Allen v. McCalla

Cole, J. The only questions made in this case arise upon the instructions given by the court to the jury, and the refusal to give others asked by the plaintiff. Without giving the instructions at length (they cover thirteen pages of the transcript), we will content ourselves by simply stating and deciding the questions involved in them. i. notice: mortgage of chattels. I. Do the words “ without notice ” in section 2201 of the Revision apply to creditors as well as to purchasers ? The section is as follows; “No sale or mort- ~ gage oí 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 filed for record with the recorder of deeds of the county where the holder of the property resides.” This section of the statute, which is the same as section 1193 of the Code of 1851, has heretofore been under review in this court. In Miller v. Bryan (3 Iowa, 58) the plaintiff in the action (which was replevin) claimed the property by purchase; no bill of sale was recorded and the vendor continued in possession. The defendant was the sheriff and had seized the goods as the property of the vendor, under writs of attachment against him. The court instructed the jury, that if the vendor kept — 478 — possession, the sale was void unless there was a bill of sale acknowledged and recorded like deeds of real estate. The jury found for defendant and there was judgment accordingly. On appeal by the plaintiff, this court reversed the judgment, holding the instruction erroneous, and that it should have been qualified by saying “ that the sale would not be valid against such creditors or purchasers without notice.” Citing Code of 1851, § 1193. ' ' The case of Crawford v. Burton (6 Iowa, 476) was also a controversy between a purchaser and an attaching creditor. The bill of sale was so defectively acknowledged as that no notice was imparted by its record. There was judgment for defendant. On appeal to this court that judgment was reversed, because, if the creditor had notice of the sale, that would be sufficient, although the bill of sale was not acknowledged or recorded. Citing Miller v. Bryan, supra, and Code of 1851, §§ 1193, 1211. McGavran v. Haupt (9 Iowa, 83) is decisive of the question made in this case, as to the construction of the statute. In that case, the controversy, as in this, was between the mortgagee in an unrecorded mortgage, and an attaching creditor of the mortgagor. The court, per Stockton, J., say, “The question for our decision is, whether a mortgage of personal property, executed and acknowledged, but not recorded, where the mortgagor retains possession, is valid against existing creditors, with notice of the mortgage at the time of its execution. The provisions of the statute are peculiar. Code, § 1193. * * * * We think the validity of the mortgage is not made to depend solely on the fact of its being recorded before the goods are seized by the creditor oh his legal process ; and that actual notice of its contents to the creditor is sufficient to give to the claim of the mortgagee, by virtue of his unrecorded mortgage, duly executed and acknowledged, a preference over the creditor with notice.” — 479 — And this court, therefore, reversed the judgment of the District Court, — that court, the present chief justice then presiding therein, having ruled, that the mortgage, unrecorded, was of no validity, even though the creditor knew of its existence. The opinion of the court in the case last cited, also clearly holds that the phrase “ without notice,” in the statute, applies to both creditors and purchasers; that such is a, fair construction of the statute, as well as reasonable in itself. This point is therefore res adjucHeata. Not only so, but the decision is in accord with the judgment of the court, as now constituted. Nor is there, in our opinion, any soundness whatever in the argument at bar, to the effect, that such a construction of the statute tends to enable parties to commit, or facilitate them in the perpetration of, fraud. The filing of a mortgage for record, and the recording thereof, is but constructive notice of its existence; and, if a party has notice of its existence otherwise than by its record, the full purpose of the statute is attained. Fraud cannot be perpetrated under cover of a notice to a party otherwise than by record, any more easily in degree or effect than when the notice is communicated by means of recording. Any distinction in this particular is imaginary, not real. In support of this, we might cite the decisions under the early English registration acts, as well as under certain of our State laws. The early English,'and some of our State statutes, made no exception in terms, as to purchasers, etc., with notice; but all conveyances, mortgages, etc., were declared to be invalid as to subsequent purchasers, etc., unless recorded; and yet nothing is better settled in England and in this country, than that a purceaser of a legal title, will be liable to all equities