Kirby v. Holman

• Decision Date: 14 January 1947
• Docket Number: 46884.
• Parties: KIRBY et al. v. HOLMAN et al.
• Court: Iowa Supreme Court

25 N.W.2d 664

238 Iowa 355

KIRBY et al. v. HOLMAN et al.

No. 46884.

Supreme Court of Iowa

January 14, 1947

Rehearing Denied April 11, 1947. [Copyrighted Material Omitted]

Ralph U. Woodcock, of Des Moines, and Carlos W. Goltz, of Sioux City, for appellants.

Boardman Cartwright & Druker, of Marshalltown, for appellees.

MULRONEY Justice.

The plaintiffs, who are residents of New York, own the Pilgrim Hotel in Marshalltown. This is a 92 room, four story hotel. Their agent in Marshalltown is the Fidelity Savings Bank of Marshalltown, Iowa and Mr. Berkley the vice president of that bank was the officer in charge of the Kirby interest. On July 1, 1938, the plaintiffs sold the furniture and equipment in the hotel to the defendants, Dora C. Holman and her son L Grant Holman and leased the hotel building to the purchasers at a monthly rental of $300. The purchase price for the furniture and equipment was $16,000. The defendants paid $5,000 down and gave plaintiffs a note for $11,000, secured by a chattel mortgage on the furniture, equipment and other personal property in the hotel or any additions thereto which defendants would bring into the hotel during their period of occupancy. The note provided for payment in monthly installments of $150. The lease provided that the lessor would care for the outside of the building but that lessee would make all repairs and improvements covering the interior. The defendants operated the hotel until in January, 1942, when Grant, who was then 25 years old, enlisted in the army. They paid the rent but were in arrears in their installment payments on the chattel mortgage. In May of 1942, defendants made a payment of $5,281.64 of which payment $4,250 was credited on principal and $1,031.64 was credited on interest. This left a balance due of approximately $6,000. No further payment was made and in September, 1942, plaintiffs started suit to foreclose the mortgage which resulted in a judgment in rem and decree of foreclosure and the subsequent sale of the mortgaged chattels on special execution. On September 16, 1943, defendants filed, in the same foreclosure suit, their petition to vacate the decree.

The petition states that defendants seek an order vacating the decree under the provisions of Rules 252 and 253, Iowa Rules of Civil Procedure, on the ground of irregularity or fraud practiced in obtaining the decree and unavoidable casualty or misfortune preventing them from defending. The defendants allege the proceedings were irregular in that the alleged jurisdiction in the foreclosure suit was obtained upon published notice, upon affidavit that defendants were non-residents of Iowa and were residents of California, whereas both of said defendants were residents of Iowa. The petition also alleged that 'the court was induced to sign and enter said decree of foreclosure upon an erroneous and false affidavit filed in said case by counsel for plaintiffs, alleging that neither of said defendants, insofar as known by said affiant, was at the time in military service of the United States, whereas in truth and fact it was known by plaintiffs and their duly authorized agents that L. Grant Holman was and had been in the service of the armed forces of the United States * * *.' The petition asserted the entry of the judgment constituted a violation of Grant's rights under various provisions of the Soldiers' and Sailors' Civil Relief Act, 50 U.S.C.A.Appendix, § 501 et seq., and alleged 'that said defendants had at the time of the entry of said decree and now have a meritorious defense in whole or in part to said action'; it being claimed in the petition: 'That the said Dora C. Holman was deprived of the aid and assistance of said L. Grant Holman (by reason of his being in the army) in the operation of said hotel business, and by reason of such fact the said defendants were granted, and it was agreed and understood that defendants would have, additional time in which to make payments on said note as evidenced by said chattel mortgage which was undertaken to be foreclosed * * *.' Both the petition and supporting affidavit of defendants (required under Rule 253, Iowa Rules of Civil Procedure) assert that prior to their taking over the hotel business in 1942 the plaintiffs had received no rent for their hotel property for five years; that the property was run down and much in need of decoration and repairs and defendants spent large sums of money in decorating and repairing the building and they expended for new and additional equipment the sum of approximately $18,465. 'That in order to put the hotel on a paying basis by the securing of the necessary and essential patronage, it was necessary for the defendants to make the extensive improvements and additions herein stated, and that while the expenditures of such large sums of money depleted their cash and assets, and likewise impaired their ability to meet their obligations under the said lease and the said chattel mortgage, yet nevertheless such expenditures were made in full cooperation with the consent of M. C. Berkley, agent for the plaintiffs herein, and the terms of the said chattel mortgage and lease were modified and indefinitely extended by mutual agreement of all the parties under the circumstances. * * * Rental payments were continued until May of 1942 and in that month further payments were made upon the note and chattel mortgage obligation in amounts exceeding $5,280. By mutual agreement obligations for the suspension of rental and chattel mortgage payments were made between the parties herein although no reduction in the amount thereof was acceded to by the plaintiffs herein.' In general it was the claim of defendants that by reason of their untiring efforts and the expenditures of large amounts of money they built up a prosperous hotel business, reasonably worth at the time of the foreclosure $30,000, and by reason of the 'fraudulent and irregular and illegal proceedings' commenced when they were temporarily absent from the city they were deprived of an equitable interest in said business of $25,000. The petition also alleged that plaintiffs had been operating the hotel business since the entry of the 'illegal' decree by an agent and using their property; that they were still operating the business at the time of the filing of the petition on September 16, 1943 and that large profits had resulted from such operation for which defendants were entitled to a credit and that an accounting should be made by plaintiffs.

