Rand v. Barrett

Reed, J. The three causes were tried together in the circuit court, and were submitted in this court on one abstract and argument, and will be disposed of in one opinion. On the twelfth of November, 1877, the defendants R. A. Barrett and W. L. Barrett, acting as the agents and trustees of the heirs of R. A. Barrett, deceased* and J. N. Martin sold to the firm of Sweney & Bell the furniture and fixtures in a hotel in the city of Burlington for the price of $7,500. Of this amount the purchasers paid $3,000 in cash, and they gave their promissory notes (six in number) for the balance, and to secure the same they gave a chattel mortgage on the property purchased. On the same day Sweney & Bell rented of defendants, for a term of years, the hotel in which said property was situated. At the time this lease was entered into, the firm of Sweney & Bell was composed of IT. Sweney and J. M. Bell, but by a subsequent arrangement the interest of II. Sweney in the property and business of the firm was taken by her husband, M. Sweney, and this arrangement was assented to by defendants. This new firm having made default in the payment of the rent of the hotel, a suit was instituted by defendants against them therefor, in which defendants claimed a landlord’s lien on the furniture and fixtures in the hotel, and an attachment was issued in said suit, and the property in question was seized thereon by the sheriff. In that action defendants recovered judgment against Sweney & Bell for $1,777.09, and an order was entered for the sale of the attached property. A special execution was issued on [734] this judgment, and the sheriff was proceeding to sell the property thereunder, when plaintiffs served him with written notice that they claimed the property. He thereupon notified defendants that an indemnifying bond was required, and they accordingly gave the bond on which the actions were brought, and the sheriff proceeded to sell the property under the execution, and defendants bought it in at the sale. Plaintiff Rand is executor of the estate of John Taylor, deceased. His claim is that one of the promissory notes given by Sweney & Bell in the purchase of the property belongs to said estate. This note is for $1,000, and by its terms it became due on the twelfth of November, 1878. The claim asserted by plaintiff Julia Noble, in the action first instituted by her, is that she is also the owner of one of the notes given by Sweney & Bell in the purchase of said property; said note being for $1,000, and falling due February 12,1878, and was payable to the order of J. N. Martin. While they were in possession of the hotel under the lease, Sweney & Bell purchased certain billiard tables, which they placed in the billiard-room in the hotel. For a portion of the purchase price of this property they gave their notes, and, to_ sécure the same, gave a chattel mortgage on said billiard tables. This property was also seized on the attachment issued in the cause instituted by these defendants against Sweney & Bell, and it was sold on the special execution issued on the judgment: rendered therein. The claim asserted by plaintiff Julia Noble, in the action last brought by her, is that she is the owner of these notes, and the mortgage given to secure them. Defendants admit the execution of the mortgage, as alleged by plaintiffs, but deny that plaintiffs have any interest therein, or in the property covered thereby, and they aver that the debts secured by said mortgages were paid off and discharged by Sweney & Bell; but that, for the purpose of cheating and defrauding defendants, who were entitled to a landlord’s lien on the property covered thereby to secure the rent of said hotel, they procured said mortgage [735] and notes to be transferred to plaintiff, and that the claims now asserted by plaintiffs thereunder are asserted, in fraud of their rights. The cause in which E. D. Rand, executor, is plaintiff, and the one first instituted by plaintiff Julia Noble, were tried in the circuit court as equitable actions. The other cause was tried as an ordinary action. 1. PROMTSsoRYnote: deposit ot as ourfty^de-6’ party:'pay-rd íacts' consulered‘ I. As to the action brought by plaintiff E. D. Rand, executor. The evidence establishes that the note which plaintiff claims belongs to the estate of which he is exec- . utor was indorsed by defendants, who were the ^ ' Pa.7ees thereof, to Theodore Guelich, and was by him iQdorsed and delivered to the Eirst National Bank of Burlington, as collateral security. At about the time of its maturity, plaintiff’s testate paid to the bank the amount then due upon the note, and it was delivered to him, and was found among his papers after his death, which occurred some years afterwards. [736] posiLryto" sel1- 3 landciiaweimortloffo^priorlfcy' [735] Defendants’ claim is that Taylor, in paying the money to the bank, was acting for Sweney & Bell, and that the transaction amounted to a payment and satisfaction of the debt evidenced by the note. But this claim, we think, is not sustained by the evidence. The money which he paid to the bank belonged to Taylor himself, and not to Sweney & Bell. The note was not canceled by the bank when it was delivered to Taylor, and Sweney & Bell made one or two payments of interest on it to him after he received it. Nothing is shown with reference to the transaction between Taylor and the bank except the payment by him of the money, and the delivery by it to him of the note. The