finding "[t]he character of an action is determined by the complaint in its main purpose and broad outlines and not merely by allegations that are merely incidental"Summary of this case from Gordon v. Drews
April 8, 1935.
Before ANSEL, J., County Court, Greenville, April, 1934. Modified and affirmed.
Action by Ella M. Alford against Phil N. Martin, trading as Banner Furniture Company, and another. From an adverse decree, the defendant, Hall Bros. Co., appeals.
The decree of Judge Ansel directed to be reported is as follows:
This case comes to me on exceptions to the Master's report of date June 6, 1933. The exceptions filed and served by the plaintiff to said report are as follows:
1. "That the Master erred in not sustaining the four separate contentions of the plaintiff as set out in Paragraph 3 on page 2 of his report.
2. "That the Master erred in holding that the defendant, Hall Bros. Company, used due diligence in connection with the purchase of said contracts, when the undisputed testimony showed that the defendant failed to make an examination of the records in the R.M.C. office for Greenville County, and testified that he would not have purchased the contracts in question if he had known of the mortgage."
3. "That the Master erred in finding that the plaintiff was estopped to deny the agency of Phil N. Martin."
4. "That the Master erred in not holding that Phil N. Martin had no authority in fact or in law to transfer the contracts in question at 35c on the dollar."
5. "That the Master erred in not holding that the plaintiff's mortgage was valid in all respects and a lien upon the property therein described as against any claim of the defendant, Hall Bros. Company."
The original action is for claim and delivery of certain furniture and certain lease contracts or chattel mortgages mentioned and described in the complaint.
The facts in brief are as follows: On the 19th day of August, 1931, the defendant P.N. Martin executed and delivered to the plaintiff his note in the sum of $1,745.07 payable $50.00 November 10, 1931, and $50.00 on the 10th day of each successive month thereafter until paid in full. That on the same date said P.N. Martin, executed and delivered to the plaintiff his mortgage to secure the payment of said note. That the sum of $320.00 was paid on said note, leaving the sum of $1,425.07 and interest still due on said note on the date this action was commenced; that said mortgage covered all the furniture then in the possession of said P.N. Martin, and all the future purchases made by him; and also the following: "All lease contracts which I now own arising out of sales heretofore made by Banner Furniture Company; also all lease contracts or chattel mortgages which I may hereafter acquire in connection with my business." Said mortgage also contains the following: "It is further agreed between the mortgagor and the mortgagee that the mortgagor shall have the right to sell any of the property covered by this mortgage in the regular course of business from time to time in the future; that said furniture when so sold shall be released and discharged from the lien of this mortgage and that said lien shall immediately be transferred to and be a lien upon the proceeds of said sale, and lease contracts received by the seller." That on the 17th day of June, 1932, the defendant P.N. Martin sold and delivered to the defendants, Hall Bros. Co., the lease contracts mentioned and described in the complaint amounting to the sum of $855.00 at the price of 35 cents on the dollar, without giving any notice to the plaintiff of the same, and soon thereafter moved to the State of Texas without saying anything to the plaintiff or to her agent, H.J. Alford, about moving or paying any part of the money received from such sale to the plaintiff. That the said mortgage, executed by the said P.N. Martin to Ella M. Alford, was duly recorded in the R.M.C. office for Greenville County on the 29th day of August, 1931, in Chattel Mortgage Book 199, at page 30.
That the defendants, Hall Bros. Co., made investigation of the lease contracts offered them by the said P.N. Martin and found them good, but made no investigation of the records of the county as to whether there was a mortgage on said lease contracts due to any one.
