Jones v. Loree.

mortgagees, took possession of the stock of goods. After the execution of the last mortgage he was requested to hold possession under that mortgage on behalf of the mortgagees named therein. Subsequently attachments and executions were issued against Charles E. Briggs on behalf of a number of creditors, and the plaintiff in error, as sheriff of Gage county, seized the stock of goods under these attachments and executions as the property of Charles E. Briggs.

This suit was brought in replevin by the mortgagees, and the goods were taken under the writ and delivered to the plaintiffs, in whose favor, upon the trial, there was a verdict and judgment. The plaintiffs, of course, claimed under their mortgages. The defendant justified under the attachments and executions, claiming the mortgages were fraudulent as against creditors whom he represented. Numerous errors are assigned.

The plaintiff in error undertakes to present a dilemma as follows: That if the several mortgages are to be construed separately and as independent transactions, then each of them is void, because covering all the property of the debtor and property greatly in excess of the debt; and upon the other hand, if the mortgages are to be taken together as constituting a single transaction, then the same amounts to an assignment for the benefit of creditors and is void because not in conformity with the assignment law.

Upon the first branch of this argument it is sufficient to say that the mortgages to Loree, Mrs. Briggs, and the two Higginses are shown conclusively by the evidence to have been given at one time as part of the same transaction, Loree acting, in taking the mortgages, on his own behalf and as agent for the other mortgagees. For the purpose of considering the proportion existing between the property mortgaged and the debts secured, the court instructed the jury that they were to be considered as one transaction. The reason of the rule avoiding, as against creditors, conveyances of property in value greatly in excess of a debt

Jones v. Loree,

secured by such conveyances is that such a conveyance necessarily operates to hinder and delay, if not to defraud, other creditors; that it evinces an intention upon the part of the debtor to do more than secure the creditor preferred, and practically conclusively proves an intent upon his part to deprive other creditors of their remedies. From the nature of the transaction the creditor preferred is chargeable with notice of such design, and is shown by his act of taking grossly disproportionate security to have participated in the fraudulent intent. But when a number of small debts are secured upon property not disproportionate to the aggregate amount of these debts no such effect follows and no such intention can be imputed either to grantor or grantees. This court has repeatedly sustained a series of conveyances of this character. Among such cases are Hershiser v. Higman, 31 Neb., 531; Hamilton v. Isaacs, 34 Neb., 709.

Upon the second branch of the dilemma, counsel rely upon the case of Bonns v. Carter, 20 Neb., 566, and 22 Neb., 495. There the decision was that a mortgage made to one person as trustee to secure debts owing several creditors amounted to an assignment because of the trust created.

In this instrument no such trust was created upon the face of the instrument, and such cases have not been held within the rule in Bonns v. Carter. (Hershiser v. Higman, supra; Hamilton v. Isaacs, supra; St. Louis Wrought Iron Range Co. v. Meyer, 31 Neb., 543.)

But if the case can be considered as falling within the rule of Bonns v. Carter, by reason of the fact of Loree's actual agency for all the mortgagees, still we do not think the transaction offended against the assignment law. Bonns v. Carter was decided by a divided court, upon a rehearing. The views expressed by Judge Maxwell, in announcing that the majority of the court adhered to its former judgment, show that in that adhesion the court was influenced chiefly by other elements rendering that particular transaction fraudulent.

Jones v. Loree.

Recently the case has not been adhered to, and in Hamilton v. Isaacs, supra, it was practically overruled. The views expressed by Judge REESE in the dissenting opinion, 22 Neb., 495, and by Judge Post in Hamilton v. Isaacs, supra, present very clearly and forcibly the reasons against the adoption of any such rule. Bonns v. Carter, in this respect, can no longer be considered as expressing the law of the state.

