Opinion
No. 1709
May 10, 1932
CHATTEL MORTGAGE — KNOWLEDGE OF PRIOR UNRECORDED MORTGAGE — PARTNERSHIP — PREFERENCE OF CREDITORS.
1. Indemnity agreement which also assigned chattels as security held in effect "chattel mortgage," and void as to third party because not filed in county clerk's office (Rev. St. 1931, § 71-105). 2. Evidence held to support finding that subsequent mortgagee was without knowledge of prior unrecorded chattel mortgage (Rev. St. 1931, § 71-105). 3. Surviving partner may borrow money or pledge partnership assets to close up partnership affairs, even though effect thereof is to prefer one creditor over another.
ERROR to District Court, Platte County; SAM M. THOMPSON, Judge.
For the intervener and appellant, Fidelity Deposit Company of Maryland, a corporation, there was a brief by T.A. Mapes, of Denver, Colorado, and H.B. Henderson, Jr., of Cheyenne, Wyoming, and oral argument by Mr. Henderson.
The court erred in finding that the indemnity agreement is in effect a chattel mortgage, and not having been filed or recorded, was absolutely void as to plaintiff; that defendant had a legal right to prefer plaintiff over intervener. The court also erred in dismissing the petition of intervener. The principle of intervention has long been recognized, although the remedy has not always been designated by the work itself. It is a remedy permitted by statute in some States. Ditch Co. v. Hawley, (Colo.) 95 P. 317. The provisions of the code of Civil Procedure of Wyoming to have all interested persons before the Court provides this remedy. 5592-5600 C.S. The scope of the remedy is defined in Rocca v. Thompson, U.S. Sup. Ct., (Me.) 56 L.Ed. 457. Also in O'Keefe v. Foster, (Wyo.) 40 P. 525; Gibson v. Ferrell, (Wyo.) 94 P. 783; Bamforth v. Ihmsen, (Wyo.) 204 P. 345. See also Jones on Mortgages, Vol. 3, (8th Ed.) Pac. 308, 21 R.C.L. 125. Intervener having completed a highway contract at an expense of $20,000.00, the direct benefits of which accrued to all of the parties in the suit, it should in equity be reimbursed. Walker v. Sanders, (Minn.) 123 Am. Reps. 297. Intervener certainly had a claim superior to that of plaintiff bank. Brice, President and Manager of the bank had full knowledge of this indemnity agreement for the reason that he was also the agent of intervener, and assisted in its execution. See Trust Co. v. Hauf, 32 Wyo. 127. As against rights of intervener and property upon which it relied for reimbursement, it is necessary that the claim of the bank be a bona fide claim, based on a valuable consideration. Horse Co. v. Durick, (Ala.) 69 So. 545. Even if the indemnity agreement was in legal effect a chattel mortgage, which we do not concede, it would be valid as against a subsequent purchaser with notice, if not filed. Browning v. deFord, 44 L.Ed. 1033; Van Winkle v. Crewell, 36 L.Ed. 880, 11 C.J. 520; Bank v. Ludvigsen, 8 Wyo. 230. The bank was charged with notice of the existence of the indemnity agreement.
For the plaintiff and respondent there was a brief by M.A. Kline, of Cheyenne, Wyoming, and O.O. Natwick, of Wheatland, Wyoming, and oral argument by Mr. Kline.
After praising the brief filed on behalf of Bagley Bros. and Mamie E. Bagley, executrix in Case No. 1708, and agreeing with all that is said there, intervener proceeds to set forth the allegations of its petition for intervention, and points out certain errors committed by the trial court. But the alleged errors of the trial court are not discussed. Intervener's brief is largely devoted to the principles of law governing intervention, a question not before the court in the present case. There is an inference in the brief that Mr. Brice having acknowledged that John R. Bagley had possession of, and was using the contracting outfit belonging to the partnership, but not in the best interests of the bank, as a creditor, and by reason thereof, should be compelled to account to the bank. Intervener's entire argument is based upon the assertion that it is one of the largest creditors of the co-partnership, and for that reason, its right in and to this property, was and is superior to the rights of the plaintiff. It is noteworthy that intervener in this entire operation made no move of any kind to protect its interests, except to file a petition in bankruptcy against Bagley Brothers in an attempt to have the partnership adjudicated a bankrupt. It is also asserted by intervener that Mr. Brice had knowledge of the existence and terms of its indemnity agreement, but the evidence is to the contrary. The point was decided in the United States Court for the District of Wyoming on June 22nd, 1931, in the case of Fidelity Deposit Co. of Maryland v. State Bank of Wheatland, et al., where it was held upon evidence practically the same as we have in the present case that Mr. Brice was without knowledge of the terms and conditions contained in the agreement. Mr. Brice testified that he had never read this so-called indemnity agreement which was in legal effect a contract. Title Guaranty Surety Co. v. Witmire, 195 Fed. 41; Mass. Bonding Ins. Co. v. Kemper, 220 Fed. 847. It was void as to creditors unless filed in compliance with the chattel mortgage statute. Commercial Casualty Co. v. Williams, 37 F.2d 326; St. Louis Clay Products Co. v. Christopher, (Wis.) 140 N.W. 351, Sec. 4687 C.S. 1920. It was shown by the evidence that the agreement had never been filed in the office of any County Clerk of the State of Wyoming. It is complained that the mortgage given to the bank, dated October 1, 1927, created a preference. There is no merit in this claim of the intervener. Quealy Land Livestock Co. v. George, 36 Wyo. 268; Johnson v. Abbott, 25 Wyo. 133. It is respectfully submitted that the brief of the intervener fails to show any right, title or interest of said company in the property covered by the mortgage, which plaintiff is seeking to foreclose, and the decree of the trial court in dismissing intervener's petition, was the only finding possible under the law and the evidence, and it should be affirmed.
