Court Opinion

ID: 6858242
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:44:58.41708+00
Date Added: 2024-06-11T16:05:11.937724
License: Public Domain

GARRE CHT, Circuit Judge
(dissenting).
I cannot coneur in the majority opinion. The decision in this case involves the construction of a statute of the state of Idaho. The Supreme Court of the State of Idaho has construed that statute. The judge of the District Court properly followed that construction and his ruling should he upheld. The pertinent part of section 6377 of the Idaho statute, as amended in 1929 (Laws 1929, e. 250, § 5), is as follows: “When mortgaged personal property is * * * removed from any county where the mortgage is filed for record the validity and effect of the mortgage as against all persons is not affected thereby unless such property be removed by the written consent of the mortgagee. * * * ”
It is conceded that the entire controversy, so far as appellant is concerned, revolves about the question, whether parol evidence was admissible to prove that plaintiffs consented to the removal of the wheat. The trial court held that oral evidence tending to prove consent was incompetent under the statute in question.
Appellant takes the position, first, that the statute has no application, and, second, that if it did, that the issuance of the receipts or tickets referred to in the majority opinion, coming into the possession and being held by plaintiffs was a sufficient compliance. Appellant further contends that Bott, who received the tickets, was acting for the plaintiffs and the transaction was in effect as if the wheat had been delivered to the warehouse by the mortgagees, and these scale tickets or receipts accepted by them, and that the appellant thus became bailee for plaintiffs, and the existence of the chattel mortgages would have no hearing on the ease. It was also contended that by the testimony erroneously excluded it could be shown that Comstock, the agent of the plaintiffs, was directly concerned in the storing of this wheat, and thus appellant was the bailee of the plaintiffs, and that said agent orally consented to the removal of the wheat and therefore the statute in relation to chattel mortgages had no application.
It is not disputed that Bott was the owner of the wheat upon which he had given two chattel mortgages to these plaintiffs. He delivered the wheat to the warehouse as the owner of the wheat with the consent of the agent of the mortgagees, and received the scale tickets therefor. The testimony of plaintiffs was to the effect that this wheat was to he piled separately and remain in the warehouse in Tetonia until sold, and both Bott and Comstock deny any consent to its removal. The claim of appellant is that there was no understanding that the wheat should remain in the Tetonia warehouse, and that the wheat tickets themselves, which were received by Bott, provided for the removal of all of said wheat by October 13, 1929, and that these tickets being memorandums in writing delivered to Bott, and which after-wards came into the hands of plaintiffs’ agent, in effect constituted consent in writing to the removal of the wheat.
Appellant further contended that it was the bailee of the plaintiff, and that by reason of this relationship that a valid parol contract for a change of the place of bailment to any place within or without the state could be entered into, and that the statute concerning chattel mortgages, which requires the consent of a party to the removal of the wheat to be in writing, had no application to the case at bar.
• The District Court held that conceding the relationship between Bott and appellant to be that of bailee and bailor, this relationship did not extend to appellees. Appellant was not sued as a bailee hut for conversion of the mortgaged property by removing it out of the state without the written consent of the mortgagees.
It will be observed that all of these tickets were issued by appellant and on their face A. E. Bott, not the plaintiffs, is designated as the owner of the wheat. The record shows that these tickets were not delivered to plaintiffs until October 28, 1929, or until the owners’ right of disposition would have lapsed. To accept the contention urged by appellant would in effect hold that Bott, the mortgagor, was the agent of the mortgagee to effectuate the release of the mortgage by accepting the wheat tickets and subsequently delivering^ them to the agent of the mortgagees. Such a conclusion is not admissible. These instruments were issued by appellant and were in no sense equivalent to the written consent of the mortgagees.
