Farwell & Co. v. Howard & Co.

Dillon, Ch. J.

1. Assignment for benefit of creditors: mortgage: — I. Was the mortgage to the garnishees void because it amounted to a general assignment with preferences ? That Howard & Co. were bona fi&e creditors of Read is not denied. That their mortgage was taken in good faith is to be presumed, there being no evidence to the contrary. It is not even shown that they knew that Read had any other creditors. All question of actual fraud is out of the case.

The instrument is, and purports to be, a mortgage and not an assignment, and it is not void as being in contravention of the statute. Rev. § 1826; Code, 1851, § 977. This statute does not prevent a debtor from mprtgaging or selling all of his property to one creditor to secure or pay his debts, if the transaction be honest — free from fraud. The latest decisions of the court have settled this point, and it is sufficient to refer to them. Lampson & Powers v. Arnold, garnishee, 19 Iowa, 479 ; Fromme v. Jones, 18 id. 474, 480; Hutchinson & Co. v. Watkins, 17 id. 475.

2. Garnishment: liability of garnishee: agency. II. .Were the plaintiffs entitled to judgment against the garnishees ? Before the garnishment process was served the garnishees were in actual possessi°n S00<^s ^01’ the purpose of securing their debt. It is to be borne in mind that this is not a proceeding by the debtor, Read, to auestion *385 the right of Howard & Co. (the garnishees) to the possession of the goods. Though the garnishees obtained possession of the property in May, 1866, and although they did not answer until September, 1867, and the trial did not occur until January, 1868, there was no evidence that Eead ever objected to the garnishee’s right to the goods, or that he ever disaffirmed the act of his attorney in fact whereby Howard & Co. were authorized to and did take possession of the property.

It is true, that they were garnished by the plaintiffs in about six days after the obtaining possession of the property and after they had removed it from Wilton, in Muscatine county, to Burlington. It may be true, that if the agent had no authority whatever to transfer the goods to Howard & Co. that the ratification of his act by his principal subsequent to the date of the garnishment would not defeat rights which that process had conferred.

Yet the failure of Eead at any time to complain of the act whereby the garnishees obtained possession of the goods is a fact from which the agent’s authority may be inferred in the absence of any thing to the contrary being shown.

3. _ liability not presumed. This contest is between two creditors of Eead. The garnishees were in actual possession of the goods for the Purpose of securing their debt. They are golloht pe charged as garnishees. They are not presumed to be liable. Smith, T. & Co. v. Clarke & Henley, 9 Iowa, 241 ; Williams & Cunningham v. Housel, 2 id. 154. The burden is on the plaintiffs to show the garnishee’s liability, either from their answer or by taking issue thereon, and showing it by evidence. Id.

There can be no pretence that the answer of the present garnishees disclosed any liability.

• In our judgment, the court below did not err in holding that such liability was not shown by the evidence.

*386 It will be seen that the answer of the garnishees does not set up the chattel mortgage, and base their right upon that. It does not allude to this instrumentbut it alleges that they are in possession of the goods for their security, by virtue of a sale and delivery to them by their debtor, Read, through his attorney in fact, Romulus Read.

It cannot be learned from the answer, that any chattel mortgage was even executed, or that the garnishees claim thereunder. Nor does the answer in any manner refer to the power of attorney, much less does it allege, that this was the only source of the power of the agent.

The garnishees do not set up this mortgage or power of attorney, but they are set up by the plaintiffs.

4. Agency: ratification. It is evident from the plaintiff’s argument, that they base their case upon two propositions of fact, and one of law. The first proposition of fact is, that the garnishees’ only right to the possession of the goods was that conferred by the mortgage, and the second is, that the only authority of the agent was that given by the letter of attorney. The proposition of law deduced therefrom is, that the letter of attorney did not authorize the execution of a mortgage upon the whole stock, and hence it is wholly void, conferring no rights and giving no lien even though possession be taken thereunder, and therefore the goods are wholly the property of the debtor, and the garnishees in contemplation of law hold them for him.

It may be doubted whether either of the propositions of fact above named is established by the evidence, and particularly the second one. For the mere fact that the plaintiffs produce a power of attorney does not of itself show that the agent in possession had no other authority, and power to mortgage or sell goods may be verbally conferred. That the agent had the power he assumed, viz., to pledge the goods, if necessary, to secure a cred *387 itor, may be inferred from tbe silence of the principal, and bis failure to complain of, or disaffirm the act.

Romulus Read was the agent of the debtor, in possession of the property. He claimed to have the power to sell or mortgage it to pay creditors. Whether he claimed to have any other authority than that conferred by the power of attorney does not appear. He exercised this power, and put the garnishees in possession of the property. His principal has never questioned his act or dis-affirmed it. His silence supplies sufficient evidence of his acquiescence therein. The act of the agent was lawful and free from fraud. The garnishees have an equal equity with the plaintiffs, both being creditors, and have exercised superior diligence.

Under these circumstances the garnishees are not chargeable on the ground that they have no rights in the property, and that they are mere naked bailees.

Nor under these circumstances can the plaintiffs exercise a power which, ordinarily, at least, is personal to the principal, viz., to disaffirm the act of his agent.

This view makes it unnecessary to decide whether,- as between the principal and the garnishees, the power “ to sell goods,” would include the power to mortgage.; or whether, under the power “to transact all other business,” etc., authority was given to execute the chattel mortgage.

Affirmed.