Sylvester v. Ammons

101 N.W. 782, 126 Iowa 140

• Court: Supreme Court of Iowa
• Decided: December 16, 1904
• Status: Published

Opinion

Ladd, J.—

On the 24th day of February, 1902, D. W. Townsend, as agent of the plaintiff, entered into a contract by virtue of which he conveyed to the defendant, J. E. Ammons, a hotel property at Independence, Iowa, and some land in Missouri, estimated to be worth $1,700, in consideration of which the latter delivered to said agent a certain stock of merchandise at Eldora, this State. Under the agreement the goods were to be inventoried “ at cost price as shown upon the goods, except such goods as be damaged, and they to be taken at their actual worth.” Ammons acted for himself in making the inventory, and Townsend was represented by one Smith, who had acted as Ammons’ agent in effecting the deal. The invoice amounted to $11,075, and Townsend, acting for the plaintiff, executed a note to Ammons for the sum of $3,375, the difference between. estimated values of the properties exchanged, and a chattel mortgage on the stock of goods to secure its payment. This occurred on the 26th day of February, and about the middle of March Am-mons seized the entire stock under the mortgage, and proceeded to foreclose the same. Jn this action, begun March 20th, the goods were replevined, the plaintiff alleging (1) that the terms of the mortgage were not such as to authorize the mortgagee to take possession whenever he might choose, and, (2) by way of an amendment to the petition, that the mortgage was without consideration, for that the cost marks, of the goods had been fraudulently raised by Ammons, and invoice “ padded ” by including goods not in the stock.

1. Chattel mortgages inconsistent provisions; right to foreclose. ' I. The plaintiff had paid the proceeds of sales in strict conformity with the terms of the note, and the only excuse urged for seizing the property is a condition of the mort-gRge authorizing the mortgagee so to do whenever he should choose. The court instructed the jury that the mortgagee had that right, and this view is challenged by plaintiff’s appeal. An examination of all the instruments has convinced us that such was not the intention of the parties. The mortgage provides that. “ the right to move said goods to some other place in Towa is reserved, subject to giving the mortgagee notice in writing of said place and time of removal; mortgagee also reserves the right to handle said goods in a regular legitimate mercantile way”; that the amount secured should be,paid “ according to tbe terms of on© promissory note ”; and also that, “ in case of default made in„the payment of the above-mentioned promissory note, or in case of my attempting to dispose of or remove said goods only as stipulated in note of the1 aforesaid goods and chattels, or any part thereof,' or. whenever the said mortgagee shall choose so to do, then and in that case it shall be lawful for the said mortgagee or his assigns by himself or agent to take immediate possession of said goods.” Other portions of the mortgage are similar to those usually found in such instruments. Tire portion quoted is in harmony with the language of the note in connection with which and the contract the mortgage should be construed:

For value received I promise to pay J. E. Ammons or order thirty-three hundred and seventy-five dollars as soon as the money can be obtained from the sale of a certain stock of clothing for which this note is given as a part of the purchase money. All money received is to be turned over as fast as received less necessary and legitimate expenses, which are not however to exceed the sum of one hundred dollars per month. The right to remove these goods to some other place in Iowa is reserved and also the right to handle these goods in a regular mercantile way which is agreed to.

Thus the money to pay the note was to be obtained from the sale of the goods, and to accomplish this the “ right to handle the goods in a regular mercantile way ” was reserved to the mortgagor both in the note and mortgage. That right was not parted with. That was the right Townsend was exercising when the defendant Ammons seized the stock. It was essential, in order to enable him, as agent of the plaintiff, to reduce the goods to money out of which, by the terms of both instruments, the indebtedness was to be paid. Only by the continued possession of the property could sales “ in the regular mercantile way ” be effected, and to guard against any interferences therewith the reservation was incorporated into the mortgage. That the seizure of the goods by Am-mons was in derogation of this reserved right, in that it de-privecl the mortgagor of the opportunity a to handle said goods in regular legitimate mercantile way,” seems too plain for argument. Certainly the plaintiff could not proceed with the sale of the stock as merchants usually do while Ammons was in possession and proceeding to foreclose. ’If so, the printed clause permitting the mortgagee to take possession whenever he might choose was inconsistent with the written reservation of the right to sell in tire regular mercantile way; and the latter, for that it was in writing, must prevail. Section 4616, Code.' Robinson v. Gray, 90 Iowa, 699, and like cases, are not in point.

