Dewey v. Bowman

| Cal. | Jul 1, 1857

Burnett, J., delivered the opinion of the Court—Terry, J., concurring.

This case was decided at the last April Term of this Court, and the judgment of the Court below affirmed, upon the ground that no motion was made for a new trial. Upon a petition for a rehearing, we are satisfied that our former decision was erroneous. The case was an equitable proceeding, and no motion for a new trial is necessary in such cases. We were led into this error by a mistake in the brief of the defendant Cohen, in which the action is styled, “ an action of trover and conversion.”

This case was heard in the Court below upon complaint, answer, and exhibits, and not upon “ allegations, proofs, and arguguments,” as the plaintiffs’ counsel has it. The finding uses the terms “ allegations, exhibits, and arguments,” and not the word “ proofs,” as stated in plaintiffs’ additional brief.

This being a proceeding in equity, and having been tried upon the complaint, answers, and exhibits, the usual presumption in favor of the correctness of the finding cannot apply.

The only substantial error in the finding of the Chancellor, is in reference to the value of the note of Schoyer to Bowman. In the complaint, it is alleged, that “Schoyer being indebted to said defendant Bowman, upon a note, dated August 25,1854, for the sum of fifteen hundred dollars, payable three months after date, with interest at four per cent, per month, for the purpose of securing the payment of said note, executed to said' Bowman a writing, a copy of which is hereto annexed, marked D.” This instrument was an assignment of the lease to Bowman for the purpose stated in the complaint. The statement of the note, as contained in the complaint, is the same as the description found in the assignment to Bowman.

The first question to be determined, regards the period at which the interest began to run. Was it from the date of the note, or at the time the note became due ? The parties had the right to stipulate what the rate of interest should be, and when it should begin to run. They have expressly stipulated as to the rate of.interest, but not as to the time of its commencement. We must, therefore, infer the intention of the parties as to the time the interest should commence, from the note as we find it. From the face of the note, the conclusion is clear, that the consideration for which it was given, passed from the payee to the maker at the date of the note. We must presume that this consideration was of the value of fifteen hundred dollars; this sum the maker promises to pay, with interest, at a specified time. The promise is to pay the amount of the note, with interest on the same, at a future day. The interest, therefore, in the contemplation of the parties, must accrue before the note falls due, and must run from the date of the note.

If these views be correct, the note of fifteen hundred dollars would draw interest from the date until the twenty-eighth day of ¡November, 1855, the time when Cohen received the State warrants. The principal, with the interest included, would exceed the sum of nineteen hundred and thirty dollars, the amount as found by the Court below.

The fact that Cohen knew the terms of the assignment from Schoyer to Bowman, cannot, we think, be doubted. The assignment of the claim for rent made by Bowman to Cohen was upon a copy of the written application of Bowman to the State officers, in which written application it was expressly stated that the assignment to Bowman was made to secure the payment of the note, and that he claimed no more. Besides, this knowledge on the part of Cohen is expressly charged in the complaint, and not denied in the answer. It is true, Cohen states in the close of his answer, after admitting many facts alleged in the complaint, that he “denies, generally and specially, each and every allegation as set forth in the complaint.” But this general and sweeping denial—though the answer is sworn to— is insufficient. The complaint being verified, the answer must contain “ a specific denial to each allegation of the complaint, controverted by the defendant, or a denial thereof according to his information and belief;” and “ every material allegation of the complaint, not specially controverted by the answer, shall, for the purposes of the action, be taken as true.” (Practice Act, §§ 46 and 65.)

The object of this provision of the statute was to avoid the necessity and expense of producing proof to sustain the allegations of the in cases where the would swear they were true, and the defendant would not deny the truth of the alleged facts under oath. This end could not be effectually accomplished, if defendants were permitted to deny the allegations of the complaint in general terms. The answer should contain a separate and specific denial of each separate allegation of material fact in the complaint, which is intended to be controverted by the answer. In this way, the attention of the defendant is distinctly and separately called to each allegation of fact, and if he commits perjury in his answer, it can be at once seen in reference to what fact it is committed; and without any reference to this, or any other particular cases, we must be permitted to remark, that it is truly painful to witness the reckless ease with which defendants, in too many cases, make these “ general and specific ” denials, under oath, of “ each and every allegation of the complaint,” when it is clear that some of the material allegations of the complaint would never have been separately denied. This is shown, in such cases, by the conclusive proof afterwards produced on the trial.

The principal error assigned by the defendant, Cohen, has reference to a question of law, arising in the Court below upon the facts as found. It is insisted by the learned counsel that " the assignment of the lease by Schoyer to Bowman, to secure the payment of the note for fifteen hundred dollars, with interest, was a mortgage, and upon the failure of Schoyer to pay the note at maturity, the title to the lease became absolute in Bowman.”

