Bankers Life Co. v. Garlock
| Decision Date | 02 April 1940 |
| Docket Number | 45088. |
| Citation | 291 N.W. 536,227 Iowa 1335 |
| Parties | BANKERS LIFE CO. v. GARLOCK et al. (WALLACE, Intervener). |
| Court | Iowa Supreme Court |
Appeal from District Court, Pocahontas County; F. C. Davidson Judge.
Suit to foreclose a real estate mortgage, intervener claiming landlord's share of rents, issues, profits, and crops under assignment of lease. Decree for intervener, from which plaintiff appeals.
Reversed and remanded.
Shaw & Shaw, of Pocahontas, D. M. Kelleher, of Fort Dodge, and J. P Lorentzen and Emory M. Nourse, both of Des Moines, for appellant.
John M. Schaupp, of Fort Dodge, for appellees Charles A. and Leone G. Garlock and Nellie A. Wallace.
Plaintiff brought suit to foreclose a mortgage given by Charles A. Garlock and wife in 1928. The mortgage, in the granting clause immediately following the typewritten description of the land, has the words: " and also all the rents, issues, uses, profits, and income therefrom, and all the crops at any time raised thereon from the date of this agreement until the terms of this instrument are complied with and fulfilled." Immediately following is the habendum clause, with covenants of seizin, right to sell and convey, freedom from incumbrances, and covenants as to quiet enjoyment and warranty. The usual further agreements follow relating to obligation to pay taxes, insurance, waste, and so on.
The mortgage was recorded November 19, 1928, and indexed in the chattel mortgage index. Petition for foreclosure was filed on August 13, 1938, asking foreclosure as to both real estate and personal property, and asking judgment. Answer was filed by defendant Charles A. Garlock, admitting that the mortgage was due, but denying that plaintiff had any lien or right or interest in any of the rents, issues, profits, income, or crops from the mortgaged real estate; alleging that he had leased the real estate on February 3, 1938, to J. H. Kelley and wife for a two-year term commencing March 1, 1938, and ending March 1, 1940, and on May 17, 1938, has assigned the landlord's share in said lease for a valuable consideration to Nellie A. Wallace (intervener herein), and asking that her rights be established as superior to any rights of the plaintiff. The lease, attached as an exhibit to the answer, provided that the lessee was to give as rental a share of corn and small grain raised on the mortgaged premises, and pay $6 per acre for all hay and pasture land not in crop. Nellie A. Wallace intervened, setting up the assignment of the lease to her as collateral for a prior mortgage of $8,000, and alleging the superiority of her right to the crops of 1938 and 1939. Plaintiff filed answer to the petition of intervention, alleging that its chattel mortgage on the crops was duly recorded and indexed long prior to intervener's lease and assignment. Decree of foreclosure was entered November 18, 1938, and judgment rendered against Charles A. Garlock for the amount of the principal, interest, and costs, and continuing the action as to the foreclosure of the personal property and as to the controversy involving the plaintiff's chattel mortgage and the issues raised by the petition of intervention and the assignment of the lease. Most of the facts as to the assignment were stipulated.
Trial on the question of plaintiff's right to foreclosure of its chattel mortgage as against the intervener-assignee was had on January 25, 1939, and the court found the facts as above stated; that there was a deficiency on sale on execution of over $2,000; that there was no question that the intervener was a creditor of the defendant Garlock, and that at the time of receiving the assignment of the lease she substituted the same for other security then in her hands; that she was a good-faith holder for valuable consideration, and that she was entitled to the landlord's share of the corn and small grain produced under the two-year lease, but that the plaintiff was entitled to the cash rental payment for the year 1938, amounting to $180. Order and judgment was entered on June 12, 1939, in substance as above set out, giving to the intervener all the share rental consisting of the landlord's share of the corn and oats grown upon the mortgaged premises for the years 1938 and 1939, and ordering and adjudging that the plaintiff was not entitled to enforce any lien under its mortgage against said grain rental or any part thereof. From this order and judgment plaintiff appeals.
The mortgagor Garlock was the owner of the land from and before the date of the mortgage in 1928 up to the time of the finding of this appeal, so that no question arises in this case as to any change of ownership. Plaintiff alleges that the court was in error in giving to the intervener the landlord's share of the corn and oats grown on the mortgaged premises for the years 1938 and 1939, and in finding that the plaintiff was not entitled to enforce the lien of its chattel mortgage against such share of the grain rental, and in finding that the assignee of the lease had priority over the chattel mortgage clause in plaintiff's mortgage; and, in substance, that the finding, order, and judgment of the court were erroneous in that they failed to recognize and hold that the lien of plaintiff's duly indexed chattel mortgage on the rents, uses, issues, income, and profits of the mortgaged premises was paramount and superior to any right, title, or interest of the intervenor claiming under a subsequent lien.
There is no question that the recording and indexing of the mortgage were in compliance with section 10032 of the Code of 1935. The dispute is as to whether the mortgage clause was such as to constitute a valid chattel mortgage. Plaintiff claims that its lien under the chattel mortgage clause conveying rents, issues, profits, and crops, attached at the time the chattel mortgage was executed and indexed, and that the assignee under a subsequent lease had constructive notice that such personalty was covered by the chattel mortgage, citing Equitable Life Ins. Co. v. Brown, 220 Iowa 585, 262 N.W. 124, 125.The granting clause of the chattel mortgage clause in the Brown case was in the following language:
In the instant case the granting clause of the chattel mortgage clause is as follows: " * * * sell and convey * * * (describing the land) and also all the rents, issues, uses, profits and income therefrom, and all the crops at any time raised thereon from the date of this agreement until the terms of this instrument are complied with and fulfilled."
Plaintiff's contention is that the two clauses are substantially the same. The holding of the Brown case under the clause above quoted was that this constituted a legal chattel mortgage, which gave to the mortgagee as against the mortgagor and others having actual notice thereof a first lien on all subsequently executed leases of the land and on certain promissory notes which represented the rental under said leases, and gave to the mortgagee a first lien on all such leases and notes against all assignees thereof. The further holding was that the lien of the rents and profits created by a chattel mortgage clause in a real estate mortgage is effective from the date of the execution of the mortgage, and not from the date when petition for foreclosure and appointment of receiver is filed. The opinion, by Justice Hamilton, in that case, is based upon and follows the case of Farmers' Trust & Savings Bank v. Miller, 203 Iowa 1380, 214 N.W. 546, and the case of Soehren v. Hein, 214 Iowa 1060, 243 N.W. 330.It also follows the rule laid down in Capital City State Bank v. Riser, 215 Iowa 680, 246 N.W. 763.The facts in the Brown case and those in the case at bar are very similar. The habendum clauses in the two cases are similar, except that there is a covenant of warranty in the case at bar. In both cases the mortgagors leased the premises and assigned the landlord's interest in the leases to the interveners before the beginning of the foreclosure proceedings. In neither case did the mortgagor raise the crop. In each case the same claim was made-that the assignment of the lease before commencement of the foreclosure action gave the assignee of the lease a right to the rent during the period of redemption, and that the mortgagee had no rights superior to the rights of the assignee. In both cases a...
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