APPOLOS ApPOLOS et al. (Circuit C01lh't Qf DECISION.
V.
BRADY. BRADY et aI.
tJ.
Eighth C1Ircuit. Febl"Uary 8,1892.)
L INDIAN TERRITORy-ADOPTION OJ' ARKANSAS STATUTES-FOLLOWING ARKANSAS
9.
In construing the statutes of Arkansas which were extended over the Indian Territory by Act Congo May 2, 1890, the federal courts will follow the decision of the supreme court of that state. In determining whether a given instrument is an assignment credito.rs, under the law of the Ind ian Territory as adopted from is, according to tbe settled rule of Arkansas decisions;whetber tion of the parties to divest the debtor of the title, and to make of the property to raise a fund to pay debts. for the benefit of Arkansas, the test it was the intenan appropriation
AsSIGNMENT FOR BENEFIT OF CREDITORS-CONSTRUCTION OF DEED.
8.
,
SAME.
Under this rule an instrument conveying property to a trustee, empowering him to take possession, sell at private sale, pay certain debts from the nroceeds, together with all expenses, and then to turn over the remaining property and proceeds to the grantor, is an assignment. since no equity of redemption is reserved. While it'is proper, in determining whether a given instrument is an assignment for benefit of creditors, or merely a mortgage, to show the intention of the parties by parol evidence of their situation, and of their acts in connection with the transaction, yet they themselves cannot be allowed, as against third persons, to testify as to what they had in mind when execnting the paper. In tb.eJndian Territory an assignment for the benefit of oreditors is void when the trustee is directed to sell at private sale, and when no bond is filed, as required by the Arkansas statute. ·
.. SAMI!-PABOL EVIDENOE.
II.
SAME-VALIDITY.
In Et:ror to the United States Court in the Indian Territory. J. B. Brady, D. C. BraclY, and H. Brady, commenced byattlJ.chtDent, against A. M. Means and J. S. B. Appolos, intervener. Verdict and judgment sustaining the attachment. Defendants bring error. Affirmed. W. ,0. Davis, for plaintiffs in error. A. Eddleman and A. a. Cruce, for defendants in error. Before CALDWELL, Circuit Judge, and SHIRAS, and THAYER, District Judges. SUIRAS, District Judge. The defendants in error brought an action at Iawin the United States court in the Indian Territory against A. M. Means to recover theamount due upon a draft drawn upon and accepted by him, gnd caused a writ of attachment to be issued and levied upon certain articles of personal property. The defendant below traversed the facts relied upon as grounds for the issuance of the attachment, and one J. S. R Appolos intervened in the cause for the purpose of asserting h,is rights to the attached property, based upon a written instrument execotedtohim as trustee,and which he averred was in fact a mortgage given to secure the claims of the firms named therein, to whom A. M. Means was indebted. The case went to trial before the court and jury upon these issues, with the result that the attachment was sustained, and the claim of the intervener was defeated on the ground that the in. strumentunder which he claimed the attached property was an assignV.49F.no.6-26
lOft
J'EDERAL REPORTER,
vol. 49.
