Ghio v. Byrne

Bunn, C. J. i. Neg-ii-of c.1 a rlr in registering mortg*ag*e. (after stating the facts.) In Brothers v. Mundell, 60 Tex. 240, to which we have been referred by appellant’s counsel, the Supreme Court of Texas, in construing the statute of that State noted in the statement of this case, providing for the registration of chattel mortgages, held that such a mortgage, filed for record and recorded, furnishes no notice to third parties, since the statute requires the instrument in such a case to be filed, abstracted in the appropriate book, and kept on file for the inspection of all concerned. Such is the settled law of that State, and, besides being conclusive on or as being the construction put upon one of its statutes by its highest court of judicature, it is the only construction of which the statute admits, if we are permitted to say as much. Upon the application of this law to the facts of this case, namely, that the deed of trust of appellees, by mistake of the clerk and recorder, was not properly filed and abstracted until after appellant’s bill of sale was delivered and recorded, and appellant had taken possession of the propertj’ involved, he bases one of his contentions, that is to say, that his purchase is superior to the mortgage of appellees. We do not think this contention can be sustained, for several reasons, among which are the following: It is quite generally settled that where no duty with reference to the act of the registration is imposed by law upon the holder of a mortgage except to deliver the same to the proper officer for that purpose, no default of the registering officer is to be made to inure to the detriment of the beneficiary in the mortgage. Throckmorton v. Price, 28 Tex. 605; Wade on Notice, sections 152-162, and authorities cited ; Case v. Hargadine, 43 Ark. 144; Weise v. Barker, 2 Pac. Rep. 919; Mims v. Mims, 35 Ala. 23; Merrick v. Wallace, 16 Ill. 486. In this case, no duty in this respect was imposed by law upon Byrne. No fault is attributed to him, and he delivered the instrument to the proper officer in due time to precede the purchase of Ohio, and the mistake was solely that of the recorder in not inspecting the instrument and from its character •determining the place and manner of its registration, as the law directs. 2. Recitals of bill of sale as constructive notice of unrecorded mortgage. Again, the bill of sale of appellant contains a recital to the effect that the sale to him and his purchase from Zucchini, Byrne’s mortgagor, were made subject to the mortgage to Byrne. This kind of notice is now generally held to be constructive notice, such as devolves upon the holder of the instrument containing it the duty of following up the information thus furnished by proper inquiry, as in other cases where the duty of inquiry is imposed. Gaines v. Summers, 50 Ark. 322, and authorities cited ; Wade on Notice, sections 307-309, and authorities cited. Frye v. Partridge, 82 Ill. 267; Corbitt v. Clenny, 52 Ala. 480; Peto v. Hammond, 30 Beav. 495. Not only do the authorities make such to be constructive notice, but there is another reason why appellant in this case must be held bound by the recital in his bill of sale. That recital is a condition upon which the sale was made to him. That appellant should accept the muniment of his title with that condition was a part of the consideration accruing to Zucchini, his vendor. Appellant accepted the property on that condition. He ought not to hold on to the fruits of his purchase and yet be unwilling to observe its conditions. He should abandon his purchase in toto, or stand by all its terms. The plea that, the mortgage of Byrne being invalid, Ghio was not bound to observe the recital of its existence in his bill of sale is not well founded, for the reason that a failure to register at all does not render a mortgage invalid. The act of registration is for the benefit of persons in the situation of appellant, in this : that it furnishes them notice of the existence of prior inconsistent claims to their own. In this case, had there been no registration, and nothing in lieu thereof, still the appellant was affected with notice otherwise of this mortgage, and that is all the benefit that registration could have afforded him. 3. Effect in Texas of actual notice of nnfiled mortgragre. There is still another reason why this contention of appellant cannot be sustained. It is this : In our argument heretofore we have given the appellant the benefit of the rule which governs in this State, that is to say, that the registration of a mortgage is the only notice by which persons other than parties to the mortgage can be affected ; that third parties are not bound by actual notice of the existence of an unrecorded mortgage ; for such is the rule here. Main v. Alexander, 9 Ark. 112; Jacoway v. Gault, 20 Ark. 190; Hannah v. Carrington, 18 Ark. 105; and- the later decisions of this court on the subject. The rule grows out of the peculiar language of our statute giving effect to the registration of mortgages and similar instruments, which, taken from Mansfield’s Digest, is as follows, to-wit: “ Sec. 4743. Bvery mortgage, whether for real or personal property, shall be a lien on the mortgaged property from the time the same is filed in the recorder’s office for record, and not before; which filing shall be notice to all persons of the existence of such mortgage.” The preceding section provides that all mortgages shall be proved or acknowledged in the same manner as deeds are proved or acknowledged, and, when so proved or acknowledged, shall be recorded, if for lands, in the county where they are situated, and, if for personal property, in the county where the mortgagor resides. It is evident, that one dealing with property, under this peculiar statute, cannot be affected by actual notice, simply because constructive notice of record is made the only notice effectual in such cases. Now our statute giving effect to the registration of deeds and other absolute conveyances, digested in Mansfield’s Digest as section 671, as affects the argument, is almost in the language of the section of the Texas statute, to which we have referred in our statement of the case, which gives effect to the registration of chattel mortgages such as that we have under consideration. The construction given to this, our statute, is that constructive notice of registration is not the only notice by which a purchaser may be affected ; for, if he have actual notice of the existence of an unrecorded deed, he is bound by it. Byers v. Engles, 16 Ark. 543; Sisk v. Almon, 34 Ark. 391. The Texas statute on the subject does not, in our opinion, confine the holder of a chattel mortgage to the benefits of , the notice of registration; but, as against a subsequent purchaser with actual notice, the mortgagee may claim the benefit of this notice. This being true, and appellant having actual notice of the mortgage by the very terms of his bill of sale, there does not appear to be any -very great utility in this discussion of the effect of the registration laws of Texas as applied to this case. Sparks v. Pace, 60 Tex. 298; Brothers v. Mundell, 60 Tex. 240. 