Court Opinion

ID: 3879756
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:11:38.441417+00
Date Added: 2024-06-11T09:18:45.685840
License: Public Domain

I think the appellant's fourth and sixth exceptions should be sustained.
"It is a well-recognized rule of construction that a mortgage is security only for such demands or indebtedness as are in the contemplation of the parties at the time." 11 C. J., 494; § 157.
While the "blanket clause" of a chattel mortgage is valid (Behrmann v. Brown [S.C.] 113 S.E., 273), the very generality and sweeping inclusiveness of its provisions may furnish the best of reasons for defining and making certain the intention of the parties with respect to what debts were actually within their contemplation. If such a clause is to be construed without reference to the situation of the parties and the extraneous facts tending to shed light on *Page 341 
the intention, then such a blanket clause should be condemned for vagueness and uncertainty.
In the case at bar the defendant gave the bank a mortgage to secure a note for $126.17. Unknown to defendant the bank at the time of taking this mortgage, into which was written this blanket clause, had acquired an unsecured note given by defendant to a third party, and, when defendant paid the $126.17 mortgage note, the bank proceeded to foreclose the mortgage for the purpose of applying the proceeds to the payment of the note defendant had given to the third party as an unsecured obligation. A construction of the blanket provision of a chattel mortgage that would permit a mortgagee who holds the mortgage to go out and buy up unsecured claims against the mortgagor, and, after the mortgagor has paid the debt the mortgage was really intended to secure, spring these other claims on him, and enforce the mortgage to secure payment, is to sanction a use of this blanket clause that would make of it an instrument of oppression and fraud. In the case at bar, for example, the bank taking a mortgage on mules worth, say $600 to secure $126 could have gone out and bought unsecured store accounts or fertilizer notes of the defendant to the face value of $600 for perhaps 10c. on the dollar, and, after defendant had paid the $126, sell the mules under the mortgage for $600 to apply on the $600 of old debts that had cost the bank only $60. If the debts that were fairly and reasonably within the contemplation of the parties may not be inquired into and ascertained, it is further apparent that such a mortgage could readily be made a means of fraud on creditors. An insolvent debtor who owes $2,000, and who has given a mortgage on all his property, worth $1,000 to secure a debt of $200, could under the construction adopted by the circuit Judge in the case at bar, select the creditors he wished to prefer and have their accounts assigned to the mortgagee, paid in full under the blanket clause, and let the other creditors get nothing. *Page 342 
How could a subsequent creditor, with constructive notice of this mortgage for $200 into which was written a blanket clause susceptible of the construction here authorized, ever ascertain by the most diligent inquiry what debts would be brought under cover of the mortgage?
"Where a mortgage is conditioned as security, in addition to the principal sum named, `for all further advances to the mortgagor by the mortgagee, and other indebtedness to the mortgagor by the mortgagee that may exist, arise, or be contracted before the satisfaction hereof,' a subsequent note, indorsed by the mortgagor and by him transferred to the mortgagee, is not secured by the terms of the mortgage.Moran v. Gardenmeyer, 82 Cal., 96, 97, 23 P. 6. A chattel mortgage executed by a farmer to a hardware company to secure certain notes and `for all other amounts I may now be due, or hereafter become due,' as well as for the purpose of securing a line of credit from the mortgagee, does not cover a judgment against the mortgagor in favor of a third person, which judgment the mortgagee purchased. Poulterv. Weatherford Hardware Co. (Tex. Civ. A.)166 S.W., 364."
See 11 C.J., 495, footnote.
For the reasons indicated, I dissent.
MR. JUSTICE FRASER concurs in this dissent.