Statement of the Case.

States v. Kansas Pacific Railway Co., 99 U. S. 455, and the Thurman Act of May 7, 1878, in United States v. Central Pacific Railroad Company, 118 U. S. 235.

There was no error in the judgment of the Court of Claims, and it is, therefore,

Affirmed.

SOUTH BRANCH LUMBER COMPANY v. OTT.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF IOWA.

No. 135. Argued December 18, 1891. Decided January 18, 1892.

The question of the construction and effect of a statute of a State, regulating assignments for the benefit of creditors, is a question upon which the decisions of the highest court of the State, establishing a rule of property, are of controlling authority in the courts of the United States. The decisions of the highest court of Iowa with regard to the statute of that State regulating such provisions now codified in section 2115 of the Code, hold: (1) that it does not prevent partial assignments with preferences, or sales or mortgages of any or all of the party's property in payment of or security for indebtedness; its operation being limited to the matter of general assignments: (2) that several instruments, executed by a debtor at about the same time, may be considered as parts of one transaction, and as in law forming but one instrument; and if, so construed, they have the effect of a general assignment with preferences, they are within the denunciation of the statute: (3) that although several instruments may be executed by the debtor at about the same tine, they do not necessarily create one transaction, nor must they necessarily be considered as one instrument; but the decision of whether they do or not, and whether they come within the denunciation of the statute, or not, must depend, in each case, upon the character of the instruments, the circumstances of the case and the intent of the parties. When the effect of invalidating such an assignment, without preferences on its face, by reason of previous preferential transactions claimed to be part of it, will be to let in to preference another creditor attaching after the assignment, the court will be justified in adhering to the letter of the statute, when the circumstances permit it.

THE Court stated the case as follows:

On April 27, 1886, George Ott, one of the defendants, doing business at Davenport, Iowa, made a general assignment of

Argument for Appellant.

all his property, for the benefit of his creditors, to Charles F. Meyer. The next day complainant commenced its action at law in the District Court of Scott County, Iowa, against Ott, to recover $37,191.69, and caused a writ of attachment to be issued against the property of Ott. The writ was served by a levy upon certain real estate; and by the garnishment of Meyer, the assignee, and also of Charles Hill and Addie Kloppenberg, holders of chattel mortgages against Ott.1 The action was removed by the plaintiff to the Circuit Court of the United States for the Southern District of Iowa, and thereafter proceeded to judgment on September 17, 1887, for $40,261.34. Shortly after such removal complainant commenced this suit, in aid of the action in attachment, by filing its bill in that court, the object of which was to have the assignment declared void, and a receiver appointed of the property. The debtor, Ott, his assignee, Meyer, the chattel mortgagees, Hill and Kloppenberg, and the guardian of the latter, were made parties defendant. Thereafter Meyer, the assignee, died, and in his place were substituted his successor, J. B. Meyer, and his executrix, Auguste Meyer. Answers were filed, proofs taken and at the June, 1887, term, a decree was entered sustaining the validity of the assignment, but adjudging the mortgage to Hill fraudulent as against complainant, and ordering that the assignee, out of the funds in his possession, pay to complainant the sum of $3225, the amount due on that chattel mortgage. From this decree the plaintiff has appealed to this

court.

Mr. Frank J. Smith (with whom was Mr. J. M. Flower on the brief) for appellant.

The provision of the Iowa statutes under which it is claimed the assignment in controversy is void, is as follows: "No general assignment of property by an insolvent, or in contem

1 Both mortgages were executed and delivered February 20, 1886, and both were withheld from record until April 26. The one to Hill was to secure him as indorser. The one to Kloppenberg to secure his granddaughter, a minor, of whose estate he had been appointed guardian, and whose moneys he had taken into his business.

Argument for Appellant.

plation of insolvency, for the benefit of creditors, shall be valid, unless it be made for the benefit of all his creditors in propertion to the amount of their respective claims." Iowa Rev. Stats. sec. 2115, p. 569: tit. Of Assignments for Creditors. It is well settled by the general current of authority in Iowa, that where an insolvent debtor, in contemplation of making a voluntary assignment for the benefit of creditors, gives security to one or more of his creditors by separate instruments, followed by an assignment, all of said instruments will be construed together as an assignment with preferences and therefore void under the statute. Cole v. Dealham, Garnishee, 13 Iowa, 551; Van Patten v. Burr, 52 Iowa, 518; Farwell v. Jones, 63 Iowa, 316; Perry v. Vezina, 63 Iowa, 25; Gage v. Parry, 69 Iowa, 605.

