Chicago Title & Trust Co. v. O'Marr , 18 Mont. 568 ( 1896 )

HuNt, J.

Inasmuch as the inception of any rights which may have accrued to the respective parties to this suit and the judgment rendered therein antedate the adoption of the codes of 1895, the law as it stood at the time such rights became fixed must control. The statute, section 5182, of the Political Code, 1895, expressly provides, among other things, that the repeal of the old statutes should not abridge, abolish or impair any vested right or rights accruing or accrued; nor should such repeal change the force and effect of any act done or judgment rendered, or suit or proceeding had or commenced under the law as it stood prior to the taking effect of the codes and repeal clauses thereof, but all such rights and liabilities may be enforced and the proceedings continued conforming the same, as far as practicable, to the provisions and remedies prescribed by the new codes, etc. This section preserved rights founded upon past transactions. The judgment herein determined the rights of the parties before the court as the law stood at those times. To now consider the new mortgage law as applicable and to award one mortgage a priority over another, not awarded by the statute in force when the transactions were had and the judgment was rendered, would, by postponing the right to enforce certain liens as prior to others, materially lessen the value of the security for the payment of certain of the debts and thus change the force and effect of the judgment already rendered, and so directly conflict with the letter of the provisions of the new codes.

We, thérefore, dismiss defendants’ contention that the new codes affect the mortgages involved in this suit, so as to exchange their priorities as the old law may have fixed them, and we shall consider the case with relation to the code of 1887.

The case may be simplified by first deciding whether defendants and intervenors had mortgages, or liens or pledges upon the personal property of Burchard & Pierse, and if they did what were their relations between themselves and plaintiff. The first mortgage to Atkinson Is admitted to be valid in all respects. It is also conceded that Atkinson had possession of the property under this mortgage, such possession being through his agent Harrison. But Harrison had hardly entered upon possession when the mortgagors to secure other indebtedness, executed subsequent mortgages to Finch, Yan Slyke, Young & Co., defendants, and to the several in-tervenors. These several mortgages were all executed by Harrison, who consented to act, and did act, as the agent of the defendant, Finch, Yan Slyke, Young & Co., and intervenors, with the “express consent of Atkinson, the mortgagee in the first (Atkinson) mortgage. Harrison verified the affidavit of good faith as the agent' of the mortgagees named in the mortgages, and we think' under the evidence held possession as much for their benefit as for Atkinson. It is true that the affidavits to these mortgages given to defendants and intervenors were defective; but the mortgages, under section 1588 of the Fifth Division General Laws; code 1887, were none the less valid between the parties to them, while as against third parties delivery of possession and taking actual possession under the mortgages before the acquisition of rights by such third parties, cured the invalidity of the instruments arising from their insufficient verification. (Jones on Chattel Mortgages, § 178; Chapman v. Sargent (Col.) 40 Pac. 849; Cobbey on Chattel Mortgages, § 498.) This doctrine is well sustained by authorities, and is thus stated in Petring v. Chrisler, 90 Mo. 649:

‘‘ Where the mortgagee, in good faith, takes actual possession of the goods prior to the levy of the attachment, for the purpose of securing the payment of his debt and continues to hold the actual possession up to the time of the levy, he will be protected, and will, in that event, hold the goods as against the subsequent attaching creditor, and that, under this state of facts, it is immaterial that the mortgage contains stipulations Avhich render it void, except as between the parties. ’ ’

In Leopold v. Silverman, 7 Mont. 266, a chattel mortgage was held void as to third persons because of the omission in the mortgage and the affidavit thereto, to show the interest of a certain firm in an indebtedness to secure which the mortgage was given. But the court said, that: “If the mortgagees were really in undisputed possession of the goods mortgaged, no affidavit would be necessary at all, and the defects so apparent in the affidavit would become immaterial. ”

This undisputed actual possession of Harrison, was therefore, until July 31st, at least the joint and valid possession of all the mortgagees (other than plaintiff), including the possession of defendants Finch, Van Slyke, Young & Co., who held the first mortgage after the undisputed one to Atkinson.