The transaction between Bott and appellant did not effectuate the satisfaction or waiver of the chattel mortgage; therefore appellant’s act in transporting the wheat outside of the county without the written consent of the mortgagees constituted conversion. Further, appellant’s answer admits that it sold the wheat on or about the 18th day of April, 1931. The tickets were issued to Bott, the mortgagor, as the owner, and any arrangements made between him and appel*425lant concerning the removal of the wheat from the state were not binding on the mortgagees, unless consent of appellees was shown to be in writing. When the appellant removed the wheat from Idaho to Utah, it was a wrongful act in violation of the rights of the plaintiffs, and the removal of their security in defiance of their rights was a conversion. Carver v. Ketchum (Idaho) 26 P.(2d) 139; 26 R. C. L. 1098, § 3; 27 R. C. L. 1000, § 61; 1005, 1006, § 67.
Conversion is any distinct act of dominion wrongfully exerted over another’s personal property, in denial of, or inconsistent with his rights therein. United States Zinc Co. v. Colburn, 124 Old. 249, 255 P. 688; Pine & Cypress Mfg. Co. v. American Engineering & Construction Co., 97 W. Va. 471, 125 S. E. 375; Suzuki v. Small, 214 App. Div. 541, 212 N. Y. S. 589; Schlieff et al. v. Bistline et al., 52 Idaho, 353, 15 P.(2d) 726.
Much of the majority opinion is devoted to a discussion intending to show that the purpose of the statute under consideration was merely to continue the lien of the mortgage, and that the lien had not been lost. As the opinion fully demonstrates that without such a statute the lien of the mortgage would have continued, notwithstanding the removal of the wheat from Idaho into Utah, this could not have been the purpose of the enactment of the statute. Moreover, this question of foreclosure was not a matter of controversy, it being conceded that this is not a suit to foreclose the mortgage lien, but an action whereby appellees seek to recover for the unlawful conversion of property by reason of having been deprived of rights which they had in the wheat, and which were lost to them by the removal of the wheat out of the state of Idaho. Under the authorities above cited this clearly constituted a conversion.
Appellees’ right to sue as mortgagees is not denied by appellant, hut it claims: “That the complaint does not state facts sufficient to constitute conversion; that the evidence was not sufficient to show it, and, that in any event, inasmuch as the removal of the wheat from the State of Idaho was the only conversion relied on, the consent to the removal on the part of the mortgagees would prevent the removal from constituting a conversion.”
The controversy on these issues at the trial, as here, narrowed down to the question as to whether this consent could be shown by oral testimony.
In passing on a statute similar to that of Idaho here under discussion the Supreme Court of Maine, in the case of Rowe v. Green, 116 Me. 94, 100 A. 145, squarely upholds the ruling of the District Court. The majority opinion seeks to distinguish this case with the statement that the statute there expressly established a rule of evidence. That this was likewise the purpose of the Idaho statute is plain from its reading, and this is the construction that has been placed upon it by the Supreme Court of that state, and .that construction was binding on the District Court and should ho followed here.
The majority opinion suggests that this section 6377 of: the code of Idaho is concerned only with the removal of mortgaged personal property from one county to another within the state of Idaho, and that it was not the purpose of the Legislature to extend the rule to parties who removed the mortgaged property entirely from the state. This condition but augments the evil, and any reason for such a distinction is not apparent, and the language of the statute is to the contrary. The Supreme Court of Idaho, in Young v. Boise Payette Lumber Co., 45 Idaho, 671, 264 P. 873, 874, negatives any such implication. There the court said: « * * * j.j. may ■j3e ^at $le Legislature, considering, as is suggested in Hoit v. Remick, supra [11 N. H. 285], that it was not among the purposes of the recording act to subject a bona fide mortgagee to the inconvenience, if not impracticability, of the constant vigilance and ceaseless watching which would ho requisite to guard his interests if he is obliged to recoi'd his mortgage in every place to which the mortgagor might see fit to remove the property, and further considering that the mortgagee should not he subjected to the peril of being divested of his lien by oral testimony, deemed it a wise policy to require written evidence of his consent to a removal before he should be deemed to have waived his lien. * * ”
From this opinion it is quite clear that not only does the Idaho court hold that this statute establishes a rule of evidence, but it furthermore excludes any supposition that the removal of the property from the state, whereby all the inconveniences pointed out are increased, was not intended to bo covered by its provisions.
