Rhea Mortgage Co. v. Lemmerman

• Decision Date: 28 November 1928
• Docket Number: (No. 839-4904.)
• Parties: RHEA MORTGAGE CO. v. LEMMERMAN.
• Court: Texas Supreme Court

Page 690

10 S.W.2d 690

RHEA MORTGAGE CO. v. LEMMERMAN.

(No. 839-4904.)

Commission of Appeals of Texas, Section B.

November 28, 1928.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Action by the Rhea Mortgage Company against R. H. Pringle and others to foreclose a mortgage, in which a writ of sequestration was issued, and A. H. Lemmerman asserted a claim to the property sequestered. Judgment in claimant's favor was affirmed by the Court of Civil Appeals (294 S. W. 959). and plaintiff brings error. Judgment of Court of Civil Appeals affirmed.

Austin F. Anderson, of Fort Worth, for plaintiff in error.

W. O. Davis, of Gainesville, for defendant in error.

LEDDY, J.

Plaintiff in error, in due course of trade, for a valuable consideration, acquired a promissory note executed by R. H. Pringle, payable to the order of the Fain-Bender Motor Company, a corporation; said note being secured by a chattel mortgage on an automobile.

It appears that the Fain-Bender Motor Company was engaged in the business of selling new and used automobiles in the city of Fort Worth, and that it was the custom for this company to assign notes taken by it for deferred payments on automobiles sold to its customers to this mortgage company, together with the mortgages securing them, and that the transaction out of which this suit arose was handled as other transactions, the only difference being that in this instance the note and mortgage were executed by an officer of the Fain-Bender Motor Company.

After plaintiff in error had duly registered the mortgage assigned to it in this transaction, the automobile covered thereby was sold from the floor of the Fain-Bender Motor Company salesroom to one High, who subsequently traded the car to said company on another car, and it was then sold to defendant in error, Lemmerman, out of the stock daily exposed for sale by the Fain-Bender Company. Lemmerman had no actual notice at the time he purchased the car of the existence of the mortgage held by the plaintiff in error.

Pringle having made default in the payment of said note, plaintiff in error brought suit against him thereon and sought a foreclosure of its mortgage lien. At its instance a writ of sequestration was issued, and the car covered by the mortgage was taken by an officer acting under such writ from the actual possession of the defendant in error. Upon proper claimant's affidavit and bond being filed by Lemmerman, a trial of the right of property followed. At the close of the evidence the trial court peremptorily instructed the jury to render a verdict in favor of the claimant, Lemmerman. Upon appeal the judgment of the trial court was affirmed by the Court of Civil Appeals by a divided court; Associate Justice Buck dissenting.

There is no evidence in the record, aside from the mortgage, showing that Pringle was the owner of the car at the time he executed the mortgage to the Fain-Bender Motor Company, under which plaintiff in error claims. In fact, the evidence affirmatively shows, without dispute, that Pringle was not the owner of the car at the time he attempted to mortgage the same to the Fain-Bender Motor Company. No bill of sale was recorded or found in the files of the company showing such sale. The car was not shown to have ever been licensed in the name of Pringle on the records of the county. It was the custom of the company to keep record sheets of all new cars, showing the name of the purchaser, and a search of the company's records failed to show any sales sheet covering this transaction. The evidence further disclosed without dispute that the car was kept as a part of the stock of the Fain-Bender Motor Company daily exposed for sale, and therefore was never in the individual possession of Pringle. In addition to this, one employee of the Fain-Bender Motor Company swore positively that Pringle never owned an automobile while he was with the company. There was no evidence showing that the Fain-Bender Motor Company consented to or knew of the execution of the notes and mortgage by Pringle, or knew or consented to their transfer to the Rhea Mortgage Company, nor is there any evidence in the record showing that the Fain-Bender Motor Company ever received any part of the cash paid to Pringle by the Rhea Mortgage Company in consideration of the transfer of such notes. Under this state of the record, we think it conclusively shown that Pringle never owned, nor did he ever have in his individual possession, the automobile in question.

A determination of the question as to whether the registration of the mortgage held by plaintiff in error was constructive notice to Lemmerman at the time he purchased the car from the Fain-Bender Motor Company is decisive of this appeal.

We think the overwhelming weight of authority establishes the rule that a mortgage on personal property made by one who is not the owner thereof, although placed of record, is not constructive notice to any one dealing with the owner of the property. Beaumont Rice Co. v. Bridges, 45 Tex. Civ. App. 439, 101 S. W. 511 (writ refused); Wunschel v. Farmers' State Bank of Burkburnett (Tex. Civ. App.) 203 S. W. 924; Kinney v. Murray, 170 Mo. 674, 71 S. W. 197; Bradford v. Lembke (Tex. Civ. App.) 118 S. W. 159; Mackey v. Cole, 79 Wis. 426, 48 N. W. 520, 24 Am. St. Rep. 728; Maier v. Davis, 57 Wis. 212, 15 N. W. 187; Johnson v. Wilson, 137 Ala. 468, 34 So. 392, 97 Am. St. Rep. 52; Lembeck-Betz Eagle Brewing Co. v. Barbi, 90 N. J. Eq. 373, 106 A. 552; Crawford v. Benoist, 97 Mo. App. 219, 70 S. W. 1098; Brayton v. Beall, 73 S. C. 308, 53 S. E. 641, L. Fish Furniture Co. v. Reliable Storage & Van Co., 187 Ill. App. 6; Wade on Notice, § 205, p. 223; Cobbey on Chattel Mortgages, § 781; Lewis v. Buttrick, 102 Mass. 412; 5 Ruling Case Law, p. 415, § 40; 11 C. J. p. 540, § 288; Gibbs v. Childs, 143 Mass. 103, 9 N. E. 3.

The prevailing rule is well stated in 5 Ruling Case Law, p. 415, § 40:

"The weight of authority is that a mortgage on personal property made by one who is not the owner of the property * * * although placed on record, is not...