Slimmer v. Lawler

• Decision Date: 13 March 1928
• Docket Number: 38617
• Citation: 218 N.W. 516,205 Iowa 813
• Parties: SLIMMER & THOMAS, Appellees, v. JOE LAWLER et al., Appellees; BROOKS BROTHERS et al., Appellants
• Court: Iowa Supreme Court

218 N.W. 516

205 Iowa 813

SLIMMER & THOMAS, Appellees, v. JOE LAWLER et al., Appellees;

BROOKS BROTHERS et al., Appellants

No. 38617

Supreme Court of Iowa, Des Moines

March 13, 1928

Appeal from Cerro Gordo District Court.--M. F. EDWARDS, Judge.

There is deposited in the Cerro Gordo State Bank the sum of $ 3,413.24, being the proceeds of the sale of certain mortgaged cattle. Slimmer & Thomas in point of time have the first mortgage thereon. Subsequent to the time of the execution of said mortgage, Brooks Brothers purchased a portion of the cattle, and executed a chattel mortgage thereon, and Eric Josten and George Ulrich are the assignees of said latter mortgage. This action involves the conflicting rights of the aforesaid parties to said fund. Upon trial, the court found that Slimmer & Thomas are entitled to priority over Eric Josten and George Ulrich. Brooks Brothers, Josten, and Ulrich appeal.

Reversed.

Ira Jones, for Eric Josten and George Ulrich, appellants.

J. E Williams, for Brooks Brothers, appellants.

Smith & Feeney, for appellee.

WAGNER J. STEVENS, C. J., and DE GRAFF, ALBERT, and MORLING, JJ concur.

OPINION

WAGNER, J.

On May 22, 1924, the defendant Joe Lawler, at St. Paul, Minnesota, purchased from Slimmer & Thomas 180 head of steers, and executed unto the plaintiff his promissory note for the sum of $ 11,836.98. On the same day, and as a part of the same transaction, as security for the payment of said note, he executed a chattel mortgage upon the cattle. In said instrument, the description of the cattle is as follows:

"One hundred eighty (180) steers, two and three year old, various colors, each branded with the letter T on the left hip. These cattle are now in possession of the said Joe Lawler in the Union Stockyards at South St. Paul, Minnesota, and are this day to be shipped to Garner, Iowa, and thereafter kept on Section 4, in Township 22 Range 95 in Cerro Gordo County, Iowa. These cattle were this day purchased by the said Joe Lawler of the said Slimmer & Thomas and this mortgage is given to secure payment of the purchase price of same. The above described chattels are now owned by Joe Lawler and are free from all incumbrances and are now in his possession as stated and to be in said Cerro Gordo County, Iowa."

It is shown by the record that the defendants Joe Lawler and A. R. Butler were both interested in this business venture. The note representing the purchase price of the cattle was forwarded to Butler, who resided at Garner, Iowa, and by written indorsement on the back thereof, he guaranteed the payment of said note. On July 15, 1926, the date of the rendition of the decree, there was due and owing on said note the sum of $ 2,831.20. The aforesaid chattel mortgage was filed in the recorder's office of Cerro Gordo County, Iowa, on May 23, 1924. It was not recorded, but presumably indexed in conformity with our statutory law. Immediately after the purchase of the cattle by Joe Lawler, they were shipped to Thornton, Iowa, instead of Garner, Iowa, and were placed in a pasture which defendant Butler had rented from Wood Brothers, in Grimes Township, the legal description of which is as follows: Section 4, Township 94 north, Range 22 west. The cattle were kept in this location for some time, many of them having been sold, and the proceeds applied upon the aforesaid note. The question of the sufficiency of the description of the cattle in said mortgage will be hereafter considered.

Butler was a banker at Garner. He was a silent partner with Lawler in his purchases and sales of cattle. While he did not join as a mortgagor in the aforesaid mortgage, he had actual notice or knowledge of its execution.

Forty-four of the 180 head of mortgaged cattle were ultimately taken to the Brooks farm in Section 27, Township 95, Range 22. Brooks Brothers rendered service in caring for these cattle, as well as other cattle owned by Lawler and Butler, receiving compensation therefor. On April 13, 1925, Butler sold said 44 head of steers to Brooks Brothers. He, as payee, received a note from Brooks Brothers, which was secured by a chattel mortgage for the purchase price upon said 44 head of steers. The sufficiency of the description in this latter chattel mortgage is in no way questioned. The note of Brooks Brothers to Butler became due on December 1, 1925. On July 24, 1925, Butler sold the $ 2,835 note to Eric Josten and George Ulrich, and by written assignment assigned to them the latter chattel mortgage. Josten and Ulrich are good-faith purchasers of the note for value (having paid full value), and had no actual notice of the mortgage from Lawler to Slimmer & Thomas.

