25 S.D. 212 | S.D. | 1910
This is an appeal from an order of the circuit court of Beadle county, sustaining defendant’s demurrer to plaintiff’s complaint, • and from a judgment for defendant entered upon plaintiff’s election to 'stand upon the allegations of its complaint. The complaint alleged, in substance, that in July, 1904, one H. S. Drake was the owner of a certain Buffalo Pitts engine, and upon that day executed and delivered to H. W. Dean a chattel mortgage thereon for the sum of $1,025 to secure an indebtedness due from Drake to said Dean, which mortgage was filed in the register of deeds’ office of Beadle count}-, on the 13th day of July,- 1904; that no renewal of said mortgage has ever been filed in said office; that the indebtedness ■secured thereby had never been paid; that on the 3d day of September, 1907, the said IT. S. Drake, being still the owner of the said Buffalo Pitts engine, executed and delivered to plaintiff a chattel mortgage to secure.an indebtedness in the sum of $625 to said plaintiff, which mortgage wais duly filed in the office of the register of deeds of Beadle county, on September 3, 1907; that said last-named mortgage specifically described the Buffalo Pitts engine as the one theretofore purchased from H. W. Dean by said H. S. Drake, and also contained a recital that said mortgage was “subject to any incumbrance held by said H. W. Dean.” And it is expressly alleged in the complaint that the “incumbrance” referred to was the mortgage given by PI. S. Drake to IT. W. Dean in 1904, and that it was so understood by the plaintiff and H. S. Drake at the time of the execution of said last-named mortgage; that each of said mortgages contained the usual power of sale, and the mortgage executed and delivered to the plaintiff
Appellant contends that the court erred in sustaining the demurrer : “First. Because the plaintiff was a creditor of the mort
Appellant first' contends “that, under the concluding paragraph of section 2089, the words, ‘or it ceases to be valid as against creditors of the mortgagor, and subsequent purchasers and incumbrancers,’ the rights of creditors, and of subsequent purchasers and incumbrancers, are placed on an equal footing.” We presume counsel means by this that the omission of the words “in good faith” from this paragraph places the purchaser or incumbrancer in the same position as a creditor, and that as actual notice of a prior mortgage does not affect the rights of a creditor, under the decision of this court in Kimball Co. v. Kirby, 4 S. D.
Appellant also contends that “it makes no difference how the court construes this statute as to subsequent purchasers and incumbrancers, because the plaintiff here is a creditor.” This court, in the case of W. W. Kimball Co. v. Kirby, supra, held that the qualification of “good faith and for value” applies only to “subsequent purchasers and incumbrancers,” and not to creditors, and that actual notice of a prior mortgage does riot affect the rights of -the execution creditor. That case involved the construction of section 2085, Civ. Code, which is as follows: “A mortgage of personal property is void as against creditors of the mortgagor, and subsequent purchasers and incumbrancers of the property in good faith for value, unless the original, or an authenticated copy thereof, be filed by depositing the same in the office of the register of deeds of the county where the property mortgaged or any part thereof, is at such time situated.” Under this section of the Code a chattle m'ortg'age, is void as against creditors of the mortgagor and subsequent purchasers . and incumbrancers of the property in good faith for value.” Under section 2089, Civ. Code, a mortgage of personal property “ceases to be valid,” as against “creditors of the mortgagor, and subsequent purchasers or incumbrancers in good faith.” The creditofs, as to whom such mortgage is “void” under the one section, and “ceases to be valid” under the other, are the same. Whether the omission from section 2089 of the words “for value,” which are in section 2085, would render necessary any distinction in the construction of the two sections, is not now before us, because the character of the indebtedness here involved is not in question as to either party. But the language of the two sections is identical both as to “creditors’'' ■and “subsequent purchasers and incumbrancers in good faith,” and the ruling of this court in Pierson v. Hickey, 16 S. D. 46, 91
In the case of Union National Bank v. Oium, 3 N. D. 193, 54 N. W. 1034, 44 Am. St. Rep. 533, in discussing the rights of a creditor under section 2085, the court says: “While an unfiled chattel mortgage -may be void as to a general creditor, he cannot avail himself of the statute until he has armed himself with attachment or execution and levied on the property, or has in some other way secured a lien thereon. Before he has siezed the property covered by the chattel mortgage or secured some lien thereon, he is in no position to raise the question that the mortgage is void as to him. * * * Whether he belongs to that class is one question; whether he is in a position to derive benefit from belonging to- that class is another and entirely different question.” The general rule as laid down by the authorities is stated in 6 Cyc. 1070:. “Although recording statutes usually provide that an unrecorded mortgag'e i-s void as to- creditors, the- prevailing doctrine only makes the mortgage void ag'ainst those creditors who obtain a lien on the -mortgaged property by attachment or levy of execution before the instrument is filed for record (citing authorities). This rule only applies, however, to- creditors who became such before the mortgage was executed; and, where credit was extended to the -mortgagor during the time that the mortgage was withheld from record, it has been held that the mortgage is void alike as to creditors with or without liens.” In a note dis
