Peterson v. Hailey National Bank, 5704

• Decision Date: 17 December 1931
• Docket Number: 5704
• Citation: 6 P.2d 145,51 Idaho 427
• Parties: M. M. PETERSON and HAZEL PETERSON, Husband and Wife, Respondents, v. HAILEY NATIONAL BANK, a Corporation, Appellant
• Court: Idaho Supreme Court

6 P.2d 145

51 Idaho 427

M. M. PETERSON and HAZEL PETERSON, Husband and Wife, Respondents, v. HAILEY NATIONAL BANK, a Corporation, Appellant

No. 5704

Supreme Court of Idaho

December 17, 1931

CHATTEL MORTGAGES-SUMMARY FORECLOSURE-STATUTORY PROCEDURE-CONVERSION-MEASURE OF DAMAGES-ALTERATION OF MORTGAGE, EFFECT OF-INSTRUCTIONS.

1. Complaint in chattel mortgagors' action against mortgagee for conversion of mortgaged property held to state cause of action.

2. Complaint stating cause of action sufficient to put defendant upon defense is sufficient as against general demurrer.

3. Provisions of law relative to summary foreclosure of chattel mortgages must be strictly followed (C. S., sec. 6380).

4. Foreclosure of chattel mortgage can be conducted by sheriff only when peaceable possession of property is refused or mortgagors are out of county of foreclosure (C. S., secs 6379, 6380).

5. Although statute requiring mortgagee to demand peaceable possession before foreclosing is to protect mortgagor from foreclosure expenses, mortgagee's noncompliance therewith is not cured by his paying foreclosure expenses (C. S., secs 6379, 6380).

6. Chattel mortgagee selling mortgaged property in any other manner than that directed by statute is guilty of conversion (C. S., sec. 6380).

7. Chattel mortgagee, failing to demand peaceable possession of mortgaged property of mortgagors residing in county of foreclosure before delivering affidavit to sheriff for further proceedings, is guilty of conversion (C. S., sec 6380).

8. Measure of damages for mortgagee's conversion of mortgaged chattels held market value at time and place of sale, plus special damages caused by taking, and interest.

9. Chattel mortgagee may, in mortgagors' action against him for conversion, set off mortgage debt and interest to date of conversion.

10. In mortagors' action against mortgagee for conversion alleging amount mortgaged chattels sold for, although unnecessary, held not reversible error.

11. Allegations that wool from mortgaged sheep was sold after mortgagee's conversion of other mortgaged chattels held not cause of action separate from mortgagors' action for conversion required to be separately stated.

12. Instruction that mortgagee's unauthorized material alteration of mortgage destroyed lien and right to foreclose held authorized by pleadings.

13. Where jury reached verdict upon proper theory, appellants held not prejudiced by improper instructions given or court's refusal to give requested instructions.

14. Whether chattel mortgage was illegally foreclosed held for court, facts being undisputed.

15. Since mortgagors' action against mortgagee for conversion was for money only, judge had discretion whether he would instruct to find particular questions of fact if jury found general verdict (C. S., sec. 6861).

16. Where there is reporter's transcript, appellant should not request instructions "given or refused" in praecipe to clerk (C. S., sec. 6886, as amended by Laws 1927, chap. 33).

APPEAL from the District Court of the Fourth Judicial District, for Blaine County. Hon. D. H. Sutphen, Judge.

Action for conversion against mortgagee by mortgagors. Judgment for plaintiff. Affirmed.

Affirmed.

Roy Van Winkle, for Appellant, cites no authorities on points decided.

A. F. James, for Respondents.

The material alteration of a mortgage annuls the instrument as a lien upon the property and likewise prevents proceedings for its foreclosure. (2 C. J., pp. 1187, 1188, secs. 27, 28. See, also, Bradbury v. Nethercutt, 95 Wash. 670, 164 P. 194.)

The provisions of C. S., sec. 6380 et seq., relative to summary foreclosure of chattel mortgages, are mandatory and must be strictly complied with. (McDougall v. Kasiska, 48 Idaho 424, 282 P. 943; Advance Rumley Thresher Co. v. Ayres, 47 Idaho 514, 277 P. 20.)

Whenever a mortgagee takes possession of and sells the mortgaged property in any other manner than that provided by statute, he is guilty of conversion and becomes liable to the mortgagor the same as anyone else who converts property to his own use. (Marchand v. Ronaghan, 9 Idaho 95, 72 P. 731; 1929 Sess. Laws, chap. 251; Trudell v. Hingham State Bank, 62 Mont. 557, 205 P. 667; 11 C. J. 589.)

The measure of damages for the conversion of mortgaged chattels is the value of the chattels at the time of the conversion against which however the mortgagee may offset the amount unpaid on the mortgage indebtedness. (Advance Rumely Thresher Co. v. Brady, 47 Idaho 726, 278 P. 224.)