Such being the rule, it becomes necessary to examine the facts, about which there is little dispute. The chief controversy is upon the time when Ott began to contemplate making an assignment. The facts bearing on it are briefly these. On April 12, Beidler, the appellant's secretary, had an interview with Ott. He had with him a statement of Ott's financial condition, which, in his opinion, showed insolvency, and which showed an enormous increase of liabilities over assets, as compared with his statement of the preceding year. At this meeting, Beidler insisted that the debt must be reduced, although it does not appear that he threatened suit, although the claim was so large and the circumstances were such that Ott might reasonably apprehend a vigorous effort to enforce collection in the near future, unless the amount was materially lessened. In the forenoon of April 26th Ott evidently felt that a crisis had been reached in his affairs, and consulted a lawyer for the first time so far as known, and from thence on was actively engaged in putting his affairs in order.

This is what he did on that day: (1) He told Peters, his attorney, to record the Kloppenberg mortgage, which had never been delivered, and it was filed for record at six minutes past five P.M. (2) He told Hill that he might have his mortgage, given to secure him as endorser, recorded, which was filed for record at seven minutes past five. (3) He directed his book

Argument for Appellant.

keeper to make out and give to Christ. Mueller three drafts on, customers for $1239.46 as collateral security for a debt owing to him, which drafts were delivered by the clerk. (4) He personally delivered to T. W. McClelland, for T. W. McClelland & Co., a draft upon one of his customers for $660.80, as collateral security for a debt not then due, with a statement that he was in trouble and did not propose to go back on his friends. On the morning of the 27th of April, at or about the time of executing the assignment, Ott, by an instrument in writing, drawn up by his attorney who drew the assignment, pledged four carloads of merchandise for the payment of a freight bill of $826.57. Whether this reached the freight agent before the assignment was recorded cannot be determined, but the security was recognized by the assignee and the debt paid.

All of these transactions were purely voluntary upon the part of Ott, as much so as the assignment itselt. No compulsion was used or even threatened by any of the creditors who were preferred, to obtain these securities. It is vastly more reasonable to suppose that these preferences were given because Ott was contemplating a voluntary assignment than that the assignment was made because he had voluntarily given the preferences. The real question is, had Ott in contemplation the making of an assignment at the time of these transactions? and not whether he had made up his mind to do so.

Some men are so constituted that they do not regard their minds as made up so long as the opportunity to change their views remains, or until matters have proceeded so far that such change is impossible. Ott must have looked at the matter in this light, and for the purposes of this case concluded that his mind was made up when he had actually executed the assignment, and not before; for when he is asked whether the papers were being prepared on the afternoon of the 26th, he testifies simply to a belief that they were not, because he hadn't yet reached a conclusion; that is, made up his mind. The assignment itself, with its three pages of carefully prepared schedules of assets and liabilities, is a flat contradiction of and sufficient to discredit his testimony. So complete a list

VOL. CXLII-40

Opinion of the Court.

of creditors, with a list of their addresses and the amounts due to each, could never have been prepared on the morning of the 27th of April so as to be filed before 9 o'clock.

The testimony of Ott as to his secret intent, wholly unsupported, inconsistent with itself and contradicted as to material matters, by the testimony of other witnesses, is entitled to no weight as against the irresistible conclusion to be drawn from the series of acts and transactions which preceded and culminated in a voluntary assignment within the space of twenty-four hours.

Some stress is laid by the learned judge who decided this case in the court below upon the inequitable result of holding the Ott assignment void, as it would give to the attachment creditors the entire estate. Undoubtedly it would be much more satisfactory to a court of equity, had the law provided that the preferences and not the assignment should be void. The fact that the penalty imposed by the legislature was a harsh one, and operated unjustly upon the right of others, seems to have been something of an obstacle in the way, in determining Ott's intent.

The inquiry is do the facts and circumstances and the testimony show that Ott, by his various transactions and instruments, has made an assignment with preferences? If he has done so, then all he has done is void by the terms of the statute. If the testimony is sufficient to justify that conclusion, when the law makes the preferences void, the same result must follow, though the law makes the assignment void. Mr. John C. Bills for appellees.

MR. JUSTICE BREWER, after stating the case, delivered the opinion of the court.

The single question in this case is as to the validity of the assignment. Its invalidity is claimed under section 2115 of the Code of Iowa: "No general assignment by an insolvent, or in contemplation of insolvency, for the benefit of creditors, shall be valid unless it be made for the benefit of all his creditors in proportion to the amount of their respective claims."