The Union National Bank v. Oium
| Decision Date | 28 December 1892 |
| Citation | 54 N.W. 1034,3 N.D. 193 |
| Court | North Dakota Supreme Court |
Petition for rehearing denied.
WALLIN J., took no part in the decision.
We have carefully considered the petition for rehearing. It has not convinced us that we were in error. It is urged that it appears that the mortgagee took its security for an antecedent debt, and that, therefore, it does not occupy the same vantage ground which it would have held had the mortgage been taken to secure a loan made on the strength of that security. This contention is founded on an utter misapprehension of the question. A mortgagee, whether for a present or an antecedent debt, whose security is prior in point of time, is entitled to priority of lien except as such priority is affected by the statute. We hold that one who attaches for a debt incurred before any default in filing the mortgage exists is not entitled to the protection of the statute; that he is not within its manifest policy and spirit. To bring himself within the act, he must show that he parted with value while the default existed. But a mortgagee who has first obtained a valid lien has a right to rely upon the priority secured by what the law regards as his superior diligence, whether the mortgage is to secure an old or a new debt. His lien is protected, unless the creditor can point to a statute which denies the mortgagee such protection. The question whether the attaching creditor comes within the statute is in no manner affected by the inquiry whether the mortgagee took his security for an existing claim or a newly created indebtedness. This inquiry only becomes important as to one whose lien is subsequent in point of time, but who claims priority of right. It is never made to determine the rights of one who has secured the first lien in point of time. He stands on his legal priority until one having a subsequent lien brings himself within some statute which will give him priority of right.
It is also urged that the attaching creditor was injured by the delay in enforcing his claim, induced by the failure to file the chattel mortgage, creating in his mind the belief of the solvency of the debtor. It would be difficult to support such a contention under the facts in this case the execution of the mortgage having been followed by the levy of the attachment within a few days. But considering this argument in the abstract, without reference to the particular facts of this litigation, we can see no force in it. It amounts to this: That a creditor may be as greatly prejudiced by refraining from action, relying on the silence of the record, as if by a binding agreement he had actually extended the time of payment. But how is the creditor injured by the withholding of the mortgage from the record under such circumstances? Had the mortgage been immediately filed, he must have attached subject to it. He is in no worse position if he attaches, and the mortgagee who has not filed his security claims and is allowed priority. The mortgage is simply a first lien, as it would have been had it been promptly filed. But where time of payment is extended by binding agreement, the creditor is seriously detrimented, because the mere subsequent discovery of an unfiled chattel mortgage will not entitle him to rescind the agreement extending the time of payment, there being no fraud. To hold that mere inaction entitles one to protection would be to overturn elementary principles. It would destroy the distinction which has always been recognized between subsequent incumbrancers for a newly created indebtedness and those who have merely taken security for antecedent obligations. To remain passive for a day because lulled into a sense of security by the silence of the record would as fully entitle to protection as to stand inactive for a week or a month, or even a year. Upon this theory, then, every mortgagee for an existing claim would become, at least after the expiration of a day, an incumbrancer entitled to protection as against a prior unrecorded instrument. But all authority is against this.
It is also urged that this rule will have a tendency to encourage fraud by inducing the withholding of mortgages from record. This argument, if such it can be termed, applies with equal force to the doctrine that a subsequent chattel mortgagee for an antecedent debt is not protected as against an unfiled prior mortgage on the same property. The first mortgage may be withheld from record for a year, and yet one who was a creditor when it was given, and who has not since it was executed altered his position to his disadvantage cannot, by taking a second mortgage on the property, although without knowledge of the unfiled lien, secure any priority, however long thereafter the first mortgage is kept from record. If the mortgage in either case is kept from record for a fraudulent purpose, a different rule would apply. Nor do we think that one who takes security for an honest debt will care to risk that security by failing without reason to file it as required by law. There can be no pretense, under the facts of this case, that the attaching creditor refrained from taking steps to collect his claim because of the silence of the record. Only three days elapsed between the execution of the mortgage and the commencement of the action in which the property was seized. He was not stirred to action by discovering that a chattel mortgage had been given. Nor is there aught to indicate that he would have enjoyed any more advantageous position had the mortgage been filed the day it was given, and had he thereafter and on the same day commenced his suit and seize the property. It is said that, if the creditor whose claim accrues while the default in filing the mortgage exists is to be protected even after the mortgage is filed, he may wait two years, and then, by attaching, surprise the mortgagee, who will be injured because he has not anticipated that his lien could be so defeated. But is the innocent creditor who parts with his money on the strength of the mortgagor's credit--a credit frequently created because of his ownership of unincumbered property--to be debarred his right to rely on the silence of the record merely by reason of the filing of the mortgage before he can seize the property for his claim? Debts are seldom payable when incurred, and, if the subsequent filing of the unfiled instrument is...
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