Hibbard, Spencer, Bartlett & Co. v. Zenor

Reed, J. — The mortgage under which plaintiffs claim was given to secure a promissory note for seventy-five hundred dollars. The evidence tended to prove that Hall & Co. were indebted to plaintiffs in that amount, and that they, on the twenty-eighth of December, 1886, executed their promissory note for the amount, and to secure the same gave a chattel mortgage on their stock of goods and merchandise. They were anxious, however, to continue their business; and, being apprehensive that other creditors would close them up by attachment, if the fact of its execution should become known to them, they requested plaintiffs to withhold it from record, and promised that they would execute another mortgage on the same property, and place the same on record at any time in the future when there should appear to be danger that plaintiffs might lose the security. Plaintiffs assented to that arrangement, and accordingly withheld the mortgage from record. On the seventh of January following, Hall & Co. became satisfied that they could not continue the business, and on that day they executed the mortgage now sued on, and delivered it to the recorder to be recorded at 6:30 p. m. The recorder endorsed on the back of the instrument his certificate that it was filed for record at that hour, but he did not enter it in the record index until 8:30 the next morning. At about eight o’clock, on the evening of the seventh, defendant received a writ of attachment issued in the suit of the Baker Wire Co. v. Hall & Co. He immediately went to the store for the purpose of making a levy, but, finding it closed, he left a watchman at the building, and went to the home of John C. Hall, senior member of the firm, [474] and demanded of him the key to the store. Hall informed him that a mortgage had been placed on the stock, and refused to surrender the key. Subsequently, another writ, issued in the suit of the McCormick Harvesting Machine Co. v. Hall & Co., was placed in his hands ; and at eleven o’clock on the same evening, he returned to the store, and effected an entrance through a window, and seized the goods. On the tenth of January, a landlord’s attachment, sued out by the owners of the building for rents accruing within one year, was placed in his hands, and he levied the same on the property. Each of these suits was prosecuted to a judgment, and special executions were ordered for the sale of the attached property. It was conceded that the landlords had the superior lien on the property. Plaintiffs intervened in that action, and tendered the amount of the judgment, and the court entered an order requiring the landlords to accept the tender, and subrogating plaintiffs to their rights under the judgment. The verdict determines that the interest of defendant in the property, which had been delivered to plaintiffs under the order issued by the clerk, was the amount of the judgment recovered by the Baker Wire Company and the McCormick Harvesting Machine Company, and a nominal amount for that obtained by the landlords, and he elected to take a money judgment for. those amounts. 1. Chattel mortgage: record: where constructive notice begins. I. On the trial plaintiffs offered evidence to prove that it was a custom of the recorder, when instruments were delivered to him to be recorded near the close of business on one day, not to enter them in the index until the next morning; but the court excluded the evidence, and instructed the jury that defendant was not charged with constructive notice of the mortgage until the proper entries thereof were made in the index. These rulings are clearly right. The notice created by the record of an instrument is constructive. The implication or presumption that those dealing with reference to the property affected by the instrument have notice of [475] such, facts as are shown by the record is raised by the statute, and the whole subject is governed and limited by it. Under section 1925, Code, it is the duty of the recorder, when an instrument of the character of that in question is deposited with him to be recorded, to note thereon the day and hour of filing, and enter in the. entry-book or index the names of the mortgagor and mortgagee, the dates of the instrument and the filing, and the nature of the instrument; and the section also provides that from the time of such entry the instrument shall be deemed complete as to third persons. Under this provision there can be no question as to the time whón the record becomes notice to the world of the instrument. When the prescribed entries are made, any person desiring information with reference to the property, by an inspection of them, would learn of the existence of the mortgage, and he is charged with notice of its existence, whether he makes such examination or not. But until they are made, the record, which is the source to which he is bound to go lor information, is silent, and it is the only instrument by which he can be charged with the constructive notice. 2. Attachment: levy: when complete: placing guard at door. II. There is some conflict in the evidence as to whether Hall informed defendant, when the demand was made for the key, that plaintiffs were the parties to whom the mortgage had been given. It was undisputed, however, that he informed him that a mortgage on the stock had been executed. The district court instructed that if defendant was informed, before the levy was made, that plaintiffs held a mortgage, or if he was then informed of such facts as would have put a reasonable man upon an inquiry which would have led to the discovery that plaintiffs held-the mortgage, and the notice to surrender the property prescribed'by the statute had been served upon him before the suit was instituted, plaintiffs would be entitled to recover. The general verdict does not necessarily imply a finding in favor of defendant on either of these questions. Neither are they determined by the special findings. The general verdict may have [476] been based' upon a finding that the levy was complete before the information with reference to the mortgage was imparted to defendant. On that question the court gave the following instruction : “To constitute a good levy upon personal property, the officer must have such property within his dominion and control, and must, within a reasonable time, reduce the same to his actual possession. If you find that the defendant, having in his possession the writs in question, went to the store of Hall & Co. for the purpose of levying them upon the goods kept in said' store, and, on attempting to enter, found the building locked, and thereupon, in pursuance of his