Commercial Security Bank of Ogden v. Chimes Press (Zion's Savings Bank & Trust Co., Intervener)

• Decision Date: 30 March 1935
• Docket Number: 5464
• Citation: 42 P.2d 990,88 Utah 148
• Parties: COMMERCIAL SECURITY BANK OF OGDEN v. CHIMES PRESS (ZION'S SAVINGS BANK & TRUST CO., Intervener)
• Court: Utah Supreme Court

42 P.2d 990

88 Utah 148

COMMERCIAL SECURITY BANK OF OGDEN v. CHIMES PRESS (ZION'S SAVINGS BANK & TRUST CO., Intervener)

No. 5464

Supreme Court of Utah

March 30, 1935

Petition for rehearing denied November 23, 1935.

Appeal from District Court, Second District, Weber County; E. E Pratt, Judge.

Suit by the Commercial Security Bank of Ogden against the Chimes Press, in which the Zion's Savings Bank & Trust Company intervened. From a judgment dismissing intervener's complaint, intervener appeals.

REVERSED and REMANDED, with directions.

Thomas & Thomas, of Salt Lake City, for appellant.

DeVine Howell & Stine, of Ogden, for respondent.

FOLLAND, Justice. ELIAS HANSEN, C. J., and EPHRAIM HANSON, MOFFAT, and WOLFE, JJ., concur.

OPINION

FOLLAND, Justice.

This appeal involves a contest of priority between respondent's (plaintiff's) chattel mortgage and appellant's (intervener's) attachment and execution levy on personal property of Chimes Press (defendant). The plaintiff, Commercial Security Bank, hereinafter referred to as respondent, brought suit against Chimes Press to foreclose a chattel mortgage on certain personal property of the defendant. Zion's Savings Bank & Trust Company, hereinafter referred to as appellant, filed a complaint in intervention to which respondent filed a demurrer. The demurrer was sustained, and, appellant electing to stand on its complaint in intervention, the complaint was dismissed. From the judgment of dismissal, this appeal was taken and the court's action in sustaining the demurrer assigned as error.

The complaint in intervention alleged in substance that appellant commenced suit on a promissory note in the district court of Salt Lake county on March 14, 1933, against the Chimes Press and attached its personal property in Weber county on the same day; that after judgment was obtained in the attachment action it caused execution to be levied on the same property on March 4, 1933; that the respondent claims an interest in the attached property of the Chimes Press by reason of a chattel mortgage filed for record January 13, 1930; that thereafter more than three years elapsed and respondent did not within thirty days thereafter, or at all, take possession of the mortgaged property nor file any affidavit exhibiting its interest as mortgagee, and for that reason respondent's mortgage became and was, and now is, wholly void and subject to the lien of appellant's attachment and execution. To this complaint respondent filed a general demurrer and also alleged that it appeared from the complaint in intervention that the debt of defendant to appellant was contracted after respondent's mortgage was filed and before the expiration of three years from filing and while the mortgage was in full force and effect, and that it did not appear that appellant has been misled or in any way induced to change its position to its prejudice by failure to file an affidavit extending the lien of the mortgage.

It appears from the files in the case that the suit for foreclosure was commenced within the thirty-day period following three years after the filing of the mortgage, and hence suit was commenced at a time when the mortgage was in full force and effect. While there is no direct allegation in the complaint of the time when appellant extended credit to the Chimes Press, the inference is reasonably clear, and is not disputed, that the debt was incurred after filing of the mortgage and before the three-year period of its validity had expired.

The arguments in briefs before the court were directed to the question of whether or not appellant, within the meaning and purview of Comp. Laws Utah 1917, § 474, was a creditor as to whom respondent's mortgage was void because of failure to file renewal affidavit as provided therein. That section is as follows:

"Every mortgage so filed shall be void as against the creditors of the person making the same, or against subsequent purchasers or mortgagees in good faith, after the expiration of three years after the filing thereof; unless within thirty days after the expiration of the term of three years from such filing and within thirty days after the expiration of each year thereafter, the mortgagee, his agent or attorney, shall make an affidavit exhibiting the interest of the mortgagee in the property at the time last aforesaid claimed by virtue of such mortgage, and if such mortgage is to secure the payment of money the amount yet due and unpaid, and shall file the same with the county recorder, to be attached to the instrument or copy on file, to which it relates; provided, that no mortgage of personal property shall be valid as against creditors of the mortgagor or subsequent purchasers or mortgagees in good faith after the expiration of the five years from the date of the original filing."

