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.
Free access — add to your briefcase to read the full text and ask questions with AI
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.