| Mich. | Dec 22, 1891
The bill in this cause was filed for the purpose of declaring a certain bill of sale, given by A. Weed & Co. to Hoxie & Mellor, a chattel mortgage as security for certain accommodation paper made and indorsed by Hoxie & Mellor, and used by A. Weed & Co. in their business, and to decree the same to be a lien upon the logs described in said bill of sale, and the lumber and other material manufactured therefrom, and that the same be declared a trust fund for the payment of such accommodation paper; to declare the articles of agreement or sale by said A. Weed & Co. to the South Branch Lumber Company null and void as against said bill of sale given to Hoxie & Mellor; that the bill of sale be decreed to be a lien upon said property in the nature of a chattel mortgage prior to the purchase of the said South Branch Lumber Company; that a certain' chattel mortgage held by the First National Bank of Ashland, Wis., be declared to be a lien subsequent to-the lien of the complainants upon said property; and that the accommodation paper held by the complainants, be first paid out of the proceeds realized from the sale of the logs.
" The bill asked for an injunction against defendants restraining them from interferring with, removing, or disposing of the logs, lumber, lath, shingles, or timber, and for the appointment of a receiver. Upon the hearing in the court below, a decree was made from which complainants and several of the. defendants appeal.
On November 28, 1889, A. Weed & Co., composed of Alfred Weed and Paul Weed, who were engaged in the business of getting out logs, manufacturing them into lumber, and selling the lumber, made with Hoxie & Mellor the following contract:
“Antigo, Wis., Nov. 28, 1889.
“This agreement witnesseth that Hoxie & Mellor, in*359 consideration of two promissory notes of A. Weed & Co., for $2,500 each, dated to-day, one due July 15 next, and one due October 15 next, without interest, hereby agree to advance to A. Weed & Co. their notes for such amounts and at such times as will be necessary to carry on A. Weed & Co/s business at Ramsay, and for the purpose of logging a certain four million tract at Ashland. Hoxie & Mellor also agree to indorse A. Weed & CoJs notes for $14,000, for payment of purchase price of above four million feet of timber. It is agreed between both parties that the amount of notes advanced for Ramsay business shall not exceed $70,000 in all at any one time, and that the amount advanced for Ashland business shall not exceed $30,000 in all at any one time, including the indorsement of $14,000 for purchase price of timber. A. Weed & Co. agree to use Hoxie & Mellor paper at such places as will not interfere with the conducting of their (Hoxie & Mellor’s) other business, and also agree that all notes shall be taken up by them before Dec. 31, 1890, out of the proceeds of sales of stock.
“Hoxie & Mellor.
“A. Weed & Co.”
Under this contract notes were advanced by Hoxie & Mellor to A. Weed & Co., and renewals of such notes were made by Hoxie & Mellor, up to April 5, 1890, amounting to $108,000.
On March 30, 1890, Paul Weed, who acted for A. Weed & Co., wrote to Mellor, who acted for Hoxie & Mellor,, the following letter:
“Ashland, Wis., March 30, 1890..
“Mr. E. W. Mellor,
“Antigo, Wis.
“Bear Sir:
“We inclose the last $3,500 note for signature and return, as per my letter of recent date. We finish the last of our logging operations on April 2, and they have been very satisfactory. As fast as we market our lumber we shall retire the notes out, but that will not begin until June or July. We have arrangements to take care of our renewals in the mean time. I did not see Bishop but a few minutes, owing to a mistake, and we having a*360 lawsuit on our hands the following day. Did he take the logs?
“Yours truly,
“Paul Weed.”
To this letter Mellor replied by letter of April 5, as follows:
“Antigo, Wis., April 5, 1890.
“Paul Weed,
“‘Ashland, Wis.
“ Dear Sir:
“Your favor of the'30th ult. came while I was away; hence the delay in replying. I return the note herewith, as it is impossible for me to sign it under existing circumstances. Will explain more fully when I see you. Expected to see you ere this, and, if you are not coming down soon, let me know, and I will go np there, as I must see you ere long. I inclose you also your note which was renewed.
“ Yours truly,
“E. N. Mellor.”
After receiving this letter, Paul Weed went to see Mellor at Antigo, and there executed to Hoxie & Mellor the bill of sale which complainants, by their bill, claim was intended as security for certain notes indorsed, and thereafter to be indorsed, by Hoxie & Mellor. This bill of sale is as follows:
“Know all men by these presents, that A. Weed & Co., of Eamsay, Gogebic county,, Michigan, of the first part, for and in consideration of the sum of seventy thousand dollars, lawful money of the United States, to me in hand paid, at or before the ensealing and delivery of these presents, by Hoxie & Mellor, of the second part, the receipt whereof is hereby acknowledged, have bargained, iSold, granted, and 'conveyed, and by these presents do bargain, sell, grant, and convey, unto the said parties of the second part, their executors, administrators, and •assigns, twenty-eight thousand pine saw-logs, scaling seven million feet, more or less. Said logs are now lying and being in the Black river, near Eamsay, Gogebic county, Michigan.
