Case ID: ohio-st_14/html/0488-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William T. Day and Samuel D. Day v. Edward A. Munson, George Spear, et al.
    1. Under the act of February 24, 1846, “to require mortgages or bills of sale of personal property to be deposited with township clerks," a person taking a subsequent mortgage, with actual notice of an unsatisfied prior mortgage upon the same property, is not a bona fide mortgagee; but constructive notice alone, will not constitute mala fides.
    
    2. The terms “subsequent mortgagees in good faith," used in the first and fourth sections of this act, are to be construed alike in both sections; the word “ subsequent " has relation, in each section, to the execution of the prior mortgage. Hence, a mortgage not re-filed within one year from the time of first filing, will lose its priority over a subsequent mortgage taken without actual notice, and filed within the year.
    6. The construction given to this statute on the foregoing points, in Paine et al. v. Mason, 7 Ohio St. Rep. 198, having become a rule of property, should be adhered to so long as the statute remains unchanged.
    4. Where there are three mortgagees, of whom the first has lost his lien as against the third, by a failure to re-file within the year; and the second has taken his lien with actual notice of the prior one, and has preserved his priority of lien over the third; and the proceeds of the mortgaged property is insufficient to satisfy all the liens, distribution will be made in the following manner: To the third mortgagee, so much of the fund as would be applicable to his mortgage after satisfying the prior lien of the second. To the second, so much of the whole fund as would be applicable to his debt, after satisfying the prior lien of the first, and without reference to the third. And to the first mortgagee, the residue.
    Reserved in the district court of Cuyahoga county.
    This action was instituted by the plaintiffs, to enforce th6 liens which they claim were secured to them by two mortgages upon certain chattel property, executed by the defendants, Munson & Spear, to secure certain indebtedness to them.
    The Cleveland Paper Mill Company, as the assignee of T. L. Wilcox, to whom a mortgage was executed upon the same property substantially, and Younglove & Hoyt, who likewise received from said Munson & Spear a mortgage on the same property, were, among others, made parties.
    The dates, times of filing and re-filing, and the amounts due on each of these mortgages, on the-day of September, 1861, as found by the district court, are as follows:
    1. First mortgage to the plaintiffs, dated December 12,1857, filed February 16, 1858; re-filed March 22, 1859; amount $995.
    2. Second mortgage to the plaintiffs, dated July 3,1858, filed July 6, 1858; re-filed July 7, 1859; amount $467 56.
    3. Mortgage to Wilcox, dated July 6, 1858, filed July 6, 1858; re-filed July 1, 1859 ; amount $54 17.
    4. Mortgage to Younglove & Hoyt, dated October 28,1858, filed October 28, 1858; re-filed October 14, 1859; amount $949 75.
    The pleadings and the findings of the district court, show that the Wilcox mortgage had originally been given, with full knowledge, on the part of Wilcox, of .plaintiffs’ mortgages, to secure the payment of $1000, due from Munson-& Spear; that on the 30th December, 1858, Wilcox assigned said mortgage to defendant, Warren, to secure the amount then due Warren from Wilcox (which the court found, as above, to amount to $54 17, on the-day of September, 1861), also, to secure any future advances which Warren might make for Wilcox, or liabilities which he might incur for him. That, on the first of January, 1859, Wilcox became the purchaser of the property from Munson, subject to the above mortgages, and agreeing to pay them off, except the one to himself. That, about September, .1859, Warren made advances for Wilcox, or became liable for him to the amount, with interest to said-day of September, 1861, of $408 44. That the remainder of the Wilcox mortgage was, subsequent to the commencement of this suit, assigned by Warren, at the request of Wilcox, tc the Lake Erie Paper Mill Company, who are now the owners-of any benefit that may be derived therefrom.
    The amount which may ultimately be realized from the mortgaged property, is yet uncertain; but there is reason to apprehend that the proceeds of its sale will be insufficient to discharge the amount due to the plaintiffs on their two mortgages, the amount found due to Warren, as the assignee of the Wilcox mortgage, and the amount due Younglove & Hoyt under their mortgage. And with a view to the adjustment and determination of the respective priorities of these mortgagees, the questions of law arising upon the facts found-by the district court, and shown by the pleadings, have been reserved for the decision of this court.
    
      Hitchcock, Mason Hstep, for plaintiffs,
    cited 19 Wend. 514; Gregory v. Thomas, 20 Wend. 17; Meach v. Patchen, 4 Kernan, 71; Manning v. Monaghan et al., 28 N. Y. Rep. 539; Dillingham v. Laden, 35 Barb. 38; Gardner v. Smith, 29 Barb. 68; Hill v. Bebee, 3 Kernan, 556.
    
      Backus Noble, for Younglove & Hoyt;
    cited Paine et al. v. Mason, 7 Ohio St. 198; Gregory v. Thomas, 20 Wend. 19.
   Scott, J.

The first question arising in this case is, whether by force of the statute, the plaintiffs’ mortgages, upon the failure to re-file them within one year from the time of the first filing, became void as against Younglove & Hoyt, whose mortgage was executed and filed within the year, and who received the same without actual notice of plaintiffs’ mortgages.

