Armstrong v. Broom

Zane C. J.: This action was instituted to foreclose a chattel mortgage given by defendant Beardsley to the plaintiff on the fourteenth day of January, 1885, and duly recorded, to secure his promissory note of that date for the sum of $8,000. The complaint was filed on the twenty-second day of July, 1885, .and a decree was rendered for the plaintiff for the prin — 177 — cipal and interest • due, directing sale of tbe mortgaged property to satisfy tbe same, witb costs. And tbe Utab National Bank recovered a judgment against tbe same defendant on March 18j 1885, on wbicb an execution issued August 13 of tbe same year, which was levied tbe same day on tbe property mortgaged, and it was sold to defendant Broom on tbe twenty-second day of tbe same month, and by him mortgaged tbe same day to defendant Whitaker. Tbe two defendants last mentioned claim tbe title to tbe property by virtue of this sale. This appeal is from tbe decree of foreclosure, and from tbe order denying a motion for a new tidal. Section 5, c. 21, Laws of Utab 1884, is'as follows: “Any mortgage of personal property acknowledged and filed as hereinbefore provided shall thereupon, if made in good faith, be good and valid as against tbe creditors of tbe mortgagor, and subsequent purchasers and mortgagees, from tbe time it is so filed for record until tbe maturity of tbe entire debt or obligation for tbe security of wbicb tbe same was given, and for a period of ninety days thereafter: provided tbe entire time shall not exceed one, year.” Tbe 90 days after tbe maturity of tbe note secured by mortgage in this case expired on August 12, 1885, and tbe Us pen-dens was filed tbe preceding day; tbe action having been commenced on tbe twenty-second day of tbe preceding-month. Tbe levy was made tbe day following that on wbicb tbe 90 days expired. In view of these facts tbe appellants Broom and Whitaker insist that tlieir rights to tbe property in question are superior to tbe plaintiff’s; that tbe plaintiff’s lien, by virtue of bis mortgage, and tbe pendency of tbe foreclosure action, was invalid as against tbe levy of tbe execution, because tbe property was found in tbe actual possession of tbe mortgagor, and levied upon tbe day after tbe 90 days bad expired. We are of tbe opinion that a mortgage of chattels, though made in good faith and duly recorded, is invalid as against tbe creditors of the mortgagor, and subsequent ■purchasers from him, if tbe property remains in bis possession after tbe expiration of one year, or after tbe expiration of tbe 90 days in tbe fifth section mentioned, — 178 — without any measures taken to foreclose. So the question arises, what effect did the institution of the suit and the filing of the lis pendens have? The ninth section of chapter 21, mentioned above, provides that “an action for the foreclosure of a mortgage on personal property, or the enforcement of any lien thereon, of whatever nature, may be commenced, conducted, and concluded in the same manner as provided by the law for the foreclosure of a mortgage or lien on real property,” etc. Section 266, p. 200, Laws Utah 1884, provides that a notice of the pendency of an action affecting the title or the right of possession of real property may be filed for record with the recorder of the county,, etc.; and that from the time of filing such notice only, shall a purchaser or incumbrancer of the property be deemed to have constructive notice of the pendency of such action. This provision relates to actions for real property, and to constructive notice of the pendency thereof. The court below found that the defendants Broom and "Whitaker had actual notice of plaintiff’s mortgage, and of the suit to foreclose it, before they acquired any interest in the property in dispute. This finding appears to be supported by the evidence, and it does not appear that there was any unreasonable delay in the prosecution of the foreclosure suit to a final decree. This presents the further question, could the defendants Broom and Whitaker, with actual notice of the mortgage, and of the pendency of the suit, instituted before the expiration of the 90 days, acquire a valid title as.against the plaintiff. The foreclosure of the mortgage by the plaintiff was an appropriate remedy to subject the property therein described to the payment o'f the debt secured thereby. The action having been commenced by plaintiff while the lien of the mortgage was good as against creditors, >it kept the lien alive, and continued it until the decree and sale under it perfected his right with respect to it, and passed the title to the purchaser. If the plaintiff had failed to take any steps to foreclose his mortgage until after the 90 days had expired, and the mortgage had ceased to be a lien as against creditors and purchasers, their rights might have intervened, and become superior to those of the plaintiff. But the credit — 179 — ors, with notice tliat plaintiff was proceeding to subject the property to tire payment of the- debt secured in the mode prescribed by law, could not acquire rights superior to the decree which might be rendered. When the 90 days expired, the