*361 “ To have and to hold the same unto the said parties •of the second part, their executors, administrators, and assigns, forever. And we do, for our heirs, executors, administrators, and assigns, covenant and agree, to and with the said parties of the second part, to warrant and defend the same described goods, hereby sold unto the said parties of the second part, their executors, administrators, and assigns, against all and every person and persons, whomsoever.
“In witness whereof we have hereunto set our hands .and seals the fifteenth day of April, A. D. 1890.
“A. Weed & Co. [Seal.]
“ Signed, sealed, and delivered in the presence of
“ George E. Fraser.”
When this bill of sale was made the logs were where they had been banked. The driving of them had mot commenced, and A. Weed & Co/s men were on the ground preparing for the drive. They continued the work, and drove the logs. The drive started about the 17th of April, and was finished about the 4th of May. A. Weed & Co. began sawing the logs about May 5, and •continued sawing them until some time in September, when all the logs in controversy had been sawed. The bill of sale before set out was not filed until the 10th day •of May, 1890. On the 11th of June following, A. Weed •& Co. made a contract of sale to the South Branch Lumber Company of all the merchantable white pine lumber which had then been sawed from the logs, and .all which they should saw from the logs, as follows:
“ Chicago, III., June 11, 1890.
“South Branch Lumber Company,
“Chicago, 111.:
“We will sell you all the merchantable white pine lumber now piled at our mill at Eamsay; also the lumber from logs now in Black river and tributaries, •and to be sawed at our mill in Eamsay, — the entire cut ■being about seven million feet, — for the sum of $14 per M ft., board measure, f. o. b. cars at our mill. The 10 ft. c. and better to go in at the same price, and the 6 and 8 ft. c. and better at $10 per M feet.. The mill culls,*362 and 6, 8, and 10 ft. common and poorer, are not a parcel of this agreement. The lumber to be all cross-piled, and grades kept separate, as directed by you. We will also sell you our extra star shingles at §1.75, and the 6 dimension clear shingles at §2.20, per M, f. o. b. cars at Ramsay. Lumber to be settled for on the basis of §13 per M on McOlintock’s estimate, the first of each month, and you to give us your ninety-day paper for the same. The lumber to be manufactured from time to time as directed by you or your representative; and we shall take proper care in piling and covering same to prevent staining, and see that no lumber is piled nearer than 150 ft. of the mill, to protect you in insurance. When estimates are taken each pile to be marked, ‘The property of the South Branch Lumber Company.'’
“We also agree to make good to you any expense or loss that you may be put to by any claims or otherwise made against this lumber by other parties. Final settlement to be made as per the price of §14 on the completement of the shipment of all the lumber. Lumber to be inspected by C. M. E. McOlintock, each paying one-half of the same.
“We also agree to hold this lumber in piles until reduced in weight not to exceed 2,500 lbs. per M ft. You also have the privilege of letting this lumber remain here as long as you wish, providing that it does not interfere with the necessities of our mill for piling room.
“Very respectfully yours,
“A. Weed .& Co.
“We accept the above.
“The South Branch Lumber Co.
“B. F. Ferguson, Treas.”
After this contract had been made, and the parties, begun to act upon it, and to ship lumber under it to the South Branch Lumber Company, a further agreement was made that the South Branch Lumber Company should take the lower grade of lumber which should be-piled in the piles of lumber made under the contract of June 11, and this became a part of the contract.
On September 6 the lumber which had been thus sawed, and whicb is the lumber in controversy between the complainants and the South Branch Lumber Company, was.
The defendant the South Branch Lumber Company, upon its contract of purchase of the lumber in controversy from A. Weed & Co., executed and delivered to A. Weed & Co. its negotiable promissory notes to the amount of $58,000. These notes were made and delivered to A. Weed & Co., as follows: About June 21, the sum of $25,000; August 1, $18,000; September 1, $15,000. The first payment was made upon the certificate of the inspector agreed upon in the contract. The last two payments were made without any such certificate or any inventory of Mr. McOlintock, that being waived by both parties. All these notes have been paid by the South Branch Lumber Company.