VARIAN, J. Lee, C. J., and Budge, Givens and McNaughton, JJ., concur.

OPINION

VARIAN, J.

Action for conversion against mortgagors. The complaint alleges, in substance, the giving of two promissory notes on November 1, 1928, each due six months after date; the execution and delivery of a chattel mortgage, copy attached, on December 14, 1928, to secure payment thereof; that after execution, without knowledge or consent of plaintiffs the mortgage was materially altered by defendant (appellant) in the following particular, viz., "the year '1928' as the same appears in the chattel mortgage in connection with certain crops, was altered and changed to read '1929'"; that the mortgaged property represented all of the livestock and farm machinery then being used by plaintiffs in the course of their farming operations; that after execution of said chattel mortgage plaintiffs paid $ 433.61 to defendant to be applied in part payment of said notes; that on October 9, 1929, the sheriff served an affidavit and notice of sale, signed by him, upon plaintiffs and took into his possession all of said property then in existence; that he sold, acting pursuant to said affidavit and notice all the then existent property described in said chattel mortgage for the sum of $ 2,749, and sets up a list of the property sold and the prices received therefor; that defendant did not serve upon plaintiffs, prior to October 9, 1929, or at all, the affidavit and demand for peaceable possession of the mortgaged property, required by the provisions of the statute then in force, C. S., sec. 6380 (now amended, Sess. Laws 1931, chap. 110, p. 190); that certain enumerated exempt property included in said chattel mortgage was of the reasonable market value of $ 860; that the reasonable market value of all the property covered by said chattel mortgage was, at the date and place of sale, $ 4,540; that after the sale of October 19, 1929, defendant sold certain wool, clipped during the spring of 1929, from the mortgaged sheep, and received therefor $ 461.58; and that no part of said sum, nor the value of the exempt property, has been paid to defendants; and that defendant has not accounted for, or credited, the amount received from the sale of October 19, 1929.

Appellant demurred to the complaint generally that it did not state a cause of action. Under the familiar rule, if the complaint states a cause of action that will put defendant upon his defense, the order overruling a general demurrer must be sustained. (Steinour v. Oakley State Bank, 32 Idaho 91, 177 P. 843; Outlook Farmers' Elevator Co. v. American Surety Co., 70 Mont. 8, 223 P. 905; Des Moines Nat. Bank v. Fairweather, 191 Iowa 1240, 181 N.W. 459, 184 N.W. 313.)

Chattel mortgages may be foreclosed by notice and sale, or by action in the district court. (C. S., sec. 6379.) Prior to its amendment, supra, C. S., sec. 6380, read as follows:

"In proceeding to foreclose by notice and sale, the mortgagee, his agent or attorney, must make an affidavit stating the date of the mortgage, the names of the parties thereto, a full description of the property mortgaged, and the amount due thereon. Such affidavit shall be sufficient authority to demand and receive possession of the property, if the same can be taken peaceably, but if it can not be so taken, then such affidavit must be placed in the hands of the sheriff of the county or the constable in the precinct where the property is located, together with a notice signed by the mortgagee, his agent or attorney, requiring such officer to take the mortgaged property into his possession and sell the same."

The complaint alleges that no demand for possession of the mortgaged property was ever made by appellant prior to its seizure by the sheriff.

This court, in interpreting the above statute, has consistently followed the rule that "the provisions of law relative to the summary foreclosure of chattel mortgages must be strictly followed. If there is a deviation therefrom, and the property is sold by, or through the acts or procurement of the mortgagee, without such compliance with the statutes he cannot thereafter maintain any action to collect the deficiency." (First Nat. Bank v. Poling, 42 Idaho 636, 643, 248 P. 19; Garrett v. Soucie, 46 Idaho 289, 267 P. 1078; Gandiago v. Finch, 46 Idaho 657, 666, 270 P. 621; Advance Rumley T. Co. v. Ayres, 47 Idaho 514, 277 P. 20; Standlee v. Hawley, ante, p. 129, 4 P.2d 340.) Said provisions are "mandatory and must be strictly complied with." (McDougall v. Kasiska, 48 Idaho 424, 282 P. 943.) And in Advance Rumley T. Co. v. Ayres, supra, it was stated that "only when peaceable possession of the property is refused, or all the mortgagors are out of the county where the foreclosure is had, can the foreclosure proceedings be conducted by the officer."

While it has been said the provision requiring demand by the mortgagee, or his agent, for peaceable possession of the mortgaged property was designed for the protection of the mortgagor against costs and expenses of foreclosure (Tappin v. McCabe, 27 Idaho 402, 149 P. 460; Advance Rumley T. Co. v. Ayres, supra; Standlee v. Hawley, supra), the failure to follow the statute in that respect is not cured by the mortgagee himself paying...