Case Name: CONE v. IVINSON
Court: Supreme Court of Wyoming
Jurisdiction: Wyoming
Decision Date: 1893-05-19
Citations: 4 Wyo. 203
Docket Number: 
Parties: CONE v. IVINSON.
Judges: GROESBECIí, C. J., concurs.
Reporter: Wyoming Reports
Volume: 4
Pages: 203–272

Head Matter:
CONE v. IVINSON.
Pleading — Chattel Mortgage — Sale op Property by Mortgagor — Liability to Mortgagee op One Instigating Such Sale — Conversion—Election op Remedies.
1. A petition which states a cause of action, although, in a defective manner, is not subject to attack by general demurrer; but if it state a defective cause of action it is open to such attack..
2. In an action brought by a mortgagee of sheep against one who, as alleged, with knowledge of the mortgage, fraudulently requested and instigated the mortgagors to sell and dispose of the mortgaged sheep, an allegation in the petition respecting such sale, that the mortgagors “sold and disposed of all of said sheep” construed to mean an absolute sale of the entire property in the sheep, and not the sale of the mortgagors’ qualified limited property in the chattels. (Conaway, X, dissenting.)
3. An allegation in such petition that the sale was made fraudulently for the purpose of hindering, delaying and defrauding the creditors of the mortgagors, is an allegation of a substantive essential fact, and not a conclusion of law, nor a mere general allegation of fraud.
4. An absolute sale of mortgaged personal property In hostility to the mortgage lien, and in disregard of the mortgagee’s rights, is a conversion for which an action will lie against the parties making the sale; and it is no defense to such an action that the mortgagee’s lien was not divested by the sale, and that he could still follow the property, and subject it to the payment of the debt secured.
5. Although a mortgagor of chattels retains a vendible interest in the property, it is a limited and qualified interest, and he has no legal or moral right to sell or dispose of the property unless the sale be made expressly subject to the mortgage. A sale without such reference to the mortgage is, in itself, an absolute sale in hostility to the mortgage and in violation of the mortgagee’s rights, and upon such sale the mortgagee may maintain an action against the mortgagor as for a conversion. (Conaway, J., dissenting.)
6. One, who with a fraudulent purpose, instigates and advises the mortgagor to make a sale of the mortgaged property in violation of the rights of the mortgagee, is also liable as for a conversion of the property, and an action therefor may be maintained against him by the mortgagee. (Con-away, J., dissenting.)
7. Before recovery, in such an action, from one who fraudulently procures the sale to be made in hostility to the mortgage, the mortgagee is not required to look to the personal responsibility of the mortgagor or to show his insolvency, or to follow the property. Having his remedies, he could elect to pursue any of them. (Conaway, J., dissenting.)
ON .EE-HEABINO.
1. A demurrer will not lie to a-petition on the ground that the allegations thereof are ambiguous, uncertain and indefinite.
2. The common law rule that all pleadings are to be construed most strongly against the pleader is abrogated in this state by that provision of the code (R. S., sec. 2483), “the allegations of a pleading shall be liberally construed with a view to substantial justice between the parties.”
3. An allegation in a pleading that one “instigated” another to do any act implies that the act itself was wrongful. The word is never used properly with reference to a good, virtuous lawful act.
4. The petition "alleging that the sale was made without plaintiff’s knowledge, it is a fair inference that it was without his consent. Further, it is well settled that the defense of leave, license or consent, is new matter which must be affirmatively pleaded.
5. The allegation of the sale, setting forth that character of sale which was a tortious conversion of the property as against the mortgagee, and it being alleged that defendant instigated the sale, it is immaterial that the defendant had not been In possession of the property.
(Conaway, J., dissenting. Holding that in any view of the case the petition was insufficient.)
[Commenced in District Court December 19, 1889.
Decided May 19, 1893.
Re-hearing granted. Decision on re-hearing, February 28, 1894.]
Eeeoe to District Court of Albany County, HoN. M. C. Saueley, Judge.
This ease was determined upon the pleadings, the facts-being fully stated by Clark, J., who delivered the opinion of the court.
I. P. Caldwell, and Nellis Gorthell, for plaintiff in error.
The plaintiff’s mortgage was and continued to be a lien upon the property up to the time of sale, prior and paramount to the lien of the defendant. "Upon the sale of the property these liens attached in the same order to the proceeds. The defendant is not a subsequent mortgagee in good faith, not. having parted with a present valuable consideration, but having notice of the prior mortgage. (Jones Chat. Mort. 313, 313, 316, 318; People’s Savings Bank v. Bates, 130 TJ. S., 556; Coddington v. Bay, 30 Johns., 637; Thompson v. Van Yechten, 37 N. Y., 581; Yan Hensen v. Badcliff, 17 N. Y., 583; Wilson v. Leslie, 30 0., 161; Kendall v. Mason, 7 O. S., 199.) When mortgaged property has been sold or converted into money the lien of the mortgage follows the fund and binds it in all respects as it was bound before conversion of- the property. • (Wait Fraud. Conv., 44; Gibson v. Warden, 14 Wall., 344; Astor v. "Miller, 3 Paige, 68; Bartlett v. Gale, ■ 4 Paige, 503; Currany. Ark., 15 How., 304; Platt v. Stewart, 13 Blatcb., 500; Gimbel v. Stolte, 59 Ind., 453; Ball v. Green, 90 Ind., 76; Brown v. Stewart, 1 Md. Ch., 87; 01-cutt y. Bynum, 17 Wall., 44; Markey v. Langley, 2 Otto, 142; Platt v. Bright, 31 N. J. Eq., 86; Bank v. Roberts, 44 N. Y., 192; Neel v. Levy, 24 Pac., 253; Lowe v. Wing, 13 N. W., 892; Brackett v. Harvey, 91 N. Y., 214; Rider v..Edgar, 54 Cal., 127.)
