Schwanz v. Farmers Co-Operative Co. , 204 Iowa 1273 ( 1927 )

I cannot concur in the opinion of the majority on the question of the measure of damages. The facts are simple. Herman Schwanz owned some hogs. He gave a chattel mortgage on them to the intervener. The mortgage was duly recorded. It covered increase, and the pigs in question are the increase. Appellant had constructive notice of the mortgage. He bought the pigs from the mortgagor, and immediately commingled them with others of his own, of like age, size, and breed. From that moment, they could not have been identified by the mortgagee, or anyone acting for him. Appellant expended money by feeding the pigs and enhancing their value. He changed the condition of the property. He "manufactured" the pigs into matured hogs. It was analogous to threshing grain that was in the stack at the time of conversion. There is no claim of fraud or bad faith or any willful act on the part of appellant.

Two questions are presented at this point: (1) hat is the proper measure of damages, and (2) is appellant entitled, in any event, to allowance for the reasonable value of the feed and labor expended upon the property? It is important to note the character of intervener's action. He did not sue in replevin, nor in detinue. He brings, by intervention, an action to impress a trust upon the proceeds of the sale of the "finished product" — the hogs. Conceding that such an action will lie, as between the intervener and the appellant, it is, in effect, no more than an action for damages for conversion. The measure of damages is no different because intervener happens to be in equity, asking for a trust in funds that belong to appellant. He has made no attempt at foreclosure of his mortgage. He has waived every form of action except one for his damages, and he now seeks to impress a trust for those damages upon certain funds of appellant's. What is the measure of such damages? Of course, the general rule as to the measure of damages in case of conversion is well established. Are intervener's damages enhanced because the property has been confused with other property and its value increased by the acts of the appellant? The situation as to the measure of damages is exactly the same as if one had purchased logs upon which there was a chattel mortgage, and had caused a confusion of goods by mingling the logs with others of his own, destroying their identity, and then converted all the logs into lumber, and sold the lumber. Would the mortgagee have a lien on the proceeds of the sale of the lumber at the selling price of the finished product? Suppose the lumber had been converted into furniture by the original purchaser, and then sold, would the mortgagee have a lien on the proceeds at the selling price of the furniture? Suppose the mortgage had covered grain which was sold to a mill, and mingled with other similar grain and ground into flour and sold by the miller, would the mortgagee be permitted to recover the sellingprice of the flour, instead of the value of the grain which was converted and commingled? Wool covered by a chattel mortgage is sold, commingled with other wool, and all converted into cloth, and then sold. Is the mortgagee entitled to recover in money the value of the wool which he lost, or the selling price of the cloth? How would it be if the buyer had made the cloth into garments, and sold the garments? Suppose appellant had re-sold the pigs, the day he bought them, what would be intervener's measure of damages? If we are to go to the extent of holding that a mortgagee may have a trust imposed upon the proceeds of the property with which goods upon which he had a chattel mortgage have been confused and commingled and their identity destroyed (which I submit is much further than any of the cited cases go), still the question of the measure of his recovery must be the damage he suffered by reason of the conversion of his property. The measure of that damage is the fair and reasonable value of the property at the time and place of the conversion. It is not the selling price of a mass of transformed articles with which his property has been confused and commingled. The authorities cited by the majority do not touch the question of the measure of damages in such a case. McDonald v. Norton, 72 Iowa 652, is in no wise in point on this question. In that case, a chattel mortgagee sued in detinue for the value of a colt that had been purchased by the defendant, and it was charged that defendant had disposed of the property or concealed it. We held that plaintiff could not recover exemplary damages, and that "plaintiff was entitled to a judgment for the value of the property, and for actual damages for its wrongful detention." If the case touches the question of measure of damages, it fixes it at the time of the conversion, for it allows damages for the wrongful detention after that time.

The true rule in such cases is stated in Forsyth v. Wells, 41 Pa. St. 291, as follows:

"Where the defendant's conduct, measured by the standard of ordinary morality and care, which is the standard of the law, is not chargeable with fraud, violence, or willful negligence or wrong, the value of the property taken and converted is the measure of just compensation. If raw material has, after appropriation, and without such wrong, been changed by manufacture into a new species of property, as grain into whisky, grapes into wine, furs into hats, hides into leather, or trees into lumber, the law either refuses the action of trover for the new article, or limits the recovery to the value of the original article. [Silsbury v. McCoon], 6 Hill 425, and note; [Hyde v.Cookson], 21 Barbour 92; [Swift v. Barnum], 23 Conn. 523; [Moodyv. Whitney], 38 Maine 174."

In Weymouth v. Chicago N.W.R. Co., 17 Wis. *550, it is said:

"In determining the question of recaption, the law must either allow the owner to retake the property, or it must hold that he has lost his right by the wrongful act of another. If retaken at all, it must be taken as it is found, though enhanced in value by the trespasser. It cannot be restored to its original condition. The law, therefore, being obliged to say either that the wrongdoer shall lose his labor, or the owner lose the right to take his property wherever he may find it, very properly decides in favor of the latter. But where the owner voluntarily waives the right to reclaim the property itself, and sues for the damages, the difficulty of separating the enhanced value from the original value no longer exists. It is then entirely practicable to give the owner the entire value that was taken from him, which certainly seems to be all that natural justice requires, without adding to it such value as the property may have afterwards acquired from the labor of the defendant. In the case of recaption, the law does not allow it because it is absolute justice that the original owner should have the additional value, but because the wrongdoer has by his own act created a state of facts where either he or the owner must lose something. There the law says the wrongdoer shall lose. But if the owner chooses to resort to another remedy, in applying which the law may give him full compensation for all that he has lost, without compelling the wrongdoer to pay more, I see no reason why that should not be the rule. The value of the property at the moment of conversion, with such increase as it may have received from fluctuations of the market, or other causes independent of the acts of the defendant, should be the measure of damages."

The foregoing states the rule as applicable to this case, where there has been no attempt at recaption, and the goods have been confused and commingled, and the mortgagee seeks only to recover damages.

The nearest we have came to passing on the question now before us was in Clement v. Duffy, 54 Iowa 632, which was an action in replevin to recover wheat in the stack. Plaintiff took the wheat under his writ, and threshed it and sold it. The jury found that defendant owned the wheat. We expressly declined to pass on the question of the measure of damages if the action had been in conversion, but held that recovery was on the bond, which required plaintiff to return the property and pay all damages occasioned by the taking under the writ, which, of course, allowed recovery for the highest market price. But in that case we said:

"In our opinion the expense of threshing and marketing thegrain was properly deducted from the market price."

That is exactly the situation in this case. Appellant only asks that he be allowed for the feed and labor that he expended upon the pigs. If intervener is to recover for the conversion of his pigs, it is of his pigs as pigs. That is what appellant converted. Intervener makes no claim for "wrongful detention" of his pigs. Wherein could there be damages for the "wrongful detention" of a pig?

If intervener is to be allowed the selling price of the hogs (which was not shown to be the reasonable market value), then appellant is entitled to the value of his feed and labor expended upon the property. This is our former rule. I think intervener should be limited to a recovery of the fair and reasonable market value of the pigs at the time and place they were converted. In any event, if allowed the selling price of the hogs, appellant is entitled to the value of the feed and labor he expended. As bearing on the question, see Sloan State Bank v. Stoddard Son,178 Iowa 104.