In Utah, an action under the statute (§ 3460 Compl.Laws Utah,
1888) to foreclose a chattel mortgage, if commenced while the lien
of the mortgage is good as against creditors and purchasers, keeps
it alive and continues it until the decree and sale perfect the
plaintiff's rights and pass title to the purchaser.
Under § 3206 of the Compiled Laws of Utah, the rule of
lis
pendens applies to an action to foreclose a mortgage of
personal property.
The enforcement of a mortgagee's rights under a chattel mortgage
by a suit for foreclosure is commended as affording a safer and
more adequate remedy than is afforded by actual seizure and sale of
the mortgaged property or by an action of replevin, detinue, or
trover.
This case arose upon a complaint filed in the District Court of
Weber County, Utah Territory, on the 22d of July, 1885, by James C.
Armstrong, the appellee, against Mills H. Beardsley to foreclose a
mortgage of certain chattels, made January 14, 1885, by Beardsley
to Armstrong as security for the payment of his promissory note of
that date to Armstrong for the sum of $8,000, payable in four
months, with interest from date at one percent per month, payable
monthly from date until paid, both before and after judgment, until
maturity, and if not paid at maturity, ten percent additional as
cost for collection, which mortgage was duly recorded as provided
by the laws of the territory.
On the 22d of September thereafter, Armstrong, with leave of the
court, filed an amended complaint making John Broom and E. A.
Whitaker parties defendant, in which he alleged that the two
defendants, Broom and Whitaker, after the original
Page 137 U. S. 267
suit was instituted, had claimed an interest in the mortgaged
chattels; that Broom's claim arose from his being a purchaser of
the mortgaged property at a sale on August 13, 1885, under an
execution issued upon a judgment dated March 18, 1885, against the
defendant Beardsley, in favor of the Utah National Bank, for
$3,160; that the property having been levied upon by the United
States marshal and sold, as above stated, was delivered by the
marshal to Broom as purchaser thereof, and put into his possession;
that Whitaker's claim arose out of a mortgage upon the same
property, made to him by Broom August 22, 1885, to secure the
payment of four thousand one hundred and thirty dollars ($4,130)
advanced by him to Broom; that this action on the original
complaint had been pending from the date of the filing thereof to
that time; that a notice of the pendency thereof was filed in the
Recorder's office of Weber County on the 11th of August, 1885, and
that the defendants had due notice and actual knowledge of all
these facts and proceedings at the time the levy was made on the
mortgaged property and at the time Broom received and took
possession of the same. Wherefore, in addition to his prayer for
foreclosure against Beardsley in the original complaint, he prayed
that the two defendants, Broom and Whitaker, and all persons
claiming under them subsequently to the execution of said chattel
mortgage be foreclosed of all right or claim or equity of
redemption in the said property and every part thereof.
The defendants Broom and Whitaker, and the defendant Beardsley
also, filed their respective demurrers to the amended and
supplemental complaint as not stating facts sufficient to
constitute a cause of action, both of which demurrers were
overruled. Thereupon the defendants Broom and Whitaker filed their
separate answer setting up, among other defenses, the levy upon the
property mortgaged, the purchase by Broom at the judicial sale
thereof, and the invalidity of the lien of the chattel mortgage
after the expiration of ninety days from the maturity of the note
which it secured. The case was submitted to the court on the
pleadings and
Page 137 U. S. 268
proofs. A decree was rendered for the plaintiff in accordance
with the prayer of the amended complaint, finding that Beardsley
was liable for the principal and interest due on the note, with ten
percent additional for collection, etc., and that the said amount
was a valid lien upon the property described in the amended and
supplemental complaint, and directing a sale of the mortgaged
property to satisfy the same, with costs, etc. The supreme court of
the territory affirmed the decree of the district court, and that
decree of affirmance is brought to this Court for review by the
present appeal.
Page 137 U. S. 274
MR. JUSTICE LAMAR delivered the opinion of the Court.
There seems to be no dispute as to any material fact in the
case. The note and chattel mortgage sued upon were executed on the
14th of January, 1885, recorded on the 17th of the same month, and
became due on the 14th of May, 1885. The action for foreclosure was
commenced, and the notice of pendency properly recorded, within the
ninety days provided by the statute of Utah for the lien to
continue in force after the maturity of the debt secured by the
mortgage. By the terms of the mortgage, it was provided that the
mortgaged property should remain in the possession of the
mortgagor, who, in accordance therewith, retained such possession
until the property was levied on and sold under execution against
the mortgagor. This levy therefore was made after the ninety days
from the maturity of the debt secured by the
Page 137 U. S. 275
mortgage had expired, and while the property was in the
possession of the mortgagor.
