Arlington Mill & Elevator Company v. Yates

• Decision Date: 22 December 1898
• Docket Number: 8515
• Citation: 77 N.W. 677,57 Neb. 286
• Parties: ARLINGTON MILL & ELEVATOR COMPANY v. WILLIAM J. YATES ET AL
• Court: Nebraska Supreme Court

77 N.W. 677

57 Neb. 286

ARLINGTON MILL & ELEVATOR COMPANY v. WILLIAM J. YATES ET AL

No. 8515

Supreme Court of Nebraska

December 22, 1898

ERROR from the district court of Washington county. Tried below before BLAIR, J. Affirmed.

AFFIRMED.

L. W Osborn, W. S. Cook, Frick & Dolezal, and Osborn & O'Hanlon, for plaintiff in error.

References as to effect of the mortgage on partnership property, the execution sale of the realty, and the rights acquired by making the improvements: Murrell v. Mandelbaum, 19 S.W. 880; Harney v. First Nat. Bank, 29 A. [N. J.] 221; Goldthwaite v. Janney, 15 So. Rep. [Ala.] 560; Rosenbaum v. Hayden, 22 Neb. 744; Donaldson v Bank of Cape Fear, 18 Am. Dec. [N. Car.] 577; Tarbell v. West, 86 N.Y. 286; Barber v Palmer, 24 N.Y.S. 451; Graham v. Thornton, 9 So. Rep. [Miss.] 292.

The chattel mortgage should have been declared void from its inception, especially as to creditors and subsequent purchasers. (Jones v. Richardson, 10 Met. [Mass.] 481; Wright v. Bircher, 5 Mo.App. 322; Barnard v. Eaton, 2 Cush. [Mass.] 294; Pettis v. Kellogg, 7 Cush. [Mass.] 456; Wilhelmi v. Leonard, 13 Ia. 330.)

The notes were barred, but whether so or not, the lien of the chattel mortgage had expired. (Compiled Statutes, ch. 32, secs. 14, 16; Thompson v. Van Vechten, 27 N.Y. 568.)

Jesse T. Davis, F. S. Howell, and Gregory, Day & Day, contra.

OPINION

IRVINE, C.

The Arlington Mill & Elevator Company, hereafter called the mill company, seeks by these proceedings in error to secure the reversal of a decree whereby its property, or a portion thereof, was ordered sold to satisfy a real estate mortgage held by William J. Yates, the plaintiff below, and a chattel mortgage held by the Cockle Separator Manufacturing Company, hereafter called the Cockle Company. There were other parties to the record below, but the contest is confined to the mill company on one side and the two mortgagees named on the other, and only their respective rights are open for consideration.

The facts are somewhat complicated, but their statement in some detail is essential to an elucidation of the questions presented. One Shepard and one Lane seem to have been the owners of a large quantity of land in Arlington, Washington county. In 1888 one Y. D. Denison appeared in Arlington with a project to erect a flouring mill. He procured certain donations, and obtained from Shepard and Lane a contract, informal in its terms but sufficient to meet legal requirements, whereby Shepard and Lane agreed to convey to "Denison & Co." certain land, upon the completion and putting in operation thereon of a flouring mill of forty barrels capacity. At that time Denison had no partner. The enterprise was his own, but he procured the contract in that form in contemplation of taking a partner. He proceeded to erect a mill which all the evidence on the subject tends to show met the requirements of the contract. Shepard and Lane did not, however, make the conveyance. Denison purchased machinery for the mill from the Cockle Company of Milwaukee, giving his notes for the purchase-money and securing the same by chattel mortgage on the machinery purchased. This mortgage was dated October 4, 1888, and was filed in the office of the county clerk of Washington county October 11. The machinery was described as contained in the elevator in Arlington situated on the land above mentioned. In fact the machinery had not left Milwaukee when the mortgage was executed, but it was about that time shipped and was soon thereafter placed in the mill. Denison about this time disposed of a one-half interest in the business to one Baith, who afterward sold to one Monroe, and Monroe later bought one-half of Denison's remaining interest. These transfers do not seem to have been evidenced by any instrument in writing. Having become indebted to one McMasters, Denison, May 22, 1891, executed a real estate mortgage to him, containing covenants of warranty and purporting to convey a one-fourth interest in the land already mentioned, and apparently a small tract additional. This is the mortgage which Yates, who acquired it from McMasters, brought this action to foreclose. The Commercial National Bank of Fremont, having obtained certain judgments against Denison and Monroe, caused executions to be levied on the land, and a sale was made to McMasters. In making the appraisement for the purpose of the sale the whole amount of the Yates mortgage was deducted as a lien prior to the judgments. McMasters knew, and was before he bought expressly warned, of the claim of the Cockle Company on the machinery. McMasters conveyed by quitclaim deed to Jewett & Baith. After this suit was begun the mill company was incorporated and Jewett & Baith conveyed to it, also by quitclaim. In the meantime Lane had conveyed his interest in the legal title to Shepard. In April, 1892, the legal title passed to L. M. Keene, ostensibly as trustee for Martha Shepard and Ada Shepard. In July, 1892, Shepard undertook to convey by warranty deed to McMasters, who then held under the sheriff's deed, but that conveyance passed nothing, as it was subsequent to the deed to Keene. In November, 1892, Keene conveyed by quitclaim to Jewett & Baith, who had in the meantime bought McMaster's title. Jewett & Baith expended large sums in improving the property. The decree of the district court ordered a sale of the machinery described in the Cockle Company's mortgage to satisfy the same, and a sale of the mortgaged real estate to satisfy Yates.

The number of questions involved requires that each be disposed of as briefly as possible, but some are of sufficient importance to warrant a more extended discussion than is here practicable.

With regard to the Yates mortgage it is contended that Denison had no mortgageable interest on account of the state of his title, and also because the land was partnership property and he could not convey any fixed interest, but only that which would result to him on the settlement of the partnership with Denison. Further, that the land having been sold on execution to pay partnership debts, that sale passed title as against one claiming under a single partner. Reliance is also placed on the title derived through Keene. The nature of Denison's interest and the original effect of the mortgage are immaterial. When McMasters bought at the execution sale he bought under an appraisement recognizing the mortgage as a valid senior incumbrance, his bid was based on that hypothesis, and he became estopped to deny the validity of that mortgage. (Koch v. Losch, 31 Neb 625, 48 N.W. 471; Nye & Schneider Co. v. Fahrenholz, 49 Neb. 276, 68 N.W. 498; Farmers Loan & Trust Co. v. Schwenk, 54 Neb. 657, 74 N.W. 1063.) The conveyances whereby the title so acquired by McMasters passed to the mill company are all deeds of quitclaim, and operated to convey McMasters' rights and no greater. (Lincoln Building & Saving Ass'n v. Hass, 10 Neb. 581, 7 N.W. 327; Savage v. Hazard, 11 Neb. 323, 9 N.W. 83; Hoyt v. Schuyler, 19 Neb. 652, 28 N.W. 306; Snowden v. Tyler, 21 Neb. 199, 31 N.W. 661; Bowman v. Griffith, 35 Neb. 361, 53 N.W. 140; Connell v. Galligher, 36 Neb. 749, 55 N.W. 229; Pleasants v. Blodgett, 39 Neb. 741, 58 N.W. 423.) Nor is the case of the mill company aided by the subsequent conveyances of the legal title. In this state an equitable estate may be mortgaged, and the lien of that mortgage will not be defeated by a subsequent conveyance of the naked legal title, where the rights of innocent purchasers are not involved. (Lincoln Building & Saving Ass'n v. Hass, supra.) The conveyance of the legal title to...