In re Johnson

Decision Date28 June 1915
Docket Number1250.
Citation224 F. 180
PartiesIn re JOHNSON. Petition of PACIFIC COAST INV. CO.
CourtU.S. District Court — Western District of Washington

[Copyrighted Material Omitted]

Troy &amp Sturdevant, of Olympia, Wash., for petitioner. A. Emerson Cross and T. H. McKay, both of Aberdeen, Wash., for trustee.

CUSHMAN District Judge.

The bankrupt, prior to bankruptcy, was engaged in the hotel and retail liquor business. Petition for adjudication in bankruptcy was filed December 24, 1912. Eleven months prior thereto the bankrupt, in order to purchase the saloon, hotel furniture, and business, and secure the unexpired portion of the seller's liquor license, borrowed $3,800 from the Pacific Coast Investment Company, for which notes were given payable monthly, for $100 each. These notes were secured by a mortgage on chattels, including the hotel and saloon furniture and fixtures and the merchandise stock.

The trustee petitioned for the sale of the personal property of the bankrupt, on which the Pacific Coast Investment Company held this mortgage. That company appeared and objected to the sale, setting up that the property offered for sale was covered by its mortgage, executed in good faith more than four months prior to the adjudication, and that it was a good and subsisting lien. The referee overruled the objection of the petitioner and sold the property for $2,100. Whereupon the petitioner filed its petition for the distribution of the funds realized to itself. To this petition, the trustee filed an answer admitting the mortgage and alleging that it was invalid for the reason that, while it was made in the name of the Pacific Coast Investment Company, it was, in reality, a transaction wherein the Olympia Brewing Company advanced the money and received the mortgage; that, in part, it was secured upon, and given for the purchase of, the license, liquors, and saloon of the bankrupt, in violation of the laws of Washington.

An amended answer was filed for the trustee, alleging, further, a subsequent transaction, whereby the bankrupt, within four months prior to bankruptcy, surrendered to petitioner the bankrupt's liquor license, alleged to be of the value of $666.65, and that it received such amount therefor, whereby petitioner gained an illegal preference. The referee, after taking testimony, held the mortgage invalid.

If it be concluded that the relation between the petitioning company and the Olympia Brewing Company was sufficiently close to warrant a finding that what was done in this matter by the Pacific Coast Investment Company was virtually the action of the Olympia Brewing Company, the question still remains as to the legality of the mortgage in question.

The Washington statute provides:

'Section 1. That from and after the 31st day of December, 1909, it shall be unlawful for any person, persons, firm or corporation engaged in the manufacture, rectifying or bottling of spirituous, fermented malt or other intoxicating liquors or engaged in buying, selling or disposing of the same in quantities of five gallons or more to own all or any part of or to have any interest in the liquor, stock, fixtures or equipment of any kind whatsoever of any retail liquor store or to pay, advance or loan or become surety for the payment for any other person of the license fee required by any state law or city charter or ordinance, or to hire, engage or employ, directly or indirectly, any person, persons, firm or corporation to manage, conduct, control or operate a place where intoxicating liquors are sold at retail, to wit, in less than five gallons at a time or to sign or become surety on any bond required by law of a retail liquor dealer. ' Section 6282, Rem. & Bal.; title 267, Sec. 97, Pierce's Code 1912.

The referee concludes that a manufacturer of intoxicating liquors is forbidden by this statute to take a mortgage upon a retail liquor store, and in effect holds that such a mortgage would be an 'interest' in such liquor store, within the meaning of this statute.

This law deprives persons of a right of contract theretofore at all times enjoyed under the law and, in the present cause, is being invoked for the purpose of establishing a forfeiture, not only as to the lien of the mortgage upon those things comprising the saloon, but also those not connected with it in any way. It should therefore be strictly construed.

It will not be presumed that the Legislature intended to deprive one engaged in an authorized business of such rights, in the absence of unequivocal language. Before the contract, or any part of it, can be held illegal, it must be clearly within the prohibition of the letter and spirit of the statute, and, if there is a fair doubt as to whether it is embraced within such prohibition, the doubt will be resolved in favor of the petitioning mortgagee. 36 Cyc. 1178 to 1188.

