143 P. 1178 | Idaho | 1914
The respondent is a corporation engaged in the business of selling lumber and building material in the city of Boise, Idaho, and had been so engaged for a long time prior to the commencement of said action. Hezekiah Saunders for some years before July 1, 1912, had been a builder and contractor in said city and was at that time engaged in said business, and on account of lumber and other building -materials purchased he became largely indebted to the plaintiff corporation, so that as found by the lower court the defendants, Hezekiah Saunders and Lucy Saunders, were indebted to the plaintiff in the total sum of $3,077.21 on July 1, 1912. Said Lucy Saunders is the wife of defendant Hezekiah Saunders. For the purpose of securing this indebtedness as contended by respondent, said Hezekiah Saunders and his wife, Lucy Saunders, on July 2, 1912, executed and
A number of very interesting legal questions are submitted by the briefs and arguments of counsel, and we have therefore given them as careful consideration as our time would afford. The appellants’ brief shows much research and care in its preparation, and in deciding the ease we find it logical and convenient to consider the points of argument on the several questions presented as arranged in the brief. There are eight alleged errors presented, based upon findings of the court at the trial, but these are included in and presented quite fully by the four points of argument urged as grounds for the reversal of said judgment, which are as follows:
(1) “The deeds in this ease from the insolvent Saunders to the Capital Lumber Co. were not intended to be or to operate as mortgages.”
(2) “This transaction was a voluntary assignment by an insolvent debtor to two creditors with a secret interest reserved for himself.”
(3) “Such an assignment as made by Saunders was illegal and void as to the other creditors of Saunders under section 5932, Idaho Revised Codes; and
Appellants in support of the first point presented quote sec. 3388, Rev. Codes, which defines a mortgage as follows: “A mortgage is a contract by which specific property is hypothecated for the performance of an act without the necessity of a change of possession,” and also sec. 3391, Rev. Codes: “Every transfer of an interest in property other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by an actual change of possession, in which case it is to be deemed a pledge.” In applying these sections to this case, it is urged that by the general rule of law and by these statutes, the instruments in question must have béen given for the performance of an act, and that these instruments do not provide that Saunders shall perform any act or pay any money.
Sec. 3388, supra, gives a very concise definition of a mortgage, and by this definition we are unable to say that these instruments are not mortgages. In the transaction of business it often happens that a mortgage is given to secure a debt already incurred, and even in such case no act on the part of the mortgagor is required for its consideration: it would of course require an act, that is, the payment of the consideration to release it. But suppose the instrument, though in fact given to secure an existing debt, be in form a deed, as our statute declares it would be only a mortgage, the actual result as to the remedy is the same as if it had been in the usual form of a mortgage. However, sec. 3391, supra, and sec. 3392 we think bear directly upon this point, the last named section being as follows:
“The fact that a transfer was made subject to defeasance on a condition, may, for the purpose of showing such transfer*414 to be a mortgage, be proved (except as against a subsequent purchaser or encumbrancer for value and without notice), though the fact does not appear by the terms of the instrument. ’ ’
The testimony shows and the court below found that “ plaintiff demanded security for the debt due it, and the defendants, Hezekiah Saunders and Lucy Saunders, elected to furnish security in the form of deeds instead of in the form of a mortgage without plaintiff’s knowledge or consent, .... and that said deeds, as to the answering defendants and all the world, are valid and tona fide; that they were not executed and delivered to plaintiff in virtue of any secret agreement, scheme, or plan to hinder, delay or defraud any creditor or creditors of the defendants Hezekiah Saunders and Lucy Saunders, but were given solely to secure the said claim of plaintiff.”
But this court had this question before it in Kelly v. Leachman, 3 Ida. 392, 29 Pac. 849. In that case the deed and assignment to reconvey were held to be a mortgage. In Brown v. Bryan, 6 Ida. 1, 51 Pac. 995, the court held a trust deed to be a mortgage, and announced the broad doctrine that “any hypothecation of property made by the debtor by his own voluntary act, as security for the payment of a debt which he owes to his creditor, whether made with or without the intervention of a third party as trustee, is, under the statutes quoted above, a mortgage, and to be so regarded and treated, whether the instrument by which such property is hypothecated is called a mortgage, deed, or trust deed, irrespective of its form or provisions.” And then the test of a transaction of this kind is given as follows: “If a transaction resolves itself into a security, whatever may be its form and whatever name the parties may choose to give it, it is in equity a mortgage.”
