Adler-Goldman Commission Company commenced an action against Charles Bloom, Ben Bloom, and Morris Bloom, partners doing business under the name and style of Bloom Bros, and C. Bloom & Co., on two notes and an open account, and sued out an order of attachment, and caused the same to be levied on certain property.
Joseph W. Phillips filed his complaint in the case, and claimed the property under the following instrument:
“This indenture, made and entered into by and between Charles Bloom, Ben Bloom and Morris Bloom, partners as C. Bloom & Co., parties of the first part, Joseph W. Phillips, party of the second part, trustee, and the Dawrence County Bank, R. Dambeth, Kaminer, Prinz & Co., Isaac Dess, Dave Bloom, Schwab Clothing Company, H. Arndt, and the Dittle Rock Mill and Elevator Company, parties of the third part, witnesseth:
‘That whereas, the parties of the first part are now indebted to the parties of the third part as follows: The Dawrence County Bank in the sum of three hundred and seventy-one dollars and seventeen cents ($371.17), as evidenced by their promissory note of this date, payable in- thirty days, with 10 per cent, interest from date until paid, with I. Ness surety; to R. Lam-beth in the sum of five hundred dollars ($500), as evidenced by their -promissory. note of-fanuary, iSpj, and due and payable on the 1st day of fuly, i8gy, with 10 per cent, interest from date until paid, with I. Less as surety; to Kaminer, Prinz & Co. in the sum of ten hundred and forty eight dollars and seventy five cents ($1,048.75)^ which is to become due and payable in equal installments of three hundred and forty nine dollars and fifty eight cents ($349.58), as is evidenced by their three promissory notes of this date, the first one of which is to be due and payable 60 days after date, the second one is to be due and payable 90 days'after date, and the third and last one to become due and payable 120 days after date, each of which is to bear interest at the rate of 8 per cent, per annum from maturity until paid; to I. Ness in the sum of three hundred dollars ($300), as is evidenced by their promissory note to become due and payable 120 days after date, and bearing 10 per cent, interest from date until paid; to Dave Bloom the sum of seven hundred dollars (fjoo) upon aii accoimt which is now due, but upon which he is willing- to extend the time of payment in consideration of these presents; to Schwab Clothing Company in the sum of five hundred and twenty six dollars ($526), as is evidenced by their promissory note, payable 90 days from date; to H. Arndt in the sum of one hundred and forty dollars ($140), to become due and payable 60 days after date, as is evidenced by their promissory note bearing date the same as this instrument; and to the Nittle Rock Mill and Elevator Company in the sum of one hundred and seventy eight dollars ($178) upon an account of goods, wares and merchandise, the full payment of which said debts the parties of .the first part are anxious to secure.
“Now, therefore, for.the purpose of securing' the payment of said debts, and in consideration of $1 cash in hand paid to the parties of the first part by the parties of the second part, the parties of the first part have this day bargained, granted and sold to the party of the» second part all of their general stock of merchandise and accounts now in the storehouse now occupied by them as a place of business in the town of Walnut Ridge, in the county of Lawrence, State of Arkansas, together with all the store fixtures therein.
