First National Bank v. Flynn, 117 Iowa 493

First National Bank v. Flynn

117 Iowa 493

| Iowa | 1902

McOlain, J. —

1 The lease on which suit was brought was, executed in June, 1899., The action was instituted in February, 1900. The L. Humbert Company, defendant, on the 28th of March, 1900, filed an answer, stating that on that day a petition in bankruptcy had been filed against the said defendant in the United States district court, and praying that the courts make such order in the premises as should be necessary. The court proceeded, however, without regard to the pendency of the bankruptcy proceedings, to adjudge defendant to be in default, and rendered judgment against the defendant for the full amount of rent provided for in the lease, and established a lien in plaintiff’s favor on property of the defendant, which had been seized under a landlord’s writ of attachment at the beginning of the action, and ordered such property to be sold. Thereafter, on the 9th of May, Flynn, who had been on the 5th of May duly qualified as trustee in bankruptcy of the defendant firm, filed a motion to set aside the default, and presented therewith his answer, taking issue with plaintiff as to his right to a lien.

2 I. Plaintiff contends that as Flynn, trustee, did not file his motion and answer until the next term after the default was granted, he was not entitled to relief. Oode,. section 3790. But, in the first place, the statutory provisions as to setting aside a default are not applicable where no default whatever should have been granted (Hoitt v. Skinner, 99 Iowa, 360); and it is plain *496that, after defendant had set up the pendency of the bankruptcy proceedings, the lower court should not have proceeded to render a personal judgment, but should have determined the issue of fact whether such bankruptcy proceedings were pending in the federal court, and, on finding that such proceedings had been commenced, should have stayed further action, so far as the personal claim against the bankrupt was concerned, until the determination of the bankruptcy proceeding (Bankruptcy Act, section 11a). In the second place, the trustee’s application was not an ordinary motion to set aside a default, which could be made only by the defendant against whom the default was rendered, but was in reality an intervention in behalf of the creditors of the bankrupt’s estate to contest plaintiff’s claim and its right to a lien. That the state court had the inherent power to entertain such an application, so long as the case was pending before it, cannot be doubted. Heath v. Shaffer (D. C.) 93 Fed. Rep. 674. That the state court still had jurisdiction of the attached property, and the power to determine what disposition should be made of it, clearly appears; for, although the judgment on default was formally a final adjudication, it is shown that at the time such judgment was rendered, and also at the time when the trustee sought to assert his right to the property, the sheriff had not only not sold the attached property under special execution, but as a matter of fact had not yet made return to the court of the writ of 'attachment under which the property had been seized. We think there can be no question of the right of the trial court to set aside its erroneous judgment, and make further determination as to the proper disposition of the attached property. This the trial court did, and we think its action is correct.

*4973 4 *4985' *496II. Having set aside the default, the trial court received evidence tending to show that,, while the lease was executed six months from June 1, 1899, at the agreed rental of $122.30 per month, as a matter of fact the amount *497■of rent to be paid was determined by adding to the real rental value of the premises, which, under a previous lease, had been $50 a month, such additional sum as that the payment for the rent under the lease would satisfy not only the real rental value of the premises, but arrearages of rent to the amount of some $433; and the amount' to be paid per month under the lease for each month was simply one-sixth of a total amount agreed upon in satisfaction of indebtedness for arrearage rent and rent for the six months for which the lease was executed. It is contended for plaintiff that parole evidence showing these facts was not admissible, on the ground that it was thereby attempted to vary the terms of a written instrument. But it is certainly competent in any case to show what the real consideration for a contract is, even though the contract is in writing and recites the consideration; and on the issue-as to whether plaintiff was entitled to a lie.n under this lease for $738 it was proper to admit evidence to show that the rent agreed to be paid by the terms of the lease was not the real rental for the use of the premises, but included additional indebtedness,'for which plaintiff was attempting to secure a lien by means of the recitals of the lease. As between plaintiff and the trustee in bankruptcy, it was material only to determine for what amount plaintiff was entitled to a lien, and on that question the recitals of the lease could not be conclusive. It is well settled that a landlord cannot assert a lien for other indebtedness than that arising from the renting of the premises for the time covered by the lease, and that, if he attempts to do so in such way as to render it impracticable to determine what amount is due for the lease of the premises, he forfeits his entire lien. Smith v. Dayton, 94 Iowa, 102; Ladner v. Balsley, 103 Iowa, 674; In re Wolf (D. C.) 98 Fed. Rep. 74. That is exactly what the plaintiff did in this case. Having a claim against the L. Hum*498bert Company for $433, it attempted to lump that amount in' with a charge for the rental of the premises for six months, and thereby secure a landlord’s lien under the last lease for a- much larger amount than that for which the premises were actually rented. The trial court assumed that the real rent charged for the premises under the last lease was $50 per month, the rate at which the premises had been rented under the'previous lease, and gave plaintiff a judgment under his landlord’s attachment for that amount. But this, we think, was error. It does not appear that the parties agreed on a rental of $50 per month, but, rather, that they made a contract by which, if the tenant should pay $122.30 each month for six months, he'would satisfy the claim of the plaintiff for delinquent rent under the previous lease, and have the use of the premises under the new lease. The representative of plaintiff who made the contract of lease testified as a witness that the premises, with slight repairs, might have been rented for $75 a month; and whether or not it was the purpose of plaintiff to throw off part of the claim which it held for delinquent rent under the old lease, and charge a higher rental for the premises during the new lease, does not appear. It is enough to say that the plaintiff so managed the transaction that it was not agreed what the rental under the new lease actually was, and, as plaintiff is not entitled, as against the creditors of the bankrupt, to enforce its lien for more than the real rental, it should have been held to have forfeited its lien by this attempt to make a new lease cover the payment of antecedent indebtedness. The lower court erred, therefore, in recognizing plaintiff’s lien as to any portion of the proceeds of the attached property.

The judgment of the lower court is therefore affirmed on plaintiff’s appeal, and on the appeal of Flynn, trustee, it is REVERSED.