Bryant & Co. v. Fink

39 N.W. 820, 75 Iowa 516, 1888 Iowa Sup. LEXIS 389

• Court: Supreme Court of Iowa
• Decided: October 16, 1888
• Status: Published

Opinion

Reed, J.

1. Appeal: practice: trial de novo: kind of action. — I. A question arises as to the manner of the trial in this court. Appellees contended that the cause should be regarded as an ordinary action, and be governed as to the trial by the rules applicable to that class of cases : while appellant claimed that the proceeding is in the nature of an action in equity, and is triable de noto. We find it unnecessary to determine to which class of actions the proceedings properly belonged originally ; for we are satisfied by the record that in the trial below both the parties and the court regarded it as an equitable action, and it was tried upon that theory, and it will be so regarded here.

II. As stated above, the mortgage t-o appellant, by its terms, is security for two promissory notes. The question whether it is competent to show by parol what its real object was, as alleged by appellant in his petition of intervention, was elaborately and ably argued by counsel for the respective parties. But, in the view we have taken of the case, it is not necessary to determine that question. For the purposes of the case, it is admitted that the evidence is competent; and we have considered it in reaching our conclusion ; and it shows without doubt that at the time the mortgage was executed Fink was not indebted to Shawver in the amount of the nine hundred dollar note, but that one purpose which the parties had in view was to indemnify Shawver and the other sureties on Fink’s official bond against their liability thereon.

2. Fraudulent conveyance: by chattel mortgage: what is: evidence. III. We find that the mortgage was in fact fraudulent. As we regard the case as triable anew in this court, we of course give no weight whatever ^he findings of fact by the lower court, but reach our conclusion upon an examination of the evidence, and a consideration of the circumstances which we find established by it. The five hundred and twenty dollar note was given for money borrowed from a bank for the purpose of satisfying a previous mortgage on the property, which was about to be foreclosed. Both Fink and Shawver signed a note to the bank for the money; but it does not clearly appear which was the principal and which the surety in that transaction. Nor is that material. It will be conceded that Shawver had the right to seek indemnity against his liability on the bond; and if it was necessary, as it appears to have been, to discharge the prior mortgage in order to secure such indemnity, he also had the right to do that, or assist in • doing it, and obtain security for the money advanced, or indemnity against the liability incurred in accomplishing that result. All that he did in the premises then would have been legitimate, if his sole object had been to thereby secure or indemnify himself. And in that case it would have made no difference that he knew that Fink was insolvent, and a defaulter, and that the effect of the mortgage would be to postpone the other creditors, or defeat the collection of their debts. But, on the other hand, if Pink intended by the transaction to hinder, delay or defraud his other creditors, and Shaw ver knew of that fact, and accepted the mor fcgage with the view of aiding in the accomplishment of that purpose, he will not be permitted, as against the other creditors, to retain the fruits of the enterprise, even though one of the objects he had in view was to obtain security for himself.

Now, the evidence shows conclusively that the execution of the mortgage' was but one of a series of acts by which Pink intended to delay certain of his other creditors in the collection of their debts, and compel them to compromise with him, and accept a small fraction of the amount due them in full satisfaction of their claims. That such intention was fraudulent will not be denied; or that it will defeat the mortgage, if Shawver participated in it, is equally clear. If the case rested alone on the circumstances immediately attending the execution of the mortgage, it could hardly be said that they afford evidence of a fraudulent intent by appellant. But his conduct and actions, subsequent to that, show that he was then consciously lending his aid in furtherance of Pink’s fraudulent design. That this subsequent conduct would not of itself defeat the mortgage is certainly true. But, unexplained, it affords evidence of the purposes he had in view when he accepted the mortgage, and he made no attempt to explain it. When conduct which is apparently suspicious or dishonorable is the subject of investigation, and the actor has an opportunity to explain it, and an interest in doing so, yet fails or refuses, it is but reasonable that the worst construction should be put upon it. The fair inference is that it is incapable of any explanation consistent with honesty and fair dealing. Two days after appellant received the mortgage, he aided in deceiving and misleading another creditor, when Fink’s only object in the transaction was to gain time, and thereby be enabled to accomplish his purpose of compelling a compromise. That appellant knew of that design at that time can hardly be doubted ; at least, he has not deigned to deny that he knew it and we are led to believe by that circumstance, and his failure to attempt any explanation of it, not only that he intended then to aid in the consummation of the fraudulent purpose, but that such was his intention from the beginning.

3. _: attaching creditors: agreement: judgement. IV. The court found that the mortgage was not only fraudulent, but that the notes for the security of which it was given did not evidence any existing debt from Pink to appellant, and yie judgment was based upon that finding. If not settled by the judgment, a question might possibly arise between the parties with reference to the money paid appellant by the receiver. Under the pleading, appellant is entitled to have the question of his right to that amount determined by the decree. As stated above, the money was paid to him in accordance with the agreement under which the receiver was appointed. As by that agreement the other parties secured whatever advantage arose from the early sale of the property, they cannot now question appellant’s right to the money which was paid to him under it; and a provision establishing his right to it, as against them, should be added to the judgment. With that modification, the judgment will be affirmed. One-fourth of the costs in this court will be taxed to appellee, and the remainder to appellant.

Modified and Affibmed