Smith v. Russell
| Decision Date | 16 March 1937 |
| Docket Number | 43674. |
| Citation | 272 N.W. 121,223 Iowa 123 |
| Parties | SMITH v. RUSSELL. |
| Court | Iowa Supreme Court |
Appeal from District Court, Polk County; Loy Ladd, Judge.
Action in replevin for the possession of a mimeograph machine. A jury was waived and the court held that the plaintiff was entitled to the possession of the machine upon payment of the balance due on the conditional contract of sale. Opinion states the facts.
Reversed.
Parties to conditional sales contract had right to provide therein that on re possession of property by seller, purchase money already paid was to be considered as rent for use of property.
Mills Hewitt, Diltz & Holliday, of Des Moines, for appellant.
Reed & Elick, of Des Moines, for appellee.
The plaintiff, Kenneth Smith, appellee, purchased a mimeograph machine from the defendant appellant, at the agreed price of $195, payable in installments. There was a written contract entered into which is designated by appellant as a " lease agreement" which provided for the payments and which contained the following provision: Notes for the deferred payments were also executed and in each of these notes is this statement: " It is hereby agreed that the ownership and title to said goods remain in said Office Equipment Company until this note is fully paid." The contract bears date of September 12 1932, and the last of the installment notes was due and payable February 1, 1933.
On account of financial reverses plaintiff was unable to complete the payments of this and other debts, and it appears that on or about the 5th of May, 1935, plaintiff filed a voluntary petition in bankruptcy and was adjudged a bankrupt. He listed among his assets and liabilities the defendant as a creditor " holding security" and listed the machine as purchased on contract with a balance due and unpaid. There was a dispute over the exact amount of the balance, but it is conceded that there was a balance due and unpaid. A trustee was appointed in the bankruptcy matter, and on the 22d of March, 1935, the defendant filed with referee in bankruptcy a petition for reclamation of said machine under the terms of his contract. After defendant obtained possession of said machine, plaintiff through his attorney attempted to negotiate with the defendant in reference to the balance due, and to reclaim the machine. Plaintiff offered to settle by paying $30, which was more than the balance due, but the defendant refused to accept the sum of $30, but offered to take the sum of $40, and it was therefore this small item of $10 which might be said to be the inducing cause of this litigation over a machine which had been operated since 1932, which litigation has resulted in costs and attorney fees no doubt many times the actual value of the machine.
When the parties were unable to agree, the plaintiff made a tender of what he claimed was the amount due, which was refused, and this was followed by formal demand upon the defendant for the machine. The trial court, in what might be termed, in a sense, a laudable effort to do equity, even in a law action of replevin, actually made an accounting between the parties and found the balance due on the contract, and then found that the plaintiff was entitled to relief prayed for in his petition, " conditioned upon the further terms of this judgment and order," which judgment and order is as follows:
In due time a motion to set aside judgment and for new trial was filed by the defendant, which the court overruled, and from this order the defendant has appealed, the court having granted a certificate authorizing the appeal. A supersedeas bond was filed and a supplemental order was granted, directing sheriff to again return the machine to defendant, and plaintiff has perfected an appeal from this order. Such is the record in this case.
It is the contention of appellant that the right of possession, the only question involved in this replevin action, had, prior to this trial, been adjudicated by the United States bankruptcy court to be in defendant, and that said prior adjudication was conclusive on the district court as to that question; while appellee contends that his equities in the property were not adjudicated, that he still had a right to redeem his machine by paying or tendering the balance due under the contract. This contention is based upon the theory that the contract was in effect a chattel mortgage, or evidence of a lien for security only, which the appellant must foreclose in order to get full title.
The law is well settled that upon adjudication, title to the bankrupt's property vests in the trustee, with actual or constructive possession, and is placed in the custody of the bankruptcy court as of the date of the filing of the petition in bankruptcy, and thereafter the bankruptcy court has exclusive jurisdiction to deal with the property of the bankrupt estate. And when this jurisdiction has attached, the court's possession cannot be affected by actions brought in the state court. The bankruptcy court being a court of competent jurisdiction, having acquired possession and jurisdiction over the bankrupt's property, other courts, even though of concurrent jurisdiction, may not interfere or disturb such possession. Therefore, when the plaintiff filed his voluntary petition in bankruptcy, he submitted to the jurisdiction of such court, and that court became possessed of all his right, title, and interest in this machine, including any equitable right of redemption, with full power to hear and determine all questions respecting title, possession, and control of the same. Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 51 S.Ct. 270, 75 L.Ed. 645, 661, 667." All of the interest of the bankrupt in the nonexempt property vested in the trustee subject to the valid liens thereon. The trustee took all the bankrupt had." First Trust & Savings Bank v. Kleih, 201 Iowa, 1298, 1302, 205 N.W. 843, 845.
Hence, when the appellant undertook to reclaim the machine and petitioned the bankructy court setting up his contract and claim of title, the default of the purchaser and his consequent right to repossess the property and treat the amount paid as rent, and the trustee appeared thereto, it became not only the trustee's right, but it was his legal duty if there was anything to be gained for the unsecured creditors of the bankrupt, to defend and set up any right in the machine or equities therein that existed in law in favor of the bankrupt. He might even, under proper order of the court, have paid the balance due and thus prevented the reclamation of the machine. The appellant set up in his petition for reclamation all the facts and attached a copy of the contract, and alleged the default of the appellee and stated: " Your petitioner elects to demand possession of said property," that title to said machine did not pass from him, and " your petitioner is still the owner and entitled to the immediate possession thereof."
The order of the bankruptcy court recited the appearance of the petitioner and of the trustee in person And order, judgment, and decree was entered accordingly, and signed by the referee in bankruptcy.
The rule in this state is that " an adjudication is final and conclusive, not only...
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