Court Opinion

ID: 5170771
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:54:45.406385+00
Date Added: 2024-06-11T08:24:18.560770
License: Public Domain

BUDGE, J.,
Dissenting.
This appeal is taken from two orders made by the trial court: First, in appointing a receiver to take charge of a certain automobile; and, second, in refusing upon proper application to set aside such order.
From the record it appears that on September 25, 1915, the plaintiff, who is respondent here, filed a complaint in the district court of the third judicial district, to recover a balance due upon a promissory note and conditional sale contract, with a prayer for the appointment of a receiver to take possession of an automobile referred to in the note. The application was ex parte and without notice to the appellants. The receiver was thereupon appointed and, on the first day of August, 1915, the appellants filed a motion to set aside the order of appointment, which motion was denied.
The instrument sued upon is set out in haec verba in the majority opinion of the court, and by reference thereto it will appear that it is a promissory note and conditional sale contract for the payment of money on a stipulated date and in stipulated amounts. The following clause appears in the note: “And it is further understood and agreed that the ownership and title to said National automobile shall not pass from J. J. Keane until the full sum of the principal and interest is paid.”
Counsel for respondent contends that this instrument is a chattel mortgage. But it will be observed that it is not acknowledged; that it has never been recorded; that it is not entitled to be recorded; that it is not accompanied by an affidavit of the mortgagor “that it is made in good faith and without any design to hinder, delay or defraud creditors”; and that it contains no right of redemption of the property referred to therein either before or at the sale of such property. While it may be conceded that, as between the mortgagor and the mortgagee, in order to constitute a valid mortgage, it is not essential to its validity that it be acknowledged, recorded or entitled to be recorded, or that it be accompanied by the affidavit of the mortgagor that it was made in good faith, yet in the absence of a right of re*284demption such an instrument cannot be construed to be a valid mortgage, even between the parties.
The absence of the acknowledgment, the affidavit and the failure to record the instrument, and especially the lack of a provision authorizing the mortgagor to redeem the property mortgaged, furnish ample evidence that the parties intended the transaction to be a conditional sale, and that the instrument was not intended to be considered a mortgage.
The instrument contains all of the necessary elements to-constitute a conditional sale and it should, in my opinion, have been so construed by the trial court upon the application to appoint a receiver. It is true that it is frequently difficult to say whether a particular transaction constitutes a mortgage or a conditional sale as between the parties; yet, the mere difficulty of determining this question would not justify the court in failing to carefully scrutinize the allegations of the complaint, and basing its action upon those-allegations. The rule is well established by numerous decisions that a conditional sale is an agreement to sell upon conditions to be performed, and not an absolute sale. In the case of Harkness v. Russell, 118 U. S. 663, 7 Sup. Ct. 51, 30 L. ed. 285, it was said that a conditional sale is a transfer of ownership for a price paid or to be paid, to become absolute-on the performance of the conditions expressly stipulated in the contract; and if the conditions of the payment are not strictly performed at or before the time limited, the right to' the title of the property is lost and there is no right of redemption. While, on the other hand, a chattel mortgage is an instrument whereby the owner of personal property transfers the title of such property to another as security for the payment of money or the performance of contract or other obligations, such to be defeated on payment of the money or performance of the obligation.
In the ease at bar it cannot be successfully contended under the instrument sued upon, or upon a fair construction of the complaint, that the respondent transferred the title to the automobile to the appellants, and that the appellants *285thereafter gave security upon said automobile to respondent for the payment of the money stipulated in the agreement.
Jones on Chattel Mortgages, sec. 26a, p. 36, says: “There can be no mortgage without a conveyance from a debtor to his creditor.”
It clearly appears that a mortgage was never given to secure the debt. But, on the other hand, the contract in question expressly provides that, upon payment of the $3,100 according to the terms stipulated in the note, a considerable portion of which is admitted to have been paid, together with interest, which constituted the consideration for the purchase price of the automobile, the ownership and title to said National automobile should pass to appellants. And upon the failure of the appellants to pay the sum stipulated in the note according to the terms thereof, it was expressly understood and agreed between the parties that the ownership and title to said automobile should not pass from respondent to appellants.