plaintiff was not relying upon his mortgage alone. He had availed himself of the remedy which the law gave him. That added additional life and vitality to his right under the mortgage, and resulted in a perfect right. The remedy converted the property mortgaged into money, and gave that to the plaintiff. This was the end in view when the mortgage was made, if the debt should not be paid. The mortgage and the remedy together held the property, and accomplished the end in pursuance and by virtue of both. The statute authorizes the foreclosure of a chattel mortgage by an action as we have seen. But if, between the day the mortgage would cease to be a lien without any steps to foreclose it and the day of the decree, the rights of creditors might intervene, and deprive the mortgagee, without his fault, of the benefit of the lien, — the object of the action — instead of being the means of perfecting the plaintiff’s right, the remedy would afford an opportunity for its destruction. The property in question was described in the mortgage, and that was made a part of the complaint. In 2 Lead. Cas. Eq. (Hare & Wallace’s notes,) 170, the rule of lis pendens is stated thus: “A purchaser will also be affected with constructive notice whenever his purchase is made during the prosecution of a suit brought to enforce an adverse claim or title which is set forth with sufficient certainty and distinctness to apprise him of its being on the property purchased.” At page 173, Id., is the further statement of the rule: “In Murray v. Lylburn, 2 Johns. Ch. 444, the principles asserted in Murray v. Ballou [1 Johns. Ch. 581] were held to apply to ohoses in action as well as to real estate. * * * And there are several cases which sustain the idea that, whenever personal property falls within the jurisdiction of chancery by becoming the subject of a suit for specific delivery or performance, * * * it will fall within the rules which apply, under — 180 — similar circumstances, to land, and cannot be discharged from tbe equity of tbe complaint by a sale pendente lite,.” In tbe case of an equitable action to foreclose a mortgage or to enforce a lien, when tbe property is sufficiently described, we see no reason wby tbe same rule as to lis pen-dens should not apply, as is provided in similar actions against real estate. Tbe suit of Thompson v. Van Vechten, 5 Abb. Pr., 458, was to determine tbe priority of the claims of tbe respective parties to tbe proceeds of tbe sale of tbe steam-boat Alida. Tbe priority of tbe rights of one of the parties depended upon a sale under a chattel mortgage held by one Dunlap, who, by bis agent, bad advertised tbe boat to be sold in pursuance of tbe mortgage, but bad not taken actual possession. The court in its opinion said: “On June 28, 1854, Dunlap took measures to foreclose tbe mortgage and sell tbe vessel. This was equivelent to an assumption of possession.” Tbe case of Otis v. Sill, 8 Barb., 102, was brought for taking and detaining personal property. Tbe plaintiff claimed by virtue of a chattel mortgage, and tbe defendant by virtue of an execution on a judgment against tbe mortgagor. At tbe time of tbe levy tbe plaintiff bad not taken actual possession of tbe property, or filed a copy of tbe mortgage within 30 days previous to tbe expiration of tbe year. Tbe court said: “Tbe plaintiff’s mortgage was dated tbe eighteenth day of October, 1847, and was filed in tbe office of tbe county clerk on tbe nineteenth day of October, 1847. On tbe sixteenth of October, 1848, tbe plaintiff caused an inventory of tbe property, which be claimed was embraced by tbe mortgage, to be taken, and tbe property to be advertised for sale under tbe mortgage. Advertising tbe property for sale, under tbe power of sale contained in tbe mortgage, previous to tbe expiration of one year from the time of tbe filing of tbe mortgage, in my judgment, excused tbe plaintiff from tbe obligation of filing a copy of tbe mortgage witbin 30 days previous to the expiration of tbe year, as required by tbe third section of tbe act in relation to chattel mortgages. Laws 1883, p. 402. Tbe third section of this act is evidently applicable only to cases — 181 — wben tbe mortgagee allows the mortgagor to continue in possession of the mortgaged, property after the expiration of the year without taking the property into his actual possession, or adopting some proceeding to enforce the forfeiture of the mortgage, or to sell the equity of redemption of the mortgage previous to the expiration of the year from the filing of the mortgage.” In holding that the interest of, the defendants Broom and Whitaker, under the levy and sale by virtue of the execution on the judgment of the Utah National Bank against Beardsley, was subject to plaintiff’s right under his mortgage and decree, we are of the opinion the trial court committed no error; and we are also of the opinion that the evidence authorized the finding that the mortgage was given to secure a bona fide debt and in good faith. After a careful consideration of this record, we find no error in it. The decree of the court below is affirmed. Boreman J., and Henderson, J.,' concurred.