Opinion
No. 17,904.
Filed December 15, 1949. Rehearing denied January 13, 1950. Transfer denied March 21, 1950.
1. CHATTEL MORTGAGES — Construction and Operation — Governed by Law Where Chattel Is at Time of Mortgage. — The validity and effect of a chattel mortgage are determined by the law of the state where the chattel is at the time when the mortgage is executed. p. 181.
2. EVIDENCE — Judicial Notice — Laws of Other States. — In action by the holder of a chattel mortgage executed and recorded in Tennessee against subsequent purchasers, the trial court was required to take judicial notice of the law of Tennessee. Burns' 1946 Replacement, §§ 2-4801 to 2-4804. p. 182.
3. CHATTEL MORTGAGES — Foreclosure — Action — Evidence — Weight and Sufficiency — Insufficient To Support Finding That Mortgage Was Not Recorded in Mortgagor's County. — In an action to recover an automobile on which plaintiff held a chattel mortgage, a recital in the mortgage, and in the note which it secured, that the mortgagor lived in Clinton, Tennessee, Knox County, was, in the absence of any contention that a city or town of Clinton existed in Knox County, an obviously erroneous description of the location of Clinton, and did not have the dignity of substantial evidence which would contradict the positive evidence that the mortgagor resided in Johnson County where the mortgage was recorded, therefore the trial court's decision based on the premise that the mortgage was not recorded in the county of the mortgagor's residence was contrary to law. p. 182.
4. CHATTEL MORTGAGES — Foreclosure — Action — Evidence — Weight and Sufficiency — No Evidence of Mortgagee's Knowledge of Certificate of Title to Chattel. — In an action by the holder of a recorded chattel mortgage on an automobile to replevy it from subsequent purchasers, the trial court's decision for the defendants could not be sustained on the theory that plaintiff lost its prior right by failing to withhold a certificate of title on the automobile from another state or to have its lien endorsed thereon, where the certificate of title was not introduced nor was there any evidence that the plaintiff ever had any knowledge of it. p. 183.
5. CHATTEL MORTGAGES — Foreclosure — Action — Evidence — Weight and Sufficiency — No Evidence of Mortgagee's Failure To Protect Its Interests. — In an action by the holder of a recorded chattel mortgage on an automobile to replevy it from subsequent purchasers, the record did not support defendants' position that plaintiff, by failing to follow the car when it was removed from the state and by allowing the mortgagor to retain possession after his default on the mortgage, lost its prior right under the rule that out of state lienors must take every step possible to protect their interests, because the evidence did not show that plaintiff consented to the removal of the car from the state, but rather that plaintiff was trying to find the automobile and the mortgagor in order to enforce its rights. p. 184.
6. CHATTEL MORTGAGES — Construction and Operation — Governing Law Recognized in Another State. — In an action by the holder of a chattel mortgage on an automobile, recorded in Tennessee where the car was located at the time of the execution of the mortgage, in accord with the law of that state the mortgage was valid as against claims of subsequent purchasers and would be so recognized in Indiana under the rule of comity between the states. p. 184.
From the Lake Superior Court, Room No. 1, Joseph V. Stodola, Jr., Judge.
Action in replevin by Manufacturers Acceptance Corporation against Shaver Motor Company, Inc., a corporation, and Ralph Kellison to recover possession of an automobile. From a judgment for defendants, plaintiff appeals.
Reversed. By the court in banc.
Alfred H. Highland; and Peters Highland (of counsel), all of Hammond, for appellant.
Huebner Huebner; and Carl A. Huebner (of counsel), all of Hammond, for appellees.
On or about September 19, 1944 the appellant, at its Knoxville, Tennessee office, loaned one Harry E. Johnson the sum of $437.90 on his promissory note secured by a chattel mortgage on a 1942 Pontiac Sedan Coupe. The mortgage was recorded in the office of the Register of Deeds, Anderson County, Tennessee on September 21, 1944. Johnson never made any payments on said note and mortgage.
About April, 1945, Johnson entered into negotiations with appellee Shaver Motor Company, Inc., at its Hammond, Indiana office, (hereinafter said appellee will be referred to as the Dealer and the appellee Kellison as the Purchaser) for the trade of the above mentioned automobile for one which said Dealer had for sale. After several conversations a deal was consummated whereby the Dealer took said automobile in part payment on the purchase of the other car. As evidence of his title Johnson showed the Dealer a Georgia registration card showing no liens. Georgia has no Certificate of Title Act. They use only the certificate of registration to transfer in Georgia. Johnson also gave Shaver a cancelled conditional sales contract showing he had paid off the purchase price of said auto to General Motors at South Bend, Indiana. The Dealer told him because he was a resident of Illinois he would have to get a certificate of title in that State before the trade could be finally closed. Subsequently, Johnson returned with an Illinois certificate of title dated June 26, 1945 showing no liens. The Dealer sent the Illinois certificate of title he received from Johnson to the Secretary of State of Indiana and received in its name a certificate of title for said automobile. Subsequently, on or about August 10, 1945, the Dealer sold this car to the Purchaser who was a resident of Illinois, and transferred its Indiana title to this automobile to him. Several weeks after this sale appellant informed the Dealer of its mortgage. Thereafter, appellant brought this action in replevin against the Dealer and Purchaser. Trial to the court resulted in finding and judgment in favor of the Dealer and Purchaser.
