First National Bank of Edgerton v. Biederman

| Wis. | Mar 12, 1912

Winslow, O. J.

The plaintiff’s mortgage of February 22, 1907, was filed only in the city of Edgerton, and hence, owing to the fact that one of the mortgagors resided in the town of Eulton, it was never properly filed as required by see. 2314, Stats. (1898). The plaintiff’s second mortgage of March 13, 1909, was filed in tbe city of Edgerton, two hours after tbe second mortgage of tbe defendant Biederman, and bence must be regarded as subordinate thereto even bad it been duly filed; but as there is no evidence to show that it was ever filed in tbe town of Eulton, and it appears that Biederman’s mortgage was duly filed in both city and town, it is clear that tbe plaintiff can claim nothing under it as against Biederman. In fact tbe plaintiff’s counsel makes no claim under tbe second mortgage, but only claims under tbe first mortgage, and very frankly admits in bis brief that because of tbe failure to properly file that mortgage tbe plaintiff’s rights are only those of tbe bolder of an unrecorded mortgage.

Having only these rights, tbe respondent’s argument is that by accepting their mortgage of January 11, 1908, containing tbe exception in favor of tbe plaintiff’s prior mortgage, Biederman and tbe Bank of Marshall acquired only a mortgage upon tbe equity of redemption in tbe tobacco previously mortgaged to tbe plaintiff, and that they secured no greater rights under their mortgages of March 13, 1909, given to secure tbe same debt, because they had notice of tbe unrecorded mortgage and therefore were not subsequent purchasers or mortgagees for value in good faith.

Without deciding tbe question it may be admitted, for tbe purposes of tbe case, that by reason of the exception contained in tbe defendant’s mortgage of January 11, 1908, be acquired by that mortgage no interest in or lien upon tbe tobacco previously mortgaged to tbe plaintiff except a lien in tbe equity of redemption after tbe plaintiff’s claim should be satisfied.

But conceding this to be tbe situation when that mortgage was given and up to tbe time of tbe execution of tbe mortgage of March 13,1909, we have yet remaining the question of tbe effect of this later mortgage which contained no exception. In terms it covered tbe whole property. It was unquestionably a lien upon the whole property and a first lien thereon, unless the fact that the defendant knew of the existence of the plaintiff’s unrecorded and unpaid mortgage prevents him from claiming any lien prior to that of the unrecorded mortgage. To put the matter in simpler form, the question is whether failure to file a chattel mortgage can only be taken advantage of by subsequent purchasers or mortgagees in good faith, or whether persons dealing with the property with notice can also take advantage of it. The section itself (sec. 2313, Stats. 1898) seems very plain and unmistakable. It says that no chattel mortgage “shall be valid against any other person than the parties thereto" unless the possession of the property be delivered and retained or the mortgage duly filed.

There is no room for interpretation or construction here. The words are definite and the meaning certain, — “any other person than the parties” can mean but one thing, and the court is not at liberty to construe it to mean anything else.

In the majority of states notice of an unrecorded mortgage will deprive a subsequent purchaser or mortgagee of any protection under the filing act; he will take subject to the rights of the holder of the unrecorded mortgage. In Wisconsin, however, unrecorded mortgages have no validity as against subsequent purchasers or mortgagees, even though they have actual notice of them. Jones, Chat. Mortg. (5th ed.) secs. 313, 314. This has been squarely decided by this court. Parroski v. Goldberg, 80 Wis. 339" court="Wis." date_filed="1891-10-20" href="https://app.midpage.ai/document/parroski-v-goldberg-8183773?utm_source=webapp" opinion_id="8183773">80 Wis. 339, 50 N. W. 191; Ryan D. Co. v. Hvambsahl, 89 Wis. 61" court="Wis." date_filed="1894-12-11" href="https://app.midpage.ai/document/ryan-drug-co-v-hvambsahl-8184695?utm_source=webapp" opinion_id="8184695">89 Wis. 61, 61 N. W. 299; Dornbrook v. M. Rumely Co. 120 Wis. 36" court="Wis." date_filed="1903-12-11" href="https://app.midpage.ai/document/dornbrook-v-m-rumely-co-8187795?utm_source=webapp" opinion_id="8187795">120 Wis. 36, 97 N. W. 493. In Manson v. Phœnix Ins. Co. 64 Wis. 26" court="Wis." date_filed="1885-09-22" href="https://app.midpage.ai/document/manson-v-phœnix-insurance-6604820?utm_source=webapp" opinion_id="6604820">64 Wis. 26, 24 N. W. 407, language which seems to indicate a contrary view was used, but the question there was simply whether an unrecorded mortgage was valid as between the parties. The question at issue in Ullman v. Duncan, 78 Wis. 213, 47 N. W. 266, was as to the construction of sec. 2315, Stats. (1898), with regard to the failure to file an affidavit of renewal, and by the very terms of this latter section tbe only persons protected are “subsequent purchasers or mortgagees in good faith.”

It seems unquestionable that our filing statute makes sharp practice possible and enables one who has full notice of a.previously unrecorded mortgage to purchase the property, or to take a mortgage thereon to secure a pre-existing debt or one presently created, with the deliberate purpose of cutting off the unrecorded mortgage. The idea of the statute doubtless is that it is better to have the statute certain and effective than it is to leave the question in each case to depend on notice or good faith, and thus afford opportunity for conflicts in oral testimony and offer a reward to active and fertile memories.

The defendant had a right to take additional security if he could get it. He obtained such a security in the chattel mortgage which was given to him on March 13, 1909. That mortgage never has been reformed and doubtless could not be reformed in this action. There are no elements of estoppel here because the plaintiff has made no change of position relying on any act of the defendant. Under the terms of the chattel mortgage law the defendant was entitled to the money deposited in court.

By the Gourt. — Judgment reversed, and action remanded with directions to render judgment for the defendant in accordance with this opinion.