2. The next question presented is raised by the fourth paragraph of the court's instructions. In this instruction the jury was told: "If the mortgagor intended to hinder or defraud creditors and the mortgagee knew it, that would not make the mortgage void unless the mortgagee also intended, by taking the mortgage, to hinder or defraud creditors, and that was in part his purpose in taking it. A creditor has a right to take a chattel mortgage on a reasonable amount of his debtor's personal property as security for his bona fide pre-existing debt, and the debtor has a right to make such preference of his creditors, even though the effect thereof be to defeat, hinder, or delay other creditors in the collection of their debts; and this is so even if the parties knew that such would be the effect, and even though the property so taken as security was all the debtor had, but in value reasonably proportionate to the amount justly owing to the creditors so preferred."

Plaintiff in error argues that this instruction is in violation of the rule established in Tootle v. Dunn, 6 Neb., 99; Savage v. Hazard, 11 Id., 323; Temple v. Smith, 13 Id., 513; and Bollman v. Lucas, 22 Id., 813. These cases establish the rule that a purchaser of goods from a debtor knowing or chargeable with notice of the debtor's fraudulent intent is not a purchaser in good faith, and that the sale is void as against creditors.

Each of these cases was the case of a sale, and the rule is undoubtedly correct as applied to such cases. The court's instruction was given upon the theory that a distinction

Jones v. Loree.

exists between a sale or security given for a debt created at the time of the giving of security, and a security given for a pre-existing debt. We think the distinction is well founded. To give any effect at all to the rule established by so long a line of authorities that their citation would be useless, that a debtor even in failing circumstances may secure a creditor to the exclusion of others, provided the transaction be bona fide,-we must draw the distinction pointed out by the trial judge.

To say that knowledge upon the part of an existing creditor of the debtor's intention to defraud creditors would render any security demanded by such creditor fraudulent would be equivalent to saying that the creditor is estopped from protecting himself by knowledge of the very facts which warrant him in seeking protection. A fraudulent intent may be very properly imputed to a stranger who knowingly assists the debtor in defeating his creditors by a purchase of the debtor's property, but no such intent can be imputed to an existing creditor because of his knowledge of such intent, when for the sole purpose of protecting himself he receives sufficient and reasonable security for that purpose. We think this instruction stated the law with perfect accuracy. The mere knowledge of the debtor's fraudulent intent would not defeat the mortgage; but the participating therein on the part of the mortgagee, or any motive upon his part not consistent with good faith, would have that effect. The following authorities sustain this view of the law: Chase v. Walters, 28 Ia., 460; Kohn v. Clement, 58 Id., 589; York County Bank v. Carter, 38 Pa. St., 446.

3. The refusal of the court to give certain instructions asked by the defendant is assigned as error.

The fifth instruction requested and refused is in the words of the opinion in Morse v. Steinrod, 29 Neb., 108: "The right of a debtor to prefer creditors is very much restricted in this state by virtue of the attachment, assign

Jones v. Loree.

ment, and other laws, and will not be applied in any case where a just and fair distribution of the proceeds of the debtor's property can be made among all his creditors." To have given this instruction would have left the jury without any information as to the manner in which the right of a debtor to prefer his creditors is restricted, and would leave them to infer that they might arbitrarily set aside such preferences if they thought a fairer distribution of the property might be made. To have given such an instruction would have been manifest error.

The sixth instruction requested would have left to the jury the right to infer fraud from the fact that a preference was made. This is not the law of this state and it would be supererogatory to discuss the question further.

The twelfth instruction requested was that if Loree, "prior to the making of the mortgages in controversy in this case, took particular pains to exhibit the notes claimed to have been given him by the said Charles E. Briggs to a number of different persons in Vinton, Iowa, then the jury have the right to take this fact into consideration in arriving at their verdict." This instruction was not applicable to the evidence. There was no evidence whatever that Loree took particular pains to exhibit the notes to a number of different persons. Several witnesses testified that at different times they had seen the notes, but in each case the domestic or business relations of such witnesses with Loree were of such a character as to forbid an inference that Loree had exhibited the notes for the purpose of manufacturing evidence in his own behalf.

The fifteenth instruction was that the burden of proof was upon the plaintiffs to prove all the material allegations. in their petition. The sixth instruction given by the court of its own motion is that the "burden of proof is now on the plaintiffs to sustain the validity of their mortgages by a preponderance of evidence. If they have shown that the making of the mortgages was accompanied by an