Johnson v. Thayer

The parties are in this court in the same relation as they were in the trial court, and may be referred to as plaintiff and defendants.

The uncontradicted evidence is in substance as follows:

On or about February 27, 1933, the defendants, Ivan Thayer and father, James Thayer, purchased a secondhand truck and trailer from Ray Johnson, a son of the plaintiff, Jay W. Johnson, for the sum of $2200, paying $700 in cash; and on the same day defendants executed and delivered to Ray Johnson a note for $1500 for the balance of the purchase price, and a chattel mortgage on the truck and trailer to secure the same.

On March 24, 1933, Ray Johnson transferred and assigned to plaintiff all his "right, title and interest in and to this chattel mortgage and the note secured hereby" for a claimed valuable consideration, to wit, a debt owed by Ray Johnson to plaintiff. The chattel mortgage contained the following provisions:

"Said mortgagors further covenant that * * * if the said mortgagee shall at any time before the debt becomes due, deem it necessary for the more complete and perfect security of his said claim; that the said mortgagee or assigns may take said property into his possession and dispose of the same at public or private sale * * *. Otherwise the property is to remain in the peaceable possession of said mortgagors * * *."

The note was payable in monthly installments on the first day of each month beginning April 1, 1933, and the first installment of $100 was paid, but some days after the first when it was due.

When defendants were loading the truck and trailer in Akron, preparatory to starting out on a trip during the month of April, plaintiff inspected the truck and trailer and observed that certain parts thereof needed fixing, and called Ivan Thayer's attention thereto; and some, if not all, of such parts were fixed before defendants started on that trip.

On April 29 or 30, 1933, the estranged wife of Ivan Thayer informed Ray Johnson in substance that defendants did not intend to pay the balance owing on the truck and trailer, that defendants did not intend to renew the insurance on the outfit, which insurance expired in a few days and before defendants would return from the then contemplated trip, and that defendants were intending to start out on May 1 and were going to run the truck and trailer as long as it would run and then let it set.

On the evening of April 30, Ray Johnson informed plaintiff as to what Ivan Thayer's wife had told him. On the next morning (May 1) plaintiff went to the office of his attorney to see what could be done about the matter, and while there, the wife of Ivan Thayer came into the office and told plaintiff and his attorney substantially the same thing that Ray Johnson had told plaintiff she had told him; and she further said that she had been with her husband on his previous trip to New York with the outfit, that during the trip she had slept in the tractor, and that while lying in such tractor she overheard her husband telling someone that that was what defendants were intending to do.

After plaintiff and his attorney had conferred concerning the situation, the attorney prepared the necessary papers to at once replevy the truck and trailer, which were then being loaded to start out on another trip that day. The petition and affidavit in replevin were filed in Common Pleas Court, and a writ of replevin was duly issued, directed to the sheriff of Summit county before noon of that day.

After defendants had loaded the truck and trailer and had left the place of loading, the sheriff served the replevin papers upon defendants and took possession of the truck and trailer about noon of May 1, 1933, and thereafter delivered the same to plaintiff upon his having given a surety company bond as provided by law; and the defendants not having executed to plaintiff, within five days thereafter, a bond to plaintiff for the redelivery of the outfit to defendants, as provided by law, the plaintiff sold the outfit at public sale.

At the time the writ of replevin was so served upon defendants, the installment due May 1 upon the note had not been paid, and the insurance about to expire had not been renewed.

There is a direct conflict in the testimony as to whether plaintiff had notified defendants some time in April that he expected them to pay promptly the installment due on May 1, and there is much conflict in the evidence as to the condition of the truck and trailer, not only at the time of the replevin, but at other times prior thereto.

We might say in this connection that we are of the opinion that the testimony pertaining to certain conversations between Ivan and Raymond Thayer and Lester Johnson about burning the truck and trailer, was incompetent, and was properly excluded by the trial court, and that the testimony pertaining to the conversations between Ivan Thayer and Ray Johnson about Ray Johnson wanting the truck and trailer to haul liquor, and about Ray Johnson wanting defendants to sign a contract to haul for some transportation company, was incompetent, in view of the lack of proof of conspiracy as between plaintiff and his sons, and especially in view of the fact that the principal question at issue was whether plaintiff in good faith believed it necessary "for the more complete and perfect security of his said claim" to take possession of the truck and trailer.

It is to be observed that plaintiff did not himself attempt to take possession of the truck and trailer without legal proceedings and without the advice of counsel, as he might have done under the terms of the mortgage, but that he proceeded, in a manner provided by law, on the advice of an attorney, to obtain possession thereof.

The case was tried to the court without a jury. The trial court found that the right of possession and the right of property were in the defendants at the time of the commencement of the action, and that the value of the property taken was $1500; and the court also assessed damages against plaintiff and in favor of defendants in the sum of $1900 — making the total amount found owing to the defendants by plaintiff $3400, for which amount judgment was accordingly rendered.

A motion for a new trial was filed and overruled, and the case is in this court on error proceedings, the plaintiff in error seeking to reverse that judgment.

The principal questions at issue in this court are whether the judgment of the trial court is against the manifest weight of the evidence and contrary to law, the answers to which questions hinge largely, if not entirely, upon the right of plaintiff to take possession of the property at the time he did under the so-called "insecurity clause" in the chattel mortgage.

As to this so-called "insecurity clause" there are two lines of decisions by the courts of other states:

One to the effect that such a clause vests in the mortgagee an absolute discretion, and that his right to take the property does not depend upon his having reasonable grounds for deeming himself insecure, and that the mortgagor has no right to question the grounds upon which the mortgagee entertains such feeling of insecurity.

