Farmers' Sav. Bank of Williamsburg v. Cash

• Court: Iowa Supreme Court
• Writing for the Court: PRESTON
• Citation: Farmers' Sav. Bank of Williamsburg v. Cash, 199 Iowa 597, 200 N.W. 603 (Iowa 1924)
• Decision Date: 11 November 1924
• Docket Number: No. 36071,36071
• Parties: FARMERS' SAV. BANK OF WILLIAMSBURG ET. AL. v. CASH ET AL.

199 Iowa 597

200 N.W. 603

FARMERS' SAV. BANK OF WILLIAMSBURG ET. AL.

v.CASH ET AL.

No. 36071

Supreme Court of Iowa.

Nov. 11, 1924.

Appeal from District Court, Iowa County; R. G. Popham, Judge.

Action in equity to foreclose a chattel mortgage upon certain personal property. Various defendants appeared, including the Conroy Savings Bank, and filed answers claiming a prior lien on the personal property under and by reason of a chattel trust mortgage executed by the debtor, William Cash. All the creditors named in the trust chattel mortgage were made defendants in this action. The trust mortgage is prior in point of time to the plaintiffs' chattel mortgage. The trust mortgage was executed January 13, 1922, and plaintiffs' mortgage May 29, 1922. The trial court held the Conroy Savings Bank had a prior lien under the trust chattel mortgage for the full amount of its claim to that of the claim of plaintiffs, and rendered a decree so finding, and providing that the plaintiffs, before they could sell the property under their foreclosure, must pay the claim of the Conroy Savings Bank. The court found that none of the other defendants had accepted under the trust mortgage, and that it had not been delivered as to them, and were therefore not entitled to a lien thereunder. The decree also removed the prior trustee under the trust mortgage and directed William Cash to appoint a successor; failing which, one would be appointed by the court for the purpose of executing the trust imposed. Cash, protesting that he did so without waiving any rights, appointed Leasure, who accepted the trust in writing. Defendants do not appeal, so that the controversy is now between plaintiffs, appellants, on the one hand, and the Conroy Savings Bank, appellee, on the other. Plaintiffs alone appeal.

Affirmed.Walter M. Davis, of Iowa City, and W. E. Wallace, of Williamsburg, for appellants.

Havner, Flick & Powers, of Des Moines, and P. P. White, of Williamsburg, for appellees.

PRESTON, J.

Appellee says there is but one issue in the case, and states it substantially thus: Whether the trust chattel mortgage executed January 13, 1922, and recorded on the same day, which trust chattel mortgage was accepted by the Conroy Savings Bank March 18, 1922, is a lien upon the chattel property described in the trust mortgage, prior and superior to another chattel mortgage executed by the owner of such property on May 29, 1922. Appellants state the issues in this wise: Whether the trust chattel mortgage was valid, and whether it was delivered or accepted by the Conroy Savings Bank under its terms, and, if so, the amount of its lien, and whether it was necessary for all the creditors named in the trust chattel mortgage, or a majority thereof, to accept before said trust mortgage was valid. The last proposition involves, to some extent, a construction of the trust instruments.

On said January 13 Cash executed the trust chattel mortgage, known in the record as Exhibit 3, conveying the property therein described to a trustee to secure his indebtedness therein listed to the creditors therein named. At that time Cash was insolvent. At the same time, and as a part of the same transaction, Cash executed a trust real estate mortgage, known in the record as Exhibit 5, conveying the real estate to the same person, as trustee, securing the same creditors. The two instruments covered all the property then owned by the debtor, William Cash. The trust mortgage purports to secure something less than $80,000, and includes a large number of claims which are listed therein. Plaintiffs' mortgage purports to secure approximately $22,000 of claims against Cash. Some of these are the same persons, and we take it the same claims, as listed in the trust mortgage, and who are plaintiffs and appellants in this case. Among the claims listed in and secured by the trust mortgage is the claim of the appellee herein, the Conroy Savings Bank, in the sum of about $4,200. A like amount based on the same indebtedness was secured by the conveyance to the trustee of the real estate. At the time Exhibit 3 was executed Mr. W. E. Wallace, attorney for Cash, and Cash were present, and no one else. Exhibits 3 and 5, also Exhibit 2, were drawn by Mr. Wallace and executed by Cash. Mr. Wallace subsequently represented all the plaintiffs in this case, and is himself one of the plaintiffs. Exhibits 3 and 5 were both taken by the trustee therein named and his partner to the recorder's office, and by him filed for record. The trust mortgage, Exhibit 3, was retained by the recorder, and the real estate trust mortgage was returned by the recorder to Mr. Wallace, who retained it until the trial of this case. The note therein described for $80,000 was not executed and never has been. At the January, 1922, term of court in Iowa county appellee had secured a judgment against Cash on the note which was secured by the trust chattel mortgage and another note, and under said judgments execution had issued and was levied upon certain collateral which had been pledged to secure their payment.