ment, and not a mortgage, and that as a deed of assignment it was void. The errors assigned relate only to the'question touching the instrument under which the intervener claimed the property, the correctness of the verdict and judgment on the issue made upon Uleattachment'not being questioned before this court. The ficiof'congress of May 2, 1890, makes appHcable to the Indian 'fernt,()ry certain portions of the statutes olthe state of Arkansas, including'the chapter dealing with the subject of .ssignments of property for the benefit of creditors. ,When called upon to construe the sections of thus adopted,we deem it our dutyto follow the construction given, thereto by the supreme court of Arkansas. The adoption of thiscou.rse as the settled rule to be followed by this court, and the court of original jurisdiction in the Indian Territory, must commend itself to all interested. , ,Many, If not aU, of the adopted sections of the Arkansas ,b4ye been &A-efully considered and construed by the supremeicourtof that state'i'landthus we have at hand a large number of a ,court ;hjgh in t.he law. which'Willse.rva.tO ex. plaIn and ,remove the doubts and uncertamties that always anSa In the of the gen'er,u terms used in statutes to the varying affairs of human Hfe. "Byadopurig .these ueCisionsas,an autjloritative guide the nEon, the. local law, uniformity: of will be secured, and We bench.' and bar of tQeterritory will not be in doubt as to which one, among conflicting rules prevailing in the states, will befoll,9wed in determining any given question arising under "brcarrying' out the spirit MUie rule thus these anridilhced, it is clear that, li!l the Arkl,\nsas statute regiIlatingassignmerttSig;tnade the ,law fOT the, territory, 'the rules prevailing 'in Arkansas for,deterthHiingwhethera'giveninsttulffllnt is to be deemeds 'deed'of assignment, within the meaning of the Arkansas statute, should be applied to the determination of the like' qUilstion when it arises in the' ter, :,:," , ritory. Upon the tHal before the jury, the, court ruled that, the instrument under which the intervener claimed was a deed of assignment, and; as such, was void as to creditors. This ruling is assigned as error, and hence tbe'tirlJtquestion for consideration is as toWe:nature of this iniltrument;""iByits termsthe maker thereof sells and conveys to thetrus,tee: his entire stock of' goods located in lit certain building in Ardmore,: and covenants that he is lawfully seised of said property, 'and will defend the same; The is authorized and empowered to takeitnmediate possession:of the property, and sell the same, at private sale for, cash, and to apply the proceeds to the paymentof the debts due the Waples-Platter, Company and Tyler & Simpson, and to the paYIUent of the '8Xtpenses"of sale, including a salary of $75 per month to the trustee, ,it being proVided that, after said debts ,and" the expenses have been paid, :the Temamder of the property and proceeds shall be turned: over to the maker:of the instrument, and 'on the payment of the ,expensesandfBaiidind'ebtedness out of the proceeds, of the sale of the is to become null'and void. The rule to be e
APPOLOS tI. BRADT.
403
followed in determining whether a given instrument is to be deemed & mortgage or a deed of assignment is fully stated by the supreme court of Arkansas in the cases of RichmlYnd v. M'l88'i88ippi Mills, 52 Ark. 30, 11 S. W. Rep. 960; State v. Dupuy, 52 Ark. 48, 11 S. W. Rep. 964; RobslYn v. Tomlinson, 54 Ark. 229, 15 S. W. Rep. 456; Pe:nzel Co. v. JeU, 54 Ark. 428, 16 S. W. Rep. 120. These cases the test to be, has the party made an absolute appropriation of property as a means for raising a fund to pay debts, without reserving to himself, in good faith, an equity of redemption in the property conveyed? In Robson v. Tomlinson, 8uJY!'a, the rule is stated as follows: .. The controllinK guide, according to the previous decisions of this court, is, was it the intention of the parties, at the time the instrument was executoo, to divest the debtor. of the title, and to make an appropriation of the a fund to paydebtsi''' property In Richmond v. Mi88i88ippi Mills, supra, it is held that, while the meaning of the instrument is ordinarily to be derived from the language used therein, evidence may be admitted, showing the collateral facts surrounding the transaction, for the purpose of enabling the court to determine intention of the parties in the execution of the instru.ment;, but thatH, from the entire evidence, it, appears that the debtor executed conveyance with· the intention of conveying the property absolutely,; lpld, without the reservation of the right to redeem, in order that the may be appropriated to raising a fund for the payment of then the transaction constitutcsanassignment. The distinction existing between' mortgages and deeds of assignment is very clearly the opinion of Judge CALDWELL in the case of Bartlett v. Teah, stated 1 Fed. Rep. 768, in which it, is shown that.' ."A mortgage does not in vest the mortgalCee with an absolute a1)d indefeasible title; the equitahle title, called the · equity of redemption,' remains in tbe 'fhe mortgage iS8 security for the debt, and creates a lil'D upon the property' in favor of the crerlitor. There is no difference,in legal effect, between a mortgage with a poWer of sale and a deed of trust, executed to secure a debt; where the power of sale is placed in a third person. Both are securitil's a debt. Buth create specific liens on the property, and in both title or of redemption rema.ins in the debtor, and is all esta.te .or the property which the debtor may sell, or that may be seized Rlld sold under jUdicial process by his creditors, subject to the lien created by the lDortglige or deed of trust. · · · Whereas a deed of assignment, unlike a mortgage or deel1 of trust, is not given by way of security. 'fhereis no defea8ance clause giving the grantor the right of redemption. It does not create a lieu on the property, .but conveys it absolutely tOI the purpose of raising a fllnd to pay delJts." There can. be no question that, under these decisions, the instrument eXt'cuted by A. M. Means was rightfully held by the trial court to be a deed of assiRJ1ment. It conveyed the title of the property to the trustee, and .appropriated the property to the· purpose of raising a fund to pay the without reserving an equity of redemption in the maker of.tbe·instrument.The defeasance clause is not to the effect that, u,ponpayment of the debts by the debtor, the conveyance should be v9id;J>ut.pnly that.; the debts have been paid out of the pro-
FEDERAL REPORTER.
