Eade v. First Nat. Bank

• Decision Date: 26 January 1926
• Parties: EADE ET AL. v. FIRST NAT. BANK OF CONDON ET AL.
• Court: Oregon Supreme Court

242 P. 833

117 Or. 47

EADE ET AL. v. FIRST NAT. BANK OF CONDON ET AL.

Supreme Court of Oregon

January 26, 1926

In Bank.

Appeal from Circuit Court, Gilliam County; Fred W. Wilson, Judge.

Action by Margaret Eade and another against the First National Bank of Condon and another. From a judgment for plaintiff, the named defendant appeals. Affirmed.

Burnett J., dissenting.

This is an action to recover damages for conversion of personal property alleged to have been included in two chattel mortgages owned by plaintiffs. The cause arose as follows: On December 1, 1920, W. I. Ebbert, who is in default and not a party to this appeal, executed and delivered to each of the plaintiffs a promissory note for $500, due one year after date, bearing interest at the rate of 10 per cent. per annum and containing the usual agreement to pay reasonable attorney's fees in the event suit or action should be instituted to collect the amount due thereon. These notes were secured by two chattel mortgages of even date covering certain live stock. Plaintiffs' respective mortgages were duly filed and recorded in Gilliam county, Or., on December 6, 1920. After averring the ownership of the notes, and that no part of the amount due thereon has been paid, plaintiffs charge the defendant bank with having converted to its own use the property covered by the chattel mortgages to their damage in the sum of $2,600. It is alleged in the amended complaint that $100 would be reasonable attorney's fees for the collection of each note. Defendant admits the execution of the notes and mortgages, but denies generally the other allegations of the amended complaint, and affirmatively alleges special ownership in the property in question by virtue of a chattel mortgage executed and delivered by the same mortgagor September 27, 1921; that, the conditions of the mortgage having been broken, the bank instituted foreclosure proceedings, and sold the property at public sale to satisfy the amount due it. During the trial it was stipulated, in the event of recovery by plaintiffs, the measure of damages would not be the value of the property included in the chattel mortgages, but the amount due on the notes. Counsel for appellant also stipulated, without waiving his objection to the allowance of attorney's fees herein that $200 would be a reasonable fee if it were a proper element of damages. A verdict was returned in favor of plaintiffs for $1,602.77, being principal and interest on the notes, and including the sum of $200 as attorney's fees. Defendant appeals.

Frederick Steiwer, of Pendleton (Charles H. Horner, of Condon, on the brief), for appellant.

B. S Huntington, of Portland (Huntington, Wilson & Huntington, of Portland, and J. D. Weed, of Condon, on the brief), for respondents.

BELT, J. (after stating the facts as above).

At the beginning of the trial defendant objected to the introduction of any testimony, for the reason that the amended complaint failed to allege facts sufficient to constitute a cause of action in conversion. It is contended that such pleading does not aver ownership and right of possession in plaintiffs to the property in controversy at the time of the alleged conversion. There is no merit in this contention. Relative to the matter of ownership and right of possession, the complaint alleges the execution of the notes and mortgages on December 1, 1920; that plaintiffs are the owners thereof; that there has been a default in payment of the amount due thereon; and that the mortgages are a first lien on the property under consideration. It is also alleged that the bank converted to its own use all of the property included in said mortgages, and "sold and disposed of the same to divers persons, who have carried it away to places to plaintiffs unknown." Section 10183, Or. L., provides:

"Whenever the condition of any mortgage of goods and chattels shall be broken, the mortgagee shall be entitled to the immediate possession of the mortgaged property, and when after breach of the condition of any such mortgage the possession of the mortgaged property shall not be delivered up to the mortgagee upon demand by him or by any person duly authorized by him to make such demand of the person or persons having such mortgaged property in possession, the mortgagee may recover the possession of such mortgaged property in the manner provided by chapter II of title IV of the Code of Civil Procedure."

Plaintiffs, by virtue of their chattel mortgages and breach of conditions thereof, had sufficient special ownership in the property to maintain this action. In Bower's Law of Conversion, § 490, it is said:

"An allegation that a person executed and delivered to plaintiff a chattel mortgage on the chattels involved was held sufficient without also averring generally that plaintiff owned the property or that the mortgagor owned it or had an interest in it"--citing Brunswick Balke-Collender Co. v. Brackett, 37 Minn. 58, 33 N.W. 214, which supports the text.

