Court Opinion

ID: 9600988
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:34:49.857543+00
Date Added: 2024-06-11T09:48:13.410783
License: Public Domain

On Petition eor Rehearing
Before Brand, Chief Justice, and Hay, Rossman and Latotjrette, Justices.
Petition denied.
ROSSMAN, J.
The defendant-appellant (Johnston) has filed a petition for a rehearing which, as stated in a brief aceompanyin gthe petition, “assigns as error the failure of this court to consider and determine the following issues:
“1. That where the chattel mortgagee consents to the sale of the mortgaged property by the *432mortgagor that such mortgage is invalid as to subsequent purchasers.
“2. That where the chattel mortgagee consents to the sale of the mortgaged property by the mortgagor, that the lien of the mortgage is waived thereby as to subsequent purchasers either with or without notice and irrespective of the validity of such mortgage.
“3. That where a chattel mortgagor sells the mortgaged property as agent for the mortgagee, the mortgagee is bound by the representations and warranties of the mortgagor in connection therewith. ’ ’
Those contentions were not made the subject matter of any assignment of error.
Section 68-207, O.C.L.A., provides:
“Every mortgage, * * * conveyance or instrument of writing intended to operate as a mortgage of personal property * * * , hereafter made, which shall not be or shall not have been accompanied with immediate delivery and followed by the actual and continual change of possession of the personal property mortgaged, or which shall not be or shall not have been recorded or filed as provided in section 68-203, shall be void as against subsequent purchasers and mortgagees in good faith and for a valuable consideration, of the same personal property or any portion thereof; * *
A brief submitted in support of the petition, after referring to that statute, says:
“Since the opinion of this court is that Johnston (purchaser) had actual knowledge and has also held that the bill of sale was in fact a chattel mortgage, it must now be assumed then that under our statute Johnston came within the third exception in the statute and that the mortgage was valid as to him insofar as actual notice is concerned. ’ ’
*433We deem commendable the frankness of counsel for the petitioner (Johnston). Going on, the brief says:
“However, our statute sets forth not when a chattel mortgage is ‘valid’ but when it is ‘void’ and makes no mention of the validity of the mortgage where a mortgagee voluntarily permits or directs the sale of the mortgaged property.
“Our statute was designed merely to substitute ‘recording’ or ‘actual notice’ for the common law requirement of ‘possession’ and hence is not determinative of the question of validity where the mortgagee consents to the sale.
“The statute does not say a chattel mortgage is valid as to purchasers with notice, but says a chattel mortgage is void unless such notice is had by the purchaser.
“A voluntary act on the part of the mortgagee therefore in consenting to the sale may render the mortgage void as to creditors or subsequent purchasers.
“In the present case, it is conceded that the mortgage is valid as to the parties thereto and as to purchasers with knowledge until the sale with consent of the mortgagee. ’ ’
Thus, it is seen that counsel for Johnston argue that a sale of mortgaged personal property, made with the consent of the mortgagee, renders the mortgage void. They, however, limit that broad contention by stating:
“This court has had this matter under consideration as between the parties and has held that the mortgage was valid as between the parties where the express direction was to pay the money to the mortgagee, but contrary where no such direction was given.
“Orton vs. Orton, 7 Ore. 478;
“Jacobs vs. Erwin, 9 Ore. 52;
“Currie vs. Bowman, 25 Ore. 364;
“Sabin vs. Wilkins, 31 Ore. 450;
*434“Kenney vs. Hurlburt, 88 Ore. 688;
“Teshner vs. Roome, 106 Ore. 382, 399.”
A more recent decision by this court, which employed the principle set forth in the last quotation, is First National Bank of Burns v. Frazier, 143 Or. 662, 19 P. 2d 1091, 22 P. 2d 325. Prom it we quote:
“In Sabin v. Wilkins, 31 Or. 450 (48 P. 425, 37 L.R.A. 465), after discussion of several preceding decisions of this court on this subject, it is said:
“ ‘In a later case (Currie v. Bowman, 25 Or. 364 [44 Am. & Eng. Corp. Cases 662], 35 Pac. 848), it was held that a chattel mortgage is valid which by its terms permits the mortgagor to retain possession with power to sell, but which required him to account to the mortgagee for the proceeds less expenses of sale. These cases indicate very fairly the policy and trend of the law in this state in so far as it is involved by the facts before us.’
