Nixv v. Wiswell

Cassoday, J. It is conceded that at the time Hall conveyed the real estate and transferred the personal property to Charles. H. Nix, April 24,1885, no part of the principal sum of the indebtedness of $16,000. from Hall to McConnell had been paid, but the same remained a subsisting debt, secured not only by the mortgage given by Hall to McConnell on the real estate, but also by the chattel mortgage given at the same time by Hall to McConnell on the personal property. In fact, Charles H. Nix took the real and personal estate subject to those mortgages, and the — 340 — amount of such indebtedness was deducted from the purchase price which he was to pay to Hall. As indicated in the foregoing statement, that chattel mortgage was filed May 22, 1883. The statute applicable to such chattel mortgage provides that “every such mortgage shall cease to be valid, as against the creditors of the person making the same or subsequent purchasers or mortgagees in good .faith, after the expiration of two years from the filing of the same or a copy thereof,” unless renewed as therein prescribed. Sec. 2315, R. S. That chattel mortgage was never so renewed. Charles H. Nix was allowed to testify, against objection, to the effect that he had no knowledge of the existence of that chattel mortgage until he had sold and transferred the personal property, and conveyed the real estate to the Hanleys, May 17, 1886; and the jury found that he had no such knowledge. The contention is that, as the chattel mortgage was not so renewed, the same became, under the statute quoted, ipso faeto void, even as against Charles H. Nix, at the end of the two years from the filing thereof, to wit, May 22, 1885. This court has, however, from the beginning construed that statute to the effect that, in the absence of such renewal, such mortgage would cease to be valid as against such creditors as should, after the expiration of the time for such renewal, seize the property, and such purchasers or mortgagees as should, after the expiration of said time, purchase the property or take a mortgage thereon in good faith, but that such renewal was unnecessary to preserve the rights of such mortgagee to the property as against any and all prior seizures, transfers, and mortgages. Newman v. Tymeson, 12 Wis. 448; Case v. Jewett, 13 Wis. 498; Lowe v. Wing, 56 Wis. 31; Rockwell v. Humphrey, 57 Wis. 421; Ullman v. Duncan, 78 Wis. 217. In fact the court has gone so far as to hold that “ a chattel mortgage which has been duly filed is valid as against a subsequent bona fide — 341 — purchaser of the property, although prior to his purchase the mortgage has disappeared .from the files through the negligence or misconduct of the town clerk.” Marlet v. Hinman, 77 Wis. 136. We must hold as a matter of law that Charles H. Nix was not a subsequent purchaser, nor a purchaser in good faith, within the meaning of the statute quoted; and hence that parol testimony to the contrary was improperly admitted. 2. The questions recur whether the Hanleys were such purchasers, and whether Mrs. Meisch and the plaintiff were such mortgagees in good faith. The Hanleys were certainly “subsequent” purchasers, within the meaning of that statute, for they did not purchase until after the expiration of the time for such renewal, to wit, May 17,1886. The questions for consideration, therefore, are whether they were purchasers “ in good faith,” within the meaning of that statute, and whether Mrs. Meisch and the plaintiff, claiming under them, were such mortgagees in good faith. Upon the strength of the parol testimony admitted against objection, the jury found that they purchased from Charles H. Nix “ for value and without notice of the existence of the NhiZ-McConnell chattel mortgage.” They and Charles H. Nix all testify to the effect that the amount of the purchase price of the real and personal property together was $35,000. They all agree, in effect, that the Hanleys paid nothing down on the purchase, except to transfer to Charles H. Nix the Afton House lease in Chicago, and'the furniture therein, some land in Marquette, Mich., and certain personal property, all of the aggregate value of about $12,000; but that the balance of the purchase price, amounting to $23,000, was to be paid by them in the manner following, to wit, that, in and by the deed from Charles H. Nix to them, they thereby assumed and agreed to pay the Hall-McConnell notes and mortgage, amounting to $16,000, and also executed and delivered to Charles H. Nix a prom — 342 — issory note for $7,000, payable two