The complainants are the holders of a part of the notes made by A. Weed & Co. and Hoxie & Mellor under the contract of November 28, 1889. All such notes held by the complainants were made after the sale of June 11 by A. Weed & Co. to the South Branch Lumber Company. Some of these notes are renewals of notes made prior to
Some considerable testimony was given to show what the agreement and understanding was between A. Weed & Co. and Hoxie & Mellor at the time the bill of sale was executed, which, taken with the bill of sale, would constitute a security, and what were the terms. The South Branch Lumber Company contends that when the bill of sale was executed it was the understanding and agreement between A. Weed & Co. and Hoxie & Mellor that A. Weed & Co. should continue in possession of the logs, drive them to their mill at Bamsay, manufacture them into lumber, sell the lumber, and, by means of the proceeds, pay the notes indorsed or signed, and to be indorsed or signed, by Hoxie & Mellor, and that Hoxie & Mellor would continue to indorse and renew notes for A. Weed & Co. to enable A. Weed & Co. to do that business; and that in doing that business A. Weed & Co. made sale of the lumber in question to the defendant by the contract of June 11. It appears that $40,-725 of the notes given by the South Branch Lumber Company was directly applied to the payment of the notes made or guaranteed by Hoxie & Mellor, and by
The bill was filed in this cause October 1, 1890, setting up that the complainants were holders of the notes made or guaranteed by Hoxie & Mellor for the accommodation of A. Weed & Co., and that the bill of sale was given for the purpose of securing Hoxie & Mellor against any loss they might suffer by reason of the failure of A. Weed & Co. to pay the promissory notes in accordance with the understanding of the parties, or to secure the several parties and persons by whom the said notes were purchased, and designed that all the property described in and covered by the said bill of sale was to be and form a fund to secure the payment of such notes.
The South Branch Lumber Company filed its answer and cross-bill, denying that the bill of sale was given either to secure Hoxie & Mellor or the notes; setting up the contract of November 28, 1889; alleging that the bill of sale was not intended to interfere with the manufacture of the logs into lumber, and the sale thereof; setting up that the sale to the South Branch Lumber Company by A. Weed & Go. was made with the knowledge and consent of Hoxie & Mellor; that 840,725 of the 858,000 which it had paid under its contract had been applied by A. Weed & Co. to the payment of the notes made by Hoxie & Mellor for the accommodation of A. Weed & Co., and which were outstanding on the date of the making of the bill of sale or given to renew notes then outstanding; setting up that A. Weed & Co., and all the members thereof, were residents of Ashland, in the state of Wisconsin; that the larger part, if not all, of the logs which the parties intended to cover by the bill of sale were in the township of Ironwood, in the county of Gogebic, at the date of the execution and delivery of said bill of sale, to wit, the 15th of April, 1890; that
For' the purpose of showing that the bill of sale was in fact intended as a chattel mortgage, Mr. Mellor, of the firm of Hoxie & Mellor, was called as a witness, and testified that on April 15 there were outstanding notes made or indorsed by Hoxie & Mellor for A. Weed & Co. in the sum of $108,000; that up to that time no security had been given; that this was all accommodation paper, and made for the accommodation of A. Weed & Co. He testified that Paul Weed called upon him at that date, April 15, and wanted to renew this paper when it fell due. He was then asked:
“Q. What did you say to that?
“A. I said to him that if he wanted to renew any more of that paper we wanted security.
“Q. What security did you get?
“A. Security on logs at Bamsay.
“Q. State what occurred in regard to" the giving of the bill of sale, on or about the 15th of April, 1890.
“A. Paul Weed came down here to see me about renewing more of that paper, and I told him I was very sorry we had gone into that deal, and I did not want to renew any more without security. He asked me what security we wanted, and I told him we wanted a bill of sale of the logs there at Bamsay. He said, ‘All right, you can have it.’ I went out in the other room, and got a blank bill of sale, and filled it out, and he signed it, and signed the name of A. Weed & Co. * * * *
*367 “Q. Did this bill of sale contemplate the security of all paper that was outstanding at the time it was given, and any renewals that might be issued of such original paper?
“A. That was what the bill of sale was given for. It was for the security of the notes that were outstanding ■at the time, and any renewals of those notes.
“Q. Did you have any conversation with Paul Weed on that point, — about the renewals or securing renewals., etc. ?
“A. I did have a conversation about that.
“Q. What did he say?
“A. He said that of course the’ bill of sale was given to secure any renewals that might be made.
“Q. Did you have any conversation with Paul Weed by which it was agreed between you that you were to renew any stated amounts of paper then outstanding?
“A. Yes, sir; we had.
“Q. State what that conversation was.
“A. He said he would probably want to renew most ■of the paper that was outstanding at that time.
