Case ID: ohio-st_37/html/0378-01.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

Nesbit v. Worts et al.
    1. Where an indemnity mortgage is conditioned to save the mortgagee harmless, and to pay the note on which the mortgagee is surety, the protection of the mortgage extends to a liability incurred by the mortgagee jointly with the mortgagor, for money borrowed to pay the first note, and with which such note was paid.
    2. The affidavit on an indemnity mortgage, under section 2 of the act relating to chattel mortgages, as amended May-7, 1869 (66 O. L. 345), must show that the mortgage was taken in good faith, to make it valid against creditors. A statement that the claim on which the mortgagee is surety is just and unpaid, is not sufficient.
    Error to the District Court of Lucas County.
    The plaintiff in error, Andrew Nesbit, in an action of replevin in the court of common pleas, recovered judgment for the possession of certain personal property under a chattel mortgage executed to him by Matthew Rooney. The defendants in error, Worts & Co., attaching creditors of the mortgaged property, in whose favor judgment had been rendered against Rooney, and Patrick W. Keegan, who held a second mortgage on the same property, filed answers in the nature of cross petitions, setting up them respective liens, and praying an account against the plaintiff of the proceeds of the sale of said mortgaged property.
    A copy of the condition and affidavit of the plaintiff’s mortgage is as follows:
    “The condition of the above conveyance is such, that whereas the said Nesbit has become liable as indorser for said Rooney, in the sum of $300, on a certain promissory note given to the Second National Bank of Toledo, Ohio, and whereas said Rooney is indebted to said Nesbit for money borrowed in certain other sums, and $50 indorsed for to William Rooney by said Nesbit:
    “Now if said Matthew Rooney shall save said Nesbit harmless, and shall well and truly pay said sum of money as the same shall fall due, then this conveyance to be void, otherwise in force.”
    
      “ The State of Ohio, Lucas Count/y, ss. Personally appeared before me, Alman Hall, a notary public of said county, Andrew Nesbit, wbo being by me duly sworn according to law, deposes and says that he is the mortgagee above mentioned that the above mortgage is Iona fide, and that the claim secured by said mortgage as therein set forth, -amounts to six hundred dollars, and that the same is just and wholly unpaid.-
    “Andrew Nesbit.
    “ Sworn to and subscribed before me this 16th day of April, A. d. 1875.
    “Adman Hadd,
    “ Notary Public in and for said county.”
    The following is a copy of the condition and affidavit of the Keegan mortgage:
    ' “ The condition of the above conveyance is such, that whereas the said Patrick W. Keegan has heretofore indorsed a certain promissory note given by said Rooney to Sckumaker & Egley for $160.75, and the said Rooney is indebted to the said, Keegan in the sum of forty dollars, due as follows, to wit: on the 7th day of November, 1875,
    “Now, if the said M. Rooney shall pay said note at maturity, and save said Keegan harmless, and shall also well and truly pay said sum of money as the same shall fall due, then this conveyance to be void; otherwise in force.
    “ State of Ohio, Lucas County. Personally appeared before me, Patrick "W. Keegan, who being duly sworn according to law, deposes and says that the claim described in and secured by said mortgage as therein set forth, amounts to two hundred dollars and — cents, and that the same is just and wholly unpaid.
    “ Patrick W. Keegan.
    “ Sworn to and subscribed before me, this 28th day of October, a.d. 1875.
    “ Byron F. Ritchie,
    “ Notary Public, Lucas county, Ohio.”
    
      Both of said mortgages were duly filed for "record, and the levying of the attachment of Worts & Co. was subsequent thereto.
    On the trial it appeared that the $300 note to the Second National Bank which the Nesbit mortgage was given to secure was paid by Rooney, except the *$100. At the instance of Nesbit the remaining $100, with which the balance of the note was paid,- was borrowed from Keeler, Holcomb & Co., under an arrangement made by Nesbit, for which Rooney and Nesbit gave their joint judgment note. In this note Rooney and Nesbit were described as principal debtors, but Nesbit was in fact surety.
    It also appeared that the mortgagee, Nesbit, having sold the mortgaged property, from the proceeds paid the $100 note, and the balance due him on the mortgage; and likewise paid to Keegan the amount due him on his mortgage, including the note on which he was indorser for Rooney to Schumaker & Egley, and the balance he brought into court to be disposed of as the court should order.
    The court adjudged both moiigages valid, and in effect confirmed the payments made by Nesbit, and ordered the balance to be paid over to Worts & Co.
    The order of distribution is excepted to by Worts & Co. only in respect to the payment of the $100 note to Keeler, Holcomb &Co. under the Nesbit mortgage, and the payment of the $160 note to Schumaker & Egley, under the Keegan mortgage.
    On petition in error, filed by Worts & Co. in the district court, the judgment of the court of common pleas was reversed.
    The only errors assigned in the district court were the payment of the $100 to Keeler, Holcomb & Co., and the $160 on the note to Schumaker & Egley.
    The object of the present petition in error is to obtain the reversal of the judgment of the district court.
    