8. Replevin by mortgagor: pleadings. II. An amendment to the petition was filed, alleging that the cost marks on the goods were fraudulently raised so as to increase the apparent cost from thirty to one hundred per cent., and the invoice padded by including goods not in the stock, and that the mortgage was without consideration for that the stock, if invoiced at cost price, did not exceed the estimated value of the property exchanged for it. The defendant moved to strike this amendment because an attempt to attach to an action in replevin an issue not triable therein. There was no error in overruling the motion. The issue in replevin is always which of the parties was entitled to possession at the commencement of the action. Hilman v. Brigham, 117 Iowa, 70. If there was entire want of consideration in the mortgage, the defendants had no right to enforce it, and the ground asserted was a proper one on which to base plaintiff’s claim to possession.

3. Replevin :counterclaim. III. The defendants then added a counterclaim to their answer, averring that Townsend had fraudulently misrepresented the value of the real estate exchanged for the stock of goods, and thereby induced Ammons a]low a price therefor exceeding its value more than the face of the note and mortgage. A demurrer to this was rightly sustained for the reason that the filing of a counterclaim in a replevin suit is prohibited by statute. Thereupon the same matter was pleaded in an amendment by way of defense on the theory that, even though the allegation -of the amendment to the petition were true, the amount was offset by the difference between the actual and represented values of the real .estate. A motion to strike this was sustained. It will be recalled that the mortgage was executed to secure the excess of the invoice over and above the estimated value of the real estate. The contention of plaintiff is that there was no such excess. If so, then the mortgage was without consideration, regardless of whether the valuation of the real estate was procured by fraud. Fixing that value was independent of the making of the invoice. Any fraud therein might well be urged as a ground for avoiding the original contract of exchange,- brit furnished no answer' to the charge that in executing that contract a mortgage was obtained without consideration, through deceit. In other words, it is no answer to the charge of fraud in one transaction to allege that plaintiff hád indulged in similar deceit in another. See Whitworth v. Thomas, 83 Ala. 308 (3 South. Rep. 781, 3 Am. St. Rep. 725). Irrespective of the nam'e by which the amendment was disguised, it, in effect, pleaded a counterclaim, and the ruling of the court in striking it was correct.

4. Fraud: cost price of goods; evidence. IY. The inventory was taken “ at the cost price as shown upon the goods, except such goods as were damaged, and these to be taken at their actual worth.” The fraud charged was that Ammons “ padded ” the" in- . . t voice and raised the cost marks on the goods. • . . ' ° To establish this, it was shown that after the stock was replevined Townsend caused another invoice to be taken by O. E. Petty and L. G. Ward, from which it appeared from the highest marks on the goods that the stock amounted to $9,380.04. Up to that time Townsend had received on sales $516.14 and Ammons $93.55. Petty had enjoyed an experience of fifteen years in the mercantile business at Eldora, and was asked whether the mark on the goods was the original cost mark. This was objected to on the ground that the witness had not shown himself competent. We think that his experience as a merchant and his examination of the tickets attached to the articles in the course of making the inventory qualified him to express an opinion as to the character of the marks on the several articles. Ordinarily, these are letters or hieroglyphics, which by the use of a key advise the merchant of the cost at wholesale without-disclosing it to his patrons. Of course, Petty could not have-known what the goods in fact cost, but his experience in handling similar goods enabled him to say with some degree of certainty whether tire prices thereon so nearly approximated the usual wholesale or retail price as to indicate which was intended. This was illustrated by a subsequent answer that, “ as a rule, the marks were what the goods usually retailed at.”

Complaint is made of rulings by which this witness was allowed to state that the stock was old. This was admissible as a circumstance tending to show that the marks on the-goods, which were shown to have been fresh, were not the original cost marks.

