Platte Valley Cattle Co. v. Bosserman-Gates Live Stock & Loan Co.

• Citation: 202 F. 692
• Decision Date: 16 December 1912
• Docket Number: 3,741.
• Parties: PLATTE VALLEY CATTLE CO. v. BOSSERMAN-GATES LIVE STOCK & LOAN CO.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

202 F. 692

PLATTE VALLEY CATTLE CO. v. BOSSERMAN-GATES LIVE STOCK & LOAN CO.

No. 3,741.

United States Court of Appeals, Eighth Circuit.

December 16, 1912

Syllabus by the Court.

In the federal courts an assignment as error of a rejection of an offer to prove certain facts without propounding any questions to a witness properly raises the issue of the admissibility of competent proof of those facts which will be determined by the appellate courts on its merits and on the presumption that the offer was made in good faith.

A sale by a mortgagor of chattels, in whom is the legal title, with the consent of the first mortgagee, without notice to intermediate lienholders, does not foreclose their liens although the sale is made for the full value of the property and the proceeds are applied to the payment of the debt secured by the first mortgage.

A third person, not a volunteer, who pays and procures a release of a first lien upon property under an agreement with the owner that as purchaser or first lienor he shall have the pecuniary benefit of such payment, becomes subrogated in equity, as against an inferior lienor whose burden is not increased by such subrogation, to the rights held by the first lienor before the payment was made.

In the federal courts the general rule is that the difference between causes of action at law and in equity is sedulously preserved, that a legal cause of action cannot be maintained in equity nor can equitable causes of action or defenses avail in actions at law, and this although they are permissible in the state courts of the district, and the distinction between the forms of actions at law and suits in equity has been there abolished.

One in actual possession of personal property holding the right to that possession and an interest in the property by subrogation to the rights of a superior lienor may prove, in an action at law in the federal courts in defense of his possession and interest against a claim of an inferior lienor, the facts which establish the subrogation.

Louis Quarles, of Milwaukee, Wis. (George Lines, W. M. Spooner, and F. C. Ellis, all of Milwaukee, Wis., and E. A. Cook, of Lexington, Neb., on the brief), for plaintiff in error.

J. J Halligan, of North Platte, Neb. (W. T. Wilcox and J. G. Mothersead, both of North Platte, Neb., on the brief), for defendant in error.

Before SANBORN and HOOK, Circuit Judge, and McPHERSON, District Judge.

SANBORN Circuit Judge.

The Bosserman-Gates Live Stock & Loan Company, a corporation, brought an action of replevin against the Platte Valley Cattle Company, a corporation, for cattle in the latter's possession on the ground that the plaintiff had a special property therein of the value of $12,000 by virtue of a chattel mortgage thereof made by R. D. Brown on December 7, 1909, wherein default in the payment of the debt had been made. The defendant denied the averments of the plaitiff's complaint. Two hundred and eighty cattle were taken from the defendant under the writ of replevin and delivered to the plaintiff at the commencement of the action, and the verdict and judgment were that the plaintiff recover 1 cent damages for the detention of these cattle and $924, the value of certain cattle in the possession of the defendant which the plaintiff did not obtain by virtue of its writ.

The defendant offered to prove these facts at the trial: All these cattle had been mortgaged by R. D. Brown to the Welpton Investment Company to secure his debt of $10,000 to that corporation on May 25, 1909, more than six months before the mortgage to the plaintiff was given. This mortgage had been duly filed for record on May 26, 1909. About May 9, 1910, Brown sold these cattle for their full value to the defendant under an agreement between the Welpton Company, Brown, and the defendant that the purchase price realized by the sale should be applied first to the payment of Brown's mortgage debt to the Welpton Company, and that the remainder only should be paid to him. This agreement was performed. The sum of $12,700 was due to the Welpton Company on its mortgage debt. This was paid out of the proceeds of the sale, and the remainder, $400, was paid to Brown. Thereupon the Welpton Company released its mortgage, and Brown made a bill of sale to the defendant. The defendant was in possession of the cattle pursuant to this transaction when this action was commenced and they were taken from it under the writ of replevin. An objection to the defendant's offer to prove these facts was made on the ground that they were incompetent, irrelevant, and improper under the issues. That objection was sustained, and this ruling is the first error assigned.

