Continental National Bank v. Naylor

DUNN, J. On December 29, 1920, respondent brought an action against defendant Naylor on three promissory notes *270 aggregating $20,000. Writ of attachment was issued on the same day, and on December 30, 1920, the sheriff of Bannock county levied on 1,381 head of sheep as the property of defendant Naylor. Loren C. Woolley on January 12, 1921, filed his complaint in intervention, alleging his ownership of the sheep attached by the sheriff, his service upon the sheriff of written notice of ownership and demand for the return of said sheep to him, the demand by the sheriff and the giving by respondent of an indemnity bond in the sum of $15,000, and the sheriff’s refusal to deliver the sheep to intervenor, the delivery of 1,450 sheep to defendant Naylor in October, 1908, by the intervenor and his father, John W. Woolley, under a contract by which Naylor was to run said sheep and pay therefor a certain amount of wool each year and certain increase for each 100 head of sheep, and the relinquishment on December 14, 1920, by said Naylor to intervenor of all claim to said sheep and the repossession of said sheep on said last-named date. The intervenor alleged the value of the sheep attached to be at least $15,000, and judgment for that sum is prayed for, or that he be given immediate possession of the sheep. Respondent answered the complaint in intervention, denying the material allegations thereof and denying that the sheep in controversy were of the value of “at least fifteen thousand dollars ($15,000), or any sum in excess of ten thousand dollars ($10,000).” As a further answer and separate defense, respondent alleged the bringing of its suit against Naylor on December 29, 1920, to recover judgment on three promissory notes aggregating $20,000, besides interest and attorney’s fees; that said indebtedness was then due, and that respondent at the times mentioned in said notes and for a long time prior thereto, and at all times since, was a creditor of said Naylor in good faith and for value, and was such on the date of the attachment of said sheep; that respondent in making loans to the defendant, represented 'by said promissory notes, nine of which have been paid, believed and relied upon the fact that the said defendant was the owner of the sheep which are the sub *271 ject of this attachment; that if the intervenor had any interest in or to said sheep or any sheep at the time said loans were made or for a long time prior thereto or subsequent thereto the said intervenor shduld not be permitted to claim any title to or interest in said sheep, for the reason that during all the times that respondent made loans to the defendant the sheep mentioned in the complaint in intervention were in the possession and under the control of defendant, with all the indicia of ownership, and that the defendant in the usual course of business made application to respondent for credit without any notice or knowledge by respondent of intervenor’s claim to said sheep, and further, that the inter-venor had failed and neglected to record in the state of Idaho the lease under which he claimed the defendant held the sheep claimed by the intervenor; that the respondent did not know at the time it became a creditor of said defendant, or at any time, until December 14, 1920, that the inter-venor claimed any title to or interest in said sheep and had no means of knowing that he did so claim, and relying upon the possession and ownership and apparent ownership of said defendant and being induced thereby did make the loans described in its complaint and did pay over to said defendant the sums of money evidenced by said promissory notes. For a further defense respondent alleged that if the intervenor had a lease upon any sheep which were in the control and possession of defendant, said lease did not cover the sheep taken under the attachment in this ease. Pursuant to stipulation between the parties by their respective counsel, the case between respondent and intervenor, who is appellant here, was tried before the court without a jury. Findings of fact and conclusions of law were made by the court, and judgment entered in favor of respondent. Appellant moved for a new trial, which was denied, and an appeal was taken from the judgment and the order denying a new trial. Appellant assigns a large number of errors, but we think the case can be decided without an examination of these in detail. *272 The evidence shows without- dispute that John W. Wooley, the father of appellant, entered into an agreement with defendant Naylor in Utah on October 20, 1908, by which Naylor leased from Woolley and Woolley delivered to Naylor 1,450 head of sheep. Said lease was for the term of one year, and provided that the lessee should keep the number and kind of sheep good, and deliver the -same, or an equal number of as good sheep of the same kind, quality and condition to Woolley at the end of the said term or at the end of any term during which he might keep them. It is further provided that Naylor should deliver to Woolley for each year that the agreement might be in force eight head of lambs for each 100 head of sheep, and that he should deliver to Woolley each year at shearing time, at the place where he might sell his wool, one and one-half pounds of wool, or the cash therefor, for each head of said sheep, and also one and one-half pounds of wool for each of the eight lambs for each 100 head of sheep when the lambs should become one year old. The contract also forbade Naylor to dispose of any of the sheep or their increase without first obtaining written consent of Woolley. It also provided that the agreement should be canceled and determined at any time if Woolley should be dissatisfied with the manner in which the sheep, their increase or wool, was being handled. It also provided a method by which, at the expiration of the contract, the sheep to which Woolley would be entitled might be separated from the remainder of the flock, but in case there should not be a sufficient number of sheep in the herd to satisfy Woolley’s claim, provision was made that the number should be made up by substituting other sheep as good. So far as the record shows, no sheep were added to the number originally received from Woolley, but the rental was each year paid according to contract except for the year 1920. Nothing in the nature of a final settlement was ever had between the parties until the sheep were turned over to Woolley on December 14, 1920. At that time Woolley