But right here another mortgage is to be cpnsidered with its attendant facts. Directly after the mortgages to interven-ors bad been given, and while Harrison was in possession as above stated, to-wit: July 12th, 1893, the failing debtors gave still another mortgage — to the plaintiff in this suit. This mortgage included the same property which had theretofore been mortgaged, namely: the stock of goods and book accounts, etc., of Burchard & Pierse and certain other property, which at the time of the execution of the mortgages, by the mortgagors, was described as follows: “ The freight outfit of Burchard, Fowler & Pierse, consisting of sixteen head of horses, all freight wagons and harness, being same property described in mortgage given to First National Bank of Nei-hart, Montana, and bearing same description. This mortgage subject to mortgage of First National Bank aforesaid for $1,500; kept in Neihart and on road freighting; more particularly described as follows:” The mortgage authorized the mortgagees, or their attorney, to remain in .possession of the property mortgaged, and also contained the following clause: £ 1 This mortgage is given subject to the following mortgages in ease said mortgages or any of them are duly executed, dated and recorded prior to the date, execution and recording hereof, to-wit : F. P. Atkinson, $4,100; Finch, Van Slyke, Young & Co., $1,917; Lindeke, Warner & Schurmeier, $154.14; Foot, Schultz & Co., $485; M. McKibbin & Co., $412.41; Brown Bros., $1,684.50.”

It appeai;s that when this mortgage was executed and verified by the mortgagors, not having at hand a more detailed description of the ‘£ freighting outfit, ’ ’ the attorney of the mortgagees was given authority by the mortgagors to consider the mortgage absolute at his option and to consult a mortgage on record at the county seat some forty miles away, for the purpose of securing a further description of said outfit, and when so secured to add to the description already given the more specific designation of such freighting outfit. The next day the attorney for the mortgagees attached to the mortgage an amplified description of the wagons and animals constituting said outfit, and thereafter, without the presence of the mortgagors, the attorney verified the affidavit of good faith in behalf of his clients and then filed the instrument with the county clerk.

We shall treat this mortgage as valid, disregarding the appellants’ contention that the description of the freighting outfit, which plaintiff’s counsel added to the description already in the mortgage, “constituted a material change in the instrument after execution, acknowledgment, verification and delivery and thus rendered it void and of no effect. ’ ’ The mortgage contained a sufficient description of the freighting outfit before the more specific description was added. There was a complete means of identifying the property by reference to it and such inquiries as the instrument itself suggested. The property was described as “the freighting outfit of Bur-chard, Fowler & Pierse consisting of sixteen head of horses, all freight wagons and harness, being same property described in mortgage given to First National Bank of Neihart, Montana, and bearing same description. This mortgage subject to the mortgage of First National Bank aforesaid for $1,500, kept in Neihart and on road freighting, more particularly described as follows : ’ ’ This was sufficient not only between the parties, but as to others who had in good faith acquired rights against the property. (Jones on Chattel Mortgages, § 53, et seq.)

But assuming the law did demand a more elaborate description of the property, it would seem under the circumstances of the case that the mortgage was still not void as to defendant. The agreement between the parties was that the mortgagees’ attorney could consult the bank mortgage and then insert the description which he did insert, and furthermore, that the mortgage should be considered absolute at the option of the mortgagees’ counsel. No rights intervened between the time that plaintiff received the mortgage at Neihart and added the description, and verified and filed the mortgage at White Sulphur Springs. The added description was not the inclusion of property not already included, nor was it an alteration of the contract between the parties; nor was it a fraud in fact. It amounted to the elaborated expression of the already expressed intent of the parties, made in conformity with their positive authorization and before the instrument was finally delivered. Under these circumstances the mortgage should not be regarded as void. (Fisherdick v. Hutton, 62 N. W. 488.)

Upon another ground it would seem this mortgage must be held valid as against the defendant. If we still assume it was defectively executed, we nevertheless find a possession in plaintiffs under it before defendants made their levy of attachment. This proposition has heretofore been discussed and need not be dwelled upon. The fact of possession by the mortgagees before the attachment of defendants was levied distinguishes the case from Marcum v. Coleman, 10 Mont. 78, and M. M. Co. v. Johnson, 9 Mont. 542, cited by the appellant defendant. Appellant makes a point of the fact that taking possession was delayed until some nineteen days after the filing of the mortgage; but if the mortgage was good between the parties, in the absence of fraud and' of any intervening rights accruing before possession was taken, why should it be held void on this ground ?

We, therefore, have this resume of affairs : Up to July 31, Atkinson, Finch, Van Sly ke, Young & Co., defendants, and the intervenors were all in actual, valid possession of the property, with Harrison as their agent. Harrison stood in a capacity not unlike that of an assignee of an insolvent debtor with preferred creditors under an assignment. The mortgagors were not in possession, and his duty was to watch the property and duly apply it to the payment of the debts due by Burchard & Pierse in the order of the mortgage liens filed, and pay over the surplus, if any, to the mortgagors. Now, while he was so executing his trust and still held possession, the mortgagors executed the mortgage to the Trust Company. This brings us to consider another point in this last mentioned mortgage with its effect upon the various phases of the case. It was given subject to Atkinson’s, defendants’ and interven-ors’ mortgages “in case said mortgages, or any of them, are duly executed, dated and recorded prior to the date,’ execution and recording hereof, ’5 etc.

