Globe Grain & Milling Co. v. De Tweede Northwestern & Pacific Hypotheekbank

69 F.2d 418, 1934 U.S. App. LEXIS 3565

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 23, 1934
• Docket: No. 7248
• Status: Published

Opinions

WILBUR, Circuit Judge.

This is an appeal from a judgment for the sum of $8,663.88 for the conversion of 563,833 pounds of wheat. The plaintiffs and appellees are the mortgagees in the chattel mortgage given by A. E. Bott and his wife on a growing crop of wheat on certain lands in Teton county, Idaho, described in the chattel mortgage which was duly recorded in the office of the county recorder of that county. The wheat was harvested and put into hags by the mortgagor and delivered by him to the appellant for storage. Subsequently the appellant shipped the wheat to its ware* houses in Utah for storage. The appellees claim that the appellant’s act of shipping the wheat from its warehouse in Tetonia in Teton, county, Idaho, tolhe warehouse of the Globe Warehouse Company in Ogden, was a conversion of the wheat. There is evidence to the effect that A. E. Bott, the mortgagor, was acting not only for himself but also for the mortgagees in delivering the wheat to the appellant. At the time of delivery of the wheat a receipt was issued for each truck load thereof, as follows:

“Tetonia, Idaho.

“Receiving record: The merchandise covered by this receipt is to be held at owners’ risk (except by fire) for disposition by the owner until Sept. 22, inclusive, after which time Globe Grain & Milling Company will deliver this merchandise to Globe Warehouse Company at its elevators or warehouses in the State of Utah, and a public warehouse receipt will be issued therefor, subject to storage and other charges. If this merchandise is sold while on disposition to other than Globe Grain & Milling Company it will he subject to a charge of 3e per bushel, which includes loading out. For account of owner A. E. Bott.

“Globe Grain & Milling Co.

By Rulan Hanning, Weigher.”

These receipts were subsequently delivered by the mortgagor, A. E. Bott, to Ross J. Comstock, who was the agent of the mortgagees.

Evidence as to the issuance of this receipt, and other evidence tending to show that the -wheat was received with the understanding that it was held for both the mortgagor and the mortgagee, that the stdrage in Tetonia was temporary only, and that all parties agreed that the wheat should bo shipped to Utah which was the customary method of handling wheat in that vicinity for sale on the market, was excluded by the trial court on the ground that the statutory law of Idaho required that the consent of the mortgagees to the removal of the mortgaged property from the county of Teton must be in writing, and that any evidence other than written consent to such movement was therefore immaterial. Notwithstanding these rulings there was evidence tending to show that the plaintiffs-mortgagees had consented to the removal of the wheat from the county of Teton to the state of Utah, sufficient to take the ease to the jury if such evidence were material. The trial court, however, at the eon-elusion of the trial, granted the motion of the appellees for an instructed verdict. The appellees depend upon section 6377 of the Idaho statutes, as amended in 1929 (Laws 1929, c. 250, § 5), which is as follows:

“Section 6377. When mortgaged personal property is * * * removed from any county where the mortgage is filed for record the validity and effect of the mortgage as against all persons is not affected thereby unless such property be removed by the written consent of the mortgagee into a county where the mortgage is not filed for record, in which event, the mortgage, except as provided in Section 3 hereof, is, as to the property so removed, void as against suen purchasers or in-cumbraneers thereof in ^ good faith and for value as acquire their rights and such cred- . itors of the mortgagor as acquire specific liens on sueh property after such removal and prior to the time when the mortgage, acknowledged or proven as provided in Section 1 hereof, or a true copy thereof, verified by the mortgagee’s affidavit as provided .in Section 1 hereof, or certified as a true copy by the Recorder of a county where the same has been previously filed, is filed for record either:

“(a) In the office of the Recorder of the county or counties into which the property has been removed, or

“(b) In the office of a county recorder and the Secretary of State as provided in, Section 2 hereof.”

