Opinion
No. 5490.
January 14, 1929. Rehearing Denied March 5, 1929.
Appeal from the District Court of the United States for the Eastern Division of the District of Idaho; Charles C. Cavanah, Judge.
Suit by Strauss Co., Inc., against Roy Zaring and others, in which defendants filed a cross-bill. From an adverse decree, defendants appeal. Reversed and remanded, with instructions.
On December 31, 1924, the appellant Roy Zaring was indebted to the appellee in the sum of $3,867.83, with interest for four years thereon. On that date he and his wife executed to Evans Mercantile Company a mortgage upon all crops grown on their lands during the years of 1925 and 1926, together with all their live stock, implements, and machinery, to secure the payment of their promissory notes, one for $3,133.87, and one for $4,000, with interest. On April 5, 1926, Roy Zaring and his wife, in consideration of $1, gave to Hector Zaring, their son, a bill of sale of the crops then growing on 2,700 acres of said land, together with 43 horses and mules, 7 head of cattle, 150 pigs, and a large amount of farm machinery, and on September 18, 1926, in consideration of $1, they executed to Hector a bill of sale of a Ford coupé. Both these bills of sale were acknowledged before Evans, the secretary of Evans Mercantile Company, appellant herein, and were by him filed for record. On November 19, 1926, Roy Zaring and his wife and Hector gave the Evans Mercantile Company a mortgage on all crops grown or harvested during the year 1927 and 1928 on 2,700 acres of land which mortgage was on the date thereof filed for record at the request of Evans. On January 17, 1927, the appellee brought an action against Roy Zaring, and caused a writ of attachment to issue, whereby all interest of Roy Zaring in the property described in the mortgage of December 31, 1924, and the crops described in the mortgage of 1926, were levied upon. On January 26, 1927, the Evans Mercantile Company began a statutory foreclosure of its mortgage of November 19, 1926, and all the mortgaged property was advertised to be sold on February 2 and February 3. At the sale the Evans Mercantile Company was the only purchaser and bought in all the property. Immediately thereafter the Mercantile Company for a consideration of $1 gave to Hector Zaring a bill of sale of all the property so purchased, and took back from him a mortgage on the same to secure a note to it of Roy Zaring and his wife for $7,515.70. On March 14, 1927, the appellee recovered a judgment in the attachment suit above mentioned for the sum of $7,128.52, and, upon execution on the judgment, all the property described in the mortgage and the crops of the year 1927 were sold to the appellee for $2,000.
The appellee brought a suit in the court below alleging that the appellants were concealing, commingling, and disposing of the crop of 1927, which the appellee alleged to have been in excess of 15,000 bushels of wheat and 300 tons of alfalfa hay, amounting in value to $15,000; that the appellee, by virtue of its sale upon execution and purchase thereunder, was the owner of said property, and entitled to the possession thereon; that Hector Zaring claimed to be the owner of all thereof, and that the Evans Mercantile Company and J. Paul Evans claimed an interest therein, but that said claims rest entirely upon fraudulent acts; and that said last-named appellants, unless restrained by the injunction of the court pending the suit, would dispose of said grain and conceal the identity thereof. The appellants answered, denying that more than 12,000 bushels of grain were grown in 1927, and later in an amended answer alleged the amount to be but 9,000 bushels, and they filed a cross-bill asking equitable relief and the foreclosure of the mortgages of December 31, 1924, and November 19, 1926. Upon the issues and the evidence, the court below found that the purpose of the attempted transfers and foreclosures by the appellants was to wipe out the claim and lien of the appellee against Roy Zaring's property, and at the same time preserve for the latter the use and benefit thereof; that the transaction had been done in fraud of the creditors of Roy Zaring; that the execution of the mortgage of November 19, 1926, covering the crops for 1927, and all steps of the proceeding thereafter taken by the appellant in the attempt to foreclose the mortgage and apply the grain produced on the premises for 1927 are void as to the appellee; and that the attachment and sale thereof upon the execution issued upon the appellee's judgment were prior to any claim of the appellants, and should be first satisfied, and the decree ordered that the clerk of the court pay to the appellee $984.99, the proceeds of the sale of certain wheat sold under stipulation and deposited with the clerk; that the appellants pay to the appellee $5,360 and $127 costs, less the amount paid to the appellee by the clerk from the fund above mentioned, or that the appellants serve upon the appellee and file in court an account identifying and showing the location of said 9,000 bushels of wheat, 50 acres of barley, and 250 tons of hay, and produce and deliver the same to the marshal; that the marshal sell the same, or so much thereof as may be necessary to pay to the appellee $5,360 and costs of suit.