In opposition to rehearing: The allegations of a: pleading must be liberally construed. (Rev.-Stat., Sec. 2483;. -Shank v. Teeple, 33 la., 139.) If petition indefinite the defect is attacked, by motion, not 'demurrer. " (Pomeroy on Rem., 549.) Allegations will be construed to sustain rather than destroy cause of action. (Olcott v. Carroll, 39 N. Y., 436; I Chitty, 237; Allen v. Patterson, 7 N. Y., 480.) Although the word “procure” is not used in petition, its equivalents are used. Fraud is charged by the usual form of allegation. It makes no difference whether defendant converted the sheep or the fund. (Baker v. Beers,- 6 Atl., 35; McPheetus v. Page, '22 Atl., 101.) Plaintiff had a right to elect as to remedies. (Below v. Robbins, 45 N. W., 416.)
ON RE-HEARING.
The code has reversed the common'law rule-that a pleading must be construed most strongly against the pleader.- (Max* well Code PI. 10, and cases cited.) ’ A meaning should be adopted which will support the declaration. (Maxwell 11,- and-cases cited.) In the chattel mortgage statute the'words “sell,” “sale,” and “dispose of,” are used in the sense of -an absolute-' transfer. (Rev. Stat., Secs. 78-90.)' They have the same significance whenever employed without' qualifying' language. (Anderson Law Diet., 914; Benjamin on Sales,-See. 1; Re-towsky y.'Watson, 71 N. C., 455; Storey 'on Sales,'Sec. 1;-Creveling y.'Ward, "95 Pa., 158.) Plaintiff is'entitled to the rule of construction that-words -shall be taken in their common and ordinary meaning.- Good faith cannot-be presumed under the facts alleged in the petition. It is no defense that plaintiff might still pursue the property. (Ashmead v. Kellogg, 23 Conn., 70; Norris v. Hix, 38 N. W., 395; Merchants, etc., Bank v. Meyer, 20 S. W., 406;. Liniger v. Harron, 36 N. W., 481 • Jones on Chat. Mort., 710; Ashe y. Livingston, 2 Bay S. C., 80.)
Brown & Arnold, for defendant in error.
The lien of plaintiff’s mortgage upon the chattels continued after the sale; he had the same rights after sale as before, no more, and no less. It is neither alleged that the sheep were sold to an innocent purchaser, nor that defendant interfered with plaintiff’s right of possession, nor that defendant took the sheep, or asserted dominion over them, nor that the sale was in hostility to the mortgage, nor that upon sale the herd was divided among several purchasers;- therefore plaintiff has no right to complain. For aught that appears the proceeds of sale were the value of the equity conceded by the pleading to be vested in defendant. The petition does not state a cause of action. (Jones Chat. Mort., 461; Goulet v. Asseler, 22 N. Y., 225; Hall v. Omaha Nat. Bank, 64 N. Y., 550; Hathaway v..Brayman, 42 N. Y., 322; Manning v. Managhan, 28 N. Y., 585.) The legal title was never in the plaintiff. (Bev. Stat., Chap. 5; Sanford v. Bell, 2 N. D., 6; Byrd v. Forbes, 3 Wash. Ty.; 318;- Chapman v. State, 5 Or., 432; Bandall v. Higby, 37 Mich., 40; People v. Bristol, 35 Mich., 28; Campbell v. Quaekenbush, 33 Mich., 287; Graham v. Blinn, 3 Wyo., 746.)
ON RE-HEARING.
The petition cannot be viewed as alleging the sale to have been made without.the knowledge or consent of plaintiff.A sale is alleged, and a sale was impossible without plaintiff’s consent, under the facts alleged. The petition does not allege-that defendant “procured” the sale to be made. • The petition is defective in substance and not in form. The petition does not allege a fraudulent' sale. The money was paid to defendant to pay an honest debt. The question of tortious conversion is not applicable to this case. No conversion of the property is alleged. The -right of plaintiff to recover possession of the personal property was barred by statute of limitations. The mortgage was given Oct., 1884, and the sale occurred May 20, 1889. At time of sale therefore, by reason of statute of limitations (4 years) he had no right to possession. This appeared on face of the petition, and made it subject to demurrer. (Bliss on Code, PI. 205; 1 Chitty, PI. 225.) There is no ground for the conclusion that defendant w.as guilty of a wrongful conversion. • To constitute a sale, there must be, first — parties competent to contract; second— mutual assent; third — a thing, the absolute or general property, which is transferred from the seller to the buyer; and, fourth — a price in money paid or promised. (Benj. on Sales, 2; Parsons on Cont., Vol. 1, Secs. 574-576.) Delivery is hot requisite to a sale. (1 Parsons Cont., Secs. 529-531.) So far as can be gathered from the petition, the sale was not unlawful, or made in hostility to the prior mortgage, or without consent of plaintiff, nor does it appear that Lawrence & McGibbon are not now in thepossessionof the sheep sold, and holding the same in the interest of the Cone mortgage. The use of the words “sold and disposed of” in the petition indicates a transaction other than a mere sale; mortgaging property is a disposition thereof, and other acts which do not amount to an absolute unqualified sale may be a disposition. (Platt v. U. P. Ry. Co., 99 U. S., 48; Shoe Co. v. Haines, 82 Tex., 273.) A fair and unbiased construction of the allegations of the petition shows, as we believe, a simple transfer by Lawrence & McGibbon of their equitable interest in the sheep, without delivery of possession, subject to the rights of Cone, the mortgagee. This was the interest' mortgaged to Ivihson, and the interest they had a perfect right to convey. Ivinson’s receiving the money ’ was an act entirely consistent with honest dealing. Even if the new rule for the construction of a pleading obtained in Wyoming, and that theory never did obtain in our courts, the petition is not thereby aided, because there is no ambiguity in ■ this petition and no room for construction. The new rule does not require a leaning in favor of the pleader. (Pom-eroy’s Remedies, See. 546.)’ A mortgagor of chattels who sells the property cannot be pursued by the mortgagee unless it is shown that the sale was made without consent. The rule is stated as follows: If it appears on the face of the statute or instrument that there is no right in the plaintiff unless he negatives the exception, he must by his declaration show that his adversary is not within it. (Encyl. of Law, Yol. 18, p. 571, and authorities there cited.) The question of consent is not matter of defense. To support an action of trover plaintiff must show right of possession in himself, the conversion of the property by the defendant when such right of possession existed. (4 Black, 317; 2 Black, 395, 465; 23 Geo., 484; 39 Me., 448; 5 Denio, 497; 31 Ill., 120; 6 Barb., 436; 27 Ala., 228.)