4. Effect of mortgagor reserving- power to sell. Another contention of appellant is this: The mortgage of Bvrne conveys to him certain articles of merchandise, such as are kept for daily sale, and the stipulatiou is that Zucchini, the mortgagor, as Byrne’s agent, was to continue to sell these goods, turning in the proceeds daily to Byrne, and the same were to be credited on the mortgage debt. The 17th section of the general assignment act of that State, (which section the Supreme Court of Texas holds as applicable to mortgages as well as assignments) makes invalid a mortgage of merchantable goods, daily exposed to sale in parcels in the regular course of business, and contemplating a continuance of possession and control of the business by the owner ; and declares such to be fraudulent and void. This statute has received a construction from the Supreme Court of Texas, about the real meaning of which there may be room for controversy. In other words, to some it appears clear that the making of the mortgagor the agent of the mortgagee in such cases, to carry on the business in his name and for the benefit of the mortgage debt, renders the transaction fraudulent and void. To others, however, no such meaning is to be attributed to these decisions. Happily, we are not driven in this case to the necessity of entering into an inquiry so unsatisfactory, if not unseemly, in its nature.* The mortgaged goods consisted of two classes, one consisting of articles for daily usé in that line of business, and the other consisting of furniture and other furnishings of the house not intended for sale in the usual course of business. Whatever may be the settled construction of the section of the Texas statute under consideration, it can only affect the mortgage as to the first class of goods according to our law. Lund v. Fletcher, 39 Ark. 325. Thus, eliminating from the controversy this particular subject of controversy, as did the court below, the only thing remaining to be done by the court below was to determine the value of the property not affected by this legal question, and therefore, upon the basis of $5000 being the then present value of all the property, as agreed upon, the court finding from the testimony that, about two years previously thereto, all the property was valued at $15,000, of which the furniture constituted one-half in value, or was worth $7500, and reasoning that naturally the salable goods would be more apt to undergo change in quantity, and therefore in value, than those not intended for sale, and there being no suggestion that there had been any special loss, addition or changes in value since that time, concluded that the furniture had at least retained its relative proportion of the whole value, and upon that theory found the value thereof to be at least $2500, thus, for all that appears, giving every advantage of doubt to the appellant. The court would have had a right to withhold its judgment, and have present and definite proof taken of the wines, whisky, etc. on hand, but it would doubtless have been a delay for nothing. We see no real objection to the process by which the court ascertained the value of the property, and, as none is suggested, we will not disturb the finding. 5. Right of mortgagee to sue for conversion. Finally, the appellant contends that, under the peculiar laws of Texas, appellees have no right of action in this kind of procedure, and several decisions of the Supreme Court are cited in support of this view. Wright v. Henderson, 12 Tex. 43; Gillian v. Henderson, 12 Tex. 47; Wootton v. Wheeler, 22 Tex. 338; Belt v. Raguet, 27 Tex. 471; Osborn v. Koenigheim, 57 Tex. 91; and Sparks v. Pace, 60 Tex. 298. There is no proof of the existence of a statute on the subject, but we will treat the law as enunciated in the decisions referred to. From them we gather the law of that State to be that a mortgage is a mere security; that the interest of a mortgagor in a chattel mortgage is the subject of the levy of an execution and sale to satisfy the judgment of his creditor, but that such sale is made subject to the mortgagee’s rights ; and, finally, that a mortgagee out of possession, and one not entitled to possession, cannot protect his rights by a resort to the special statutory proceeding in vogue in that State to try the rights of property. We do not find, however, that these decisions sustain the broad proposition of appellant that “in Texas a simple mortgagee, as such, has no right of possession, and can not maintain trespass, trover or conversion, nor the statutory remedy of trial of the right of property, which is substantially the same remedy.” On the contrary, we find in Focke v. Blum, 82 Tex. 436, that “a mortgagee or lien holder may sue for the conversion of the mortgaged property or for a trespass upon it.” It would be strange if there were not such a remedy for the mortgagee. We deem it unnecessary to prolong this discussion by a more extended notice of possession of Byrne, for much of the difficulty connected therewith seems to have been occasioned by the immediate interference of appellant. Nor do we deem it necessary to inquire further into the attitude of appellant in this transaction. Suffice it to say that he does not seem to be a “creditor,” in the meaning of the particular statute to which he appeals ; nor does he seem to be a bona fide purchaser (an innocent purchaser) for value, since the consideration he paid consisted largely of the satisfaction of a pre-existing debt owing to him by Zucchini, and probably the assumption of other debts of Zucchini., of the actual payment of which, before he had knowledge of appellee’s mortgage, we have no evidence. The judgment of the Miller circuit court is affirmed. Footnotes [*] As to the effect upon the validity of a mortgage of merchandise of a provision giving the mortgagor possession with power of sale, see Ephraim v. Kelleher, 18 L. R. A. 604. (Rep.),