The fourth section of the act requiring mortgages or bills of sale of personal property to be deposited with township clerks, provides that, 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 from the filing thereof, unless, wdthin thirty days next preceding the expiration of the said term of one year, a true copy of such mortgage, together with a statement exhibiting the interest of the mortgagee in the property at the time last aforesaid, claimed by virtue of such mortgage, shall be again filed in the office,” etc. S. & C. St-476.

The first section of the same act provides that mortgages of goods and chattels, not accompanied by delivery, and followed by actual and continued change of possession, shall be void as against creditors, and subsequent purchasers, and mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be forthwith deposited, etc.

The question in this case turns upon the proper construction and meaning of the expression subsequent purchasers and mortgagees in good faith,” as used in these sections.

It is well settled, in New York, under a statute substantially similar, and from which our own has been mainly copied, that to constitute good faith ” on the part of the subsequent mortgagee, there must be the absence of actual notice of the existence of the prior mortgage. And so it was held by this court, in Paine et al. v. Mason et al., 7 Ohio St. Rep. 198. In that case, it was also held, that constructive notice alone, of the prior mortgage, would not constitute malafides on the part of the subsequent mortgagee; and that as against him, the priority of the first mortgage could not be retained, without refiling pursuant to statute.

That decision, unless overruled, must be fatal to the claim, of the plaintiffs in this case. We are accordingly asked to reconsider the question thus decided, on the ground that the court, in that case, assumed, without full consideration, that the term subsequent in each of these sections had relation’ to the same thing; that is, to the time of the execution of the mortgage declared to be void; whereas the policy of the statute requires the term “ subsequent,” in the fourth section of the act, to be construed as relating to the expiration of the year within which the re-filing is required. And in support of this view, we are referred to the case of Meach v. Patchen, 4 Kernan, 71, in which it was so held by the court of appeals-of New York (Mitchell, J., dissenting). The decision of the majority of the court, in that case, is supported by reasoning, which is, certainly, not without force. But it is a construction-given to the statute after its adoption in this state, and in opposition to the opinion expressed by Justice Cowen, in Gregory v. Thomas, 20 Wend. 19, prior to the enactment of the statute 'in this state. This latter opinion, it is true, was of an obiter • character, but I am not aware of any New York decision to the contrary, prior to the enactment of our own statute. Sub- . sequent decisions, which could not have been before the mind •of the legislature, can throw no light on its intentions. Be,-side, the phraseology of the fourth section of the statute of this state, differs somewhat from that of the corresponding section in the New York act, and is such that the term “ subsequent,” in the fourth section, can not well be regarded as referring to any later point of time than the original filing of the mortgage. The language is, “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,” etc. Subsequent to what? The phraseology would import, subsequent to the making, or to the filing of the mortgage, which are the only acts previously spoken of. As the term refers clearly to the making of the mortgage in the first section, it should not, without strong reason, be differently construed in the fourth. And we think it by no means clear, that the policy of the act designed to place a mere creditor on a better footing than a bona fide mortgagee, in respect to the laches of a prior mortgagee.

Where a subsequent mortgage is taken in good faith, and without actual notice of a prior one, no satisfactory reason is perceived, why the rights of its owner should depend on the •fact of its date, being one day before, or one day after, the laches of the first mortgagee. In either case, the statute may reasonably have intended, that such laches should inure to •the benefit of the specific lienholder, as well as to that of the mere creditor.

Besides, no disapprobation of the construction given to the statute, in the case of Paine v. Mason, has been indicated by any subsequent legislation; and when to this acquiescence we add the further consideration, that a decision which has 'become known, and been acted on as an established rule of ¡property, should not be lightly overruled, and the law be thereby rendered uncertain, we are satisfied that the former-decision of this question should stand as the law of this state,, until changed by legislative authority.

The case, then, stands thus: The plaintiffs’ mortgages, not-having been re-filed, pursuant to statute, are void as to Young-love & Hoyt, the third mortgagees; but the plaintiffs retain their priority of lien over Warren, who holds under Wilcox,,, the second mortgagee, and whose mortgage was taken with actual notice of the plaintiffs’ prior mortgages. Warren’s lien under the Wilcox mortgage, has priority over that of the third' mortgagees, and is riot to be affected by the laches of the plaintiffs. The plaintiffs’ mortgages, are then, not to affect the rights of the third mortgagees; nor is the laches of the plaintiffs to affect the rights of the second mortgagee; and whatever rights these conditions leave to the plaintiffs, they still' retain. The result will be, if the fund is insufficient for the - discharge of all mortgages, that the third mortgagees, Young-love & Hoyt, are entitled to so much of the fund as would J)e applicable on their mortgage, after satisfying Warren’s prior lien.. Warren is entitled to so much of the fund as would be-applicable to the satisfaction of his claim, leaving the third mortgage out of the question, and preserving the plaintiffs’ priority/ of lien. And the plaintiffs are entitled to the residue.

The case will, therefore, be remanded to the district court, ■ for decree and distribution pursuant to the foregoing opinion of this court, and for such further decree as may become necessary.

Brinkerhoee, O.J., and Wilder and White, JJ., concurred.

Ranney, J., having been of counsel, did not sit in this case.