Counsel for the defendant argue that there was no error in the rejection of these facts, whatever their relevancy may have been, because there was no witness on the stand and no question calculated to elicit these facts was propounded before or when the offer was made. When an offer of proof is made, the trial court, if it suspects bad faith, may undoubtedly in its discretion require counsel to produce his witnesses and to propound pertinent questions to them, but such an offer is often the most convenient and satisfactory method of presenting decisive issues of law upon the trial. In the absence of evidence of bad faith, it is presumed to be made in good faith and in the federal courts an assignment as error of a rejection of an offer to prove certain facts without propounding any questions to a witness calculated to elicit them, properly raises the issue of the admissibility of competent proof thereof, and this issue will be determined by the appellate courts on its merits and on the presumption that the offer was made in good faith. Scotland County v. Hill, 112 U.S. 183, 186, 5 Sup.Ct. 93, 28 L.Ed. 692; Missouri Pacific Ry. Co. v. Castle, 172 F. 841, 844, 97 C.C.A. 124, 127; Scotland County v. Hill, 132 U.S. 107, 113, 10 Sup.Ct. 26, 33 L.Ed. 261; Scotland County Court v. Hill, 140 U.S. 41, 42, 11 Sup.Ct. 697, 35 L.Ed. 351. The real question in this case, therefore, is whether or not the facts offered present a defense in whole or in part to the plaintiff's claim in this action.

There were two issues in the case-- the right of possession of the cattle and the value of the plaintiff's special property therein by virtue of its mortgage. Before the sale to the defendant, Brown was in possession of the cattle and the Welpton Company had the right of possession because it held the first mortgage upon them and the debt which that mortgage secured was due and unpaid. As it is conceded that the full value of the property was $13,100 the value of the plaintiff's special property in the cattle was $400, and the Welpton Company had the right by seizure and foreclosure to take and apply $12,700 of the value of the cattle to the payment of the debt due to it. The plaintiff contends that the facts tendered were inadmissible in evidence because their legal effect was to increase its special property in the cattle $12,700 and to leave the defendant, the purchaser, without right of possession to or interest in the cattle for which it had paid $13,100. On the other hand, the defendant insists that the effect of the transaction portrayed by these facts was to vest in the purchaser all the rights of possession of the cattle and the property interests which, before that transaction, were held by both the Welpton Company and Brown. Counsel for the defendant claim that this effect is wrought by the defendant's actual and rightful possession of the cattle, the foreclosure of the first mortgage effected by Brown's sale and the subrogation of the defendant to the rights which the first mortgagee had before its mortgage was released. The actual possession of the cattle by the purchaser, the defendant, at the commencement of the action is conceded. The claim that the first mortgage was foreclosed is founded on the proposition that a sale of mortgaged chattels by the mortgagor for their full value and the application of the proceeds of the sale to the payment of the claim of the first mortgagee with his consent forecloses all right of redemption of the holders of inferior liens, and vests a complete title as well as the right of possession in the purchaser. There is respectable authority for this position (2 Cobbey on Chattel Mortgages, 1298; Faeth v. Leary, 23 Neb. 267, 36 N.W. 513), but it is illogical and unjust. It took its rise when and where the law was that a chattel mortgage vested the legal title in the mortgagee leaving naught but the right of redemption in the mortgagor, and that, upon default, the title of the mortgagee became absolute. When the case of Faeth v. Leary was decided, the law of Nebraska was that the legal title to mortgaged chattels was vested in the mortgagee subject only to the right of redemption in subordinate lienholders. Adams v. Nebraska City National Bank, 4 Neb. 370; Gillilan v. Kendall & Smith, 26 Neb. 82, 42 N.W. 281, 18 Am.St.Rep. 766. But, when the mortgages in this case were made, that rule had long been reversed, and the legal title to the cattle remained in the mortgagor, and the mortgages evidenced nothing but liens upon it in the mortgagees. Musser & Co. v. King, 40 Neb. 892, 59 N.W. 744, 42 Am.St.Rep. 700; Drummond Carriage Co. v. Mills, 54 Neb. 417, 74 N.W. 966, 40 L.R.A. 761, 69 Am.St.Rep. 719; Midland State Bank v. Kilpatrick-Koch Dry Goods Co., 54 Neb. 410, 74 N.W. 837. Before the sale, therefore, Brown held the legal title, the Welpton Company had the first lien, and the plaintiff had the second lien upon these cattle. The plaintiff had the right to pay Brown's debt to the Welpton Company, and then to take and sell the property to pay that debt and its own original claim. The statutes of...