Loranz & Co. v. Smith

• Decision Date: 01 July 1927
• Docket Number: 37796
• Citation: 214 N.W. 525,204 Iowa 35
• Parties: LORANZ & COMPANY, Appellant, v. M. O. SMITH et al., Appellees
• Court: Iowa Supreme Court

214 N.W. 525

204 Iowa 35

LORANZ & COMPANY, Appellant, v. M. O. SMITH et al., Appellees

No. 37796

Supreme Court of Iowa, Des Moines

July 1, 1927

Appeal from Audubon District Court.--TOM C. WHITMORE, Judge.

Action for damages for the conversion of an automobile upon which the plaintiff held a mortgage. The defendant Smith was a constable. His codefendants were signers of an indemnifying bond given for the protection of the principal defendant. The defendants filed a demurrer to the petition, which was sustained. The plaintiff elected to stand upon his pleading and judgment was entered against him, dismissing his petition. The plaintiff has appealed.

Reversed.

Charles S. White, for appellant.

T. M Rasmussen, for appellees.

EVANS C. J. DE GRAFF, MORLING, and KINDIG, JJ., concur.

OPINION

EVANS, C. J.

The allegations of the petition disclosed that the plaintiff had a valid mortgage upon an automobile, executed by the owner thereof, one Julius Wolfe. The petition also disclosed that the defendant Smith, purporting to be a constable, had levied upon such automobile an execution against Julius Wolfe, and in favor of the defendant P. M. Christensen. After the levy, the plaintiff gave appropriate notice to the defendant Smith, as required by statute. Smith, having been indemnified by his codefendants, proceeded under his levy, and sold the property. The defendants' demurrer was predicated upon two grounds: (1) That the petition did not aver that the mortgage had ever been recorded; (2) that it did not aver any notice to the defendants.

The question presented involves a construction of Section 10015, Code of 1924 (Section 2906, Code of 1897). It is as follows:

"10015. No sale or mortgage of personal property, where the vendor or mortgagor retains actual possession thereof, is valid against existing creditors or subsequent purchasers, without notice, unless a written instrument conveying the same is executed, acknowledged like conveyances of real estate, and such instrument, or a duplicate thereof, is duly recorded, or filed and deposited with the recorder of the county where the property shall then be situated, or if the mortgagor be a resident of this state, then of the county where the holder of the property resides."

In the absence of the foregoing section, the plaintiff's mortgage, being valid as against the mortgagor, would have been valid as against all others, regardless of the question of recording or of notice. The effect of the statute is to render the mortgage, if unrecorded, invalid as to "existing creditors or subsequent purchasers, without notice."

Is the technical burden of proof upon the plaintiff, as mortgagee, to allege and prove that the defendant was not an "existing creditor or subsequent purchaser, without notice;" or is it upon the defendant to allege and prove that he was an "existing creditor or subsequent purchaser, without notice?" Each party herein contends that the burden is upon the other.

The plaintiff, as appellant, relies for authority upon the following of our previous decisions: Diemer v. Guernsey, 112 Iowa 393, 83 N.W. 1047; Zacharia v. Cohen Co., 140 Iowa 682, 119 N.W. 136; Bartlett v. Bolte, 193 Iowa 1063, 188 N.W. 814.

On the other hand, the appellees rely upon the following of our previous decisions as authority for their contention: Carson & Rand Lbr. Co. v. Bunker, 83 Iowa 751, 49 N.W. 1003; State Bank of Dayton v. Felt, 99 Iowa 532, 68 N.W. 818; Martin Bros. & Co. v. Lesan, 129 Iowa 573, 105 N.W. 996.

It is rather a surprise to us to discover that, in all the history of this court, no direct issue upon this particular question has ever before been presented to us for decision, although the question itself is one which has been involved, directly or indirectly, in scores of cases litigated before us. The earliest case cited by counsel is Carson & Rand Lbr. Co. v. Bunker, 83 Iowa 751, 49 N.W. 1003, cited by appellee. In that case, the contest was between two mortgagees. The mortgage of the appellant (defendant) was first executed, but last recorded. After the execution of the mortgage, and before its recording, the appellee (plaintiff) took and recorded his mortgage. The appellant (defendant) averred that the appellee (plaintiff) had notice of his prior mortgage, when he took his own. The court said:

"But the appellant contends that the plaintiff had notice, when the mortgage to it was executed, that the property had before that been mortgaged to Bunker. The burden was on the defendant Bunker to establish this alleged fact by a preponderance of evidence. The court below was of the opinion that the defendant failed to maintain the issue. We have carefully examined the evidence, and reach the same conclusion."