ceeds of'the'sale,-:"acts to be done by the the conveyance should become void. If the instrument, as we. hold' it is, is in fact a deed of assignment, then it is not questioned that, under the settled rule obtaining in Arkansas, it is void, in that it directed the assignee to sell at private sale, and no bond was filed as required by the statutes. Raleigh v. Griffith, 37 Ark. 150i Lincoln v. Ji'ield, 54 Ark. 471, 16 S. W. Rep. 288. It is, however, said that the trial court erred in refusing to permit the assignor and his attorney to testify that it was the intent of the ties to the instrument to give and receive a mortgage, and that it was not the purpose of the assignor to make an assignment, and that it was understood by all the parties to the deed at the time of its execution that'said Means would, within a tinH}; pay the therein named and release the propertYi and that i'npursuance of this uti(1etstalldingsaid Means had acquired the money to pay the debts nam'ed in the deed, and thereby redeem the property, but was' pre-vented from so doing by the levy of the attachment 'It is urged in gume'ntthat the supreme court of Arkansas hasheldthat parolevidence is' ndl1 issible to show ,what the real intent of the parties was in the cution1 (jf 'the which rilay be undercorisideratibn. This is uridoribte'lHy true, butthat does not open the door tathe admission Of evetythingwhich witnesses maybe willing tos\'\'ear'to; .It is agenetal rUle that, as an aid 'to reaching the proper construction of any written contrlibtor instrument,parole"idence showing the circumstances undEli' instrument was executedund the the p,arties may be introduced; and so, also, wheredouht exists as Lto the of an instrument, the acts of the parties don'eincarrying otitthecontraci:ti1ay be shown as evidence construction put upon the terms oftne.:instrument by the :partieslninterest. '.. ", . : : Applying these genE'ral rules. the supreme cD.\lrt'of Arkansas has that parol evidence, showing the collateral facti:!. and the acts 1:IY the parties to nn instrument like that under consideration, may 1: mitted to aid the court in determining the real intent of the parties; but 1 tbis does not justify the admission of testimopy as to the intent that have existed tn the mind of the parties, but which evidepced by acts done. The point of the inqUiry is, what was. the purposa.of the party in executing a.given instrument? and, as against persons not parties thereto, the intent must be held to be that which is properly derivable from the language of the instrument, applied to the and read in the light thrown there0n by the attending circumstances and the acts done in carrying thecontraet, into effect. Where the rights of the parties to the instrument are alone and they; agree upon the meaning thereof, acoutt would be justified in construction to becorrect,withQutclose sorutiny olthe legalefleetof the langul;lgeused in thew-ritten instrument,butwheJi the parties'to the instrument rely thereon, as a' means>of<Iefeatingae'ti(ln taken by third parties, and limiting rights acquired in ol''to the subject-matter of the contract, then such ::hird parties have tn6,rightto I
, APPOLOS V.BRADY.
