South Branch Lumber Co. v. Ott - 142 U.S. 622 (1892)
U.S. Supreme Court
South Branch Lumber Co. v. Ott, 142 U.S. 622 (1892)
South Branch Lumber Company v. Ott
Argued December 18, 1891
Decided January 18, 1892
142 U.S. 622
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 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. 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 $3,225, the amount due on that chattel mortgage. From this decree the plaintiff has appealed to this Court.