Meyer v. Munro

• Decision Date: 09 March 1903
• Citation: 9 Idaho 46,71 P. 969
• Parties: MEYER v. MUNRO
• Court: Idaho Supreme Court

71 P. 969

9 Idaho 46

MEYER v. MUNRO

Supreme Court of Idaho

March 9, 1903

CHATTEL MORTGAGE ON CORDWOOD-WOOD DEALER-AUTHORITY TO SELL-EXTRINSIC EVIDENCE-DECLARATION OF MORTGAGOR.-1. Under the evidence in this case the chattel mortgage on 285 cords of wood containing the following clause, to wit: "And until default be made in the payment of the said sum of money the said party of the first part, his executors, administrators and assigns, may remain and continue in the quiet and peaceable possession of the said wood and chattels and in full and free use and enjoyment of the same." Held, not to authorize the sale of said wood by the mortgagor. 2. When a chattel mortgage is attacked, evidence is admissible which tends to show that it was made in bad faith or for the purpose of hindering, delaying or defrauding creditors either on the part of the mortgagee or of both the mortgagor and mortgagee. 3. Declarations of the mortgagor made after the execution of the mortgage as to his purpose in executing the mortgage, or the amount due, or any other statement touching the bona fides of the transaction are inadmissible, unless the mortgagee is shown to have been a party to a common unlawful purpose between mortgagor and mortgagee.

(Syllabus by the court.)

APPEAL from District Court, Boise County.

Affirmed with costs.

H. L Fisher, for Appellant.

The mortgage in question covered the stock in trade of a wood dealer, permitted him to remain in possession with power to sell the mortgaged stock, and contained no provision that the proceeds and profits of the sale of said mortgaged property should be applied in payment of the mortgage debt, and is therefore void as to creditors. (Lewiston Nat. Bank v Martin, 2 Idaho 734, 23 P. 920; Harbison v Tufts, 1 Colo. App. 140, 27 P. 1014; Lyon v. Council Bluffs Sav. Bank, 29 F. 566; Aiken v. Pascall, 19 Or. 493, 24 P. 1039; Wilson v. Voight, 9 Colo. 614, 13 P. 726; Roberts v. Johnson, 5 Colo. App. 406, 39 P. 596; Brasher v. Christophe, 10 Colo. App. 284, 15 P. 408; Rocheleau v. Boyle, 11 Mont. 451, 29 P. 872; Byrd v. Forbes, 3 Wash. Ter. 318, 13 P. 715.) The power to sell will be implied from the terms of the instrument and character of the mortgaged property. (Brasher v. Christophe, supra; Harbison v. Tufts, supra; Collins v. Myers, 16 Ohio 547; Roden v. Norton, 128 Ala. 129, 29 So. 637; Hedges v. Polhemus, 9 Misc. 680, 30 N.Y.S. 556; Robbins v. Parker, 44 Mass. 117; Simpson v. Mitchell, 16 Tenn. 417; Davenport v. Foulke, 68 Ind. 382, 34 Am. Rep. 265; Mobley v. Letts, 61 Ind. 11; Benedict v. Renfro, 75 Ala. 121, 51 Am. Rep. 431; Perry v. Shenandoah Nat. Bank, 27 Gratt. 755; Sommerville v. Horton, 4 Yerg. 541, 26 Am. Dec. 245.) The fact that a mortgage was taken for a larger amount than was due, from one known by the mortgagee to be in failing circumstances, and pressed by his creditors, is conclusive evidence of fraud. (Butts v. Peacock, 23 Wis. 359; Bailey v. Burton, 8 Wend. 339; Divver v. McLaughlin, 2 Wend. 596, 20 Am. Dec. 655; Cheatham v. Hawkins, 80 N.C. 161; Wallach v. Wylie, 28 Kan. 138.) Defendants pleaded and proved an estoppel. Under the plainest principles of equitable estoppel, the mortgagees should not be allowed to enforce this mortgage. (Lick v. Munro, 8 Idaho 510, 69 P. 285.) A much wider latitude of inquiry is permissible in cases involving a charge of fraud than those where no such element exists or is alleged. (Murch v. Swensen, 40 Minn. 421, 42 N.W. 290; Walter v. Garnant, 13 Pa. 515, 53 Am. Dec. 491; Stewart v. Severance, 43 Mo. 322, 97 Am. Dec. 392; Bump on Fraudulent Conveyances, 588, 589.)

Karl Paine and Bert Resser, for Respondents.