Opinion:
CLARK, JüSTXCE.
(Statement of case.)
On the 19th day of December, 1889, the plaintiff in error filed his petition in the district court of Albany County, in which he alleged:
"That heretofore, to wit: on the 6th day of October, 1884, "William Lawrence and James' McGibbon, then and now co-partners as Lawrence and McGibbon, were indebted to the "plaintiff in the sum of twenty-two- thousand one hundred "and seventy dollars ($22,170.00), and to secure the payment "of the said sum said Lawrence and McGibbon made their "two certain promissory notes of that date, each for the sum "of eleven thousand eighty-five dollars ($11,085.00), payable in "nine and twenty-one months, respectively, after the date "thereof, to the order of the plaintiff, with interest at ten per "cent per annum from date until paid; and at the same time, "and to further secure the payment of the said indebtedness "said Lawrence & McGibbon executed and delivered to the "plaintiff a chattel mortgage, conveying to the plaintiff twelve "thousand three hundred and ninety head (12,390) of sheep, "branded with the 'Block Y' brand, thus , together with "the natural increase of said sheep, all of which said sheep "were then ranging and pasturing at, or near, the ranches of "the said Lawrence &' McGibbon, in Albany County, and the "Territory of Wyoming; also fourteen (14) head of horses, ."branded with the said 'Block Y' brand, and all harnesses, "wagons, and farm implements and tools belonging to the said "Lawrence & McGibbon, and then at or near the ranches "aforesaid, together with certain other property in said mortgage more particularly described, which said mortgage was "duly executed, acknowledged and delivered, and was thereafter, to wit: on the 6th day of October, 1884, at five o'clock "p. m., duly filed for record in the office of the county clerk, "an ex-rofficio register of deeds of said Albany County, and "Territory of Wyoming, a.nd was duly recorded in Book 'B' of "the Chattel Mortgage Records, on page 137. That said indebtedness, notes, and mortgage have ever since remained, "and still remain in full force and effect and unsatisfied, ex"cept as to four thousand head (4,000) of said sheep, which "were sold by said Lawrence & McGibbon and releaséd from "said mortgage "by the plaintiff, and the proceeds thereof applied on plaintiff's debt, and there is still due and unpaid of "said indebtedness the sum of six thousand one hundred and' '.'twenty-eight dollars and nineteen eénts ($6,128.19), together with interest thereon at the rate of twelve per cent "per annum from the 14th day of November, 1888.
"Plaintiff further alleges that after the execution of the "said mortgage, to-wit: on the 28th day of January, 1887, "said defendant Edward Ivinson, to secure a pretended antecedent indebtedness of the said Lawrence & McGibbon to "him in the sum of twenty thousand dollars ($20,000.00), procured from the said Lawrence & McGibbon a chattel mortgage upon seven thousand one hundred (7,100) head of the "sheep conveyed by plaintiff's mortgage above described, be"ing all of said sheep then remaining.unsold; and that there"after, to-wit: on the 22d day of August, 1888, said defend"ant Ivinson procured the execution by said Lawrence & Mc-"Gibbon of a certain other chattel mortgage, conveying, with' "other propertj', to him all the property described in the afore'"said mortgage to plaintiff,' except the four thousand (4,000) "Read of sheep theretofore sold by said Lawrence & McGibhon "as aforesaid, securing the payment of said indebtedness of "the said Lawrence & MeGibbon to said Ivinson. That said "Ivinson caused his said mortgages to be recorded in the office "of the county clerk, an ex-officio register of deeds of said Al"bany County and Territory aforesaid.
"Plaintiff further alleges that thereafter, to wit: on the "20th day of May, 1889, said Lawrence & MeGibbon, at the "request and instigation of said Ivinson, sold and disposed of "all of said sheep theretofore unsold, for a large sum of money, "to wit: about the sum of twenty thousand dollars ($20,-"000.00), and that said Ivinson collected and retained the "proceeds of said sale, to wit: the said sum of twenty thousand dollars ($20,000.00).
