Lovejoy v. Merchants' State Bank
| Decision Date | 15 June 1896 |
| Citation | 67 N.W. 956,5 N.D. 623 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Cass County; McConnell, J.
Action by Frank L. Lovejoy against the Merchants' State Bank for conversion. From a judgment for plaintiff, defendant appeals.
Newman Spalding & Phelps, for appellant.
S. G Roberts, for respondent.
The important facts in this case are not in dispute, and may be summarized: The defendant held a first mortgage on certain personal property to secure an indebtedness of $ 1.500. The mortgagor voluntarily surrendered the property to the mortgagee, and the latter took possession thereof under his mortgage. The defendant did not foreclose the mortgage in any manner, nor attempt to do so, but sold the mortgaged property at private sale for the sum of $ 1,271.10. The property was sold fairly, and for its full value. The plaintiff is a junior mortgagee, whose mortgage covered the same property, but was made and filed after the defendant's mortgage, and was, in terms, made subject to defendant's mortgage. Plaintiff's mortgage was given to secure an indebtedness of $ 291.66. After plaintiff's mortgage debt matured, and after defendant had sold the property at private sale, as before stated, the plaintiff demanded the possession of said property from the defendant, but such demand was not complied with. Until such demand was made, the defendant had no knowledge of the existence of plaintiff's mortgage. The plaintiff, after making the demand, brought this action for the wrongful conversion of the mortgaged property, and recovered a judgment against defendant, in the District Court, for the full amount of the debt secured by plaintiff's mortgage.
The plaintiff's theory is that the sale of the mortgaged property at private sale was a wrongful conversion of the property by the defendant, and that such wrongful conversion operated to extinguish the lien of defendant's mortgage under the provisions of section 4342, Comp. Laws, which reads, "The sale of any personal property on which there is a lien in satisfaction of the claim secured thereby, or, in case of personal property, its wrongful conversion by the person holding the lien, extinguishes the lien." Plaintiff cites, with other authority, Everett v. Buchanan, 2 Dakota 249, 6 N.W. 439, as supporting his contention. Our views are in entire harmony with the plaintiff's contention, to the extent that the sale of the mortgaged property, without a foreclosure of the mortgage, and at private sale, was a wrongful conversion of the property by the defendant, within the meaning of the statute, and that such conversion operated to extinguish the lien of defendant's mortgage. Section 4342, supra, embodies an established doctrine of the common law. In selling the mortgaged property without a foreclosure of the lien, the defendant not only violated express legal requirements regulating foreclosure proceedings, but also wrongfully assumed to deal with the property as owner, without warrant of law. The mortgaged property was wheat, and the defendant's wrongful conversion of it by a private sale placed the plaintiff's security entirely beyond his reach, and thereby wholly destroyed the value of such security to him. For such a wrong an action at law will lie for damages. True, it might perhaps be successfully urged, as against a recovery in this action, that plaintiff, at the time of the unlawful conversion of the wheat, was not in the actual possession thereof, nor entitled to such possession, because he had neither paid nor tendered to the defendant the amount secured by defendant's prior mortgage. Without deciding whether the plaintiff was or was not, for the reasons stated, in a position to bring an action in the nature of trover for conversion, we shall proceed to dispose of the case upon other grounds. Assuming that plaintiff's action will lie for damages for the wrongful conversion, the inquiry arises as to what extent the plaintiff has been injured,--in other words, what is his measure of damages? Reverting to the situation as it existed prior to the sale, we find that the defendant was lawfully in the possession of the property, the same having been voluntarily surrendered to him by the mortgagor. At that time the plaintiff, as a junior mortgagee, was in a position to obtain the possession of the property, and could do so at any time by tendering to the defendant an amount sufficient to discharge the debt secured by the first mortgage, to-wit, $ 1,500. The wrongful sale deprived the plaintiff of this right, and whatever sum may be necessary to compensate the plaintiff for this injury the law will award as plaintiff's measure of damages. The true measure of damages is actual compensation for the loss suffered by reason of the wrong complained of. 3 Suth. Dam. p. 527, states the rule in conversion as follows: The same author, on page 525, in speaking of cases where property is converted by lienholders, lays down the rule a follows: "A party who has a lien on, or other special interest in, property, and converts it, is liable to the owner for its value, but is entitled to recoup the value of his special property." See cases cited in note 6. It will be noticed that the rule of damages, as above quoted, presupposes that the primary measure of damages in cases of conversion of personal property is presumed to be the value of the property. This is the measure presumed under the Code (Comp, Laws § § 4603-4605.) But this rule of damages, wherever found, and however expressed, must be interpreted with reference to the underlying principle of compensation. A plaintiff is not in every case necessarily entitled to recover the full value of property wrongfully converted by the...
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