Edwards v. Negim & Co. , 105 Okla. 7 ( 1924 )

This case turns largely on the construction of section 7660 and 7661, Comp. Stat. 1921, which read as follows:

"7660, Mortgaged chattel may be attached. Personal property mortgaged may be taken under attachment or execution issued at the suit of a creditor of a mortgagor.

"7661. Same — Rights of Mortgagee. Before the property is so taken the officer, on execution, or attachment creditor, must pay or tender to the mortgagee the amount of the mortgage debt and interest, or must deposit the amount thereof with the county treasurer, payable to the order of the mortgagee. In the event that the attachment or execution levied on such property is defeated or for any reason fails, and the attachment or execution lien is held not good, and such deposit has been made with the county treasurer, the party procuring the issuance and levy of said attachment or execution shall be subrogated to all rights of the mortgagee in and to said property."

The question involved in this case has been before this court a number of times, and while the different decisions seem to be somewhat conflicting and confusing on account of the difference in the facts of each particular case, we think they can be reconciled, and as we construe them, they have established this rule, that is when a party desires to levy upon personal property that is subject to a chattel mortgage, he must first pay or tender to the mortgagee the amount due under the mortgage, and if the mortgagee refuses to accept payment of the amount due he may then pay the amount to the county treasurer to be placed to the credit of the mortgagee, and then proceed to levy his attachment or execution on the mortgaged property and when said writ is so levied on the property, the mortgage lien is released or discharged, and if the attachment or execution fails, the plaintiff may proceed to judgment for his debt, and he may also set up the purchase of the mortgage lien and ask to be subrogated to the right of the mortgagee as against the property, and while he cannot, strictly speaking, foreclose the mortgage, he has an equitable lien against the property which is paramount to any other debt that the mortgagor may owe, and he can foreclose in the same suit his equitable lien against the property. This situation is brought about by the rule that two conflicting liens cannot exist at the same time against the same property, and where the plaintiff in the attachment suit or execution thinks he will gain some advantage by paying off the mortgage lien and proceeding under his execution or writ of attachment against the property, it is not the intention of the law to deprive him of his equitable lien against the property for the amount he paid to discharge the mortgage lien. The following cases seem to bear out the construction we have placed on this statute: Dix v. Smith,9 Okla. 124, 60 P. 303, 50 L. R. A. 714; Crimson v. Barse Live Stock Commission Co., 17 Okla. 117, 87 P. 876; Bailey v. Willoughby, 33 Okla. 194, 124 P. 955; Rooney v. McPherson,38 Okla. 411, 133 P. 212; Johnson v. Jones, 39 Okla. 323,135 P. 12; Seamans Oil Co. v. Mitchell, 87 Okla. 13,208 P. 801; Bell-Wayland Co. v. Miller-Mitscher Co., 39 Okla. 4,130 P. 593.

Again quoting from Dix v. Smith, the court said:

"At common law, the equity of a mortgagor in property could not be attached, but by the statutes of several of the states, this rule has been changed so that the interest of a mortgagor in chattel property may be attached, garnished, or seized and sold under execution. This, however, can only be done by statutory permission. At common law, the legal title was, by the mortgage, vested in the mortgagee, and this title became absolute upon default. The mortgagor only had the equity of redemption — nothing more."

There seems to be a hiatus in the statute as it does not specifically prescribe the manner in which the purchaser of the mortgage may enforce his equitable lien against the property. But it is clear to us that he has such a lien and the trial court in this case may have been in error when it directed a foreclosure of the mortgage, but the court reached the right result and the error, if error, in directing a foreclosure of the mortgage was harmless. The property covered by the mortgage and levied on under the writ of attachment had been placed in the hands of a receiver soon after the commencement of this action, and had been sold by the receiver and the money was in his hands at the time of the trial of the case in the court below, and it would not make much difference what order the court made with reference to the foreclosure of the mortgage as that could not be done because the property had already been sold by the receiver and the money was in his hands. The proper order perhaps would have been to have satisfied his plaintiffs equitable lien out of the money in the hands of the receiver. There can be no doubt about what the court found was due under plaintiff's equitable lien because the court sets it out specifically in instruction No. 3, heretofore quoted.

In regard to the oral agreement set up by Edwards in his answer that he had with Negim Company, and which he offered testimony to prove, which said offer was denied by the court, it is sufficient to say that all of said negotiations set up in Edwards pleadings show on the face of the pleadings that said negotiations were had and discussed prior to the time that Edwards got his lease and it is apparent that the court ruled out the testimony on the ground that the negotiations were had prior to the lease transaction. If it was an independent agreement it should have been reduced to writing, or if it was a part of the agreement that was to be incorporated in the lease, it should have been made a part of the lease, and the court was right in excluding the evidence.

It must be borne in mind that the plaintiffs in error, J.P. Edwards and Mary Morgan, were the mortgagors against whom the mortgagee held the mortgages which were paid off by the plaintiff, and they got the full benefit of having the mortgage they had executed paid off and discharged so far as they were concerned and the plaintiff acquired by his purchase of said mortgage and notes an equitable lien on the property for the amount that it had paid; and as before stated, it makes very little difference what order the court made, the money being in the hands of the receiver, the plaintiff is entitled to an order on the receiver to pay off these equitable liens, so far as the money in his hands will do so; and the court below, if it has not already done so, should make an order directing the receiver to pay off these two equitable liens of the plaintiff out of the money in his hands if the same is sufficient to do so, and make such order, with reference to the excess, if any, as shall be equitable and proper.

We can see no good that would come of reversing this case and remanding it for a new trial. As before stated, the trial court reached the proper result, and the case should be affirmed, with directions to the trial court to make such orders and decrees as herein indicated to the end that the plaintiff shall have his equitable liens discharged as far as the money in the hands of a receiver will do so, and if there be a surplus apply the same to the payment of the other judgment of the plaintiff. The judgment of the trial court will, therefore, be affirmed with the above directions.

By the Court: It is so ordered.