In Bank of Ukiah v. Gibson (1895) 109 Cal. 197 [41 P. 1008], defendant Drew purchased sheep from defendant Weldon, who knowingly purchased them from a seller who did not have title to the livestock.Summary of this case from Oakdale Village Group v. Fong
Appeal from a judgment of the Superior Court of Mendocino County. R. W. Crump, Judge.
A purchaser gets no better title than his vendor had. (Tiedeman on Sales, sec. 310; Saltus v. Everett, 20 Wend. 267; 32 Am. Dec. 541; Ash v. Putnam, 1 Hill, 303; Wright v. Solomon , 19 Cal. 64; 79 Am. Dec. 196; Putnam v. Lamphier , 36 Cal. 158; Chase v. Whitmore , 68 Cal. 547; Agnew v. Johnson , 22 Pa. St. 471; 62 Am. Dec. 306.) The title of the purchasers could not be tried in the foreclosure suit. (San Francisco v. Lawton , 18 Cal. 473; 79 Am. Dec. 187; 21 Cal. 594; Elias v. Verdugo , 27 Cal. 424; Croghan v. Minor , 53 Cal. 15; Marlow v. Barlew , 53 Cal. 460; Bostwick v. McEvoy , 62 Cal. 501; Odell v. Wilson , 63 Cal. 159.) Any property which is capable of absolute sale may be mortgaged. (Jones on Chattel Mortgages, sec. 114; 1 Cobbey on Chattel Mortgages, sec. 189.) Respondent was not a purchaser for value. (1 Abbott's Law Dictionary, 536; Anderson's Law Dictionary, 496, note 10; Jewett v. Palmer, 7 Johns. Ch. 65; 11 Am. Dec. 401; Jones on Chattel Mortgages, secs. 312, 313, 317; 2 Cobbey on Chattel Mortgages, sec. 1016; Wilhoit v. Lyons , 98 Cal. 413; Eversdon v. Mayhew , 65 Cal. 167; Pomeroy's Equity Jurisprudence, sec. 751.)
J. A. Cooper, for Appellant.
J. M. Mannon, and T. L. Carothers, for Respondent Mahulda C. Drew.
At the date of the chattel mortgage sheep were not subject to mortgage, and the mortgage had no validity as against a purchaser for value without notice. (Civ. Code, sec. 2955; Jones on Chattel Mortgages, sec. 122; Gassner v. Patterson , 23 Cal. 299; Stringer v. Davis , 30 Cal. 318; Glenn v. Arnold , 56 Cal. 631; Dufficy v. Shields , 63 Cal. 332; In re Fischer , 94 Cal. 523.) It is a good defense to an action to foreclose a chattel mortgage that the title has failed to a part of the chattels. (Cobbey on Chattel Mortgages, secs. 1001, 1002.)
JUDGES: In Bank. Garoutte, J. Harrison, J., Van Fleet, J., Temple, J., and Henshaw, J., concurred. McFarland, J., dissenting.
Plaintiff brought this action to foreclose two mortgages given by defendant Gibson, one upon certain real estate, and the other upon certain sheep and neat cattle. One Weldon purchased the cattle and sheep of Gibson, the owner, subsequent to the date of the mortgage, and prior to the commencement of the foreclosure proceedings, and thereafter sold the sheep to Mrs. M. C. Drew. These vendees Weldon and Drew are made defendants. The court entered a decree foreclosing the mortgage as to the real estate and the neat cattle, but denied a foreclosure as to the sheep, and plaintiff now appeals from that portion of the judgment denying a foreclosure as to the sheep. This appeal is before us upon a judgment-roll without a bill of exceptions.
At the time Gibson gave the chattel mortgage to plaintiff upon the sheep and cattle, he retained possession of the property, and, although this mortgage was made, executed, verified, and acknowledged as required by law pertaining to chattel mortgages, still sheep and cattle, at the date thereof, were not among the articles of personal property which could be mortgaged under section 2955 of the Civil Code. But, as to the mortgagor, Gibson, the fact that this kind of personal property was not enumerated in said section 2955 is wholly immaterial, for, as between the parties, a chattel mortgage upon any character of personal property is valid. (Tregear v. Etiwanda Water Co ., 76 Cal. 537; 9 Am. St. Rep. 245; Works v. Merritt , 105 Cal. 467.)
