McDougall v. Kasiska

• Decision Date: 29 November 1929
• Docket Number: 5295
• Citation: 282 P. 943,48 Idaho 424
• Parties: ISAAC MCDOUGALL, Trustee in Bankruptcy of the Estate of XAVIER SERVEL, Bankrupt, Respondent, v. W. F. KASISKA, Appellant
• Court: Idaho Supreme Court

282 P. 943

48 Idaho 424

ISAAC MCDOUGALL, Trustee in Bankruptcy of the Estate of XAVIER SERVEL, Bankrupt, Respondent, v. W. F. KASISKA, Appellant

No. 5295

Supreme Court of Idaho

November 29, 1929

BANKRUPTCY-RIGHTS AND DUTIES OF TRUSTEE-ACCOUNT STATED-FRAUD AND MISTAKE-USURY-INSTRUCTIONS-CHATTEL MORTGAGES - SUMMARY FORECLOSURE - STATUTORY PROCEDURE - JOINDER OF CAUSES-ATTORNEY FEES.

1. Trustee in bankruptcy for mortgagor had right to maintain action against mortgagee for conversion of mortgaged property because of alleged violation of law in method of foreclosure exercised, regardless of whether bankrupt had challenged mortgagee's right to foreclose, in accordance with provision of C. S., sec. 6385.

2. Trustee in bankruptcy as representative of unsecured creditors has duty of protecting bankrupt estate against fraud or mistake, notwithstanding what bankrupt might do or say, and admission or waiver of bankrupt cannot operate so as to bind trustee.

3. Judgment in federal court after instruction of bankruptcy proceedings denying petition to restrain sale of sheep under mortgage uutil trustee could be appointed was not res adjudicata, in subsequent action by trustee to recover against mortgagee for conversion by reason of alleged violation of law in method of foreclosure.

4. Where defendant in action for accounting and damages for conversion of sheep, alleged that account between parties was general account kept to show total balance due, and also that accounts were kept in one general account, with agreement on total balance, trial court properly instructed jury on both theories in accordance therewith.

5. An account stated is always open to attack for fraud or mistake.

6. Court, in action for accounting and conversion, properly instructed relative to usury on its own motion, where usury was injected into case by reason of calculating interest at 10 per cent not only on principal but on overdue interest as well, in violation of C. S., sec. 2551, and section 1540, as amended by laws 1919, chap. 114.

7. Provisions of C. S., sec. 6380 et seq., relative to summary foreclosure of chattel mortgages, are mandatory, and must be strictly complied with.

8. Attempted foreclosure of chattel mortgages in one foreclosure proceeding under C. S., sec. 6380 et seq., by marshaling of separate debts and separate securities in one proceeding where neither mortgagors nor attaching creditors could have possibly been able to ascertain from blanket affidavit the amount claimed due under any particular note and mortgage was invalid.

9. In order to recover on contract for attorney's fee plaintiff must plead and prove the contract for a fee, the amount of fee contracted for, and that the same is reasonable.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Ralph W. Adair, Judge.

Action for an accounting and damages for conversion of sheep. Judgment for plaintiff. Affirmed.

Judgment affirmed, costs to respondent. Petition for rehearing denied.

Holden & Coffin and Hawley & Hawley, for Appellant.

Section 47-A, subdivision 2, of the Bankruptcy Act (U. S. C., title 11, sec. 75), provides that trustees in bankruptcy "as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied."

This court, in the case of Neustadter Bros. v. Doust, 13 Idaho 617, 92 P. 978, determined the rights of general creditors to attack proceedings under a chattel mortgage foreclosure. The court held unequivocally that a general creditor was not a person in a position to attack such proceedings.

The foregoing decision was followed, with approval, in the case of Ryan v. Rogers, 14 Idaho 309, 318, 94 P. 427. It has been subsequently followed by this court in the case of Kettenbach v. Walker, 32 Idaho 544, 549, 186 P. 912. The federal court of this district in the very recent case of In re Simpson, 31 F.2d 317, has held likewise. The circuit court of appeals of the United States for the second circuit, in the case of In re Avlon Syrup Corp., 25 F.2d 342, has held to the same effect.

The supreme court of the United States in the following two cases has held to the same effect: Holt v. Crucible Steel Co., 224 U.S. 262, 32 S.Ct. 414, 56 L.Ed. 756; Martin v Commercial National Bank, 245 U.S. 513, 38 S.Ct. 176, 62 L.Ed. 441.

A failure to give a proper notice of a judicial sale under the Idaho statutes does not render the sale void, but gives to any interested party a right of action against the officer or other person selling for the penalty provided by our statute and the actual damages incurred. This is the rule of C. S., sec. 6923, which is identical with section 693 of the California Code of Civil Procedure, and section 1226 of the Montana Code of Civil Procedure. The following cases involve the California and Montana sections corresponding to the Idaho section: Smith v. Randall, 6 Cal. 47, 65 Am. Dec. 475; Shores v. Scott River Water Co., 17 Cal. 626; Blood v. Light, 38 Cal. 649, 99 Am. Dec. 441; Frink v. Roe, 70 Cal. 296, 11 P. 820; Burton v. Kipp, 30 Mont. 275, 76 P. 563, 565, 566.