To set out all of the testimony would make this opinion quite lengthy, but the facts are such that we are abidingly satisfied that Brooks Brothers had knowledge of facts sufficient to put them upon inquiry as to the existence of the mortgage from Lawler to Slimmer & Thomas, and we find that they had actual notice of said mortgage. Brooks Brothers assisted in unloading the cattle at Thornton, and both Lawler and Butler were present when the cattle were taken to the Woods' pasture. Lawler stayed with the Brooks family for quite a period of time, in looking after his interest in the cattle business. The Brooks were in the employ of Lawler and Butler in caring for the cattle. On January 28, 1925, Boyce, a collector for Slimmer & Thomas, together with Lawler and Butler, visited the Brooks' farm, where the cattle were viewed, and where the elder Mr. Brooks, as we believe, was shown the Slimmer & Thomas mortgage. At a later conversation with Boyce in November, 1925, Mr. Brooks told Boyce that he supposed that the mortgage on the cattle had been paid; that he understood that Lawler had paid it. The elder Mr. Brooks admits that he had an interest in the partnership of Brooks Brothers at the time of the trial, but denies any such interest at the time of the aforesaid transaction and conversation. According to the testimony of Brooks, Brooks Brothers consisted of Cyrus, James, and Harold Brooks, all being single, and aged, respectively, 26, 20, and 17. The farm operated by the Brooks Brothers was a large one, owned by the Northwestern Life Insurance Company. The three boys lived at home, with their father and mother. It is hardly believable that the father and mother were living off their minor sons, as a matter of gratuity. The facts and circumstances surrounding the entire transaction are such that we believe that Brooks Brothers, --no matter how many of them may have constituted the partnership, [205 Iowa 817] --prior to the execution of the latter mortgage, were not innocent of the existence of the mortgage from Lawler to Slimmer & Thomas.

In November, 1925, the cattle were shipped by Brooks Brothers from Hurley to Chicago, in the name of A. N. Grimm, and there sold; and the proceeds of sale, in the amount of $ 3,413.24, are on deposit in the Cerro Gordo State Bank, and it is for this sum that the parties to this legal quarrel are contending.

On November 23d, the elder Brooks informed Boyce that he would produce the cattle to him at Klemme for shipping purposes on November 28th, and on that date, Boyce was at Klemme when cattle were delivered, other than those upon which Slimmer & Thomas held a mortgage. The mortgaged cattle had been shipped to Chicago, as aforesaid, and the testimony by one of the Brooks boys is that:

"We, Brooks Brothers, talked to Mr. Grimm, and got him to ship them for us in his name. We made no effort to get the check from the bank after it came back. * * * From what we heard, we did not know just who the money might belong to, and we figured that we would put the money where it would be safe until it was found out and settled who it should be paid over to. It was placed in the Cerro Gordo State Bank for the purpose of being applied on the note, and whoever was determined to be entitled to it."

Both Slimmer & Thomas and Josten and Ulrich are seeking to hold the fund for the payment of their respective notes.

We are aware that it is the general rule that, where the mortgaged chattel property is sold without the consent of the mortgagee, the lien of the mortgage does not attach to the proceeds of such sale, and the proceeds cannot be followed by the mortgagee and a lien enforced against them. See Jones v. Home Sav. Bank, 200 Iowa 1186, 206 N.W. 107, and cases therein cited. But in this case, the thought and intention of Brooks Brothers appear to have been that the proceeds should be placed in the Cerro Gordo State Bank for the purpose of being applied, or paid, to whomsoever it should be determined to be entitled to it. Both Slimmer & Thomas and Josten and Ulrich are endeavoring in this proceeding in equity to impress a trust upon the fund held by the bank. The bank is a party to the litigation, and will be bound by the adjudication.

The real contention in this litigation is, Whose claim is entitled to priority under their respective mortgages,--that of Slimmer & Thomas, or that of Josten and Ulrich? The answer to this question must be determined by our recording statute and the facts of the case. Section 10015 of the Code of 1924 provides:

"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."

The Slimmer...