For defendants and respondents there was a brief by Kinkead Pearson, of Cheyenne, Wyoming, and W.B. Jones, of Wheatland, Wyoming, and oral arguments by Mr. W.C. Kinkead and Mr. A.A. Pearson.
See Abstract of brief in Case No. 1708.
This appeal presents that phase of the record already discussed at length in the opinion filed in No. 1708, 11 P.2d 572, which relates to the action of the District Court in finding in its decree that:
"The indemnity agreement set forth and described in the intervening petition of the Fidelity Deposit Company is in effect a chattel mortgage and not having been filed or recorded as required by the laws of this State, was and is absolutely void as to plaintiff, and created no right, title or interest in or to the property described therein that was or is superior to the rights, title and interest of plaintiff.
"That Bagley Brothers and John R. Bagley, as surviving partner of said copartnership, had a legal right to prefer the plaintiff over the intervenor if they chose to do so."
Upon these findings, the court adjudged that the intervenor, Fidelity and Deposit Company of Maryland, take nothing by its petition of intervention and that the same should be dismissed. The parties will herein be referred to as in that opinion.
That the finding of the District Court concerning the nature of the indemnity agreement received in evidence and its effect touching the bank, in consequence of not being filed in the county clerk's office of the proper county, was correct, is sufficiently established by the law of this state, Wyo. Rev. St. 1931, § 71-105, Wyo. Comp. St. 1920, § 4687, and the following cases: Title Guaranty and Surety Company v. Witmire, 195 Fed. 41; Massachusetts Bonding and Insurance Co. v. Kemper, (C.C.A.) 220 Fed. 847; Commercial Casualty Co. v. Williams, (C.C.A.) 37 Fed. 2d 326; St. Louis Clay Products Co. v. Christopher, 152 Wis. 603, 140 N.W. 351. The record shows beyond dispute that the indemnity agreement was never filed for record.
The argument is made, so far as we are enabled to understand it, that Brice, as president of the bank and as local agent for the intervenor, was chargeable with actual knowledge of the terms of the indemnity agreement between the firm and intervenor and hence, did not take in good faith the chattel mortgage of date "Aug. ___ 1927" counted upon in plaintiff's seventeenth cause of action, but the record proof appears to be that the application for the bond, which contained the indemnity agreement and which was made by the firm preliminary to their undertaking the Newcastle-Lead highway construction contract and presented to intervenor in order to obtain it as surety upon the bond which secured the proper performance of the highway construction contract, was arranged for through other parties than Brice. He testifies that he knew nothing of the contents of the agreement and there does not seem to be evidence in the record to establish the fact contrary to this statement. The court found against intervenor and we find no reason submitted for disturbing that finding.
The suggestion is made in intervenor's behalf that the act of John R. Bagley, as surviving partner, in giving the real estate mortgage of October 1, 1927, resulted in giving a preference to the bank over other creditors, but we see no force in this point. In 20 R.C.L. 997, § 234, it is said:
"For the purpose of winding up partnership affairs a surviving partner has the power to borrow money and give a pledge or mortgage of the partnership assets. It seems that he may exercise this power even if the effect is to prefer one firm creditor over another."
The right of a debtor in failing circumstances to prefer a creditor has previously been considered by this court and allowed. Quealy Land etc. Co. v. George, 36 Wyo. 268, 254 P. 130; Johnson v. Abbott, 25 Wyo. 133, 165 P. 991.
Those portions of the decree involved in this appeal should be affirmed.
Affirmed.
KIMBALL, C.J., and BLUME, J., concur.