Gilman v. Heitman

• Decision Date: 20 November 1907
• Parties: GILMAN v. HEITMAN ET AL.
• Court: Iowa Supreme Court

137 Iowa 336

113 N.W. 932

GILMAN

v.HEITMAN ET AL.

Supreme Court of Iowa.

Nov. 20, 1907.

Appeal from District Court, Woodbury County; William Hutchinson, Judge.

The opinion states the case. Reversed.

Hubbard & Burgess, for appellants.

H. A. McManus and Shull, Farnsworth & Sammis, for appellee.

WEAVER, C. J.

The facts in this case are numerous and complicated, and it is difficult to state them with any degree of clearness, except by tracing the various material events in the history of the controversy in their chronological order.

On January 20, 1888, one Atwood sold to the defendant Mrs. G. A. Heitman certain lots in Sioux City, Iowa, for the expressed consideration of $5,000. The deed, at the request of Mrs. Heitman, was made to Lillie M. Wood, who was her employé, and seems to have taken the title in trust for the use of said purchaser. The reason why the conveyance was made to Wood, instead of Heitman, the real purchaser, is the subject of considerable inquiry and animadversion by counsel, but the truth concerning that matter is not of great importance in determining this appeal; though we find nothing to impeach the good faith of the transaction. Soon after the purchase was made, Mrs. Heitman went into possession of the property, and occupied it until late in the year 1899. At this time the city of Sioux City was the scene of a very remarkable real estate speculation, in which the market values of property were exaggerated to an unnatural degree, and many enterprises were being undertaken which subsequently suffered a ruinous collapse. In September, 1899, Mrs. Heitman sold and caused the said Lillie M. Wood to convey the said property to a corporation known as the Sioux Automatic Refrigerating Company, for the purpose of establishing therein a cold-storage plant. The stock of the refrigerating company was owned largely, if not entirely, by one O. C. Tredway and Elizabeth B. Tredway, his wife. The corporation seems to have been conceived, brought into existence, and managed by O. C. Tredway, who was a friend and to some extent adviser of Mrs. Heitman. He negotiated with Mrs. Heitman for the purchase of these lots for the use of the corporation at the agreed price of $20,000. No part of this price was in fact paid, but said O. C. Tredway gave to Mrs. Heitman therefor his two personal notes of $10,000 each, and as collateral thereto delivered to her two other notes executed by one S. T. Davis for $10,000 each. After obtaining title to the property, the refrigerating company built thereon a cold-storage plant at the alleged cost of $60,000. After the property had been thus improved, and on December 29, 1891, the corporation made its four notes of $10,000 each to Elizabeth B. Tredway, and gave her a mortgage thereon to secure the payment of the same, which mortgage was duly recorded on January 2, 1892. This mortgage and the notes secured thereby appear to have been made, not to secure any actual indebtedness owing to said Elizabeth B. Tredway, but were given to her in trust to enable her to make use thereof in raising money or otherwise obtaining funds to meet the demands upon the corporation. Soon after their execution, the Tredways took the note first maturing under this mortgage to Mrs. Heitman, and gave the same to her in exchange for one of the $10,000 notes given to her by O. C. Tredway upon the purchase price of the property, and she surrendered to them the last-named note, together with one of the Davis collateral notes. In other words, one of Tredway's notes representing one-half of the purchase price of the property was paid by the delivery to the payee of the note of the corporation for a like amount secured by the mortgage to which reference has been made. Later, O. C. Tredway substituted another $10,000 note signed by himself for the remaining Davis note for a like amount held by Mrs. Heitman as collateral. At that stage there in the history of the proceedings Mrs. Heitman held the note of the refrigerating company for $10,000 secured by the mortgage and Tredway's personal note for $10,000, with an additional personal note of Tredways for a like amount; the latter representing no actual indebtedness and held as collateral so called. In October, 1893, Mrs. Heitman borrowed $1,500 from Burke Bros. in Chicago, and put up as collateral thereto several notes, among which were the notes we have above described, one for $10,000, executed by the refrigerating company, and the two personal notes of O. C. Tredway for $10,000 each. On December 4, 1893, the taxes being delinquent thereon, the county treasurer sold the property in controversy at tax sale to the plaintiff herein, D. T. Gilman. On December 27, 1894, the Tredways borrowed about $10,000 from the plaintiff Gilman, and as collateral security for the debt thus contracted turned over to Gilman the three remaining $10,000 notes of the refrigerating company, secured by the mortgage of December 29, 1891. On July 2, 1895, Elizabeth B. Tredway obtained a sheriff's deed of the property in controversy upon a sale made thereof by virtue of an execution upon a judgment theretofore rendered against the corporation in favor of a stranger to this action. On April 9, 1898, the Tredways united in conveying the mortgaged premises to plaintiff D. T. Gilman by warranty deed, excepting from the covenants of warranty the taxes, liens, and incumbrances of record. Upon receiving said deed, the plaintiff went into and has ever since retained possession of the property. The consideration for this conveyance to plaintiff was the cancellation of the obligation which the Tredways had given to him for the loan of about $10,000 above mentioned. The note which had been given for this loan was then surrendered to the Tredways, but, for some reason not explained, plaintiff did not turn over to them the three $10,000 notes which he had received as collateral security for the payment of the former. When plaintiff took the Tredways' deed for the property, he knew of the existence of the mortgage securing the four $10,000 notes, but says he was informed by Tredway that the first of the series was not a lien upon the property, but, if it were a lien, he, Tredway, would take it up. On February 21, 1899, Gilman applied to the county treasurer and obtained a tax deed himself for the mortgaged property under the sale which had been made to him as aforesaid December 4, 1893. On January 7, 1900, the refrigerating company, by O. C. Tredway as president, confessed judgment in favor of Mrs. Heitman in the sum of $10,000, with interest thereon according to the terms of the first note of the series of four which were secured by the mortgage of December 29, 1891. This confession was entered in the office of the clerk of the district court of Woodbury county. The plaintiff was not in any way a party to this proceeding, but learned of the confession of judgment shortly after it was made. On November 21, 1904, execution was issued on this judgment and levied upon the property. Notice of the levy was served on the refrigerating company only. A sale was had under such levy, but, before a delivery of the certificate thereof was made to Mrs. Heitman, plaintiff begun this action in equity, making Mrs. Heitman and the sheriff defendants, and procuring a temporary injunction which arrested further proceedings at that point. The plaintiff alleges that he is the owner of the property free of the lien of the mortgage, and bases his claim of title on his tax deed. Shortly after the beginning of this action, plaintiff transferred the three $10,000 notes in his hands to his son, W. S. Gilman, who brought another action to recover thereon and to foreclose the mortgage. This action was subsequently consolidated with the one brought by D. T. Gilman. As counsel for appellee in this court abandon any claim thereunder, we shall not further consider it.

