Farmer v. Evans

Appellee, Evans, instituted this suit in the county court of Lipscomb county, Tex., alleging in his amended original petition, in substance, that in October 1914, R. W. Warren executed and delivered to him a certain promissory note for the principal sum of $230, together with a chattel mortgage on six head of live stock, the mortgage having been executed in Harper county, Okla., where plaintiff and Warren lived, and where the mortgaged property was situated; that immediately thereafter plaintiff had said chattel mortgage registered in Harper county, as required by law, to give notice to subsequent purchasers; that subsequently Warren brought two black mules, being a part of the live stock covered by the mortgage, into Lipscomb county, Tex., and sold them to either Ben F. Farmer or one F. F. Schick, without the knowledge or consent of plaintiff, and that, with the exception of the $120 credited on the note, the same remains unpaid; that the value of the two mules exceeds the debt.

The defendants, Farmer and Schick, answered, alleging that they purchased the mules in good faith, without notice of the lien; that the chattel mortgage was never registered in Lipscomb county as required by law; that the description of the property as contained in the mortgage did not sufficiently identify and describe the mules purchased by defendant Farmer from Warren; that plaintiff had attempted to foreclose the mortgage on the other live stock under the Oklahoma statutes, but had failed to do so in compliance with said statutes; that under said foreclosure sale plaintiff had bought one of the animals at an inadequate price and sought to obtain credit for the difference upon the note sued upon.

Upon a trial before the court judgment was rendered for plaintiff against the defendant Farmer, but it was decreed that the plaintiff take nothing as against the defendant Schick. It appears from the record that Farmer purchased the mules from Warren, and afterwards sold them to Schick.

Farmer alone prosecutes this appeal, and first assigns as error the action of the court in not sustaining the general demurrer to plaintiff's petition. It is urged that plaintiff's pleadings are defective and subject to general demurrer, because they allege that Farmer purchased the mules from Warren at a time when such property was located in Lipscomb county, Tex., and when the mortgage lien given by Warren to plaintiff, and registered in Harper county, Okla., had not been duly filed in Lipscomb county, Tex., and did not allege that Farmer had any notice, either actual or constructive, of the existence of said lien. This is the principal question on this appeal.

It was held by this court in Best v. Farmers' Merchants' Bank,141 S.W. 334, that a lien acquired by registration of a chattel mortgage in a foreign state will not be given priority in Texas, since constructive notice imparted as a result of its registration depends wholly upon a foreign law which will not be enforced in the domestic forum. There is a conflict in the decisions of our own state upon this question. In the case of Blythe v. Crump, 28 Tex. Civ. App. 327,66 S.W. 885, Templeton, J., held that under such conditions the mortgagee's lien follows personal property into another state to which the personalty is removed without his knowledge or consent, and that such mortgagee was not at fault in failing to give notice of his lien by registration or otherwise to the citizens of the other state into which the property was removed where sufficient time therefor did not elapse between the removal and a sale of the property to a person without notice.

To the same effect is the holding by Judge Speer in Scaling v. First National Bank, 39 Tex. Civ. App. 154, 87 S.W. 715. The only expression by the Supreme Court of this state with reference to the rule is by Hemphill, C.J., in Crosby v. Huston, 1 Tex. 203, 238. That was a case in which it appears the trial court held that the execution and registration of a deed of trust in Mississippi conveying personalty situated in that state was notice to all the world. While there was no proof of the existence of or the requirements of the registration laws of Mississippi, or that the instrument had been recorded in accordance with such law, if any existed, the court announced the broad doctrine that:

"Whatever may have been the effect of registration in Mississippi, it cannot be extended beyond the territorial limits of the state. The operation of such a municipal regulation is local, and cannot effect property in a foreign jurisdiction.'"

