Smith v. Moore , 2 Indian Terr. 126 ( 1900 )

Clayton, J.

There is but one proposition presented for our consideration by counsel for appellant, to wit: Were the instruments of writing offered in evidence in the nature of a mortgage, or do they constitute an assignment? There appear to have been four purported mortgages executed by appellant on the same day to secure the claims of certain four of his creditors therein named, aggregating the sum of over $1,500. Only three were offered in evidence, but as the .record is clear on this point, and it not being disputed, we will consider it as a fact that appellant conveyed all of his property, valued at $1,700, to secure the payment of over §1,600 indebtedness. If the instruments, which must be considered as one transaction, are mortgages made to secure the payment of bona fide debts, they cannot be considered as fraudulent; and, as they were duly filed for record, the lien created thereby is superior to that of the attachment. “A conveyance or assignment by a debtor of his personal property to a creditor, upon trust, to sell and pay his debt to one or more creditors, with a reservation to himself of any surplus there may be, is, in effect, a mortgage.” Jones, Chat. Mortg. 352; Cobbey, Chat. Mortg. § 99; Burrill, Assignm. § 8. The test is, has the debtor absolutely disposed of his property for the purpose of raising a fund to pay his debts, without reserving the equity of redemption? . If so, the transaction constitutes an assignment; otherwise a mortgage. It is specially provided in the instruments above set out that, if the debts secured thereby shall be paid within 30 days, then the obligation shall be void. The appointment of Keeler as agent of the creditors named therein, with power to take immediate possession and sell the property, did not render the defeasance clause inoperative. As stated in Hat Co. vs Malcolm, 2 C. C. A. 479, 51 Fed. 737, — a case almost precisely in point. “ There is nothing on the face of the deed to warrant the court in declaring this defeasance clause a nullity. * * * Whether the mortgagor entertained an honest hope or expectation of redeeming the property, or whether the defeasance clause was inserted as a mere device to evade the statute on the subject of assignments for the benefit of creditors, was a question of fact for the jury. ” To constitute an assignment; there must be a trustee, either express or implied, who is responsible to other creditors, and not to the debtor, for the proceeds of the property. Burrill, Assignm. § 3. The test is well stated in the case of Fecheimer vs Robertson, 53 Ark. 105, 13 S. W. 424, in which case the court say: “Can other creditors call the grantee, or person stipulated for by the grantor, to account for the proceeds of the property? If they can, then the conveyance is not solely for the benefit of the grantees, and conveyances of this kind -would constitute an assignment. If the grantees, or the parties to whom by arrangement with the grantors the property is given, are not liable to account to other creditors for the proceeds of sale, then there is no trustee and no assignment.” In Robson vs Tomlinson, 54 Ark. 229, 15 S. W. 456, it is held. ‘ ‘In arriving at the intent of the parties,' therefore, the, question is not whether the debtor intended to avail himself of the equity of redemption by payment of the debt, but, was it the intention to reserve the equity?” The instruments in questions specifically reserve the equity of redemption, and, therefore, on their faces, are bona fide chattel mortgages, and not in the nature of an assignment. Cobbey, Chat. Mortg. § 98. The case of Richmond vs Mississippi Mills, 52 Ark. 30, 11 S. W. 960, is very similar to the one under consideration; but in that case the instrument, as well as orders given by Richmond to the trustee, clearly shows that it was the intention to have all the property sold for the purpose of paying all of the debts of Richmond, whether secured by the mortgage or not, — thus making it an assignment, rather than a mortgage. “ The case of Hat Co. vs Malcolm, supra, decided by the circuit court of appeals for the Eighth circuit, seems to us to state the law correctly, and fully sustains the views herein expressed.

We hold, therefore, that the instruments of writing offered in evidence in this suit are, on their faces, mortgages, and that they do not constitute an assignment for the benefit of creditors. And, therefore, if they are to be so held, it must be upon the oral testimony introduced in evidence at the trial. The only witnesses called to testify in relation to this matter were the defendant, Smith, and Keeler, the agent uamed in the mortgages; and they were called by the plaintiff. And, while some facts and circumstances were elicited from them which might tend to show that the defeasance clause in the mortgages was not made in good faith, yet, when, on cross-examination, for the very purpose of showing the good faith of the parties, Mr. Smith was asked the question by his counsel, ‘ ‘What was the purpose of giving these mortgages?” he was not allowed to answer, on the ground that the mortgages themselves were the best evidence of his purpose, and exceptions were duly saved. The witness was not allowed to testify at all to the bona fides of the transaction. If he, being a party to the instrument, as well as to the suit, had been called as a witness in his own behalf for the purpose of contradicting the terms of the instrument, and of showing that at the time they were executed he intended something different to that expressed by the plain language of the mortgages, the rule that parol evidence is not admissible to contradict the terms of a written instrument would apply. But third persons, not parties to the instrument, may show by parol evidence that the instrument is different from what on its face it purports to be. The very purpose'oi the plaintiff in putting the witness on the stand was to show that the instruments were not what on their faces they purported to be. From the very necessity of the case, he was driven to parol evidence to establish these facts. And in such a case, of course, the law permits it. If, then, in this case parol evidence may be used by one of the parties to the suit to vary its terms,— to show that it is not what it purports to be, that it was fraudulent, and that the true intent of the parties is not expressed by it, — is it not equally clear that parol evidence may be used by the other party to support the deed, to show that by its terms the true intent of the parties was expressed, and generally to establish the bona fides of the transaction? Such is clearly the law, and the exclusion of the testimony by the court was error. Let the judgment be reversed, and the case remanded.

Townsend, J., concurs.