These lease contracts were non-negotiable, and whether assigned or not, the purchaser took them subject to the rights of the mortgagor, the plaintiff. This doctrine is fully set out in the case of Noland v. Law et al., 170 S.C. 345, 360, 170 S.E., 439, 444: "In none of the cases depended upon by the appellant do we find a holding by this Court to the effect that the signing or indorsement in blank of a non-negotiable instrument by the original holder is of itself sufficient to estop that holder from thereafter asserting his title to, or interest in, the instrument. In all the cases in which the doctrine of estoppel has been applied and sustained, the holder of the instrument did something more, either affirmatively or clearly negligently, to mislead the party in favor of whom the estoppel operated. In other words, the cases have not held that the mere signing in blank and delivery of a non-negotiable instrument by the owner is sufficient in itself to deprive the owner of the right to later assert his claim to ownership. The rule that such blank signing or indorsement of itself is not sufficient to constitute a valid unqualified assignment, but must be accompanied by other evidence showing an intention to assign, is stated by a well-recognized authority in the following language: `In the absence of statutory authorization, it has been held that the mere indorsement in blank upon a non-negotiable instrument of the name of the transferror and delivery of the instrument do not constitute a valid assignment; but such indorsement in blank and delivery may constitute a valid equitable assignment if accompanied by other evidence showing an intention to assign, and in many jurisdictions statutes have been passed making non-negotiable instruments assignable by mere endorsement and delivery so as to authorize the assignee to sue upon them in his own name.' 5 C.J., 905."
There is no statute in this State providing that the mere indorsement of a non-negotiable instrument shall on itself constitute an assignment.
The lease contracts mentioned in the complaint as purchased by the defendant, Hall Bros. Co., amounted to $855.00, and they purchased the same from P.N. Martin for 35 cents on the dollar, which amounted to $299.25. Selling them at this large discount, it seems to me, should have caused the defendant, Hall Bros. Co., to have examined the records to see if there were a mortgage on record by P.N. Martin to any one; this they did not do. Mr. Hall testifies if he had known of the plaintiff's mortgage, he would not have bought the papers.
In Brown Stribling v. Rankin, 100 S.C. 371, at page 373, 84 S.E., 1001, I find the following: "When the plaintiffs recorded this mortgage in the proper county it was constructive notice to the whole world, and they did all that the law required them to do, and whosoever took possession of the property after that time took it subject to this mortgage, as was said by Mr. Justice Gary (now Chief Justice) in Grafton v. Patrick, 77 S.C. 420-426, 58 S.E., 1, 3, 122 Am. St. Rep., 586."
There is no evidence to show that P.N. Martin had authority from the plaintiff to sell the lease mentioned in the complaint at the price of 35 cents on the dollar or to sell them at any price.
Under the law, as I understand it, I cannot see my way clear to sustain the report of the Master, and it is therefore ordered and adjudged that the plaintiff is entitled to the possession of the lease contracts mentioned in the complaint.
It is further ordered that the case be referred back to the Master to ascertain and report the amount that the defendant, Hall Bros. Co., have collected on said lease contracts since the purchase by them from the said P.N. Martin.
Messrs. Mann Plyler, for appellant, cite: Agency: 100 S.E., 418; 144 S.C. 271; 142 S.E., 623; 105 S.C. 305; 89 S.E., 675. Liability of principal: 167 S.C. 534; 124 S.C. 19; 115 S.E., 900; 157 S.C. 464; 168 S.C. 285; 159 S.C. 301; 91 A., 102; 52 L.R.A. (N.S.), 1074; 142 S.C. 375; 136 S.C. 267; 138 S.C. 354; 111 S.C. 507; 115 S.C. 360. Chattel mortgages: 61 S.C. 110; 39 S.E., 233; 170 S.C. 345; 170 S.E., 439. Messrs. Love Thornton, for respondent, cite: Mortgages: 11 C.J., 427; 213 Fed., 147; 298 S.W. 652; 205 P., 810. Recording mortgages: 100 S.C. 371; 170 S.C. 345; 170 S.E., 439; 23 R.C.L., 198; 77 S.C. 420; 91 S.C. 122. As to implied authority: 2 C.J., 635; 73 S.E., 740; 50 Am. Rep., 503; 32 S.E., 123. As to apparent authority: 111 S.C. 509; 115 S.C. 360; 100 S.E., 418.
