Mills v. Williams
Philo L. Mills v. J. V. Williams
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Summary
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Opinion of the Court
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Philips, P. J.
I. The ' chief question presented for our determination is, what is the legal character of the written instrument % Is it a bill of sale, a chattel mortgage, or a deed of assignment ?
It is not a bill of sale, because no actual consideration was paid, or agreed to be paid, for the property conveyed ; nor were the debts thereby extinguished, so as to irrevocably pass the title, without any condition or trust attached thereto, or any reversionary interest in the seller.
It is either a chattel mortgage, or a deed of assignment. It is made by a debtor to creditors, the consideration being the existing debts ; and the conveyance is coupled with a trust to be kept and performed by the grantees, as a means of accomplishing payment of said debts; and there would, by equitable implication, arise a reversionary right in the grantor to any surplus after satisfaction of the debts out of the property conveyed.
II. In some respects this, deed is unique. To define its exact character and determine whether it should be assigned to the class of chattel mortgages or deeds of assignment is by no means free from embarrassment. Viewed as-a chattel mortgage, it is peculiar in many *458 respects. Nowhere does it, in terms, declare that it is given to secure the payment of the designated debts ; nor does it provide for, nor contemplate the exercise of the right by the grantor to defeat the sale of the property conveyed by paying off the debts, otherwise than by a sale of the property ; nor does it seem to anticipate that any residue might remain for the grantor; or provide for the reversion. These are certainly the usual incidents of a mortgage.
On the contrary, the debts of the grantor are only named as the consideration of the conveyance; the transfer, in terms, is absolute, with no clause of defeasance on performance by the grantor. The grantees, by designated agent, are to take immediate and absolute control and possession of the property,, and proceed unconditionally to sell the same, and distribute the proceeds among the designated creditors.
It possesses, therefore, the qualities and characteristics of a conveyance in trust to pay debts, rather than a c onveyance as a security for debts.
The authorities all concur in holding that one of the distinguishing characteristics of a mortgage is, that it purports to be a security for debt. Jones' Chat. Mort., secs. 1, 34; Jones on Mort., sec. 60; Harris v. Jones, 83 N. C. 321 , 322, and loc. cit.
In Crow v. Beardsley, 68 Mo. 438 , the language oi Burrill on Assignments is approved, that an assignment is a conveyance to a trustee for the purpose of raising funds to pay a debt, while a deed of trust in the nature of a mortgage is a conveyance in trust for the purpose of securing a debt subject to a condition of defeasance.
So in the recent case of Smith & Keating Implement Co. v. Thurman, 29 Mo. App. 186 , we have said: “A mortgage is a conveyance of an estate by way of a pledge, for the security of a debt, to become void upon payment of it, or a conditional conveyance of land designed as security for the payment of money, the fulfilment of some contract, or performance of some other act, and to be void upon such payment or performance.”
*459 III. The essential qualities of a deed of assignment are, that it is a transfer of property by a debtor, supposed to be in insolvent circumstances, to an assignee, in trust to apply the same to the payment of debts. The object is to raise a fund to pay the debt. The conveyance does not satisfy the claim to any extent, but merely provides a method for raising the means with which to pay. The title of the property passes, eo instanti, to the trustee ; it is divested out of the debtor, without any equity of redemption. The trustee takes it, however, subject to the uses of the creditors. Authorities supra; Burr, on Assign., secs. 2, 4, 6.
