Keane v. Kibble

MORGAN, J.

On February 13, 1913, the appellants above named made, executed and delivered to respondent their promissory note in words and figures as follows:

“Boise, Idaho, February 13, 1913.

“On or before two (2) years from date thereof, for value received, I, we or either of us promise to pay to the order of J. J. Keane, Three Thousand One Hundred ($3,100) Dollars, in lawful money of the United States of America, with interest thereon in like lawful money from date until paid at the rate of ten (10) per cent per annum, interest to be paid monthly, and if not so paid the whole sum of both principal and interest to beeome immediately due and collectible. And in case suit or action is instituted to collect this note or any portion thereof, we promise to pay, besides the costs and disbursements allowed by law such additional sum as the court may adjudge reasonable as attorneys fees in such suit or action.

“It is understood and agreed that the consideration for this note is the purchase price of a National Automobile; and the principal of this note shall be paid at the rate of not less than One Hundred ($100) Dollars on or before the first day of each and every month, together with the proportionate amount of interest due thereon that the partial payment bears to the amount due, until the whole principal and interest is paid.

“And it is further understood and agreed that the ownership and title to said National Automobile shall not pass from J. J. Keane until the full sum of the principal and interest is paid.

“M. C. KIBBLE,

“W. C. KIBBLE.”

On September 25, 1915, respondent filed his complaint in the district court against appellants wherein he alleged, among other things, the making and delivery, for a valuable consideration, of the note above set out; that respondent is the owner and holder thereof and that there is due, owing and unpaid thereon the sum of $2,296.70. It is further alleged in.the complaint that at the time of the execution of said note, and as a part of the same transaction, the appellants and respondent agreed that the respondent should have title to the automobile as security for the payment of the note. It further appears from the complaint that appellant, M. C. Kibble, has the automobile in his possession and is using it as a carrier of passengers, and that the use to which it is being put is causing it to depreciate rapidly; that it is in great danger of being lost, removed and materially injured by said usage and that its value, which is alleged to be $750, is not sufficient to discharge the debt for which it was mortgaged as security.

Respondent prays for a judgment against appellants for the amount of the principal and interest due and attorney’s fees; that the note be decreed to be a mortgage upon the automobile; that the court appoint a receiver to take and keep possession of the automobile during the pendency of the action and until the sale thereof; that the mortgage be foreclosed and that the automobile be sold and the proceeds be applied as is usual in the foreclosure of chattel mortgages.

On the day the complaint was filed respondent made written application to the district judge for the appointment of a receiver which was granted. Thereafter and on October 1, 1915, appellants filed a motion and gave notice of motion to set aside the order appointing the receiver which motion was, on October 16, 1915, denied.

From the order appointing the receiver and from the order denying the motion to set aside the appointment, this appeal has been taken.

Appellants contend that the complaint fails to disclose a cause of action entitling respondent to equitable relief and insist that, having failed to plead a mortgage, respondent has not invoked either the exclusive or the concurrent jurisdiction of a court of equity, and that the district judge was, therefore, without jurisdiction to appoint the receiver. In other words, that the instrument sued upon shows upon its face that it is a conditional sale note, and that title to the automobile never passed from respondent and that the transaction cannot be construed to have created the relation of mortgagors and mortgagee between the parties.

Appellants urge that the instrument sued upon is neither ambiguous nor uncertain in its terms, and that it must be inferred from the second and third paragraphs thereof that respondent conditionally sold the automobile to appellants, but retained the title to it until the full amount of the purchase price is paid; that since appellants do not and never have owned the property, they could not mortgage it. Respondent contends that the instrument discloses no such state of affairs; that it is ambiguous and uncertain; that while it does recite that the indebtedness mentioned is the purchase price of the automobile, it does not state from whom it was purchased, whether from respondent or from a third party, and that the money mentioned in the note may have been, so far as is therein disclosed, loaned by respondent to appellants with which to make the purchase; also that while it is recited that title shall not pass from respondent, it is not stated for what purpose it is held by him, and he insists that it is so held only to secure the payment of the principal and interest due to him from appellants, and that parol evidence may be submitted at the trial to prove that the note was intended as a mortgage and not as evidence of a conditional sale.

Under the heading “Defeasance may be Shown by Parol,” sec. 3392, Rev. Codes, provides: “The fact that a transfer was made subject to defeasance on a condition, may, for the purpose of showing such transfer to be a mortgage, be proved (except as against a subsequent purchaser or encumbrancer for value and without notice), though the fact does not appear by the terms of the instrument.”

It is said in 35 Cye., p. 659: “ If goods are delivered to the buyer under an agreement whereby the property in the goods is transferred with a reservation of a lien to secure the purchase price the transaction is a mortgage. But if the goods are delivered under an agreement by virtue of which there is no conveyance of title, but the property in the goods is to remain in the seller until payment of the price, the transaction is not a mortgage but a conditional sale. Generally the question whether the transaction is a conditional sale or a mortgage is one of intent of the parties to be determined from a consideration of all of the provisions of the contract, and in some cases contracts of conditional sale have been held to be chattel mortgages within statutes requiring chattel mortgages to be recorded.”

