Lindemann v. Ingham (36 Ohio St. 1, 1880)

Okey, J.

The petition does not show that Lindemann filed the deed of assignment in the probate court, pursuant to the acts relating to assignments by debtors to assignees for the benefit of creditors, nor that he acted under the orders of that court in doing the things of which Ingham & Brothers complain ; and hence, the questions sought to be made by the plaintiff in error may not arise on the petition. But these facts are alleged in the sixth defense ; and Ingham & Brothers demurred to -that defense, and the court sustained the demurrer. It seems, therefore, pertinent to inquire whether, if the petition had embraced the additional matter set forth in that defense, it would have contained facts sufficient to constitute a cause of- action. If a petition in tbat form would have been sufficient, it is clear tbat the court properly sustained the demurrer to that defense; but if the facts alleged in the petition and in the sixth defense, when taken together, would constitute no cause of action, the court erred in sustaining the demurrer.

Counsel for defendants in error have, with great industry, collected more than three hundred cases, which are claimed to bear on the question involved in this- case. ¥e deem it unnecessary, in this report, to do more than state the result of our examination of them. We entertain no doubt that the general rules of law with respect to chattel mortgages are as claimed by counsel for defendants in error in their able argument. These rules have been recognized in a number of our cases. Thus, in Robinson v. Fitch, 26 Ohio St. 659, 663, it was said: “A chattel mortgage in the usual form conveys to the mortgagee the property mortgaged, and he thereby becomes the general owner of it, and in the absence of a reservation of the right of possession in the mortgagor, he is entitled to the immediate possession of it. If there is such a reservation in favor of the mortgagor, such reservation only affects the possession according to the terms of the reservation, the title to the property remaining, in the meantime, in the mortgagee, who becomes entitled to the immediate possession on breach of the condition.” Gilmore, J.

But this is not inconsistent with the existence of an equity in the mortgagor, notwithstanding a breach in the condition of the mortgage. This is well illustrated in the instructive case of Carty v. Fenstemaker, 14 Ohio St. 457. It appeared in that case that Oarty caused personal property in possession of Alspach to be seized on an attachment as the goods of Alspach. There was, at the time, a chattel mortgage upon the property in favor of Fenstemaker,. executed by Alspach, and the condition therein was then broken, so that the mortgage had become absolute. Eenstemaker obtained possession of the property from the officer by replevin, and thereupon took from Alspach an assignment of all his interest in the property that might remain after satisfying the mortgage debt. Carty having subsequently obtained judgment against Alspach, in the action wherein, the attachment was issued, brought suit against Fenstemaker to reach that portion of the proceeds of a sale of the property which might remain after satisfying the mortgage debt. The court held, that while the officer was not entitled, under the provisions of the statute relating to attachments, to retain possession of the property as against such mortgagee, yet that, notwithstanding the condition of the mortgage was then broken, a lien was secured by the levy of the attachment, in favor of Carty, upon any balance that might remain after satisfying the mortgage debt; that this lien was superior to the rights of Fenstemaker under his assignment from Alspach subsequently made ; and, further, that the lien thus 'secured by the attachment might be enforced by Carty in an action against Fenstemaker. See, also, Morgan v. Spangler, 20 Ohio St. 38.

Nor is the general rule of law, as to the rights of the mortgagee, inconsistent with, but it is subordinate to, another wrell settled rule which is thus expressed in Smith v. Parsons, 1 Ohio, 233, 242: “ Contracts must be expounded according to the laws in force at the time they were made; and the parties are as much bound by a provision contained in a law, as if that provision had been inserted in, and formed part of, the contract.” Burnet, J. And see Jewett v. Railway, 34 Ohio St. 601, 607; Brine v. Insurance Co., 96 U. S. 627.

If the statute in force at the time of the execution of the mortgage under consideration in Carty v. F&mtemaker, had provided that an officer levying an attachment, as in that case, should sell the property on the attachment, holding possession in the meantime, and after satisfying the mortgage debt out of the proceeds of the sale, apply the balance, so far as needed for the purpose, in satisfaction of the attachment, no serious doubt can be entertained that the act would have been valid. It would have been a perfectly lawful mode of reaching any possible interest the mortgagor might have in the property, without resorting to a suit against the mortgagee.