presumption arising from these -facts, and the subsequent recognition of the note by the makers as a continuing obligation, is that -the transaction between Taylor and the bank was a sale of the note by the bank to him. It is true that Mr. Guelich testified that he did not authorize the bank to assign the note to any third [736] and that he was informed by the bank soon a^er transaction that it liad been paid, and had no knowledge, until about the time this suit was instituted, that it was claimed that the bank had sold it. We do not understand him to mean by this, however, that there was an express understanding between him and the bank that the note should not be negotiated; but his meaning doubtless is that he did not, in express terms, authorize it to sell the instrument. But when he indorsed the note and delivered it to the bank as collateral security, he thereby vested it with the title to it, and, unless its rights with reference to the instrument were expressly limited, it had the power to make such disposition of it as it might elect; being answerable to him, of course, for its value. We think it dear, therefore, that Taylor became the owner of *he nofcei and, as the chattel mortgage given for its security was executed before the contract for the rent of the hotel was entered into, the lien created by it is superior to the lien of the landlord for the security of the rent of the property; and it follows that plaintiff had an interest in the property covered by the mortgage, which was senior to the interest of defendants therein. 4« PROMISsory note: payment by subrogation seoiirRie^of1 bolder. II. As to the claim first instituted by Jtilia Noble. The promissory note which she claims to own, as stated above, was payable to J. N. Martin. George Sweney, a *• v o t/ ^ brother to M. Sweney, was liable thereon as euar- ^ . ° antor. At its maturity this note was in the hands of the National State Bank of Burlington, belonged to Martin, but had been indorsed to the bank for collection. Sweney & Bell being unable to meet it, at their request George Sweney paid the amount due thereon to the bank, and the note was delivered to him, the bank indorsing it “without recourse.” Martin thereupon entered on the margin of the chattel mortgage an acknowledgment of the satisfaction of his interest therein. Plaintiff claims to have purchased the note from George Sweney. This [737] claim is denied by defendants, and this issue presents one of the principal questions of fact which we have to determine in the case. We will not attempt to set out the evidence bearing on the question, but will content ourselves with a statement of the conclusion to which our examination of the evidence has led us. After George Sweney had paid the amount of the note to the bank, M. Sweney repaid him the amount and received the note from him. We are satisfied, however, that this payment was made with money belonging to plaintiff, and that M. Sweney acted in the transaction as her agent. Both plaintiff and Sweney swear that the latter acted in that capacity in the transaction, and their testimony on the question is not contradicted. We are also satisfied that the transaction was intended by the parties asa purchase by plaintiff of whatever interest accrued in favor of George Sweney on account of the payment by him of the amount of the debt evidenced by said note. It becomes important, therefore, to determine the character of the right which accrued in his favor on account of such payment. The relation which existed between Sweney & Bell and him was that of principal and surety, and when he paid the debt he was entitled to be subrogated to all the rights of the creditor. lie was entitled to have the principal undertaking assigned to him, and 1 o have the benefit of all securities which had been placed in the creditor’s hands by the principal debtor. In equity, the payment by him of the amount of the indebtedness is regarded as a purchase of the debt rather than a payment of it; and when, the bank assigned the note to him, it did simply what he was entitled to have done by virtue of his relation to the parties and the fact of his having made the payment. See Pomeroy Eq. Jur., § 1419 and authorities cited in the note. When George Sweney made the payment to the bank, then, and received the assignment of the note, he became the owner of the indebtedness evidenced by it. Tie also became the equitable owner of the chattel mortgage which was given [738] for its security, and as against Sweney & Bell he had the right to seize and sell the property covered by it for the satisfaction of the debt, and his rights as against them were in no manner affected by the satisfaction of the mortgage entered on the record by Martin. Plaintiff, by her purchase from him, acquired these rights. As against Sweney & Bell she has the same rights and interests which Martin had before the payment was made by George Sweney to the bank. It is clear, therefore, that her interest in the property covered by the mortgage is superior to the defendants’ lien thereon for the rent of said hotel, unless her right is defeated by some equity which does not arise out of her relations to the mortgagors. lieu: prior gage: fraiuiulent caneellation of mortgage: change of lessees: affected. It is claimed by defendants that, after the satisfaction of the mortgage was entered of record by Martin, they consented to the substitution of M. Sweney as a party to the lease in place or liis wire, who was a member