Blass v. Goodbar , 65 Ark. 511 ( 1898 )

Wood, J.,

(after stating the facts). First.The most painstaking examination of this record fails to discover any fraud upon the part of Gus Blass & Co., either actual or constructive. The matters pressed here for actual fraud are all consistent with honest conduct, and only comport with the efforts which we would naturally expect an honest and vigilant creditor to put forth to collect his debt. The bona fides of the Blass claim is nowhere called in question. That being true, the other matters urged as evidence of fraud do not prove it. It is insisted, for instance, that the time of night the goods were delivered to Gus Blass & Co.; the character of the instrument that evidenced the transfer; the disparity between the amount of the debt and the goods pledged for its payment; the fact that the pledge included $1,708.75, for which Blass & Co. were only indorsers; and that, after all the goods had been attached, Gus Blass & Co. “took the lead,” as counsel express it, in getting up a compromise, at 45 cents on the dollar, with tine attaching creditors, except Goodbar & Co., by the terms of which Blass & Co. were first to be paid in full, and then the mortgagees, and then, if any, balance to go to Griffing & Co. — all these things, it is urged, when taken in connection with all the circumstances, bear the earmarks of actual fraud upon the part of Blass & Co. But not so. Undoubtedly Griffing & Co. in the impending financial collapse desired to have Gus Blass & Co. fully protected, and hence notified them of the situation, and they, as prudent creditors, ‘stood not upon the order of their going,’ but made haste to reach their debtors, and to secure their own claim, and indemnify themselves against certain loss upon that for which they were sureties. They adopted the most expeditious and efficient means and methods for accomplishing their purpose. That is all there is about the transfer being at night, and being evidenced by an unrecorded pledge with delivery of possession, instead of by a recorded mortgage.

The transfer of some nineteen thousand dollars’ worth of goods in pledge to secure the payment of an amount approximating only $5,000 is not prima facie or per se fraudulent. It is a circumstance to be considered in determining the good faith of -the parties to the transaction. Inasmuch as a pledge, and also a mortgage of property, removes the property so pledged or mortgaged beyond the reach of other creditors under the ordinary process of execution, the placing under pledge or mortgage of an amount grossly in excess of what would be necessary, under any and all contingencies, to meet the debt intended to be secured might tend to show a purpose, upon the part of the debtor making and the creditor receiving such a pledge or mortgage, to hinder and delay other creditors in the collection of their debts. Therefore, where a fraudulent disposition of property is charged, it is always proper to consider the question of excess, in connection with other circumstances, to determine whether the debtor, in making the conveyance to one creditor, was seeking some undue advantage for himself against other creditors, in which the favored creditor was assisting him. Bennett v. Union Bank, 5 Humphreys, 612-617; Burgin v. Burgin, 1 Ired. L. (N. C.) 453-459; Ford v. Williams, 13 N. Y. 577; S. C. 67 Am. Dec. 83; Bump, Fraud. Conv. § 58; Wait, Fraiid. Conv. § 238a, and authorities cited. The fact that the amount pledged greatly exceeded the debt does not show any fraud in the present instance. The pledge of the dry goods to Gus Blass & Co. immediately transferred the possession of the same to them, and, as to said goods, immediately took it out of the power of Grilling & Co. to use them any longer for their own profit. The language of the pledge indicates that Gus Blass & Co. were to proceed immediately to use the goods in pawn for the payment of their debt, and it is not shown or even pretended that, duiing the short interval in which Gus Blass & Co. had tlie possession of the goods, they used or attempted to use and dispose of same in any manner detrimental to or inconsistent with the rights of other creditors.' It is not shown that they sought to collect any more than their own debt, or in any manner to assist the debtor in gathering unto himself forbidden gains. Likewise it may be said of the proceeding under the trust deeds and mortgages. The effort under these was simply to collect in the legal way the debts which had been provided for in said deeds.