We need not cite authorities to the effect that the mortgagees were not affected by the fact that the mortgagor sold part of the wood, or that he contemplated fraud against his creditors. The mortgagees must have consented to such sale, or had knowledge of such fraudulent intent. There is no evidence of either such knowledge or consent. (Jones on Chattel Mortgages, 4th ed., secs. 335-343.) The law of Missouri as determined by the courts, is identical with the law of this state. Yet it is there held that the mortgage is not void as to creditors, unless it appears from a consideration of the whole instrument, that it was necessarily the intention of the parties that the mortgagor should continue to sell; and that such intention must appear either by express terms or by necessary implication. (Jones on Chattel Mortgages, sec. 397; Weber v. Armstrong, 70 Mo. 217.) The intent of the statutes providing for the recording of mortgages on personal property was to do away with the necessity of any delivery of the property, and to enable mortgagors to hold possession until default. For this purpose registration is required as giving, perhaps, even greater notoriety to the transaction than delivery and retention of possession. Registration thus becomes a substitute, as well for delivery as for retaining possession of the property. (Jones on Chattel Mortgages, 4th ed., 211; Lewiston Nat. Bank v. Martin, 2 Idaho 734, 23 P. 920.) A mortgagee's title cannot be defeated by the subsequent acts or declarations of the mortgagor, impeaching it as void against his creditors. (Toms v. Whitmore, 6 Wyo. 220, 44 P. 57, 58; Jones on Chattel Mortgages, sec. 342.)

STOCKSLAGER, J. Sullivan, C. J., and Ailshie, J., concur.

OPINION

The facts are stated in the opinion.

STOCKSLAGER, J.--

This case was tried in the district court of Boise county. A jury together with findings of fact and conclusions of law, were expressly waived. Judgment was rendered and entered in favor of the plaintiff for the sum of $ 448.81 and costs. Judgment filed and entered November 30th, 1901.

On the twenty-seventh day of June, 1902, a statement on motion for a new trial was settled and allowed, and on the twenty-third day of August, thereafter, the motion was overruled. It is from this order the appeal is taken. The complaint alleges the conversion of two hundred and sixty-eight cords of cordwood by the defendant, as sheriff of Boise county, by levying upon and selling the same, plaintiffs claiming title thereto by virtue of a chattel mortgage of date September 12, 1900.

Appellant in his answer justifies such seizure and sale by virtue of two executions based on judgments against John Rost, the mortgagor. It is urged by appellant that this mortgage was void and of no effect as against the creditors of Rost, to wit: Braunschweiger & Co., T. H. Lermon, and Henry Larsen, for the reason that by the terms of said chattel mortgage as construed by appellant, Rost was permitted to remain in possession of said wood, and to sell and retail the same, and did remain in such possession and continued to sell the same in the usual course of trade. Also, that the mortgage contained no provision that the proceeds of the sale of such wood should be applied on the payment of the debt alleged to be due the mortgagees. That said wood was an article of merchandise, and it was cut and prepared for said Rost for the purpose of sale, etc.

It will thus be seen that the important question presented to us for consideration is the validity of the chattel mortgage and was it void as to the creditors of John Rost.

The first assignment of error is that the court erred in holding said mortgage valid, and says the undisputed evidence showing that Braunschweiger & Co., T. H. Lermon and Henry Larsen were bona fide creditors of Rost at the time the mortgage was executed and are still such creditors.

The second assignment is that it was error to hold that defendant was liable to plaintiff, it appearing that the mortgage is void. Third, that the judgment against the defendant for $ 448.81 is erroneous and unsupported by the evidence. Fourth, that the decision is not supported by the law or evidence. Fifth, the court erred in refusing to permit defendant Munro's witness, Henry Larsen, to testify as to a conversation with John Rost as to the wood in controversy. Sixth, the court erred in refusing to permit Munro's witness, Larsen, to testify as to whether he ever had a conversation with Rost as to the cordwood. The seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth and fifteenth assignments of error are based upon the refusal of the court to permit witnesses to testify to certain conversation between them and Rost. The assignments of error will be disposed of in the order named.

Counsel for appellant calls our attention to a number of authorities which he urges support his contention that the chattel mortgage set out in the complaint is void as to the creditors, of Rost, for the reason that the instrument by its terms permits him to remain in possession of the wood and have the use and enjoy the same. An inspection of the instrument discloses that it is the usual form of chattel mortgages in use in this state.

Section 3386 of the Revised Statutes provides: "That where the mortgagor retains possession of mortgaged chattels the recording of the mortgage shall protect the mortgagee against attaching creditors."

Counsel for appellant...