Opinion ID: 1180775
Heading Depth: 1
Heading Rank: 3

Heading: respondent's liability for the 1964 repairs

Text: Appellant Morgan & Morgan contends respondent must pay for the repairs made to the tractor in 1964. Morgan & Morgan's argument is threefold: first, that under the governing Washington law, respondent's mortgage was completely void as to Morgan & Morgan regardless of Morgan & Morgan's actual knowledge; second, that respondent knowingly received the benefit of the repairs when it purchased the tractor at the foreclosure sale, so that principles of unjust enrichment require respondent to pay Morgan & Morgan for the repairs; third, that the evidence clearly establishes an equitable estoppel precluding respondent from denying its liability for the repairs.
Respondent's mortgage, though unrecorded, was valid as to Morgan & Morgan because Morgan & Morgan had actual knowledge of the mortgage. Under governing Washington law, an unrecorded chattel mortgage is void    against all subsequent    encumbrancers for value and in good faith   . [22] The in good faith requirement excludes from the recording statute's protection a subsequent encumbrancer with actual knowledge of a prior though unrecorded mortgage. [23] And this rule applies though the subsequent encumbrancer with knowledge be an artisan who has supplied labor and materials to the chattel. [24]
We find no merit in Morgan & Morgan's contention that respondent must make restitution because it was unjustly enriched in the amount of the value of the repairs by purchasing the tractor at the foreclosure sale. Generally, that a mortgagee receives on foreclosure the benefit of repairs previously done to the mortgaged property does not in itself render the mortgagee liable for the value of the repairs. [25] But even if the facts of the present action came within general principles of restitution, nevertheless Morgan & Morgan could not recover from respondent because no unjust enrichment due to the repairs appears from this record. The repairs were completed in March 1964; the tractor was not repossessed until about June 26, 1964. Respondent purchased it on July 2, 1964, for the balance due on appellant Smith's contract. Although the district court found the parties agreed the reasonable value of such repairs amounted to $1,289.46, the only evidence on this point concerned actual costs and there was no evidence that the tractor was worth more to respondent than the balance due from Smith because of the repairs. The record does not indicate if the tractor has been resold or if so for what price. We find the district court did not err in its conclusion to deny Morgan & Morgan recovery for unjust enrichment.
Morgan & Morgan contends the district court committed error by concluding respondent was not liable to it for the repairs on grounds of equitable estoppel. We find this is not a proper case for equitable estoppel and so the court was not in error. Assuming Morgan & Morgan refrained from filing a lien or attempting to take possession of the tractor in mistaken belief that respondent would pay for the repairs, nevertheless such conduct would not have been detrimental to Morgan & Morgan's interests. [26] For, as determined earlier in this opinion, respondent by its mortgage had superior right to the tractor. For these reasons we decide the district court properly denied Morgan & Morgan's claims against respondent for the cost of repairs to the tractor. Judgment affirmed. Costs to respondent. TAYLOR, C.J., SMITH, J., and NORRIS and COGSWELL, D. JJ., concur. On Denial of Petition for Rehearing.