The law denies a liquor manufacturer the right to 'own all or any part or to have any interest in the liquor, stock, fixtures or equipment of any kind whatsoever of any retail liquor store. ' The words 'have any interest,' as used here, have the same meaning as 'own any interest.' If they are given a broader meaning, the words 'own all or any part' are wholly superfluous, for a man who owns 'all or a part' of a thing certainly has an interest in that thing. The words 'any part,' as used in this act, were liable to be misunderstood and taken as meaning, for example, a case where one man owned the fixtures and equipment of a saloon and another owned the liquor. Hence the words 'or to have any interest in' were inserted to deny the manufacturer the right to have or own a fractional or undivided interest in a retail liquor store, its liquor stock, fixtures, or equipment.

The statute also forbids the manufacturer loaning or becoming surety 'for the payment for any other person of the license fee required by any state law' for a retail liquor store. The statute, by denying the manufacturer the right to make a loan for this purpose, impliedly authorizes a loan by the manufacturer to a retail dealer for any other purpose.

This under the familiar maxim, 'Expressio unius est exclusio alterius.' This right to loan carries with it the right to take security upon any and all property, because such right is incidental to the right to loan, which right cannot be denied, in the absence of unequivocal language to that effect.

By this construction only can all the words of the statute be given effect. The Legislature is presumed not to have used unnecessary words in expressing its meaning. If the word 'interest,' as used, is broad enough to include a mortgagee's lien, it is broad enough to include the right of one who 'owns all or any part,' and the Legislature is thereby convicted of using useless and unnecessary words in the statute.

Ownership of any article affords a different control and warrants the anticipation of a different result than that to be expected from a mortgagee's lien. The influence and control of the mortgagee over the mortgaged property and its us would depend largely, if not entirely, upon the solvency of the mortgagor, which would not be the case with an owner.

Whether the purpose on the part of the Legislature in enacting this statute was to prevent a manufacturer of intoxicating liquors from controlling saloons, or to discourage their activity in starting saloons, as the words used in the statute are confined to a denial of right of ownership in the saloon, there is no reason to strain the words used to include something else, because deemed capable of producing a somewhat similar result to that presumed to arise from the admittedly condemned act. Johnson v. So. Pac., 117 F. 462, 54 C.C.A. 508; Id., 196 U.S. 1, 25 Sup.Ct. 158, 49 L.Ed. 363; Field v. U.S., 137 F. 6, 69 C.C.A. 568; Erbaugh v. U.S., 173 F. 433, 97 C.C.A. 663; St. Louis Merchants' Bridge Termin. Ry. v. U.S., 188 F. 191, 110 C.C.A. 63.

Even though this statute imposed a penalty and is invoked to justify a forfeiture, the court would have no right to disregard the obvious intent of the Legislature; but no obvious intent is manifest to include, by the word 'interest,' a mortgagee's lien.

A chattel mortgagee, not in possession, has no title to the mortgaged chattels, although he has a right or lien, which he may preserve against other creditors or grantees by recording. Silsby v. Aldridge, 1 Wash. 117, 23 P. 836; Binnian v. Baker, 6 Wash. 50, 32 P. 1008; Sayward v. Nunan, 6 Wash. 87, 32 P. 1022; First Nat. Bk. v. Hagan, 16 Wash. 45, 47 P. 223.

In Ormsby v. Ottman, 85 F. 492, 29 C.C.A. 295, Judge Sanborn writing the opinion, where a statute authorizing service by publication in suits to quiet title was involved, the language of the statute being 'adverse estate or interest,' it was held that the word 'interest' would include a mortgagee's lien, and that the mortgagee might be served by publication. The court apparently concedes that generally the word 'interest' means an estate, but, in the statutes in pari materia and upon consideration held (partly in view of the statutes in pari materia and upon consideration of the very object of a suit to quiet title) that the word 'interest' included the claim of a mortgagee. Ordinarily an interest would mean an estate, but its being coupled in the disjunctive with the word 'estate' would tend to show that it was used in another sense. One of the statutes before the court in that case, held to be in pari materia with the one in question, provided for service by publication 'when any defendant has or claims a lien or interest.'

The Washington statute in the present case is not one of procedure. It takes away a right of contract and is invoked to justify a forfeiture, and the interpretation is rather to be controlled by the...

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