Birkeland v. Clearwater Concentrating Co., Inc.

• Decision Date: 14 July 1942
• Docket Number: 6979
• Citation: 127 P.2d 1047,64 Idaho 122
• Parties: GUNDER BIRKELAND, Respondent, v. CLEARWATER CONCENTRATING COMPANY, INC., a corporation, Appellant
• Court: Idaho Supreme Court

127 P.2d 1047

64 Idaho 122

GUNDER BIRKELAND, Respondent, v. CLEARWATER CONCENTRATING COMPANY, INC., a corporation, Appellant

No. 6979

Supreme Court of Idaho

July 14, 1942

CHATTEL MORTGAGES-FORECLOSURE-EXCLUSIVE REMEDY-CONDITIONAL SALES CONTRACT-MORTGAGE, EFFECT OF.

1. The prosecution of an action for recovery of a debt secured by a mortgage in any other manner or form than by foreclosure action is prohibited by statute. (I.C.A., sec. 9-101, et seq.)

2. The execution of negotiable note, which was not a title-retaining note and contained no reference to any conditional sales contract, and securing it by mortgage on real and personal property was in conflict with theory that title to the property, or any part thereof covered by the mortgage, rested in mortgagee, and taking of mortgage vested title in vendee. (I.C.A., sec. 9-101, et seq.)

3. A claim and delivery action for possession of machinery sold on conditional sale was not maintainable, where such machinery was subsequently mortgaged by vendee to vendor, since the taking of mortgage vested title in vendee and the only method of enforcing any right secured by mortgage is by foreclosure. (I.C.A., sec. 9-101.)

4. Where claim and delivery action for possession of property sold under conditional sale was held, on appeal, not maintainable because title to property vested in vendee by vendee's subsequent mortgage to vendor, cause was remanded to allow plaintiff to amend complaint and convert action into suit in foreclosure. (I.C.A., sec. 9-101, et seq.)

APPEAL from the District Court of the Tenth Judicial District, for Idaho County. Hon. Miles S. Johnson, Judge.

Action in claim and delivery for recovery of possession of personal property or the alleged value thereof. Judgment for plaintiff and order dismissing defendant's cross-complaint. Defendant appeals. Reversed and cause remanded.

Reversed and remanded. Costs awarded to appellant.

C. H Potts and W. H. Smiley for appellant.

The conditional bill of sale, promissory note, and assignment of lease and mortgage were given to secure a loan of money, and in legal effect constituted a mortgage. (Sec. 44-804, I.C.A.; Sec. 44-805, I.C.A.; Hughbanks Inc. v. Gourley, Supra, p. 525; Lyon v. Nourse, 176 P. 359 (Wash.) ; Lahn & Simons v. Magzen Woolen Mills, 266 P. 697 (Wash.) , 700; Clinton v. Utah Construction Co., 40 Idaho 659, 682, 237 P. 427, 436.)

The taking of a mortgage on the same property covered by the conditional bill of sale vested title in the purchaser and conclusively fixed the status of the transaction as a loan secured by mortgage. (Sparkmen v. Miller-Cahoon Co., 48 Idaho 254, 259, 282 P. 273; 24 Ruling Case Law Sales, sec. 744, p. 445, sec. 745, p. 447, 448; 55 C.J. Sales, sec. 1220, p. 1226; Aultman v. Silha, 55 N.W. 711 (Wisc.) ; Beer v. Aultman-Taylor Co., 19 N.W. 388 (Minn.) .)

The transaction being a loan of money and the conditional bill of sale and other instruments being a mortgage, the respondent did not have title or the right to immediate possession of the property upon default in payment of the indebtedness, and was not entitled to bring this action of claim and delivery to obtain possession. (Sec. 9-101, I.C.A.; Sec. 44-1009, I.C.A.; Rein v. Callaway, 7 Idaho 634, 638, 65 P. 63, 64; First National Bank of Pocatello v. Poling, 42 Idaho 636, 643, 248 P. 19; Garrett v. Soucie, 46 Idaho 289, 293, 267 P. 1078.)

Cox, Ware & Stellmon for respondent.

The taking of a mortgage on additional property as security for the purchase price of property sold on a title retaining contract does not affect the validity of the title retaining contract. The act of the vendor to constitute waiver of his retained title must be clearly proven and inconsistent with his intention to rely upon his right as a vendor. ( Sparkman v. Miller-Cahoon Co. (1929), 48 Idaho 254 at 259; Warren v. Lair (1919), 179 N.Y.S. 632, 134 N.E. 599; In Re A. E. Richardson Co., Inc. (D. C. 1923), 291 F. 772; In Re. A. E. Richardson Co., Inc. (C. C. A. 1923), 294 F. 451 at 455; Valley Chevrolet Co. v. O. S. Stapley Co. (Ariz. 1937), 71 P.2d 945; Thornton v. Findley (Ark. 1911), 134 S.W. 627 at 628.