of which he had actual or constructive notice at the time of the purchase; and a purchaser by deed duly registered — 480 — will, in England, be restrained in equity from availing himself of his purchase, when he had notice of a prior unregistered conveyance, although the statute does not use the words “ without notice;” and in this country it is held', both in law and in equity, that a conveyance, duly registered, passes no title whatever, when taken with a knowledge of the existence of a prior unregistered conveyance. The construction of the statute, and the rule, are the same, whether the words “ without notice ” are in the statute or not. See authorities cited in 2 Leading Cases in Equity, in the notes to Le Neve v. Le Neve, 182, 184. And the rule is equally applied, and it applies with as much force, to personal property as to real estate, and renders the purchaser of a chattel subject to all trusts and equities of which he had notice at the time of the purchase. See id. 183, and also The Mechanics’ Bank of Alexandria v. Seton, 1 Peters, 299; Clark v. Flint, 22 Pick. 251. And this is especially so under our statute as to mortgage of personal property, and the construction given to it. See Miller v. Bryan, supra; Crawford v. Burton, supra; McGavran v. Haupt, supra; Kuhn v. Graves, 9 Iowa, 303; Campbell v. Leonard, 11 id. 489; Torbet v. Hayden, id. 435; and Hughes v. Cory, 20 id. 399. In view of the authorities cited in notes to Le Nene v. Le Neve, above referred to, it might well be doubted whether, if the words “ without notice ” were omitted from our statute, the same construction as that heretofore given by this court, and now approved, would not necessarily follow. We refer to this doctrine for the purpose of showing the radical error of counsel, in supposing that fraud would be facilitated by holding the words “without notice,” in our statute, to apply to creditors as well as to purchasers. For if the courts of equity, both in England and in this country, found it necessary, in order — 481 — to prevent fraud, to go beyond the language of the statute, so as to. apply it to parties having notice otherwise than by registration, it could hardly be contended that fraud would be facilitated by giving full force to the express language of our statute, which is in precise accord with those decisions. In other words, if courts of equity interpolate those words in the statute, where they are omitted, in order to prevent fraud, to give them force when used in the statute will not facilitate fraud. It follows, from the foregoing, that the court erred in-holding, that the words “ without notice,” in the section of the statute quoted, did not apply alike to creditors and purchasers, as it did by refusing the second instruction asked by plaintiff, and in other of the instructions given. It may be proper, though perhaps unnecessary, to add, that the different construction which obtains in Ohio, New York, Massachusetts and other States, grows out of the different, not to say peculiar, language of the statutes of those States, and hence we do not deem it necessary to review the authorities from those States, cited and ably enforced by counsel in argument at bar. 2. —: actual notice: statute construed. II. The next question in order is, whether the notice contemplated by the statute is actual notice as contradistinguished from constructive notice, or whether , . . * it includes both. Ihe District Court ruled, and so instructed the jury, that the notice must be actual. This question has not been directly decided by this court, as applied to conveyances of personal property by mortgage or bill of sale. But the same words, “ without notice,” are used in the section in relation to real estate in substantially the same connection. Rev. § 2220. In English v. Waples et al. (13 Iowa, 57), which was a controversy between two mortgagees of real estate, the mortgage last in date having been first recorded, this court stated and held the general rule as follows: The last mortgagee — 482 — is entitled to priority unless he had actual or constructive notice of the contents or existence of the first, or such notice as was sufficient to put him, as a reasonable man, upon inquiry; and particularly so, if such inquiry would certainly lead to a knowledge or discovery of the right or equity of the first. It is held, in the case of Wilson v. Miller & Beeson (16 Iowa, 111), which also was concerning real estate, that, where a party has actual knowledge of another’s rights, or, what is the same thing in law, designedly abstains from making inquiry for the purpose of avoiding knowledge — or, in other words, where a party knows the rights of another, or fraudulently determines not to know them — in either case, he is not a bona fide purchaser. The doctrine of these cases, if it is applicable to bills of sale and mortgages of personal property, as well as to conveyances and mortgages of real estate, is decisive of the question made in