r-, 1 . ,. ... The purpose of this section is readily understood. It is to protect a mortgagee in case the mortgaged property is removed without his knowledge or consent from the county m which the chatte mortgage is recorded and to protect innocent purchasers or encumbrancers or attachment or judgment creditors from the lien of the mortgage where there it no evidence in the recorder’s office or the office of the Secretary of State of the existenee of the mortgage. The Supreme Court of Idaho said in Young v. Boise Payette Lumber Co., 45 Idaho, 671, 264 P. 873, 874, in considering the purpose and effect of this statute: “It may well be that the Legislature, considering, as is suggested in Hoit v. Remiek, supra [11 N. H. 285], that it was . not among the purposes of the recording act to subject a bona fide mortgagee to the inconvenience, if not impracticability, of the constant vigilance and ceaseless watehing which would be requisite to guard his interests if he is obliged to record his mortgage in every place to which the mortgagor might see fit to remove the property, and further considering that the mortgagee should not be subjected to the peril of being divested of his lien by oral testimony, deemed it a wise policy to require written evidence of his consent to a removal before he should be deemed to have waived his lien. In any event we could not, without extending the meaning of C. S. § 6377, beyofid its plain terms and doing violence to its express language, hold that anything less than a written consent to a removal of the property would require the mortgagee to record the mortgage elsewhere than in the original county or to lose his lien in default thereof.”

¿^ould be noted, however, that the removaj 0£ the mortgaged property without the -w^tten consent of the mortgagee does not destroy the lien of the mortgage. Young v. Boise Payette Lbr. Co., 45 Idaho, 671, 264 p 873, 874, supra As the Supreme Court • 0£ further said in that case: “It has become settled law that in the absence of a specific statutory provision, requiring further recordation of a chattel mortgage -upon the removal of mortgaged property, the record 0f a chattel mortgage in the county where it js reqúired to be originally filed for record is constructive notice to all the world, and the mortgage is valid even though the mortgaged property may be removed to another eounty. Hammels v. Sentous, 151 Cal. 520, 91 P. 327, 12 Ann. Cas. 945, and note; Pease v. Odenkirchen, 42 Conn. 415; Smith & Co. v. McLean, 24 Iowa, 322; Elson v. Barrier, 56 Miss. 394; Barrows v. Turner, 50 Me. Feurt v. Rowell 62 Mo. 524; Grand Island Banking Co. v. Frey 25 Neb 66, 40 N. W. 599, Am. St. Rep. 478; Hoit v. Remick, 11 N. H. 285 Kanaga v. Taylor, 7 Ohio St. 134, 70 Am. Dec. 62; Jones, Chatel Mortgages (5th Ed) § 260 11 C. J. 529. Bailey v. Costello, 94 Wis. 87, 68 N. W. 663."

Section 6377, supra, .expressly provides that the removal of mortgaged property shall not affect the validity and effect of the mortgage as against all persons “unless such property be removed by the written consent of the mortgagee.” Wo call particular attention to the rule as stated in section 260 of Jones on Chattel Mortgages (5th Ed.) above cited by the Supremo Court of Idaho in Young v. Boise Payette Lbr. Co., supra, as follows:

Ҥ 260. The removal of a mortgagor from the town or county in which he resided when the mortgage was executed, and where it was duly recorded, and the taking of the mortgaged property with him, does not invalidate the record of the mortgage, or necessitate the recording of it again in the town or county to which he has removed. The object in requiring a record of the mortgage is to give publicity to it, and to provide a source of information eommon to all persons, so that they may determine, with some degree of facility, convenience, and certainty, the question of title to the property, whenever they may be interested to know it; while at the same time it is not among the purposes of the recording acts to subject a bona Me mortgagee to the inconvenience of the constant vigilance and ceaseless watehing which would be requisite to guard and secure his interests, if he were obliged to record his mortgage in every town into which the mortgagor might see fit to remove with the property. If he were required to do this, his security would be well-nigh worthless; for before he could do this, a creditor of the mortgagor might seize the property by process of law, or the mortgagor himself might pass the title to it by way of sale to an innocent purchaser.

