Goldberg v. Brule Timber Co.

• Decision Date: 14 June 1918
• Docket Number: No. 20855.,20855.
• Citation: 140 Minn. 335,168 N.W. 22
• Parties: GOLDBERG v. BRULE TIMBER CO. et al.
• Court: Minnesota Supreme Court

140 Minn. 335

168 N.W. 22

GOLDBERG

v.BRULE TIMBER CO. et al.

No. 20855.

Supreme Court of Minnesota.

June 14, 1918.

Appeal from District Court, St. Louis County; Bert Fesler, Judge.

Action in replevin by Moses Goldberg against the Brule Timber Company and others, in which Ed. Ingalls, as trustee in bankruptcy of defendant company, intervened. From a judgment in favor of the trustee, plaintiff appeals. Affirmed.

Syllabus by the Court

The validity of a chattel mortgage upon property in Michigan and the rights of the parties under it, are governed by the laws of Michigan.

Under the Michigan statute (How. St. Ann. 1912, § 11407), as construed by the Michigan courts, where possession of the mortgaged property is not transferred, failure to properly file the chattel mortgage renders it absolutely and conclusively void as to creditors of the mortgagor who become such after the mortgage is given and before the statute is complied with, and such creditors may attack the mortgage although they did not acquire a lien during the period of noncompliance with the statute.

A trustee in bankruptcy has the right to assail such a mortgage on behalf of general creditors who became such after the mortgage was given.

Possession, taken by the mortgagee in legal proceedings after the rights of creditors have become fixed, can detract nothing from the rights of such creditors. W. H. McDonald, of Minneapolis, and Benj. M. Goldberg and C. W. Stilson, both of Duluth, for appellant.

Fryberger, Fulton & Spear, of Duluth, for respondent.

HALLAM, J.

In October, 1915, the Brule Timber Company, a Duluth corporation, was engaged in logging operations near Ontonagon, Michigan. Plaintiff, a resident of Duluth, sold to this company twelve horses with harness. The property was shipped from Duluth to Ontonagon. The negotiation was begun in Duluth but was completed after the horses arrived in Michigan. Notes were given for the price and to secure them a chattel mortgage was given covering the property sold and other property. Plaintiff sent the mortgage to the proper officer in Michigan for filing and it was received and filed, but the statute relative to the filing of chattel mortgages was not complied with.

After the consummation of the negotiations above mentioned, the Brule Timber Company incurred debts to creditors and later became insolvent. The mortgaged property was transferred to defendant Taylor, a creditor, and was shipped by him to Minneapolis. Plaintiff then commenced this action in replevin and the property was seized by the sheriff under process. Taylor immediately rebonded and the property was redelivered to him. Soon thereafter the Brule Timber Company was adjudicated a bankrupt. The trustee in bankruptcy intervened. The trial court ruled that plaintiff's mortgage was void as to creditors and gave plaintiff no rights in the property and submitted to the jury only the question of the validity of the transfer to Taylor. The jury found against Taylor. The result was to give the property to the trustee. Plaintiff alone appeals.

The question on this appeal is whether the rights of the intervener as trustee for creditors are superior to those of the mortgagee.

1. The property had its situs in Michigan. The laws of Michigan provide, that a chattel mortgage not accompanied by immediate delivery and followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void against the creditors of the mortgagor unless the mortgage is filed and the mortgagor or some one in his behalf shall, before filing, make and annex thereto an affidavit setting forth that the consideration was actual and adequate and that the same was given in good faith, and that no officer shall receive or file a chattel mortgage until such affidavit is made and annexed thereto. 4 How. Stat. § 11407. This statute was not complied with. The affidavit there provided for was never made.

The creditors of the bankrupt company who became such after this mortgage was given were all general creditors, that is none had any lien upon this property and none acquired any by attachment or otherwise prior to the bankruptcy. There is a line of decisions of this court to the effect that the validity of a chattel mortgage not filed as required by law cannot be questioned by a creditor of the mortgagor unless while the mortgage is still unfiled and the possession with the mortgagor, he has laid hold of the mortgaged property by legal process or is in a position to invoke estoppel or show fraud. Ellingboe v. Brakken, 36 Minn. 156, 30 N. W. 659;Howe v. Cochran, 47 Minn. 403, 50 N. W. 368;Clark v. Richards Lumber Co., 68 Minn. 282, 71 N. W. 389. Plaintiff urges that these decisions rule this case. If this were a mortgage upon property situated in Minnesota, the laws of Minnesota would control and the rule of these Minnesota decisions would be applied. But this was a Michigan mortgage, and its validity and the rights of the parties under it are governed by the statutes of Michigan as construed by the courts of that state. 6 Cyc. 1060; Swedish American Nat. Bank v. First Nat. Bank, 89 Minn. 98, 94 N. W. 218,99 Am. St. Rep. 549;Green v. Van Buskirk, 7 Wall. 139, 19 L. Ed. 109;Aultman & T. Mach. Co. v. Kennedy, 114 Iowa, 444, 87 N. W. 435,89 Am. St. Rep. 373;In re Antigo Screen Door Co., 123 Fed. 249, 59 C. C. A. 248;Etheridge v. Sperry, 139 U. S. 266, 11 Sup. Ct. 565, 35 L. Ed. 171;In re Johnson (D. C.) 212 Fed. 311.

[2] 2. Under the Michigan statute it has been held in numerous Michigan cases that noncompliance with the statute renders the mortgage not merely presumptively void but absolutely and conclusively void as to creditors of the mortgagor who become such after the mortgage is given and before the statute is complied with, Fearey v. Cummings, 41 Mich. 376, 1 N. W. 946;People v. Burns, 161 Mich. 169, 125 N. W. 740,137 Am. St. Rep. 466; City Bank & Trust Co. v. Hurd, 179 Mich....