William B. Grimes & Co. v. Farrington Bros.

| Neb. | Jan 15, 1886

Reese, J.

These cases being argued and submitted together and presenting the same questions will be disposed of in the same way. The questions presented by the brief of plaintiffs in error will be noticed in the order in which they there occur therein.

Certain attachments were issued from the district court of Richardson county in actions brought by plaintiffs in error, which were, upon motion of defendants in error, discharged by the order of the judge of the first judicial district. This ruling of the district judge is assigned as error, and is brought to this court for review. The affidavits upon which the attachments were issued allege and charge, in substance, that defendants in error had.assigned and disposed of their property with the intent to defraud their creditors, and that they were about to convert the remainder of their property into money with the intent to defraud their creditors. Defendants in error moved to discharge these orders upon the ground that the facts stated in the affidavits were insufficient in law to authorize the issuance of the orders, and that the facts stated in the affidavit were untrue. The ruling of the court was evidently based upon the latter ground. The facts, as shown by the proofs submitted to the lower court, were, that defendants in error were merchants in Falls City, carrying a stock of goods of the value of from $14,000 to $18,000, and that they were indebted to various persons and firms to the amount of about $11,000. That certain of the creditors who resided in the city of Chicago, and representing about $9,000 of the indebtedness, were pressing defendants in error for payment or security, when they executed and delivered to them a chattel mortgage on their stock of goods, and under which the mortgagees took possession. The attachments followed.

The fraudulent intent which it is claimed existed at the time of the execution of the mortgage is not proved by any direct testimony, but it is claimed that the circumstances surrounding the transaction clearly indicate such intent. These circumstances consist in part in the facts that the goods were not removed from the store; that one of defendants in error remained in the store, apparently in charge, or at least partially so; that defendants in error refused to secure the debts due plaintiffs in error either by turning over to them a part of the goods or by the execution of mortgages subject to that held by the Chicago creditors; and by the fact that goods were purchased of plaintiffs in error a short time before the execution of the mortgage, and that- the property mortgaged exceeds in value the amount of the debts secured.

Upon the other hand this intent is denied, and the positive denial under oath of defendants in error, as well as of the agent of the creditors who procured the mortgage, the fact that the debts secured were bona fide debts, that the property was put into the hands of the mortgagees, who took possession and control of them, placing the agent in charge as cashier, and hiring one of defendants in error as clerk at the agreed wages of $15 per week, are relied upon to repel any presumption of fraudulent intent which might be relied upon by plaintiffs in error. These questions were submitted to the district judge upon the hearing, and in view of the fact that the burden of proof rested upon plaintiffs in error, the intent having been denied, we cannot say the decision was wrong.

It is claimed that when defendants in error executed the chattel mortgage to the creditors named therein, it was done in contemplation of their insolvency, and with the full intention by them to make a final disposition of all their property, quit business, and dissolve the partnership, and that-therefore the mortgage was equivalent to an assignment by which certain creditors were preferred, and was therefore void in law. Much is said in support of this theory. We grant that were the legal effect of the mortgage as claimed, then the position assumed by the plaintiffs in error would be unassailable, for the assignment law of this state — chap. 6, Comp. Stats., 1885, § 29 — specifically declares that such assignments shall be void. But we cannot see that the legal effects claimed by plaintiffs in error necessarily follow. It has been repeatedly held by this court, and is the settled law of this state, until changed by legislative enactment, that a debtor in failing circumstances, has the right to prefer bona fide creditors, and may secure such to the exclusion of others. Nelson v. Garey, 15 Neb., 531" court="Neb." date_filed="1884-01-15" href="https://app.midpage.ai/document/nelson-v-garey-6644098?utm_source=webapp" opinion_id="6644098">15 Neb., 531. Bierbower v. Polk, 17 Id., 268. But it is said that the decisions of this state were made before the present assignment law took effect, or rather, the events out of which the actions arose occurred before that time and under the assignment law of 1877. This is true, but the fact remains that these holdings did not depend upon the assignment law of 1877. See Bump on Fraudulent Conveyances, 183, et seq. Wait on Fraudulent Conveyances, § 390, et seq. Kerr on Fraud and Mistake, 212. This rule has never been changed in this state by legislative enactment, and we know of no reason why it should. It is true that an assignment of property for the benefit of creditors must, under section 29, supra, be without preferences. But where no assignment is made the rule does not apply. Neither can it be maintained that the mortgage executed by defendants in error is an assignment as claimed by plaintiffs in error. There was no attempt to make an assignment. It was a transfer of property to secure specific debts. The effect of the preference may be to delay other creditors, but if the motive is to secure or pay the preferred debt, it being bona fide, the transaction is not fraudulent.

Plaintiffs in error also contend that the value of the mortgaged property being greater than the debt secured, is an indication of fraud, or at least works a fraud upon them. The extent of the discrepancy between this value and the amount of'the debt secured, was a question of fact upon which the judgment of the lower court was taken. The debts amounted to $9,051, and the court might have found from the testimony that the value of the goods was $14,390. If he did so find, we cannot hold that this would be in law such a fraud upon the rights of plaintiffs in error as would render the transfer invalid. If it became necessary to foreclose the mortgage and sell the property at forced sale, the residue might not, and probably would not, be great after paying the debt and the necessary expense of the foreclosure.

In the ruling of the court upon this part of the case we see no error.

It is next contended that defendants in error have no*standing in court which will permit them to question the attachments. That according to their own theory they were not in possession of the goods at the time of the levy and are not entitled to t he possession of them. This might, perhaps, be sufficiently answered by saying that since plaintiffs in error have levied upon the property as the' property of defendants in error, and insist that it does belong to them, they might not be heard now to say that plaintiffs in error have no such interest in it as would permit them to defend against the attachment. But, however that may be, it is plain that under the provisions of section 235, et seq., of the civil code, the defendant in an attachment proceeding may, at any time before judgment, move to discharge an attachment which has been issued against him and is levied upon property in which he claims an interest. While in this case defendants in error were not entitled to the possession of the property levied on, yet they clearly had an interest in it, subject to the mortgage, which they had the right to protect. The cases cited by plaintiffs in error upon this point are not in conflict with this view.

The order of the district court discharging the attachment is affirmed.

JUDGMENT ACCORDINGLY.

The other judges concur.