Rainwater-Boogher Hat Co. v. Malcolm et al., (Waples, Intervener.), 51 F. 734

Caldwell, Circuit Judge, (after stating the facts.) The case presents but a single question: Is this instrument a deed of trust in the nature of a mortgage or a deed of assignment for the benefit of creditors? If the former, it is valid; if the latter, it is void for noncompliance with the requirements of the statute in force in the Indian Territory regulating assignments for the benefit of creditors.

The statute in question is an Arkansas statute put in force in the Indian Territory by the act of congress of May 2,1890, (26 St. pp. 81, 94, c. 182, § 31,) and the decisions of the supreme court of that state construing the statute, and determining when an instrument is a deed of assignment and when a mortgage, are followed by this court in cases coming from that territory. Sanger v. Flow, 4 U. S. App. 32, 1 C. C. A. 56, 48 Fed. Rep. 152; Appolos v. Brady, 4 U. S. App. 209, 1 C. C. A. 299, 49 Fed. Rep. 401.

Construed in the light of the decisions of the supreme court of Arkansas, this instrument'on its face is a deed of trust in the nature of a mortgage,—the legal equivalent of a mortgage with a power of sale,—and not a deed of assignment for the benefit of creditors. Richmond v. Mississippi Mills, 52 Ark. 30, 11 S. W. Rep. 960; State v. Dupuy, 52 Ark. 48, 11 S. W. Rep. 964; Robson v. Tomlinson, 54 Ark. 229, 15 S. W. Rep. 456; Penzel Co. v. Jett, 54 Ark. 428, 16 S. W. Rep. 120. Reviewing these decisions, Judge Shiras, in delivering the opinion of this court m. Appolos v. Brady, 4 U. S. App. 209, 1 C. C.

A. 299, 49 Fed. Rep. 403, said: “ These cases declare 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?” There is in this deed what the learned counsel for plaintiff in error not inaptly characterizes as “an apparently iron-clad defeasance.” There is nothing on the face of the deed to warrant the court in declaring this defeasance clause a nullity, or from which the court can say it was not inserted in the instrument in good faith.

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. For the purpose of showing that it was a mere device to avoid the statute on the subject of assignments, the plaintiff in error called the maker of the instrument as a witness, and he testified that he desired and expected to pay the mortgage .debt and redeem the property inside of the 60 days.

That he did not do so cannot affect the validity of the deed. A sufficient explanation of his failure to do so, if any is necessary, is found in the attachments sued out by the plaintiff in error and others two days after the execution of the mortgage. Attachments against merchants commonly upset their.business plans and destroy their commercial credit. But, as we have said, the question of good faith was one for the jury, and it was submitted to them under instructions certainly as favorable to the plaintiff in error as it had any right to ask. The deed is not obnoxious to the statute of frauds.

The objection that it was not duly acknowledged, if well founded in fact, has no force, because the trustee took actual possession of the mortgaged property upon the execution of the deed, and continued in possession until it was taken from him under the attachment. Actual possession of mortgaged chattels by the mortgagee, before the rights of third parties have intervened, dispenses with the necessity of acknowledging the mortgage. Wood v. Weimar, 104 U. S. 786; Hauselt v. Harrison, 105 U. S. 401, 405; Cameron v. Marvin, 26 Kan. 612; Greeley v. Reading, 74 Mo. 309. The judgment of the trial court is affirmed.