Plaintiffs' right to the immediate possession of the chattels follows by reason of their special ownership therein and by force of the above statutory provision. An allegation of right to immediate possession would seem superfluous, since the statute gives such right whenever the conditions of the mortgages shall have been broken. It should be borne in mind that the primary object of this action is to recover damages and not possession of the property.

It is contended that the complaint is defective, in that the terms and conditions of the mortgages are not disclosed. After verdict, the complaint is entitled to every reasonable intendment, and we think it would be sacrificing substance for form to hold in keeping with such contention. It is alleged in the complaint, and the proof establishes, that the chattel mortgages are first liens upon the personal property therein described.

It is also argued that plaintiffs should have alleged and proved a demand upon the bank and its refusal to deliver the chattels to them. This contention is answered adversely to appellant in Daniels v. Foster & Kleiser, 95 Or. 502, 187 P. 627, wherein Mr. Justice Harris, speaking for the court, said:

"Where a conversion has actually occurred, there is no necessity of alleging and proving a demand and refusal"--citing Cobbey on Replevin, § 449; Rosenau v. Syring, 25 Or. 386, 35 P. 845; Caples v. Ditchburn, 87 Or. 264, 169 P. 510.

In the light of the facts in this case it would, indeed, have been an idle and vain thing to have demanded a return of the property.

The act of the bank in selling the mortgaged property in disregard of plaintiffs' superior liens constituted conversion, and it is immaterial whether in doing so it acted in good faith. Its alleged wrong did not consist in undertaking to foreclose its mortgage, but in failing to apply the proceeds of the sale to plaintiffs' superior liens. Bower's Law of Conversion, § 128, tersely states the rule thus:

"A junior mortgagee is liable in trover to the senior mortgagee if he take the property from the latter and sell it without regard to his rights."

The interesting question involved in this appeal is whether plaintiffs are entitled to recover attorney's fees herein. Under the general rule such would not be an element of damages in an action for conversion. Ordinarily, the measure of damages is the value of the property taken at the time and place of conversion. Garber v. Bradbury, 106 Or. 490, 209 P. 477; Backus v. West et al., 104 Or. 129, 205 P. 533; Montesano Lum. & Mfg. Co. v. Portland Iron Works, 94 Or. 677, 186 P. 428; Swank v. Elwert, 55 Or. 487, 105 P. 901. However, in a contest between two mortgagees, the junior mortgagee is liable only for the value of the property converted, not in excess of the amount of the prior lien. Harris v. Grant, 96 Ga. 211, 23 S.E. 390; Stanley v. Citizens' Coal & Coke Co., 24 Colo. 103, 49 P. 35; Barron v. San Angelo Nat. Bank (Tex. Civ. App.) 138 S.W. 142; Jones on Chattel Mtg. (5th Ed.) § 448; Bower's Law of Conversion, § 681. The stipulation in this case relative to the measure of damages is in keeping with such rule.

We should not be unmindful that the mortgages executed were given as security to plaintiffs not only for the amount due on the notes but for attorney's fees therein provided. First Nat. Bank of Stigler v. Howard, 59 Okl. 237, 158 P. 927. The bank's alleged tortious act in selling the property and causing the same to be scattered to the four winds resulted in destroying plaintiffs' security. It would have been futile for plaintiffs to have instituted foreclosure proceedings, as execution upon the property was impossible. It became necessary to seek other relief. They were compelled to sue defendant to satisfy their liens. While the proceeding is in the form of conversion, it is equivalent to an action to collect the amount due on the notes, and the stipulation therein contained concerning attorney's fees must be given force and effect. Otherwise stated, plaintiffs are entitled to as much relief in this action as they would have been in foreclosure proceedings, had it not been for the alleged wrongful act of the bank. It is true that the bank after the sale could have satisfied plaintiffs' liens by paying the amount due on the notes, and, under such circumstances, would not have been liable for attorney's fees. However, we are not concerned with what defendant might have done. This action arises out of what it did. It deprived plaintiffs of their security covering attorney's fees as well as principal and interest. Why should it not respond for such damages as are the direct and proximate result of its alleged wrongful act? The question is of first impression in this state, and we are not aided by the decisions of...