"Plaintiff further alleges that said defendant, at and before "the time when he obtained from said Lawrence & MeGibbon "the first of his said mortgages, and at and before the time "when he obtained from them the second of his said mortgages, and at and before the time when he collected and regained the proceeds of said sale as aforesaid, and at all times "since the execution of the said mortgage to plaintiff, had full "notice and knowledge of plaintiffs claim, and of the existence of said indebtedness, and of the giving of said mortgage, "and of the fact that the same constituted and was a lien and "incumbrance upon the sheep aforesaid, and that the defendant procured each of his said mortgages, and collected and "retained the proceeds of said sale, without other consideration than the said antecedent indebtedness and with full "knowledge of the plaintiff's rights, and fraudulently for the "purpose of hindering, delaying and defrauding the creditors of the said Lawrence & MeGibbon, and especially this "plaintiff, of their just debts.
"That the plaintiff had no knowledge of the said fraud and "fraudulent acts of the said defendant, and did not discover "the same until long after the sale and disposal of the said "mortgaged property, and that such facts have only recently, "and long since the sale of said mortgaged property, come to "his knowledge.
"Plaintiff further alleges that said Lawrence & McGibbon, "after the giving of said mortgages to defendant had no "other property out of which the plaintiff could recover his "debt, and that by reason of the aforesaid fraudulent acts "of said defendant plaintiff has been unable to and is still "unable to collect his said indebtedness from the said Lawrence & McGibbon.
"Plaintiff further alleges that he has duly demanded from "said Edward Ivinson the said sum of six thousand one hun"dred and twenty-eight dollars and nineteen cents ($6,-"128.19), and interest thereon at the rate of twelve per cent "per annum, and that to pay said sum, or any part thereof, "said defendant wholly failed and refused."
Thereafter the defendant in error filed in said court a general demurrer to plaintiff's petition, for that it did not state facts sufficient to constitute a cause of action in favor of plaintiff and against defendant.
On April 9th, 1890, the matter was heard by the court upon the petition and demurrer, and the demurrer sustained, and •the plaintiff failing to ask leave to amend his petition, it was ordered and adjudged that the petition be dismissed and that defendant have judgment against plaintiff for his costs, to which ruling, order and judgment plaintiff duly excepted, and now brings the case here upon such exceptions.
OPINION OP COURT.
Inasmuch as there is no averment in the petition that the defendant ever at any time attempted to foreclose either of the two mortgages executed to him by the mortgagors, of ever at any time asserted any right under those mortgages, or either of them; the allegations in the petition concerning the making of the two mortgages by Lawrence & McGibbon to the defendant Edward Ivinson may be dismissed from further consideration; those allegations, in my opinion, in no way whatever affect or qualify the remaining allegations of the petition, unless it be that it appears from these allegations that Edward Ivinson was a creditor of the mortgagors in the sum of twenty thousand dollars. Hence, all argument based upon propositions relating to the rights of a junior mortgagee are irrelevant to any issue in this case, as no such question is presented by this petition.
Briefly stated, the substantial facts set forth in the petition are: That on the 20th day of May, 1889, the plaintiff held a chattel mortgage upon a flock of sheep belonging to Lawrence & McGibbon to secure the payment of a balance due to him from them, amounting to the sum of $6,128.19, with interest from November 14, 1888, at the rate of twelve per cent per year; that on said day the said chattel mortgage was in full force and effect and constituted a valid subsisting lien upon said sheep; that on said day the defendant, Edward Ivinson, with full knowledge of plaintiff's rights, of the existence of said indebtedness and of said mortgage, and fraudulently for the purpose of hindering, delaying and defrauding the creditors of said Lawrence & McGibbon, and especially this plaintiff, of their just debts, and without the knowledge or consent of plaintiff, requested, instigated and procured the said Lawrence & McGibbon to sell and dispose of all of said sheep for the sum of twenty thousand dollars, which sum he, Ivinson, collected and retained; that Lawrence & McGibbon had no other property than the mortgaged property out of which plaintiff could recover his debt, and that by reason of the sale so made plaintiff has been unable to and still is unable to collect his said indebtedness from said Lawrence & McGibbon; that plaintiff has demanded the sum due him from Lawrence & McGibbon of defendant and defendant has wholly failed to pay the same or any part thereof.
Do these facts entitle plaintiff to relief? I am clearly of the opinion that they do, and that the demurrer should have been overruled and defendant required to answer the petition.
Let it be admitted that the petition sets forth in a defective manner the plaintiff's cause of action;' that it is lacking in certainty and definiteness; still there is a vast distinction between stating a cause of action in a defective manner and stating a defective cause of action. In the one ease the petition is not subject to attack by general demurrer; in the other it is open to such attack because it matters not how well pleaded the defective cause of action may be, such cause cannot entitle a party to any relief.
Our code provides that "The allegations of a pleading "shall be liberally construed with a view to substantial justice "between the parties." Rev. Stat., Sec. 2483.
In Pomeroy's Remedies and Remedial Rights, at Sec. 549, the rule is stated as follows:
"The true doctrine to be gathered from all the eases is, that "if the substantial facts which constitute 'a cause of action "are stated in a complaint or petition, or can be inferred by "reasonable intendment from the matters which are set forth, "although the allegations of these facts are imperfect, incomplete, and defective, such insufficiency pertaining, how"ever, to the form rather than to the substance, the proper "mode of correction is not by demurrer, nor by excluding evidence at the trial, but by a motion before the trial to make "the averments more definite and certain by amendment."
Counsel for defendant in error in their brief use this language:
"It is not alleged that the property was sold in hostility to "plaintiff's right. Certainly in the absence of averment, it "will not be presumed that Lawrence & McGibbon committed a crime by selling the property for its full value in disregard of plaintiff's rights. Por aught that appears the sale "was a legal one, subject to the prior mortgage, and the proceeds of the sale were the value of the equity conceded by the "pleading to be vested in the defendant by virtue of his subsequent mortgage. What right then has the plaintiff to complain. His general allegation of fraud will not help him "when the facts alleged show good faith."
