John V. Farwell & Co. v. Stick, Kemp & Co.

Granger, C. J. [89] I. It is important to first determine the ownership of the goods attached. The facts in support of the claim of M. A. and L. J. Stick to the ownership are substantially as follows: We have said that M. A. Stick is the wife of Daniel Stick, and that L. J. Stick is the wife of D. L. Stick. The firm of Grove & Co. consisted of M. A. and L. J. Stick and D. P. Grove. The terms' of the copartnership were that [90] M. A. and L. J. Stick should furnish the capital and he the entire owners- of the property of the firm, and that Grove should be the salesman and do- the work for the firm, and receive a stated compensation and one-tenth of the profits. The purchase of the good© was made by M. A. and L. J. Stick, M. A. Stick held the note of Stick, Kemp & Co-, for five thousand dollars, and L. J. Stick held a note of the same firm for three thousand five hundred dollars. The payment for the goods was made by an indorsement on the note held by M. A. Stick for three thousand eight hundred and fifty dollar© and thirty-five cents-, and on that held by L. J. Stick for two thousand five hundred dollars. These indorsements- were made on the fifteenth day of October, 1891. We do not think that the evidence sustains-the claim that the sale of the goods was fraudulent. It is true that the transaction is largely a family affair, and, while that fact should be given due consideration in determining a question of fraud, care should be taken to1 avoid results founded only upon- facts showing opportunities for fraudulent combinations with, perhaps, some methods of dealing not in strict accord with general business rules. As these women are the wives- of members of the firm whose note© they held, the question of good faith in the transaction of taking the notes properly leads to an inquiry as- to the consideration for the notes. Briefly stated, the claims- are these: That M. A. Stick received from her father’s- estate, some twenty-two years ago,, one thousand dollars; that she received from her mother’s estate three hundred dollars; that one nephew boarded with her some six years, for which she received one thousand two hundred and fifty dollars-, and another nephew for five1 years, from whom she received one thousand dollars. The amounts were invested as loans, so that the interest made up the amount for which the note of the firm was given. It appears that [91] in April, 1889, she loaned to her husband four thousand dollars to buy land in Dakota, and took his note therefor. This note was to be paid when the land was sold. It was this1 note, with accumulated interest, that made up the five thousand dollar note. As to the three thousand five hundred dollar note of L. J. Stick, it appears in evidence that she had no money in her own right, but that her father-in-law, Daniel Stick, gave to her and her husband a homestead in Yinton, Iowa, which was sold, and a homestead bought in Huron, Dak., which was sold, and another purchased; so that, in the spring of 1891, they had a homestead valued at three thousand one hundred dollars. In the spring of 1891 the firm of Stick, Kemp- & Co. made a purchase in Indiana of a stock of goods and millinery, of the value of some twenty-two thousand dollars, and these goods, with others, were put into the store at Sioux City. The goods purchased in Indiana were' paid for in real estate, except a small amount, and of the real estate so applied was the land owned by Daniel Stick, purchased, in part a,t least, with the money received from his wife, and also the homestead of D. L. and L. J. Stick. . At this time it was agreed that, for the five thousand dollars due M. A. Stick from her husband, the firm -of Stick, Kemp & Co. should give her its note, which it did. The note of L. J. Stick was given as follows: Her husband desiring to apply the homestead in part payment for the goods purchased in Indiana, it wasi agreed that, if L. J. Stick would consent to its sale, she should have three thousand five hundred dollars of the consideration, and a note of Stick, Kemp & Co. therefor, and the note was in that way given. These facts, are shown by the testimony of the women and their husbands, and, in part, by other evidence. There are facts and circumstances to both confirm and contradict these statements, but, on the whole, we regard the claims as fairly established; or, as we may [92] say with greater certainty, the evidence fails to show that the taking of the notes, or either of them, was fraudulent. The proposition is not to be seriously questioned that, as to' the homestead, the husband had the right to so disipóse of the proceeds, as it does not appear that he was then insolvent, or that any existing creditor was prejudiced by it. Our conclusion is that the plaintiff has no Lien on the property attached. [92] II. The district court established the lien of the State Bank Building Company on the goods-, and the judgment in that respect is questioned on this appeal. That thei State Bank Building Company had a lien on these goods1 up to. the time of the sale of the stock on which the mortgages were executed, which was. November 17, 1891, there is no dispute, for they at one time constituted a part of the stock in the store for which rent is. due. But the claim is that on the day of the sale, and before it took place, the building company, through its president, waived its lien, and the facts on which the claim is based are' as follows: When the people had assembled for the sale, James F. Toy, who was president of the company, publicly