DeVaughn v. Harris , 103 Ga. 102 ( 1897 )

Cobb, J.

When this case was here before (96 Ga. 211), it was held that the court erred in granting a nonsuit. By that decision it is settled that if the holder of a junior mortgage on personal property, with knowledge of the existence" of a senior mortgage, receives the mortgaged property from the mortgagor, and with his consent appropriates it in whole or in part to the satisfaction of the junior mortgage, and then places it beyond the reach of an execution issued upon the foreclosure of the senior mortgage, he is liable to the plaintiff in that execution for the value of the property thus received and disposed of, but not, of course, in a sum exceeding the amount due upon such execution. An examination of the opinion of Chief Justice Simmons will show that the right to recover was placed solely upon the fraudulent conduct of the junior mortgagee in so dealing with the property as to defeat the rights of the senior mortgagee. He uses this language: “ If one who knows that another has a mortgage on personal property wilfully destroys the property, he will certainly be subject to an action by the mortgagee for damages. And su we think, if a junior mortgagee knows of a superior mortgage lien, and by collusion with the mortgagor secures the goods and hides them or mixes them with his own so that they can not be identified, seized and sold, the senior mortgagee would have equally a right of action against such junior mortgagee for damages; and that this is true although the junior mortgagee may have acted solely for the purpose of securing his own debt. He has no right to thus deprive the senior mortgagee of the priority which the law gives him; and if he does so, we think he should be held liable for such damage as the senior mortgagee may thereby sustain.” The underlying principle of the decision is, that one who, in attempting to preserve his own rights, fraudulently deprives another of a right, will be liable to such person. It will be noted that the words “knowledge” and “know” are used instead of notice, — words which convey the idea of actual knowledge or information. It was undoubtedly intended to restrict the right of recovery to a state of facts 'in which it would appear that the junior mortgagee had actual notice of the existence of the senior* mortgage at the time that he placed the property in a position in which it could not be seized and sold under execution. It was therefore error in the court to charge the jury, that if the junior mortgagee had constructive notice of the mortgage, he would be liable, whether he had actual notice or not. A creditor who, ignorant of the existence of a lien upon property, takes it in good faith, and in the regular course of his business sends it out of the jurisdiction of the court, or otherwise disposes of it so that it can not be seized under execution, for the sole purpose of advancing his own interest, and with no intention to defeat the rights of other people in the property, should not be held liable in damages for such conduct simply because a lien upon this property is duly registered. We do not think it safe to extend the doctrine further than the ruling made upon the facts as they appeared in the case when it was here before. The right of action belongs to that class which arises out of fraud committed by one person, accompanied with damage to the party defrauded. Civil Code, § 3813. The fraud which is the basis of such an action is moral fraud. Without actual notice of the prior lien there could be no moral fraud. While in the case of Benton v. McCord, 96 Ga. 393, the expression “actual or constructive notice” appears in the headnotes, still, upon an examination of the facts of that case, it will be found that there was, as in this case, proof of actual notice of the lien at the time that the mortgaged property was placed beyond the jurisdiction; and Justice Atkinson in his opinion places the decision upon the ruling in the case cited supra. Therefore, so far as that case purports to hold that constructive notice is sufficient, it is obiter and not binding as authority. See the case of Reid v. Matthews, 102 Ga. 189.

Judgment reversed.

A ll the Justices concurring.