received from Naylor the following letter: *273 “Bountiful, Utah, Dec. 10th, 1920. “John W. Woolley: “Dear Uncle: I am sorry to say my business affairs haven’t been as I could wish them to 'be. The bank is taking over all my property. You had better go to Bancroft, Idaho, and receive your sheep. O. J. Carter has them in charge. I have instructed him to turn them over to you. Take camp, team of horses and set of harness with them. “I am sorry I haven’t enough sheep to pay you in full. Hope to make them good some day. ‘ ‘ They are all young ewes, and much better grade of sheep than what I received from you. They are straight ewes and no lambs with them. Hand this letter to O. J. Carter, Bancroft, Idaho. “Yours resp., “ARTHUR NAYLOR.” To this letter was also attached the following direction to O. J. Carter, who appears to have been in charge of the sheep for Naylor: “Mr. O. J. Carter, “Dear Nephew: Turn all sheep we have over to Mr. Woolley, with camp, team of horses and set of harness. “Yours resp., "ARTHUR NAYLOR." The record shows that respondent 'began lending money to Naylor in 1908, and that various amounts of money were loaned to him, reaching at one time the sum of $75,000. Naylor appears to have been handling a large number of sheep during this time and to have had about 11,000 head of sheep within two months of the time at which he turned over the sheep in controversy to Woolley. There is no showing that either Woolley or Naylor ever made any representations to the bank with regard to the particular sheep received by Naylor from Woolley; nor is there any showing that the bank had any knowledge whatever of the contract between Naylor and Woolley. The credit extended by the respondent to Naylor is shown to have been given not alone upon sheep, but upon other assets. It is fair to infer, however, from *274 the record that Naylor was doing a reasonably successful business as a sheepman, and that he had corresponding credit with the respondent on that account. The respondent at no time, so far as the record shows, had a lien of any character on the sheep that were being handled by Naylor. Naylor, so far as respondent was concerned, appeared to be perfectly free to buy and sell as he pleased, and there is no claim that any of the statements made to respondent on which it claims to have relied were false in any particular. More than two weeks after Naylor had delivered the sheep to Woolley, in settlement, so far as a settlement at that time could 'be made, of the contract between them, and after title had passed to Woolley, the respondent caused the attachment to be levied upon the sheep in controversy. Respondent rests its claim to the sheep in controversy upon C. S., sec. 1955, which reads as follows: “All leases of more than 10 head of livestock must be in writing and must be acknowledged in like manner as grants of real property, and filed of record in the same county recorder’s office or offices, and within the same time and manner, and for the same fee, as are chattel mortgages; and the failure to comply with the provisions of this section renders the interest of the lessor in the property subject and subsequent to the claims of creditors of the lessee, and of subsequent purchasers and encumbrancers of the property in good faith and for value.” Respondent relies upon the case of Hare v. Young, 26 Ida. 682, 146 Pac. 104, but it has not brought itself within the holding of this court in that case. There the parties claiming ownership of the sheep had leased them to Young and permitted him to handle them as his own without recording the leases, but the sheep had been mortgaged to Anderson Brothers Bank to secure a loan obtained by Young before the owners set up a claim to possession of the sheep. This mortgage had been assigned to plaintiffs in that ease, and it was in the foreclosure action that the claim of ownership was unsuccessfully asserted. *275 It is the contention of respondent in this case that under the facts shown here a general creditor, such as respondent, would have a right to levy upon these sheep in the hands of Woolley. To this proposition we cannot assent. The term “creditor” as used in C. S., sec. 1955, does not refer to a general creditor, but to one who has acquired some sort of lien, by attachment or otherwise, upon the property. This construction was given 'by this court to language similar to that used in C. S., see. 1955, in the case of Martin v. Holloway, 16 Ida. 513, 102 Pac. 3, 25 L. R. A., N. S., 110. Respondent, not being such a creditor as the statute contemplates, could not acquire any valid claim to the sheep that had previously been turned over to Woolley in part settlement of Woolley’s claim under the contract between himself and Naylor. We think there is no doubt that the contract between Naylor and Woolley, as between themselves, was valid and enforceable at law. Naylor was in possession of these sheep and had a legal right to dispose of them as he did by turning them over to Woolley in settlement, or part settlement, of his obligations under the contract between them. When he did so, title vested in Woolley and respondent had no more legal right to complain than it had to complain of the sale or disposition which had taken place with regard to more than 9,000 of Naylor’s sheep within the preceding sixty days. The seizure of these sheep under attachment was wholly unwarranted and without right. The trial court erroneously denied appellant an opportunity to introduce evidence as to the value of the sheep in controversy; consequently, there is no finding on that point to determine the issue raised by the complaint in intervention and the answer thereto. It will be necessary, therefore, if the sheep cannot be delivered to the intervenor, to take further evidence to determine the value of the sheep. The judgment is reversed and the trial court directed to enter judgment that the intervenor was, at the time of the attachment, the owner of the sheep in controversy and entitled to their possession; that the attachment be discharged *276 and the sheep be returned to the intervenor. If their return is not possible, the trial court is directed to take evidence as to their value and make a finding thereon, and thereupon to enter judgment in behalf of the intervenor and against the respondent for such value, with interest thereon from the date of the attachment, December 30, 1920, and costs. Costs on appeal awarded to appellant. Budge and Wm. E. Lee, JJ., concur. McCarthy, C. J., and William A'. Lee, J., dissent.