The fact that $1,708.75 was included in the pledge for which Blass & Co. were only liable as indorsers was not evidence of a fraudulent purpose in taking the pledge, and could not render the same nugatory and void on that account. Griffing & Co. were notoriously and hopelessly insolvent. It was only a matter of time, and of a very short time at that, when Blass & Co. would have the note to pay. They only purported, in the pledge, to indemnify themselves in the event of their having the note to pay. It was a perfectly legitimate transaction, indicating foresight rather than fraud. The fact that the same amount was also included in a mortgage to secure the Bank of Conway could not affect Gus Blass & Co. with fraud, even if it had been any evidence of a fraudulent purpose upon the part of Griffiug Co. It remains that there could, in law, properly be but one satisfaction of the note, and there was no possible chance for any creditor to be defrauded because Gus Blass & Co. had provided indemnity for themselves in case of its payment. For, the moment Blass & Co., the first preferred creditors, paid off the note, that would extinguish the note, and eo instanti the mortgage given to the bank to secure it. So far as the compromise is concerned, the creditors are supposed to be dealing with each other “at arm’s length.” We see nothing that Blass & Co. might have done in connection therewith that could be regarded as a badge of fraud on their part. Certainly, no creditor was forced to accept any compromise, and the one complaining here has not done so as to the paying off of its debt for 45 cents on the dollar. The other provisions of the compromise, by which Blass & Co. for a certain price bought the goods from the receiver and executed to appellees a bond which was to take the place of the attached property, appellees assented to. We fail to comprehend how any kindly offices that might be extended by a favored creditor to his debtor who had preferred him, in bringing about a compromise with other creditors who had not been preferred, could be regarded as even tending to show actual fraud upon the part of the preferred creditor in the transfer of property which had been previously made to him. This is the most that could be said of the compromise.

The suggestion or contention that the pledge of Blass & Co. may be tainted with fraud, for the reason that Griffing & Co. a short time thereafter executed to Mrs. Griffing a mortgage which was indeed fraudulent, is an obvious non sequitur; for a creditor may know, at the time he takes his conveyance or transfer, that his debtor has an intent to defraud other creditors, but that does not prevent him from collecting his own debt, and, so long as he does not wilfully or intentionally, or by gross and inexcusable carelessness, assist his debtor to defraud another— his sole purpose being to collect • his own debt — any transfer or conveyance made with that end ih view will be upheld.

Second. Was there constructive fraud? It is insisted that the pledge to Gus Blass & Co. and the deeds to Martin, trustee, and the other mortgages, taken altogether, constitute an assignment for the benefit of creditors. We do not so construe them. It would be doing violence to the plain language and tenor of the instruments themselves to so construe them. They lack essential elements for an assignment. “Conveyances directly to creditors, in payment or by way of security for their own debts solely,” says Mr. Burrill', “are not generally assignments for the benefit of creditors.” Burrill, Assignments, § 3. The pledge to Gus Blass & Co. was made to them direct, no trustee was named or contemplated, and the transfer was to enable them solely to pay off their own debt. After they were paid, the property remaining was subject to various other mortgages and deeds of trust, to be sure, but there was no stipulation in the pledge, nor was any understanding otherwise shown, that Gus Blass & Co., after they were paid, should hold and manage the balance of the property as a trustee to raise money to pay other debts. The doctrine “that one or more instruments, in whatever form, or by whatsoever name, when executed with the intention of having them operate as an assignment, and with the intention of granting the property conveyed absolutely to the trustee to raise a fund to pay debts, shall constitute an assignment,” was announced under the peculiar facts in the case of Richmond v. Mississippi Mills, 52 Ark. 31. In Fecheimer v. Robertson, 53 Ark. 101, this court, through the same learned judge, shows that the case was not to be extended to cover cases not brought strictly within the facts upon which it was decided. Speaking of Richmond v. Mississippi Mills, supra, Judge Sandels says: “Richmond’s agreement that Taylor should assume charge for himself and twelve others not represented or consulted, and that a man suggested by Richmond should be manager for all, together with many other circumstances indicating the intention of the parties, made it clear that the transaction in that case was an assignment.” See other cases cited in Fecheimer v. Robertson, supra. The facts of the case under consideration are altogether different from those of Richmond v. Mississippi Mills, and bear a nearer resemblance to the facts in Fecheimer v. Robertson. Certain it is that, so far as Gus Blass & Co. were concerned, they were trustees for nobody, acted for themselves, and themselves alone, and not in conjunction with any other creditor. Nor was there any concert of action among any of the various creditors.

It appears, from the terms of the compromise to which Goodbar & Co. assented, and the provisions of t’he bond filed in pursuance thereof, that said bond was to stand in lieu of the attached property, if Goodbar & Co. should establish “a lien on said property superior to that of Gus Blass & Co. and to the lien of those creditors of said L. B. Griffing & Co., to whom they gave mortgages on said property.” Conceding that the attachment should be sustained, we have been unable to find warrant for the ruling of the learned chancellor that the lien created by the attachment in favor of Goodbar & Co., appellees, is superior to that of Gus Blass & Co.

As to the ruling of the court sustaining the attachment against Griffing & Co., it suffices to say that there is evidence to support the finding of the chancellor in that particular.

Reversed and remanded, with directions to enter a decree in favor of Gus Blass & Co. for the proceeds of the attached property, and in favor of Goodbar & Co. for costs in the attachment against L. B. Griffing & Co., and for such other and further proceedings as may not be inconsistent with this opinion.