“Q. Did you make any agreement with Paul Weed mot to file this bill of sale?
“A. No, sir.”
The witness further testified that he afterwards filed "the bill of sale in the town clerk’s office in the township of Bessemer, and that, at the time of filing, the logs covered by the bill of sale were in Black river, at Ramsay; that the head of the jam was at the mill at Ramsay, and that he understood the logs were in a solid .jam; that A. Weed & Co. were doing business at Ramsay, operating a saw-mill, manufacturing lumber, and were ■doing a logging business, and that their office was situate •at Ramsay, and that they were also doing business at Ashland, Wis.; that after the bill of sale was given they renewed other notes, and some new ones were given, but that they were for renewals, though given for different •amounts when they were renewed. The witness also testified to having received a letter from Paul Weed, dated
“ Please sign or indorse, as the case may be, and send' them hack to me in inclosed envelope. We do not know yet whether we shall need to renew much in July or hot. We expect we sold our Kamsay stock to-day; shall know next week. If we did, it will run into money fast. We send one other note of $3,000, to renew note of same-amount due at bank of Antigo, July 21. I hope we shall not have to trouble you much more. Everything running well with us.
“Yours truly,
“Paul Weed.”
The witness further testified that he first learned of the sale made to the South Branch Lumber Company on July 3, which was by letter; that he never authorized the sale, and never had any talk with A. Weed & Go. about it. The witness stated that prior to this time he signed the bond in certain attachment proceedings for A. Weed & Co. to get the logs restored to those parties,, and that he expected them to proceed and manufacture the logs and sell the lumber; that they were to take care of the notes as fast as they could sell the lumber off; that, at the time he signed the bond to release the logs from the attachment, A. Weed & Co. had spoken of the-South Branch Lumber Company as a possible buyer; and that at that time he entered no protest against A. Weed & Co. making a sale to the South Branch Lumber Company.
The evidence shows that all the notes referred to were thus signed and indorsed by Hoxie & Mellor under the contract of November 28, 1889. Mr. Mellor, in making this contract, understood that the notes referred to therein were to be carried along by renewals of their indorsements until the fall of 1890, and that A. Weed & Co. by their contract agreed to take care of them by
It is evident from this testimony, and the interpretation which Mr. Mellor gavé the contract, and his understanding of the arrangement between himself and Paul Weed, acting for A. Weed & Co., that the bill of sale was given to secure the performance by A. Weed & Co. of the contract of November 28, 1889. By the terms of this contract, which was not changed, or understood between the parties to have been changed, in any respect, A. Weed & Co. were to manufacture the logs into lumber, sell the lumber, and out of the proceeds take up the notes before December 31, 1890, and the bill óf sale was given to secure Hoxie & Mellor for the faithful performance of this contract; and i|; is evident that it was the intention of the parties that, so long as A. Weed & Co. went forward and executed the contract, they would not be interferred with by Hoxie & Mellor, but that, should they fail to perform the contract according to these terms, then Hoxie & Mellor would have their remedy under the chattel mortgage to enforce performance. It is difficult to understand from the testimony of Mr. Mellor or of Mr. Paul Weed (which we have not set out here) how it can be claimed that Hoxie & Mellor had a right under this bill of sale — which, by the arrangement between the parties at the time of its execution, was intended and understood as a security — to interfere with A. Weed & Co. in driving these logs to the mill, manufacturing them into lumber, and selling and disposing of the lumber for the purpose of taking care of these
The question of the place of filing the mortgage does not become important in determining the rights of the South Branch Lumber Company. But in determining the rights of the defendant the First National Bank of
The amount of the accommodation paper now outstanding and held by parties to this action is $86,232.50, some of which are renewal notes, the balance being notes discounted and the money used in whole or in part to pay up old notes. The First National Bank of Ashland paid out in the. sawing and taking care of the property and carrying out the contract with the South Branch Lumber Company, after it took possession under its assignment of contract and chattel mortgage, the sum of $11,804.11, and for taxes on the lumber $456.92.
The particular parts of the decree to which the First
“That the lien of said bill of sale is prior to the lien of the said First National Bank of Ashland created by its said chattel mortgage, dated September 15, 1890. *
“That the said First National Bank of Ashland, the First National Bank of Bessemer, and the complainants, herein, excepting the First National Bank of Appleton, are entitled to share pro rata (provided, however, that the said First National Bank of Ashland shall first exhaust its other security obtained by it as security for the said notes and other demands) in the surplus that shall remain after satisfying the said sum so ascertained to be due to said bank as aforesaid, and for which it has a first lien; and that they shall so share to the amount and extent only of the notes, respectively, held by them, and secured by said bill of sale of April 15, 1890, namely, notes then outstanding, signed or indorsed by Hoxie & Mellor for the accommodation of said A, Weed & Co., and renewals of said notes.”