“To have and to hold to the said party of the second part, and to his heirs and assigns. This conveyance is. however upon condition and for the purpose of paying the indebtedness aforesaid, and at the time that it may become due, the -parties of the first part to remain in possession of all the property herein conveyed until default is made; and it is expressly understood and agreed that they may proceed to sell any of said goods in the regular order of business for cash, and to collect any outstanding indebtedness; and shall pay at the end of each week into the Lawrence County Bank the amount of sales for said week, after deducting only the necessary expense of carrying on the sales, such as rent of building, clerk hire, and the living expenses of the party of the first part; and the amount of said sales to be immediately applied by them, through said bank, to the payment of the above mentioned debts in the order in zuhich they become due; and after all of said indebtedness here-inbefore described and mentioned has been paid in full, with any accrued interest thereon, then this conveyance to become void, and all of said property revest in the grantors absolutely. It is further agreed and understood that the expenses of carrying on the business, until the before mentioned indebtedness shall be fully paid, shall be limited to the least practical sum, considering the successful management of the conveyed property; but if the parties of the first part shall make default in the payment of either of the above mentioned debts at the time it becomes due, or should they injure the security herein intended to be given in any manner by their neg.lect or mismanagement, then it shall be lawful for the party of the second part to, on demand of the parties of the third fart, take possession of all the property herein conveyed, and, after giving twenty days’ notice by printed posters, posted in five public places in Lawrence county, offer all of said property for sale to the highest bidder for cash. The accounts and evidences of debt he shall collect in the regular course of business, and with the proceeds of said sale he shall pay off and discharge the above indebtedness in full, if there be a sufficient amount; but if the amount be insufficient, then he shall pay all the debts fro ratd, according to the respective interest of all the parties thereto. Money received from the collection of accounts and evidences of debt to be applied in the same manner; and, if anything remains, to be paid to the parties of the first part or their legal representatives.
“Witness our hands and seals on this the 15th day of December, 1893.
“C. Bloom & Co., (l. s.)
“C. Bloom, (l. s.)
“Ben Bloom, (l. s.)
“ Morris Bloom. (l. s.)”
The plaintiff answered the complaint, alleging that the conveyance relied on was fraudulent; that the debts mentioned therein were simulated ; and that the conveyance was an assignment, which, not being made in conformity with law, was fraudulent and void on its face.
Afterwards, on the 19th day of January, 1894, the court made an order that the main issue in the attachment proceeding be tried first, and that the issue formed by the answer to Phillips’ complaint be tried afterwards.
construction °On the 27th of April; 1894, the court, being held by a special judge, recited the order made on the 19th of January, 1894, and directed that, so far as said order related to the then present term, it should be sustained.
On the 26th day of September, 1894, the plaintiff filed a motion,, copying the order made on the 19th of January, 1894, and that made on the 27th of April, 1894, and moving that the trial of the issues joined by the complaint of Phillips and the answer thereto be postponed until the trial of the issues in the attachment proceeding according to these orders; but on the 27th of September the court overruled said motion, and directed that the claim of Phillips be tried at once.
On the 28th of September, 1894, a jury was impaneled, and the claim of Phillips was tried. There was a verdict in his favor, and judgment accordingly; and the plaintiff, after filing a motion for a new trial, which was overruled, and a bill of exceptions, appealed.
Appellant complains of being forced into trial on the 28th of September, when it was not ready. It insists that it was taken by surprise, and that its motion for a new trial should have been granted on that ground. The evidence relied on to support this contention were the orders made on the 19th of January, 1894, and on the 27th of April, following. But there was evidence sufficient to sustain the finding of the court to the contrary. The motion filed by it on the 26th of September indicates as much. Then, again, there was no sufficient showing for a continuance.
Appellant contends that the deed relied on by Phillips is an assignment, and, as such, is void, because it stipulates for a method of sale different from that prescribed in the statute regulating assignments. The reasons given for this contention are: “It is a conveyance by merchants of their entire stock in trade, notes and accounts. (2) It is made for the purpose of paying, as far as the assets niay extend, the debts due to several creditors. (3) It is made for the purpose of raising a fund to pay off these debts, and not to furnish security for their future payment. * * * * (4) it does not reserve any right of redemption. It does not provide for the paying off the debts from money derived from any source, save from the sale of the goods and the collection of the choses in action. Nothing of the sort was contemplated or thought of. (5) The condition was broken as soon( as made, and the grantee was entitled to instant possession.”