The majority opinion cites for its support Jones on Chattel Mortgages (5th Ed.) § 456; 11 C. J. 626, § 340, and several cases to bo separately noticed hereafter. The quotation of Jones on Chattel Mortgages is as follows: “Although a sale of the mortgaged property by the mortgagor without the con*426sent in writing of the mortgagee be prohibited by statute, if the mortgagee consent verbally to a sale, such sale is sufficient to pass title to the purchaser in possession, and the mortgagee cannot maintain trover for the property.” Citing Gage v. Whittier, 17 N. H. 312.
The rule as stated in 11 C. J. 626, § 340 is: “The mortgagee’s consent to a sale of the mortgaged property may be given verbally, although the mortgage forbids sales without his written consent, and notwithstanding a sale by the mortgagor, without such written consent, is, by statute, made a misdemeanor.”
To sustain this text is eited Shearer v. Babson, 1 Allen (Mass.) 486; also, the ease of Randol v. Buchanan, 61 Mo. App. 445. The case of Shearer v. Babson did not involve a statute. In that ease the mortgage 'contained a provision that if the mortgagor should attempt to sell the property without notice to the mortgagee and without his written consent, the latter might take immedi'ate possession of it. The court held that if the question had arisen between the mortgagor and mortgagee as to their respective rights under the proviso in the mortgage, parol evidence would have been inadmissible to show a different agreement than that expressed in the written contract, but that this question was not involved as defendant was not a party to the instrument and not bound by its stipulation.
Here appellees correctly contend that the public statute enacted by the state of Idaho was binding upon all as an inherent part of all mortgage contracts, and affecting all transactions in relation thereto. Dighton v. First Exchange Nat. Bank, 33 Idaho, 273, 192 P. 832; 13 C. J. 560, § 523; Kitchen v. Schuster, 14 N. M. 164, 89 P. 261.
In Randol v. Buchanan, 61 Mo. App. 445, the statute involved was a criminal statute, making it a misdemeanor for the mortgagor to sell mortgaged property without the written consent of the mortgagee. The court pointed out that there was a misconception of the purpose and scope of the statute; that it was not operative upon the sale of the property, but merely provided that in a case of its violation by the mortgagor that he be punished. In Idaho there is also such a statute which makes it a criminal offense for a mortgagor to dispose of mortgaged property, but section 6377 of the Idaho code is not a criminal statute, but it is a statute of evidence relating to the removal of mortgaged personal property from any county, and the statute explicitly holds that “the validity and effect of the mortgage as against all persons is not affected thereby, unless such property be removed by the written consent of the mortgagee.” The provisions of the statute apply to all persons, not merely to the mortgagor.
The majority opinion also cites as authority for its position Reese v. Kapp, 82 Kan, 304, 108 P. 96; Chase v. Willard, 67 N. H. 369, 39 A. 901, and Colston v. Bean, 77 Vt. 40, 58 A. 795, 796. In Reese v. Kapp the statute involved was likewise a criminal statute which was held not to affect the question presented. There the evidence showed that plaintiff, the mortgagor, with the oral permission of the mortgagee, had sold cattle to defendant, who as part payment had issued a check for $1,000 which was intended to andi would have satisfied the mortgage, if defendant had not stopped payment of the check. Defendant claimed as a reason for his stopping payment of the check that he had just been informed of the existence of the mortgage. The court ruled that having stopped the payment of the cheek, which would have otherwise been used to satisfy the payment of the mortgage, he could not justly complain of its existence.
The case of Chase v. Willard, supra, was also a case which likewise did not involve the rights of the mortgagee.. A purchaser from a mortgagor with the consent of the mortgagee had bought property under a warranty that it was free from incumbrances, sought to rescind the sale. The question of evidence, that the consent of the mortgagee was required to be in writing, was not raised. The court merely held that this statute did not prevent the title from passing, which rule is not questioned here. The court held that the purchaser received the title he contracted for, saying: “It is not understood that a technical breach of a contract of warranty in an immaterial respect, resulting in no appreciable damage to the vendee, authorizes him to repudiate the contract, and exercise the remedial power of rescission.”'