The prayer of the petition asked that the decree of foreclosure be set aside and vacated or in any event it be corrected or modified and that the court by an order require plaintiffs to render a full accounting of the monies received since seizing the hotel property in order that the court may thereby determine the profits, if any, that defendants are entitled to receive in the way of a credit to apply upon the indebtedness of defendants and if deemed necessary to protect the legal and equitable rights of all parties in interest; that the court appoint a receiver to manage the hotel business; and for other and further equitable relief.

The plaintiffs did not answer the petition, relying upon the provisions of Rule 253(c) to the effect that such a petition 'Shall stand denied without answer.' After hearing evidence the trial court made no findings of fact or conclusions of law but rendered a decree adverse to the defendants; the judgment entry simply stating the petition to set aside the decree 'is denied.'

Grant Holman was still in service at the time of the hearing on the petition. He testified that he had taken flying lessons before our entry into the war, and on January 28, 1942, he enlisted in the air corps. He knew Mr. Berkley and saw him before he left for service. In fact he told Mr. Berkley the approximate date he intended to leave, the last of January, and said good-bye to him. He testified that his father died in 1918, leaving him some land and that, with a loan on this land, he and his mother bought the Pilgrim Hotel business in 1938 and went into active management. He testified that he signed the note, mortgage, and lease heretofore referred to. He testified to many purchases to improve the hotel such as wallpaper, paint, carpets, etc., and to the remodeling and extensive repairs to the heating and lighting system and the elevator. They opened a tap-room coffee shop and barber shop and in all, he estimated he and his brother put into the hotel, in addition to the purchase price, $20,000. He testified that he made a memorandum from memory which was an itemized statement of his recollection of new equipment they had purchased and his recollection of the cost of each piece of equipment. The total of this list which was in evidence was $18,465. He was shown Exhibit 5 which was the foreclosure decree which was as follows:

'Now on this 13th day of November, A. D. 1942, the above and foregoing matter coming on for hearing and trial before the Court in its regular order; the Plaintiffs appearing by Boardman & Cartwright, their attorneys, and the Defendants Dora C. Holman and L. Grant Holman appearing by James D. Robertson, their attorney, and said matter having been fully tried, argued and submitted and the Court being duly advised in the premises.

'It is found, ordered, adjudged and decreed as follows:

'That on or about the 1st day of July, A. D., 1938, the Defendants Dora C. Holman and Louis Grant Holman (also known as L. Grant Holman) made, executed and delivered to Charles C. Kirby, Margaret C. Kirby Casey and Arthur T. Kirby their certain promissory note in the face amount of $11,000.00. That a true and correct copy of such promissory note is attached to Plaintiffs' Petition and made a part thereof as Exhibit '1'.

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