This holding of the Supreme Court was followed by this court in the case of Best v. F. M. Bank, supra. The Crosby-Huston Case was not cited in either the Scaling Case or the Blythe Case, and, we presume, was overlooked since the opinions in those cases are based upon authorities from other states. From the notes to Walter C. Jones v. North Pacific Fish Oil Co., 6 L.R.A. (N.S.) 940, and Snider v. Yates, 64 L.R.A. 353, we understand that the great weight of authority is against the rule announced by the Supreme Court in the Crosby Case, and by this court in the Best Case. It is not within the province of this court to overturn the decision by Judge Hemphill, as announced in the Crosby Case. Decisions of the Supreme Court may be overruled only by that court. Jones v. G., C. S. F. Ry. Co., 23 S.W. 186; Missouri, etc., Railway Co. v. Blecher, 88 Tex. 549, 32 S.W. 518; Cleveland Co. v. Carr,90 Tex. 393, 38 S.W. 1123. By the principle of stare decisis we are constrained to follow the decisions of the Supreme Court until that court has changed its ruling.

There is another ground upon which we think Farmer and Schick should recover: By the weight of authority a chattel mortgage executed and filed for registration in one state, covering chattels situated there, is given effect in the state to which the property is subsequently removed solely upon the doctrine of comity; but this doctrine should not be applied when to do so would conflict with the public policy of the state of the forum, and when the effect of enforcing it is to injure or destroy the rights of local citizens innocently acquiring the property or some interest therein. The policy of our laws, evidenced by statutory provisions, require the registration of chattel mortgages "forthwith," and upon failure to so register them the lien reserved in such instruments is declared to be absolutely void as to creditors, subsequent purchasers, and mortgagees in good faith. Vernon's Sayles' Civil Statutes, art. 5655. In Austin v. Welch, 31 Tex. Civ. App. 526,72 S.W. 881, it is held that a chattel mortgage executed on Saturday at 2 o'clock p. m., which was not filed by the mortgagee until the following Monday, although he passed the clerk's office Saturday afternoon before 5 o'clock, was not filed "forthwith" as required by statute. To hold that a chattel mortgage registered in a distant state should be given effect against bona fide purchasers of the property described against it in this state is diametrically opposed to the policy evinced by the above-mentioned statute and the decisions of this state construing it. In Pope v. Hanke, 155 Ill. 617, 40 N.E. 839, 28 L.R.A. 568, this doctrine is declared by Magruder, J. That was an action upon three notes executed in St. Louis, given in settlement of a gambling contract for the sale of wheat and corn. The notes would have been valid under the laws of Missouri, because they were acquired by plaintiff before maturity, and without notice of their illegality. The court said:

"This being so, can a recovery be had in this state [Illinois] upon the notes here sued upon? The general rule is that the validity of a contract is to be governed by the law of the place where it is made (Phinney v. Baldwin, 16 Ill. 108, 61 Am.Dec. 62; Mumford v. Canty, 50 Ill. 370,99 Am.Dec. 525); and in the application of this principle to notes it is held that the laws of the state where a note is made will govern as to the defenses, which can be set up against a recovery thereon [citing authorities]. While it is true, however, that one state or nation will recognize and execute the laws of another through comity, yet the principle of comity does not permit the enforcement of foreign laws which are prejudicial to the interests of the state where they are sought to be enforced. A contract made in one state will not be enforced in another, when to do so would contravene the criminal laws of the latter state, or would be against the express prohibition of its laws. Comity between different states does not require a law of one state to be executed in another when it would be against the public policy of the latter state. No state is bound to recognize or enforce contracts which are injurious to the welfare of its people, or which are in violation of its own laws. Mumford v. Canty, supra; Storey's Conflict of Laws, § 327; Faulkner v. Hyman, 142 Mass. 53 [6 N. ED. 846]; Hill v. Spear, 50 N. H. 253, 9 Am.Rep. 205; Fisher v. Lord, 63 N. H. 514 [3 A. 927]."

