Case ID: ohio-st_25/html/0549-01.html
Source: Caselaw Access Project
Author: {"author": "White, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Luther Hanes v. Norman S. Tiffany.
    1. The act in relation to chattel mortgages, as amended May 7,1869, requires a mortgage given to indemnify the mortgagee against a liability as surety for the mortgagor, to have entered thereon a true statement of such liability, and that the instrument was taken in good faith to indemnify against any loss resulting therefrom; and the omission of such statement renders the mortgage void as against the creditors of the mortgagor.
    2. A mortgage void as to creditors is void as against an assignee in trust for the benefit of creditors.
    3. "Where a mortgage is good as against the mortgagor, but void as to creditors, in replevin by the mortgagee to. recover the mortgaged property, brought against the assignee of the mortgagor for the benefit of creditors, it is error, in assessing damages to the assignee, to include the value of property which the assignor is authorized to select as exempt from the payment of debts, where such property had been selected and set apart by the assignor, although, at the time of the replevin, it had not been appraised.
    Motion for leave to file a petition in error, to reverse the judgments of the District and Common Pleas Courts of Greene county.
    The original action was brought by Luther Hanes, the plaintiff in error, against Norman S. Tiffany, the defendant in error, to recover certain personal property, consisting of a stock of goods. The plaintiff derived title under amortgage executed to him by Thomas C. Morallee, on the 7th day of February, 1874. The defendant Tiffany, as assignee, claimed the property under a general assignment, executed by Morallee on the 13th of February, 1874, for the benefit of his creditors.
    The mortgage contained the following condition: “ That if the said Thomas C. Morallee shall well and truly pay unto the said Luther Hanes, or to the First National Bank oí Xenia, the just and full sum of two hundred dollars as follows :
    
      “‘$200. • Xenia, Ohio, February 5, 1874.
    “ ‘ Thirty days after, we, oi’ either of us, promise to pay to the order of the First National Bank of Xenia, Ohio, two hundred dollars, at its banking-house in Xenia, for value received.
    “ ‘ Thomas C. Morallee,
    “ ‘ Luther Hanes. ’
    “ $50 to be paid each Saturday, to be credited on the note, then these presents shall be void,” etc.
    The affidavit of the mortgagee, indorsed on the mortgage, is as follows:
    “ The State of Ohio, Greene county, ss. I, Luther Hanes, mortgagee, being duly sworn, say- the within mortgage is made bona fide; and there is due thereon the sum of two hundred (thirty days after date) dollars, and that the sum is just and unpaid.
    “ Luther Hanes.”
    The mortgage was duly filed with the proper officer on the day of its execution.
    In the assignment to Tiffany, Morallee reserved and excepted from the property assigned so much thereof as he was entitled to under the exemption law's. While the goods were being appraised under the assignment, Morallee selected and set apart from the stock certain goods, which he claimed to hold as exempted. Before the goods thus selected and set apart had been appraised, they, with the rest of the stock, were replevied by the sheriff and delivered to Hanes.
    It appeared from the testimony that the goods w'ere left by the mortgagee in the possession of the mortgagor, and that Ilanes signed the note described in the mortgage, as surety for Morallee to the bank, and that the mortgage wms given by Morallee to indemnify Hanes against such liability.
    The court instructed, the jury, in substance, that the affidavit indorsed on the mortgage was defective, and that, by reason of such defect, the mortgage was void as against the creditors of Morallee, and as against Tiffany, to whom the property had been assigned for their benefit.
    
      It also appeared on the trial that Morallee was the head of a family, and not the owner of a homestead.
    On the measure of damages, certain instructions asked by the defendant were refused, and the court, in substance, instructed the jury that the damages to which the defendant was entitled was the value of the entire stock of goods, and that no deduction could be made on account of the goods which Morallee had selected, and which he might be entitled to hold against the assignee as exempt from the claims of creditors.
    Damages were assessed by the jury for the defendant at $2,923.97, for which judgment was rendered.
    On error, the judgment was affirmed by the District Court, and it is now sought to obtain the reversal of these judgments.
    
      Winans, Darlington ft Smith, for the motion:
    I. The affidavit of Hanes indorsed upon the mortgage, aided by the mortgage itself, in which the suretyship of Hanes is stated, and the note set out in hcec verba, is substantially sufficient under the statute. 66 Ohio L. 345. It is conceded it was valid against Morallee; it is then valid as against Tiffany, his assignee — Tiffany taking subject to the equities against Moralice, and, in effect, stauding in his shoes, and not being regarded as a bona fide purchaser for value. Fisher on Mortgages, sec. 715, s. p. 401; 2 Hilliard on Mortgages, sec. 15, p. 529; Bump on Bankruptcy, 4 ed. 327, and note h, 328; Burrill on Assignments, 2 ed. 483 ; 17 N. Y. 580; 11 Paige, 21; 6 Ohio St. 448; 2 Hill, 275; 1 Wait’s Dig. 181, sec. 69; 2 Barb. 475; 19 Ohio St. 291.
    IT. Tiffany had no right to the goods claimed and selected by Morallee as exempted. But Ilanes, under 3us mortgage, had, being accountable to Morallee for the surplus, after satisfying his claim; and the goods selected, oribe value of them, on Hanes’ sales, to the amount of §500, should have been deducted. The goods were exempt without reservation. S. & S. 396; Frost v. Shaw, 3 Ohio St. 270; Wilkin
      