The case of Colston v. Bean, likewise, was a controversy between a purchaser and the mortgagor; the rights of the mortgagee being in no wise involved. There the court held that the statute providing that a mortgagor of personal property shall not sell the same without the written consent of the mortgagee indorsed on the mortgage and on the record thereof, and a statute providing for the punishment of the mortgagor for violating such section by fine etc., have no application to an action brought by the purchaser of *427mortgaged chattels against the mortgagor on the ground that the sale was induced by the mortgagor’s fraudulent statement that the property was free from incumbrances. The court held that this was an action for fraud, in no wise dependent upon the statute. Continuing, the court said: “* * * We hold that the charge to the effect that, in no view of the evidence, could verbal permission to sell, given to the mortgagor, avail the defendant, was erroneous. This holding in this action on the case for fraud does not in any way touch the question of what constitutes a defense to a proceeding under the statute.”
But even if these decisions from other states were contrary to the holding in this case, they should not be followed, because they are in conflict with the interpretation given by the Supreme Court of Idaho to the statute of that state here invoked.
This was the position of the District Court, and was made clear in the ruling expressed in the following language:
“ * * * The statutes of the state prohibit the removal of mortgaged property from the county where it is situate without the written consent of the mortgagee, and the chattel mortgage here provides that the plaintiffs, mortgagees, can take possession of the mortgaged property whenever a breach of the conditions of the mortgage occurs. * * *
“This statute in effect required written consent to he obtained from the mortgagee before mortgaged property could be removed from the county where it was situate at the time of the execution of the mortgage. Tho 1929 statute, without change, will be found in section 44-1007, Idaho Codes Annotated 1932, and reads: ‘When mortgaged personal property is removed from any county where the mortgage is filed for record the validity and effect of the mortgage as against all persons is not affected thereby unless such property be removed by the written consent of the mortgagee into a county where the mortgage is not filed for record * * *.’ The Supreme Court of the State has on numerous occasions construed these provisions of the statute, and the court has consistently held that before mortgaged property can be removed from the county where it was situate at the time of the execution of the mortgage, written consent must he given by the mortgagee.
“In the ease of Young v. Boise Payette Lumber Co., 45 Idaho, 671, 264 P. 873, the Supreme Court of the State, when in construing section 6377, Compiled Statutes, said:— ‘In any event, we could not, without extending the meaning of C. S. § 6377, beyond its plain terms and doing violence to its express language, hold that anything less than a written consent to a removal of the property would require the mortgagee to record the mortgage elsewhere than in the original county or to lose his lien in default thereof.’
“And again the Supreme Court of the State held in the late .ease of Forbush v. San. Diego Fruit, etc., 46 Idaho, 231-240, 266 P. 659, where an action was brought for conversion of a crop of potatoes covered by a mortgage and judgment for the mortgagee was affirmed, and after reviewing many of the decisions of that court, it is said: ‘The eases cited above, it is true, are concerned with the right to bring an action in claim and delivery. But even more cogent reasons compel the conclusion that tho mortgagee can likewise protect his interest by bringing an action in conversion.’
“In the ease of Averill Machinery Company et al. v. Vollmer-Clearwater Company, Ltd., 30 Idaho, 587, 166 P. 253, where the defendant wrongfully and unlawfully converted a portion of tho mortgaged property to his own use, tho Supreme Court of the State of Idaho upheld the right of the mortgagee to sue in conversion. Adamson v. Moyes, 32 Idaho, 469, 184 P. 849.
“ * * * This property was moved into the State of Utah in violation of the statute. This statute says you have got to get the written consent of the mortgagee to move tho property, and the Supreme Court has put life into it and said what was meant. The mortgagee could not be inconvenienced, running from county to eounty, especially to another state, in protecting his property. That is the situation here. The defendant moved that grain from where it was situated in storage in the state of Idaho into Utah, without compliance with the statute by getting written consent of the mortgagee. It is unlawful because the Legislature said it is unlawful. The property became converted, and conversion is nothing else but the unlawful taking of property, and that is what has been done here, so far as the record shows. * * * The Supremo Court says tho mortgagee shouldn’t be subjected to the inconvenience of running from one county to another in protecting its property rights. Tho removal of this property was unlawful, and' in *428violation of the rights of these mortgagees. It was a conversion and nothing else. That is the interpretation I place upon this statute, and if it doesn’t mean that it doesn’t mean anything at all.”