Again, in the recent case of Bergen v. Johnson, 21 Ida. 619, 123 Pac. 484, it was held that, “Where an instrument in writing in the form of a deed or conveyance is executed and delivered as security for a debt, such instrument becomes a mortgage and not a deed, notwithstanding the form of the
The next point presented, that the transaction was a voluntary assignment by an insolvent debtor with a secret interest reserved for himself, will now be considered. The first authority cited in support of this point is White v. Cotzhausen, 129 U. S. 329, 9 Sup. Ct. 309, 32 L. ed. 677. An examination of this ease shows that the Illinois voluntary assignment act was then in force, and the supreme court of the United States, was dealing with the provisions of that act in deciding the case. It will be found by an examination of this voluntary assignment act that it is similar to the proceedings in insolvency of this state and other states that had insolvency or bankruptcy laws prior to the enactment of the national bankruptcy law. For this reason White v. Cotzhausen cannot be accepted as authority in the ease at bar, but even in the opinion in that ease Mr. Justice Harlan says: “We would not be understood as contravening the general principle, so distinctly announced by the supreme court of Illinois, that a debtor, even when financially embarrassed, may in good faith compromise his liabilities, sell or transfer property in payment of debts, or mortgage or pledge it as security for debts, or create a lien upon it by means even of a judgment confessed in favor of his creditors.” But he adds that when a debtor is hopelessly insolvent, he will not be permitted to evade the statute by a preference in favor of only a part of his creditors and leave the others with no share in his estate. But in this he was simply construing said assignment act.
In Northern National Bank v. Weed, 86 Wis. 212, 56 N. W. 634, the decision was controlled by the statutes of Wisconsin then in force, and cannot be authority in this case. We have not had time to carefully examine the many other authorities cited by appellants in support of their second point, but all those that we have glanced over seem to have been controlled by the statutes of the states where they were tried,
The third point presented by appellants is that such an assignment as they allege the one made by Saunders to respondent to be, was illegal and void as to his other creditors under sec. 5932, Rev. Codes. This raises a very interesting question, and one that has never been passed upon by this court, and we have found no authority that we regard as directly in point from other states. Under the common law, a debtor in failing circumstances could convey or assign his property to one creditor, notwithstanding it might work a preference in favor of such creditor and leave other creditors unpaid. The alert and diligent creditor might secure his debt as a reward for his diligence, and wherever the rights of creditors in this respect have been restrained or entirely taken away, it has been by statute, and in derogation of the common law. “By the common law a debtor has an absolute right to prefer in payment one creditor over another, and such a preference, in the absence of fraud, is perfectly valid
The right of an insolvent debtor to prefer one or more creditors over others seems to have been directly passed upon by this court in Wilson v. Baker Clothing Co., 25 Ida. 378, 137 Pac. 896, 50 L. R. A., N. S., 239. In that case it was held that, “An insolvent corporation is not prohibited by the statutes of this state from preferring certain creditors over others in the due course of business where such preference is not eollusively or fraudulently made. A corporation, although insolvent, holds its assets just as a natural person holds his property, with the same power to dispose of it to secure or pay its debts, and neither a private person nor a
Having held that the deeds in controversy were mortgages, it follows that they are not assignments within the meaning of said section 5932, as they could not be both mortgages and assignments at the same time. But, assuming that said deeds were in fact assignments, then said section is suspended by the national bankruptcy law.