In case of Smith v. Pfluger, decided by the supreme' court of Wisconsin and reported in 126 Wis. 253, 110 Am. St. 911, 105 N. W. 476, 2 L. R. A., N. S., 783, wherein an instrument, in form a bill of sale, was held to be a chattel mortgage, the court said:

“Counsel seem to suppose that an instrument, in form an absolute conveyance, cannot be shown to be anything else, except by judicial interference in an equitable action. Such is not the general rule, especially in jurisdictions where the distinctions between actions at law and suits in equity have been abolished.

“The mere form of an instrument cuts but very little figure in respect to whether it is enforceable as a mortgage or not upon its character being called in question in a legal or equitable action, as those terms are used under our system. The purpose of the instrument is the controlling feature under all circumstances. If that is security, and the facts of the matter are established in any action involving the subject, the instrument is treated as a mortgage, and nothing else.” (Hudson v. Wilkinson, 45 Tex. 444; D. A. Tompkins Co. v. Monticello Cotton Oil Co., 137 Fed. 625; Morgan’s Assignees v. Shinn, 82 U. S. 105, 21 L. ed. 87.)

There is appended to the decision of the case of People v. Burns, 137 Am. St. 466, a note, on page 489, wherein a great number of authorities are collected in support of the rule that as between the parties themselves chattel mortgages, although defective in form, will be held valid.

Counsel for respondent has brought to our attention certain cases holding that oral chattel mortgages are valid as between the parties. (Mower v. McCarthy, 79 Vt. 142, 118 Am. St. 942, 64 Atl. 578, 7 L. R. A., N. S., 418, and cases cited in note thereto.) This doctrine, however, cannot be held to apply in Idaho, for sec. 3389 of our Rev. Codes is as follows: “A mortgage can be created, renewed or extended only by writing executed with the formalities required in the case of a grant or conveyance of real property.” (Willows v. Rosenstein, 5 Ida. 305, 48 Pac. 1067.)

In this case, however, the instrument sued upon is in writing, and is executed with the formalities required in the case of a grant or conveyance of real property, for it is signed as provided for by sec. 6007, Rev. Codes, relating to transfers of real property, and, while it is not acknowledged, the acknowledgment of instruments is made necessary by sec. 3153, Rev. Codes, in order that they may be recorded, and sec. 3163 provides: “An unrecorded instrument is valid as between the parties thereto and those who have notice thereof.”

The right to have a receiver appointed in Idaho is statutory and is provided for by sec. 4329, Rev. Codes, as amended by Sess. Laws 1909, p. 26, which is, in part, as follows:

“A receiver may be appointed by the court in which an action is pending or has passed to judgment, or by the judge thereof:

“ (2) In an action by a mortgagee for the foreclosure of his mortgage and sale of the mortgaged property, where it appears that the mortgaged property is in danger of being lost, removed or materially injured, or that the condition of the mortgage has not been performed, and that the property is probably insufficient to discharge the mortgage debt.”

Whether the instrument here sued upon is a conditional sale note or a chattel mortgage, and whether or not' respondent has mistaken his remedy, are questions which are dependent upon the agreement of the parties at the time the transaction was entered into, and must be decided, not alone from the language of the instrument itself, but from all the facts and circumstances which will tend to show the intent of the parties to it. They are questions which must be left for the trial court to determine after having heard the evidence and are not before this court for decision at this time.

This court, on appeal from an order appointing a receiver and from an order denying a motion to set aside the appointment, can only inquire into the merits of the action so far as the facts may bear upon the propriety of making such orders. (Cotton v. Rand (Tex. Civ.), 92 S. W. 266.)

If it should appear on the trial of this case that the respondent is the owner of said automobile and does not hold the title thereto simply as security, he must fail in this action; and if he has procured the appointment of a receiver to take charge of his own property, he must pay the cost and expense of such receivership; but if it should appear that he simply holds the title as security for the payment of his debt under the allegations of the complaint, he has a right to have a receiver appointed to hold said property in statu quo in order that his security may not become valueless on account of its being used during the pendency of his action by the mortgagees.

Appellants are not in position to contend that by the appointment of a receiver they have been deprived of the possession and right to the use of their property, since they contend on this appeal that said automobile is the property of respondent.

We find that the complaint sufficiently alleges that the instrument sued upon was given as security for the payment of money to justify the trial court in admitting evidence to show that it was intended for that purpose and was, therefore, a mortgage, should such evidence be offered, and that it states the necessary jurisdictional facts to warrant the trial judge in making the orders appealed from, and his action in so doing is accordingly affirmed. Costs are awarded to respondent.

Sullivan, C. J., concurs.