It will be noted that in that case the defendant assumed the burden on the issue, and no dispute was presented as to where the burden of proof was. The declaration of the court was quite incidental, and in accord with the attitude of the parties.

In State Bank of Dayton v. Felt, 99 Iowa 532, 68 N.W. 818. cited by appellee, the plaintiff (appellant) was a purported mortgagee of certain horses and cattle, and brought replevin therefor. The answer was a general denial, and a challenge to the sufficiency of the description contained in plaintiff's mortgage to impart notice by recording. The district court sustained this challenge, and refused to admit the mortgage in evidence. This court said:

"The answer contains a denial, and an express statement that the description was insufficient to impart notice. The court, when the mortgage was offered in evidence by plaintiff, so held, and refused to permit it in evidence. That ended appellant's case. Its right of recovery depended on its mortgage being such as to impart notice. If it relied on actual notice to defendant, it must allege and prove it."

The reliance of appellee is upon the last sentence above quoted. What we have said above concerning the opinion in the Carson case is likewise applicable here. This pronouncement by the court did not purport to be responsive to any issue in the case.

The next case in order of time is Diemer v. Guernsey, 112 Iowa 393, 83 N.W. 1047, cited by appellant. In that case, plaintiff brought a suit in equity, to foreclose a chattel mortgage. From a decree dismissing his petition he appealed. Certain subsequent mortgagees were made parties-defendant, and the question of priority was involved. The defendants (appellees) claimed priority over the plaintiff's mortgage, because of his failure to record the same, and they prevailed. The court said:

"The burden is upon appellees to show that they took their mortgages without notice of the existence of appellants' mortgage, and this they have failed to do; but on the contrary, it appears quite satisfactorily that the plaintiff and Olney & McDaid did have actual notice of its existence. The testimony of Mr. Johnson and of Mr. Duncan is quite conclusive as to plaintiff's knowledge, and other evidence leaves no doubt but that Olney & McDaid also knew of it before they took their mortgage."

The foregoing was responsive to the issues, but it does not appear that there was any dispute between the parties as to where the burden of proof lay.

The next case in point of time, cited by appellee, is Martin Bros. & Co. v. Lesan, 129 Iowa 573, 105 N.W. 996. In that case, plaintiff claimed the right to possession of certain cattle under a chattel mortgage, and brought replevin therefor. It was held here definitely that he had failed to identify the cattle, and that his case was properly dismissed on that ground. On the question of notice, however, we said:

"Even conceding arguendo that there was a sale to Edie, there was no such change of possession as to give third persons dealing with the cattle notice thereof. Intervener took the mortgage under which it now claims for a valuable consideration,-- extension of time for the payment of Lesan & Dunning's debt, if nothing else,--without notice of the claimed sale to Edie and without any actual notice of plaintiff's mortgage. * * * Plaintiff says, however, that intervener had actual notice of its mortgage when it took its security, and it introduced testimony to establish its claim. It failed, however, to produce enough to overcome the denials made by intervener. Under Section 2906 of the Code, the burden was upon plaintiff to show actual notice, and this it did not do."

So far as appears, plaintiff was asserting notice and assuming proof thereof, and no question of law was raised therein as to where such burden of proof properly lay.

In Zacharia v. Cohen Co., 140 Iowa 682, 119 N.W. 136, cited by appellant, there was a controversy between plaintiff, as mortgagee, and the defendant, as alleged owner under a conditional bill of sale. In that case the statute pertaining to conditional sales was involved. Section 10016, Code of 1924 (Section 2905, Code of 1897). The plaintiff prevailed below on the ground that the conditional bill of sale was not properly recorded, and therefore did not impart constructive notice. We said:

"Whether the acknowledgment or mode of indexing was defective, we need not now inquire. The instrument was a valid instrument, as between the parties thereto, even though it had neither been acknowledged nor recorded. Under Section 2905, such instrument, unrecorded, is regarded as invalid only as against a creditor or purchaser from the vendee without notice. Before the plaintiff could be heard to question the validity of such instrument, it was incumbent upon him to show not only that he was the mortgagee of the same property but that he became such 'without notice' of the conditional sale. The burden was upon him both to plead such fact and to prove it. Diemer v. Guernsey, ...