Schueler v. Weintrob

• Decision Date: 15 September 1960
• Docket Number: No. 68,68
• Parties: Arthur M. SCHUELER, Receiver for Donald L. Merriam and Merle Merriam, individually and doing business as Merriam's Hardware, Plaintiff and Appellant, v. Robert WEINTROB and Arthur Weintrob, Defendants and Appellees.
• Court: Michigan Supreme Court

Page 42

105 N.W.2d 42

360 Mich. 621

Arthur M. SCHUELER, Receiver for Donald L. Merriam and Merle

Merriam, individually and doing business as

Merriam's Hardware, Plaintiff and Appellant, v. Robert WEINTROB and Arthur Weintrob, Defendants and Appellees.

No. 68.

Supreme Court of Michigan.

Sept. 15, 1960.

Wurzer, Higgins & Starrs, Detroit, for plaintiff-appellant. Robert A. Macdonell, Detroit, of counsel.

I. Goodman Cohen, Detroit, for defendants-appellees. Irving L. Halpern, Detroit, of counsel.

Before the Entire Bench.

EDWARDS, Justice.

This appeal requires the construction of a portion of the chattel mortgage filing statute of the State of Michigan (C.L.S.1954, § 566.140 [Stat.Ann. 1953 Rev. § 26.929]) and of Section 70, sub. c of the Federal bankruptcy statute (11 U.S.C.A., § 110, sub. c). Plaintiff-appellant Schueler filed a bill of complaint in Wayne county circuit court, as receiver in bankruptcy of the estates of Donald L. Merriam and Merle W. Merriam, individually and doing business as Merriam Hardware. The bill of complaint sought a decree against defendants-appellees Weintrob declaring a mortgage held by them to be void.

Subsequent to the filing of the bill of complaint, plaintiff-appellant was appointed trustee in bankruptcy of the estates of the Merriams, and the action was continued by him as trustee. The matter was submitted to the circuit court of Wayne county on a writtn stipulation of facts. Basing his opinion upon his contruction of the Michigan chattel mortgage filing statute and a Michigan Supreme Court case, Peter Schuttler Co. v. Gunther, 222 Mich. 430, 192 N.W. 661, the chancellor dismissed the bill of complaint. The facts as stipulated by the parties are as follows:

'1. The defendants herein [Weintrob] being the owners and operators of a certain retail hardware business located at 15035 E. Warren avenue, Detroit, Michigan, sold same to Merle W. Merriam and Donald L. Merriam on October 19, 1954, for a total consideration of $17,000, of which $8,000 was paid in cash and the balance of the unpaid balance in the sum of $9,000 was secured by a commercial form chattel mortgage, the bill of sale and chattel mortgage bearing date of October 19, 1954, and possession of said business was given to the purchaser the same date.

'2. That on October 19, 1954, the same date of the transaction, said purchasers, Merle W. Merriam and Donald L. Merriam, father and son, executed a copartnership certificate under the name and style 'Merriam Hardware' at the above address of 15035 E. Warren avenue, Detroit, Michigan. However, the certificate did not indicate whether they 'now' or 'intend' to carry on a business under such name and at such address, the alternative not being crossed out on such certificate.

'3. Both the copartnership certificate and the chattel mortgage were filed and recorded respectively at the office of the county clerk for Wayne county and register of deeds for the county of Wayne on the first next possible date after their execution to-wit, October 20, 1954. The chattel mortgage was not recorded in the county of Oakland.

'4. At the time of the execution of the chattel mortgage and at all times material to this action, Merle W. Merriam resided in Oakland county, Michigan, and continuously and uninterruptedly was employed in an industrial plant in Pontiac, entrusting the care, management and control of the business to the other copartner, his son, Donald L. Merriam, who at the time of the execution of the chattel mortgage resided in Wayne county, Michigan.

'5. The mortgagors being in default in the payments due on said chattel mortgage, and $8,000 remaining unpaid thereon, the defendants, as mortgagees, foreclosed said chattel mortgage on October 4, 1955, and took possession on October 4, 1955, of said chattels through their agent, a constable, and were proceeding to sale set for October 17, 1955, on which date, about 15 minutes before the time set for sale, were served with a restraining order obtained by the receiver in bankruptcy of the mortgagors, who had filed their individual and copartnership bankruptcy petitions on October 11, 1955.

'6. Plaintiff is the trustee in bankruptcy of the mortgagors, having been the receiver in bankruptcy at the time of the commencement of this suit.

'7. Subsequent to adjudication of bankruptcy the parties hereto stipulated that a sale should be had under the direction of the bankruptcy court, and that the proceeds thereof should be held intact to await the determination in this contemplated litigation, said assets covered by the mortgage appraised at the time of its being delivered to the receiver in the sum of $3,216.23 and being sold at auction for $3,044.78, net proceeds being $2,689.64.

