Stotts v. Johnson

• Decision Date: 12 September 1951
• Citation: 235 P.2d 560,192 Or. 403
• Parties: STOTTS v. JOHNSON et al.
• Court: Oregon Supreme Court

Page 560

235 P.2d 560

192 Or. 403

STOTTS v. JOHNSON et al.

Supreme Court of Oregon.

Sept. 12, 1951.

Boyd, Ferris & Erwin, of Portland, for the petition.

Wheelock & Hathaway and C. R. Richardson, all of Portland, contra.

Before BRAND, C. J., and HAY, ROSSMAN and LATOURETTE, JJ.

ROSSMAN, Justice.

The defendant-appellant (Johnston) has filed a petition for a rehearing which, as stated in a brief accompanying the petition, 'assigns as error the failure of this court to consider and determine the following issues:

'1. That where the chattel mortgagee consents to the sale of the mortgaged property by the mortgagor that such mortgage is invalid as to subsequent purchasers.

'2. That where the chattel mortgagee consents to the sale of the mortgaged property by the mortgagor, that the lien of the mortgage is waived thereby as to subsequent purchasers either with or without notice and irrespective of the validity of such mortgage.

'3. That where a chattel mortgagor sells the mortgaged property as agent for the mortgagee, the mortgagee is bound by the representations and warranties of the mortgagor in connection therewith.'

Those contentions were not made the subject matter of any assignment of error.

Section 68-207, O.C.L.A., provides: 'Every mortgage, * * * conveyance or instrument of writing intended to operate as a mortgage of personal property * * *, hereafter made, which shall not be or shall not have been accompanied with immediate delivery and followed by the actual and continual change of possession of the personal property mortgaged, or which shall not be or shall not have been recorded or filed as provided in section 68-203, shall be void as against subsequent purchasers and mortgagees in good faith and for a valuable consideration, of the same personal property or any portion thereof; * * *.'

A brief submitted in support of the petition, after referring to that statute, says: 'Since the opinion of this court is that Johnston (purchaser) had actual knowledge and has also held that the bill of sale was in fact a chattel mortgage, it must now be assumed then that under our statute Johnston came within the third exception in the statute and that the mortgage was valid as to him insofar as actual notice is concerned.'

We deem commendable the frankness of counsel for the petitioner (Johnston). Going on, the brief says:

'However, our statute sets forth not when a chattel mortgage is 'valid' but when it is 'void' and makes no mention of the validity of the mortgage where a mortgagee voluntarily permits or directs the sale of the mortgaged property.

'Our statute was designed merely to substitute 'recording' or 'actual notice' for the common law requirement of 'possession' and hence is not determinative of the question of validity where the mortgagee consents to the sale.

'The statute does not say a chattel mortgage is valid as to purchasers with notice, but says a chattel mortgage is void unless such notice is had by the purchaser.

'A voluntary act on the part of the mortgagee therefore in consenting to the sale may render the mortgage void as to creditors or subsequent purchasers.

'In the present case, it is conceded that the mortgage in valid as to the parties thereto and as to purchasers with knowledge until the sale with consent of the mortgagee.'

Thus, it is seen that counsel for Johnston argue that a sale of mortgaged personal property, made with the consent of the mortgagee, renders the mortgage void. They, however, limit that broad contention by stating: 'This court has had this matter under consideration as between the parties and has held that the mortgage was valid as between the parties where the express direction was to pay the money to the mortgagee, but contrary where no such direction was given. Orton v. Orton, 7 Or. 478; Jacobs v. Erwin [Ervin], 9 Or. 52; Currie v. Bowman, 25 Or. 364 ; Sabin v. Wilkins, 31 Or. 450 [48 P. 425, 37 L.R.A. 465]; Kenney v. Hurlburt, 88 Or. 688 [172 P. 490, 173 P. 158, L.R.A. 1918E, 652]; Teshner v. Roome, 106 Or. 382, 399 [210 P. 160, 212 P. 473].'

A more recent decision by this court, which employed the principle set forth in the last quoted paragraph, is First National Bank of Burns v. Frazier, 143 Or. 662, 19 P.2d 1091, 22 P.2d 325, 331. From it we quote:

'In Sabin v. Wilkins, 31 Or. 450, 48 P. 425, 426, 37 L.R.A. 465, after discussion of several preceding decisions of this court on this subject, it is said: 'In a later case (Currie v. Bowman, 25 Or. 364 [44 Am. & Eng. Corp. Cases 662], 35 P. 848) it was held that a chattel mortgage is valid which, by its terms permits the mortgagor to retain possession with power to sell, but which requires him to account to the mortgagee for the proceeds, less expenses of sales. These cases indicate very fairly the policy and trend of the law in this state in so far as it is involved by the facts before us.'

'The court then states that the purpose of the parties in giving and receiving the mortgage is a test of its validity at its inception, but that the same is subject to modification, either express or implied; that it is a prerequisite to its continuing validity that good faith and fair dealing be maintained toward those whose interests are affected by it; * * *.'

Since the brief which accompanies the petition for a rehearing refers to the bill of sale possessed by the plaintiff as a chattel mortgage, so shall we. As held in our previous opinion, the bill of sale was, in legal contemplation, a chattel mortgage.

As nearly as we can ascertain from the record, Johnston did not claim during the trial that the chattel mortgage was void and that a power of sale possessed by a chattel mortgagee to sell the mortgaged item renders the mortgage void. The original brief filed upon appeal made no contentions of that kind. After the brief was filed, Johnston's present counsel were retained and that circumstance, possibly, accounts for the tardy voicing of the above-quoted contentions. The latter appear to be within the general issues developed by the pleadings, although it seems likely that the draftsman of Johnston's answer did not have them in mind when he wrote the answer.

When the chattel mortgage was delivered to the plaintiff neither he nor Marshall anticipated a sale of the tractor. Both thought that Marshall would continue, as in the past, to use the tractor himself. Since neither of them looked forward to a sale of the tractor, they, of course, made no provision for the disposition of the proceeds of a sale, if a sale should ever occur. It is clear that the plaintiff, when he accepted the chattel mortgage, conferred upon Marshall no power to sell the tractor.

Notwithstanding the fact that Marshall's prospects looked bright when he obtained his loan from the plaintiff, his fortunes shortly took an unfavorable turn and before long he faced the necessity of converting some of his logging equipment into money.

Although the evidence is not extensive which indicates whether or not the plaintiff authorized Marshall, after the latter's financial difficulties became acute, to sell the tractor, it warrants a belief that no such authority was given--at least, none was expressly given. The unsatisfactory condition of the evidence upon that phase of the contentions possibly is due to the fact that counsel who represented Johnston at the trial apparently did not have in mind the contentions made in the petition for a rehearing. Since the defendant-appellant, Johnston, has the burden...