Rutherford v. Edward L. Eyre & Co.

Action by W.W. Rutherford and another against Edward L. Eyre Company, and another, for an alleged conversion of turkeys by foreclosure sale under a chattel mortgage which was allegedly paid. From a judgment of nonsuit, plaintiffs appeal. AFFIRMED. This is an action for conversion in which the plaintiffs have appealed from a judgment of involuntary nonsuit. The property involved was a quantity of turkeys which the plaintiffs owned up to December 30, 1940, the date of the alleged conversion. On that day the defendant Edward L. Eyre and Co., claiming to exercise rights under two chattel mortgages executed by the plaintiffs, caused the turkeys to be sold at foreclosure. They were purchased by the defendant Northwest Poultry and Dairy Products Co. Whether the court ruled correctly or not in granting the nonsuit depends upon whether the mortgages were still in existence at the time of the sale. The plaintiffs say that they were not; that the indebtedness which they were given to secure had been fully paid; and upon that contention arises the only important question in the case. In the year 1940 the plaintiffs were engaged in the business of growing turkeys for the market in Marion County, Oregon. The defendant Eyre and Co. is a corporation which deals in grain. Cherry City Milling Company is a corporation engaged in the general feed business in Salem. In 1939 the plaintiffs had purchased a quantity of feed from Cherry City, and, in the spring of 1940, being desirous of continuing such dealings and of obtaining sufficient feed for some 8,000 turkeys during the 1940 season, an arrangement was made under which Cherry City would sell such feed to the plaintiffs on credit and the plaintiffs would execute promissory notes, secured by mortgages on the *Page 165 turkeys, to evidence the indebtedness thus incurred; Cherry City would obtain grain to process into feed from Eyre and Co., likewise on credit; and in order to secure Eyre and Co. would assign to the latter the notes and mortgages to be executed by the plaintiffs. In accordance with this arrangement the plaintiff executed to Cherry City two mortgages, one in May and the other in June of 1940, each covering 4,000 bronze turkey poults. Each recited that it was given in consideration of the sum of $7,600.00. One was expressed to be given as security for a promissory note for $1,442.00 and other notes to be thereafter executed, and the other a promissory note for $1,470.00 and other notes to be thereafter executed. Aside from the difference in the amounts and dates of the original notes, the mortgages were identical and contained, among other provisions, the following: "The above is intended as a mortgage to secure the Cherry City Milling Co., its successors or assigns for the payment of that certain promissory note made by the mortgagors in favor of the mortgagee under date of May 5, 1940, in the principal sum of $1,442.00 and which is due and payable on or before November 8, 1940; also certain promissory notes which will be executed from time to time in favor of Cherry City Milling Co. by the mortgagors; provided, however, that the total principal indebtedness secured by this mortgage shall not exceed the sum of $7,600.00." At or about the time of the execution of each mortgage the plaintiffs and Cherry City also signed a written agreement (referred to by counsel as the collateral agreements), which, after acknowledging receipt of the note and the mortgage securing it, provided as follows: *Page 166 "It is understood and agreed that said Cherry City Milling Co. holds the above-described securities as collateral security only and it is contemplated that said Cherry City Milling Co. will make advances from time to time to the said customer of goods, wares and merchandise. "It is further specifically understood and agreed that the above-described securities are for the purpose of securing payment of such advances and are to be held by the said Cherry City Milling Co. as security for any and all indebtedness now existing or which may hereafter be incurred or in any manner owing from the undersigned customer to the said Cherry City Milling Co. and that said securities secure the payment of such indebtedness and every part thereof, but the same shall be held by the said Cherry City Milling Co. and shall be enforceable between the parties only to the extent of the indebtedness actually owing from the customer to the Cherry City Milling Co. "It is further understood and agreed that when all indebtedness of every kind and nature owing from the undersigned customer to the Cherry City Milling Co., has been paid in full, such securities will be returned to the customer." The notes described in the mortgages, together with the mortgages, were thereupon endorsed, assigned and delivered by Cherry City to Eyre and Co., and notes subsequently executed by the plaintiffs as feed was furnished to them, were likewise endorsed and delivered, so that at the time of the alleged conversion Eyre and Co. held all of these certificates in its possession. The case is no different, so far as any question to be decided is concerned, than if one mortgage containing a limitation of $15,200.00 on the amount of the principal indebtedness secured, together with one collateral *Page 167 agreement, had been executed. Counsel have so treated it and we shall do likewise. From the date of the execution of the mortgages until December 11, 1940, promissory notes aggregating more than $20,000.00 were executed by the plaintiffs to Cherry City and endorsed and delivered to Eyre and Co., evidencing indebtedness incurred by the plaintiffs for feed furnished by Cherry City to them. Payments were made on the indebtedness through funds secured from the slaughter and sale of turkeys. On November 1, 1940, the amount of the principal indebtedness was nearly $15,000.00. Between November 1 and December 30 additional promissory notes were executed by the plaintiffs for the purchase price of feed furnished by Cherry City, bringing the total of the indebtedness incurred by the plaintiffs to the above mentioned figure of approximately $20,000.00. On December 2, 1940, some of the turkeys were slaughtered and payment of $9,647.85 was made from the proceeds of their sale. On December 20, 1940, more turkeys were slaughtered and sold for $6,117.84. There is some dispute as to whether the proceeds of this sale were paid to Eyre and Co. before December 30, the date of the alleged conversion, but we deem it unnecessary to determine that question, and for the purposes of the case shall assume that the payment was made before that day. On that assumption the plaintiffs, on December 30, had paid more than $15,200.00, and the balance owing on their notes was in excess of $5,000.00. During the trial the plaintiffs made an offer of proof, which was rejected by the court, to the effect that on or about October 31, 1940, Cherry City made a count of the turkeys; that, owing, to the negligent *Page 168 manner in which this was done, many of the turkeys lost weight; that, as a consequence, it became necessary for the plaintiffs to purchase quantities of feed which otherwise would not have been required; and that it was for the purchase price of this additional feed that the notes executed after November 1 were given. This ruling is the subject of one of the assignments of error in the plaintiffs' brief.