Gilbert Hunt Manufacturing Co. v. Wheeler

The opinion of the court was delivered by Scott, J. Plaintiff brought this action to foreclose [596] a chattel mortgage. Subsequent to the making of the mortgage the mortgagor made an assignment for the benefit of his creditors to the respondent Brooks, which assignment proceeding was pending in the court where the action to foreclose the mortgage was brought. Prior to the bringing of the action^ the plaintiff petitioned said court, settingup its mortgage and the pendency of said assignment proceeding, for leave to bring said action to foreclose, and leave of court was duly obtained and the action instituted. Thereafter the assignee appeared in said suit and moved to dismiss the same on the ground of the pend-ency of said assignment, and the motion was granted and the cause dismissed. Whereupon plaintiff appealed. It is contended by the respondents that the action of the court in dismissing the foreclosure suit was based upon the case of Quinby v. Slipper, 7 Wash. 475 (38 Am. St. Rep. 899, 35 Pac. 116), and that this court held in that case that all claims against the insolvent must be presented and prosecuted in such proceeding. But we do not so view the decision there rendered: That was an action- to foreclose a mechanic’s lien, which was instituted without asking or obtaining leave of court §o to do. While we have held that an assignment transfers all of the property of the insolvent debtor to the jurisdiction of the court, regardless of whether it is mentioned or described in the deed of assignment, we have also held that the assignment only passes the interest of the assignor in his property, and that it is subject to all valid liens existing thereon. Bierer v. Blurock, 9 Wash. 63 (36 Pac. 975). It appears in this case that the mortgagor had covenanted in said mortgage, in case of default therein or in case the property mortgaged was molested or inter [597] fered with, or if the mortgagee should deem himself insecure, that- the mortgagee should be entitled to take immediate possession of the property and to foreclose the mortgage, etc. A mortgagee of chattels might be willing to accept such security with a condition of the kind mentioned regarding possession, and might be unwilling to accept it without such condition, or if it was understood that the law required in case of foreclosure, where the mortgagor had made an assignment, that the foreclosure must await the determination of the insolvency proceeding and the possession of the property meanwhile be held by the assignee therein. The right of possession pending a foreclosure suit might be a valuable right. It might be that a mortgagee would be in a situation to take care of the property pending a proceeding to foreclose, much more cheaply and advantageously than the assignee in the insolvency proceeding could care for it, and the mortgage security preserved to that extent. It is contended that the contractual right to take possession and foreclose, as contained in the mortgage, would authorize the mortgagee to proceed without presenting his claim and obtaining permission to prosecute it independently. But that question is not involved in this case. We 'see no reason why the substantial rights of the mortgagee can not be fully protected in the insolvency proceeding. If the validity of the mortgage is not contested, a sale of the property can be directed to take place without waiting for the termination of such proceedings, and the proceeds applied in satisfaction of the mortgage debt. Or in case the debt or the validity of the mortgage is disputed, that matter could be determined in such proceedings independently of the other matters involved in the assignment, and a sale then had. But in this instance the [598] court made no such order, but after a presentation of the petition authorized the institution of the action to foreclose; and,we are of the opinion that the court had authority to do this, :and that it was error, after the institution of such suit and the incurring of costs, to dismiss the same for the reason stated, even though the withholding or granting of leave to sue was a matter addressed to the discretion of the court. Reversed and remanded for further proceedings. Anders, Gordon and Dunbar, JJ., concur. Hoyt, C. J., dissents.