A vendor under a title retaining contract for the sale of personal property may maintain an action in claim and delivery upon the buyer's default. (Smith v. Harrington (1925), 41 Idaho 155; Neitzel v. Lawrence (1924), 40 Idaho 26.)

AILSHIE, J. Budge, Morgan and Holden, JJ., concur, Givens, C. J., concurs in conclusion.

OPINION

AILSHIE, J.

Appellant, Clearwater Concentrating Company, a corporation organized and existing under the laws of the State of Washington, was doing business in Idaho in full compliance with the state laws. C. G. Hage and C. H. Netheway were president and secretary, respectively, of the company. The Union Iron Works of Spokane, (hereinafter referred to as the Iron Works) was a corporation organized under the laws of Washington, with F. D. Williamson as its sales manager. Respondent, Gunder Birkeland, was a builder, also engaged in the investment business, took mortgages and bought real estate contracts.

This case involves the ownership and sale of certain mining machinery and equipment, sold originally by the Iron Works to the Argenta Consolidated Mining Co., and shipped to the mill of the latter company at Argenta, Montana. The price of the equipment, to the Argenta Company, was approximately $ 14,000, f.o.b. plant of the Iron Works. The Argenta Company got into financial difficulty and owed personal property taxes against the machinery, which Williamson paid. The Iron Works repossessed the mill in Montana.

During the summer of 1938, Williamson discussed with Netheway the proposition of the latter's company buying the mill, suggesting that Netheway "have it for the remaining portion of the unpaid conditional sales contract"; Netheway gave a check for $ 500 and later a second check for $ 1,000, making a total payment of $ 1500; and the remaining portion was left at "about $ 6500". Date of this transaction was June 11, 1938. The mining equipment was hauled from Montana to the warehouse of the Iron Works at Spokane and held there "for the payment of the balance."

In October, 1938, Netheway consulted Birkeland about making a loan of $ 10,000, to pay off the balance due on the equipment purchased by the concentrating company (appellant) and bill for hauling the equipment. Netheway, Hage and Birkeland inspected the millsite at Elk City, Idaho, and the equipment at Spokane. As a result of the conferences, Birkeland negotiated a loan to appellant of $ 6,774.35 ($ 5,000 of which was to be paid to the Iron Works and $ 1,774.35 to a drayage company for hauling equipment to Washington and thence to Idaho.) The Concentrating Company gave Birkeland a note for $ 8500 and $ 100,000 shares of its capital stock.

November 5, 1938, bill of sale from the Iron Works to the appellant was executed, showing receipt of $ 1500 and a balance owing of $ 5,000; by letter of November 8th, the Iron Works requested the First National Bank of Everett, Wash., to deliver the bill of sale to Netheway or his associates, upon payment of $ 5,000 to the credit of the Iron Works.

In making this loan to the company, Netheway, Hage and Birkeland were informed by Attorney Ferguson that it would involve usury; that the only way to make this loan would be to forward a written letter to the Iron Works, stating the appellant company was unable to pay the balance due on the machinery; then Birkeland could buy the machinery from the Iron Works and sell it back to the company on a conditional sale contract, with monthly payments. Accordingly, November 8, 1938, Netheway wrote to the Iron Works, informing them of the inability of the Concentrating Company to raise $ 5,000, due on equipment, and releasing all claim against the equipment. November 11, 1938, another bill of sale was executed by the Iron Works, conveying to Birkeland the mining equipment for the consideration of $ 5,000.

November 14, 1938, by letter from the Iron Works to the National Bank of Commerce of Seattle, bill of sale, for the mining equipment, was to be delivered to Birkeland, on payment of $ 5,000 and signing the release by the Concentrating Company.

November 22, 1938, "Conditional Bill of Sale" was executed by respondent to appellant, specifying consideration as $ 8,500, with interest at 6% providing for monthly payments, beginning with January, 1939. Simultaneously with the execution of this latter sales contract, appellant company executed and delivered to Birkeland an assignment of lease and a negotiable promissory note secured by mortgage, as additional security for the payment of the $ 8500 note which covered the purchase price of the personal property, transportation and other charges.

In February, 1939, the machinery was moved to Elk City (Orogrande Mining District, 55 miles southeast of Grangeville). Netheway installed the machinery, constructed the mill, and got it into operation. The mill remained in operation for about sixty days, finally closing down in August, 1939, about the time this action was commenced. Payments were made on the equipment, for the months of January to and including May, 1939, amounting to the sum of $ 1,531.78 (principal and interest). No further payments were made on the contract.

In the meanwhile, June 8, 1939, respondent addressed a letter to Hage and Netheway, asking that they meet with him in Seattle for a conference over surrendering the 100,000 shares of stock of the Concentrating Company. The following day, William Henderson, Seattle industrial engineer and accountant, employed by the Concentrating Company, wrote to Israel Nelson, attorney, advising that, unless the 100,000 shares of stock were turned over to Henderson's attorney by ...