Harding v. American State Bank

Mackintosh, J. Tbe respondent, as administrator of tbe estate of bis deceased father, in tbis action against tbe appellant bank, sets out two causes of action in Ms complaint; in tbe first, alleging that tbe bank bad received, at divers times between August 20, 1920, and February 1, 1922, various deposits from tbe respondent, as administrator, and that, on tbe last named date, $5,124.46 remained on deposit, and that tbe bank bad refused to pay tbis amount, or any part thereof, to tbe respondent. Tbe second cause of action states that, at divers times and places, tbe respondent, as administrator, bad delivered to the appellant certain promissory notes, tbe property of tbe estate, and that tbe bank bad converted them and retained tbe proceeds, amounting to $5,270.30, and refused to pay that amount upon demand. A great deal of irrelevant matter made its appearance in the trial of tbis case, but in spite of tbis tbe facts are very simple and present tbe following situation: O. Gi. Harding, on November 1, 1919, made a chattel mortgage to tbe appellant, covering a great amount of personal property located on bis farm in Adams county, together with a mortgage upon tbe crop to be grown thereon during tbe year 1920. Tbe mortgage was properly filed on November 8, 1919, and states that it was given to secure tbe sum of $10,000, evidenced by two notes of $5,000 each, dated November 5, 1919, and payable one year after date, with interest at ten per cent per annum. In August, 1920, O. G. [486] Harding died, and the respondent was soon thereafter appointed administrator of Ms estate. The appellant and the respondent considered what was most advantageous to do for all concerned in regard to the chattel mortgage. Both parties were consulting, so far as the legal phase of this matter is concerned, the same attorney. The result of the consideration was that, on October 19, 1920, a public sale was made of the mortgaged personal property, under an arrangement whereby the proceeds of such sale should be applied upon the mortgage debt. The mortgaged wheat was sold under a similar arrangement. At no time has any suggestion been made that the sale did not take place under the most advantageous conditions and that a fair and adequate price was not obtained. As a matter of fact, the record shows that the sale was an exceptionally good one from the standpoint of both parties to this litigation. The amount received from the wheat was $4,750, and from the personal property, cash in the sum of $2,875 and notes in the amount of $3,470.30. The appellant, under the arrangement, was entitled to retain all and apply it upon its mortgage. It, however, merely retained notes for $2,320.30 and applied them at their face value to the indebtedness and returned to the respondent, as administrator, out of the cash received all but the amount sued for in the first cause of action. (To avoid confusion, we are not discussing a deposit on hand at the time of Harding’s death about wMch there is no controversy.) The only question in the case is whether the mortgagee in a chattel mortgage is compelled to foreclose his mortgage, or whether he can agree with the administrator of the estate of the mortgagor that foreclosure is not necessary and provide that the mortgaged property may be sold without foreclosure and [487] the proceeds applied upon the debt. In the absence of fraud,, undue influence, or some similar inducing cause, and where the sale has resulted beneficially to all concerned, we see no reason why such an arrangement cannot he made. In fact, this court, in In re Spark’s Estate, 101 Wash. 462, 172 Pac. 545, so held, and also disposed of the other question raised by the appellant here regarding the necessity of filing a claim, in that case holding that secured creditor was under no such obligation. It is apparent, therefore, that no ill resulted to the respondent from the fact that the same attorney was representing him and the appellant, as they both knew, for the advice that such a sale was legal was correct, and, as we have already noticed, the sale was advantageous. On the second cause of action it appears that the face value of notes for $2,320.30, taken at the sale, was applied upon the mortgage indebtedness, although the testimony shows the real value of those notes was far less than their face value, and thereby the Harding estate has profited much more than it would have were the appellant either called on to account for the value of those notes or to return them. The difference between the $2,320.30 and the $5,270.30, sued for in the second cause of action, is made up of two notes for $1,100 which have been cancelled by the respondent because of respondent’s inability to deliver the property for which they were taken, and one note for $1,800 which the bank held at the time of Harding’s death as collateral under another obligation of the deceased, which obligation the bank now claims is paid and offers .to return to the respondent this collateral note. The trial court was in error in holding that the sale in October, 1920, was not lawful, and in holding that, under Adler v. Scandinavian-American Bank, 116 Wash. [488] 484, 199 Pac. 762, the bank was not entitled to apply the proceeds of that sale upon the indebtedness to it. The facts in this case are dissimilar to those in the Adler case. There the bank was attempting to set off against the debt due it money deposited in the bank by the administrator of the debtor. Here the bank is not in that position; it is merely applying on a mortgage indebtedness the proceeds of the sale of the mortgaged property, not received by the bank as a deposit of the administrator and part of the estate, but received by the bank as its own property, applicable to the reduction of its debt. The judgment is reversed, with directions to enter judgment in favor of the appellant upon the respondent’s first cause of action, and in favor of the respondent upon his second cause of action for the return of the three notes, one for $600, known as the Appel note, one for $550, known as the Trevasser note, and one for $1,800, known as the Fitzpatrick note. MaiN, C. J., PaRkee, and Tolman, JJ., concur.