“In like manner, if the mortgage be required to be recorded in tbe county of the mortgagor’s residence, his removal with the property to another county does not necessitate the recording of tile mortgage again in the county to whieh he removes. * * ”

The general rule with reference to harvested crops is stated as follows in Jones on Chattel Mortgages, § 69: “Gathered crops may he identified as the same property described in a mortgage as-growing crops.”

The Supreme Court of Idaho has applied this rule in Forbush v. San Diego Fruit & Produce Co., 46 Idaho, 231, 266 P. 659, 665, where the court stated: “The lien would also continue though the mortgaged crops had been tortiously removed and disposed of without the consent of either the mortgagor or the mortgagee,” citing section 69, supra, of Jones on Chattel Mortgages (5th Ed.). Thus, wheat harvested, threshed, removed, and sold in the market may be identified as the same covered by a mortgage of ten acres of growing wheat. The mortgage vested the title of the growing wheat in the mortgagee, and the recording of it created a constructive notice as against a subsequent purchaser or attaching- creditor. The lien follows the grain after severance and removal and the money after sale whether such removal ho by the mortgagor or by the third person or whether the removal bo legal or tortious. The change which it underwent did not change the property so as to divest the title of the mortgagee or to prevent its identification.

The appellees state their position thus:

“Our pleading is based on our rights under our statute against removal of mortgaged property by third persons without our written consent. * * s It was plaintiff’s theory upon the trial, and the court adopted this theory, that the appellant could not excuse removal of the mortgaged property without written consent from their mortga-

“The fundamental thing overlooked by counsel in this matter, is that the mortgage lien and this statutory right are not identical; there is more than a mere ‘lion’ involved.

“If there is no removal of the mortgaged property from the county where mortgaged, this statute never springs into action, but the Tien’ still exists. The ‘lion’ would continue in the foreign jurisdiction, even if the statute did not exist. This discloses that the statute confers a right additional to the ‘lien’ of the mortgage; therefore, when they admit the continuance of the ‘lien’, they have not met the whole issue — the statutory right against removal still stands. Wo are here standing upon that right, andj>y the above admission appellant confesses our case.”

As we understand the position of the appellees, they concede that the mortgage lien followed the mortgaged property into the state of Utah. The general rule is that where mortgaged property is moved from one state to another the mortgagee does not lose his lien unless the rights of third parties have intervened. The Supreme Court of Idaho has followed this general rule in Smith v. Consolidated, etc:., Co., 30 Idaho, 148, 163 P. 609, 610; the rule was thus stated: “The question presented by this appeal is: Does this mortgage constitute a lien upon the property which is enforceable against respondent? The great weight of judicial opinion is that, by reason of comity between states, if personal property, situated in a given state, is there mortgaged by the owner and the mortgage is duly executed and recorded as by the local law required so as to create a valid lien, and if the property is thereafter removed into another state and is there sold to a purchaser without knowledge of the ineumbrance, such purchaser takes title subject to the lien of the mortgage, although it has not been recorded in the latter state, and this is particularly true when the removal is accomplished without the knowledge or consent of the mortgagee. 6 Cyc. 1089, Jones on Chattel Mortgages (5th Ed.) § 260a; 5 R. C. L. 399, § 21; Shapard v. Hynes, 104 F. 449, 45 C. C. A. 271, 52 L. R. A. 675; Kanaga v. Taylor, 7 Ohio St. 134, 70 Am. Dec. 62; Ord Nat. Bk. v. Massey, 48 Kan. 762, 30 P. 124, 17 L. R. A. 127; Handley v. Harris, 48 Kan. 606, 29 P. 1145, 17 L. R. A. 703, 30 Am. St. Rep. 322; Hornthal v. Burwell, 109 N. C. 10, 13 S. E. 721, 13 L. R. A. 740, 26 Am. St. Rep. 556; Smith v. McLean, 24 Iowa, 322; Keenan v. Stimson, 32 Minn. 377, 20 N. W. 364.”

