Franklin Nat. Bank v. Austin

• Decision Date: 04 May 1954
• Citation: 99 N.H. 59,104 A.2d 742
• Parties: FRANKLIN NAT. BANK v. AUSTIN et al.
• Court: New Hampshire Supreme Court

Page 742

104 A.2d 742

99 N.H. 59

FRANKLIN NAT. BANK v. AUSTIN et al.

Supreme Court of New Hampshire.

Argued April 6, 1954.

Decided May 4, 1954.

Morse, Hall & Morse and Charles T. Gallagher, Concord, for plaintiff.

Devine & Millimet, Manchester (Shane Devine, Manchester, orally), for defendants.

DUNCAN, Justice.

The defendant in support of the exception to the denial of their motion for a nonsuit assert that the plaintiff is precluded from recovering the deficiency after sale of the chattels, because of its failure to comply with the requirements of R.L. c. 262, § 28, which requires that the proceeds of a statutory foreclosure sale be applied to payment of the demand secured by the chattel mortgage. While the Trial Court found that notice as required by R.L. c. 262, §§ 26, 27, was given before the foreclosure sale of the truck, there was no finding and no evidence that the statute was followed with respect to the subsequent sale of the cattle.

In jurisdictions where a chattel mortgagee is held to have merely a lien to secure the loan, see Metheny v. Davis, 107 Cal.App. 137, 290 P. 91, his failure to pursue the statutory method of enforcement of the lien has been held fatal to any right to recover a deficiency, because he is considered to have converted the mortgaged goods. Metheny v. Davis, supra; First Nat. Bank of Pocatello v. Poling, 42 Idaho 636, 248 P. 19. Under the rule of this jurisdiction, however, the mortgagee has legal title to the mortgaged chattels, subject only to the mortgagor's equity of redemption, or statutory right to redeem. Provenchee v. Piper, 68 N.H. 31, 36 A. 552; Sargent v. Usher, 55 N.H. 287, 289. Where this view of the nature of the interest of the mortgagee prevails, a failure to follow the statutory provisions with respect to foreclosure of the mortgage is not considered to result in forfeiture of any balance due. By the terms of the defendants' mortgage, the plaintiff had both legal title and the right to possession of the chattels. The 'consequence' of an irregular sale is 'not that the debt becomes extinguished, but that the mortgagor may be credited with payment up to the value of the property. * * *' Harrison v. Hall, 239 N.Y. 51, 145 N.E. 737. 'The mortgager should be compensated, if wrong is done to him, but to subject the whole debt to forfeiture might be much more than justice requires.' Leach v. Kimball, 34 N.H. 568, 575. Accordingly, if the mortgagor is damaged by the mortgagee's failure to comply with statutory requirements, he is entitled to set off his damages against the debt. Where redemption is not sought, he is ordinarily entitled to credit for all sums received for the repossessed chattels and not less than their fair value. Griswold v. Morse, 59 N.H. 211; Mercier v. Nashua Buick Co., 84 N.H. 59, 146 A. 165; Caraway v. Jean, 97 N.H. 506, 92 A.2d 660.

The further issue is presented whether the bank's bid for the Ford truck on foreclosure, which was for the balance of over $1,400 then due on the defendants' note, may be reformed so as to reduce its undertaking to the amount of $200 credited on the note. According to recognized principles, unilateral mistake affords no ground for reformation of a contract, see Commercial Cas. Ins. Co. v. Mansfield, 98 N.H. 120, 136, 96 A.2d 558; Phinney v. Cheshire County Sav. Bank, 91 N.H. 184, 190, 16 A.2d 363, although it may be ground for rescission. Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749; Rosenblum v. Manufacturers Trust Co., 270 N.Y. 79, 200 N.E. 587, 105 A.L.R. 947. See Carignan v. Amoskeag Hamper Co., 95 N.H. 262, 265, 61 A.2d 799.

'If the erroneous transaction was such as to involve the act of the plaintiff only, and the effect of the transaction would be the unjust enrichment of the defendant, the plaintiff is entitled to have the transaction rescinded, although he was the only party mistaken.' Rosenblum v. Manufacturers' Trust Co., supra, 270 N.Y. at page 85, 200 N.E. at page 588. In the language of the Connecticut Court, 'equity will grant relief, if (the defendant) * * * seeks to take an unconscionable advantage of (the mistake).' Geremia v. Boyarsky, supra, 107 Conn. at page 390, 140 A. 749, 750. See 5 Williston on Contracts (Rev. Ed.) 4402.

The principles stated are applicable here. The defendants seek to achieve discharge from their obligation for nearly $800 by insisting that the bank be held to its purchase of a $200 truck upon a bid of more than $1400. They make no pretense that the truck was fairly worth the amount bid, nor is there any evidence that it was worth substantially more than the figure of $200 found to be its actual value. While it appeared that the defendant who used the truck after its purchase had expended money upon it, it had been used for some three years in lumbering operations over woods roads, and was in poor operating condition. The finding as to value is not open to serious question.

The defendants seeks to obtain a credit for the price bid by the bank, although it is inconceivable that it was made with any appreciation of the consequences of bidding the amount of the balance of the note. The bid appears to have resulted from blind adherence to custom by the bank's cashier, and possibly in part from his unexplained idea that any other course would prevent realization upon the remaining security. Since no prospective bidders appeared at the sale, the bank's bid cannot have operated to prevent a possible sale to any third party for more than the figure found to represent fair...