for the benefit of creditors.
II. The deed of general assignment to Parry was executed within one hour after the execution of the chattel mortgages and the assignment to Briscoe. Plaintiffs contend that the execution of all the instruments constituted but one transaction, and that the “whole transaction amounted to an assignment for the benefit of creditors, — each of the instruments being part of the assignment, — and that such assignment is invalid, for the reason that a preference is given to the secured creditors. This claim, however, is not sustained by the proof. The undisputed evidence is that Morris & Humphreys did not contemplate making a general assignment when they executed the other instruments, but that they determined to make an assignment when advised, after the execution of the mortgages, that the recording of those instruments would probably have the effect to cause their unsecured creditors to institute attachment suits against them. In this respect the case is similar in its facts to Perry v. Vezina, 63 Iowa, 25; Farwell v. Jones, Id., 316.
III. Morris & Humphreys assured Briscoe, when he *611became surety for them on the note to the bank, that they would protect him against the same. But there was no agreement that he was to be indemnified in any particular manner against the liability he incurred by signing it. When the assignment of the accounts was executed, it was taken possession of by Jones, the person at whose suggestion it was made. As stated above, Jones had no authority from Briscoe to act for him in the transaction. In doing what he did about the matter, he was performing a friendly act in Briscoe’s behalf. But he was in no position to bind him by any thing he did in the transaction. After he secured the assignment he took possession of the books in which the accounts were kept, and delivered them, together with the assignment, to Briscoe. But before this delivery was made the deed of general assignment had been executed, and the assignee had qualified and taken possession of the merchandise in the store. We are of the opinion that Briscoe acquired no rights under the assignment of the accounts. Delivery of the instrument was essential to give it validity and effect. The delivery to Jones was not a delivery to Briscoe; for, as we have said, he had no authority to bind him by accepting it. Morris & Humphreys could not be divested of the property by the instrument until it was accepted by Briscoe. But, before such acceptance by him, they executed the deed of general assignment, and the effect of that instrument was to pass to the assignee, for the benefit of their creditors, all the property of which they were seized at the time it was executed. Code, § 2117. The case, in this respect, is governed by the rule laid down in Day v. Griffith, 15 Iowa, 104.
The facts with reference to the execution of the mortgage to defendant Harrod are the same as those with reference to the assignment to Briscoe. There was no delivery or acceptance of the mortgage until after the deed of general assignment was executed, and the assignee had qualified and taken pos*612session of the property. Iiarrod, therefore, acquired no right under it which can be asserted against tbe assignee.
On tbe appeals of plaintiffs and the defendants Briscoe and Iiarrod, the judgment will be affirmed. On tbe appeal of defendants Baker and Jones it will be reversed.