Best v. Felger

Parker, J.

The plaintiff, as executor, seeks foreclosure of a chattel mortgage, given to Caroline Merryman during her lifetime, as against the claims of the defendant W. W. Pelger, who is the holder of a chattel mortgage upon the same property subsequently executed by the same grantor. A trial in the superior court resulted in a decree denying a f oreclosure as against the defendant Felger, upon the ground that no affidavit setting forth the amount due upon the Merryman mortgage was filed in the office of the county auditor within two years after the maturity of the debt secured thereby, nor at any time, as required by Rem. & Bal. Code, § 3662 (P. C. 349 § 43). From this disposition of the cause touching the rights of the defendant Felger, the plaintiff has appealed to this court. In so far as the decree and judgment deals with rights of the plaintiff as against other defendants, it is not drawn in question upon this appeal.

The controlling facts are not in dispute. On July 1, 1909, Andrew J. Reed, the owner of the property here involved, executed and delivered to Caroline Merryman a chattel mortgage, to secure an indebtedness evidenced by three promissory notes maturing on and prior to May 1, 1910; the indebtedness and the dates of its maturity being plainly so shown upon the face of the mortgage. On August 15, 1910, after the maturity of the whole of the indebtedness secured by the Merryman mortgage, Andrew J. Reed executed and delivered to respondent Felger another mortgage upon the same property, to secure an indebtedness evidenced by a promissory note for the sum of $1,100, then loaned by respondent Felger to Reed. Both of these mortgages were duly and timely filed for record in the office of the county auditor. On May 27, more than two years after the maturity of all of the indebtedness secured by the mortgage given to Caroline Merryman, she having died in the meantime, appellant, as her executor, commenced this action to foreclose the same as against respondent Felger as well as others claiming interest in the property. There has never been filed in the office of the county auditor any affidavit setting forth the amount due upon that mortgage, as provided in § 3662, Rem. & Bal. Code (P. C. 349 § 43), which reads as follows:

“Every mortgage filed and indexed in pursuance of this act shall be held and considered to be full and sufficient notice to all the world, of the existence and conditions thereof, but shall cease to be notice, as against creditors of the mortgagors and subsequent purchasers and mortgagees in good faith, after the expiration of the time such mortgage becomes due, unless before the expiration of two years after the time such mortgage becomes due, the mortgagee, his agent or attorney, shall make and file as aforesaid an affidavit setting forth the amount due upon the mortgage, which affidavit shall be annexed to the instrument to which it relates and the auditor shall indorse on said affidavit the time it was filed.”

Counsel for appellant contend, in substance, that since Reed’s indebtedness to respondent was incurred, and the mortgage securing the same given, before the expiration of two years following the maturity of the Merryman mortgage, respondent does not belong to the class of persons specified in § 3662 above quoted, who may claim rights superior to the Merryman mortgage, notwithstanding the Merryman mortgage has not been renewed by affidavit as required by that section. Counsel invoke the general rule as stated in the text of 6 Cyc. 1095 as follows:

“It is usually held that a person who purchases mortgaged property within the period when the mortgage is valid without refiling cannot later object that the instrument was not properly filed at the time when renewal should have been made, for the term ‘subsequent purchaser’ in a renewal statute means purchasers subsequent to the time of the refiling of the mortgage.”

A number of decisions of the courts are cited and relied upon by counsel from which this general rule is deduced. They all, however, deal with the rights of parties under statutes in words, or in substance, as follows:

“Every mortgage so filed shall be void as against the creditors of the person making the same, or against subsequent purchasers or mortgagees in good faith, after the expiration of one year after the filing thereof, unless, within thirty days next preceding the expiration of the term of one year from such filing, and each year thereafter, the mortgagee, his agent or attorney, shall make an affidavit etc.”

This language is quoted from the opinion in Howard v. First Nat. Bank of Hutchinson, 44 Kan. 549, 24 Pac. 983, 10 L. R. A. 537. The substance of the holding in that decision is stated in the syllabus as follows:

“The words ‘subsequent purchasers’ and ‘subsequent mortgagees in good faith’ in § 3905, mean only purchasers and mortgagees who purchased or took their mortgages after the expiration of the year from the filing of the mortgage.”

The holding of all the other decisions to which our attention has been called are in harmony with this view, but all of them deal with statutes either identical or in substance the same as the Kansas statute. No decision has come to our notice dealing with the rights of parties arising subsequent to a first mortgage under a statute like ours. Under the Kansas statute, the mortgage expires as to those subsequently acquiring rights, upon the “expiration of one year after the filing thereof” in the absence of the filing of. the renewal affidavit thirty days preceding such expiration; while under our statute, the mortgage expires as to those subsequently acquiring rights upon the “expiration of the time such mortgage becomes due” in the absence of the filing of the renewal affidavit within two years thereafter. In the case before us, respondent Felger acquired his rights under the second mortgage, when he made the loan to Reed, several months after the expiration of the time the first mortgage became due, which mortgage, we have noticed, has never been renewed by affidavit as required by statute, though over two years elapsed after its maturity before it was sought to be foreclosed by this action. This situation, it seems to us, answers the question of the superiority of the rights of the respective mortgagees in favor of respondent; unless the fact that the Mterryman mortgage was of record, and subject to renewal at the time the second one was given to respondent, continued the Mterryman mortgage in force as against him. But here we are met with this distinction between the Kansas statute and our own. By the provisions of the Kansas statute, under no circumstances can a subsequent mortgagee’s rights intervene or supersede the rights of the first mortgagee before the time specified as the limit of the first mortgagee’s rights, because the renewal affidavit, under that statute, must be filed thirty days before the expiration of the mortgage, which, as we have noticed, is one year after its filing; while under our statute, the mortgagee has two years after its maturity during which period his mortgage will remain in force if renewed by filing the affidavit within that period. Our statute recognizes the possible good faith of those acquiring rights after maturity of the prior mortgage, and before the expiration of two years thereafter. It seems to us that, in view of these provisions, a subsequent purchaser or mortgagee for value — and that, we think, is as far as his good faith need extend — may acquire rights subsequent to the maturity of a prior mortgage, subject only to the possibility of such prior mortgage being thereafter renewed by affidavit within two years after its maturity. We are of the opinion that our statute is, in substance, a statute of limitation, in so far as the rights of purchasers and mortgagees who acquire rights in the property after the maturity of the first mortgage are concerned, and that as to such there can be no renewal of the prior mortgage after the expiration of two years following its maturity.

The judgment is affirmed.

Crow, C. J., Fullerton, Mount, and Morris, JJ., concur.