The other to the effect that the mortgagee, in determining that contingency, must act in good faith, based upon reasonable grounds, and that he must have probable cause to support his belief that it is necessary for him to take possession of the property for his more complete and perfect security.

See: 2 Jones on Chattel Mortgages (6th Ed. by Bowers), Sections 431, 431a, 431b; Robinson v. Gray, 90 Iowa 699, 57 N.W. 614, 23 L.R.A., 780, and note; and 11 Corpus Juris, 555 "Chattel Mortgages," Section 254, and citations thereunder.

In the case of Barrett v. Hart, 42 Ohio St. 41, 51 Am. Rep., 801, our Supreme Court, after discussing the two lines of cases, did not agree with either of the holdings, and held, in the last paragraph of the opinion, that "The mortgagee should act in good faith, and his mind and judgment should be controlled by facts arising after the making of the mortgage, and in regard to the condition of the property mortgaged," but that such facts are not necessarily only such facts as he can show to a court are reasonable, and which holding is carried into the syllabus of the case.

In 11 Corpus Juris, "Chattel Mortgages," note 74 to Section 254 indicates that the Barrett case, supra, was impliedly overruled by the case of Francisco v. Ryan, 54 Ohio St. 307,43 N.E. 1045, 56 Am. St. Rep., 711, apparently because the Barrett case is nowhere referred to in the opinion or syllabus of theFrancisco case, and because at page 320 of the opinion in theFrancisco case the court seems to have adopted the theory that such clause vests an absolute discretion in the mortgagee, and quotes at length from Werner v. Bergman, 28 Kans., 60, at page 64, 42 Am. Rep., 152, one of the leading decisions adopting that view.

However, it will be noted that in the Francisco case, supra, nothing is said in the syllabus on that question, that the controversy was not between the mortgagor and mortgagee, that the mortgagor was not even a party to the suit, that the sole questions at issue were, first, as to the validity of a chattel mortgage on a stock of merchandise when the mortgagor is allowed to remain in possession with a power of sale in the course of business, with a stipulation in the mortgage that it shall also be a lien on goods thereafter purchased to replace those that were sold, and second, as to the priority of liens as between the mortgagee who had taken possession of the goods and creditors of the mortgagor who had thereafter levied an attachment thereon, and that from the facts set forth in the opinion the question of good faith and probable cause or reasonable grounds for the belief of insecurity of mortgagee's claim upon which he acted in taking possession of the property was not raised and was not before the court in that case. Accordingly, what the court said on page 320 with reference to that question is in reality obiter dictum so far as the question of good faith, reasonable grounds, and probable cause for belief as to insecurity, is concerned.

It may be further observed that while the Francisco case is a leading case on the above-mentioned two questions, which pertain only to the validity of the mortgage and the priority of liens, and which do not involve the question of good faith or reasonable grounds for belief by the mortgagee that his claim is insecure, and while the Barrett case has often been cited in support of the proposition that where something is agreed to be done to the satisfaction of a particular person, such person cannot act arbitrarily but must act in good faith as to not being satisfied, we have been unable to find any decision in which both of these cases have been cited.

After a careful consideration of the two cases and the two lines of decisions in other states, we hold the rule to be that where, in a chattel mortgage, the mortgagor and mortgagee agree that the mortgagor shall have possession of the chattel so long as he performs his part of the contract unless the mortgagee deems it necessary to take possession of the chattel "for the more complete and perfect security of his claim," and before default in such performance by the mortgagor the mortgagee brings a replevin suit against the mortgagor to obtain possession of the chattel for his more complete and perfect security, his right to take possession does not depend upon whether it is actually necessary to do so for the protection of his claim or whether he has reasonable grounds for deeming it necessary, if he in good faith believes it to be necessary; if he is honest in his belief that it is necessary, he has a right to take possession, and in that event his motives in bringing the suit are unimportant. It is good faith in believing it necessary, rather than good faith in bringing suit, that is important. If the circumstances and facts within the knowledge of the mortgagee are such that a reasonable person would be justified in believing that the necessity existed, then the fact that the mortgagee, in bringing the suit, was actuated by motives of malice, does not justify a finding that he did not act in good faith.

When a man has a right to bring an action, his motive in doing so, even though malicious, does not render the doing of it wrongful. Letts v. Kessler, 54 Ohio St. 73, 42 N.E. 765, 40 L.R.A., 177; Lancaster v. Hamburger, 70 Ohio St. 156,71 N.E. 289, 65 L.R.A., 856; Raynolds, a Taxpayer, v. Cleveland, 2 C.C. (N.S.) 139, 14 C.D., 215; 1 Ohio Jurisprudence, 330 "Actions," Section 23.

Under this holding we are unanimously of the opinion that the finding and judgment of the trial court that the right of possession and the right of property were at the time of the commencement of the action in the defendants, is manifestly against the weight of the evidence. Accordingly, the rendering of judgment against plaintiff for the value of the property and the assessing of damages against him for the use of the outfit is contrary to law.

It is further claimed by counsel for defendants that the covenant in the mortgage that "if the mortgagee shall at any time deem it necessary" he could take the property into his possession, is a personal covenant and not transferable.

We believe this question, under the provisions of the mortgage in question, has been settled in Ohio in the case of Robinson v.Fitch, 26 Ohio St. 659. For holdings in other states to the same effect, see 2 Jones on Chattel Mortgages (6th Ed. by Bowers), Section 501, et seq., and authorities cited in notes.

The judgment is therefore reversed because the finding of the trial court is against the manifest weight of the evidence and the judgment is contrary to law, and the cause is remanded for further proceedings according to law.

Judgment reversed.

STEVENS and WASHBURN, JJ., concur.