It is true that if we consider only the allegation of the sale, viz.:
"That on the 20th day of May, 1889, said Lawrence & Mc-"Gibbon, at the request and instigation of said Ivinson, sold "and disposed of all of said sheep theretofore unsold for a "large sum of money, to wit: about the sum of twenty thousand dollars, and that said Ivinson collected and retained the "proceeds of said sale, to wit: tlie said sum of twenty'thousand dollars/'
It might possibly he open to the construction which counsel gives to it, but even then I think it would be a strained construction to hold that the allegation that the mortgagors "sold and disposed of all of said sheep," meant, or might fairly be construed to mean that they sold only their equity in the sheep.
It may be true that a mortgagor of personal property continues to possess an interest in the property which he may sell and transfer, or to state it otherwise, he may sell and dispose of the property expressly, subject to the incumbrance (but upon this proposition I express no opinion at pr§sent because of the stringent provisions of Sec. 90, Revised Statutes), but this is certainly the only right which he possesses, the right to sell his limited qualified property in the chattels, and good faith and good conscience towards both the mortgagee and the purchaser demands of him that in making the sale of mortgaged chattels during the existence of the lien, he shall make it expressly subject to the mortgage; otherwise he would be guilty of perpetrating a fraud upon either the mortgagee or the purchaser. This being true, how can it be claimed that an allegation that during the existence of the mortgage lien — the mortgagor "sold and disposed of all of said mortgaged chattels," can fairly be construed to mean that the mortgagor sold and disposed of only his qualified limited property in the chattels; or that he sold and disposed of them expressly subject to the incumbrance. The usual and ordinary definition of the word "sale" is "the transfer of the absolute or general property in a thing for a price in money." Benjamin on Sales, Sec. 1. And I can conceive of no reason why in the absence of any words limiting the meaning; the words "sold and disposed of all of said sheep," should be construed to mean anything less than an absolute sale of the entire property in said sheep. Suppose the purchaser was here complaining in an action upon the implied warranty of title, and the proof simply showed a sale generally by the mortgagor while in possession, without any reference whatever to the mortgage by any of the parties, nothing at all said about it; could it in such case he said that such proof did not establish an implied warranty because it did not expressly negative the idea that the sale might have -been made subject to the mortgage. It seems to me that in such case the court would say that fact was matter of defense; and certainly in such ease the pleading need not be any broader than the proof required to meet the legal proposition upon which plaintiff's rights depended. Tiedeman on Sales, Sec. 185.
But taking all the allegations concerning the sale into consideration, the sale itself, the intent and purpose with which it was procured to he made, the fact that it was made without the knowledge or consent of the plaintiff, and applying to them the rule quoted from Pomeroy, how can it he said that it does not appear by fair and reasonable inference from the matters which are set forth in the petition that it was an absolute sale, which was in hostility to plaintiff's lien and in violation and utter disregard of his rights. The allegation that the sale was made "fraudulently for the purpose of hindering, "delaying and defrauding the creditors of Lawrence & Mc-"Gibbon," etc., is not an averment of a conclusion of law, nor a "mere general allegation of fraud," hut of a substantive essential fact. How then can it be claimed under any fair and reasonable construction of these allegations that "the facts alleged show good faith." "Good faith consists in an "honest intention to abstain from taking any unconscientious "advantage of another, even though the forms or technicalities of law, together with an absence of all information or "belief of facts which would render the transaction uncon-"scientious." Gress v. Evans, 1st Dak., 399.
It is further claimed that inasmuch as it does not appear from any allegation in the petition that plaintiff's lien has been destroyed or in any way impaired by the fact of sale, hut on the contrary that it does fairly appear that plaintiff's lien after the sale remained in full force and effect, and that for aught alleged he could have followed the property and subjected it to the payment of his debt, that he was not in jured by the sale and that he had alter the sale the same remedies which he had before the sale, no more and no less.
I do not think this is the law. It is to my mind well settled that an absolute sale of mortgaged personal property in hostility to the mortgage lien, and in disregard of the mortgagee's rights is a conversion for which an action will lie against the parties making the sale; and it is no defense to an action for the conversion of the property to say that the mortgagee's lien was not divested by the sale, and that he can still follow the property and subject it to the payment of the debt secured by the mortgage.
In Ashmead et al. v. Kellogg, 23 Conn., 70, the facts were that the defendant made a chattel mortgage upon a schooner to the plaintiffs to secure the indebtedness of $3,000.00 from defendant to plaintiffs. After the making of the mortgage the defendant made sale of the entire interest of said vessel to one Brannon for the sum of $14,000.00, which the defendant retained to his own use. Ko attempt was made by the mortgagees to follow the property, and an action of trover was brought by them against the mortgagor. Upon the trial the plaintiffs had judgment and defendant appealed. The supreme court, in the opinion at page 74, say:
"On the facts appearing in this ease, two points have been "presented. First, whether the plaintiffs had a sufficient "title to the property in question to maintaian the action; "and secondly, whether there was a wrongful conversion of it "by the defendant to his own use. Respecting the latter of "these questions, it is too obvious to require argument, that "if the plaintiffs had sufficient title to the property when it "was sold by the defendant, such sale constituted a wrongful "conversion of it by the latter. It was an unauthorized deprivation of the plaintiffs of their property, and a direct appropriation of it by the defendant to his own use. It is "true, as stated by the defendant, that the plaintiffs did not "by such sale lose their title to the property, and might have "reclaimed it, if they elected to do so, in the hands of the purchaser from the defendant, or those into whose hands it "might afterwards come; but they were not bound to do this, "and had a right to resort immediately to the defendant, by "whose means they had been wrongfully deprived of it. It is "scarcely necessary to say that the wrongful conversion of "property, which is sufficient to sustain the action of trover, "does not necessarily imply its destruction or even its re"moval, so that the owner cannot retake it. If the defendant had merely disposed of his own interest in the property "and sold it subject to the incumbrance of the mortgage of it "to the plaintiffs, there would have been no interference with "the rights of the plaintiffs; but here the defendant assumed "to sell the entire vessel, as unincumbered, and retained the "proceeds as his own, which was a clear invasion of the rights "of the plaintiffs, and a wrongful conversion of their property by the defendant to his own use."
