Byrd v. Forbes

Mr. Chief Justice Greene

delivered the opinion of the court.

It is not disputed but that under the statutes of this territory the interest of a mortgagor in mortgaged personal property is subject to attachment. Liability of his interest to be attached exists even in states where the mortgage operates to pass to the mortgagee the title to the goods. (Hull v. Carnley, 11 N. Y. 501.) A fortiori, such liability obtains under our statutes, which clearly will not consist with any other doctrine than that a chattel mortgage is a mere security under which no title can possibly pass except by foreclosure and sale. Such a mortgage is defined as to its nature and effect by the provisions of chapter 141, sections 1986-1999, of the Code, being therein spoken of and treated as giving a lien only and serving for a security, and as needing foreclosure to divest the title of the mortgagor. Sections 618 and 619 of the Code speak of such mortgages as instruments “creating liens,” provide for their foreclosure, class them with mortgages of real property, and assimilate the foreclosure of them to that of mortgáges on real property, which have been determined by this court to be under our statutes mere securities. (Parker v. D’Acres, 2 Wash. 439.)

As a general rule, any interest that may be sold on execution is subject also to process of attachment, and it is expressly provided in section 1990 that a mortgagor’s interest in goods may be taken in execution. Under our law of attachment, there exists no other way of making the attachment levy upon chattels capable of manual delivery than to take them into custody. (Code, sec. 179.) . Section 1990 contemplates such a taking, when it provides that the officer who executes the process shall mail to the mortgagee, “or to his agent, if their post-office is known, a notification of the intended sale at the time such mortgaged property is seized under said process, or within five days thereafter,” and that “said property *325shall not be sold within thirty days after its seizure,” and that he shall post notices at the time of “ the seizure under said process.”

The provisions of section 1990 are inconsistent with the idea that after levy by the sheriff the mortgagee can demand and take possession. So, too, are all those provisions of statute which compel us to regard a chattel mortgage as a mere security. The theory upon which at common law, and in some states of this Union, the mortgagee can take possession, and even dispossess the sheriff, is, that the mortgagee is owner, and the sheriff a trespasser. (Hall v. Sampson, 35 N. Y. 274.) An express stipulation in a chattel mortgage, that the mortgagee may take possession upon a certain contingency, may be good as between the parties to the instrument, so as to allow the mortgagee to take possession from the mortgagor; but it cannot, in face of our statutes, be held to authorize a taking or retaining the possession as against creditors of the mortgagor seeki'Dg to attach his interest, or subject it to execution. Under our statutes, an unforeclosed mortgage is a mortgage still, regardless where the possession lies. We are clear that the provisions of section 1990 regarding notification of the mortgagee are mandatory, but do not affect the validity of the sale. This is evident from the consideration that the service of notice is contingent upon the knowledge of the officer as to the residence and post-office of the mortgagee or his agent. A sheriff, like any other man, is liable to be misinformed or mistaken, and if the validity of his doings were to depend upon his knowledge of such facts, the title of the purchaser of the mortgagor’s interest would often be illusory. But as these provisions are plainly intended for the benefit of the mortgagee, he has his action against an officer possessed of the requisite information, who fails to comply with the law, and whose failure proximately results in damage to the mortgagee. In the case before us, the complaint *326does not state facts sufficient to show that the sheriff is liable for non-compliance with section 1990, for it does not show that the sheriff, being well informed, failed to notify, nor that plaintiff lost his security or suffered any damage from the sheriff’s acts. The instrument upon which plaintiff based his right to recover purports to mortgage a certain “ stock of goods ” marked throughout with “the private tag and cost-mark” of the plaintiff. Following the description of property, it contains the following clauses: “It is expressly understood and agreed by and between the mortgagor and mortgagee that until default be made in the payment of any of the said promissory notes, and so long as mortgagor shall keep up his stock of goods so as to be good and ample security for the payment of the said principal and interest of the said promissory notes, that the said mortgagor may and shall have the right to retain possession of said mortgaged property, and sell and dispose of the same in the usual course of his retail business in trade, or in job lots, for the sole use and benefit of mortgagee, until said promissory notes are fully paid, and said mortgage debt is fully satisfied.”

“ It is expressly agreed between the mortgagor and mortgagee that the said mortgagor shall not sell or dispose of his merchandising business and stock in trade, and discontinue the business of merchandising, but shall keep a good and sufficient stock of merchandise, such as above enumerated, and continue in the merchandising business in the city of Tacoma, in said county of Pierce, until said notes and the debt secured by this mortgage is fully paid and satisfied; and in case default shall be made in the payment of the principal or any part thereof, or any interest as provided in said promissory notes, or this mortgage stipulated, or in case of attempt to sell said stock of goods otherwise than as above provided, or in case of any attempt by mortgagor to remove said stock of goods, or any part thereof, from said Tacoma *327until said promissory notes and this mortgage debt are fully satisfied, or in case,” etc. Also a covenant that the mortgagor will keep the “ said stock of goods ” insured at his own expense.

It would appear from the entire instrument, and especially from the stipulations above quoted, that the original stock, definitely marked as it would appear to have been, was not to be and continue the only security to which the mortgagee was to look, but that his security was to be this stock and additions. In short, the instrument was to be a floating mortgage, under the cover of which, from time to time, new stock to an uncertain limit must be and beyond that limit might be introduced. It is to cover all of the mortgagor’s stock, however large it may become. This feature of itself is enough to avoid the instrument, for it would serve to shield any amount of property from creditors other than the mortgagee, without any corresponding lawful advantage to him. But this instrument has another fatal infirmity. If any of the hypothecated goods are to be sold in course of trade or job lots, the proceeds ought to be applied so as to relieve the rest of the property pro tanto from the mortgage. In the case of Langert v. Brown, decided at ■this term, we have upheld a chattel mortgage, by the terms of which a stock of goods was to be sold in the usual course of trade, and the proceeds applied to payment of the mortgage debt until it should be satisfied. But by the terms of the instrument before us now, there is no restriction put upon the disposition of proceeds save what is implied in the agreement that the goods shall be sold and disposed of “ for the sole use and benefit of the mortgagee.” It seems to us that this restriction would be as fully met if the proceeds of sales were applied on a new indebtedness as upon the original mortgage debt, or even if they were applied in other ways as the mortgagee might appoint. This peculiar restriction, taken in connection with the other provisions surround*328ing it, is consistent with and rather suggests the idea that the parties intended the mortgagor to have his option either to apply the proceeds to the satisfaction of the mortgage debt, or to use them in paying for new bills of goods from the mortgagee, so long as the latter did not insist on canceling the older debt. An arrangement like that might be prolonged indefinitely, and would be from the first and all the time palpably unjust to the other creditors, for it would enable the mortgagor, so long as the mortgagee should not press payment of the mortgage debt, to sell the goods as his own, and within a certain range, to appropriate the proceeds to-his own purposes for an indefinite length of time. Thus we 'think the mortgage falls fairly within the principle underlying the case of Robinson v. Elliott, 22 Wall. 523, followed by us in Wineberg v. Schaer, 2 Wash. 328.

The judgment of the District Court must be reversed.

Turner, J., and Langford, J., concurred.