We shall hereinafter use the word "refiling" when referring to the filing of the renewal affidavit exhibiting the mortgagee's interest within the thirty-day period following three years from the date of filing, and use the word "filing" when it is intended to refer to the original filing of the mortgage. Appellant's contention is that, having caused an attachment and execution levy on the property in question after expiration of the time for refiling, there having been no refiling whatever, and notwithstanding the mortgage was in fact not paid and was still valid between the parties, it secured a lien superior to that claimed by the mortgagee, the mortgage by statute having become void as to such creditor.

Respondent, on the other hand, contends that since the appellant extended credit to the defendant while the mortgage was on file, thus with constructive notice thereof, and was not misled or in anywise prejudiced by failure of respondent to refile, nor had it changed its position to its injury because of such failure to refile, its lien by attachment dated back to the time the debt was incurred, and that the debt continued subordinate to the lien of the mortgage. The rule contended for is in the nature of an estoppel based on the theory that the purpose of the statute was to protect persons dealing with the debtor against secret liens.

It is conceded by appellant that not all creditors can take advantage of respondent's failure to file the renewal affidavit, but only creditors who, by legal process and levy, fix their liens on the property of the debtor, and that as to such creditors the mortgage is void because made so by express provision of the statute. The rule prevails that a mere general creditor who has not some right to or interest in or lien on the specific property is not in a position to attack a mortgage for any defect therein or for failure to file or to refile. 5 R. C. L. 414. One to whom a mortgagor owes a debt may not for that reason alone make the contest, but he must place himself in a position to contest such mortgage for defect or failure to file or refile by arming himself with process pursuant to which his debt has been affixed on the property by levy. 1 Jones Chattel Mortgages and Conditional Sales, Bowers Ed., 419; Graham v. Perry, 200 Wis. 211, 228 N.W. 135, 68 A. L. R. 267; Fred C. Silverthorn & Sons v. Pacific Finance Corp., 133 Cal.App. 163, 23 P.2d 798.

This court has recognized the same rule in Hansen v. Daniels, 73 Utah 142, 272 P. 941, 946, wherein the court said:

"We are satisfied, however, that in the absence of fraud or superior equities on behalf of a creditor the claim of a mortgagee in an unrecorded mortgage, or as in this case, a vendor in a conditional sale agreement, is superior to the right of a general creditor who has not acquired a lien by attachment or otherwise prior to the recording of such mortgage or agreement of conditional sale."

Undoubtedly appellant is a creditor of Chimes Press and by attachment and execution its debt has been fastened on the specific property of the debtor covered by respondent's mortgage. It is thereby in a position to contest the validity or priority of the mortgage. It does not necessarily follow that because appellant has placed itself in a position to contest the validity and priority of its own claim with respect to that of respondent's mortgage that it also is entitled to have its execution lien preferred before that of the mortgage. As a matter of procedure it is entitled to raise the question as it has done by its complaint in intervention. That leaves for decision the question of whether, as a matter of law under the facts stated, the attachment lien is now prior and superior to that of the mortgage.

The purpose of the filing statute has been stated, and we think correctly, by this court in Volker Lumber Co. v. Utah & Oregon Lumber Co., 45 Utah 603, 148 P. 365, 367, Ann. Cas. 1917D, 1158, as follows:

"Now, it is universally held by the courts, and such clearly is the purpose of the statute, that, under a statute like ours, filing, if it is required, or recording, where that is necessary, in law is the equivalent of taking possession by the mortgage, and hence the statute is construed to mean that the mortgage is invalid as against the class of persons aforesaid only so long as it is not filed or recorded, unless it is withheld from record so long that fraud may be inferred from the delay. When it is filed or recorded, however, it is the same, in legal effect, as though possession were taken, and the mortgage is valid as against all who become creditors of the mortgagor after such filing or recording, unless it can be declared invalid upon the ground of fraud or for some reason other than that it was not filed or recorded."

It would follow that a refiling is required for a cognate purpose. If the filing of the mortgage is of the same legal effect as the taking of possession...