At page 78 of the report the court further says:
"The plaintiffs claim that the sale of the property by the "defendant in this instance constituted, such a misappropriation and conversion of the property, and we are of that opinion. It could not be doubted that a destruction of it by the "defendant during the limited period during which he was "entitled to its use would be a conversion of it, for which "the plaintiffs might immediately maintain an action of "trover, and we think that a sale was equivalent to a destruction of it as between the parties. It may indeed, after such "sale, have remained in specie, but it is not for the defendant to insist that the plaintiffs should follow it in the hands "of the purchaser. The plaintiffs may treat it as if it were "lost or destroyed. The sale of it, moreover, by the defendant, was an act of disloyalty to the plaintiffs and a disclaimer "by him of their title."
In White v. Phelps, 12th N. H., 382, it is said:
"The general principle is, that assuming to one's self the "property and right of disposing of another man's goods, is a "conversion."
In Miller v. Allen, 10 R. I., 49, it was held:
"That a mortgagor of personal property left in possession "thereof, who again mortgages the entire property without "giving notice of the existing mortgage, and afterwards gives "the second mortgagee possession or permits Rim to take possession thereof, is guilty of a 'tortious conversion, and is "liable to the first mortgagee in an action of trover."
In Coles v. Clark et al., 3d Cush., 399, the facts were that a mortgagor who was left in possession of certain mortgaged chattels took them to the defendants who were auctioneers, for sale. The defendants as such auctioneers sold the goods, and paid the proceeds over to the mortgagor long before the plaintiff, who was the mortgagee, could learn what had become of the goods. At the time of the sale, and at the time the proceeds were paid over, and for a long time thereafter, the defendants had no knowledge of the existence of the mortgage.
The court below charged the jury that even though the mortgagor might have been guilty of fraudulent conduct, such as would make her liable to the mortgagee, yet the defendants would not be liable to the mortgagee for the property unless the jury'should also be satisfied, either that the defendants acted in concert with the mortgagor, or had knowledge in fact of the existence of the mortgage, or unless there was something in the transactions themselves, or circumstances had come to the defendants' knowledge, which would put men of ordinary prudence on inquiry so that they might have come to a knowledge of the existence of the plaintiff's mortgage. The supreme court, in an opinion by Chief Justice Shaw, held the above quoted instruction to be error, saying, at page 403 of the report:
"In the decision of this case, we lay out of it all consideration of the fraudulent intent and purpose, or conduct of the "mortgagor. Of course, if she had a fraudulent intent, and "the defendants participated with her in that intent, that "would put the matter beyond doubt, upon the plainest principles of common honesty and fair dealing. But we see "nothing to fix such an imputation upon them and we presume none is suggested. It is sufficient for the view we "take of the case that the conduct of the mortgagor was "unlawful, that she had no title in herself which she could "transfer to another by a sale, and that she had no authority "to transfer tire title of the mortgagee. And the court are "of opinion that the sale and disposition of the goods, the "delivery of them and receiving the proceeds by order and "direction of the mortgagor, who had neither title nor power, "was a conversion, and that this action may he maintained/'
If such is the law, and I know of hut one case, Rogers v. Huie, 2 Cal., 571, in which the contrary has been held, do not the allegations in the petition in this case charging an actual fraudulent intent in procuring the sale, upon the defendant, set forth upon the plainest principles of common honesty and fair dealing an actionable wrong?
In the case of Spraights v. Hawley, 39 N. Y., 441, the facts were like the facts in Coles v. Clark, supra. A mortgagor deposited certain mortgaged jewelry with the defendant for sale. Defendant sent the jewelry to New York and effected a sale there; received the proceeds of sale' and paid them over to the mortgagor without charge for his services. He acted simply as the agent of the mortgagor, without notice of the mortgage and in good faith. The supreme court of New York, to which the case was appealed, and the court of appeals in the report above cited, held that the defendant was liable for a tortious conversion of the property.
In Merchants & Planter's Bank et al. v. Meyer, 20 S. W. Rep't, 406, it was held that an absolute sale of mortgaged chattels made by an agent of the mortgagor in exclusion or defiance of the rights of the mortgagee is a conversion for which such agent is liable to the mortgagee, though the sale is made in good faith and without actual notice of the mortgage.