The defendant Mrs. Heitman takes issue upon plaintiff's petition, asserts the existence in her favor of a lien upon the property in controversy, and asks that the same may be enforced in this action. She also denies the validity of the tax deed upon which plaintiff bases his claim of title. By way of reply to the cross-demand of the defendant, the plaintiff asserted his claim of title to the property and the validity of his tax deed, and alleges that Mrs. Heitman is not the owner of the alleged confession of judgment in her favor, but that the same has been sold under legal proceedings to a third person. This last allegation is based upon the following state of facts: One Buckley, an attorney residing at Sloan, Iowa, took an assignment of a claim held by a third person upon an open account for goods alleged to have been sold to Mrs. Heitman, who at this time was a resident and citizen of the state of Illinois. Buckley thereupon brought an action against Mrs. Heitman before a justice of the peace in Sloan township, Woodbury county, and procured a writ of attachment which it is alleged he caused to be levied upon the judgment entered in Mrs. Heitman's favor by confession against the refrigerating company as hereinbefore stated. Mrs. Heitman was not personally served with notice of this proceeding, nor did she appear thereto either in person or by counsel, but service was had or attempted by posting notices under the statute providing for actions in attachment against nonresidents before justices of the peace. On this service the justice rendered a judgment in rem in favor of Buckley, and issued a special execution thereon for the sale of the judgment alleged to have been levied upon. Under this writ, the constable offered the judgment for sale, and the same was struck off of one Atkins for the sum of $113. The good faith of this transaction is challenged by the appellant on the theory that the proceeding by Buckley and the sale of the judgment were, in fact, instituted and brought about for and in the interest of plaintiff. She also alleges that such...