this case. We can see no reason or principle upon which to rest a distinction between the two classes of property. The words of the statute are the same in the one case as in the other. As a matter of conscience or equity, one man has no more right to appropriate the personal property of another, without consent or compensation, to his own use, than to thus appropriate his real estate. Whatever would bind the conscience of a man in the one case would bind it in the other. We feel constrained therefore to hold., as we do, that the word “ notice” as used in one statute, means notice either actual or constructive. s. — con-actual notice, But let us look a little at the special facts of this case as disclosed by the record. The law firm of Phillips & Phillips were the attorneys for Northrup, Taylor & Co. against Haber & Drake, in which case the attachment under which the defendant claims was issued. Two issues of fact were made be — 483 — tween the parties and tried to the jury. One, whether the mortgage to the plaintiff was properly filed for record before the levy of the attachment,-and the other, whether the attaching plaintiffs had notice of the existence of the mortgage prior to the levy of the attachment. Upon this last issue, the attorneys for the attaching plaintiffs were severally called as witnesses. J. H. Phillips testified: “ I had the order for the note before I filed the petition; the reason I did not get the note before I filed the petition, is that that was our mode of making that- collection; our mode in this case was not our general mode in other cases; I don’t know how long we had that order; a few days before the attachment, I may have heard a rumor that Mr. Allen had a mortgage; * * I had no belief when the attachment was issued that Allen had a mortgage, because I did not know; I might have suspicioned something of the kind, but I don’t know.” William Phillips testified : “ I don’t know whether I had a conversation with Huber about the mortgage to Allen; * * I heard a rumor that there was a mortgage on the stock; I did not hear that Allen had a mortgage at the time I sued out the attachment; I thought it possible Allen had a mortgage on the stock, I suspicioned it; * * I never had a belief as to Allen’s having a mortgage until after I called for the note; I will say that I suspected it before; I think I did not testify to the jury in this ease that I believe that Allen had a mortgage; I don’t know the exact words I used positively, but think I said, and intended to say, suspicioned ; I say I had a suspicion ; * * 'it was talked between us (partner and self) that if Allen had a mortgage, we would not call for the note, for fear Allen might put the mortgage on record and get ahead of us, if he had one.” In the notes to Le Neve v. Le Neve (2 Lead. Cases in Eq. 152), the learned American annotators in the com — 484 — mencement of their notes of cases say: “ Notice may be either actual or constructive. It is actual when the purchaser either knows of the existence of the adverse claim or title, or is conscious of having the means of knowledge and does not use them, whether his knowledge is the result of a direct communication or is gathered from facts and circumstances.” Citing The Mayor v. Willams, 6 Maryland, 235. Applying this law to the facts as disclosed by the testimony, extracts of which are given above, there can be but little difficulty in determining that the notice was actual within the liberal rule thus stated. But it is clear from all the instructions, as well by those given as by those refused, that the learned judge who tried this cause did not use the term actual notice with any such liberality of construction; he used the term in the sense of positive information as distinguished from a knowledge of facts and circumstances which would lead to such information. The authorities are reasonably well agreed, that where a party designedly abstains from making inquiries for the purpose of avoiding knowledge, such conduct is mala fide in itself and will not relieve the party from the effects of the knowledge his inquiries would have developed. Even where the doctrine of constructive notice is held the most rigid, and clear and decisive proof is required, those courts also hold, that, where a party has designedly abstained from inquiry for the purpose of avoiding knowledge, such conduct would show that the party had a " suspicion ” of the truth and a fraudulent determination not to learn it, and therefore, would charge the party with notice of whatever an inquiry would have imparted. Jones v. Smith, 1 Harris Ch. 43; Whitehead v. Jordan, 1 Young & Coll. 328. In view, then, of the special facts of this case, we have even less hesitation in holding that the court erred both — 485 — in giving and.in refusing instructions on this point, than we had upon the general principle above discussed. 