      Byron E. Ritchie and T. J. McDonnell, for plaintiff in error:
    The affidavits are sufficient, because the object and purpose of the statute are subserved in them, and they comply with the spirit and intent of the statute. Herman on Chattel Mortgages, 178; Patterson v. Gilles, 64 Barb. 563; 8 Bosworth (N. Y.) 396.
    
      Lockwood & Everett, for defendant in error :
    The affidavit of the mortgagee is defective because it does not state that the instrument was taken in good faith to secure the mortgagee against liability as surety. Haynes v. Tiffany, 25 Ohio St. 549.
   White, J.

The first question is whether Nesbit’s mortgage operated to protect him against his liability on the liundred-dollar note to Keeler, Holcomb & Co. If it did so operate, he was justified in paying the note out of the proceeds of the sale of the mortgaged property.

The primary object of the mortgage, as respects the note held by the Second National Bank, was not to secure the bank, but to secure Nesbit against his liability for Rooney. If Nesbit had been released from such liability, by the bank or otherwise, the mortgage would have been discharged to that extent. The bank, it is true, was paid, but the liability of Nesbit for Rooney was not discharged. There was a mere exchange or substitution of the liability to Keeler, Holcomb & Co. for that to the bank. The liability incurred by Nesbit to Keeler, Holcomb & Co. was not an independent transaction, but the direct consequence of his liability to the bank, his liability to the former being incurred solely for the purpose of raising the money with which to discharge his liability to the bank. We are of opinion therefore that, under the mortgage, he was entitled to be protected against the new liability thus incurred. At the time of the commencement of the suit, and the recovery of the possession of the property, the time had not arrived for the filing, by the mortgagee, of a new statement showing his interest in the mortgage after the payment of the $200 to the bank by Rooney.

The next question is, whether the affidavit of Nesbit on the mortgage is sufficient to cover his liability as indorser to the bank.

It was held in Gardner v. Parmalee (31 Ohio St. 551), that the affidavit need not be in any particular form; that if it contains the requisite facts, the form in which they are stated is immaterial. And it was also held that where the affidavit refers to matters contained in the mortgage, the matters thus referred to are to be regarded' as part of the affidavit. ■ Under the authority of that case we think the affidavit is sufficient to cover such liability.

The affidavit states that the mortgage is bona fide and that the claim secured by the mortgage, as therevn set forth, is just and wholly unpaid. This, taken in connection with the mortgage, is a sufficient statement, we think, of Nesbit’s liability as accommodation indorser for Rooney to the bank, and of his claim to indemnity against any loss resulting therefrom, and that the mortgage was taken in good t faith to secure such indemnity.

The remaining question is, whether the affidavit on Keegan’s mortgage is sufficient to cover his liability as accommodation indorser to Schmuaker & Egley.

This affidavit is good under the first clause of séction 2 of the act relating to chattel mortgages as amended May 7, 1869 (66 Ohio L. 345), which provides for the case where the mortgage is given “ to secure the payment of money only.” In such case the affidavit is required to contain a true statement, in dollars and cents, of the amount of his claim, and that it is just and unpaid.” But under the second clause of the section, which provides for the case of mortgages given to indemnify the mortgagee against any liability as surety for the mortgagor, the affidavit is required to state, in addition to the other requisites, that the mortgage was taken in good faith.”

The affidavit now in question, unlike the affidavit on the Nesbit mortgage, contains no statement in regard to the good faith or bonafides of the mortgage. Nor does it seem to us that in an indemnity mortgage taken under the second clause of the section, the statement of the amount justly due on the claim can be regarded as a compliance with the statute. The claim due the creditor may be just; and yet the mortgage given to the surety may be collusive and fraudulent. In so far, therefore, as Keegan’s mortgage is intended to indemnify him against his liability as indorser it must be held invalid as against the attaching creditors. Haynes v. Tiffany, 25 Ohio St. 549.

Judgment of the district court reversed, and that of the court of common pleas modified to conform to this opinion.