Nichols & Shepard Co. v. Minnesota Thresher Manufacturing Co.

CANTY, J. The complaint alleges, in substance, that in June, 1892, one Kenitzer was the owner of a threshing machine and engine, which was then in South Dakota, where Kenitzer then resided; that on that day he mortgaged the same to the plaintiff corporation to secure the payment of $325 then due by him to it, and that the mortgage was then duly recorded in the proper office in the county of his resi: dence; that thereafter in 1893, while said mortgage was in full force and effect and after the conditions thereof were broken and when plaintiff was entitled to the immediate possession of the mortgaged property, the defendant corporation obtained possession of all of the property and “wrongfully converted the same to its own use.” The answer is a general denial. On the trial before the court without a jury, the court found for defendant, and from an order denying a new trial plaintiff appeals. 1. It is assigned as error that the court permitted defendant to prove a certain statute of South Dakota, against the objection that [531] it was not pleaded in the answer, which statute, as the courts of that state have construed it, provides that a chattel mortgage shall not pass the title to the property covered by it until after foreclosure, but that it shall confer on the mortgagee merely a lien as security for the payment of the indebtedness. We are of the opinion that the evidence was competent, if material. The plaintiff did not allege the manner in which defendant converted the property, and under its complaint might have proved that defendant converted it in any one of several different ways. The proof was that defendant received the mortgaged property from the mortgagor in exchange for other property, and then sold the mortgaged property to one Hayden. The defendant was not obliged to anticipate this proof in the answer, but had a right to meet it by any evidence that showed that it was not guilty of converting the mortgaged property. Johnson v. Oswald, 38 Minn. 550, 38 N. W. 630; Adamson v. Wiggins, 45 Minn. 448, 48 N. W. 185. 2. The trial court found all of the facts hereinbefore stated, and found as a conclusion of law that plaintiff is not entitled to recover. The court seemed to be of the opinion that these facts do not show a conversion. We are of the opinion that they do. True, the mortgage did not pass the title of the mortgaged property to the mortgagee, but is a mere lien. It is also true that the mortgagor had a vendible interest in the property. Defendant could not be held guilty of conversion if nothing more appeared than that it purchased the property from the mortgagor for an adequate consideration which implies good faith. Kellogg v. Olson, 34 Minn. 103, 24 N. W. 364; Sanford v. Duluth, 2 N. D. 6, 48 N. W. 434. But something more does appear. Defendant sold the property to Hayden. The sale implies a warranty against incumbrances, including this lien (Benjamin, Sales [6th Ed.] 632), unless the contract of sale expressly provided to the contrary; and it does not appear that it did so provide. Then the finding that defendant sold the property to Hayden amounts to a finding that it “exercised dominion over the property in exclusion and defiance of the rights” of plaintiff, which will, in a case where the mortgage passes the legal title, amount to a conversion. See 4 Am. & Eng. Enc. 108; Bishop, NonCont. Law, § 406. The same is true where the plaintiff [532] has but a mere lien, if it entitles him to the immediate possession. 1 Jones, Liens (2d Ed.) § 1035; Sanford v. Duluth, supra. The fact that it was not in the power of defendant to deprive plaintiff of its rights in the property is not the test of whether trover will lie. The defendant, being in possession, may be taken at its word; and, if it exercises a dominion over the property hostile to and inconsistent with the rights of plaintiff, the latter may maintain an action for conversion. This disposes of the case. The order appealed from is reversed, and a new trial granted.