stated to' those present that the goods about to be sold, and then in the building, would be sold free of any claim, of the company for rent, and that, the proceeds of the sale could be applied in payment of the mortgages'; and it is not questioned but that, as to the goods in the building, the lien was waived. M. A. and L. J. Stick say that the stock of goods at Sioux City, on which the building company had a lien, and the one at Ames, on which it also' had a lien, constitute two. funds, or a double fund, on which it held security for rent; and that because of the interest of M. A. and L. J. Stick in the goods at Ames, being the owner’s, subject to the lien for rent, it was the company’s duty to first exhaust the stock at Sioux City, and in that way preserve the interests of both parties. Such a rule [93] has universal support on authority, and’ is founded in principles of natural justice. We are then to inquire what facts there are to justify a waiver of the lien by the building company on the stock at Sioux City in favor of the mortgagees, and then resort for its rent to the» stock at Ames. When the women purchased the goods, the only incumbrance on any of the stock was; the lien of the building company for rent, of which they took notice. Later the mortgages were given on the stock at Sioux City, hut not on that at Ames. With this situation, the equities of the parties were as follows: First, that of the building company, with a lien on both stocks or funds; second, that of the women, being owners of the stock at Ames, subject to the lien of the building company, after exhausting the stock at Sioux City; and, third, that of the mortgagees', being simply a, lien on the goods at Sioux City junior to the lien of the building company. The course of procedure that would preserve such equities has the sanction of the law. Any other has not. It will he observed that the mortgagees have no right whatever to payment from the proceeds1 of the Ames stock of goods. No' claim would he made for such a direct application. It remains to he seen if it can he done indirectly. By the course of procedure adopted when the goods at Sioux City were sold, because of the waiver by the building companj, the mortgagees were permitted, to profit to the extent of the building company’s lien on that fund, and, as a consequence, the fund arising from the stock at Ames must pay the rent; and the result to that the women must pay a part of the mortgage for which they were neither legally nor equitably liable. It appears that Mr. Toy was president of the Farmers-’ Loan & Trust Company, as- well as of the building company, and the loan company was a mortgagee that, by the course adopted, received payment in full, and then, by a resort [94] to the Ames, fund for the building company, both companies represented by him were paid. The inference is strong, if not conclusive, that the waiver was for that pnrpose. But, however that may be, the loan company stood, asi to its legal rights, as did the other mortgagees. The mortgagees had not a semblance ol a right to- the Ames-fund for their debts; nor had Mr. Toy, -as president of the building company, any right to- waive its lien on the Sioux City fund or stock, and then resort to the Ames fund, when, without the waiver, he would not be permitted to' do so. This, to us, is not a doubtful question. The case, in this particular, has been treated in argument as governed by the rules for marshaling assets-, and, so treated, the result must be the same. The contention made by the building company against the rule as urged is that, as to- the building company, the cause should be treated as one at law, and not in equity. The district court transferred the issues to the equity side of the -docket for trial, against the objections of the building company; and it is urged that the issues present only questions triable in- a law action. The issues present no contention to the right of the building company to its judgment for rent. The issues for trial were as to priorities of liens between the 'plaintiffs' and the two interveners, and the issues in this respect called for relief in equity. The prayer to the intervention petition of the building company is -as follows-: “Wherefore intervener asks judgment establishing its lien against the said property, and making the same the first and paramount lien thereon; that the proceeds- of the said property sold under the said writ of attachment herein should be first applied to the payment of the amount now due- the intervener, with interest, attorney’s fees, and costs; and that, of the remainder thereof, an amount sufficient to- pay the rent yet to become due under the said lease be held by the court [95] to await the maturity of the said amounts, and for such other orders as will fully protect the rights of intervener.” The prayer to the petition of M. A. and' L. J. Stick is for equitable relief against the building company, and, to our minds, there is no doubt that the action of the court in transferring the cause for trial was' right. Our conclusions lead to the following results: That the interveners M. A. and L. J. Stick take the fund arising from the stock of goods at Ames, discharged of any lien; that the costs in both courts be paid by plaintiff and intervener the State Bank Building Company; each one-half. On the plaintiff’s appeal, the judgment is affirmed, except that no lien i's to be established in its favor. On appeal of M. A. and L. J. Stick, the judgment is reversed. Supreme Court of Iowa. October 11, 1895. Supplemental opinion.