•, Testimony was heard as to exactly what was meant by the words £ ‘ said mortgages or any of them are duly executed, ’ ’ etc., and it clearly appeared that the mortgagees in the mortgage simply wished to reserve to themselves all right to assail the validity of each and every of said prior mortgages, and to be bound only by such of them as might be valid and prior to its own. Plaintiff was fighting for priority, that is all. But it should not be. allowed in this instance to avail itself of the insufficient verification of the prior mortgages described in its own mortgage, because, as said before, even though there were defective verifications of such mortgages, yet the mortgagees were in actual and undisputed possession of the mortgaged property by Harrison, their agent, before and at the time plaintiff’s mortgage was executed, and for the further reason that, plaintiff5 s attorney was on the ground the day that Harrison took possession for the mortgagees with Atkinson’s express consent, and had full notice of such actual possession before he secured the mortgage to this plaintiff. The testimony of Berry, counsel for plaintiff, is that Burchard & Pierse had given all these prior mortgages, and it was because of the amount of these liens and their possible validity that he pressed for the additional security of the freighting teams, etc. Under the facts, therefore, we do not think plaintiff is in any position to ask the court to ignore the possession by ihe other mortgagees of the stock of goods and other property included in their mortgages, and to adjudge their mortgage liens inferior to its mortgage. Just what lien upon the freighting outfit plaintiff had is immaterial in the case, because those chattels never were in plaintiff’s possession, nor were they levied upon by the sheriff.

We find, therefore, that on July 31st, the mortgages stood in these positions : First, Atkinson’s; next, defendant’s Van Slyke & Co., then the several intervenors’ in their respective orders, and finally the plaintiff’s. On that day the plaintiff by its counsel, Mr. Berry, purchased the Atkinson mortgage, then went up to Neihart and placed one Beech in charge. Berry delivered an order to Harrison, signed by Atkinson, first mortgagee, directing him to turn over possession to Berry. Berry only claimed to act for the plaintiff, under its own and the Atkinson mortgages. Harrison, forgetting apparently that he was the agent of other mortgagees and in possession for them as well as for Atkinson, delivered possession to Beech, an employe of Berry, who remained in sole charge until August 7th. It becomes important, therefoie, to áscertain exactly what Beech’s relation was toward the defendant Finch, Yan Slyke, Young & Co. and the intervenors. If Harrison had refused to surrender the possession he held under all the mortgages except Atkinson’s, the case would be less complicated; but evidently he acted entirely under Atkinson’s instructions and walked out. But Atkinson had no authority to order Harrison to surrender any possession to plaintiff except such as he held under his own mortgage. He had theretofore consented to and acquiesced in the joint possession of the property by Harrison as the agent of the subsequent mortgagees as well as for himself, and so long as such mortgagees made no attempt to disturb his rights, his possession and theirs was jointly maintained by their one agent. Atkinson could not by his sole order divest other mortgagees of their possession, for beyond looking after his own interests he had nothing to do with their mortgages except by way of l'ecognition of Harrison as their agent in possession with him. Therefore, Harrison should not have yielded to Beech any possession other than such as he held for Atkinson. But as he did give up to Beech, the question is : ought his principals, the mortgage es other than Atkinson, to lose their priorities of lien, or should Beech be regarded as holding possession for such other mortgagees as well as for Atkinson • and this plaintiff?

We must remember that Berry well knew of all these prior mortgages and of the joint possession of all the mortgagees under them, which, as heretofore said, made the instruments valid. Therefore, when Berry purchased the Atkinson mort gage for plaintiff and plaintiff went into possession under it by substituting Beech for Harrison, Beech should be regarded not alone as a mortgagee taking the same possession Atkinson had under the mortgage, but as assuming that possession for Atkinson’s assignee recognizing those subsequent mortgagees for whom Harrison with Atkinson’s consent agreed to act, and in whose right of possession Atkinson acquiesced so long as their rights were subordinate to his own. It would be most inequitable to hold that, because Harrison yielded to Beech in the manner he did, this plaintiff had a possession sufficiently good under Atkinson’s mortgage to make that a valid first lien against the world, yet that Harrison’s surrender subordinated the intervenors’ mortgages to plaintiff’s. The plaintiff having taken its last mortgage as well as the Atkinson mortgage with full knowledge of the intervenors’ and defendants’ actual possession and claims, cannot ask to be made first lien holder thus affirming the possession of Harrison, (recognized to be as well for others as for Atkinson), yet dis-affirming that possession as for other mortgagees, in order to have its last lien precede others superior to its own.