March 18, 1922, appellee, Conroy Bank, and William Cash, and the person named as trustee, with W. E. Wallace, had a conference which resulted in the execution of a written agreement on said date, known in the record as Exhibit 2, by which appellee claims the trust mortgage was ratified and confirmed by the signature of Cash and the trustee, and that this was in consideration of the release of the execution issued by appellee before referred to, and by this it is claimed by appellee that it accepted the terms of the trust mortgage. Subsequently plaintiffs' chattel mortgage was executed with notice, we think, through Wallace, representing plaintiffs, of the trust mortgages. There is testimony that the value of all of Cash's property January 13, 1922, was approximately $12,000, or a little more. Mr. Cash formulated the plan of executing the trust mortgage. The list of his indebtedness as set out in Exhibit 3 is correct. There is also testimony that Mr. Cash attempted to treat all his creditors alike--to put them on the same basis. Mr. Wallace told the trustee, the day Exhibits 3 and 5 were executed, that in his opinion they were not good. No copies of Exhibit 3 were sent to the creditors. Mr. Cash did not talk with his creditors in regard to Exhibit 3, except with the cashier of appellee bank.

The chattel property was not turned over to the trustee, but was retained by Cash, and some of it was sold. The trustee first named seems to have paid little attention to the matter, though it appears that there were some moneys deposited in the bank in the name of the trustee, and a few checks were drawn against this account. The trial court found, and properly so, we think, that Gallagher the first trustee accepted the trust and entered into the discharge of his duties as such, but he had since abandoned the trust and was no longer performing the duties, and because of the vacancy a new trustee was appointed. Mr. Wallace also drew the plaintiffs' mortgage. Before doing so he consulted all the creditors therein named about the execution of the same before it was executed by Cash. Plaintiffs' mortgage is on the same property as that described in the trust mortgage. The foregoing, though a synopsis only, is a statement of the essential facts in the record, except the exhibits.

Exhibit 3, the first chattel mortgage, provides, among other things: In consideration of the sum of $80,000, Cash and wife sell and convey to the trustee and his successors in office certain described horses, cattle, hogs, automobile, threshing engine, and machine, wagons, and other farm machinery, ensilage, hay, corn, oats, and so on, * * * to be void upon condition that the said Cash shall pay to the said trustee or his successors his one promissory note dated January 13, 1922, due on or before five years, for $80,000, 8 per cent. interest; said note is given and said trust is created to secure the payment of the following described notes and accounts, to wit. * * * Said trust is created and said note given, however, for the equal proportionate benefit and security of any and all the notes and accounts described herein without regard to their date, so that each note and account shall have, by virtue of this instrument, the same right and lien, except the notes given by the trustee for running expenses in caring for the property, taxes, interest on the first mortgage on the real estate given by mortgagors of even date herewith to secure the notes herein described. Should the holder of any note or open account described herein commence any action to enforce collection of the notes or account held by said holder, such holder shall forfeit all the lien hereby created in his favor, and any such holder commencing such proceeding shall have no right hereafter under this instrument. Or, should any holder of note or account described herein refuse to immediately abandon proceedings heretofore commenced by such holder to enforce collection, then such holder shall immediately forfeit all the lien created hereby. * * * All payments made upon notes described herein shall be made to the trustee and the same divided between the several holders of notes and accounts in proportion to the amount due each holder. As this mortgage is made for a greater amount than the accounts listed, with interest, it is agreed that the trustee shall have authority, and he is empowered, to borrow money in his name as trustee in a sum not to exceed $5,000 at any one time to pay running...