The main contention of the appellants is that the district and
supreme courts erred in holding that the appellee, by virtue of his
mortgage and the pendency of the foreclosure suit, had a lien upon
the property as against the levy and sale on the 13th of August,
under which the appellant Broom made his purchase. This presents
the question which really controls this case,
viz., did
the appellee, on the day of sale, have any right or interest in the
property superior to that of the appellant Broom?
To sustain their contention, the appellants rely upon sections
2805 and 2837 of the Compiled Laws of Utah. The former of these
sections provides that
"Any mortgage of personal property acknowledged and filed as
hereinbefore provided shall thereupon, if made in good faith, be
good and valid as against the creditors of the mortgagor and
subsequent purchasers and mortgagees from the time it is so filed
for record until the maturity of the entire debt or obligation for
the security of which the same was given and for a period of ninety
days thereafter,
provided the entire time shall not exceed
one year."
Section 2837 provides that
"Every sale made by a vendor of goods and chattels in his
possession or under his control, and every assignment of goods and
chattels, unless the same be accompanied by a delivery within a
reasonable time and be followed by an actual and continued change
of the possession of the thing sold or assigned, shall be
conclusive evidence of fraud against the creditors of the vendor or
assignor, or subsequent purchasers in good faith,"
etc. It is contended with great earnestness that these two
sections, taken together, constitute an express and mandatory
enactment that any sale or assignment of goods and chattels,
whether in the form of a chattel mortgage or otherwise, when
unaccompanied by delivery of possession to the vendee, assignee, or
mortgagee, shall be absolutely void as to creditors of the latter
or subsequent
bona fide purchasers after the expiration of
ninety days from the maturity of the debt secured by the
mortgage.
Page 137 U. S. 276
As opposed to the holding of the district and supreme courts
that the commencement of the suit to foreclose keeps alive the lien
of the mortgage, and continues it in force up to the foreclosure
decree, it is insisted that the sections above quoted expressly
limit the duration of the lien to the expiration of ninety days
from the maturity of the debt; that to this clear and imperative
limitation the statute makes no exception; that such a holding adds
a condition which is not only not in the sections quoted, but is
absolutely prohibited by them, and that said ruling is in
contravention of the principle established by the courts that
statutes authorizing chattel mortgages are to be strictly adhered
to, and are never to be extended by construction beyond their
letter. We cannot accept this view without coming in conflict with
the manifest intent and, in some cases, the express provisions of
other sections of the Utah statutes applicable to this case, which
should be construed
in pari materia with those above
quoted. Section 2801 in substance enacts that a mortgage of
personal property executed, acknowledged, and recorded according to
law shall be valid as to all parties, even though the possession of
the property be not delivered to and retained by the mortgagee, if
the mortgage itself provides that the property may remain in the
possession of the mortgagor and be accompanied by an affidavit
required by that section. The section reads as follows:
"No mortgage of personal property be valid against the rights
and interests of any person (other than parties thereto) unless the
possession of such personal property be delivered to and retained
by the mortgagee or unless the mortgage provide that the property
may remain in the possession of the mortgagor, and be accompanied
by an affidavit of the parties thereto, or, in case any party is
absent, an affidavit of the parties present and of the agent or
attorney of such absent party that the same is made in good faith,
to secure the amount named therein, and without any design to
hinder or delay the creditors of the mortgagor."
As the equivalent of the mortgagee's taking possession of the
mortgaged property upon default of payment and within ninety days
thereafter, a remedy in case of such default is
Page 137 U. S. 277
provided by express statutory enactment. Section 3460 of the
Compiled Laws above mentioned provides that
"there can be but one action for the recovery of any debt or the
enforcement of any right secured by mortgage upon real estate or
personal property, which action must be in accordance with the
provisions of this chapter. In such action, the court may, by its
judgment, direct a sale of the encumbered property, or so much
thereof as may be necessary, and the application of the proceeds of
the sale to the payment of the costs of the court, and the expenses
of the sale, and the amount due to the plaintiff, and sales of real
estate under judgment of foreclosure of mortgages and liens are not
subject to redemption, as in case of sales under execution."
This remedy of a suit for foreclosure of a chattel mortgage has
been adopted in most of the states, and has been much commended by
the courts and text writers as a safer and more adequate remedy for
recovering debts secured by chattel mortgages and enforcing the
lien of the mortgagee than that of actual seizure and sale of the
property by the mortgagee or than the action of replevin, detinue,
or trover. A judicial sale of the property and the application of
the proceeds as directed by the decree make a record which will
protect the mortgagee from the embarrassments and charges of
unfairness in the conduct of the sale which attend the actual
taking possession and sale of the property by the mortgagee without
a decree of the court. So
"that if it falls short of satisfying the debt, the mortgagee
may have a decree for the residue, or, if there should be a
surplus, that it may be awarded to the mortgagor, and so put an end
to litigation. If the mortgagee himself should sell, there would
be, in case of deficiency, an action at law to recover the
remainder of the debt or, if there should be a surplus, the
mortgagor might sue for it. Equity makes an end of these
matters."