This distinction is aptly put in Hoffman & Co. v. MacKall, 5 Ohio St. 130: “There is a manifest and well-settled distinction between an unconditional deed of trust, and a mortgage or deed of trust in the nature of a mortgage. The former is an absolute and indefeasible conveyance of the subject-matter thereof, for the purpose expressed; whereas the latter is conditional and defeasible. A mortgage is the conveyance of an ’estate, or pledge of property, as security for the payment of money, or the performance of some other act, and conditioned to become void upon such payment or performance. A deed of trust in the nature of a mortgage is a conveyance in trust by way of security, subject to a condition of defeasance,- or redeemable at any time before the sale of the property. * * * By an absolute deed of trust, the grantor parts absolutely with the title, which rests in the grantee unconditionally, for the purpose of the trust. The latter is a conveyance to a trustee for the purpose of raising a fund to pay debts; while the former is a conveyance in trust for the purpose of securing a debt, subject to a condition of defeasance;” citing Woodruff v. Robb, 19 Ohio, 216; Hill Mort. 359. While the purpose to make a deed of assignment is better expressed by the designation of a trustee or assignee in the deed, this is not essential; but the deed may be made, as was done in this instance, to the creditors, with a designated agent of the creditors to *460 act in such capacity. Burr, on Assign., sec. 3, and notes 3 and 4. And while it is true that such conveyances are supposed to be made by persons in insolvent circumstances, and to transfer all the property of the grantor, it is not essential that the grantor should in fact be absolutely insolvent, provided he really believes himself to be unable to proceed in business ; or that the deed should in fact cover all his property. Burr, on Assign., sec. 3, p. 6; Mussey v. Noyes, 26 Vt. 474 . As said in the last-named case:_ “A general assignment must include, substantially, all a man’s property; and a partial assignment must omit some substantial portion of the property, and cannot be made to rest upon a mere colorable omission. * * * If the property omitted was'insignificant in amount, with reference to the whole, or if it was mainly beyond the reach of process, or of such a character as not readily to be made available, either to the creditors, or the debtor, and the great mass of the debtor’s available property, which constituted the basis of his business operations, and which alone could form any reliance to himself for support, or to his creditors for payment, was included in the deed, the deed should undoubtedly be regarded as a general assignment.” And this is always a matter of proof aliunde. 26 Vt. supra, 475. The evidence in this case shows that the property conveyed would bring this case within the terms of a general assignment. The conveyance actually ended the business operations of Mrs. Botts. It embraced all her available assets. The rest, either constituted a homestead, or was covered by antecedent obligations to convey. She may have had some outstanding accounts, of unascertained amount. Be this as it may, our statute applies to “every voluntary assignment of lands, tenements, goods, chattels, and 'credits made by a debtor to any person in trust for his creditors.” And it makes such conveyance, be it of all or a part of the debtor’s estate, inure to the benefit of all the creditors, pari passu. Crow v. Beardsley, supra; Douglass v. Cissna, 17 Mo. App. 44 .
*461 IY. Tried by these tests, I cannot see how this deed can be upheld a$ a chattel mortgage. . The mere calling it a mortgage by the draftsman could not make it such, any more than designating it an assignment could make it one. Kohn Bros. v. Clement Co., 58 Ia. 593. While this might evidence the intention of- the parties, and aid in the construction of a doubtful instrument, it could not prevent the operation of the expressed terms of the instrument viewed in every part. The only sentence in the deed giving any semblance to a conditional conveyance with a defeasance, is the following: ‘ ‘ Now if the said debts are paid by the sale of the goods, etc., herein transferred, as hereinafter set forth, within ninety days from this date, this mortgage to be void.” It is to be observed that this language does not contemplate that the grantor is to, or may, defeat the forfeiture and sale by discharging the debts, but the debts are to be paid by a sale of the goods, within ninety days. To add after this, “this mortgage to be void”, is a legal solecism. For how, in law and reason, could the conveyance be void after it had operated, and the trustee thereunder had actually disposed of the property to raise the means of discharging the debts ?
•Any surplus remaining after paying the debts would) by operation of law, with or without any expressed provision therefor, revert to the grantor. This condition, taken in connection with those thereafter “set forth,” shows that it was contemplated and intended that the whole of the goods should be sold, and the proceeds distributed among the creditors unreservedly and at all events.
y. We would not be understood as going so far in this discussion, as to hold, that if any appropriate language had been employed in the instrument to indicate that the conveyance was made as a mere pledge or security to secure the payment of the debts named, its character as a -mortgage would have been destroyed, merely because it authorized the mortgagee, or trustee, *462 to proceed at once to sell the property. Gage v. Chesebro, 49 Wis. 486, 491 .