years after its date, to tlie order of themselves, and by them duly indorsed, and secured by a real-estate mortgage executed by them on said Pishcotaqua Hotel, and also by the chattel mortgage executed by them to Prescott, as mentioned in the foregoing statement. It appears that Charles H. Nix continued in the actual possession of said $7,000 note and mortgage; and the jury found, in effect, that from the time said personal property was surrendered to him by the Hanleys in the fall of 1887, down to the time the same was taken by the defendant Wiswell, October 10,1888, his acts, transactions, and-declarations were made and done in behalf of his sister, Mrs. Meisch. Since Charles H. Nix’s relation to the Hhii-McConnell chattel mortgage was such that he could not become a purchaser in good faith of the personal property covered by that mortgage, it is very obvious that his sister, whom he so represented, could not be a mortgagee thereof in good faith, within the meaning of the statute quoted, especially as there is no evidence that she paid anything therefor. - The defendants claim under and by virtue of the HaZi-McConnell chattel mortgage, and the plaintiff under and by virtue of the Hanley-Prescott chattel mortgage. The jury found, in effect, that the plaintiff, who is a sister-in-law of Charles H. Nix, at and before the time she bid in the personal property in question on the sale thereof under and by virtue of the Hanley-Prescott chattel mortgage mentioned in the foregoing statement, October 13, 1888, had notice that Wiswell claimed to hold the property in controversy by virtue of the Hhii-McConnell chattel mortgage. Such being the facts as found by the jury or undisputed, it is manifest that neither Mrs. Meisch nor the plaintiff can claim any protection as against the HaZZ-McConnell chattel mortgage, unless the Hanleys were purchasers of the property in good faith, within the meaning of the section of the — 343 — statute quoted; and hence the controversy turns upon the question whether the Hanleys were such purchasers in good faith under that section. That section was enacted for the purpose of protecting such purchaser against loss by reason of such prior unrenewed chattel mortgage. The purpose is substantially the same as in the enactment of sec. 2241, E. S., in respect to the avoiding of unrecorded conveyances and mortgages of real estate. Under that section it was early ■held by this court that “ it is not sufficient that a subsequent purchaser has purchased for a valuable consideration without notice, but the consideration must actually ham been paid before notice; and, if a part of the consideration only has been paid before notice, the purchaser will be protected only pro tanto.” Everts v. Agnes, 4 Wis. 343. To the same effect, Wynn v. Carter, 20 Wis. 107; Prickett v. Muck, 74 Wis. 206, and cases there cited; Shotwell v. Harrison, 22 Mich. 410; Smith v. Williams, 44 Mich. 240. To constitute a bona fide purchaser or mortgagee in a case like this, there must not only be an absence of notice, but also a payment of the consideration, or a fixed liability therefor. Funk v. Paul, 64 Wis. 42, and cases there cited. See cases cited in the brief of oounsel for the defendants. As indicated, the Hanleys assumed and agreed, as a part of the purchase price, to pay the whole amount of the $16,000 indebtedness to McConnell, and thereby made themselves personally liable for the payment of that debt. Kimball v. Noyes, 17 Wis. 695; Gray v. McDonald, 19 Wis. 217; Johannes v. Phœnix Ins. Co. 66 Wis. 57; Ingram v. Osborn, 70 Wis. 184. Thus it appears that the legal effect of the transaction between the Hanleys and Charles H. Nix was to give to McConnell additional security for the full amount of the Hall-McConnell indebtedness byway of their personal obligations. It logically follows that the Hanleys cannot be regarded as purchasers of the personal property in good faith, as against the prior iZcwYMcConnell chattel mortgage. To hold other — 344 — wise would make the statute quoted an instrument, not for tbe protection of the purchaser against loss of the property purchased, nor against the payment of more than he had contracted to pay, but as a means of relieving him from paying a portion of the purchase price, and destroying securities previously given therefor. In view of the fact that the special verdict does not authorize a judgment in favor of the defendants, the judgment of the circuit court is reversed, and the cause is. remanded for a new trial. By the Court.— Ordered accordingly. Winslow, J., took no part.