It is clear that appellees do not claim that they lost their mortgage lien by reason of the removal of the wheat to Ogden, Utah, but that they claim that such removal without their written consent was such an'invasion of their rights as constituted a conversion of the property although such removal was consented to by them, and this, in part, because it is claimed that the statute requiring consent for such removal becomes a part of the mortgage. In this regard appellees state:

“Appellant overlooks the fundamental principle that the statute which they seek to avoid, became instantly, upon their execution, a part of the mortgages of these ap-pellees, and was a constant admonition to the defendant and a warning against removal. It was in our mortgages by operation of law. Certainly the defendant had no way to deprive us of its effect. * * *

“What right of the mortgagee is it that gives rise to his cause to charge another with conversion? It is the right of security — a property right — and the statute, for his better security, forbids the removal of the property, from the county without his written consent.”

It would be a strange thing indeed if the mortgagees could authorize or direct or consent to the removal of the wheat for proper storage or protection' or sale and then claim a conversion by the third party because that authority or direction or consent was not in writing. Before discussing this claim it should be observed that the statute in question does not purport to prohibit a removal without the mortgagee’s written consent. It merely purports to protect him in his lien where he has not consented.

The claim presented is not new and has been frequently ruled upon adversely to the appellees’ contention. It is a fundamental rule that a party may waive a benefit of a provision of a statute or of a contract enacted or provided for his protection. This principle is most frequently applied as to policies of insurance companies in determining the effect of their insurance policies. It is applicable as well to statutory provisions similar to those here involved. Hardwick Bank & Trust Co. v. McFarland, Trustee (C. C. A.) 43 F.(2d) 807; First Nat’1 Bk. & Trust Co. v. Stock Yards Loan Co. (C. C. A.) 65 F.(2d) 226.

It is difficult to distinguish this case in principle from those cases dealing with the effect of statutes prohibiting the sale of mortgaged personal property without the written consent of the mortgagee. In such case it has been held that where the mortgagee has verbally consented to the sale the title passes. In Jones on Chattel Mortgages (5th Ed.) § 456, it is said: “Although a sale of the mortgaged property by the mortgagor without the consent in writing of the mortgagee, be prohibited by statute, if the mortgagee consent verbally to a sale, such sale is sufficient to pass the title to the purchaser in possession and the mortgagee cannot maintain trover for the property,” citing Gage v. Whittier, 17 N. H. 312.

The same rule is stated in 11 Corpus Juris 626, § 340. The reason for the rule is stated by the St. Louis Court of Appeals in Randol v. Buchanan, 61 Mo. App. 445. That case is one where the mortgagee brought a replevin suit against the vendee of the mortgaged property. There was evidence that the mortgagor had sold the property with his oral, but not with his written, consent. The trial court instructed the jury that the title of the cattle did not pass by the attempted sale by the mortgagor “unless the sale was made with the written consent of the” mortgagee. The appellate court said: “This is a misconception of the purpose and scope of the statute. It does not declare such a sale void or prohibit it, but it merely provides that in such a case the mortgagor may be punished. The intention of the legislature was to protect the mortgagee against the fraudulent acts of the mortgagor in removing and selling the property at distant points, and also to protect innocent third parties who might, under such circumstances, be inclined to purchase it.”

The Supreme Court of Kansas, in Reese v. Kapp, 82 Kan. 304, 108 P. 96, held that a sale of mortgaged property by the mortgagor with the oral consent of the mortgagee conveyed the title notwithstanding a sale without the written consent of the mortgagee was penalized by statute. See, also, Chase v. Willard, 67 N. H. 369, 39 A. 901; Colston v. Bean, 77 Vt. 40, 58 A. 795.

