Marshall v. Livingston Nat. Bank

• Decision Date: 14 December 1891
• Citation: 28 P. 312,11 Mont. 351
• Parties: MARSHALL v. LIVINGSTON NAT. BANK.
• Court: Montana Supreme Court

28 P. 312

11 Mont. 351

MARSHALL v. LIVINGSTON NAT. BANK.

Supreme Court of Montana

December 14, 1891

Appeal from district court, Park county; FRANK HENRY, Judge.

Action by S. S. Marshall against the Livingston National Bank to recover wages due from E. C. Waters, defendant's assignor. Trial was had on an agreed statement of facts, and plaintiff recovered. Defendant appeals. Affirmed.

The other facts fully appear in the following statement by DE WITT, J.:

This case was tried upon an agreed statement of facts, made and submitted under the provisions of the statute. The agreed statement sets forth as follows: The defendant was a banking corporation, duly organized, etc. On June 2, 1891, E. C Waters was operating the Albemarle Hotel, in the city of Livingston Park county, Mont. He was the owner of personal property in the hotel, which is described in the chattel mortgage below mentioned. The description covers eight type-written pages, and appears to be a detailed list of a large quantity of hotel supplies and furniture which were used in the hotel. He was also the owner of certain household goods and live-stock situated on a ranch near said city, and which was used by Waters in supplying the hotel. On June 2 1891, said Waters made a chattel mortgage of all his property in said hotel and on said ranch to the defendant, comprising all the personal property of said Waters in the said county of Park, to secure the payment of an existing indebtedness consisting of four promissory notes, due, respectively, May 7th, July 14th, July 15th, and July 16th, all in 1891 aggregating $5,737.09. The mortgage authorized the defendant to immediately take possession of a said property, and to sell the same, and apply the proceeds to the payment of said indebtedness. A copy of the mortgage is made part of the statement. It provides that the mortgagee, the defendant, is authorized to sell the said property at once, at private or public sale, and out of the proceeds to retain the principal and interest of the notes, and to pay the overplus, if any there be, to the mortgagor, that upon the execution of the mortgage the bank, defendant, took possession of the property, and proceeded to dispose of the same. The mortgage was given on account of the inability of the mortgagor to pay the notes above mentioned. The mortgage was made in good faith, and not for the purpose of securing any other creditor than the bank. One of the notes was also signed by M. B. Waters, and one by L. C. Phelps. The latter note is fully secured by the Phelps signature. As additional security for the said notes, the bank holds a mortgage on certain real estate, described. On said 2d day of June, 1891, the said Waters was indebted to the plaintiff in the sum of $85.98 for services rendered as a clerk in said hotel, within 60 days prior to June 2d. On June 3d plaintiff served upon defendant a duly-verified claim for the amount mentioned in accordance with the provisions of chapter 121, div. 5, Comp. St. The bank refused to pay said claim, or allow it as a lien prior to the lien of the mortgage. The point in controversy, submitted upon this statement, was is the claim of the said Marshall, plaintiff, entitled to be paid out of the proceeds of the mortgaged property before any of those proceeds are applied to the payment of the notes thereby intended to be secured, or any of them? The statute upon which plaintiff relied, and which was presented to the district court for construction, in connection with the facts, is as follows: "Sec. 2050. That in all assignments of property made by any person, association, corporation, copartnership, chartered company, or corporation, to trustees or assignees, on account of inability of assignor at the time of the assignment to pay his or their debts, or in proceedings in insolvency, the wages of the miners, mechanics, salesmen, servants, clerks or laborers, employed by such assignor, for services rendered within sixty days immediately previous to such assignment, not to exceed two hundred dollars for each person, are preferred claims, and must be paid by such trustees or assignees before any other creditor or creditors of such assignor." The statute provides for a similar preference in favor of wage-workers, in case of an attachment or execution against their employer. The district court held that the plaintiff was entitled to his lien under the provisions of the statute, and rendered an appropriate judgment, from which the defendant appeals.

Savage & Day, for appellant.

A. J. Campbell, for respondent.

DE WITT, J., (after stating the facts.)

E. C Waters was a debtor. He transferred all his personal property within the jurisdiction of the court to the Livingston National Bank, which was a creditor to the amount of $5,737.09, and which indebtedness Waters was unable to pay, and by reason of which inability he made the transfer of said property. We think that it is clear, from the agreed case, that Waters did this on account of his inability to pay his debts. What was this transfer,--a chattel mortgage or an assignment? It is called a "chattel mortgage" in the instrument and in the language of the agreed case. But we have the whole instrument before us as a part of the agreed case, and we have all the facts, and we are not concluded from inquiring into the nature of the transaction by any inscription that the parties have put thereon. Upon an examination of the instrument and the facts, do we find the essential characteristics of a chattel mortgage? One of the elements of a mortgage is that it is a security for a debt. It is not a payment of a debt, or a present instant means for the payment of a debt. The transaction at bar was a transfer at once of all the debtor's property within the jurisdiction to a creditor, with instructions to sell the same, at private or public sale, and to apply the proceeds to the payment of a debt of such creditor of $5,737.09, which debt the debtor and creditor made to be due at once. Furthermore, the creditor, after the payment of such debt, is to render the overplus, from the proceeds of the sales, to the debtor. The court will look through forms, and arrive at the substance. White v. Cotzhausen, 129 U.S. 329, 9 S.Ct. 309, is an instructive case upon this point, and its doctrine has not been overruled in Union Bank of Chicago v. Kansas City Bank, 136 U.S. 233, 10 S.Ct. 1013, as suggested by counsel. Therefore regarding the transaction at bar, and looking beyond the partial chattel mortgage form and name, we do not find the elements of a mortgage security.

Again a characteristic of a chattel mortgage is that there should be a defeasance. Is there one here? We find this clause in the mortgage, "and these presents shall be void if such payment be made [referring to the notes which are set out in full] according to the terms of said respective promissory note?" But following this provision, the instrument sets forth: "It is further provided that said second party shall have the immediate possession of all said above-described property, and shall have the right, at its option, to immediately declare all of said debts to be due, and is hereby authorized and empowered to sell all and singular the above-described chattels, with all and every of the appurtenances, or any part thereof, at public or private sale, and out of the money arising therefrom to retain the said principal and interest, and the costs of making such sale, and the attorney's fees, and the overplus, if any there be to be paid over to the said first party, his heirs or assigns." So it appears that there is a defeasance in words. It is upon payment of the notes as...