F.M. Bistline and Jones, Pomeroy Jones, all of Pocatello, Idaho, for appellants.
Geo. D. McClintock, of Minneapolis, Minn., H.B. Thompson, of Pocatello, Idaho, and C. Coolidge Kreis, of San Francisco, Cal., for appellee.
Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.
It is assigned as error that the court below adjudged the chattel mortgage of December 31, 1924, to be void as to the appellee, and our attention is directed to the fact that in the bill of complaint no fraud is charged as to that mortgage and no relief is sought against the same. The decree, it is true, declares that the mortgage of December 31, 1924, is void as to the appellee, but the decree in that respect has no relation to or bearing upon the actual relief that was accorded to the appellee, and it is to be disregarded on the appeal, for, while the issues brought in question the proper construction of that mortgage to determine what property was included in it, the whole gist of the controversy before the court concerned the 9,000 bushels of wheat and the hay and barley crop produced in 1927, and a contested question was whether or not the mortgage of 1924 covered that crop. The appellants asserted that it did, basing their contention on the provision: "All crops of every nature and description which have been or may be hereafter sown, grown, planted, cultivated or harvested during the year 1925 and 1926, and until said debt is fully paid." That provision, as we construe it, placed a lien upon one crop only, the annual crop of the fall of 1925 and the winter of 1926. The appellants insist that the words "until said debt is fully paid" extend the lien to all crops raised during succeeding years. We think that the court below properly held otherwise. In so ruling, reliance was placed on McConnell v. Langdon, 3 Idaho 157, 28 P. 403, a case in which the description in the mortgage was "the crop of wheat and flax now being standing and growing or that is to be sown and grown upon that certain piece of land, etc." The Supreme Court of Idaho held the mortgage good as to the crop which was growing at the time of its execution, but that as to succeeding crops it was too indefinite and uncertain, and that it was void as to creditors. The appellants cite 11 C.J. 469, § 97, where it is said: "A mortgage is not rendered indefinite by the fact that it covers successive crops until paid." But the mortgage here in question does not cover, nor does it attempt to cover, "successive crops until paid." It covers only the crop of a specified year, and the words "until paid" mean no more than that the lien on that crop subsists until the payment of the debt. Such was the meaning given to it by the mortgagee, for in the affidavit of Evans, made on January 26, 1927, in the proceeding of the Evans Mercantile Company to foreclose the mortgage of 1924, he made oath that it covered crops grown, cultivated, or harvested during the year 1925 and 1926, and in the notice of sale the crop of 1926 and 1927 was specifically referred to as described not in the mortgage of 1924, but in the mortgage of November 19, 1926, and no effort was made to sell it, nor was it sold under the 1924 mortgage.