The error assigned here is that the trial court erred in overruling appellant's motion for a new trial. In view of the conclusion we have reached, it is only necessary for us to consider the twenty-third specification of the motion for a new trial, which is that the decision of the court is contrary to law.
The validity and effect of a chattel mortgage are determined by the law of the State where the chattel is at the time when the mortgage is executed. A.L.I. Restatement, Conflict of 1. Laws, § 265; The Ames Iron Works v. Warren et al. (1881), 76 Ind. 512, 513; The Cable Company v. McElhoe (1915), 58 Ind. App. 637, 646, 108 N.E. 790.
In this case the trial court was required to take judicial notice of the law of Tennessee. Secs. 2-4801 — 2-4804, Burns' 1946 Replacement. Under the Statutes of Tennessee a chattel 2. mortgage must be registered and recorded in the county where the mortgagor resides. Sec. 7626, Tennessee Code Ann. 1934. It is not disputed by the parties that under the law of Tennessee, when a chattel mortgage is properly executed and recorded the legal title of the chattel is transferred to the mortgagee.
The only question in this case as to the validity of appellant's mortgage under the law of Tennessee is whether the mortgage was recorded in the county of Johnson's residence. Appellant's Vice-President, testifying by deposition, said that at the time the mortgage was executed Johnson resided in Clinton, Anderson County, Tennessee. The Dealer and Purchaser contend there is a conflict in the evidence as to the place of Johnson's residence. They base their contention on the following recitals in the note and mortgage: In the note it is stated that as security therefor there is a "Chattel Mortgage dated 9-19-44 to Manufacturers Acceptance Corporation recorded in Registerers Office of Knox County in Chattel Mortgage Book ____." The first sentence of the mortgage provides, in part, as follows: "For the consideration hereinafter mentioned, I, or we, Harry E. Johnson of (Street Address) General Delivery, (City) Clinton, Tennessee, Knox County, State of Tennessee,".
We cannot agree with the contention of the Dealer and Purchaser in reference to these recitals. It is undisputed the mortgage was recorded in Anderson County and it was not recorded in Knox 3. County. The above referred-to recital in the note is palpably an error. The recital in the mortgage indicates Johnson lived in Clinton, Tennessee. The statement of "Knox County, Tennessee" in the mortgage is obviously an erroneous description of the location of Clinton, Tenn. This is particularly true when there is no contention that there is a city or town known as Clinton in Knox County. Such obvious errors do not have the dignity of substantial evidence which will contradict the positive evidence in the record herein that at the time the chattel mortgage was executed Johnson was a resident of Anderson County where the mortgage was recorded.
The Dealer and Purchaser further contend they adduced evidence which fully supports the court's decision. They first say there existed at the time appellant received its mortgage from 4. Johnson, a certificate of title of the State of Illinois upon this car dated more than a year before the mortgage herein was executed; that appellant failed to withhold said title or have it assigned to it or have its lien endorsed thereon. The record indicates the Dealer's witness Shaver testified, in identifying a document marked Exhibit "E," that it was a certificate of title from the State of Illinois, dated August 24, 1943, for an automobile having the same description as the one involved here. This exhibit was in the possession of the Dealer. It was not introduced in evidence. If this exhibit would have tended to sustain their contention it should have been introduced in evidence. Furthermore, the record discloses the Dealer did not know of the existence of such certificate until a few days before the trial of this cause. There is no evidence appellant ever had any knowledge of it.
They next assert that because appellant failed to follow the car when it was wrongfully removed by Johnson from Tennessee and permitted him to retain 5. possession of the car for nine months after his default on the mortgage, appellant has thereby failed to comply with the rule that an out-of-state lienor must take every step possible to protect his security interest in order to claim a priority as against innocent purchasers for value. Assuming without deciding that the rule is as stated by appellees, there might be some merit to this contention if there was anything in the record to support it. There is no evidence that appellant knew of or consented to the removal of the car from Tennessee. The uncontradicted evidence of appellant is that it was trying to find the automobile and locate Johnson so it could enforce its rights under the mortgage.
We are of the opinion the record herein conclusively establishes appellant's mortgage was executed and recorded in accord with the law of Tennessee. Under the well-recognized 6. rule of comity between the States, the mortgage was valid as against the claims of the Dealer and Purchaser. Therefore, the decision of the trial court is contrary to law.
Judgment reversed.
NOTE. — Reported in 89 N.E.2d 81.