4._construct-attaching6: creditor. III. Upon the subject of constructive notice, however, the court went even further against it than by its general statement of the doctrine. One instruction to the jury was as follows: “If you find that the attorneys of Northrup, Taylor & Co., believed that some one had a mortgage on the said stock of goods when they sued out the said attachment, and that it was being withheld from record to hinder, delay or defraud creditors from the collection of their debts, they were not bound to make further inquiry for said mortgage before commencing the attachment suit.” The doctrine of this instruction is, that, although a party has constructive notice of a mortgage, he may defeat it by his belief that the mortgage is void. In other words, that the belief of a party will determine the rights of his adversary. This cannot be the law. The rights of a party are to be determined by the facts, not upon belief simply. The belief of the attorneys of Northrup, Taylor & Co., that the mortgage was fraudulent, could not make it so; and the rights of the parties under the mortgage ought not and cannot be effected by such belief. In Ferrars v. Cheny (2 Vern. 383), the defendant purchased an estate with notice of a post-nuptial settlement, which comprised the estate in dispute ; it was argued in his behalf, that there was no recital of the articles for a settlement entered into before the marriage ; and that for aught that appeared to the defendant, the deed was fraudulent as against a purchaser; but the court held, that he ought to have inquired of the wife’s relations, who were parties to the deed, whether it was voluntary or made pursuant to an agreement before marriage, and, having notice of the deed, must purchase at his peril, and be bound by the effect and consequence of the deed. 2 — 486 — Lead. Ca. in Eq. 143. This is an authority in point, and is adverse to the ruling of the court below. Upon this authority, as well as upon what we deem sound principle, we hold that it was error to give the eleventh instruction. 8._notice to attorney. IV. Another question involved in the case is, whether . notice to the attorney is notice to the client. As to this, we need only say, that the authorities are very Imjf0rm in holding, that notice to the attorney is notice to the client. But the further phase of the same question was somewhat discussed at bar, and that was, whether the notice to the attorney must be in the course of the transaction in which he is acting in behalf of his client.. According to our view of the case, as presented in the transcript before us, it is not necessary for us to decide this question. It is reasonably clear, that all the notice the attorneys acquired of the plaintiff’s mortgage was acquired during their employment by Northrup, Taylor & Co., and would therefore bind them. 6. mortgage : quiredcSattcl3' V. Plaintiff’s mortgage was of a certain stock of goods, describing them generally, situated in a certain store, etc., “ together with all goods of every nature which may come into said store in the ordinary prosecution of our business.” The question is now made, whether the mortgage can cover any goods not in the store at the date of its execution. The learned district judge charged the jury, that the plaintiff could not hold any goods, except such as were in the store at the time the mortgage was made, unless he had reduced the same to-actual possession before the levy. Without enlarging upon the question in this opinion {already too much extended), it may, perhaps, be admitted, that the weight and number of authorities hold with the court below, that a mortgage cannot cover after acquired property, unless possession thereof is taken. (See .the authorities cited by counsel in their briefs.) But — 487 — there are authorities entitled to great consideration holding the contrary view. (See those cited by appellant:) The tendency of modern cases is toward this view. "We are not prepared to hold, that the weight and number of the authorities are in accord with the principle upon which the question rests. As the question may-not arise upon another trial, and as we might not be entirely agreed upon it, as now advised, we leave the question open for future determination. '7 attachjibht : levy. YI. A question is made in the transcript as to the sufficiency of the levy first made, as claimed by the defendant. Upon this, we content ourselves stating the general rule. In order to make a legal and valid levy, the officer must do such acts as that, but for the protection of the writ he would be liable in trespass therefor. Any thing short of this would not confer upon the officer a right of property or possession, certainly not as against a third party. McBurnie v. Overstreet, 8 Ben. Mon. 303-4; Crawford v. Newell, 23 Iowa, 453. The eighth instruction, as given, was not of itself necessarily erroneous; and yet the plaintiff was entitled to the modification as asked. We have thus disposed of every question made in the case, and the judgment of the District Court is Reversed.