The mortgage in this case was executed on April 2, 1874, and according to the principle stated, the mortgagees were liable to be affected, as to their remedies on the mortgage, by the provisions of our statutes then in force relating to assignments. This clearly appears from Hanes v. Tiffany, 25 Ohio St. 549. There the affidavit on the mortgage was wholly defective, so that the mortgage was void as against the creditors of the mortgagor. The court held that it was also void as against an assignee for the benefit of creditors. That case was not decided in ignorance of the general rule on the subject. As to the claim that the assignee could stand in no better condition than the assignor, "White, J., distinctly stated that “the correctness of this position at common law is admitted.” And the supreme court of the United States has repeatedly held that the common law rule is applicable under the bankrupt law. Gibson v. Warden, 14 Wall. 244; Stewart v. Platt, 101 U. S. 731. But the decision in Hanes v. Tiffany, approved in Kilbourne v. Fay, 29 Ohio St. 264, 278, is a clear and distinct recognition of the principle that a mortgagee of personal property takes his mortgage subject to the provisions of our assignment laws in force at the time, and that under those laws the assignee stands in a better position than the assignor.

We come now to consider the condition of the law relating to assignments at the time the chattel mortgage in question was executed. The act of 1859, “ regulating the mode of administering assignments in trust for the benefit of creditors ” (56 Ohio L. 231, 4 Curwen, 3352), was amended in various particulars (57 Ohio L. 39, 117; 58 lb. 3, 105 ; 60 lb. 8 ; 69 lb. 172; 71 lb. 28, 73; 73 lb. 146), re-enacted with its amendments in 1878 (75 Ohio L. 936), and finally incorporated into the Revised Statutes, §§ 6335-6358. As it existed in 1874 (1 Swan & Or. 709, Swan & Sayler, 395), at the time the mortgage in question was executed, it provided a comprehensive, though by no means perfect mode of administering assignments in the probate courts for the benefit of creditors. It extended to assignments of property of every sort, and plainly included the right of a mortgagor of chattels, as well' before as after condition broken. The assignee was required to file the deed of assignment or a copy thereof with the probate judge, and to give bond for the faithful performance of his duty, on which bond any person injured by the misconduct or neglect of duty of the assignee might bring suit, to cause an inventory and appraisement of the property to be made under oath, and returned to the probate court; to file in the probate court, at the same time, a schedule, under oath, setting forth all the debts and liabilities of the assignor within the knowledge of the assignee ; to cause notice to bo given in some newspaper of general circulation in the county of his appointment as assignee., in which notice he shall require creditors to present their claims; and, under the orders of the probate court, to convert all the assets into money, sell the real and personal property, either for cash or upon such other terms as the probate court may order, and make return of such sales to the probate court.

The laws then in force further provided that the creditors should present their drams to the assignee for allowance within six months after publication of notice of his appointment; that “ the probate court shall order the payment of all incumbrances and liens upon any of the property sold, or rights and credits collected, out of the proceeds thereof, according to priority ;” and that at the expiration of eight months from the appointment, “a dividend shall be declared, payable out of the assets of the assignor applicable to the payment of non-preferred claims.”

These provisions show very clearly that the legislature intended to vest in the probate court full and complete jurisdiction over the whole subject of assignments of this character. True, the court is so organized as to render it impracticable that it should exercise jurisdiction in actions for money against the debtors of the assignor. It is also. true, that where the real estate assigned is incumbered with liens, the assignee may file a petition to sell the same in the court of common pleas. This provision was made because of the complex questions which are sometimes presented in regard to liens on real estate, embracing, as they do, questions as to liens by mortgage and judgment, liens by execution foreign and domestic, vendor's liens, mechanics’ liens, liens of occupying claimants, and others. But even questions of this character may be determined in the probate court.

The express exception that the petition, in the case just mentioned, may be filed in tbe court tion, I express no opinion upon other matters discussed.