The appellees rely upon a decision by the Supreme Court of Maine (Rowe v. Green, 116 Me. 94, 100 A. 145), hut the statute there involved expressly established a rule of evidence, namely, that no oral evidence should be received to establish the consent of the mortgagee to a sale of the mortgaged property. This decision has no application here as the statute here involved (Idaho C. S. § 6377) does not purport to establish a rule of evidence. Evidence of oral consent was admissible in the ease at bar; the only legal question involved in the matter is as to the effect of an oral consent as contradistinguished from a written consent. Also it should he observed that section 6377 of the Code of Idaho deals with the removal of mortgaged personal property from the county in which it was situated to another county of Idaho. While it is not expressly stated that its operation is confined to removal from county to county in Idaho, the provision in reference to the recording of the mortgage in the county to which the property has been removed and the taking possession of the property clearly indicate that the purpose of the Legislature was to deal with the removal from county to county it does not purport to regulate the rights of parties where there has been a removal from the state. In such a case the rights of the mortgagee are established in the state to which the property is removed by the principle "of comity. Smith v. Consolidated, etc., Co., 30 Idaho, 148, 163 P. 609, supra; Moore v. Keystone Driller Co., 30 Idaho, 220, 163 P. 1114, L. R. A. 1917D, 940. In the latter case, Moore v. Keystone Driller Co., the Supreme Court of Idaho limited the rule that the mortgagee retained his lien after removal to another state, to removals without the consent of the mortgagee, where the right of the mortgagee to his lien was in conflict with the right of an innocent purchaser who had purchased the property in the state of Idaho without knowledge of the existence of the mortgage lien. In dealing with the consent of the mortgagee to the removal from the state of Missouri to the state of Idaho, the Supreme Court of Idaho said:

“He should be and is deemed to have waived his lien against such innocent parties upon the principle that where one of two persons must suffer by reason of the wrongful act of a third, the -injury must he borne by him by whose conduct the wrongful act has been made possible.

“The following are authorities holding that the rule of comity does not apply where the removal was with the consent of the mortgagee: Jones v. North Pacific Pish & Oil Co., 42 Wash. 332, 84 P. 1122, 6 L. R. A. (N. S.) 940, 114 Am. St. Rep. 131; Blythe v. Crump, 28 Tex. Civ. App. 327, 66 S. W. 885; Greene v. Bentley, 114 P. 11.2, 52 C. C. A. 60; Pennington County Bk. v. Bauman, 87 Neb. 25,126 N. W. 654; Newsum v. Hoffman, 124 Tenn. 369, 137 S. W. 490.”

In the ease at bar the possession of the warehouse company was in recognition of and in subordination to the rights of the mortgagor and mortgagee and was in legal effect the possession of the mortgagor and mortgagee. Hence, no rights of innocent purchasers or incumbrancers could be involved because the possession of the warehouseman was notice of the rights of the mortgagor and mortgagee. See, also, discussion in L. R. A. 1917D, page 942 note.

The question involved in the case at bar is to be determined according to the statutory law of Idaho as construed by the Supreme Court of Idaho. The legislation of Idaho with relation to chattel mortgages is not novel or unique, and the decisions of the Supreme Court of Idaho accord with and are in part based upon decisions from other states upon the same matter. Por that reason our citation of decisions from other jurisdictions is deemed appropriate.

Appellant relies strongly upon the claim that its position in the matter is that of a bailee for the mortgagor and mortgagee and that its rights and obligations are to be measured by its contract of bailment. We do not deal with that contention because the trial court excluded some of the evidence bearing upon that contention and predicated its instruction to the jury to return a verdict in favor of the appellee solely on the theory that the removal of the wheat to Utah without the written consent of the mortgagees was ipso facto a conversion of the property.

Judgment reversed, and the cause remanded for a new trial.