Graham v. Perry

• Decision Date: 03 December 1929
• Citation: 200 Wis. 211,228 N.W. 135
• Parties: GRAHAM v. PERRY ET AL.
• Court: Wisconsin Supreme Court

200 Wis. 211

228 N.W. 135

GRAHAM

v.PERRY ET AL.

Supreme Court of Wisconsin.

Dec. 3, 1929.

Appeal from a judgment of the Municipal Court for Racine County; E. R. Burgess, Judge.

Action by Verna B. Graham, administratrix of the estate of Henry E. Graham, deceased, against William H. Perry and others. From a judgment dismissing plaintiff's complaint, plaintiff appeals. Affirmed.--[By Editorial Staff.]

Action begun July 26, 1927; judgment entered July 1, 1929. Chattel mortgage. On February 28, 1922, plaintiff's decedent, Henry E. Graham, executed and delivered to the Sterling Metal Products Company a chattel mortgage to secure the payment of $682.50. The mortgage was filed in the office of the city clerk of Racine on March 7, 1922. On September 1, 1925, Graham paid $100 upon this note and accrued interest, and a new note payable to William H. Perry or order for $582.50 was made and delivered, upon which was indorsed the statement, “This note secured by chattel mortgage No. 19047 on file with City Clerk” No. 19047 being the documentary number of the mortgage dated February 28, 1922. Perry transferred this note to the Knudson Sales Company, guaranteeing its payment. On May 27, 1922, Henry E. Graham gave another chattel mortgage to the Sterling Metal Products Company to secure the payment of $700, with interest at 7 per cent. from date, filed in the same office, document No. 19830, June 7, 1922. The Sterling Metal Products Company was a copartnership composed of William H. Perry and one Henry F. Teshnow. The partnership was dissolved September 1, 1922, and in the adjustment the note dated February 28, 1922, was transferred to Perry. It appears that the $700 mortgage was given to secure the balance of the purchase price of certain property, and in the mortgage it is stated it is given to secure the full amount of the purchase price, $700, whereas in fact all that remained was $525, 25 per cent. of the purchase price having been paid. On September 1, 1925, the decedent paid Perry $100, and gave his note for $425, upon which note is the following notation: “This note secured by chattel mortgage No. 19830 on file with City Clerk.” This note was transferred to the Knudson Sales Company by Perry without recourse. There remains unpaid on the indebtedness secured by both mortgages the aggregate sum of $1,007.50 and interest from September 1, 1925. The mortgaged chattels were at all times located at Racine in the possession of the mortgagor, the decedent, Graham, and, on his death, June 4, 1926, passed into the possession of the administratrix on her appointment September 1, 1926. The property was inventoried and appraised as a part of the decedent's estate and claimed by the administratrix as a part thereof until sold and delivered by her to the purchaser. The property was sold under a stipulation of the parties to this action to the effect that the proceeds of the sale should abide the result of the action. No affidavit setting forth the interest of the mortgagee or the assignee was ever made or annexed to the mortgage or filed in the office of the city clerk. The Knudson Sales Company filed against the estate its claim under the note for $425, being the note transferred by Perry without recourse, and this was allowed as an unsecured claim. No claim was ever filed by the Knudson Sales Company on account of the note for $582.50 guaranteed by the defendant Perry, except a contingent claim filed by Perry August 26, 1927, eight months after the time for filing claims against the estate of Henry E. Graham had expired. The estate is insolvent. The mortgaged property sold for $1,020.

This action was begun by the administratrix in the municipal court for Racine county to quiet the plaintiff's title to the mortgaged property. The court found that the mortgages were valid and subsisting obligations as against the plaintiff; that the defendant Knudson Sales Company was the legal owner of the renewal notes and of the chattel mortgage securing the same, directed the application of the proceeds of the sale which was made pursuant to stipulation of the parties to the satisfaction of the mortgages, and dismissed the plaintiff's complaint, with costs. Judgment was entered accordingly, from which plaintiff appeals.Thompson, Myers & Helm, of Racine, for appellant.

Simmons, Walker & Wratten and Wilbershide, Baumblatt & Weisman, all of Racine, for respondents.

ROSENBERRY, C. J.

We have not attempted to make an exhaustive statement of the facts, but only such facts as are necessary to present the questions decisive of the case. The principal proposition urged by the plaintiff upon this trial is that the administratrix of the estate of Henry E. Graham represents creditors, that the failure of the mortgagees and their assigns to file renewal affidavits rendered the mortgages void and of no effect as to creditors, and that the defendant Knudson Sales Company had no lien upon the proceeds of the property sold under the stipulation.

There are two sections of the statutes which relate to the filing and renewal of chattel mortgages:

Section 241.08. “No mortgage of personal property shall be valid against any other person than the parties thereto unless the possession of the mortgaged property be delivered to and retained by the mortgagee or unless the mortgage or a copy thereof be filed as provided in section 241.10, except when otherwise directed in these statutes.”

The mortgages here in question were filed before the rights of any third party had accrued, and no question is raised as to the sufficiency of the filing.

The second section is 241.11. “Affidavit of renewal. Every such mortgage shall cease to be valid, as against the creditors of the person making the same or subsequent purchasers or mortgagees in good faith, after the expiration of two years from the filing of the same or a copy thereof, unless within thirty days next preceding the expiration of the two years the mortgagee, his agent or attorney shall make and annex to the instrument or copy on file in the office of the clerk mentioned in section 241.10, an affidavit,” etc.

[1] It has been held under the provisions of section 241.08 that that section rendered the mortgage invalid as to third parties even though when they purchased or took a subsequent mortgage upon the property they had actual knowledge of the prior mortgage; in other words, that the statute means what it says, that the mortgage is void as to every one except the parties thereto unless it is filed as provided by statute. Parroski v. Goldberg, 80 Wis. 339, 50 N. W. 191;Dornbrook v. M. Rumely Co., 120 Wis. 36, 97 N. W. 493.

[2] The language of section 241.11 is not that the mortgage shall not be valid as against any other person than the parties thereto if the affidavit of renewal is not filed, but that the mortgage shall cease to be valid as against creditors of the person making the same or subsequent purchasers or mortgagees in good faith. The Legislature must have intended by the use of this language to make a wide distinction between the effect of failure to file and the effect of failure to renew. It did this by introducing into the statute the element of good faith on the part of subsequent purchasers or mortgagees. The only effect of a failure to file an affidavit of renewal is to render the chattel mortgage invalid as against subsequent purchasers or mortgagees in good faith or creditors who thereafter acquire liens upon the property. Ullman v. Duncan, 78 Wis. 213, 47 N. W. 266, 9 L. R. A. 683.

In Nix v. Wiswell, 84 Wis. 334, 340, 54 N. W. 620, 622, it was said: “This court has, however, from the beginning construed that statute to the effect that, in the absence of such renewal, such mortgage...