intention to make such levy, placed a guard on the premises to maintain and protect his possession and dominion over the property, while he himself went for a key with which to effect an entrance, and within a reasonable time returned and unlocked or broke open the building, and took actual possession oi‘ the goods, such acts would constitute a good and sufficient levy from the time he first went upon the premises with intent to make the same.” In our opinion this instruction cannot be sustained It holds, in effect, that if defendant, when he placed the guard on the premises, intended to maintain possession and dominion over the property, and thereafter, within a reasonable time, effected an entrance and actual seizure of the goods, the levy is to be regarded as complete from the time he first attempted to enter the building. But whether a levy was accomplished depends upon the effect of what was done, rather than upon the intent with which it was done. To constitute a levy, the sheriff must, if the property is capable of manual delivery, take actual possession of it. Code, sec. 2967. He must do that which would amount to a change of possession, or which would be equivalent to a claim of dominion, coupled with a power to exercise it. Crawford v. Newell, 23 Iowa, 453 ; Bickler v. Kendall, 66 Iowa, 703. Now, while the act of placing the guard on the premises may have amounted to a claim of dominion over the property, it did not necessarily carry with it the power to exercise that dominion; [477] for it did not necessarily have the effect to exclude the owners from the building, or prevent them from assuming the control and care of the property; and they were not necessarily deprived of possession by it. We do not hold that an actual seizure of the goods, or even an entry into the building, was essential to the accomplishment of the levy. But it was not accomplished until defendant had done some act with reference to the property sought to be seized which would, but for the writ, have amounted to a trespass ; and the levy would be valid and operative from that time only. And it would not operate by relation, as the instruction holds, from the time the prior steps were taken. 3. Appeal: practice: prejudice presumed from error. But it was contended that the general verdict is a finding for defendant on all of the issues in the case, and hence, as the answer pleaded a number of matters, either one of which constitutes a perfect defense to plaintiffs’ claim, we ought not to reverse because of the error in the instruction, which related to but one of them. Bufc this claim is not sound. The jury found specially against defendant on the issue that there was no delivery of the mortgage before the levy. They found specially that the mortgage was executed and delivered to the recorder for record in pursuance of previous agreement between the parties to it. That was a sufficient delivery, and, as between the parties, the mortgage was operative from that time. Everett v. Whitney, 55 Iowa, 146. So that the general verdict could not have been found under that issue. It must have been found under one or all of the others. Now, the evidence which tended to establish the allegation of fraud is exceedingly meager. Indeed, if it could be determined from the record that the verdict was found under that issue alone, it would be exceedingly doubtful whether it could be sustained. There was a fair conflict in the evidence on the question whether there was a valid service of the notice to return the property, and under it the jury might have found against defendant on that question. The verdict, then, may have been found [478] alone under the issue to which the instruction related. If so, the instruction was prejudicial. Now, while we will not reverse because of an erroneous ruling from which no prejudice could have resulted, the presumption, in the absence of anything in the record to the contrary, is that such ruling was prejudicial. And as it cannot be determined in the present case that the jury did not act under the instruction in question in finding their verdict, that presumption arises, and we must be governed by it. 4. Chattel mortgage: filing for record: notice: onstructions. III. In another instruction the court used the following language: “ The delivery of the instrument to the recorder, and the stamping of the same as filed by such recorder, is not a record which will impart constructive notice ; nor will any person be bound by the record, or notice of such instrument, until the proper description thereof is entered in the entry-book or index-book, as provided by law.” Appellants, while denying the general doctrine of the instruction, a question which we have already considered, took special exception to that portion of it which we have italicized. Counsel contended that the jury might well have understood from that language that even actual notice to defendant of the mortgage would not bind him, unless the proper entry had been made in the index before the notice was given. It is very apparent, however, from , the whole instruction, that the thought intended by the court is directly the opposite of that. Indeed, in another part of the instruction, the jury were told, in clear and express terms, that actual notice to defendant of the mortgage, before the levy, would bind him as effectually as the record would have done if it had then been made. While the particular language, then, standing alone, does not accurately or fully express the meaning of the court, it is very clear, we think, that the jury could not have been misled by it. [479] 5. Attachment: of goods under mortgage: validity: noticeby mortgages of his interest. [478] IV. It is contended that, as defendant did not pay or offer to pay the amount of the debt secured by the [479] mortgage, as provided by chapter 117, Laws m -, ° ’ , Í1 , . uij.ii Twenty-first General Assembly, the levy is void: and hence it was not necessary to serve the notice of ownership prescribed by chapter 4o, Laws 1884, before instituting the suit. Section 4 of ■ the act provides, however, that nothing contained in the act shall in any way affect the right of the creditor to contest for any reason the validity of the mortgage. The creditors were contesting the validity of the mortgage on the grounds (1) that it was fraudulent; (2) that it had never been delivered; and (8) that' they had no notice of it, which, if true, rendered it invalid as to them. The provisions of the act have no application when the mortgage is sought to be avoided on these grounds, and the requirement for notice is not affected by them. For the error pointed out the judgment will be Reversed.