The correct, and plainly the equitable view of the case is that, inasmuch as plaintiff knew of the possession under the preceding mortgages, which were valid and subsisting liens when Berry took possession, the priority of those liens over plaintiff’s mortgage must be sustained, and that Atkinson’s consent thát Harrison should remain in possession for inter-venors and defendants never having been withdrawn, Harrison’s substitute Beech should be treated as having held for plaintiff by virtue of Atkinson’s priority under the first mortgage, but that he held under the last mortgage as in subordination to the several other mortgages under which Harrison held and which were recited as subsisting mortgages in the plaintiff’s mortgage.

We now advance to August 7th, upon which day Finch, Van Slyke & Co., defendants, sued Burchard & Pierse on their debt and attached the whole stock of goods which had been mortgaged to them by Burchard & Pierse. Before procuring the writ of attachment they caused the balance due on the Atkinson mortgage to be deposited with the county treasurer to the order of the mortgagee. Finch, Van Slyke & Co. procured a judgment against Burchard & Pierse for the amount of their mortgage $1,917.10. Under execution they sold the stock for $5,372.75. After this present action was instituted, plaintiff accepted the $3,100, deposited as balance due on the Atkinson mortgage. It is contended that the levy was void because the deposit was not made before the property was taken, as would seem to be required by section 1546, page 1071, Compiled Statutes, 1887. This question, however, becomes immaterial inasmuch as Finch, Yan Slyke & Co. had no right to attach until they had exhausted their remedy by foreclosure sale under their mortgage lien. This has been decided in the case of Largey v. Chapman, ante, page 563. But the levy being void, should the defendants be deprived of their mortgage lien ? We think not. There was no valid lien acquired by the attachment — there could not be if the mortgage lien was valid and subsisting. That their mortgage was valid has been heretofore decided. Therefore, as mortgagees they were obliged to exhaust their mortgage security before attachment, and they did not waive their claims under the mortgage in order to attach, unless estopped by facts and conditions not appearing in this case. The defendants, therefore, have a right to enforce their lien as the first of the mortgages given subsequent to the Atkinson mortgage.

Finally we inquire whether defendants were trespassers. Towards plaintiff they were not so far as the Atkinson mortgage is concerned, because when the plaintiff accepted the deposit of $3,100 as fully liquidating the Atkinson mortgage, it waived that question. But as against these intervenors’ rights and as against the plaintiff’s lien under its last mortgage, defendants stand in a different light. The possession of Beech being a possession which should avail all the intervenors as well as the other mortgagees, when defendants, including the defendant sheriff, levied their attachment and sold the property under execution they were trespassers, and notwithstanding the fact that Finch, Yan Slyke & Co. had rights as mortgagees, they and the sheriff nevertheless became liable to the plaintiff mortgagee under its last mortgage and the interven-ors1 for the value of the property so converted. (Jones on Chattel Mortgages, § 448.)

The district court, we are advised, gave plaintiff judgment upon the ground that the intervenors never had possession, hence had no rights. Under this view the question of the value of the property converted became unimportant as the mortgagors have made no complaint. But under the ruling of this court the value is material; therefore, the cause must be sent back to the district court for re-trial of that question alone, and for judgment thereafter.

It being conceded by all parties that the plaintiff is entitled to the amount received by it on payment of the Atkinson mortgage, that feature of the case may be disregarded, and plaintiff should be allowed to retain the sum it received.

The single point to be re-tried is the value of the property at the time of the conversion. When this is determined by the court, the judgment should be that the liens stand in the order we have decided they maintain to one another, namely, first, plaintiff Atkinson’s mortgage, then defendants’ Finch, Van Slyke, Young & Co.’s mortgage, then the intervenors’ mortgages in their respective orders and lastly the plaintiff by its own mortgage lien.

It should further be adjudged that defendants have been guilty of a conversion, and that although they are entitled to first be repaid the amount they have paid on the Atkinson mortgage, $3,100, and to the amount of their own mortgage as prior to intervenors’ and plaintiff Trust Company’s mortgage, yet after receiving the amount of their said mortgage, to-wit: $1,920, they are liable to intervenors and Trust Company for any sum in excess of the amount of their own mortgage, to the extent of the value of the property at the time of the conversion.

We think that the defendants should pay the costs of this appeal. The judgment is therefore reversed and the case is remanded with directions to proceed as above stated.

Reversed.

PbmbertoN, C. J., and De Witt, J., concur.