In the case of Barton v. Groseclose, 11 Ida. 227, 81 Pac. 623, this court had under consideration an instrument similar to the one in the case at bar, which also contained a clause that the ownership of the property did not pass from the vendor until fully paid for, and the court held that such an agreement clearly constituted a conditional sale.
See, also, Kester v. Schuldt, 11 Ida. 663, 85 Pac. 974; Mark Means Transfer Co. v. Mackinzie, 9 Ida. 165, 73 Pac. 135, and Jones on Chattel Mortgages, supra, where the following rule is laid down: “A contract for the sale or lease of property, the purchaser or lessee to pay instalments or rent at stipulated times, the property to remain the seller’s until a certain sum shall have been paid, is a conditional sale.”
If the instrument upon which this action is predicated is not a chattel mortgage, but an ordinary promissory note and conditional sale contract, it must be conceded that the appointment of a receiver to take charge of the property would not be justified under a reasonable construction of sec. 4329, Rev. Codes, as amended by Sess. Laws 1909, p. 26, or under any other statutory provision of this state. And where the *286instrument itself is not ambiguous or unintelligible, but certain in its terms, to anticipate what evidence might be adduced upon the trial, and appoint a receiver to take possession of the property depriving appellants of the use and revenue from the same and causing additional expense incident to the discharge of the duties of a receivership is, in my opinion, inequitable and unjustifiable.
In order to justify the appointment of a receiver, the question is not what evidence may appear upon the trial or the ability of respondent in this case to prove that the automobile was conveyed to him by appellants to be held as security for the payment of a debt, but it is, What does the complaint show? Before a receiver can be legally appointed in a given ease, it is necessary for the plaintiff to allege a case within the jurisdiction of a court of equity; that is, a case which a court of equity has power to consider, and one which will justify a decree for relief by the court of equity. However strong a case a plaintiff may be able to establish by his evidence, and whatever the real facts may be, are absolutely immaterial unless the facts as alleged in the complaint are sufficient to authorize the appointment of a receiver and the ultimate granting of the relief sought to be obtained by the plaintiff in his suit.
The complaint in this ease fails to establish a cause of action founded upon a chattel mortgage. Therefore the respondent was not entitled to the appointment of a receiver.
The complaint utterly fails to show a transfer or conveyance of title to the automobile by appellants to respondent. It, however, affirmatively shows upon its face that, unless the obligation sued upon has either been paid or in some manner discharged, the title to the automobile is in the respondent, and was in the respondent at the commencement of the suit in the trial court.
It therefore follows that neither the contract sued upon nor what are purported to be the facts as alleged in the complaint afford sufficient basis for the conclusion that the automobile is held by respondent as security for the payment of a debt. Moreover, in the absence of an admission of the *287adverse party, it should not be conclusively presumed that the indebtedness has not been fully-discharged.
If the automobile is the property of the respondent, he has no right to the appointment of a receiver to take charge of it. If it were the intention of the parties that the instrument was to be a chattel mortgage and not a promissory note and conditional sale contract as appears upon its face, and respondent intended to rely upon parol evidence to establish that fact, it was incumbent upon him to so allege, and state that a mutual mistake had been made by the parties in drafting the instrument, and ask that the court reform the same to conform to what their intention really was and to enforce it in keeping with their mutual agreement as a chattel mortgage. The pleader having failed to do this, it cannot be presumed that such a state of facts existed.
It is a well-settled principle of law that, in a ease in which the court is empowered to appoint a receiver, the power will not be exercised where the plaintiff’s right to recover upon the allegations of his complaint is doubtful. (34 Cyc. 22.) It is also a general rule that a receiver will not be appointed where there is another safe and expedient remedy, or where the party has an adequate remedy at law. (34 Cyc. 25.)
