Mason City and Clear Lake R. Co. v. Imperial Seed Co., Civ. No. 677.
| Decision Date | 10 June 1957 |
| Docket Number | Civ. No. 677. |
| Citation | 152 F. Supp. 145 |
| Parties | MASON CITY AND CLEAR LAKE RAILROAD COMPANY, a corporation, Plaintiff, v. IMPERIAL SEED COMPANY, a corporation; Donald L. Goranson, Receiver of the Property of Imperial Seed Company; Frank M. Halpin, District Director of Internal Revenue; Iowa Employment Security Commission; and The United States of America, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
C. Frederick Beck, of Smith & Beck, Mason City, Iowa, for plaintiff.
F. E. Van Alstine, U. S. Dist. Atty., Theodore G. Gilinsky, Asst. U. S. Dist. Atty., Sioux City, Iowa, for defendant United States.
Edward R. Boyle, of Boyle & Schuler, Clear Lake, Iowa, for Donald L. Goranson, receiver of the property of Imperial Seed Co.
The plaintiff Mason City and Clear Lake Railroad Company is an Iowa corporation operating an interurban electric railway in Cerro Gordo County, Iowa. It is the owner of a certain tract of land in that county which is approximately 600 feet in length and varying from around 500 feet to 300 feet in width. On September 12, 1949, the plaintiff and the Imperial Seed Company entered into a written lease as to that tract. Under that lease the premises were leased to the Imperial Seed Company for a term of ten years commencing as of September 1, 1949, at a rental of $175 per month. At the time the lease was entered into the Imperial Seed Company was in possession of the premises as the assignee of a lease between the plaintiff and one Robert Hayden. It had erected thereon a building designated as Building "B." That building also contained certain machinery and equipment which was owned by it. The building was a steel quonset type building 40 feet by 100 feet with a concrete floor. At the time the lease was entered into there was also situated on the premises a building designated as Building "A" which was owned by the plaintiff. The Imperial Seed Company is herein also referred to as the defendant Imperial Seed Company.
The defendant Imperial Seed Company paid the rent due under the lease up to April 1, 1954. It defaulted in the payment of the rent subsequently due. On July 19, 1955, there was due and owing the plaintiff as rent from that defendant the sum of $2,730. Sometime prior to July 19, 1955, one Lang commenced an action against the Imperial Seed Company in the District Court of Iowa in and for Cerro Gordo County. On July 19, 1955, an order was entered in that action finding that the defendant Imperial Seed Company was insolvent and appointing the defendant Donald L. Goranson as permanent receiver of all the assets and property of the company.
The lease contains the following provision:
"The Lessee has constructed the building designated as Bldg. B on the annexed Plat at its own cost and expense with the consent and permission of Lessor and said building is and shall be considered for all purposes as personal property of the Lessee and may be removed from the premises at the termination of this lease, subject only to lien rights of the Lessor created by law or by this agreement. * * *"
Section 570.1, Code of Iowa, 1954, I.C.A., provides as follows:
"A landlord shall have a lien for his rent upon all crops grown upon the leased premises, and upon any other personal property of the tenant which has been used or kept thereon during the term and which is not exempt from execution."
Section 570.2, Code of Iowa, 1954, I.C.A., provides, in part:
"Such lien shall continue for the period of one year after a year's rent, or the rent of a shorter period, falls due."
The lien created by that Section is generally known and referred to as a landlord's statutory lien.
Paragraph 13 of the lease provides, in part, as follows:
The lien given by that paragraph is what is generally known and referred to as a landlord's contract lien or landlord's chattel mortgage lien. A clause in a lease providing for such a lien is generally known and referred to as a chattel mortgage clause. In the present case the plaintiff's lease containing the chattel mortgage clause was not recorded.
Starting in 1954 the defendant Imperial Seed Company became delinquent in paying the amounts withheld for federal income taxes and employment taxes. It also became delinquent in the payment of federal unemployment taxes and its income taxes. The tax situation of the defendant is as follows:
Assessment
Kind of Period Acc't Amount Lien Balance
Tax Ending No. Assessed Made Filed 3/19/57
------------------------------------------------------------------------------------------
W. & E. 3/31/54 X-XX-XXXX $10,238.25 5/14/54 8/10/54* $ 1,047.83
I 23.55
" 6/30/54 X-XX-XXXX 5,900.25 8/27/54 1/ 5/55 3,900.25
" 6/30/54 X-XX-XXXX I 16.73 9/24/54 1/ 5/55 16.73
" 9/30/54 XX-XX-XXXX 4,773.36 11/15/54 1/ 5/55 4,773.36
" 12/31/54 X-XX-XXXX 3,237.32 3/23/55 6/23/55
" P 323.73 3,561.05
" 3/31/55 X-XX-XXXX 2,127.66 5/13/55 7/20/55 2,127.66
" 3/31/55 X-XX-XXXXXX P 35.46 8/15/55 35.46
" 6/30/55 XX-XX-XXXX 899.04 10/31/55
P 134.86 1,033.90
FUT 1954 X-XX-XXXXXX 506.75 6/15/55 8/18/55
P 126.69 633.44
" 1954 11- 8-307011 624.40 11/ 8/56
P 156.10
" I 66.34 846.84
" 1955 XX-XX-XXXXXX 72.97 10/31/55 72.97
Corp. 6/30/50 X-XX-XXXXXX 16,336.86 8/31/55 9/ 3/55
RAR I 4,433.78 20,770.64
__________
$38,820.13
That defendant also became delinquent in the payment of state unemployment taxes. The Iowa Employment Security Commission filed liens for such taxes.
On August 5, 1955, the plaintiff commenced the present action in the District Court of Iowa in and for Cerro Gordo County. It made parties defendant to the action the Imperial Seed Company, Donald L. Goranson, Receiver of the Imperial Seed Company, Frank M. Halpin, District Director of Internal Revenue, and the Iowa Employment Security Commission. The plaintiff sought the enforcement of its statutory landlord's lien against Building "B" and the machinery and equipment contained therein. It also sought the foreclosure of the contract lien provided for in the so-called chattel mortgage clause of the lease against the same property. It also sought to have its lien on that property established as prior and superior to any liens or claims of any of the defendants. The United States of America was substituted as a party defendant in place of Frank M. Halpin, District Director of Internal Revenue. The defendant United States of America removed the case to this Court.
On or about August 22, 1955, the defendant Donald L. Goranson as Receiver, pursuant to the order of the District Court of Iowa, sold the machinery and equipment contained in Building "B" at public auction free of liens and received therefor in excess of $2,200 net after the payment of costs incident to the sale. The order provided that all liens on that machinery and equipment so sold were transferred to the net proceeds of the sale. On or about December 21, 1956, the defendant Donald L. Goranson as Receiver, pursuant to Court order of the District Court of Iowa in and for Cerro Gordo County, sold Building "B" free of liens and realized therefor in excess of $2,500 net after the payment of the costs incident to the sale. The order provided that all liens against the building were transferred to the net proceeds of the sale. Donald L. Goranson, as Receiver, now holds the net proceeds of the sale of the building and the machinery and equipment contained therein subject to the determination of this Court as to priority of liens. The controversy in this case is as to whether the claim of the defendant United States for taxes has priority as to the proceeds of the sale of the building and the machinery therein contained over the claim of the plaintiff for rent. The rights of those two parties in such proceeds are the same as they were to the property before the sale by the Receiver.
Section 556.3, Code of Iowa 1954, I.C.A., provides as follows:
"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...
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