In Brown v. Campbell, 44 Kan., 237, the facts were, a chattel mortgage was properly executed and recorded and was valid. The mortgage debt was not paid although it had beenduefor some time,and the mortgageenever had the actual possession of the property. The wife of the mortgagor transported the property to another county and placed it in possession of a broker* who sold it to others and paid over the proceeds of the sale to the consignor, the wife of the mortgagor; and all this was done without the knowledge or consent of the mortgagee, and without any actual knowledge on the part of the broker concerning the mortgage or the rights of the mortgagee. Upon these facts it was held by the supreme court of Kansas, that as the mortgage had been properly filed and recorded, and continued to be a valid subsisting lien upon the property, the broker was charged with notice thereof and of the rights of the mortgagee, and that by selling and delivering the property to others he made himself liable to the mortgagee as for a conversion of the property. In the opinion, at page 242, the court uses this language:
"The defendant also cites Hathaway v. Brayman, 42 N. Y., "322. In this case it was decided that a mortgagor of chattels "in possession has a right before default to sell and deliver the "mortgaged property subject to the mortgage. This we "think is good law, provided the mortgagor sells the property in good faith and without any intent t'o hinder, delay "or defraud his creditors, and especially the owner of the "mortgage debt. If the mortgagor, however, should sell the "mortgaged property without reference to the mortgage debt, "or with any intent to hinder, delay or defraud the holder of "the mortgage, he would commit a criminal offense."
In my judgment, the case last cited states the law correctly. While it may be true that a mortgagor of chattels still retains a vendible interest in the property, it is still a limited and qualified interest, and he has no legal or moral right to sell or dispose of the mortgaged property unless the sale be made expressly subject to the mortgage and the mortgagee's rights. Asale without .reference to the mortgage is in itself an absolute sale in hostility to the mortgage, and in violation to the mortgagee's rights; and upon such sale the mortgagee may maintain an action against the mortgagor as for a conversion of the property. To hold otherwise, would in my opinion be tantamount to saying, that a mortgagor of chattels might lawfully make a sale of the mortgaged chattels, which would in effect either work a fraud upon the purchaser or upon the mortgagee; and I am of the opinion that the true rule is that he shall not lawfully be permitted to do an act which will in its effect perpetrate a fraud upon either.
Por other authorities upon this branch of the case, see Howard v. Burns, 44 Kan., 543; Marks v. Robinson and Ledyard, 82 Ala., 69; Jones on Ch. Mtgs., Sec. 460, and cases cited; Lafayette Bank v. Metcalf et al., 40 Mo. App., 494; Peckinbaugh v. Quillen, 12 Neb., 587; Worthington v. Hanna, 23 Mich., 531; Longey v. Leach, 57 Vt., 377.
It is further contended on behalf of defendant in error, that:
"The petition does not allege that the defendant ever "took possession of the mortgaged property, or that the sheep "were ever sold by him. It does not allege that the proceeds "retained by the defendant was the full purchase price. Did "it contain such necessary allegations, in addition to the facts "alleged, it would still fall short of stating a cause of action."
And in support of this proposition cites the following authorities: Jones on Chattel Mortgages, Sec. 461; Goulet v. Asseler, 22 N. Y., 225; Hall v. Omaha Nat'l Bank, 64 N. Y., 550; Hathaway v. Brayman, 42 N. Y., 322; Manning v. Monaghan, 28 N. Y., 585.
It is true that the petition does not allege that the defendant ever took possession of the sheep or that he sold them, but it does allege that the defendant with a fraudulent purpose instigated and advised the mortgagor to sell the sheep, and as we have before stated, the sale by the mortgagors was in effect a conversion of the property; and that not only by them, but by the defendant who procured them to make the sale. Cooley on Torts, 127 and 131, and the plaintiff could rightfully sue any or all of those who participated in the sale. Peckinbaugh v. Quillen, 12 Neb., 587.
I think it does fairly appear from the petition that the proceeds of the sale collected and retained by the defendant was the full purchase price of the sheep; the sale being, according to my construction of the allegations concerning it, an absolute sale of the entire property in said sheep, and not simply a sale of the mortgagor's limited and qualified property right in them.
As to the cases cited by defendant in error, it will appear from examination that the eases of Goulet v. Asseler, supra, and Manning v. Monaghan, supra, were decided upon the authority of Hull v. Carnley, 11th N. Y., 501, which case was the second time before the Hew York court of appeals, and reported also in 17th N. Y., at page 202. In all- three of these cases the facts were substantially alike — and as follows: Before default in the condition of the mortgage and while the mortgagor was in possession of the mortgaged property under an express provision thereof which entitled him to the possession until default, the mortgaged property was seized under execution against the mortgagor, and the interest of the mortgagor therein sold. And it was held under such circumstances that this could lawfully be done, and that the officer making the seizure and'sale was not liable to the mortgagee, although he sold the property generally without in any way recognizing the lien of the mortgagee. This upon the ground that in an action for the conversion of property the plaintiff to recover must show not only a property in the thing converted but as well possession or the right of possession at the time of the conversion, and upon the further ground that upon execution sale, only the- interest of the debtor is ever attempted to be sold, and the doctrine of caveat emptor applies in the strongest manner to purchasers at such sales. But it is only when the mortgagor has a certain ascertained right of possession for a definite period that an execution can be levied upon his interest. Jones on Chattel Mortgages, 556; Peckinbaugh v. Quillen, 12 Neb., 586.
Hence it does not seem to me that the New York cases cited in any manner conflict with the views hereinbefore expressed, unless it be that portion of the decisions which hold that the officer's liability is not affected by the fact that he sold the property generally and without regard to the mortgage. As to this particular matter I must confess that notwithstanding my very high respect for . the very able court rendering these decision I am more impressed with the reasoning of Edwards, J., in the dissenting opinion in Hull v. Carnley, 11 N. Y., 510, than I am with the reasoning in the opinion of the majority.
But however this may be, the facts in the cases referred to, and the case now before this court, are not alike. In this case default had occurred; the debt was due and unpaid, and such being the case the plaintiff at the time of the sale was and had been for a long time entitled to the possession of the sheep.
