214 Wis. 73 | Wis. | 1934
Lead Opinion
The following opinions were filed December 5, 1933:
The only question for determination is the priority of the rights to the personal property described in the mortgages by reason of the possessory acts first taken by the'second mortgagee.
The position of respondent is that under the rule of Chynoweth v. Tenney, 10 Wis. 341, *397, the mortgages did not create a lien on after-acquired personalty, but only constituted a license to the mortgagees to take possession of the property, which continued until revoked by the mortgagor; that until possession was taken by a mortgagee no lien was acquired; that by the acts of the second mortgagee it took possession of the personal property covered by the mortgages and thereby acquired a lien which was the only lien thereon, and that this lien was not affected by the subsequent acts of the trustees under the first mortgage, because the second mortgagee’s possession terminated the possession of the mortgagor and under their license the first mortgagees could only take possession from the mortgagor.
The position of the appellants among others taken is that conceding that the rule of the Chynoweth Case, supra, makes void a mortgage of after-acquired personal property, the second mortgagee, having accepted a mortgage by its terms- expressly subject to the first mortgage, is estopped from asserting invalidity of that mortgage.
The position of the appellants seems tó us well taken. They fortify it by citing the rule of Baierl v. Riesenecker, 201 Wis. 454, 227 N. W. 9, 230 N. W. 605, wherein it was
The situation here is analogous and the same reasoning that was held to estop the purchaser under the bill of sale applies to estop the second mortgagee from asserting rights superior to those of the first mortgagees. All that the second mortgagee acquired was the equity remaining after satisfaction of the first mortgage.
Respondent’s counsel contend that the Baierl Case, supra, holds that the mere recital in a bill of sale of the existence of a chattel mortgage did not estop the purchaser from attacking the validity of the mortgage. There is a statement in the opinion to that effect. But in the second mortgage here involved there was more than a mere recital of the existence of the first mortgage as is below indicated. Counsel further claim that the basis of the ruling in the Baierl Case was the fact that the amount of the chattel mortgage debt was deducted from the agreed purchase price of the property, and it is true that such deduction was made. But the reason that the deduction operated as an estoppel is that it made the purchase subject to the mortgage, and gave the purchaser only the equity of redemption. An express recital that the purchase was so subject manifestly would have the same effect. The opinion in the Baierl Case cites in support of its ruling cases holding that a grantee is estopped from denying the validity of a mortgage to which his deed recites that the conveyance to him is subject. The opinion states, page 460, “that the basis of estoppel, whether
“The doctrine of equitable estoppel is frequently applied to transactions in which it is found that it would be unconscionable to permit a person to maintain a position inconsistent with one in which he has acquiesced.”
The doctrine is a doctrine of equity. The respondent is appealing to equity in support of its claim. It would be inequitable to permit it to secure rights superior to those of the first mortgagees when it is apparent from the recitals of the second mortgage and the bonds it secures and the covenant of the first mortgage above mentioned that the rights conferred by the second mortgage were understood by all parties to be subject in. all respects to the rights conferred by the first mortgage.
The appellants fortify their position further by citing the rule of the Massachusetts court in Federal Trust Co. v. Bristol St. R. Co. 222 Mass. 35, 109 N. E. 880, wherein it was held, notwithstanding the rule which obtains in Massachusetts that a mortgage of after-acquired personal property does not create a lien thereon, that when street cars acquired after the execution of a mortgage were sold pursuant to a decree of court reciting that they were sold subject to the mortgage, the purchaser was estopped from claiming the mortgage did not create a lien on the property purchased. This ruling was made on the express assumption that the cars were personal property included in a mortgage describing particularly described real estate and after-acquired real and personal property.
It is pointed out in Federal Trust Co. v. Bristol St. R. Co. 218 Mass. 367, 105 N. E. 1064, that there is no distinction between purchasing under a decree subject to a mortgage and purchasing by conveyance so subject. By the same token there is no distinction between taking a second mortgage expressly subject to a first mortgage, and purchasing by a
The appellants attack the rule of the Chynoweth Case, supra, and urge that it should not be continued as the law of the state because contrary to reason and overwhelming weight of authority and expressly based upon decisions some of which are overruled by the courts that rendered them. But we do not see that there is occasion for reconsideration of that rule in the instant case.
We are not unmindful of the contention of the respondent that the second mortgagee acquired a lien on the property by its possessory acts and that the first mortgagees did not and could not acquire a lien by possessory acts after the second mortgagee’s lien had attached. But we are not concerned with liens only. We are concerned with equitable rights. The second mortgagee has only such rights as equity gives it. By its own claim its mortgage of after-acquired personalty was void at law and it could only acquire rights under its mortgage by application of and action upon the equitable principle that the mortgage constituted a license to take possession which continued until revoked. And it is not only relying upon an equitable principle, but it is proceeding in an equitable action. Where does this leave it? The mortgagor in effect covenanted in the first mortgage
Nor are we unmindful of the claim of respondent that the possession of a mortgagee of after-acquired personal property cannot be taken away from him by a creditor and that the first mortgagee is a creditor. That possession may not be taken from him by a general creditor on a writ of attachment or execution is true. But he has not agreed with the general creditor that the latter’s rights to possession are superior to his, and he has agreed, by taking a mortgage expressly subject to a first mortgage, that the first mortgagee’s rights are superior to his. By so taking his mortgage he has agreed that his security is the equity of redemption. He has agreed that his right to possession of the property as security is to take it subject to the first mortgagee’s right to take it, or to take what is left after the first mortgagee has satisfied his claim. While the agreement was not made with the first mortgagee direct, the first mortgagee has the same right to enforce that agreement in protection of his rights, that a mortgagee has to enforce the agreement of a grantee of a mortgagor to pay the mortgage debt. The second mortgagee is a party to the first mortgage in the same way and in the same sense that the grantee is a party to it. That such a grantee is a party to it was held in the case of Palmeter v. Carey, 63 Wis. 426, 21 N. W. 793, 23 N. W. 586, which first ruled that a judgment for a
Other grounds for reversal are urged by appellants, but as the above rules the only proposition involved in their favor there is no need to consider them.
By the Court. — The judgment of the circuit court is reversed, with directions to enter judgment in accordance with this opinion.
Dissenting Opinion
(dissenting). I am obliged to dissent from the reasoning of the opinion filed by the court in this case. As I view it, the question in this, case is, “Did the first mortgagee have a right, under and by virtue of the license created by its mortgage, to oust the lien which was acquired when the second mortgagee took possession of the property in question under its license created by the second mortgage?”
A discussion as to the relative rights of first and second mortgagees is in my view beside the point. All that is said in that regard may be conceded. In this case neither party had a mortgage upon the property in question; each had a license which if unrevoked might by a proper procedure ripen into a lien. When the property was taken from the possession of the mortgagor under and by virtue of the license created by the second mortgage, the license created by the' first mortgage did not thereby become void, it merely became ineffective because the mortgagor then had no property subject to seizure under the license created by the first mortgage. To treat the matter as if the first and second mort
In my opinion the judgment should be affirmed.
I am authorized to state that Mr. Justice Fritz concurs in this dissent.
A motion for a rehearing was denied, with $25 costs, on February 6, 1934.