Schwanz v. Farmers' Co-Op. Co. of Lorimor
| Citation | 204 Iowa 1273,214 N.W. 491 |
| Decision Date | 01 July 1927 |
| Docket Number | No. 38169.,38169. |
| Parties | SCHWANZ v. FARMERS' CO-OP. CO. OF LORIMOR ET AL. (LORIMOR STATE BANK OF LORIMOR, INTERVENER.) |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Union County; H. H. Carter, Judge.
Action in equity by the owner of chattel property to recover from the agent who conducted the sale and the bank in which the same was deposited the proceeds of such sale. Intervention by the Lorimor State Bank, mortgagee, to impress a trust upon such proceeds and for an order directing payment thereof to it. Decree in favor of plaintiff as to a portion of the sum in controversy and in favor of intervener as to the balance. Plaintiff appeals. Affirmed.
Faville, J., dissenting.O. M. Slaymaker and R. E. Killmar, both of Osceola, and Higbee & McEniry, of Creston, for appellant.
Geo. A. Johnston, of Creston, for Farmers' Co-operative Co. and intervener.
L. J. Camp, of Creston, for First Nat. Bank.
On or about April 15, 1924, Herman and Cora B. Schwanz, his wife, executed and delivered to intervener, Lorimor State Bank, Lorimor, Iowa, two promissory notes for $2,500 each securing the payment thereof by a chattel mortgage upon certain live stock and all increase thereof. The property was owned by the mortgagors and appellant in partnership, and the mortgage purported to cover only the undivided interest of the former therein. On July 25 following, Herman Schwanz filed a voluntary petition in bankruptcy, attaching a schedule of the mortgaged property and setting out the mortgage. Thereafter and in due time the property in controversy was set aside by the court to the bankrupt as exempt. The mortgage, which under the United States statute gave a preference to the mortgagee, was invalid as to the nonexempt property. The exempt property thus set off to the bankrupt was purchased of him by appellant, who on or about February 25, 1925, caused the same to be shipped to St. Joseph, Mo., and there sold upon the market. Appellant is a member of the Farmers' Co-operative Company of Lorimor, in the name of which the hogs were shipped, and to which the proceeds of the sale were sent and in turn deposited in the defendant First National Bank of Lorimor. The net proceeds of the sale, as found by the court, were $1,698.93. This action was commenced by appellant against both the Farmers' Co-operative Company and the First National Bank of Lorimor to recover the above sum. The Lorimor State Bank, mortgagee, intervened, claiming a lien upon a portion of the hogs sold and asking that a trust be impressed upon the proceeds of the sale of the property covered by the mortgage in the sum of $1,050, and for an order directing the payment thereof to it. Issues were joined on the petition of intervention, and, so far as necessary to the decision of the points covered by this appeal, will be referred to later. Appellant concedes that he had actual knowledge of intervener's mortgage prior to the purchase of the hogs.
[1][2][3][4] I. The first proposition argued by appellant, namely, that a partner cannot give a valid mortgage upon his interest in the chattel property of the copartnership to secure his individual indebtedness is ruled by our prior decisions. The mortgage is not, per se, invalid, but is subject to all partnership liens and debts. Fargo & Co. v. Ames, 45 Iowa, 491;In re Cutler & Horgan (Iowa) 212 N. W. 573. The partnership debts were all paid, and the lien of intervener's mortgage became absolute upon the interest of the mortgagor in the partnership property. The particular property in question had been set aside to the mortgagor as exempt prior to the purchase thereof by appellant. The mortgage having been executed within four months prior to the date on which the petition in voluntary bankruptcy was filed, the mortgage, under section 9644, Compiled Statutes of the United States, was invalid as to nonexempt property. This intervener concedes, but contends that this in no wise affected the lien of the mortgage upon the exempt property. The decision of this question turns on the effect of the discharge of the mortgagor in bankruptcy. Exempt property constitutes no part of the bankrupt estate, and the jurisdiction of the bankrupt court is limited to the ascertainment and setting off to the bankrupt of the exempt property. Lockwood v. Exchange Bank, 190 U. S. 294, 23 S. Ct. 751, 47 L. Ed. 1061;Eckhardt v. Hess, 200 Iowa, 1308, 206 N. W. 291. By receiving his discharge in the bankrupt court, the mortgagor was released from all further personal liability. But it seems to be well settled, both in the federal and state courts, that such discharge does not release or in any way affect a lien arising out of contract upon exempt property. In re Bailey (D. C.) 176 F. 990;In re Hartsell & Son (D. C.) 140 F. 30;Ingram v. Wilson (C. C. A.) 125 F. 913; Lockwood v. Exchange Bank, supra; Johnson v. Turnholt, 199 Iowa, 1331, 203 N. W. 715; Eckhardt v. Hess, supra; First Trust & Savings Bank v. Kleih, 201 Iowa, 1298, 205 N. W. 843.