An examination of the deed will show that the reasons assigned for this contention are not true. The deed recites: “That whereas, the parties of the first part are now indebted to the parties of the third part, as follows: (it then describes the debts) the full payment of which said debts, the parties of the first part are anxious to secure. Now, therefore, for the purpose of securing' the payment of said debts, and in consideration, etc., the parties of the first part have g'ranted, bargained, and sold to the party of the second part all their general stock of merchandise and accounts in the store house now occupied as a place of business in the town of Walnut Ridge, in the county of Lawrence, State of Arkansas, together with all the store fixtures therein” (not all of their property). And, after authorizing' the party of the first part (mortgagors) to remain in possession of the merchandise, and sell the same, and collect the accounts, it then says: “The amount of said sales to be immediately applied by them, through said bank, to the payment of the above mentioned debts, in the order in which they may become due, and, after all of said indebtedness hereinbefore described and mentioned has been paid in full, with any accrued interest, thereon, then this conveyance to become void, and all of said ¿property revest in the grantors absolutely.” How can all of the property revest in the grantors absolutely if it was to be sold, and the proceeds applied to the payment of the debts without the privilege of redeeming?
But it is said that some of the debts secured were due when the deed was executed, and that “the condition was broken as soon as made, and the grantee was entitled to instant possession.” It is true that twb or more of the debts were due, but the deed provides, in reference to the time when the trustee may take possession, as follows : “ But if the parties of the first part shall make default in the payment of either of the above mentioned debts at the time it becomes due,” etc., “then it shall be lawful for the party of the second part (trustee) to, on demand of the parties of the third part (secured creditors), take possession of all the property herein conveyed, and, after giving twenty days’ notice by printed posters, posted in five public places in Lawrence county, offer all of said property for sale to the highest bidder for cash.” It shows that many of the debts secured’ were not due at the time it was executed, and provides that they shall be paid when due, and authorises the mortgagors to remain in possession of the property conveyed, and sell the goods in the regular order of business, and to collect any outstanding indebtedness, which could not be done if the trustee took immediate possession, and converted the property into money for the payment of the debts. And this, in connection with other portions of the deed, shows that no absolute appropriation of property for the payment of debts was intended to be made.
In Robson v. Tomlinson, 54 Ark. 229, Chief Justice Cockrill, delivering the opinion of the court, said: “Neither the possession of the goods, nor the unreasonableness of the debtor’s expectation of paying the debt at maturity, nor his intent never to pay, is the criterion for distinguishing- a mortgage from an assignment. The controlling guide, according to the previous decisions of this court, is, was it the intention of the parties, at the time the instrument was executed, to divest the debtor of the title, and so make an appropriation of the property to raise a fund'to pay debts? If the equity of redemption remains in the debtor, his title is not divested, and an absolute appropriation of the property is not made.” Richmond v. Miss. Mills, 52 Ark. 30 ; Fecheimer v. Robertson, 53 Ib. 101; Box v. Goodbar, 54 Ark. 6; Penzel Company v. Jett, id. 428; Wood v. Adler-Goldman Com. Co. 59 id. 270; Marquese v. Felsenthal, 58 id. 293; Smith v. Empire Lumber Co. 57 id. 222.
Effect of grantors’ retaining compensation.Guided by the previous decisions of this court,' we hold that the conveyance in question was not a deed of assignment, but a deed of trust to secure the payment of debts.
But it is contended that, let the instrument in controversy be what it may, it is void on its face, because it provides .that the grantors may remain in possession of the property conveyed until default in the payment of the debts secured, and sell the goods in the regular order of business for cash, and collect any outstanding-indebtedness, and pay at the end of each week into the Lawrence County Bank the amount of sales for said week, after deducting only the necessary expense of carrying on the sale, such as rent of building, clerk hire, and the living expenses of the grantors. Upon the question presented by this contention, there is a contrariety of opinion by the courts of the different states. In Lund v. Fletcher, 39 Ark. 334, a summary of these opinions is made. In that case, after making-this summary, this court held, “that a mortgage of articles of merchandise containing a provision that the mortgagor may remain in possession and sell, and no-provision that the proceeds of the sale shall be applied to the payment of the mortgage, or so invested as to fix a continuing trust upon them for the purposes of the mortgage, is invalid, save between the parties.” Martin v. Ogden, 41 Ark. 186; Gauss v. Doyle, 46 Ark. 122.