'The gist of the lawsuit is the validity of the chattel mortgage and whether the defendants herein, mortgagees, or the plaintiff, trustee in bankruptcy, is entitled to the proceeds of the sale of the assets.'

At the outset, the parties read this stipulation of facts differently. Appellees believe that the mortgage was executed by a partnership consisting of the 2 Merriams. Appellant reads the facts as indicating that the 2 Merriams executed the mortgage as individuals. Neither the appendix nor the record on appeal contains the mortgage. But our consideration of the stipuation above, and of the pretrial statement and pleadings, convinces us that the mortgage was executed by the Merriams as individuals.

The language of the filing statute declares:

'Every mortgage or conveyance intended to operate as a mortgage of goods and chattels which shall hereafter be made which shall not be accompanied by an immediate delivery and followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers or mortgagees in good faith, unless the mortgage or a true copy thereof shall be filed in the office of the register of deeds of the county where the goods or chattels are located, and also where the mortgagor resides, except when the mortgagor is a non-resident of the state, when the mortgage or a true copy thereof shall be filed in the office of the register of deeds of the county in which the property is located.' (Emphasis supplied.) C.L.S.1954, § 566.140 (Stat.Ann.1953 Rev. § 26.929).

We note, of course, that the statute employs the term 'mortgagor' in the singular. However, a specific Michigan statute requires us to take into account, in construing statutes, that 'every word importing the singular number only, may extend to and embrace the plural number.' C.L.S.1952, § 8.3(2) (Stat.Ann.1952 Rev. § 2.212); In re City of Detroit, 261 Mich 278, 246 N.W. 51.

Where, as here, one of the mortgagors lived in a county other than that in which the other mortgagor lived and the goods were located, the statute has been held to require filing in both counties. First National Bank of Marquette v. Weed, 89 Mich. 357, 50 N.W. 864; Cappon v. O'Day, 165 Wis. 486, 162 N.W. 655, 1 A.L.R. 1657.

See, also, 10 Am.Jur., Chattel Mortgages, § 93.

Thus, as against a general creditor of the mortgagors, or a subsequent purchaser or mortgagee in good faith, this mortgage would be void absent some additional facts.

In this case, however, there were additional facts. The mortgagees foreclosed the mortgage and took possession of the property on October 4, 1955. This was 7 days before the bankruptcy petitions were filed on October 11, 1955.

The purpose of the filing statute is to give notice of indebtedness to any possible creditors. We believe that the taking of possession of the chattels by the mortgagees in this case was equivalent in legal effect to filing. Parsell v. Thayer, 39 Mich. 467; Waite v. Mathews, 50 Mich. 392, 15 N.W. 524; American National Bank of Sapulpa v. Harris, 10 Cir., 84 F.2d 181.

The first of the cases provides the rationale for this holding (39 Mich. at page 469):

'The statute requires neither notice nor filing where there is an immediate and continuous change of possession. * * * Notice by such possession would be the best possible notice under the language of the statute.'

It should be noted that in our instant case there is no indication of interim creditors who extended credit to the Merriams in between the execution of the mortgage and the repossession of the property by the mortgagees. Thus, we deal with a problem essentially similar on its facts to those considered by this Court in Peter Schuttler Co. v. Gunther, 222 Mich. 430, 192 N.W. 661, and Riverside Machinery Depo v. American Steel Supply Syndicate, 232 Mich. 22, 204 N.W. 766, rather than Ranson & Randolph Co. v. Moore, 272 Mich. 21, 261 N.W. 128, relied upon by appellant.

In the first 2 cases cited above, there was a chattel mortgage, a failure to file, a foreclosure and repossession of the property by the mortgagee--all preceding the filing of a petition in bankruptcy. In the Schuttler case, the Court held (222 Mich. at page 438-439, 192 N.W. at page 664):

'The trustee upon his appointment acquired title, rights, and powers fixed as of the date of the filing of the petition in bankruptcy. See Bailey v. Baker Ice Machine Co., 239 U.S. 268, 36 S.Ct. 50, 60 L.Ed. 275.

'The trustee became vested on June 22, 1921, and not before, with the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings as to all property in the custody or coming into the custody of the bankruptcy court. But plaintiff had possession of these wagons in its replevin proceeding before that day, and the title was in the custody of the law until final determination of the cause in the courts of the state.'

Both the Schuttler and the Riverside cases were decided when the Federal Bankruptcy Act, § 47, sub. a (2), 36 Stat. 840, as amended in 1910, 11 U.S.C.A. § 75, sub. a, provided:

'* * * and such trustees, as to all property in the custody or coming into the custody of ...