Millick v. Stevens

One Eugene C. Hale, being upon April 2, 1923, the owner of certain brick and tile piled on his premises, sold the same to plaintiff who removed a portion thereof. At the time of the sale, Hale was justly indebted to the Boise-Payette Lumber Company in the sum of $341.85, and on June 12, 1924, to secure his indebtedness, he mortgaged the company that portion of the brick and tile still remaining on his premises. Neither the company nor any of its officers had any notice or knowledge that the plaintiff claimed any interest in the property so mortgaged. Thereafter, the defendant sheriff took possession of the mortgaged property under foreclosure proceedings by affidavit and notice; and plaintiff brought, against him, an action in replevin in the probate court. From a judgment in plaintiff's favor, defendant appealed to the district court where plaintiff again prevailed; and defendant appealed to this court.

The only point in this case is the right of the lumber company to assert its mortgage lien against plaintiff. Under C. S., sec. 5434, such a transfer of personal property is conclusively presumed to be fraudulent and void against certain classes of persons, including the seller's creditors while he remains in possession, and encumbrancers in good faith subsequent to the transfer. To proceed as a general creditor, the company must have secured an interest in the property hostile to the plaintiff, as by attachment or execution. (Neustadter Bros. v. Doust, 13 Idaho 617, 92 P. 978.) This, it has not done; and whatever interest it has secured as against plaintiff must derive entirely from its chattel mortgage. It must prevail as an encumbrancer in good faith or not at all. That the mortgage was given to secure an antecedent debt is admitted.

It is urged by respondent that, since the lumber company's mortgage was taken to secure an antecedent debt, the company is not an encumbrancer in good faith, and cannot avail itself of the protection of the statute. The general rule sustained by the weight of authority is that the term, "encumbrancer in good faith," means a bona fide encumbrancer for value, and does not include one who has taken security for a pre-existing debt. But, it would seem that our legislature has intentionally drawn a distinction between encumbrancers and purchasers in good faith, and encumbrancers and purchasers for value. (C. S., secs. 6375 and 5424.)

And from the facts disclosed in Land v. Hea, 20 Idaho 250,118 P. 506, and Anglo-American Co. v. Community Mill Co., 41 Idaho 561, 569, 240 P. 446, it would also seem that this court has recognized a like distinction. In each of those cases, the good faith of the purchaser and mortgagee was not questioned, but, the consideration being that of an antecedent debt, the court held that the parties seeking enforcement were not innocent purchasers or mortgagees for value. The court did not say they were not innocent. Between the rendition of the decisions mentioned, the definitions of "value" and "good faith," as applied to dispositions of property by one retaining such property after he had already sold it to another, have been modified by our Uniform Sales Act. That act provides that:

" 'Value' is any consideration sufficient to support a simple contract. An antecedent or pre-existing claim, whether for money or not, constitutes value where goods or documents of titles are taken either in satisfaction or as security therefor.

"2. A thing is done 'in good faith' within the meaning of this law when it is in fact done honestly, whether it be done negligently or not." (C. S., sec. 5748.)

With these definitions adopted, the law proceeds substantially to re-enact and strengthen our fraud statute, C. S., sec. 5434, by declaring as follows:

"Where a person having sold goods continues in possession of the goods . . . . the delivery or transfer by that person or by an agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving and paying value for the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same." (C. S., sec. 5697.)

The term "owner," of course, means the party to whom the goods were originally sold. (Hier v. Wightman, 197 A.D. 214,188 N.Y. Supp. 274.) It is further provided:

"Where a person having sold goods continues in possession of the goods, or of negotiable documents of title to the goods and such retention of possession is fraudulent in fact or is deemed fraudulent under any rule of law, a creditor or creditors of the seller may treat the sale as void." (C. S., sec. 5698.)

And under this law the term "purchaser" is declared to include mortgagee and pledgee. The provisions of this uniform law apparently extend to any property retained by a seller, and thereafter disposed of by him; and the common-law definitions of good faith and value have been superseded by its direct terms. I do not see any conflict between this position and the opinion announced in Anglo-American Co. v. Community M. Co.,supra. There had been an actual delivery and change of possession in that case; and the case involved no such situation as is contemplated by C. S., sec. 5697.

Under the state law as it now stands, we must hold that the company was an encumbrancer both in good faith and for value holding a lien superior to any claim of respondent. The regularity of the foreclosure proceedings is not attacked, and the possession of the sheriff must be upheld.

Judgment reversed, with instruction to the trial court to enter judgment in defendant's favor. Costs to appellant.

Wm. E. Lee, C.J., and Budge, Givens and Taylor, JJ., concur.

Petition for rehearing denied.