It is contended that the mortgage of November 19, 1926, was erroneously held void as to the appellee, for the reason that the bill of complaint failed to state facts sufficient to justify that conclusion. The complaint alleged that the appellee had been pressing Roy Zaring to pay or secure his debt, and that the latter and his wife and Hector, their son, without consideration and without transfer of possession of the property therein described, executed the said mortgage; that the mortgage was given by the mortgagors, and was accepted by the mortgagee, the Evans Mercantile Company, for the sole purpose of hindering and delaying creditors of Roy Zaring, and particularly the appellee, and that the same was accepted by the mortgagee with full knowledge of such fraudulent intent; that the execution of said mortgage and the execution of the bill of sale from Roy Zaring and wife to Hector and the pretended foreclosure of that mortgage and the subsequent retransfer of all said property to Hector were each and all part and parcel of the consummation of the conspiracy to hinder, delay, and defraud creditors, and were all fraudulent. We think that the allegations of fraud and the proof to sustain the same were insufficient on which to base a decree holding that the mortgage of November 19, 1926, was fraudulent as to the appellee. It was not alleged or shown that there was not a valid subsisting consideration for that mortgage, or that the full amount which it was given to secure was not justly due and owing from Roy Zaring to the Evans Mercantile Company, or that said debt was ever paid, or that the mortgage lien was discharged. The fact, as found by the trial court, that the foreclosure of that mortgage was fraudulent and void, had not the effect to discharge the lien or to render the appellee's attachment on the mortgaged property prior and superior thereto. The Zarings had the right to prefer any creditor, and, although their intention in the various transactions recited in the bill may have been to defraud the appellee and to place the property of the Zarings beyond its reach, the fact remains that no ground is shown for the conclusion that the appellee's rights are superior to those of the Evans Mercantile Company. If the mortgage of that company has not been legally foreclosed, the company still has the right of foreclosure, and, so far as the facts alleged and the proofs adduced are concerned, it has the prior right to subject the crops of 1927 to the payment of its lien. When relief is sought in equity on the ground of fraud, a case for relief must be fairly made by the bill and answer, and the relief accorded must be such as follows legitimately from the pleadings and proof in conformity with the case alleged (Voorhees v. Bonesteel, 16 Wall. 16, 21 L. Ed. 268), and general averments of fraud are wholly inadequate and insufficient (Ambler v. Choteau, 107 U.S. 586, 591, 1 S. Ct. 556 [27 L. Ed. 322]). This does not mean that all the details of the fraud shall be set forth with particularity. It is enough if the allegation is explicit and distinctly made and the method of its accomplishment is pointed out (De Louis v. Meek, 2 G. Greene (Iowa) 55, 50 Am. Dec. 491), and, where the law presumes fraud because it is the necessary consequence of alleged facts, they need not be characterized as fraudulent or otherwise (Warren v. Union Bank of Rochester, 157 N.Y. 259, 51 N.E. 1036, 43 L.R.A. 256, 68 Am. St. Rep. 777).
As against this conclusion, it is not sufficient to show that the bill of sale to Hector Zaring of April 5, 1926, was given in consideration of $1, and that Roy Zaring told the attorney for the appellee that its purpose was to place the property beyond the reach of a lawyer who was after it, and that Roy Zaring denied to the appellee that he had given any security to the Evans Mercantile Company, and that the foreclosure of that mortgage was fraudulent and void, and that thereafter the property was transferred back to Hector, and that the notes which it was given to secure were retained, and no note or obligation was taken from Hector, the ostensible purchaser of the property, and that there was concealment of the grain by hauling it to three warehouses and storing it in three different names and mixing it with the wheat of Evans, and that Evans was active in taking the acknowledgments of both bills of sale and filing same for record, and that Roy Zaring and his son Hector executed instruments in which they convenanted that they were the absolute and exclusive owners of the crop, whereas the Evans Mercantile Company, by its bill of sale of March 15, 1927, warranted the title to it to Roy Zaring, and that the appellants on the trial joined in calling E.E. Zaring, Roy's brother, to testify that he, and not Roy, was the owner of 547 sacks of grain which Hector Zaring had delivered to Schiller, and that they failed to explain why neither Roy Zaring nor Hector, each claiming to be the sole and absolute owner of the crop, made no objection to its being sold under foreclosure by Evans.
The decree is reversed, and the cause is remanded to the court below, with instructions to dismiss the complaint with prejudice.