Court Opinion

ID: 6641082
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:45:17.245354+00
Date Added: 2024-06-11T15:59:14.582741
License: Public Domain

MR. COMMISSIONER POORMAN
prepared the opinion for the court.
This is an action in conversion, originally commenced in a justice court of Missoula county, and taken by appeal to the district court of said county, where a trial was had by the court sitting without a jury, and judgment was rendered for plaintiffs. From this judgment, and the order of the court overruling a motion for a new trial, the defendants appeal.
The findings of fact made by the trial court are to the effect that one Mae Carrier, who was at that time engaged in the mercantile business at the city of Missoula, borrowed $500 from defendant W. I. Stephens, for which she gave her promissory note, and at the same time executed as security for payment of said note a chattel mortgage on her stock of merchandise, with a provision that the mortgage should extend to certain other articles of merchandise and store fixtures to be thereafter purchased by the mortgagor; that the mortgage further provided that the mortgagor might remain in possession of the mortgaged property and carefully use the same, but that she should not sell or dispose of said property, or any part thereof, or allow it to be taken from her possession by legal process or otherwise; that the mortgagor, after the execution of the mortgage, remained in the possession of the stock of merchandise, and sold and disposed of the same in the usual course of trade, and purchased other goods, and added to the stock in her store; that the defendant Stephens had full knowledge of the sale of the merchandise, and knew of the manner in which the mortgagor was *370conducting tbe business and disposing of tbe merchandise, and that be made no objection to tbe same, but acquiesced therein; that no provision was made in tbe mortgage for an accounting by tbe mortgagor for any of tbe proceeds of tbe property sold, and that no part of tbe proceeds was applied to tbe payment of tbe debt secured by tbe mortgage, except tbe payment of tbe interest on tbe note; that tbe mortgagor, after tbe execution of tbe mortgage, continued, with tbe knowledge of defendant Stephens, to conduct tbe business and to sell tbe goods in tbe same manner as though tbe mortgage bad not been executed; that tbe plaintiffs purchased from tbe said mortgagor, while she was so conducting tbe business, certain goods, wares and merchandise, and by their agent took actukl possession of tbe goods so purchased; that while they were in such possession, and after such purchase bad been completed, tbe defendants Curran and Violette, acting as tbe sheriff and undersheriff of- tbe county, and over tbe protest of tbe plaintiffs, took tbe goods from tbe plaintiffs under said chattel mortgage, at tbe request of tbe defendant Stephens, tbe mortgagee. At tbe time of tbe seizure tbe plaintiffs notified tbe sheriff that tbe mortgage was void as to tbe goods so purchased by them, but were informed by tbe sheriff that bis duty required him to take- possession of tbe goods, and that they could bring suit against him or defendant Stephens to recover tbe same. It further appears from tbe record that tbe sheriff is still bolding these goods.
Tbe findings of the court are based either upon admissions by tbe parties, or upon evidence with respect to which there is substantial conflict; and, as has been repeatedly held by the supreme court of this state, cannot be disturbed under such circumstances. (Merchants’ Nat'l Bank v. Greenhood, 16 Mont. 430, 41 Pac. 250, 851; Sanford v. Gates, Townsend & Co., 21 Mont. 288, 53 Pac. 749.)
It is claimed by tbe respondents that tbe mortgage is fraudulent, as to creditors and subsequent purchasers in good' faith, by-reason of tbe mortgagor being permitted to remain in possession of tbe goods, and' to sell and dispose of them without *371making an accounting to tbe mortgagee. The appellants contend that the mortgage is valid on its' face, and that by its terms the sheriff had the right to seize the goods, and that respondents could not attack the mortgage until they had first, obtained a judgment, and that a demand on the sheriff was necessary before an action could be maintained.