405
insist that, as against them, the written instrument cannot be held ta mean or intend anything other or different from the purpose which the language of the instrument, read in the light of its attending circumstances, shows to have been the intent of the parties in executing it. To illustrate the thought, by reference to the case before the court, under the rule of the Arkansas decisions, it would doubtless have been open to the plaintiffs in error, had such been the fact, to prove that, notwith$tanding the terms used in the instrument in question, the debtor continued in the open possession of the property, selling the same in the usual way of trade, and using the proceeds in the payment of the deqt,s t\;amed in the instrument,and that he made purchases, from time to time,' of other goods to be added to. the stock described in the mortgage, and that there was iIi fact an agreement with the creditors and the trusteethM po,ssession would not be taken under the instrument until a fixed or te8sonable had elapsed, within which the at liberty to payoff the deots. Facts of this nature, accompanying' the e:li:ecutionof the instrument, or in direct continuing connection therewith, 'would throw light upon the intent of the parties, and' yet would not mjsleadthirdparties to their inJury, and known.. This, however, was not We purport of the' of-:. fered and rejected on the trial of this cause. The admitted flichnvete that the instrument, which the court held on its face to be a deed of assignment;was executed on the 17th day of November, 1890, and' on the illJ.me day the trustee therein named took possession of the. property, and proceeded to sell the same at sale, as directed in ,the deed. On the 24th ofNovember the writ of attachment was levied in the suit . .of defendants in error, and the, property was taken from the. possession .of the trustee. As already shown, there can be no doubt that, had the {lase been submitted at this point, the right of the attaching creditors to hold the property, as against the deed of assignment, would have been clear. To defeat the attachment, it was proposed to show. not the ,acts of the parties done in connection with the possession and sale of the property, but the intent existing in the minds of the parties, or the belief they entertained that the instrument was, in legal effect, a mortgage, .and not a deed of assignment. It was not error to reject evidence of this nature. Had it been ad-mitted, it would have been the duty of the court to instruet the jury that, as against third parties, who can have no. knowledge of secret purposes existing in thought only, and who have the right to regulate their .action by that .which the parties cause to appear in an open and usual manner, no weight could, be givell to evidence of this character as against that afforded by the written instrument and the acts of the parties in connection therewith, and that, therefore, it must be held that the instrument under which the intervener claimed the property was a deed -of assignment, and as such, was void under the provisions of the statute regulating assignments. Finding no substantial merit in the errors as.signed, the judgment below is affirmed, at cost ofplaintiffs in error. i
I'EDERkL REPORTER,
THOMPSON
et al. o.
RAINWATER
et 01.
({;ireuUOourt of Appeals, E'41hth. Oweuit. February 8,1892.) 1. INDIAN TERRITORy.,....AsSIGNMENT FOR BENEFIT OF CREDITORS-EQUITY JURISDICTION.
Although in.1tl85 there was no statute in force in the Indian Territory authorizing assignments for the benefit of creditors, yet, such an assignment having heen made"the United States court for the territory, in pursuance of its equity jurbdiction u,nder Act Congo March 1, 1889, (25 St. p. 783,) will recop;nize and enforce the trust, and apply the principles of equity in determining the nature and extent of tbetrustee's liabUity. In a suit to enforce a trust for the benefit of creditors, wbere it is found that tbe trustee haa turned over a large' part of the trust funds to his daughter, who Is II. party to tbe lIuit, the decree should state the total sum for which the trustee Is liable, and fix a reasonable time for paying it into court, and award execution on default thereof. "It should fix· the total value of the assets received by the daughter, and requireber to pay the amount Into court, lIuch sum to be credited, when paid, on the total'sum found to be due'from tbe trustee. It t1hould find the amounts due on each of the several judgments recovered against the debtors by the parties to the proceeding,. and should contain appropriate directions for the distribution of the fund realized. · BENEFIT OJ' CREDITORB-ENFORCEMENT OJ' TRUST-DEORED.
D.