In reference to mortgages and pledges of personal property in general, it was held by this Court in the case of Hyatt v. Argentó, 3 Cal. Rep., 15Í, that they might be made upon such terms and conditions as the parties may agree upon, and Courts of Law will be governed by the language of the contract in each particular case.

A mortgage of personal property passes the present legal title in the property itself to the mortgagee, subject to be re-vested in the mortgagor, his heirs, or assigns, upon the performance by him or them of an express condition subsequent. Such is the effect of a mortgage of personal property at law. But in equity, under proper circumstances, the mortgagor may redeem, even after non-performance of the condition. One of the clearest cases of a mortgage of personal property, as distinguished from a pledge, is found in the eighth volume of Johnson's Reports, p. 96. A sold B three horses for two hundred and ten dollars, and gave him a regular bill of sale, but at the same time B gave to A a writing engaging that on the payment of the two hundred and ten dollars, in fourteen days, to return the horses to A. The money was not paid at the time agreed upon, and the title to the property became absolute in B, and a subsequent tender of the money by A, and demand of the property, did not entitle him to maintain trover for it.

In the case of a mortgage of personal property, the title being in the mortgagee, the risk of loss is also with him. In the case mentioned, had the horses died, or had they been stolen within the fourteen days, the loss would have fallen on B. And as A did not pay the money within the time limited, the property became absolute in B, and A was not liable to B for the two hundred and ten dollars. In cases of mortgages of personal property, if the mortgagee relies upon his legal rights, and insists that the property becomes his absolutely, the mortgagor will be discharged from all further liability upon the mortgage-debt, unless there is something special in the case.

But it is different in the case of a pledge. The pledgee has a lien upon, not the legal title to, the property. It is taken as security, and the legal title remains in the pledgor, 3 Cal. Rep., 162. If any loss occur, it falls upon him. If the debt, to secure the payment of which the pledge is made, be not discharged when due, the pledgee does not obtain an absolute title to the property. He then has a right to sell the pledged property, and pay himself from the proceeds. If they are not sufficient to discharge the debt entire, the pledgor remains liable for the deficiency, and if they are more than sufficient, the pledgee is responsible for the surplus. Story’s Eq. Jur., § 1030 to 1035a.

The question then arises, was the assignment by Sehoyer to Bowman a mortgage or a pledge ? And this question may be answered by considering: First, whether the title in the lease at once passed to Bowman; or, Second, whether it was merely intended as a collateral security for the note of fifteen hundred dollars. If it was intended as a mortgage, then all the risk of loss, and chance of gain, were thrown upon Bowman. If no rent had ever been collected upon the lease, Sehoyer would not then have been liable to Bowman upon his note.

But it would seem clear that this could never have been the intention of the parties. The assignment itself says it was “made for the purpose of securing said Bowman the payment” of the note. And Bowman, in his written application to the State officers, only claimed so much as would be required to pay the note and interest. And, in addition to these facts, Bowman took a promissory note, drawing interest; and, had no rents been realized, Sehoyer would still have been liable upon the note. That the assignment of the lease was but collateral, would seem clear, and could not, therefore, have been a mortgage, but only a pledge. After the note became due, Bowman could have sued Sehoyer upon it, at any time, without regard to the lease. Upon the failure of Sehoyer to pay the note, the title of Bowman in the lease did not become absolute, and the liability of Sehoyer upon the note continued. And, as his liability upon the note continued, his right to the surplus of the pledged property, after paying the note and interest, also continued. And this right he could, and did, assign to two of the plaintiffs.

The case of Gallick v. James, (12 John. R., 145,) cited by the counsel for defendant Cohen, is a case in point, and sustains the view we have taken. In that case, the note of a third person was deposited by a debtor with his creditor, as collateral security for a debt, and it was held that this was a pledge, and that the ownership remained in the pawnor; and that the authority of the creditor, “ with respect to the note, could extend no further than to receiving the money due upon it, without first calling upon the debtor, in some way, to redeem. The money, when received, would be a substitute for the note, and to be held upon the same terms, and subject to the same rights and duties as the note."

In the case under consideration, the authority of Bowman only extended to the receiving the rents, and he had no right to sell the lease until after demand and notice. Story’s Equity Jurisp., § 1033, and note; 3 Cal. R., 162. No demand and notice were shown in this case. The assignment by Bowman to Cohen, who took with full knowledge, passed no absolute title in the property pledged. The proceeds of the lease in the hands of Cohen, remained as a pledge, and he was liable to the assignees of Sehoyer, in the same way as Bowman would have been, had he collected the rents due upon the assigned lease. Cohen had a right to retain an amount sufficient to pay the note and interest, and was liable for the surplus.

For these reasons, the judgment of the Court below must be reversed. And that Court will so modify its judgment as to allow defendant Cohen the amount of the note and interest, and enter a decree in favor of plaintiffs, against him, for the remainder. The defendant Cohen will be entitled to the costs of this appeal.