      son v. Wait, 44 Vt. 508; 8 Am. Rep. 391; 4 Ib. 575; 103 Mass. 558.
    
      M. M. Gaunce, also for the motion.
    
      Little $■ Shearer, contra:
    I. The mortgage was void as against Tiffany, assignee, etc. 5 Ohio St. 1; 20 Ohio, 161. And because not attested according to law. 66 Ohio L. 845.
    II. Ilanes can not assert a right to hold the goods claimed as exempt, in this case. That is a matter inter alios. The goods which were claimed as exempt were never assigned to Morallee. Hanes seized the entire stock, including the goods selected by Morallee, and the assignee, representing creditors, has the right to demand an account for the whole.
    III. The measure of damages is the value of the property at the time of the seizure, with interest from that date. 2 Nash PI. 289.
   White, J.

We agree with the court below that the affidavit entered on the mortgage is defective, and that for this reason it is void as against the creditors of the mortgagor.

The act in relation to chattel mortgages, as amended May 7,1869 (66 Ohio L. 345), requires, in case the mortgage is given to indemnify the mortgagee against a liability as surety for the mortgagor, that there shall be entered thereon a true statement of such liability, and that the instrument was taken in good faith to indemnify against any loss that may result therefrom. This statement is required to be verified on oath. The original act did not contain this special provision in regard to indemnity mortgages; but the mortgage in the present case is governed by the amendatory act, and fails to comply with its requirements.

It is, however, contended that as the mortgage is good against the mortgagor, it is also good against his assignee for the benefit of creditors; that the latter stands in no better situation than his assignor. The correctness of this position at common law is admitted; but not so under the statute. Tbe mortgagee not having possession of the mortgaged property, the statute declares the mortgage void as against the creditors of the mortgagor. The assignee took the property under the assignment, and held it for the exclusive benefit of creditors. The mode of providing for creditors by way of assignment, in trust for their benefit, is recognized and regulated by statute; and we see no good reason why their rights may not be as effectually asserted through the assignee, as they could be by judgment and execution in ease there had been no assignment.

Ve think the court erred in instructing the jury that they should include in the assessment of damages the value of the property selected and set apart by the assignor as exempt from the payment of debts.

The assignor was a resident of the state, and the head of a family; and, not being the owner of a homestead, he was entitled to hold, exempt from levy and sale on execution, goods from the stock not exceeding five hundred dollars in value. Section 15 of the “ act regulating the mode of administering assignments in trust for the benefit of creditors,” provides that nothing in the act “shall be so construed as to require any property exempt from levy or sale upon execution to be delivered up for payment of debts.” In the present case, the assignor, by the terms of the assignment, reserved all the property- lie was authorized by law to hold exempt from the demands of creditors. Unless, therefore, the 'goods he selected and set apai’t exceeded five hundred dollars in value, the assignee had no right to any part of them. If they did exceed that value, the assignee was entitled to the excess. True, they had not been appraised; but we do not think the omission to make the appraisement impaired the right of the assignor in the selected property to the extent of the value allowed by law.

But whilst the exempted property, thus claimed by the assignor, did not pass to the assignee by the assignment, it did pass to the mortgagee under the mortgage. The mortgage, although void as against creditors, was valid as against the mortgagor. In opposition to his mortgage, he could claim no exemption. The law does not disable the debtor from disposing of the property by mortgage or otherwise, which he is authorized to hold exempt from execution.

The statute authorizes the selection to be made by the debtor, his wife, agent, or attorney. The selection, however, is made in all cases in right of the debtor; and where he has disposed of the property the right does not exist.

The mortgagee is, of course, liable to account to the mortgagor for the surplus of the exempted property, after the payment of the debt secured by the mortgage; but that liability does not affect his right to recover the property under his mortgage.

■ As the mortgagee could not have been prejudiced by the ruling of the court below beyond five hundred dollars, the value of exempted proporty’allowed by law to the mortgagor, if the defendant in error enters a remittitur of that amount on the judgment, the motion for leave to file a petition in error will be overruled; otherwise, leave will be granted, and the j udgments reversed, and cause remanded for a new trial.

McIlvaine, C. J., Welch, Rex, and Gilmore, JJ., concurred.