Bryan v. Robert, 1 Strob.Eq. 334, 342, per Chancellor
Harper. We think a construction of the above-quoted sections of the
statute should be in furtherance of these objects. But what avail
would be such a remedy as a means of enforcing the mortgagee's
right if his mortgage, valid and in full force at the commencement
of his foreclosure
Page 137 U. S. 278
suit, is extinguished before a decree for the sale of the
specific property can be rendered?
We are of opinion that the supreme court is correct in its
conclusion that the foreclosure
"action having been commenced by plaintiff while the lien of the
mortgage was good as against creditors [and purchasers] it kept the
lien alive, and continued it until the decree and sale under it
perfected his right with respect to it, and passed the title to the
purchaser."
We think this conclusion follows necessarily from the very
nature of the proceeding directed by the Utah statute. It is, in
its primary and controlling character, an action brought by the
creditor against the specific property which has been mortgaged to
him by his debtor, to have it seized and sold for the payment of
his debt. Its object is to reach the property to which the lien
attaches and dispose of its by sale in whatever hands it may be
found, whether in the mortgagor's, in those of third persons, or in
those of the mortgagee himself. The special prayer of the original
complaint is that a receive may be appointed immediately by the
court to take charge of, and hold possession of, said mortgaged
property, and preserve the same until it can be sold on the
judgment, order, or decree of the court. It is therefore a
proceeding
in rem, as much so as an attachment suit
against the property of an absent debtor, or a suit instituted to
partition real estate. And the property is within the power of the
court until the judgment or decree is entered, so that the lien
upon it may be enforced, as the statute requires.
Pennoyer v.
Neff, 95 U. S. 714. The
section with regard to foreclosure, which we have cited, is
imperative. It expressly limits the mortgagee to that one action.
Its language is: "There can be but one action for the . . .
enforcement of any right . . . secured by mortgage upon . . .
personal property." Of course the mortgagee cannot institute his
foreclosure suit until after the debt secured by it becomes due and
after the ninety days following begin to run. It is admitted that
when this foreclosure suit was commenced, the mortgage was good
against creditors and subsequent purchasers, and that it was
superior to the bank judgment when it was obtained, after the suit
was
Page 137 U. S. 279
commenced. If we accept the construction contended for by the
appellants, it must follow that unless the decree of the court
shall be rendered within the remainder of the ninety days, such
decree cannot enforce the lien of the mortgage, and the effect
would be not only to render futile the action which the statute
authorized the party to bring, but to take from the court the power
to give effect to its decree, which, under the statute, it is bound
to render.
It was found by the court below, and we think the finding is
fully sustained by the evidence -- in fact it is not disputed --
that the defendants Broom and Whitaker had actual notice and full
knowledge of the mortgage of Armstrong and of the institution and
pendency of the foreclosure proceedings before their claim of
interest or right in the property had arisen. The notice of the
pendency of the suit was recorded before the ninety days from the
maturity of the debt had expired. Under the Utah statutes, the rule
of
lis pendens applies to an action to foreclose a
mortgage of personal property, as well as to a similar action
respecting real estate. Section 3206 of the Compiled Laws of Utah
provides:
"In an action affecting the title or the right of possession of
real property, the plaintiff at the time of filing the complaint,
and the defendant at the time of filing his answer when affirmative
relief is claimed in such answer or at any time afterwards, may
file for record with the recorder of the county in which the
property or some part thereof is situated a notice of the pendency
of the action containing the names of the parties, the object of
the action or defense, and a description of the property in that
county affected thereby. From the time of filing such notice for
record only, shall a purchaser or encumbrancer of property affected
thereby be deemed to have constructive notice of the pendency of
the action, and only of its pendency against parties designated by
their real names."
Section 2809 provides:
"An action for the foreclosure of a mortgage on personal
property, or the enforcement of any lien thereon of whatever
nature, may be commenced, conducted, and concluded in the same
manner as provided by law for the foreclosure of a mortgage or lien
on real property, and without the right of redemption. "
Page 137 U. S. 280
We think, therefore, that the appellants Broom and Whitaker,
having had full notice, actual and constructive, of the mortgage,
and the pendency of the suit commenced before the expiration of the
ninety days, acquired no valid title to the property in question,
and that the purchase of the property by the appellant Broom was
subject to the rights of the appellee under his mortgage. His
mortgagee, with like notice, can have no superior rights in the
premises. That appellee's mortgage was executed to secure a
bona fide debt, and in good faith, is not disputed.
The decree of the supreme court of the Territory of Utah is
Affirmed.