“The court then states that the purpose of the parties in giving and receiving the mortgage is a test of its validity at its inception, but that the same is subject to modification, either express or implied; that it is a prerequisite to its continuing validity that good faith and fair dealing be maintained toward those whose interests are affected by it; * * *.''
Since the brief which accompanies the petition for a rehearing refers to the bill of sale possessed by the plaintiff as a chattel mortgage, so shall we. As held in our previous opinion, the bill of sale was, in legal contemplation, a chattel mortgage.
As nearly as we can ascertain from the record, Johnston did not claim during the trial that the chattel mortgage was void and that a power of sale possessed by a chattel mortgagee to sell the mortgaged item renders the mortgage void. The original brief filed *435upon appeal made no contentions of that kind. After the brief was filed, Johnston’s present counsel were retained, and that circumstance, possibly, accounts for the tardy voicing of the above-quoted contentions. The latter appear to be within the general issues developed by the pleadings, although it seems likely that the draftsman of Johnston’s answer did not have them in mind when he wrote the answer.
When the chattel mortgage was delivered to the plaintiff neither he nor Marshall anticipated a sale of the tractor. Both thought that Marshall would continue, as in the past, to use the tractor himself. Since neither of them looked forward to a sale of the tractor, they, of course, made no provision for the disposition of the proceeds of a sale, if a sale should ever occur. It is clear that the plaintiff, when he accepted the chattel mortgage, conferred upon Marshall no power to sell the tractor.
Notwithstanding the fact that Marshall’s prospects looked bright when he obtained his loan from the plaintiff, his fortunes shortly took an unfavorable turn and before long he faced the necessity of converting some of his logging equipment into money.
Although the evidence is not extensive which indicates whether or not the plaintiff authorized Marshall, after the latter’s financial difficulties became acute, to sell the tractor, it warrants a belief that no such authority was given — at least, none was expressly given. The unsatisfactory condition of the evidence upon that phase of the contentions possibly is due to the fact that counsel who represented Johnston at the trial apparently did not have in mind the contentions made in the petition for a rehearing. Since the defendant-appellant, Johnston, has the burden of proof upon *436Ms claim of invalidity, lie is the one who must suffer from the unsatisfactory condition of the record, if that condition is material. The plaintiff was aware of Marshall’s financial plight and evidently knew that he would have to turn some item of property into cash, but no witness testified that he empowered Marshall to sell the tractor. It affirmatively appears that he disapproved a sale of the tractor to Johnston when the subject was broached. The record does not mention any other prospective buyer for the tractor, and it clearly does not warrant a finding that the plaintiff conferred upon Marshall a general power of sale. It is true that eventually Marshall sold the tractor to Johnston, but the sale occurred when the plaintiff was absent from the state and was not aware of the negotiations. We believe that the plaintiff never authorized Marshall to sell the tractor.
It will be recalled that the brief submitted in support of the petition for a rehearing cites several decisions of this court which held that “the mortgage was valid as between the parties where the express direction was to pay the money to the mortgagee.” By the term “the money”, counsel mean the proceeds of the sale. We shall now ascertain whether such a direction was given when Marshall sold the tractor to Johnston.
When Johnston purchased the tractor, he paid Marshall $750 cash and gave him his promissory note in the sum of $1,200. He agreed to pay directly to Marshall notMng more than the total of those two amounts. No one contends that Johnston purchased the tractor at a price of only $1,950. The price set by the Office of Price Administration upon equipment of that kind was about $8,500. Marshall swore that he *437and Johnston agreed upon a purchase price of $8,000, made up as follows: $6,000 for the discharge of the mortgage held by the plaintiff, and $2,000 for himself (Marshall). Marshall also testified that, in order to induce Johnston to make the cash payment of $750, he reduced the amount of $2,000, which was payable to him, to $1,950. In that manner he obtained at the time of the sale $750 cash and Johnston’s note in the denomination of $1,200.