It occurred to us in reading said section that the phrase “provided in this title” is somewhat significant. The title referred to is title 12 of the Idaho Revised Codes, which contains the complete proceedings in insolvency of this state. Now, it may be interesting to inquire whether or. not a section of an act which in order to be enforced must be assisted by, and taken in connection with, other sections of an entire act upon one specific subject or proceeding, in order to have its force and effect, can be detached from the other sections of the act and invoked as a remedy when the other sections thereof are suspended. Prior to the passage of the national bankruptcy law of July, 1898, said section 5932 was in force, because the insolvency law of this state of which it. is a part was in force, and the deeds involved in this case would have been illegal and void as against the creditors of Saunders under said section, regardless of the question whether said deeds were otherwise made in good faith and without any intent to hinder, delay or defraud his other creditors. And this brings before this court the important and somewhat novel question as to whether the enactment of the national bankruptcy law ipso facto suspended our state insolvency law including said section. The provision of the constitution of the United States conferring upon Congress the power “to establish uniform laws on the subject of bankruptcies throughout the United States,” of necessity constitutes any act of Congress passed upon that subject the supreme law of the land, and it was determined by the courts at an early day that a national bankruptcy law suspended and superseded the operation of any and all state insolvency laws whenever there was a conflict between them.
It will be observed that a clear distinction is drawn between proceedings under a general insolvency statute of a state and one that simply permits and regulates general assignments for the benefit of creditors. This distinction between a state insolvency statute and a statute permitting and regulating general assignments for the benefit of creditors is clearly pointed out in In re Sievers, 91 Fed. 366. In that case, which was in Missouri, the contention hinged on the question as to whether the national bankruptcy law suspended the voluntary assignment statutes of the state, and the court on this subject said:
“Concerning these different contentions, it appears to me that there is a substantial difference between a proceeding under a general -insolvency statute and one under a statute permitting general assignments. The one administers upon the estate of an insolvent as a proceeding in the courts, derives its potency from the law, winds up the estate judicially, and discharges the debtor. Such is essentially a proceeding in bankruptcy, and such is undoubtedly superseded by the act of Congress in question.....It results from these views that, while proceedings under the insolvency laws, as such, are now void whether proceedings in bankruptcy follow or not, proceedings under the general assignment laws of states, like Missouri, or under the common-law deed of assignment, are not void or voidable, unless proceedings in bankruptcy are subsequently instituted.”
We think it will be found on examination of the later authorities cited by appellant that these are in line with the case of In re Sievers as to the distinction there pointed out between the insolvency statutes of a state and statutes regulating general assignments. The cases cited by appellant that date prior to the enactment of the national bankruptcy law, such as the early California cases, dealt entirely with
“As soon as the assignee is appointed and qualified, the clerk of the court must, by an instrument under his hand and seal of the court, assign and convey to the assignee all the estate, real and personal, of the debtor, with all his deeds, books, and papers relating thereto, and such assignment relates back to the commencement of the proceedings in insolvency, and by operation of law vests the title to all such property and estate, both real and personal, in the assignee. Such assignment vests in the assignee all the estate of the insolvent debtor not exempt by law from execution, subject to the lawful and bona fide liens and encumbrances thereon.”
This is the only part of the act that provides for the assignment of a debtor’s property, and this is made by operation of law through the clerk of the court, not by the debtor himself; thus it will at once be seen that said section is a vain and useless thing, without purpose or power, unless taken as a necessary part of the state insolvency law.
Counsel for appellants in his argument suggested that as this is an equity case, this court should take a broad and equitable view of the matter and endeavor to do substantial
The fourth and last point of the argument of counsel for appellants is addressed to specifications of errors numbers 7 and 8, and these are based upon sections 3169 and 3168, Rev. Codes. It is urged as to said see. 3169 that the mere execution, delivery and placing on record of the deeds in question without a defeasance rendered them fraudulent, per se, and that the trial court had no right to hear evidence or make findings of fact as to the intent with which they were made. But without going into a lengthy review of the numerous authorities cited on this point by the brief of appellants, we think sec. 3171, Rev. Codes, determines this contention:
“In all cases arising under the provisions of this title, except as otherwise provided in the last section, the question of fraudulent intent is one of fact, and not of law; nor can' any transfer or charge be adjudged fraudulent solely on the ground that it was not made for a valuable consideration.”
But counsel for appellants attempts to evade this section by urging that sec. 3169 makes a transfer of property void when “taken with intent to delay or defraud,” and that intent to delay is not within the purview of skid sec. 3171. But we think the word “delay” would have been out of place and incongruous in that section. While there may be certain acts, the mere commission of which would be a fraud per se, we are not advised of any authority that imports damage or injury to delay of any kind- as a question of law.
The judgment is affirmed, with costs to respondent.