The court then quotes from the Criminal Code and decisions of Illinois condemning such contracts, and proceeds:

"It thus appears that, under the statutes of this state and the decisions construing them, the notes sued on are absolutely void. The contracts upon which they are based are declared to be gambling contracts and void. The transactions in which they have their origin are prohibited by the criminal code of the state; and those engaging in them are subject to punishment by fine or imprisonment. * * * In view of the character of the transactions here involved as thus characterized, we think that our own law should be applied in determining whether a recovery should be had in this suit; and that comity does not require us to ignore the statute of Illinois under which these notes are void even in the hands of an innocent holder, in order to permit a defense which would be allowed under the law of a foreign state. The enforcement of such foreign law would contravene the Criminal Code of this state, and would be in opposition to its public policy, and to the express prohibition of its statutory enactments, and would be prejudicial to the interest of its people. We are therefore inclined to hold that no recovery can be had upon the notes," etc.

Upon investigation we find that other jurisdictions refuse to recognize the rule of comity adopted by a majority of the states and hold that their own citizens should be protected against prior liens acquired in other states by nonresidents. Miles v. Oden, 8 Mart. N. S. (La.) 214, 19 Am.Dec. 177; Verdier v. Leprete, 4 Ta. 41; Zollikoffer v. Briggs,19 La. 521; Tillman v. Drake, 4 La. Ann. 16; Frelson v. Tiner, 6 La. Ann. 18; Delop v. Windsor, 26 La. Ann. 185. In the last-cited case the court said:

"We are not bound by the comity of nations to enforce a contract which, if made here, could not defeat the rights acquired by attachment under our * * * laws."

This doctrine is announced after the court had stated that a chattel mortgage was unknown in Louisiana. In Miles v. Oden, supra, it was said:

"The court are aware of the common principle that contracts are governed by the laws of the country in which they are passed; and that, by the comity of nations, the rights flowing from them are not diminished by the parties passing into other states, provided, the laws of that state afford adequate remedies to enforce the obligation. But this principle is subject to the exception that in carrying them into effect no injury result to the inhabitants of the country whose aid is required to enforce them."

In the note to Farmers', etc., State Bank v. Sutherlin, Ann.Cas. 1914B, 1250, from which these authorities are cited, it is further stated that the courts of Michigan refused to enforce to the injury of a citizen of that state a chattel mortgage validly executed in a foreign state, and in Allison v. Teeters, 176 Mich. 216, 142 N.W. 340, said:

"A citizen of this state dealing with the property and its apparent owner in this state is not required to take notice of the records in Indiana."

To the same effect is State Bank of Sherman v. Carr, 15 Pa. Super. 346; Buffalo Coal Co. v. Rochester State Line Railway Co., 8 Wkly. Notes Cas. 126; Boydson v. Goodrich, 49 Mich. 65, 12 N.W. 913.

In Rosenbaum v. Dawes, 77 Ill. App. 295, the court said that the rule based on interstate comity that the constructive notice of a chattel mortgage resulting from its records in the state of its execution is also constructive notice to the citizens of other states to which the property may be removed should not be extended by the court of the latter state to the detriment of its citizens.

In view of the holding in Crosby v. Huston, supra, announcing the rule in this state, which we feel obliged to follow, and in addition thereto the doctrine as announced in the cases from which we have just quoted, we hold that the court erred in not sustaining the general demurrer.

The trial court found that in about one month after the mules in question were brought to Texas by Warren, the mortgagor, he sold them to defendant Farmer, who in good faith paid valuable consideration for them without actual notice of the existence of the mortgage and without other notice thereof than such as was afforded by the filing of said mortgage in Harper county, Okla., in accordance with the laws of that state; that in September, 1915, about six months after the mules were brought to Texas, Farmer sold them to defendant Schick, who in good faith paid valuable consideration for them without notice, either actual or constructive, other than such as results from m the registration of the mortgage in Harper county, Okla. These findings are supported by the uncontroverted evidence.

Since the case seems to have been fully developed, and it is not probable that any new matter could be either set up or proven which would affect the result in another trial, for the reasons above stated we reverse the judgment of the trial court, and here render it that appellee, J. L. Evans, take nothing by reason of his action, and that the defendants, Farmer and Schick, recover of him all costs.

Reversed and rendered.