Eade v. First Nat. Bank of Condon

242 P. 833, 117 Or. 47, 43 A.L.R. 374, 1926 Ore. LEXIS 128

• Court: Oregon Supreme Court
• Decided: October 27, 1925
• Status: Published

Opinions

BELT, J.

At the beginning of the trial defendant objected to the introduction of any testimony for the reason that the amended complaint failed to allege facts sufficient to constitute a cause of action in conversion. It is contended that such pleading does not aver ownership and right of possession in plaintiffs to the property in controversy at the time of the alleged conversion. There is no merit in this contention. Relative to the matter of ownership and right of possession, the complaint alleges the execution of the notes and mortgages on December 1, 1920; that plaintiffs are the owners thereof; that there has been a default in payment of the amount due thereon; and that the mortgages are a first lien on the property under consideration. It is also alleged that the bank converted to its own use all of the property included in said mortgages and “sold and disposed of the same to divers persons, who have carried it away to places to plaintiffs unknown.” Section 10183, Or. L., provides:

“Whenever the condition of any mortgage of goods and chattels shall be broken, the mortgagee shall be entitled to the immediate possession of the mortgaged property, and when after breach of the condition of any such mortgage the possession of the mortgaged property shall not be delivered up to the mortgagee upon demand by him or by any person duly authorized by him, to make such demand of the person or persons having such mortgaged property in possession, the mortgagee may recover the possession of such mortgaged property in the manner provided by chapter II of Title IY of the Code of Civil Procedure.”

Plaintiffs, by virtue of their chattel mortgages and breach of conditions thereof, had sufficient special ownership in the property to maintain this action. In Bower’s Law of Conversion, Section 490, it is said:

. “An allegation that a person executed and delivered to plaintiff a chattel mortgage on the chattels involved was held sufficient without also averring generally that plaintiff owned the property or that the mortgagor owned it or had an interest in it.”-—citing Brunswick Balke-Collender Co. v. Brackett, 37 Minn. 58 (33 N. W. 214), which supports the text.

Plaintiffs’ right to the immediate possession of the chattels follows by reason of their special ownership therein and by force of the above statutory provision. An allegation of right to immediate possession would seem superfluous since the statute gives such right whenever the conditions of the mortgages shall have been broken. It should be borne in mind that the primary object of this action is to recover damages and not possession of the property.

It is contended that the complaint is defective in that the terms and conditions of the mortgages are not disclosed. After verdict the complaint is entitled to every reasonable intendment, and we think it would be sacrificing substance for form to hold in keeping with such contention. It is alleged in the complaint, and the proof establishes, that the chattel mortgages are first liens upon the personal nropertv therein described.

It is also argued that plaintiffs should have alleged and proved a demand upon the bank and its refusal to deliver the chattels to them. This contention is answered adversely to appellant in Daniels v. Foster & Kleiser, 95 Or. 502 (187 Pac. 627), wherein Mr. Justice Harris, speaking for the court, said: “Where a conversion has actually occurred, there is no necessity of alleging and proving a demand and refusal”—citing Cobbey on Replevin, § 449; Rosenau v. Syring, 25 Or. 386 (35 Pac. 845); Capies v. Ditchburn, 87 Or. 264 (169 Pac. 510). In the light of the facts in this case it would, indeed, have been an idle and vain thins: to have demanded a return of the property.

The act of the bank in selling the mortgaged property in disregard of plaintiffs’ superior liens constituted conversion, and it is immaterial whether in doing so it acted in good faith. Its alleged wrong did not consist in undertaking to foreclose its mortgage, but in failing to apply the proceeds of the sale to plaintiffs’ superior liens. Bower’s Law of Conversion, Section 128, tersely states the rule thus:

“A junior mortgagee is liable in trover to the senior mortgagee if he take the property from the latter and sell it without regard to his rights.”