Appellant’s next contention is that it was in fact and in law an incumbrancer “in good faith” and it accepted the mortgage from H. S. Drake in September, 1907. Appellant earnestly insists that if it be held that the words, “subject to any incumbrance held by H. W. Dean,” were constructive notice, and put the plaintiff on inquiry, such inquiry would have disclosed nothing more than that the prior mortgage to H. W. Dean had “ceased to be valid” as against a subsequent incumbrancer. As we have seen, appellant falls within the class of persons named in the first clause of section 2089 — and it is essential to the right it seeks to assert that it be an incumbrancer “in good faith.” An unrenewed chattel mortgage “ceases to be valid” only as against a creditor, or a purchaser “in good faith.” If the plaintiff be an incumbrancer “in good faith,” it is entitled to the protection of the statute, and should recover in this action the value of its interest in the mortgaged property. But “good faith consists in an honest intention to abstain from taking any unconscientious advantage of another, even through the forms or technicalities of law, together with an absence of all information or belief of facts which would render the transaction unconscientious.” Civ. Code, § 2448. “Good faith” has been frequently defined by the decisions of the courts as ■synonymous with the words “without notice”; but this definition
In the case at bar, there was not an “absence of all information or belief of facts” on the part of plaintiff, as to defendant’s mortgage. The plaintiff had express iijformation of the following facts, viz.: That H. W. Dean had been at one time the owner of this Buffalo Pitts- engine; that he had -sold the same to H. S. Drake, with whom plaintiff was then dealing, and had given back a mortgage on the same to H. W. Dean; that the mortgage plaintiff was then receiving from Drake was “subject to any incumbrance held by PI. W. Dean’; and that the “incumbrance” referred to was the same indentical mortgage which he now seeks to defeat. Plaintiff also had constructive notice from the record, and must be presumed to have known, that Dean -had placed -his mortgage of record; that 3 years and 30 days -had expired since it was filed; and that Dean had not filed a renewal affidavit. It may be observed, also, that plaintiff’s mortgage was executed and filed September 3, 1907, and that the • indebtedness secured
Suppose, at the time its mortgage was taken, plaintiff absolute!}' knew as a fact that Dean’s mortgage had not been paid, and that no' affidavit of renewal had been filed, could the plaintiff claim .protection of the statute as an incumbrancer in good faith? No court would so hold. In such a case the language of the court in Howard v. First Nat. Bank, 44 Kan. 549, 24 Pac. 983, 10 L. R. A. 537, is particularly apt: "We do not care to> discuss the sufficiency of the affidavit, as we believe with the trial judge that, under the circumstances of this case, the renewal affidavit is not a material matter. The affidavit could only be material in case there were 'subsequent purchasers or mortgagees in good faith. But there are no subsequent purchasers and no subsequent mortgagees in good faith: First. Because all the mortgagees had full knowledge' of all the mortgages of the plaintiff below, and of the claims they secured. They each knew that the claims secured by such mortgages were not paid in whole or in part. In Gregory v. Thomas, 20 Wend. 17, Mr. Justice Cowen says: ‘To say that a man takes in good faith when he acts with notice and of course under conscious hostility to another who has before taken a similar title would be a legal solescism.- The object of the statute here is that of all the other registery acts — to prevent imposition upon subsequent purchasers and mortgagees, who must many times govern themselves by appearances. When everything is actually explained to them, they have the best kind of notice and must be holden to take subject to prior incumbrance.’ ” Counsel for appellant, however, quotes and relies upon the following language used by that court- in the same case: “He who purchases after the year has expired during which a mortgage remains in force has a right, in the absence of the renewal affidavit,
Section 2452, Civ. Code, states one branch of the rule of constructive notice — “every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry” as to a particular fact, and who omits to make such inquiry with reasonable diligence, is deemed to have constructive notice of the fact itself.” It is conceded on the record that Dean’s mortgage was unpaid when plaintiff took its mortgage. So> the ultimate fact in this case which must be decisive is whether the plaintiff knew' that Dean’s mortgage was unpaid, or had “actual notice of circumstances sufficient to put a prudent man upon inquiry” as to the facts of such nonpayment. Assuming that plaintiff knew from the record in the register of deed’s office alone that Drake had given a prior mortgage to Dean, and that Dean had not filed an affidavit of renewal, the fact that Drake inserted in his second mortgage to plaintiff the words “subject to any incumbrance held by said H. W. Dean” was sufficient to put any prudent man on inquiry as to whéther Dean’s mortgage had been paid. But upon the record before us it appears that no explanation was. asked as to why Drake inserted this clause in the second mortgage to plaintiff. Drake, the mortgagor, was Dean’s debtor, and the person of all others who knew whether the mortagge had been paid; yet, so far as this record discloses, he was not even asked why this clause was put in plaintiff’s mortgage. Drake made no attempt to conceal any fact or to mislead the plaintiff as to the fact that there was a prior mortgage, and it is conceded that the very “incumbrance” referred to was Dean’s mortgage, and that plaintiff knew it. Why did Drake put these words in plaintiff’s mortgage? Could these words imply anything less than that Dean's incumbrance was unpaid, and that plaintiff must have so under
Considering all the facts known to plaintiff, how can one escape the conviction that plaintiff’s failure to make inquiries of Drake was intentional, and with the secret purpose of asserting priority over Dean’s mortgage? We are of opinion that the insertion of this clause in .plaintiff’s mortgage was sufficient of itself to put plaintiff upon inquiry as to whether Dean’s mortgage was in fact paid, and to charge plaintiff with constructive notice of the true facts which such inquiry might have disclosed.
We find no error in -the record, and the judgment of the trial court is affirmed.