5. Same Both Petty and Ward were allowed to estimate the difference between the actual cost at wholesale of the entire-stock as inventoried by them and the amount'of their invoice. Appellants insist that neither of them was-shown to have sufficient knowledge to enable him to answer. The record is such as to throw some doubt on the value of their opinions as expressed, but not such as to have required the court to reject them altogetheri They were men of long experience in the business, and had thoroughly familiarized themselves with the stock by taking the invoice. In doing so they had observed the marks with a view of ascertaining their meaning. True,' they had not estimated each article separately, nor was this essential in order to qualify them to form a judgment as to the entire stock. If. from the examination of the invoice in connection with knowledge obtained by tbe inspection of tbe goods, they were able to form some opinion of tbe wholesale cost of tbe stock, it was sufficient. Phelps v. Sampson, 113 Iowa, 145. Tbe rule that any one familiar with tbe values in question may testify is uniformly construed liberally. See Wigmore on Evidence, section 716. Petty at first said be could not make an estimate; that it would be a mere guess; but afterwards concluded tbat by examining tbe invoice be could form a judgment “in a way.” All intended by tbis was that be could not be accurate in bis judgment of what tbe cost of the goods at wholesale might have been. There is no standard of value at wholesale any more than at retail, and, of necessity, it is fixed in each case by a bargain between the seller and purchaser. So tbat any opinion of tbe cost could not be otherwise than Uncertain. It was tbe best evidence available, however, and was competent for tbe purposes introduced. See Graves v. Ins. Co., 82 Iowa, 637; Enos v. Ins. Co., 4 S. D. 639 (57 N. W. 919, 46 Am. St. Rep. 796) ; Smith v. Jensen, 13 Colo. 213 (22 Pac. 434).

6. Same. Ammons testified tbat the stock was originally bought by MeCalmet, who transferred it to Allen & Pound, from whom he obtained it; tbat be put tbe tags on tbe goods from which tbe inventory was taken, and that the . J ’■ cost as indicated thereon was taken from tbe original stock ticket, which was removed because worn out; that tbe cost marks were explained to him by tbe parties from whom be purchased, and he was then asked 'for the explanation given. What was intended to be elicited was not disclosed, and, in the absence o’f anything indicating otherwise, the objection that the question called for hearsay evidence was well taken.

The witness was then asked his belief as to whether the price he finally put on the new tickets which he attached to the goods would equal the wholesale price. Manifestly, this called for a comparison of values, rather than for the fact as to whether he had acted in the belief that the marks bore tbe price at wholesale, and was not admissible as bearing on scienter.

7. rehlevhi: instructions. V. In tbe sixth paragraph of tbe charge tbe court inadvertently remarked that plaintiff claimed a farther credit on the’ note by reason of the fraud ’ alleged, but in others the issues were clearly stated, and the jury told tha£ £pe ciajm 0f plaintiff was that the mortgage was without consideration. That issue only was submitted, and the jury could not have been misled by this lapse. Again, in the ninth paragraph the jury was told, if either Smith or Ammons changed the tags “ so as to make the same show a greater price than the actual cost of the same,” this, with other matters, might form the basis of a finding against defendants. This was correct, for Smith, at the time of remarking the goods, was in the employ of Ammons, and assisting him therein; and the circumstances were such as to-leave it open for the jury to say, notwithstanding their denial, that changes as alleged were effected. The eleventh instruction- is criticised for that, as is said, there was no evidence that the inventory was padded. The invoice of Petty and Ward, in connection with the stipulation of the amount of sales, supplied such evidence. ■ Exceptions to other instructions given are equally void of merit. Those refused, in so far as containing correct statements of law, were included in the ones given.

„ . 8. Sales: cost price. The third instruction refused purported to eonstrue the meaning of the clause, “ at the cost price as shown upon the goods,” as meaning the price on the goods, regardless of whether these represented the actual cost or . r “ 0ost pnce ” js a relative term, necessarily depending for its meaning on the situation of the parties and the circumstances under which used. Thus the cost price to the importer is one thing, to the jobber another, to a retailer another, and to the purchaser from the retailer still another. Herst v. De Comeau, 1 Sweeny (N. Y.) 590. It is said to be what is actually paid or promised to be paid for an article. McCoy v. Hastings & Co., 92 Iowa, 585. As applied to a retail stock of goods, it usually bas reference to the cost at wholesale, and that was the sense in which the term m.ust have been employed in this contract. If the marks on the goods gave the retail price, or had been so tampered with as not to indicate the cost at wholesale, then the. cost price was not “ shown on the goods.” For this reason the instruction was properly refused. Other rulings of the court challenged by appellant do not require separate consideration.

The result of the reversal on plaintiff’s appeal and an affirmance on defendant’s appeal is that the judgment is affirmed.