B. Kuppenheimer & Co. v. Mornin

• Decision Date: 12 June 1935
• Docket Number: No. 10142.,10142.
• Citation: B. Kuppenheimer & Co. v. Mornin, 78 F.2d 261, 101 ALR 75 (8th Cir. 1935)
• Parties: B. KUPPENHEIMER & CO., Inc., v. MORNIN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

101 ALR 75, 78 F.2d 261 (1935)

B. KUPPENHEIMER & CO., Inc., v. MORNIN et al.^*

No. 10142.

Circuit Court of Appeals, Eighth Circuit.

June 12, 1935.

Robert Bachrach, of Chicago, Ill. (Julius Moses, Walter Bachrach and William A. Smith, all of Chicago, Ill., and Frank A. O'Connor, of Omaha, Neb., on the brief), for appellant.

D. M. Kelleher, of Fort Dodge, Iowa (John T. Sullivan, Jeffery G. Sullivan, and J. D. Liffring, all of Waterloo, Iowa, on the brief), for appellees.

Before GARDNER, SANBORN, and FARIS, Circuit Judges.

FARIS, Circuit Judge.

Plaintiff, appellant here, sued appellee, receiver, and one A. W. Steely in equity to subject certain money in the hands of the former, as receiver of the Commercial National Bank of Waterloo, Iowa, and two parcels of land of Steely, to an alleged equitable lien for the payment of a note of plaintiff, made to it by the Steely Clothing Company, under facts presently to be detailed. The court below sustained the motion of defendant Mornin to dismiss plaintiff's bill for lack of equity, and plaintiff appealed. We shall refer to the parties, as they stood below, as plaintiff and defendants.

The facts are few and simple, but withal unique, and legally interesting. The Steely Clothing Company, an Iowa corporation, was indebted to plaintiff in the sum of $8,500, evidenced by the note of said company. The president of the company, one W. E. Steely, was the son of defendant A. W. Steely, who "guaranteed," as the bill expresses it, the payment of this note by his indorsement thereon. In further guarantee, it is alleged, A. W. Steely, contemporaneously with the making of the note to plaintiff by the Steely Clothing Company, signed and delivered to plaintiff the following writing:

"For and in consideration of the acceptance by B. Kuppenheimer & Co., Inc., of my guarantee of the promissory note of the Steely Clothing Company, for the sum of Eight Thousand Five Hundred Dollars, said B. Kuppenheimer & Co., in the manner and form as set forth in said note, and for other good and valuable consideration, the receipt whereof is hereby acknowledged;

"The undersigned does hereby promise and agree, not to convey or mortgage the real estate now owned by him, wherever situated, until said promissory note and interest thereon has been fully paid; in the event, however, that said real estate or any part thereof be sold or mortgaged, the undersigned, hereby agrees to pay the proceeds arising from any such sale or mortgage, towards the payment of said promissory note.

"Upon the payment of said promissory note, this agreement is to become null and void and of no effect." (Italics ours.)

A. W. Steely at this time was the owner of four several parcels of land situate in Black Hawk county, Iowa. Without paying the $8,500 note, which when this suit was begun was due and unpaid, perforce an acceleration clause, defendant Steely, in breach of his promise, neither to mortgage nor convey his real estate, and without paying the proceeds thereof to plaintiff, mortgaged one parcel of his lands situate in said county, and conveyed by quitclaim another parcel, in such wise and to such effect, that defendant Mornin, as receiver, was enabled to collect out of the proceeds of such sale and mortgage the sum of $15,400, and to apply the same on certain secured indebtedness "supposedly" (again, as the bill expresses it) due to the bank of which defendant Mornin was receiver. And the bill says that this was done with the knowledge by Mornin of the existence and contents of the instrument above quoted. The mortgage was made to a Federal Land Bank, and the conveyance to one John Steely, the brother of defendant Steely. Each of them was made some two years after the making of the quoted document, and scienter is not alleged in the grantees, as of the time they took title.

It is not clearly stated precisely in what way Mornin was enabled to collect from Steely the supposed indebtedness, nor is it here and now relevant. It may be presumed that Steely owed the bank of which Mornin is receiver, and that Mornin, being interested in collecting this indebtedness, assisted Steely in making the sale and the mortgage so that Steely would be financially in funds with which to pay the insolvent bank. Of course, since no fraud seems to be alleged, the debt must be regarded, we think, as an actual one, and not a supposed one. The writing quoted and in controversy was not recorded.

In limine, appellant complains that only Mornin moved to dismiss the bill; that no pleading was made thereto in anywise by Steely, and therefore the court erred in dismissing the bill as to Steely. The record presents procedural anomalies in other aspects. It is sought in the identical bill to have decreed in the hands of defendant Mornin a lien, or trust upon certain money, in his hands, in which money defendant Steely has no interest, and also to fasten a lien on certain parcels of land owned by Steely, in which lands defendant Mornin has no interest.

The record discloses that defendant Steely neither joined in the motion to dismiss or made such a motion in his own behalf, nor did he answer; but no decree pro confesso was taken against him. When the motion of defendant Mornin was sustained by the court nisi, the plaintiff neither asked leave to amend or to file an amended bill of complaint, nor did it decline to plead further and thus leave to the trial court the only alternative of dismissing the cause of action, so that a proper appeal could be taken. At once upon the sustaining of the motion, and without further action, plaintiff took the appeal at bar against both Mornin and Steely, naming both of them as appellees, in the citation and in the bond on appeal for costs. So, without passing upon any question above suggested, or even pausing to characterize any of them, we are of the opinion that plaintiff cannot now be heard to say that the motion to dismiss the bill of complaint was not deemed by plaintiff, defendants, and the trial court as being on behalf of both defendants. In the light of plaintiff's action about the matter, it must be held that it waived the failure of defendants to specifically name Steely as a party movant in the motion to dismiss. It seems clear that the bill is duplicitous, but since no question is made upon the point, or the others suggested, we take the case as we find it.

The first question of law is, Did the writing, executed and delivered by defendant Steely to plaintiff, constitute an equitable assignment of the proceeds arising from the mortgage of the one parcel of real estate and the sale and conveyance of the other? This question concerns defendant Mornin alone. The second question is, Was the language contained in the promise of defendant Steely "not to convey or mortgage the real estate now owned by him, wherever situated," sufficient to constitute an equitable lien or mortgage on the remaining two tracts of land owned by defendant Steely? This question concerns the latter alone; defendant Mornin having presently and on this record no earthly interest in it. True it is, that it may well be, the decision of the latter question will as an inevitable corollary carry with it a decision of that first mooted. But both questions are put forward in the duplicitous bill of complaint here under attack; both are discussed at great length in the briefs of counsel, and so candor may require that both be frankly met in the expression of our views.

Much is said in the briefs touching the sufficiency vel non of the description of the lands as contained in the writing here sought to be upheld as creating a lien in the nature of an equitable mortgage. All of this is in our opinion afield from the bald question in the case. The matter of description here cuts no figure in the case. In passing, it may be said, merely arguendo, however, that courts should be slow to uphold a description of lands so blind or recondite as that those thereafter desiring to deal with the owner of the land would be compelled, as the learned trial judge expressed it, to examine "the records, not only of every county in the State of Iowa, but of every county in every other State in the United States." And since the writing limited the alleged lien "to lands now owned" by Steely, this examination must of necessity go further, and involve examination of ownership at and prior to December 10, 1931, the date of...