Reliance is placed by appellant upon Drees v. Armstrong, 180 Iowa, 29, 161 N. W. 40. The case is not in point. The plaintiff in that action held unsecured notes against the defendant which he filed in the bankrupt court. The defendant was the owner of a homestead acquired subsequent to the creation of the debt, and it was therefore not exempt from execution on a judgment therefor. After the discharge of the defendant in bankruptcy, the plaintiff commenced an action on the notes which, as stated, he had previously filed in the bankruptcy proceedings, aiding such action by an attachment levied on the homestead of the defendant. The defendant set up his discharge in bankruptcy as a defense. The court held that the claim of the plaintiff was extinguished by the discharge of the defendant in bankruptcy and that the failure of plaintiff to secure an order suspending the entry of such discharge until he could litigate his claim in the state court was fatal to his right to thereafter proceed against the property. All of the cases cited by appellant in his brief, to wit, Drees v. Armstrong, supra, In re Brumbaugh (D. C.) 128 F. 971,In re Downing Paper Co. (D.C.) 147 F. 858,In re Wells (D. C.) 105 F. 762,In re Tiffany (D. C.) 147 F. 314,Roden Grocery Co. v. Bacon (C. C. A.) 133 F. 515,In re Maher (D. C.) 169 F. 997, and In re Castleberry (D. C.) 143 F. 1021, are of the same character and to the same effect. In the case before us, the intervener is not seeking to assert a personal claim against the mortgagor, but only to enforce the lien of his mortgage upon exempt personal property. We have already pointed out that the lien of the mortgage was not affected by the mortgagor's discharge in bankruptcy.
[5] II. Intervener appeared in the bankrupt court and filed objections to the discharge of the mortgagor and to the setting aside to him of the property in controversy as exempt. Other claims were asserted by intervener and tried and disposed of in the bankruptcy proceedings. These proceedings and the acts and conduct of the intervener in connection therewith are all set up by appellant as estopping him from asserting the lien of his mortgage or seeking the impressment of a trust upon the proceeds of the mortgaged property. The point is without substantial merit. Intervener had a right to assert and litigate any proper claim in the bankrupt court. The lien of the mortgage was in no way waived. It is true that the bankrupt was compelled to litigate his right to exemptions which was contested by intervener. The adjudication of this point, if such it may be called, by the bankrupt court in no wise affected the lien of intervener's mortgage upon the exempt property, and it is difficult to conceive how an estoppel can be predicated upon the facts disclosed. Intervener has at all times insisted upon the lien of its mortgage, and the mere fact that it failed to defeat the claim of the bankrupt to exemptions, or his right to discharge, is not such an adjudication as will prevent it from demanding the enforcement of the lien.
[6][7] III. The remaining proposition for discussion relates to the extent of recovery to which intervener is entitled. It is contended by appellant that the petition in intervention proceeds upon the theory that the purchase of the pigs by appellant of the mortgagor constituted a conversion thereof and that, at most, intervener is entitled to recover their value at the time of such conversion, or, if the doctrine of conversion is not applicable and appellee bank holds the proceeds of the sale of the property for the use and benefit of the mortgagee, that appellant is entitled to have the expense of feeding and marketing the hogs set off against such fund. Intervener is not seeking to recover the value of the property as for a conversion, but is asking the impressment of a trust upon the sale of the mortgaged property. The pigs purchased by appellant of the mortgagor were covered by the mortgage as increase, and were not, of course, specifically described therein. The pigs were mingled with others of similar size and breed, so that, at the time the same were sold on the market, it would have been difficult, if not impossible, for the mortgagee to have identified them unless by the testimony of appellant. Appellant had actual knowledge of the mortgage and the purchase of the pigs was necessarily subject to the lien thereof. The mortgagee was not bound to proceed immediately to foreclose its mortgage. The mortgaged property was preserved by appellant upon his premises and did not lose its identity. The difficulty that would have confronted the mortgagee, had a foreclosure of the mortgage been attempted, would have been to pick out and segregate the particular property from the herd with which it was commingled. It was the right of the mortgagee to defer foreclosure of the mortgage until the maturity of the debt for which it was security or until it desired to take...
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