That was substantially the case of Smith Imp. Co. v. Thurman, supra, though the fact was not so fully developed in the opinion, perhaps, as it should have been. The mortgage there expressly declared, inter alia : “ This conveyance is made for the purpose of securing the payment of said debts.” It also contained the condition: “Now, if said party of the first part, shall well and truly pay and discharge said debts in full, according to the tenor and effect of said notes, at any time before any or all of said property herein conveyed shall have been disposed of by said trustee, then as to said property, or the residue thereof, this conveyance shall be void,” etc.
Nothing of the sort appears in this deed. Our conclusion is, that the circuit court properly construed the instrument to operate as a deed of assignment, and to be enforced pursuant to the statute concerning assignments for the benefit of creditors.
The other judges concurring,
its judgment is affirmed.
On Rehearing
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On motion for rehearing.
Philips, P. J.
We shall make no comment on the spirit manifested in the motion for rehearing in this case. Our office is to ascertain and follow the law as we are able to understand it. We will only say that the question of law presented by the record, as to whether the deed in question was a chattel mortgage or an assignment, was an important one, and gave us much thought; and we reached the conclusion of the opinion after the most mature consideration. Reaching the conclusion as we did, in harmony with that of the learned trial judge, that the instrument was a deed of assignment, it for all practical purposes ended this controversy.
I. The criticisms made by counsel, in their motion for rehearing, on the opinion of the court, in many *463 respects, are most trivial. They go to verbal inaccuracies, or clerical mistakes in transferring the opinion to the type copy, in no manner reaching or affecting the •merits. For instance, the statement of facts is criticised because it was inadvertently stated that the amount of the plaintiff ’ s claim against Mrs. Botts was $1,500, instead of $419.93. The draftsman of the statement of facts was led into the inaccuracy by confounding the evidence of the claim outside of the deed with the sum of plaintiff’s demand. . This, however, in no wise affects the merits. And the opinion will be accordingly amended.
Again the opinion is criticised because of the clerical error in the statement of facts, that the “defendant, against the objection of plaintiffs, introduced” certain evidence. The parties were simply transposed, «tnd the opinion is accordingly corrected. But how are the defendants injured thereby ? The answer made in the motion for rehearing is, because the court did not consider defendants’ objection to the admissibility of this evidence. If, as a matter of law, as held in the opinion, the deed on its face is a deed of assignment, that evidence amounted to nothing one way or the other. But it was perfectly competent for the plaintiff to introduce evidence to show that, as a matter of fact, the property covered by the conveyance embraced all the available assets and property of the assignor, as bearing upon the question of the intent of the party in making the deed, or whether it was a general or partial assignment. So the opinion states, “ this is always a matter of proof aliunde. 27 Vt. 475 .” And even had this evidence been inadmissible, it would have constituted no reversible error, for the reason, as held in the opinion, our statute applies as well to partial as to general assignments.
II. Criticism is made of the opinion for the assertion that the conveyance by Mrs. Botts ended her business operations. ‘ ‘ It embraced all her available assets. The rest either constituted a homestead, or was covered *464 by antecedent obligations to convey. She may have had some outstanding accounts of unascertained amount.” These statements are fully sustained by the evidence of J. Gh Trimble and W. W. Fry.
III. The observations of the court touching the fact that the instrument is not a bill of sale are criticised. We can only say that we followed in this matter Burrill on Assignments, section four.