If in objection to this statement it should be said that the petition does not set forth any of the conditions of the mortgage further than that it was to secure the debt due the plaintiff, and that no other conditions can be presumed, the objection might be admitted as valid. The conclusion would be the same; because if there was no provision in the mortgage which, authorized the mortgagor to retain possession of the sheep until default, then it follows that the mortgagee' was entitled to the possession of the sheep immediately upon the execution of the mortgage. Jones on Chattel Mortgages, Sec. 426, and cases cited.
In the ease of Hathaway v. Brayman, 42 N. Y., 322, the mortgagor sold the mortgaged horse subject to the mortgage while in possession under the terms of the mortgage; his vendee sold to another, before default, and while in possession of the last purchaser the horse died. There was no fact in the case indicating a sale in hostility to the mortgage and hence this case does not conflict with any opinion herein expressed.
Hall v. Omaha Nat'l Bank, 64 N. Y., 550, was not a ease in which a mortgagee's rights were involved. The plaintiff had a mere equitable lien upon the property, and nothing more. He could not even upon default have taken possession of the property. All that he could do would have been by some appropriate judicial proceeding to have subjected the property to the satisfaction of-his demand. The defendants were mortgagees who after default in a replevin suit, recovered possession of the goods from the mortgagors, and under the power contained in the mortgage sold the property. The court expressly found that only the mortgagor's right in the property was sold; it was not shown that the purchaser had or had not notice of the plaintiff's lien. In fact no attempt was made to show that the sale was in hostility- to plain tiff's lien. And the court held defendants not liable to plaintiff.
This ease was previously before the court upon demurrer to plaintiffs petition, and is reported in 49 N. Y., 626. The second count in the petition was very general in its allegations, not setting themforth so specifically and directly as'does the petition in this case, 'and the court held that the action of theeourtinsustainingthe demurrer was erroneous and reversed the case. And, hence, I can see nothing in this case which conflicts with the views hereinbefore expressed; but on the whole the opinion of the court upon the exceptions to the order sustaining the demurrer (49 N. Y., 626) strengthens me in the belief that the facts stated in the petition in this ease do set forth a cause of action.
It is further, on behalf of defendant in error, urged that inasmuch as the mortgage was under our statute a mere lien upon the mortgaged property, that there was no estate or title in the mortgagee which could be converted. The proposition is stated as follows:
"The legal title to the property was never in the plaintiff; under our law a chattel mortgage is a mere security "under which no title can pass except by foreclosure. After "condition broken, as well as before, the mortgagor .was the "absolute legal and equitable owner of the sheep in question, "and as such had a vendible interest which he could rightfully "sell and deliver to the purchaser, subject of course to the lien "of the mortgage. Under similar statutes in other States, "prescribing a statutory mode of foreclosure it is held that "the old theory of the common law no longer obtains, and that "both before and after default the legal estate and a vendible "interest remains in the mortgagor."
And in support of this proposition we are cited to cases from Oregon, Washington, North Dakota and Michigan.
In the cases cited, including two early Oregon cases, it is held that a chattel mortgage is a mere lien and conveys no title to the mortgagee until foreclosure, but the great weight of authority is the other way. Without further enlarging upon the matter I will content myself by referring to Case T. M. Co. v. Campbell, 14 Ore., 460, in which, the cases from that State cited by defendant are overruled. In the opinion the court speaking by Thayer, J., concerning the mortgagee's right after default, say:
"The mortgagee then has' a right to the thing, and may, -"if a delivery of it to him on demand is refused, maintain an "action in the nature of replevin to recover it. Having a "claim upon the property, a right to its possession, coupled "with the right to have it sold to satisfy his claim, is, it seems "to me, more than a lien; it is a qualified ownership. Possession is property when it includes so important a right. "The right of possession is a species of title. It is a dominion "over the thing; not for all purposes, perhaps, but for a substantial advantage to the party. He may obtain control over "it as a right, apd hold it as against every one until the mortgagor performs the conditions of the mortgage..
"Conceding that he has a special property in the thing "mortgaged, after the conditions of the mortgage axe broken, "concedes to him the right to recover for its unauthorized "conversion. If, therefore, the appellant wrongfully disposed "of the property in question he was liable in 'damages."
In my judgment the law is correctly stated in the above quotation.
In considering this case I have-investigated it along the line of reasoning followed by counsel for the defendant in error for the reason that in this argument they were thorough and forcible, and stated every proposition and cited every authority which could be stated or cited to uphold the order of the court below.
The conclusion to which I have arrived is, that plaintiff's petition does set forth facts sufficient to constitute a cause of action against the defendant. All forms of actions having been abolished by our code of civil procedure, no question can arise in this case as at common law as to whether an action of trover; trespass, case, or for money had and received was the proper remedy. It is sufficient that it-fairly appears that the defendant is guilty of a wrongful conversion of plaintiff's property. That by means and as the result of such conversion defendant obtained a sum of money largely in excess of plaintiff's debt; that the measure of plaintiff's recovery is the amount of his, debt secured by the mortgage, and this amount the defendant ought in equity and good-conscience to pay over to the plaintiff. Before recovering from defendant, plaintiff was not required to look to the personal responsibility of Lawrence & McGibbon, or to show their insolvency, or to follow the sheep. . Having his remedies, he could elect to- pursue any of-them. Merchants & Planter's Bank v. Meyer, 20 S. W., 408, and cases cited therein.
The judgment of the district court of-Albany County is reversed and the cause remanded to that court for further proceedings in accordance with the views herein, expressed.
GROESBECIí, C. J., concurs.