In Schack v. McKey, 97 Ill. App. 460, it was held that in a suit founded upon a state of facts which makes a case for replevin or trover, a receiver will not be appointed.
The appellants do not contend, for they have not yet answered, that the respondent is the owner of the automobile and entitled to the possession thereof. They do, however, contend that the complaint fails to disclose a cause of action predicated upon a chattel mortgage, and fails to supply the necessary facts to entitle respondent to equitable relief; and that the respondent having failed to plead a chattel mortgage and a right to have the same foreclosed, the trial court was without jurisdiction to appoint a receiver.
The instrument upon its face is plain and unambiguous, and constitutes simply a promissory note with a conditional sale contract, and unless the obligation has been paid or discharged, the title to the automobile is in the respondent. *288That being true, the court was without jurisdiction to appoint a receiver and the appointment was a nullity.
If the holders of promissory notes with conditional sale contract clauses are entitled to the appointment of receivers, the expense of litigation will be augmented and unnecessary burdens imposed upon litigants.
As I view it, receivers should not be appointed in doubtful cases. The appointment of a receiver is a severe remedy, because it divests the holder of property of his possession and use before a final hearing, and should not be resorted to save in strong cases, and never unless the plaintiff would otherwise be in danger of suffering irreparable loss.
Even admitting for the purpose of argument that the instrument sued upon in this action is a chattel mortgage, nevertheless, in my opinion, the trial court erred in appointing a receiver under the allegations contained in the complaint. It appears from the record that the appellants are engaged in the business of carrying passengers between certain points in Idaho, using the automobile referred to for that purpose. It is also alleged that the value of the automobile at the time of the appointment of the receiver was but $750. By reason of the appointment of the receiver the appellants were deprived of the possession and right to the use of tho property.
The appointment of a receiver is part of the jurisdiction of equity and is based on the inadequacy of the remedy at law, being intended to prevent injury to the thing in controversy and to preserve it pendente lite, for the security of all parties in interest, to be finally disposed of as the court may direct. The power of appointing a receiver is of a high and extraordinary character and should be exercised by courts with the utmost caution, and only under such special circumstances as demand summary relief.
It is the duty of the court to look to the facts stated in a complaint before entertaining an application for the appointment of a receiver. And.where a complaint fails to allege the insolvency of a defendant, or show that he is unable to respond in damages, a receiver should not be appointed. *289The mere fact that the property is deteriorating in value, or may become wholly lost to the plaintiff, will not of itself justify the court in making the appointment.
This court has held that in the absence of allegations of insolvency or of proof thereof upon the trial, it is error for the court to appoint a receiver. (Sweeny v. Mayhew, 6 Ida. 455, 56 Pac. 85; Kelly v. Steele, 9 Ida. 141, 72 Pac. 887; Brundage v. Home Savings & Loan Assn., 11 Wash. 277, 39 Pac. 666.) To the same effect is the ease of Blondheim v. Moore, 11 Md. 365, where it was held that a trial court is not authorized to appoint a receiver on the ground that the appointment can do no harm.
In view of the authorities cited, whether the respondent will be required to pay the expenses of the receiver if he is unable to prove his case is absolutely immaterial and no justification for the appointment of the receiver.
In the case of Buckley v. Baldwin, 69 Miss. 804, 13 So. 851, the court said: 1 ‘ Creditors have rights which should be upheld. So have others, which must not be disregarded in the effort to enforce the rights of creditors. When a proper case is made for a receiver, the power to appoint should be exercised, but, even then, with due regard to the situation and circumstances of the case and the rights and interests of defendants, and never without notice to them and opportunity to be heard, unless there is a satisfactory showing of a necessity for such urgency.”
From an examination of the record it is apparent to my mind that the complaint fails to contain a sufficient showing for the appointment of a receiver. The trial court was, therefore, without jurisdiction to make such appointment, and should, upon application of appellants, have discharged the receiver.
(February 10, 1916.)