King v. Good

• Decision Date: 08 May 1928
• Docket Number: No. 38621.,38621.
• Citation: 219 N.W. 517,205 Iowa 1203
• Parties: KING ET AL. v. GOOD ET AL.
• Court: Iowa Supreme Court

205 Iowa 1203

219 N.W. 517

KING ET AL.

v.GOOD ET AL.

No. 38621.

Supreme Court of Iowa.

May 8, 1928.

Appeal from District Court, Harrison County; Earl Peters, Judge.

The original action was to foreclose a real estate mortgage, but this particular controversy involves a petition of intervention on the part of Ethel C. Storie to obtain rent proceeds paid to a receiver appointed under and by virtue of the above-mentioned security contract. Affirmed.J. J. Friedman, of Omaha, Neb., D. E. Stuart, of Council Bluffs, and Ambrose V. Burke, of Logan, for appellee Storie.

Robertson & Havens, of Logan, for appellants.

KINDIG, J.

There is involved in this suit the question concerning the prior right to the 1924 rent from certain land in Harrison county. On the one hand the superiority of the claim is founded upon a clause in a real estate mortgage, while, on the other, it is asserted through the landlord's assignment of the lease.

As an aid to clearness the positions of the various parties in the court below are here given: Frank J. King, appellant, was plaintiff, and Albert Heistand, Jessie A. Heistand, and Mrs. Amanda Heistand, appellants, were defendants, as were also Walter J. Good and Mrs. Walter J. Good, his wife, appellees. In addition thereto, J. O. Silsby, appellant, was receiver, and Ethel C. Storie, appellee, was intervener.

Chronologically, these are the events: Albert Heistand, appellant, owned this farm April 1, 1924, on which day he and his wife, Jessie A. Heistand, deeded it to the appellee Walter J. Good. At that time, the acreage was incumbered by a first mortgage of $12,000 held by the plaintiff and appellant, Frank J. King, and, too, there was then a second mortgage incumbrance of $8,000 upon the premises. This latter security was owned by Mrs. Amanda Heistand, appellant, who was the mother of the appellant Albert Heistand.

Immediately after obtaining possession of the real property, Walter J. Good, appellee, on the same April 1st, leased it to Albert Heistand, appellant, for the term of 11 months, expiring February 28, 1925. The rental agreed upon was $1,100, evidenced by a promissory note which Albert and Jessie A. Heistand, appellants, both executed. That negotiable instrument was made payable to Walter J. Good, appellee, on or before February 15, 1925, with 8 per cent. interest after maturity. Thereafter, on April 11, 1924, Walter J. Good, appellee, indorsed and transferred said “note” to Ethel C. Storie, intervener, and at the same time assigned to her the written lease above mentioned, for the purpose of securing an indebtedness arising out of a loan from the assignee to the assignor. Then on the following day the intervener duly recorded the lease, together with the assignment thereof.

Thus matters rested until August 14, 1924, when Frank J. King, appellant, as plaintiff, commenced this proceeding to foreclose the first mortgage of $12,000. Under that action a default was entered November 20th, resulting in a decree of foreclosure, wherein J. O. Silsby, appellant, was designated receiver “to take immediate possession of said premises and to collect the rent * * *” and “to rent” the same “upon the best terms and conditions * * *” and “to hold said rents, issues and profits * * * subject to the further orders of the (district) court.” Qualification was duly made by this official agent, and he thus entered upon the performance of his duties.

When testifying at the trial, the “receiver” explained his operations as follows:

“After I was appointed receiver, I went out to the farm where Albert Heistand lived, which is the land described in the foreclosure action. I talked to Mr. Heistand, and told him he was to pay me the rent, and I rented it to him for the same he had rented it from Mr. Good; that was for $1,100 rent. This was in the fall of 1924. I showed him the letters of my appointment as receiver which had been issued to me by the clerk of this court. Albert Heistand paid me $1,100 rent for said premises for 1924. He paid it to me in February, 1925. He paid that rent to me five or six days before I saw the intervener at that public sale in February, 1925.”

To the same effect is the testimony of Albert Heistand, appellant, who declared:

“He (the receiver) said I would have to pay the rent over to him, and he was to take care of the place from then on. I would have to rerent it of him. That Mr. Good (appellee) had nothing more to do with it after the receiver was appointed. That did away with Mr. Good.