Johnston conceded that Marshall reduced the purchase price $50 in order to induce him (Johnston) to pay $750 cash, but swore that the price at which he purchased the tractor was $6,000. According to him, Marshall represented his indebtedness to the plaintiff as being $4,000, and thus the purported price of $6,000 was made up of the $4,000 as the debt due the plaintiff and $2,000 for Marshall. We are well satisfied, as stated in our original opinion, that Marshall’s debt to the plaintiff was, in truth, $6,000, not $4,000.
Our analysis of the evidence convinces us now, as it did when we wrote our original opinion, that Johnston promised Marshall that he would pay Marshall’s debt directly to the plaintiff as a part bf the purchase price of the tractor. We will now review some items of evidence which have brought us to that conviction.
By reverting- to our original opinion, testimony given by Johnston will be found quoted in which he stated that before he purchased the tractor Marshall told him, “I will tell Mr. Boy Stotts that I have made the arrangements, and you can just pay him direct.” We also copied other testimony given by Johnston, as follows:
“Mr. Marshall told me he would make those arrangements whereby I could pay Mr. Stotts, and *438if I didn’t feel like I wanted to pay him in cash, he even went so far as to tell me that Mr. Stotts had assured him that it could he handled in a convenient way for me.”
He also testified:
“That is what he told me when he gave me the bill of sale a day or so later, and he said, ‘I will tell Mr. Roy Stotts that I have made the arrangements, and you can just pay him direct.’ ”
In still another part of his description of the transaction he swore that he “made arrangements with the bank to take care of Mr. Stotts’ claim as Mr. Marshall gave it to me” and that after making those arrangements he “went over to Mr. Stotts’ office to talk to him about it.” The following is also taken from his account of the transaction:
“I went to Mr. Stotts’ office and told him that if he wanted to get his money right away, why, he could go to the bank at any time; I had arrangements made to pay it.”
The bill of sale which Marshall delivered to Johnston, it will be recalled, said, “free from all incumbrances except a note held by Roy Stoots. ’ ’ The name ‘1 Stoots ’ ’ was written inadvertently for that of the plaintiff, Stotts. Less than two months after his purchase of the tractor, Johnston wrote to the plaintiff as follows:
“I am leaving town so early this morning I didn’t want to phone you. If you want the money due on the tractor before I return, phone my wife and she will make arrangements to have the Bank pay you.”
This, therefore, is clearly an instance in which Johnston purchased the tractor subject to the outstanding “note”, that is, to the plaintiff’s chattel mortgage, and agreed, as a part of the consideration, *439to pay to the plaintiff the amount of Marshall’s debt to him.
A parole agreement by a grantee to pay a mortgage which encumbers the purchased property is valid and enforceable in equity: Bank of Falls City v. Pugh, 125 Or. 135, 266 P. 233, and 59 C.J.S., Mortgages, § 412, at page 589.
The evidence indicates that the plaintiff was not apprised of the transaction between Marshall and Johnston until some days after it had been completed. He then wrote to Johnston:
“Earl [Marshall] recently told me that you were taking it [the tractor] over and that Vancouver Plywood would retire the mortgage, but Chas. Hovey advised me yesterday that was not the case. I must insist that the mortgage be retired at once or I must set about disposing of it.”
It is manifest that no unfair advantage was taken by the plaintiff of Johnston when the latter purchased the tractor. In fact, the plaintiff did not participate in that transaction except to disapprove of it when Marshall broached the subject. Johnston knew of the chattel mortgage possessed by the plaintiff and, as we have seen, promised, as a part of the consideration for the tractor, to pay that debt. This, therefore, is an instance in which to paraphrase counsel’s language, an “express direction was given to pay the money to the mortgagee.” We think that the cases cited by counsel demand a holding that the plaintiff’s chattel mortgage was valid.
The foregoing disposes of the first contention submitted by the petition for a rehearing.
We believe that the second and the third contentions submitted by the petition for a rehearing are answered *440by the portrayal of the facts set forth in preceding paragraphs. The plaintiff did not authorize a sale of the mortgaged property; at least, he did not authorize a sale to Johnston. The plaintiff never made Marshall his agent for the sale of the tractor, and Johnston never assumed that Marshall was the plaintiff’s agent.
The petition for a rehearing is denied.