In Gauss v. Orr, 46 Ark. 129, the mortgage in question contained this clause: “It is agreed that I, (the mortgagor) am to hold possession of my stock of goods during the will of said Orr & Lindsay, and retail the same, and account to said Orr & Lindsay each week after this week for the proceeds of sales, and to pay $50 thereof, if not more, each week until said sum (the mortgage debt) is fully paid, said $50 per week to be paid without regard to the amount of sales.” This court construed this clause as meaning “that the mortgagor should sell for the mortgagee’s benefit, and account to them for the proceeds; that if the proceeds of sales should not reach $50 a week, that sum should be paid nevertheless, and that the first settlement and account of sales should be made the next week after the mortgage was executed;” and held the mortgage to be valid.
There is no good reason why a mortgagor'of a stock of goods should not remain in possession and sell them in the usual course of trade, provided he sells for the benefit and as the agent of the mortgagees, and receives nothing further than a mere compensation for his services. As said in Huntley v. Kingman, 152 U, S. 527: ‘ ‘ The tendency of courts in modern times has been not to hold instruments of this character fraudulent and void upon their face, unless they contain provisions plainly inconsistent with an honest purpose, or the instrument indicates with reasonable certainty that it was executed, not to secure bona fide creditors, but to enable the debtor to continue to carry on his business under cover of another’s name.”
In Smith v. Craft, 123 U. S. 436, a creditor received from, his debtor á stock of goods in payment of debts, and the debtor executed to him a bill of sale therefor; and it was stipulated therein that the creditor would employ the debtor in the old business in which the goods were sold, at the rate of $150 per month, so long as the creditor should carry on the business. The court, in speaking of the validity of this stipulation, said: “If its object appeared on its face to have been to secure a benefit to the debtor or his family, it would be fraudulent in law. * * * But if its purpose was to obtain services necessary to wind up the business, and turn the goods into money as promptly and economically as possible, for the benefit of the other party, it is valid. Wilcoxon v. Annesley, 23 Ind. 285; Baxter v. Wheeler, 9 Pick. 21; Strong v. Carrier, 17 Conn. 319. As was well said by the Supreme Court of Indiana in Wilcoxon v. Annesley. ‘Where, as in this case, the purchase was of a stock of goods in a store, and an established trade existing, it seems but reasonable that, at a fair salary, the grantor might be employed, for a time at least, to continue in charge of the business, and that circumstance will not in itself prove the transaction fraudulent.’ ”
In the deed of trust executed by the Blooms they were to “pay at tlie end of each week into the Lawrence County Bank the amount of sales for said week, after deducting only the necessary expenses of carrying on the sales, such as rent of building, clerk hire, and their living expenses, ” and to immediately apply the amount of sales deposited, through the bank, to the payment of the debts secured, in the order in which they may become due. Moneys received from the collection of outstanding indebtedness by the grantors, after deducting the expenses mentioned which were unpaid, were also to be applied at the end of each week in. the same manner. They made their living expenses a part of the expense of the business, and further stipulated “that the expenses of carrying- on the business, until the before mentioned indebtedness shall be fully paid, shall be limited to the least practical sum, considering- the successful management of the conveyed property.” Their living expenses, which only included the cost of their food, raiment, shelter, and lodging, was a compensation for services to be rendered, and was the only reward to be received by them, and that was to be limited to the least sum practicable. And after this they provide that if they injure the security intended to be given, in any manner, by their neglect or mismanagement, then it shall be lawful for the trustee, on demand of the beneficiaries, to take possession of the goods and sell, and collect the accounts and evidences of debt'; thereby limiting their right and opportunity to receive out of the property mortgaged anything more than the necessary expenses of living, reduced to the least sum practicable. We see in this no intent to pay anything more than a reasonable salary for selling the goods and closing up an old business, which they were presumably more competent to do than the trustee, or any one he might employ. There was no evidence to show that the services or compensation were unnecessary or unreasonable.
Entertaining the views expressed in Smith v. Craft, we hold the deed in question to be valid.
Judgment affirmed.