Q. What did he say as to the amount of the rent he would let you have the place for? A. For the same amount that Mr. Good had promised to let me have it for, $1,100.

Q. What did you say to him, if anything, about paying him the rent? A. I told him I would pay him the rent.”

Three or four days later, on February 17, 1925, Ethel C. Storie, the intervener and appellee, demanded this “rent” of Albert Heistand, appellant, at which time he told her that the money had already been paid to the receiver; whereupon this intervener interviewed the receiver with reference to the matter,and requested that he pay her the “rent” collected from Heistand. Replying to that demand, this officer of the court stated: “Well, I cannot pay anything, only through order of court.”

Accordingly, on March 3d thereafter, J. O. Silsby, as receiver, filed with the clerk of the trial court his first report, setting forth the collection of the $1,100 in “rent,” and then recommending the payment thereof to Frank J. King, appellant, to cover: First, a deficiency still due after the foreclosure sale; second, certain real estate taxes not included in the previous judgment; and third, attorneys and receivership fees. No mention was made in this account and application concerning the demand of the intervener, and the court's action, in approving the receiver's statement and allowing him to make the desired distribution, was in total ignorance of intervener's rights. Moreover, such judicial action was entirely ex parte because no notice of any kind was served upon the intervener, and she had no opportunity to protect her rights.

Consequently, Ethel C. Storie, on April 30th following, filed her petition of intervention asking that the receiver account to her for the proceeds of the “rent” because: First, the pretended payment thereof by that official agent to King was through a conspiracy formulated on the part of those men with the avowed purpose and intent of defeating the rights of the intervener in the premises; second, the appellant King, at the time he instituted his suit for the foreclosure and asked for the appointment of the receiver, had at least constructive notice of intervener's rights because she had timely and properly recorded the lease and the assignment; and, third, the receiver also had such notice when he took possession of the controverted money, as well as the actual knowledge of intervener's interests before paying it over.

By way of answer to this petition of intervention, appellants interposed: First, a general denial; second, the defense of fraud perpetrated by Walter J. Good in procuring deed to the real estate from Albert Heistand, so that the latter was entitled to offset, against the intervener, claims and demands held by him against Good; third, the demand that the original mortgage be reformed so that there be eliminated therefrom the words “subject to,” and substituted in their place the word “assumed” in relation to the incumbrances above mentioned; fourth, the inconsistent prayer that the cause be transferred from equity to law; and fifth, lack of good faith in making and receiving the assignment.

Upon those issues, evidence was introduced before the trial court, and on March 9, 1927, that tribunal decided for the intervener and gave her judgment against the receiver for the amount claimed. Error is predicated upon this, and because thereof appellants demand a reversal.

[1] I. Fraud, as pleaded by appellants to defeat appellee's claim, is not supported by the record. Evidence is necessary to establish such defense. It is not presumed. Jens C. Smith and Anna Salamon v. Chris T. Smith, 219 N. W. 512, decided at the current term; Andrew, State Superintendent of Banking of the State of Iowa, v. Darrow Trust & Savings Bank (Iowa) 216 N. W. 551.

We have carefully read all the evidence bearing upon this subject, and are compelled to conclude that the finding of the district court in this regard is fully sustained and appellants, therefore, have no basis for complaint.

[2] II. So too, sufficient proof is essential for reformation. Such is true whether the ground for this relief be fraud or mistake. Rankin v. Taylor et al. (Iowa) 214 N. W. 725. What was said in the Rankin Case applies here. Our language there was:

“Reformation of a written instrument is to be made only when there is proof that the intention of the parties was to make an agreement such as it is sought to have established, and that said intention was frustrated either by fraud, accident, or mutual mistake. * * * Evidence required in such instance must be clear, satisfactory, and convincing. * * * Necessity of the occasion has not been met where the evidence is in equipoise or where there is a mere preponderance in favor of the party claiming reformation.”

Necessarily then, because of the insufficiency of evidence produced by appellants for this purpose, their cause, so far as this point is concerned, must fail, for little if any testimony was offered on this phase of the litigation.

[3] III. Equally without merit is appellants' grievance based upon the district court's failure to transfer this matter from equity to law. Originally, the case was brought in equity, and the receivership proceeding was pending on that side of the calendar. And the very nature of the redress sought by the intervener is an accounting by the receiver, who is an arm of the court in an equity cause. Furthermore, appellants themselves in the present...