It is true that the forgiving of the debts owing by the vendor would constitute a sufficient consideration for a sale. But there is no pretense that the debts were extinguished, or any part thereof, by the transaction, or intended to be. - On its face it was a conveyance in trust to raise a fund to pay the debt, and, therefore, was not a sale. What is the purpose of counsel in this discussion, we are unable to understand. Is it to assume the position that the instrument in question is a bill of sale ? They tried the case below on the theory that it is a chattel mortgage, and so they contended on the appeal. The only other question in this connection, presented by the motion, of any merit, is the contention that the closing paragraph of the deed indicates the purpose on the part of the grantor to 'reserve the right of redemption: “It is further agreed that, if at the end of ninety clays, from this date, all of said debts are not paid, then the said Williams shall, at the request of any of the grantees herein, after giving five days’ public notice, proceed to sell said property herein conveyed, or as much as may be necessary, at auction, for cash, to pay any balance due on said debts.”
This paragraph did not escape the attention of the court. It so palpably refers to the preceding matter of the deed, as to the course to be pursued by the trustee in disposing of the goods, that we did not deem it important to prolong the opinion by its discussion. As stated in the opinion with reference to the first paragraph, respecting the payment of the debts “within ninety days from this date,” the whole deed clearly shows that the contemplation of the parties was, that *465 this payment- should be made by the trustee out of the sale of the goods. The deed then directs Williams to take immediate possession, and, first, sell for cash, at retail, at not less than first cost; second, he is authorized to sell at wholesale, at a discount not greater than twenty per cent, on first cost. This is followed by a third provision, which authorizes the trustee, “if at any time after taking possession of said store, the sales for a period of ten days shall not exceed the expenses of said business,” to sell at auction on five days’ notice. Then follows the final provision above quoted. The manifest design and clear purport of this clause was to provide that in no event should the trustee retain the goods longer than ninety 'days, if the beneficiaries should request him to sell at auction at the end of that period. When the ninety days had expired, if the-trustee had’not then realized sufficient funds out of the sales then made to satisfy the debts named, the grantees had the option to have the trustee sell at auction, for any price he could obtain, to raise the fund necessary “to pay any balance due on said debts.” This, to our mind, is the obvious meaning and intent of this paragraph ; and it is in perfect harmony with the preceding provisions of the instrument, which contemplated that the property should be taken into the immediate possession of the trustee to raise a fund to pay debts, without providing for, or contemplating any equity of redemption.
IY. To hold, as now requested by appellants, that the inference of a conveyance as a mere security for a debt may be drawn from thelanguage : “ Whereas, I am indebted to the above-named grantees,” would make any deed of assignment a chattel mortgage, for that is. the usually expressed consideration of a deed of assignment.
The case of Steele ex rel. v. Faber, 37 Mo. 72 , referred to by counsel, is so obviously unlike the case at bar, as to scarcely- deserve discussion. There the *466 mortgage not only expressed that it was given to secure the debts, but it showed on its face that part of the claims to be secured arose out of the relation of principal and surety, and it was designed to indemnify the surety, who would have no cause of action, or claim demandable, against the mortgageor, until the surety should pay the debt for the principal. Again it expressly provided that, “ if the grantor pays his individual indebtedness, and saves harmless his copartners and securities against their said liabilities, the deed to be void.” And the right to proceed on it was made to depend upon default in making such payments. And nothing was said as to the right of the mortgagee to take possession. It was by implication that the court held the right of the mortgagee to take possession on default existed.
Y. It is again suggested in the motion for rehearing that we should transfer this case to the Supreme Court, on the ground that the amount involved exceeds the jurisdiction of this court. This question, so far as' this court is concerned, has become rem judicatum. The appeal was originally taken to the Supreme Court. There the respondents filed motion to have the cause transferred to this court, on the ground that the real subject-matter of the controversy was within the jurisdiction of the court of appeals. On consideration, the motion was sustained by the Supreme Court, and the cause, by order of that court, was accordingly transferred. After the same was filed in ' this coiirt the appellants presented motion here to have the cause re-transferred to the Supreme Court. That motion was, on consideration, overruled, as we felt concluded by the action of the Supreme Court.
It follows that the motion herein is denied.
All coucur.
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