Exchange Bank v. Scholz

DOOLING, J. pro tem.

This is an appeal from a judgment foreclosing a mortgage made to secure a promissory note and providing for a deficiency judgment against the maker of the note, defendant Rudolph J. Scholz.

The note in the principal sum of $6,000 and the mortgage were executed by defendant Rudolph J. Scholz in favor of defendant Edward P. Sophey on November 3, 1927. The note by its terms was payable two years after date.

The defendants Sophey, who were engaged in business as

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co-partners, on December 30, 1927, entered into an arrangement for the benefit of their creditors whereby they agreed to transfer to three trustees all of their assets. Pursuant to this agreement they endorsed and delivered the promissory note involved in this action to such trustees.

On March 1, 1929, the plaintiff Exchange Bank, the defendants Sophey and the three trustees of the trust for creditors above referred to entered into an agreement which provided that the defendants Sophey were indebted to the bank in the sum of $23,602.32, that .defendants Sophey and the three trustees would convey to the bank certain described real property and would further transfer to the bank the note and mortgage here in suit, together with all accounts receivable of the business known as Sophey Bros., “notes receivable excepted,” “it being the intention of the parties hereto that the first party (bank) will take the assets herein set forth and liquidate them as rapidly as possible.”

On its part the bank agreed to pay the Sopheys the sum of $1,000, and to release and discharge any claim that it might have or assert against any and all assets of the Sopheys not mentioned in the agreement, and that such assets might be transferred to a corporation to be formed free from any claim of the bank.

Pursuant to this agreement the trustees endorsed the promissory note and delivered it to the bank and the Sopheys executed and delivered to the bank an assignment of the mortgage.

At the outset appellants attack the transfer of the note and mortgage to the bank on the ground that the trustees for creditors could not give good title to the bank without the creditors’ consent. This argument overlooks the express provisions of the agreement by which the trust for creditors was created. That agreement contained the following provisions : “Fourth: This Trust shall be irrevocable for a period of One (1) year next after the execution of this Indenture, excepting however, that this Trust Agreement may be declared imperative (inoperative?) in the event all of said creditors’ claims and all other claims be paid and discharged before the expiration of said One (1) year period. . . .