Briley v. Madrid Imp. Co.

• Decision Date: 16 July 1963
• Docket Number: No. 51021,51021
• Parties: Duane E. BRILEY and Margaret M. Briley, Plaintiffs, v. MADRID IMPROVEMENT COMPANY, Polk City Savings Bank, William J. Kendall, and Edward L. Spellman, Defendants.
• Court: Iowa Supreme Court

Page 824

122 N.W.2d 824

255 Iowa 388

Duane E. BRILEY and Margaret M. Briley, Plaintiffs, v. MADRID IMPROVEMENT COMPANY, Polk City Savings Bank, William J. Kendall, and Edward L. Spellman, Defendants.

No. 51021.

Supreme Court of Iowa.

July 16, 1963.

Wilson, Maley & Stamatelos, West Des Moines, for Polk City Savings Bank, appellant.

Mahoney, Jordan, Statton & Smith, Boone, for plaintiffs-appellees.

James W. Newell, Creston, for William J. Kendall, appellee.

Edward L. Spellman, appellee per se.

LARSON, Justice.

The only issue before us in this appeal is whether the trial court erred in granting lien priority to judgment creditors who caused garnishment to be levied against moneys or credits due the debtor on a real estate contract, which contract had been assigned and deposited as collateral security for payment of debtor's note to the appellant bank.

I. As a general rule, an attachment or garnishment is effective only to the extent of the debtor's interest in the property attached, and the lien does not displace prior equities or rights. The right first acquired is, as a rule, superior. It is generally held that the lien of an attachment or garnishment is not superior to any prior and existing possessory interest, as in the case of a bailment or a pledge. 6 Am.Jur.2d, Attachment and Garnishment, § 464, page 886. To the same effect see 5 Am.Jur., Attachment and Garnishment, § 843, page 104; Wilson v. Kelso, 250 Iowa 67, 70, 92 N.W.2d 392. That rule applies here.

From this record it appears that on November 2, 1960, the defendants Kendall and Spellman, judgment creditors of the defendant Madrid Improvement Company, hereinafter referred to as the corporation, caused garnishment to be levied against the plaintiffs, Duane E. Briley and Margaret M. Briley, for moneys or credits due the defendant corporation on a written real estate contract dated March 26, 1956. The plaintiffs then brought this suit in equity alleging these defendants and the Polk City Savings Bank claimed some interest in the balance due on the contract, tendered this sum into court and prayed for a decree granting them a deed to the real estate, quieting title in them, and for other relief proper in the premises.

All defendants, except the debtor corporation which had had its charter canceled April 8, 1957, appeared and asked that their claims to the proceeds be granted priority. The trial court granted plaintiffs relief as prayed, and a court-appointed commissioner deeded the property to plaintiffs and received the balance due on the contract of $2,274.25. This part of the judgment is not questioned, but the appellant Polk City Savings Bank, hereinafter referred to as the bank, was most unhappy when the court ordered the judgment of September 28, 1959, entered in favor of the defendant Spellman first paid from those receipts in the sum of $401.25 plus interest and costs, and ordered the judgment of October 4, 1956, in favor of the defendant Kendall next paid in the sum of $1,100.00 plus interest and costs. The balance was ordered paid to the bank to be credited upon its collateral note held against the debtor corporation. Obviously, the bank's claim of some $1,500.00 could not be paid in full, and nothing would remain for the debtor corporation. It is appellant bank's contention that its lien was entitled to priority over the claims of the other defendants, and under the circumstances disclosed by this record we must agree.

The facts are not in serious dispute. On the 26th of March, 1956, the plaintiffs purchased certain real estate on contract from the corporation for $4,250.00, with $600.00 down and the balance payable at $40.00 per month, with the privilege of paying the balance at any time. The contract was duly recorded March 27, 1956. On July 24, 1956, the corporation obtained a loan of $2,850.00 from appellant and executed a collateral note listing this real estate contract as security for payment. On that date $3,584.68 remained unpaid on the real estate contract. The plaintiffs were promptly notified of this transaction and were told to make their $40.00 monthly payments to the bank, which they did until the time of the garnishment. Exhibit C, a deed from the company to plaintiffs, under date of August 13, 1956, was also delivered to the bank to be held until the payments under the contract had been made. On the back of a copy of the real estate contract appeared the following: 'July 23, 1956. Pay to the order of Polk City Savings Bank, Polk City, Iowa. Madrid Improvement Company, Inc. by S. S. Foster, Business Manager & Secy & Treas.' This was introduced as defendant bank's Exhibit B. Mr. Miller, the bank's vicepresident, testified as to the execution of this instrument and recalled putting the date July 23, 1956, on Exhibit B at that time. This exhibit, along with Exhibit A, the collateral note dated July 24, 1956, he said, was delivered to the bank on or about that date, and as monthly payments were made by plaintiff, they were recorded as corporation credits on the back of Exhibit A. They covered approximately four years time.

It is appellant's contention the evidence clearly establishes that the right and interest in and to the moneys due under the real estate contract to the extent of the corporation's indebtedness evidenced by the collateral note were duly assigned and delivered to the bank on July 24, 1956, that this assignment established the bank's lien on said moneys as of that date, and that since the defendants Spellman and Kendall did not acquire their liens until November 2, 1960, by garnishment, the bank's lien was prior and should have been so declared by the court. We think the evidence adequately establishes a valid assignment of intangible property.

II. We have made it abundantly clear that, as to personal property capable of physical transfer, such transfer of possession must be made prior to the attachment or garnishment to preserve a lien priority. As to intangible property such as choses in action or debts not represented by negotiable instruments, no pronouncements seem to have been made, and except for the right to assign such indebtedness or obligation under section 539.1, we find no statutory provisions relating to such assignments or their priorities. No necessary statutory filing or recording requirements are cited by appellees or were referred to by the trial court in its decision. It seems, therefore, a fair conclusion that the date of assignment, when established by satisfactory proof thereof, is all that is required to preserve the lien priority of such an assignee. Aultman v. McConnell, C.C.Iowa 1888, 34 F. 724; Vigars v. Hewins, 184 Iowa 683, 688, 169 N.W. 119; Yetley v. Irons, 238 Iowa 23, 25 N.W.2d 677, 168 A.L.R. 1159.

III. A written assignment of a chose in action or other right in personal property generally is sufficient if it is delivered to the assignee without being affixed to any other instrument showing title or a right to the thing assigned, and any language, however informal, will suffice if it shows the intention of the owner of that property to transfer it. In Petty v. Mutual Benefit Life Co., 235 Iowa 455, 464, 15 N.W.2d 613, we held a policy of life insurance was a chose in action and assignable as such. It was said therein: 'As a general rule it is sufficient if the written assignment of the chose in action is delivered to the assignee, without any delivery of other paper showing title to the chose in action.' Also see Andrew v. Bankers' Life Co., 214 Iowa 573, 240 N.W. 215. In Vigars v. Hewins, supra, we held a later assignment in writing consummating the terms of an expressed parol understanding and agreement was sufficient to establish an equitable lien as of the date of the parol contract. Also see Aultman v. McConnell, supra.

We find section 539.1, Code of Iowa, 1962, I.C.A., authorizes such assignments, providing: 'Bonds, duebills, and all instruments by which the maker promises to pay another, without words of negotiability,...