In Rocheleau v. Boyle, 11 Mont., on page 469, and 28 Pac., on page 878, the court, in passing on the question as to the validity of a mortgage, where the mortgagor remained in possession and disposed of the goods, says : “If a mortgage of goods be made, as provided by statute, leaving possession with the mortgagor, and it be understood, agreed, or knowingly permitted (for, if it is knowingly permitted, it is understood and agreed) to the mortgagor to place the mortgaged goods on sale, not subject to the mortgage, to be sold, carried away, or consumed, and to use the proceeds without reference to the mortgage, this arrangement annuls every vital element of the mortgage, so far as concerns the goods to. which such arrangement or permission extends. The mortgage, under such circumstances, becomes a mere sham, a mere appearance, a delusion, asserting in form what is not in fact, as admitted by the conduct of the parties. The possession does not remain. Nor does the property remain. It is shifted over to those who will come and buy, and is carried away without respect to the mortgage; * * * and we think there ought to be no-hesitation in holding the mortgage void as to property so dealt with, or, in other words, that such property is put out from under such mortgage by the conduct of the-parties in relation to it.” This is in effect a holding that the mortgage, while valid as between the parties, has by the conduct of the parties been released as to the property sold by the mortgagor.
Extrinsic evidence is admissible to show conditions actually existing, and the conduct of the parties with reference to the mortgaged property. It is true, the statute has been slightly changed since the decision in Rochelean v. Boyle, but no change has been made conflicting with the doctrine announced in that *372ease, as above quoted! It is likewise true that a prowling creditor cannot attack a conveyance or sale on the ground of fraud; but, whenever the creditor acquires a lien on the goods, he may then attack the conveyance or the sale, in the protection of his hen and his rights.
The plaintiffs claim these goods .as purchasers. They obtained actual possession of them. The sale to them was declared by the court to be valid, and under such circumstances it was not necessary for themi to obtain judgment or levy an attachment as a condition precedent to assailing the mortgage. (Westheimer v. Goodkind, 24 Mont. 90, 60 Pac. 813.)
Had this mortgage contained a provision that the mortgagor was to account to the mortgagee for the proceeds of sales made, the doctrine as announced in Noyes v. Ross, 23 Mont. 425, 59 Pac. 367, 47 I. R. A. 400, 75 Am. St. Rep. 543, might apply; but the mortgage contains no such provision, nor does the evidence establish that there was any agreement or understanding that there should be any such accounting, or that any accounting ever was made.
The taking by the sheriff of these goods from the purchasers, the plaintiffs, Was wrongful in the beginning, and in an action of this kind, and under such circumstances, a demand is not necessary prior to the bringing of suit.
In Daggett v. Gray, 110 Cal. on page 171, 42 Pac. on page 568, which was an action in conversion, the court says: “If the relation of the defendant to the property is such that a previous demand is essential in order to establish conversion - on his part, proof of such demand must be made at the trial; but the demand need not be alleged. The allegation that the der fondants ‘converted and disposed of the property to their own use’ is the allegation of a fact sufficient, in the absence of a special demurrer, to sustain a judgment. Upon the trial of an issue, on this averment, the plaintiff would be at liberty to introduce evidence of a demand and refusal, if such evidence were sufficient or necessary to establish the conversion; and he would also,' under this averment, be authorized to offer evidence *373that the defendants had sold or otherwise dealt with the property in repudiation of the claim of the plaintiff.” The complaint in this action contains this specific allegation, and comes clearly wihin the decision in the case just quoted. (See, also, 21 Ene. P. & P. 1083.)
There is no contention made in this case that there was any intent on the part of the defendants or the mortgagor to defraud creditors or subsequent purchasers; but the instrument and the conduct of the parties thereto must be looked to in determining the rights of third persons, irrespective of the intention of the mortgagor or the mortgagee. The mortgagee’s intention undoubtedly was to assist the mortgagor, and to enable her to carry on her business and to add to her stock of goods and he probably relied more upon her ability to pay than he did upon enforcing payment under and by virtue of the terms of his mortgage. His good intention in the matter is not questioned, but the principles of law involved have been so long established that we cannot recommend that the court now disturb them.
We are therefore of the opinion that this judgment should be affirmed.
Pel, CukiaM. — For the reasons given in the foregoing opinion, the judgment of the court below is affirmed.