The court having found that the bill of sale from A. Weed & Co. to Hoxie & Mellor was never recorded in Ironwood township, where the logs therein intended to be described were situated, and that the contract of the South Branch Lumber Company is prior to the lien of said bill of sale, the First National Bank of Ashland contends that it was error in the court to hold that the lien of the bill of sale is prior to the lien of the First National Bank of Ashland.
It is urged on behalf of defendants that the bill of sale was void as to third parties, because the description did not cover the property intended to be conveyed, the bill of sale calling for logs “in the Black river, near Ramsay,” while a large portion of the logs in question were not in the river, but in roll-ways on the banks of the river, and six miles from Ramsay. It is also contended that the mortgage was void as to the First
Section 6193, How. Stat., provides:
“Except when the mortgagor is a non-resident of the State, when the mortgage, or a true copy thereof, shall be filed in the office of the township clerk of the township, or city clerk of the city, or city recorder of cities having no officer known as 'city clerk,’ where the property is.”
The same section requires chattel mortgages made by residents to be filed in the townships where the mortgagors reside. • Under this statute there is but one place for the filing of a chattel, mortgage when the mortgagor is a non-resident of the State, and that is the township or city where the property is, and the filing would not be constructive notice unless so filed. It is plain that it is the- intent of the statute that the filing should be in the township or city where the property is at the time of the execution and delivery of the mortgage, and not in some other township or city to which the property may be removed after such execution and ■delivery. It was the intent of the Legislature to fix a rule by which all mortgages should be filed, and by which all must be governed. This precise question has never, until the present occasion, been before this Court. In many of the states it is provided by statute that, in ■ case of non-resident mortgagors, the filing shall be in •the township of village “where the property may be at
“This latter clause has been stricken out in the revised statutes. Whether this was done for precision merely, or was intended to change the law in a material point, is left wholly in doubt, and has rendered thaiuncertain which was before certain.”
The point was not decided; but the court, even when the statute had been changed, was doubtful if it were not done simply for precision. Under our statute no-such doubt can arise. This statute has been carried upon the statute books for a great many years, and no one-has ever doubted that the time of the execution and delivery of the mortgage fixes and determines the place-where such mortgage must be filed.
We need not discuss the other questions raised by counsel, as this must be decisive of the rights of the complainants and the First National Bank of Ashland. The hank and its officers .had no actual knowledge of the execution of this bill of sale, which we have denominated the chattel mortgage, and the filing in the township of Bessemer cannot be construed as constructive notice.
The order and decree of the court below were substantially:
1. That the bill of sale was given to secure the payment of the notes, and all renewals thereof, but that it was not valid as against the South Branch Lumber Company, because not filed in Ironwood township, where the logs were at the date it was given, but not at the date it was filed.
*375 2. That the contract between the South Branch Lumber Company and A. Weed & Go., of June 11, 1890, was an executory contract for the purchase of lumber, upon which the South Branch Lumber Company had advanced $58,000.
3. That the lien of the bill of sale is prior to the mortgage to the First National Bank of Ashland.
4. That the First National Bank of Ashland is entitled to be reimbursed to the amount of $11,000, for money expended in protecting and manufacturing the lumber, and a reference is ordered to ascertain whether it is entitled to more.
5. That the First National Bank of Ashland, the First National Bank of Bessemer, the Security Savings Bank of Ashland, and the complainants are entitled to share pro rata in the security, after the First National Bank of Ashland shall exhaust its other security, except that the First National Bank of Appleton is not entitled to participate.
6. That a receiver be appointed, that the lumber be sold, and that the contract with the South Branch Lumber Company be carried out, and that the receiver settle with the South Branch Lumber Company therefor.
7. That a reference be made to ascertain the damages to the South Branch Lumber Company on account of this injunction.
The South Branch Lumber Company is entitled to hold all that its contract called for with A. Weed & Go., and is in no manner affected -by the bill of sale of complainants, or any claim which the First National Bank may assert. The First National Bank of Ashland, after that, is entitled to have its claim allowed for moneys* advanced in carrying on the business of A. Weed & Co.; and its claim under its chattel mortgage is held prior to any claim which the complainants may assert under the bill of salé to Hoxie & Mellor. The appointment of a receiver is confirmed, and he shall settle with the parties from the proceeds of the sales in accordance with this opinion. The South Branch Lumber Company will recover its costs against complainants.
. The decree of the court below must be modified in accordance with this opinión.