Milburn Manufacturing Co. v. Johnson

Harwood, J. The sole question involved in this appeal will appear by a brief statement of facts: The defendant Johnson was indebted to the plaintiff, Milburn Manufacturing Company, in the sum of eleven hundred dollars, to secure the payment of which Johnson executed a mortgage upon a certain chattel; but the mortgage failed to conform to the requirements of the statute, in that the possession of the mortgaged chattel remained with the mortgagor, Johnson, according to a provision in the mortgage to that effect, and the mortgage was not “accompanied by an affidavit of all the parties thereto,” either personally or by agent, “that the same was made in good faith to secure the amount named therein, and without any design to hinder or delay the creditors of the mortgagor.” (Comp. Stats, div. 5, § 1538, p. 1068.) The defendant, Robert Peltier, also became a bona fide creditor of Johnson; and, knowing of Johnson’s bona fide indebtedness to Milburn Manufacturing Company, and of said defective mortgage to that company, Peltier obtained to himself a valid mortgage on the same chattel to secure his demand, conforming to all the statutory requirements, and filed the same of record second in point of time to the first-mentioned mortgage. On default of payment of said debt to Robert Peltier, he got possession of said chattel, and was about to apply the same, under the conditions of his mortgage, to the satisfaction of the debt owing to him, when the plaintiff, Milburn Manufacturing Company, brought this action to foreclose its mortgage, and recover possession of said chattel from Peltier. The trial court rendered judgment in favor of Peltier, and plaintiff appeals. The question here involved is whether said first mortgage to Milburn Manufacturing Company is void as against Peltier, a subsequent mortgagee, by reason of the failure to accompany [541] the first mortgage with the required aifidavit, when the subsequent mortgagee had notice or knowledge of the bona fide character of the first debt. The learned counsel for appellant appeals to authorities which treat generally of equitable rights, aud obligations arising by virtue of actual notice, to maintain the negative of the above question. But we do not think the doctrine can apply so as to control the question at issue. The statute provides that “no mortgage of goods, chattels, or personal property shall be valid, as against the rights aud interests of any other person than the parties thereto, unless the possession of such goods, chattels, or personal property be delivered to and retained by the mortgagee, or the mortgage provide that the property may remain in the possession of the mortgagor, and be accompanied by an aifidavit of all the parties thereto, or, in case any party is absent, an affidavit of those present, and of the agent or attorney of such absent party, that that the same is made in good faith to secure the amount named therein, and without any design to hinder or delay the creditors of the mortgagor, aud be acknowledged and filed as hereinafter provided.” This statute, providing a method by which a creditor may acquire a special lien on the debtor’s personal property while the possession remains with the debtor, is in derogation of the common law, and it must be strictly construed, under a well-established rule of construction. The same is the doctrine declared in Leopold v. Silverman, 7 Mont. 266; Butte Hardware Co. v. Sullivan, 7 Mont. 307. All bona fide creditors stand on an equality before the law in respect to enforcing payment of debts, unless this equality is varied by a provision of law giving a special lien, or enabling one to acquire a special lien by complying with the provisions of law. If one attempting to create a special lien in his favor, or to take advantage of one provided by law, fails to comply with the provisions of the law governing, then such creditor falls back into the common line occupied by other general creditors, and cannot invoke the rules or doctrine of equity to avoid this result. Such is the case with mechanics’ liens, for example. Suppose one mechanic or material man, knowing fully of the [542] bona fide character of bis predecessor’s claim, perfects a lien which he asserts as against one filed by his predecessor after limitation had run, or without verification, or otherwise failing to comply with the statute. Is the latter, because he had knowledge of the good faith of his predecessor’s claim, estopped from contesting his lien? The debtor himself could object to the lien for failure to comply with the statute provided for it, and who would know better of the bona fide character of the obligation ? It is an arbitrary provision of lawwhich enables one creditor, in preference to another, to take and hold a special lien on the personal property of his debtor, leaving the possession with the debtor; and that law demands a compliance with its terms. The first declaration of the statute in reference to chattel mortgages is that “no mortgage of goods, chattels, or personal property shall be valid, as against the rights and interests of any other person than the parties thereto, unless,” etc. "We regard this requirement of an affidavit of, or on behalf of, all the parties to a chattel mortgage as a condition going to the validity of the mortgage, which the law demands, independent of the question as to notice or knowledge of any person other than the parties, that the debt intended to be secured was in fact a bona fide obligation. In the cases of Leopold v. Silverman, 7 Mont. 266; Butte Hardware Co. v. Sullivan, 7 Mont. 307, and Baker v. Power, 7 Mont. 326, it has been decided by this court that the failure to comply with the provisions of the statute in making the required affidavit is fatal to the mortgage. The only distinction between those cases and the one at bar is that in the latter case there was actual knowledge on the part of the second mortgagee that the debt attempted to be secured by the first was a bona fide obligation. "We hold that such knowledge would not change the rule laid down in those cases. (Hanes v. Tiffany, 25 Ohio St. 549; Belknap v. Wendell, 31 N. H. 92; Parker v. Morrison, 46 N. H. 280; Jones on Chattel Mortgages, § 36.) Judgment affirmed. Blake, C. J., and Be "Witt, J., concur.