The interesting question involved in this appeal is whether plaintiffs are entitled to recover attorney’s fees herein. Under the general rule such would' not be an element of damages in an action for conversion. Ordinarily, the measure of damages is the value of the property taken at the time and place of conversion: Garber v. Bradbury, 106 Or. 490 (209 Pac. 477); Backus v. West et al., 104 Or. 129 (205 Pac. 533); Montesano Lum. & Mfg. Co. v. Portland Iron Works, 94 Or. 677 (186 Pac. 428); Swank v. Elwert, 55 Or. 487 (105 Pac. 901). However, in a contest between two mortgagees the junior mortgagee is liable only for the value of the property converted, not in excess of the amount of the prior lien: Harris v. Grant, 96 Ga. 211 (23 S. E. 390); Stanley v. Citizens’ Coal & Coke Co., 24 Colo. 103 (49 Pac. 35); Barron v. San Angelo Nat. Bank (Tex. Civ. App.), 138 S. W. 142; Jones on Chattel Mortgages (5 ed.), § 448; Bower’s Law of Conversion, § 681. The stipulation in this case relative to the measure of damages is in keeping with such rule.

We should not be unmindful that the mortgages executed were given as security to plaintiffs not only for the amount due on the notes, but for at torney’s fees therein provided: First Nat. Bank of Stigler v. Howard, 59 Okl. 237 (158 Pac. 927). The bank’s alleged tortions act in selling the property and causing the same to be scattered to the four winds, resulted in destroying plaintiffs’ security. It would have been futile for plaintiffs to have instituted foreclosure proceedings, as execution upon the property was impossible. It became necessary to seek other relief. They were compelled to sue defendant to satisfy their liens. "While the proceeding is in the form of conversion, it is equivalent to an action to collect the amount due on the notes, and the stipulation therein contained concerning attorney’s fees must be given force and effect. Otherwise stated, plaintiffs are entitled to as much relief in this action as they would have been in foreclosure proceedings, had it not been for the alleged wrongful act of the bank. It is true that the bank after the sale could have satisfied plaintiffs’ liens by paying the amount due on the notes, and, under such circumstances, would not have been liable for attorney’s fees. However, we are not concerned with what defendant might have done. This action arises out of what it did. It deprived plaintiffs of their security covering attorney’s fees as well as principal and interest. Why should it not respond for such damages as are the direct and proximate result of its alleged wrongful act! The question is of first impression in this state, and we are not aided by the decisions of many courts—in fact, there is a surprising dearth of authority on the precise point under consideration; but the rule announced in De Costa v. Comfort, 80 Cal. 507 (22 Pac. 218), impresses us as sound. In that case the mortgagee commenced an action in conversion and the question of allowing attorney’s fees was squarely at issue. It was held that such was an element of damages, the court saying:

“The appellant contends that, the action being for a tort, the plaintiff could not recover the attorney’s fee, nor the interest from the time of the alleged conversion. We think otherwise. The property taken by the appellant was subject to the payment of the full amount due on the mortgage, and he having converted the same to his own use must be held personally liable for the same amount. It would be a strange doctrine that would allow the mortgagor to relieve his property of a part of the debt for which he has pledged it by smuggling it into the hands of a third party, and that such third party could escape liability for the full amount by saying that his taking of the property was in the nature of a tort. ’ ’

In support hereof, see, also, R. & J. McLester v. Somerville & McEachin, 54 Ala. 670; Maddox et al. v. Dunklin, 163 Ala. 278 (50 South. 277).

38 Cyc. 2101, and cases cited under note 99, are relied upon by appellant; but an examination of such cases discloses that none of them concern the right of a mortgagee to recover damages for impairment or destruction of his security. All cases cited under the above note, with the exception of Berry v. Ingalls, 199 Mass. 77 (85 N. E. 191), support the text in its statement of the general rule, but the case at bar must be considered in the light of its particular state of facts. It comes within the exception to the general rule.

Other assignments of error are not deemed of importance.

The cause was submitted to the jury under appropriate instructions covering the respective theories of the parties, and its findings in reference thereto should not be disturbed. It follows that the judgment of the lower court is affirmed. Affirmed.