The merits of this appeal rest upon the sufficiency of the findings to support the judgment, and we think the consideration of a single question demands a reversal of the judgment, and a new trial of the case. The court found as a fact that Weldon purchased this personal property from the owner, Gibson, with full knowledge of the chattel mortgage to the plaintiff bank, and as to Weldon there can be no question but that he failed to get any title, either to the sheep or cattle, which would defeat plaintiff's mortgage. It [41 P. 1009] follows that, as to the neat cattle which remained in his possession, the judgment of the trial court was correct. But let us examine the situation of the defendant, Mrs. Drew, who purchased the sheep from Weldon, and took actual possession thereof. The court made a finding of fact to the effect that she had no knowledge of plaintiff's mortgage, and further found that she gave her promissory note in the sum of seven thousand three hundred dollars to Weldon in payment for the sheep, and that said note was payable one day after date, but has never been paid, and that Weldon is still the holder and owner thereof. This state of facts is fatal to her claim of title, for upon such facts she was not a bona fide purchaser for a valuable consideration. While it may be said that she was a bona fide purchaser in a limited sense, that is, she was free from fraud and bought without notice, still she parted with no valuable consideration. She has lost nothing by the transaction, and is in no worse position than though Weldon had made her a present of the sheep. The consideration for her contract having failed, she has a complete defense to any recovery upon the note by Weldon. If the note had been negotiated, and was in the hands of an innocent third party, the case would assume an entirely different form, for an irrevocable obligation would then be outstanding against her, but such is not the fact as disclosed by this record. Mr. Pomeroy, in his work upon Equity Jurisprudence, section 751, says: "It is further settled that there must be actual payment before any notice, or what in law is tantamount to actual payment, a transfer of property or things in action, or an absolute change of the purchaser's legal position for the worse, or the assumption by him of some new, irrevocable, legal obligation. It follows, therefore, that his own promise, contract, bond, covenant, bond and mortgage, or other non-negotiable security for the price, will not render the party a bona fide purchaser, nor entitle him to protection; for, upon failure of the consideration, he can be relieved from such obligations in equity, even if not at law." (See, also, Eversdon v. Mayhew , 65 Cal. 167.)
For the foregoing reasons the judgment is reversed and the cause remanded.
McFarland, J., dissenting. I dissent. The mortgage of the sheep was fraudulent and void except as between the parties thereto under section 3440 of the Civil Code, because it "was not accompanied by an immediate delivery, and followed by an actual and continued change of possession." Sections 2955 to 2972 apply only to mortgages of the kinds of personal property therein enumerated, and of which, as therein expressly provided, constructive notice may be given by recordation. A mortgage of any other kind of personal property is simply the "lien" mentioned in section 3440, and comes within the same category as the fraudulent sale, or "transfer of personal property," declared in that section to be void. Under the statute the retention of the possession of the property by the vendor or mortgagor is itself an inherent fraud; and third persons should not be driven into a contest of the issue of "notice." If that issue can be raised in every case where the statutory fraud has been committed, the provision of the code might as well be abolished. In White v. Cole, 24 Wend. 123, the court say: "Again, it is said the plaintiff had notice of the lien by mortgage. This is an objection of a very ancient date -- one which has been often made, but never without being overruled. The obvious consequence of listening to it would be to furnish a ready expedient for the protection of fraud of the kind now alleged in all cases." Moreover, Mrs. Drew had no notice of the mortgage; and, in my opinion, she was a subsequent purchaser in good faith within the meaning of section 3440. She purchased from one who had both the legal title and the possession. The doctrine that such a purchase is not valid because not for cash in hand paid does not, in my judgment, apply to a case where the original sale or mortgage sought to be shielded is itself expressly pronounced fraudulent by the statute. In the passage quoted from Pomeroy on Equity Jurisprudence, the author is dealing principally with the question of priority under the recordation laws, and with cases where the original transfer was perfectly legitimate and not in any sense fraudulent. The purchase by Mrs. Drew may have been a very advantageous one to her; and in order to protect her credit, pledged by her note, she may have been compelled to forego other advantageous business opportunities. Why, therefore, was she not a purchaser in good faith under section 3440, which has not even the provision "for value" or "for a valuable consideration," as against one whose claim is expressly declared fraudulent? Most of the business transactions of the country are upon the basis of credit. Suppose she had sold the sheep on credit for mutton to wholesale dealers, who had sold them on credit to retail butchers, who had sold them by leg and loin on credit to family customers by whom they had been eaten, could the appellant have followed down the line and recovered against any one through whom the sheep or the meat had passed? The rule that a subsequent purchaser has protection only when he has made actual present payment is applicable, in my opinion, only in cases of conveyances of land where failure to change possession is not declared a fraud, or to mortgages of personal property without change of possession which are specially provided for by statute.
I think the judgment should be affirmed.