oi the firm of Sweney & Bell when the contract was entered into, and that they knew when they con- ’ J sented to this change that Martin had entered satisfaction, and believed when they gave their consent thereto that the debt secured by the mortgage had been paid; and they contend that upon these facts their landlord’s lien upon the property for the security of the rent which accrued after M. Sweney became a party to the lease is superior to any claim in favor of plaintiffs under the chattel mortgage; their claim being that the facts of the case bring it within the rule laid down by this court in the following cases: Bank v. Anderson, 14 Iowa, 544; McClure v. Burris, 16 Id., 591; Cornog v. Fuller, 30 Id., 212; Bowling v. Cook, 39 Id., 202. It is held in those cases that one who purchases property, after the satisfaction of a mortgage thereon has been entered of record by the mortgagee, takes it discharged of the claims of an assignee of the mortgage, if the assignment was hot recorded at the time of the purchase, and he had no actual notice of the rights of the assignee. [739] We think, however, that the facts of the present case do not bring it within that rule. Defendants, when they consented that M. Sweney might become a party to the lease, in no manner changed their position with reference to the property. They made no new contract for the lease of the hotel. They simply consented that he might become a party to the lease instead of his wife, whose undertakings therein he covenanted to perform; nor did they contract for any additional security for the rents which were yet to accrue under the contract. The law gave them a lien from the beginning of the term of the lease for all the rents which should accure under it; but this lien was junior to that created by the mortgage, and they did not contract for anything in addition to this when they consented to the substitution of M. Sweney as a party to the lease. We think it clear that they did not by that transaction acquRe the right which a purchaser of the property would have acquii’ed by a purchase thereof under like circumstances. 6. EXECUTION: je.vy on chatteis: notice of moi-wageiFlond?Umonoy judgment on. III. It is contended by defendants that, as they are still in possession of the property, plaintiffs have tjie right, if the mortgages are valid liens upon it. to seize it ° ° A thereon, and sell it in satisfaction of their claims, ; ’ an<^ that ^01’ this reaso:n they are not entitled to money judgments for the value of their interests ^erejn> e thinly however, that defendants are not in a position to urge this objection. They directed the seizure of the property on the attachments, and, after plaintiffs gave the sheriff notice that they asserted a claim to it, they gave the indemnifying bond on which the actions are brought, and directed him to sell it in satisfaction of their judgment. They have denied plaintiffs’ right to it at every stage of the proceedings, and, although the causes were tried as equitable actions, they have made no offer to return it to plaintiffs in case their right to it should be ultimately established. We think they must be treated as having converted [740] it entirely to their own use, and that they are liable to plaintiffs for the value of their interest in it. . 7. practice m court“evítánCIndings" oí court. IY. As to the action last instituted by plaintiff Julia Noble. This action was tried in the circuit court as an ordinary action, the appeal brings up q uestions of J x L a r i ^act °hly ^01’ our determination, and we deem it sufficient to say that there was evidence tending, £0 prove evejy fact essential to plaintiff’s right to recover on the claim asserted in the action, and, under the well settled rule governing in such cases, we cannot disturb the finding of the circuit court; 8. INTEREST : rate oí: on judgment for conversion c' mortgaged mortgaged01 chattels. Y. The decree in each case provides that the judgment . shall bear ten per cent interest, that being the rate of interest which the several notes owned by plaintiffs bear. .. A maionty of the court think that this provision J 1 *s right. The holding is put upon the ground that, as the condition of the indemnifying bond is that defendants will indemnify the claimants of the property for the damages which they will sustain in consequence of the seizure ^nd sale of the property .on their claim, the measure of their liability is the value of the interest of the claimant in the property at the time the damages are paid; which, as the value of the property exceeds the amount of the debts secured by plaintiffs’ mortgages, will be the amount of said debts at the time of payment. The writer of this opinion does not concur in this view. In my opinion the measure of plaintiffs’ recovery is the value of their interest in the property at the time the property was converted by defendants. The rights which were determined by the judgments are that plaintiffs had liens on the property superior to that of defendants, and that they were entitled to recover for the damages which they had sustained in consequence of the taking and conversion of the property. Their recovery was not on the notes, but for the wrongful conversion of the property, and, under the provision of section 2078' of the Code, their judgments should bear but six per cent interest. I think the [741] judgments should be modified in this respect, but the majority think otherwise, and they will accordingly he Aeeirmed.