The claim of usury in this case could not be availed of by the plaintiff in the absence of a direct pleading charging usury. (Olson v. Caufield, 32 Idaho 308, 312, 313, 182 P. 527.)

The computation of interest by the daily balance method, as appears to have been used in this case, resulting--according to that method--in a charge of slightly less than ten per cent per annum, and then at the end of the year adding the unpaid interest which was less than the credits given during the course of the year to the principal, does not constitute usury. (Jones v. Nossaman, 114 Kan. 886, 37 A. L. R. 317, 221 P. 271; Sanford v. Lundquist, 80 Neb. 414, 118 N.W. 129, 18 L. R. A., N. S., 633; First National Bank v. Waddell, 74 Ark. 241, 4 Ann. Cas. 818, 85 S.W. 417, 420, 421; First National Bank v. Cargill Elevator Co., 155 Minn. 30, 192 N.W. 111.)

Bissell & Bird, for Respondent.

Upon the filing of the petition in bankruptcy respondent became vested with all the rights of the bankrupt in the latter's property, and with all the rights and powers of a judgment creditor holding an execution duly returned unsatisfied, and, since the summary proceedings for the foreclosure of his mortgages had not been completed by appellant at the time of the filing of such petition, respondent became a "person interested" within the meaning of C. S., sec. 6385, and was authorized and empowered to prosecute the instant action. (Sec. 70, Bankruptcy Act (U.S.C. A., tit. 11, sec. 110); Ryan v. Rogers, 14 Idaho 309-323, 94 P. 427; C. S., secs. 6385 and 6917; Union Trust & Sav. Bank v. Idaho S. & Ref. Co., 24 Idaho 735-747, 135 P. 822; 5 Remington on Bankruptcy, sec. 2240; In re Hickerson, 162 F. 345; Equitable Trust Co. v. Great Shoshone etc. Co., 245 F. 697, 158 C. C. A. 99; note, U.S.C. A., tit. 11, sec. 75, p. 182.)

An account stated is only prima facie evidence of its own correctness and may be impeached for fraud, mistake or error. (6 Bancroft's Code Pr. & Rem. 5805; 1 C. J. 715; 1 R. C. L. 217; note, 23 L. R. A., N. S., 787.)

The trial court did not err in instructing the jury that the foreclosure sales were void and invalid, and such instruction is fully justified by the record and evidence for the following reasons and upon the following grounds:

(a) Three distinct mortgages were improperly foreclosed in one proceeding. (Berg v. Carey, 40 Idaho 278-282, 232 P. 904.) All the bands of sheep were not commingled. Any bands commingled were knowingly permitted to be commingled by appellant (Ryan v. Rogers, supra), and appellant cannot profit by his own carelessness, to the injury of the mortgagor's creditors as represented by respondent.

(b) If these three mortgages could be foreclosed in one proceeding "simultaneously," then the seizures and sales must all have been done by appellant, his agent or attorney; not part by such persons and another part by the sheriff. (C. S., secs. 6380, 6381; Tappin v. McCabe, 27 Idaho 402, 149 P. 460.)

(c) The sheep were sold in five sales, one band being sold at each sale, and similar forms of notices were used for all the sales. Each of these notices stated that the band therein described was to be sold for the total amount of the debt. This rendered the notices deceptive and improper.

(d) In summary proceedings to foreclose chattel mortgage an attorney's fee cannot be included in the "amount due." (No authorities.) If a fee is included it must be reasonable and cannot in any event exceed the amount actually paid. (8 C. J. 1101; Salisbury v. Stewart, 15 Utah 308, 62 Am. St. 934, 49 P. 777, 778; Porter v. Title Guaranty & S. Co., 17 Idaho 364-378, 106 P. 299, 27 L. R. A., N. S., 111.)

Where interest at the rate of ten per cent per annum is charged upon an account, and the amount of such interest is at the end of each year added to and made a part of the balance, and interest on such new balance is charged at the rate of ten per cent per annum and so on from year to year, such interest is usurious and unlawful. (C. S., secs. 2552-2554, and annotations.)

The Byington sale was conducted more than twenty miles away from the point it was advertised to be held, and it is invalid. (C. S., sec. 6924; Howard v. North, 5 Tex. 290, 51 Am. Dec. 769-781; Murphy v. Hill, 77 Ind. 129; Molette v. Hodges, 1 White & W. Civ. Cas. App. (Tex.), sec. 398, p. 172.)

T. BAILEY LEE, J. Givens, Wm....