Wineburgh v. Schaer , 2 Wash. Terr. 328 ( 1884 )

Opinion by

Turner, Associate Justice.

This action was commenced in the District Court of the Second Judicial District, holding terms at Yakima City.

The defendant in error filed his complaint in the Court below, for the foreclosure of a chattel mortgage upon a certain stock of goods, wares, and merchandise, making John Schaer, the mortgagor, E. Wineburgh, attaching creditor of the mortgagor, and J. J. Tyler, Sheriff of Yakima County, who served the attachment, defendants. The answer of E. "Wineburgh admitted the taking.on attachment by the sheriff, at his suit, of a portion of the stock of goods in question.

For a further defense, the answer sets up that the mortgagor, John Schaer, at the time of the execution of said mortgage, and ■continually thereafter, and until the attachment by the plaintiff in error, was a general merchant doing business at Yakima City, and was at the time he executed said mortgage and continuously under said attachment: and that he retained possession of said mortgaged stock of goods, all of which the defendants in ■error vvell knew. That the stock of goods continued in his possession, and that he was allowed to sell the same, with the knowledge and consent of the defendant in error, and to apply the proceeds to his own use and benefit in the ordinary course of his business.

That the plaintiff in error, E. Wineburgh, caused the attachment to issue on an indebtedness against the said John Schaer, contracted prior to the said mortgage, for $920.51, the same being the balance of an account for goods, wares, and merchandise sold by plaintiff in error to said John Schaer. To this answer the defendant in error interposed a general demurrer, which was sustained by the Court; and plaintiff in error, electing to stand upon his demurrer, judgment was rendered against him. He brings the case to this Court by appeal.

The only question presented for decision is as to the sufficiency of the answer of the plaintiff in error. If said answer constitutes a good defense, then the lien of the attachment, which it was the object of the defendant in error to have declared junior to the lien of his mortgage, must prevail, and defeat the mortgage.

The question as to whether a mortgage of chattels, such as a. stock of goods, is fraudulent per se, in cases where the mortgagor retains the possession, with power to sell and dispose of the goods in the course of his business, has been much considered,’ and variously decided by the Courts of this country. The cases-upon each side of the question were called to the attention of the Court in the argument of the case at bar, and the reasons upon which they proceeded, and the force and ■ effect which' should be given to them upon principle, were ably discussed and illustrated by counsel upon both sides. If we were at liberty to do so, it would be profitable to take up these cases, and attempt to extract from them the rule upon the subject that seems to be most consonant with sound reason. We are stopped on the threshold of the investigation, however, by an authority of such weight, that it would have great force with the Court of any State whei’e the question was still an open one ; and that, as to this Court, is binding and authoritative. We refer to the decision of the Supreme Court of the United States, in the case of Robinson v. Elliott, reported in 22 Wallace, p. 513. It was decided in that case, by the unanimous voice of the full bench, that a chattel mortgage upon a stock of goods in trade, which permits the mortgagor to remain in possession of the property, and in its disposition by sale in due course of trade, at his discretion, until the maturity of the debt purporting to be secured, by it, is fraudulent and void as to other creditors, without reference to the bona Jides of the parties. We gather from the opinion, however, that the -Court strongly doubted if the mortgage would be invalid, in case the money derived from the sale of the mortgaged property was applied, and was understood té be applied, to the extinction, in whole or in part, of the mortgage debt. '

This authority must govern us in the decision of this easel It is insisted, however, by the counsel for the defendants in error, that the laws of the Territory providing for the regulation of chattel mortgages, and for an affidavit of the mortgagor té accompany the mortgage, in which he shall declare that the mortgage is made in good faith, etc., and the law making it a penal offense to sell or remove mortgaged property without the consent of the mortgagee, have changed, by necessary implication, the rule of the common law on the subject. We think not. Similar provisions, and in some respects, stronger provisions in the laws of Indiana, were urged upon the Court in Robinson v. Elliott, as a virtual abrogation of the common law rule in that State, but the Court refused to so consider them. The statutes referred to provided for the registration of chattel mortgages, and declared “ that the question of fraudulent intent in all cases shall be deemed a question of fact.” There is nothing in the statutes of this Territory affording so strong an implication in favor of the position contended for, as the language of the Indiana statute which we have quoted. The statute providing for an affidavit of good faith, in addition to the recording of the mortgage in cases where the mortgagor retains possession, is rather a strong expression of legislative opinion against the propriety of such mortgages in all cases, than an implied recognition of the rights of the mortgagor to control and dispose of the mortgaged goods.

The statute making it an offense to sell or remove the mortgaged goods without the consent of the mortgagee, was intended for the protection of the mortgagee, and to enforce fair dealing on the part of the mortgagor toward him. ‘

Undoubtedly, the mortgagor may sell the mortgaged goods without violating this statute, if he have the assent of the mortgagee. The effect of such assent upon the mortgage, however, as between the mortgagee and other creditors, is left to be declared by the rules of law relating to the validity of mortgages.

The facts set up in the answer bring the mortgage under consideration within the principle laid down in the case of Eobinson v. Elliott, and upon said facts the mortgage was void, as against the plaintiff in error. The demurrer should have been overruled.

The judgment of the Court below is reversed, and the cause remanded, with directions to proceed to judgment in conformity with this opinion.

We concur: S. C. Wingard, Associate Justice.

Eoger S. Greene, Chief Justice.