First National Bank v. Veglahn

CAMPBELL, J.

(concurring specially). Generally speaking, an attaching creditor, unless by virtue of some statutory provision, acquires no better right to the attached property than his debtor *132had, and the attachment is subject to any claims and equities which could be maintained against the debtor. Giving full credence to all statements of the witness Given, cashier of respondent bank, as the jury apparently did, and construing the course of dealings between the respondent bank and Johnston most favorably to respondent bank, as the jury apparently did, the situation after January, 1927, seems to me substantially this: Johnston was indebted to' respondent bank upon a note. He desired respondent bank to finance him in the purchase of live stock for resale, out of the proceeds of which resale he was to repay the purchase money advanced by the bank, and, if a profit was made, receive one-half thereof and apply the other half upon his existing indebtedness to the bank. In January, 1927, it was agreed between Johnston and respondent bank that, if live stock was thus purchased for resale, the bank should “own the property,” and that the property should be “in the bank’s ownership.” So far as the public was concerned Johnston continued to operate in his own name. When he purchased cattle he paid therefor by checks on respondent bank. Respondent bank paid those checks which sometimes did and sometimes did not create an overdraft. If any check or checks created an overdraft they were carried as cash items until resale of the live stock. When the live stock was resold Johnston issued his draft against the commission company payable to respondent bank. These drafts were delivered to the bank at the time shipment was made and 'Carried in a special account. When the drafts cleared the bank took care of the overdraft, if any there was resulting from the honoring of checks given for purchase of the cattle, and, if any shipment realized a profit on the resale, the excess of the resale price over the purchase price was applied by crediting or paying one half thereof to' Johnston and using the other half to reduce Johnston’s existing indebtedness to respondent bank.

Hooking at all the facts and circumstances, the most that can be said is that there was an attempt, conceding its entire good faith, between Johnston and respondent bank, by oral agreement between themselves, to transfer title to this live stock, as the same was from time to time acquired! by Johnston, to respondent bank, without change of possession and for purposes of security.

The facts, construing them most favorably tO' respondent, show conclusively that security to respondent bank was the object, and *133the sole object, of the attempted arrangement. It was meant to furnish to the respondent bank security that it should recover back its advancements, if any, for the purpose of purchasing the live stock, and also should receive one-half the profits thereof, if any, to apply on existing indebtedness owed it by Johnston.

Section 1549, R. C. 1919-, reads as follows: “What May Be Deemed a Mortgage. Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which case it is to be deemed a pledge.”

If the attempted arrangement between Johnston and respondent bank had any validity whatever, it must necessarily, as a matter of law, be deemed a transaction in the nature of mortgage. Whatever the parties may have thought they were accomplishing, or whatever they may have chosen to call their transaction, that is the legal effect of it, if any. The transaction was at most an oral mortgage, or perhaps what might be termed an equitable mortgage, and equitable liens arising by agreement are recognized in this state. See Dorman v. Crooks State Bank, 55 S. D. 209, 225 N. W. 661, 64 A. L. R. 614, and cases cited. The bank, of course, could have no interest in the live stock until acquired from time to time by Johnston. Section 1529, R. C. 1919. But we need not consider in this case any questions regarding mortgage of after-acquired property. Neither need we consider in this case whether a valid mortgage upon personalty, whether legal or equitable, can rest in parol. It may well be contended that it cannot. See Jones on Chattel Mortgages (5th Ed.) § 2; Rev. Code 1919, §§ 855, 857, 1547, 522, 556, 1557, 1577.

Waiving that point entirely, and assuming the validity between the parties of an oral transfer of personalty for purposes of security without change of possession, certainly such mortgage of personalty resting in parol could not conceivably have any higher rank or value than an unrecorded chattel mortgage in writing between the same parties -covering the same property.

Section 1583, R. -C. 1919, provides as follows: “Mortgage of Personal Property Void Unless Filed. A mortgage of personal property is void as against creditors of the mortgagor, and subsequent purchasers and incumbrancers of the property in goo-d faith *134for value, unless the original, or an authenticated copy thereof, be filed by depositing the same in the office of the register of deed's of the county where the property mortgaged, or any part thereof, is at such time situated.”

Under this section any mortgage of personal property (that is, as provided by section 1549, R. 'C. 1919, any transfer of an interest in personalty, other than in trust, made only as security not accompanied by actual change of possession) is absolutely void as to all creditors of the mortgagor who become such after the giving and before the filing of the mortgage and is conditionally void in its inception as to all prior creditors becoming absolutely void as to any such prior creditor who before the filing of the mortgage, in the words of the Supreme Court of North Dakota (Union National Bank v. Oium, 3 N. D. 193, 54 N. W. 1034, 1036, 44 Am. St. Rep. 533) “has armed himself with attachment or execution and levied on the property, or has in some other way secured a lien thereon.” See Hollenbeck v. Louden, 35 S. D. 320, 152 N. W. 116; Brown Grain Co. v. Coughlin, 53 S. D. 66, 220 N. W. 151.

Upon the foregoing considerations I concur in the view that the judgment and order appealed from should be reversed, and the cause remanded, with directions for judgment on the merits in favor of appellant.