The court applying to section 6377, Compiled Statutes of Idaho, the interpretation given by the Supreme Court of the state, ruled that the mortgagees’ consent to the removal of the mortgaged property was required to be in writing, and appellant’s attempt to show that there was an oral understanding which overcame the statute was properly excluded. This statute was evidently designed to meet just such cases as the present. It is consistent with sound public policy. The validity of the mortgage and under the statute the inadmissibility of the oral evidence to relieve against it determine the rights of the parties here. Rowe v. Green, 116 Me. 94, 100 A. 145. It was clearly intended that any claim that a chattel mortgage had been waived or abrogated by the mortgagee to give it effect should be in writing.
“The policy of such a statute is for the Legislature to determine. It may well be that the Legislature * * * further considering that the mortgagee should not be subjected to the peril of being divested of his lien by oral testimony, deemed it a wise policy to require written evidence of his consent to a removal before he should be deemed to have waived his lien.” Young v. Boise Payette Lumber Co., 45 Idaho, 671, 264 P. 873, 874.
This court has repeatedly held that decisions of the highest court of a state construing a statute of that state are binding on the federal tribunals. Ruddock et al. v. Bloedel Donovan Lumber Mills (C. C. A.) 28 F.(2d) 684; Chicago, M., St. P. & P. R. Co. v. Campbell River Mills Co. (C. C. A.) 53 F.(2d) 69; Sanger v. Lukens (C. C. A.) 26 F.(2d) 855.
The District Court in giving effect to the statute of Idaho as construed by the Supreme Court of Idaho conformed to these prior decisions of this court, particularly giving effect to the admonition of this court that the construction of a state law by the state supreme court is binding on a federal court sitting within that state. Wallace Ranch Water Co. v. Railroad Commission of California (C. C. A.) 47 F.(2d) 8.
The decisions of the Supreme Court of the United States also make it clear that federal eourts should refrain from any attempt to'interfere with the exclusive right of the state Supreme Courts to interpret state statutes, having gone to the extent of modifying their own opinion. '
The Supreme Court of the United States, in the case of Chicago, etc., R. R. v. Risty, 276 U. S. 567 at page 570, 48 S. Ct. 396, 398, 72 L. Ed. 703, says: “Since our decision in Risty v. Chicago, Rock Island & Pacific Ry., supra [270 U. S. 378, 46 S. Ct. 236, 70 L. Ed. 641], the Supreme Court of South Dakota in State v. Risty, 51 S. D. 336, 213 N. W. 952, has had occasion to pass upon the construction and the constitutionality of the South Dakota drainage statutes. Taking a different view from that of this court and the lower eourts in Risty v. Chicago, Rock Island & Pacific Ry., supra. * * * This construction of the state statutes by the highest court of the state we, of course, accept. * * * ”
Again in the case of Sioux County, Neb., v. Nat. Surety Co., 276 U. S. 238, at page 240, 48 S. Ct. 239, 72 L. Ed. 547: “The correctness of this interpretation of the Nebraska decisions is questioned here, but all doubts on that point have been set at rest by a later decision of the state court. In Seotts Bluff County v. First Nat. Bank [115 Neb. 273], 212 N. W. 617, decided since the entry of judgment below, the Supreme Court of Nebraska held that the statute does not have the effeet asserted, and that within the amount of the bond a county may recover trom the surety the full amount of the deposit, even though it exceed 50 per cent, of the authorized capital of the depository.
“We accept this construction of the statute and accordingly set aside the conflicting interpretation of the court below, even though it antedated the determination by the state court. * * *”
The proposed evidence offered by appellant to prove the oral consent by appellees to the removal of the wheat was properly excluded, and there was no error in the instructions of the court.
The District Court should be affirmed.