In re Thompson

• Citation: 145 N.W. 76,164 Iowa 20
• Parties: IN RE THOMPSON.
• Decision Date: 27 January 1914
• Court: United States State Supreme Court of Iowa

164 Iowa 20

145 N.W. 76

IN RE THOMPSON.

Supreme Court of Iowa.

Jan. 27, 1914.

Appeal from District Court, Wright County; F. D. Letts, Judge.

A. B. Thompson, having made a general assignment for the benefit of all his creditors to one A. L. Luick, the Ft. Dodge Grocery Company filed an application in said proceedings to have a certain mortgage executed to it made a first lien upon certain property in the hands of the assignee claimed to have been covered by and included in its mortgage. The opinion states the facts. Reversed and remanded.

Weaver, J., dissenting.

P. F. Nugent, for appellant Ft. Dodge Grocery Co.

Nagle & Nagle, for appellee Belmond Savings Bank.

W. E. Bullard, for appellee Luick.

GAYNOR, J.

On the 27th day of October, 1909, A. B. Thompson purchased a stock of goods from the Belmond Savings Bank. At the time he purchased it, the stock invoiced at $3,900. At the same time, Thompson executed a mortgage to the Belmond Savings Bank, upon the stock of goods so purchased, to secure the payment of 68 promissory notes, dated on that day, each for $50; the first payable on the 27th day of November, 1909, and $50 on the same day of each month succeeding until all were paid, with interest at 6 per cent. The property mortgaged was described as follows: “All my entire stock of grocery goods, consisting of glass and crockery, woodenware, confectionery in glass and boxes, including both glass and jars, trays and boxes; also all canned goods, cigars, smoking tobacco and tobacco of every kind; also all nuts and fruits, and all other things not enumerated, and such as are usually kept in a grocery store; all showcases, including candy and cigar cases; also all other fixtures and furniture as connected therewith; also gasoline lighting plant, scales, safe, short account system, refrigerator and oil tanks, delivery team, harness and wagon; all located on the E. 1/3 of lot 1, block 25, Belmond. Iowa.” There was further provision in the mortgage as follows: “All increase from said stock of whatever kind or nature.”

After the purchase of said stock and the execution of the mortgage, Thompson commenced to do a retail business in the same building in which the stock was located, and continued to do business in the same store until the 31st day of October, 1911, at which time he made a general assignment of all his property, including the stock and property mortgaged as aforesaid, for the benefit of his creditors.

It appears that, at the time of the making of the deed of assignment, the property in the store building hereinbefore described, including the property in existence at the time the mortgage was executed, invoiced at $2,900. The assignee of Thompson, under order of the court, sold all the property in controversy here; and at the February term, 1912, filed his report, in which he sets out the entire indebtedness of the estate and the assets in his hands, and asks that he be authorized and directed to pay to the Belmond Savings Bank the amount realized from the sale of the chattels claimed to be covered by the mortgage, and that said mortgage debt be first paid out of the proceeds of the sale of the stock claimed to be covered by the mortgage. To this portion of the report, the Ft. Dodge Grocery filed objections, alleging that the mortgage, at the time of the assignment, did not cover any of the stock then on hand; that, since the execution of the mortgage, and prior to the time of the making of the assignment, Thompson had been selling from said stock at retail, and had been replacing them with new goods, and that at the time of the assignment he had in the store an entirely different stock of goods than that upon which the chattel mortgage rested, and that the chattel mortgage itself did not cover additions to the stock, and did not cover stock placed in there after the making of the mortgage.

[1] The mortgage on which the bank relies was evidently written on an ordinary farm mortgage. After describing the stock of goods, it reads as follows: “All increase from said stock of whatever kind or nature, the above-described stock being kept in my possession on ........ Section No. ........ Township No ........ Range No. ........ West of the 5th P. M. of Iowa”--indicating that this part of the mortgage was not considered of importance in making the contract between the parties. There were blanks left unfilled as appeared in the instrument. The word “increase” appearing therein, upon which the bank relies, was evidently not placed there by the parties for the purpose for which it is now contended it should be used. Nor can we gather therefrom that it was advisedly placed there by the parties, but permitted to remain there because it was in the form of mortgage used. If it had been the intent of the parties to give it the meaning that is now contended for, more apt words could be used to express that intent. Indeed, we think that, if it had been the intent of the parties to make this refer to the substantive part of the mortgage, they would not have used the word relied on, but would have used the words “additions thereto,” or substitutions therefor, made in the ordinary course of business. We are satisfied that this word “increase” cannot be given the meaning contended for by the bank.

In the deed of assignment made by Thompson, he described the property deeded as follows: “The entire stock of groceries consisting of groceries, canned and in glass, teas, coffees, spices, sugars, cereals, soaps, candies, and everything else connected with and pertaining thereto, as now kept and contained in the two-story building situated upon the east one-third of lot 1 in block 25 in the original town of Belmond; all showcases, fixtures and furniture contained in said building, above described, on the first floor thereof, together with one National Cash Register, one team of horses, delivery wagon, together with wagon and harness.” There is no question made in this record as to the right of the bank to take precedence over general creditors of the assignor as to all property actually covered by the mortgage at the time of the assignment.

[2] The contention is, on the part of the Ft. Dodge Grocery Company, that there was no provision in the mortgage covering after-acquired property or that created any lien in favor of the mortgagee upon any property in the stock which was placed there by the mortgagor after the execution of the mortgage; that the word “increase” does not cover after-acquired property, though the same was in fact acquired from the proceeds of the sale of the mortgaged property. This contention of the objector, the grocery company, must be sustained for the reason that at common law nothing could be mortgaged that was not in existence at the time of the mortgage and did not, at the time of the mortgage, belong to the mortgagor. This was founded on the rule that what a man has not got he cannot give; but this rule was somewhat modified so as to cover property in which the mortgagor had a potential interest or ownership at the time of the execution of the mortgage. Thus it has been held that the increase of stock mortgaged may be covered by the mortgage, though not in being at the time of the execution of the mortgage. Crops to be grown upon certain premises owned or controlled by the mortgagor may be mortgaged. The wool upon certain sheep owned by the mortgagor at the time of the execution of the mortgage may be anticipated in the mortgage. But it is essential that he own the thing out of which the nonexistent thing must proceed, or does proceed. Or, in other words, it has been held that he may sell or mortgage the natural and expected product, growth, or increase of his own property, and this is peculiarly good as to third persons, where the property is not delivered into the possession of the mortgagee, and where the only notice of the thing intended to be mortgaged, or covered by the mortgage, is the constructive notice given by the recording of the mortgage itself. In no sense can new goods, though purchased and paid for out of the proceeds of the old goods, be said to be the natural increase of, or proceeding from, the goods then in existence. The added stock is...