April 8, 1935. The opinion of the Court was delivered by
The Court approves the result of the decree of Judge Ansel, except as hereinafter indicated, and adds the following in response to the questions made by appellant:
1. The County Judge did not err, as charged by appellant, in failing to hold that Phil N. Martin was the agent of the plaintiff or that, in the circumstances, plaintiff was estopped to deny such agency, she having by her conduct and inaction made it possible for Martin to overreach appellant.
A. This is an action at law, being a money demand and claim and delivery and the findings of Judge Ansel on the facts cannot be reviewed here. The character of an action is determined by the complaint in its main purpose and broad outlines and not merely by allegations that are merely incidental.
B. The portion of the chattel mortgage relating to the question is as follows: "Mortgagor shall have the right to sell any of the property covered by this mortgage in the regular course of business from time to time in the future; that said furniture, when so sold, shall be released and discharged from the lien of this mortgage, and that said lien shall immediately be transferred to, and be a lien upon the proceeds of said sale, and lease contracts received by the seller."
We note that these sales can only be made in the regular course of business, and only furniture, when sold, shall be released and discharged from the lien of the mortgage. We do not know why this was made a part of the paper. We find it there, and that is sufficient for us.
We see no error here.
2. "Did the trial Judge err in holding that the chattel mortgage given by P.N. Martin personally was valid, and that its record constituted constructive notice to the world, and that the appellant took these lease contracts subject to same, when Martin with the knowledge of the plaintiff was then and thereafter dealing as Banner Furniture Store, and not as P.N. Martin?"
As to this question, there is no decision on the subject by our Supreme Court, nor is there any statute with reference thereto, but it seems well established by text-writers and in encyclopedias of law that any personal property which is capable of being sold may be the subject of a mortgage. This, of course, will mean that a mortgage may be given on a mortgage. The important question here, however, is whether or not the recording of a mortgage on a mortgage will be notice to any subsequent purchaser.
It seems to us that in the sale of personal property which may be transferred by assignment and delivery, it would be an intolerable burden to require a prospective purchaser or assignee to search the records to find out whether or not such papers were covered by a chattel mortgage. While a mortgage on a mortgage is good as between the parties, the recording of such mortgage would not be notice to purchasers or assignees, ordinarily. Papers capable of being assigned by indorsement pass by such indorsement, and recording of assignment of real estate mortgages is provided for by Section 8881 of our Code.
In the present case, however, the assignor of the chattel mortgages was carrying on a furniture business in the course of which he acquired a number of chattel mortgages on furniture sold on credit. He took a large batch of these papers to the appellant in this case and sold them at 35 percent. of their value. This, in itself, should have been enough to put the appellant on inquiry. To buy a large batch of chattel mortgages from a going concern at such a discount seems to be sufficient to have made the appellant look further and see if the stock of goods was mortgaged. If he had done so, he would have found that the stock of goods was mortgaged, and that the mortgage provided that it should cover all papers taken on furniture on credit.
For the foregoing reasons, we find no error, under the peculiar facts of this case, in the second ground or question of the appellant.
3. "Did the Court err in holding that the Banner Furniture Store by P.N. Martin had no authority to sell the lease contracts to appellant?"
This matter has already been disposed of by what has been said above.
4. "Did the Court err in not allowing credit for the purchase price paid by appellant, and the reasonable expense of making installment collections on said chattel papers so purchased by the appellant ?"
We think that this contention of the appellant is correct so far as it relates to a credit being allowed for the purchase price paid for the chattel mortgages and papers; and the Master is hereby directed, on the accounting to be had before him as ordered by the trial Judge, to allow Hall Bros. Co., the appellant herein, credit for the purchase price paid by it for the said chattel mortgages and papers. In every other respect, we think Judge Ansel was eminently correct in the result of his decree.
The judgment of the Court below is modified in the respect named, and, as so modified, is affirmed.
MR. CHIEF JUSTICE STABLER, MESSRS. JUSTICES CARTER and BONHAM and MR. ACTING ASSOCIATE JUSTICE E.C. DENNIS concur.