Sullivan v. Vera

This is an appeal by the intervener from a judgment in favor of plaintiff for the foreclosure of a chattel mortgage bearing date March 6, 1930, and given by defendant to plaintiff to secure the payment of a promissory note in the principal sum of $6,500 with interest at seven per cent. Appellant, a creditor, intervened in the action as against both litigants, alleging, among other things, that the chattel mortgage sought to be foreclosed had been executed by the defendant Vera, “with

The factual background of the controversy may be epitomized thus: During the month of July, 1925, the defendant purchased a ranch from plaintiff, paying a small amount in cash on the purchase price and executing his note, secured by a deed of trust on the property, for the balance. He thereupon began to operate a dairy on the premises, but soon met with financial difficulties and defaulted in payments due plaintiff. Plaintiff, however, evidently believing the defendant would eventually make a success of his business, began to advance him various sums of money to pay for labor and to purchase equipment, including a tractor, pump, electric motor, piping for irrigation, lumber and other materials. These pecuniary advances, aggregating more than $6,500, began in November, 1925, and ended in January, 1930, at which time the plaintiff, dissatisfied with the arrangement, demanded security for his loans. It was in these circumstances that defendant, two months later, executed the mortgage in question.

It seems that for several years prior to the date of the mortgage, appellant had worked continuously as a milker for the defendant and had failed to draw or demand the greater part of his wages. On April 17, 1930, less than a month after the execution of the mortgage, appellant filed a suit in the superior court for the collection of his back wages and, three months later, obtained a judgment against Vera in the sum of $810. It is an admitted fact, also, that on December 15, 1929, appellant, in due course of his employment as a milker for defendant, sustained an injury consisting of a fracture of his right arm. Thereafter he filed a claim with the Industrial Accident Commission, which, on May 7, 1930, made an award of $9.49 a week for temporary disability, payments to begin as of December 23, 1929. The commission found that the employer was uninsured.

The trial court found, in substance, that the mortgage was executed by the defendant for a valuable and sufficient consideration and with no intent to hinder, delay or defraud the intervener or any other creditor of the defendant; that the instrument was accepted by plaintiff in good faith and as security for a sum in excess of $6,500, which he had theretofore advanced the defendant; that the mortgage was duly acknowledged by the parties thereto before Frank L. Crist, a notary public in and for the county of Santa Clara.

Appellant states in his opening brief that he cannot criticise the trial court’s finding on the question of adequate consideration, but insists that the mortgage is invalid for two reasons: (1) that it was given and accepted to hinder, delay and defraud creditors; (2) that it is not in the form prescribed by section 2956 of the Civil Code of California. The points thus relied upon by appellant in his specifications of error will be considered in the order named.

The first point relied on is the usual challenge to the sufficiency of the evidence to support the trial court’s finding on the issue of fraud. Without an extensive discussion of the testimony, it may be pointed out that plaintiff testified he had demanded the mortgage in order to protect his interests; that when the same was executed he did not know of defendant’s indebtedness to appellant for wages, but was aware of appellant’s injury and of the claim filed pursuant thereto; that he did not demand or accept the chattel mortgage for the purpose of enabling Vera to avoid appellant’s claim; that said mortgage note did not cover any part of the obligation secured by the deed of trust. The defendant, called as an adverse witness by appellant, admitted the amount claimed by plaintiff and the purpose for which it was advanced. It could scarcely be said that the defendant’s testimony was the result of collusion. On the contrary, appellant’s counsel terminated the cross-examination somewhat abruptly, declaring at the time: “I won’t ask this witness any more questions. I think what he says is true.” Mrs. Flossie Tripp, called as a witness

Appellant suggests that the admitted facts, together with the circumstances surrounding the transaction, throw more light on the issue of fraud than the parol testimony of the parties. This view seems to be based largely on the assumption that the execution of the mortgage in consideration of a pre-existing debt, and at a time when the defendant owed appellant a substantial sum for wages and had also become liable to him for compensation by reason of the injury to his arm, was in itself an act inherently fraudulent. This contention, as an abstract proposition, cannot be sustained. One who owes another money is not, in every instance, estopped from executing a chattel mortgage to a third person in consideration of a preexisting debt. On the contrary, except in certain circumstances not present in the instant case, “a debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of his demand in preference to another”. (Civ. Code, sec. 3432.) And “in the absence of fraud every contract of a debtor is valid against all his creditors, existing or subsequent, who have not acquired a lien on the property affected by such contract”. (Civ. Code, sec. 3431; Parkinson Brothers Co. v. Figel et al., 24 Cal. App. 701 -712 [ 142 Pac. 135 ].) It is not suggested in the briefs that appellant had acquired any lien on the property involved prior to the execution of the mortgage.

Whether the transaction in question was tainted with fraud was primarily a question of fact for the trial court to determine, and since its finding thereon is supported by the evidence, we cannot, under well-established rules of appellate practice, interfere. It may be ob

As to appellant’s second specification of error: In his complaint it is alleged, as already pointed out, that the mortgage in question was not actually acknowledged before a notary public. Section 2956 of the Civil Code prescribes the form for chattel mortgages, and section 2957 of the same code explicitly provides that a mortgage of personal property is void as against creditors of the mortgagor and subsequent purchasers and encumbrancers in good faith and for value, unless (subdivision two) “it is acknowledged or proved, certified, and recorded in like manner as grants of real property”. It has been held that the term “creditors”, as used in the last-mentioned code section, “ ‘is general and applies to creditors existing prior to the mortgage, as well as subsequent’ (Noyes v. Bank of Italy, 206 Cal. 266 , 271 [ 274 Pac. 68 , 71] ; Cardenas v. Miller, 108 Cal. 250 , 258 [ 49 Am. St. Rep. 84 , 39 Pac. 783 , 41 Pac. 472 ].) The trial court, however, found adversely to appellant on the question of whether the chattel mortgage had been properly acknowledged and this finding, in similar circumstances, was sustained in the case of Ware v. Julian, 122 Cal. App. 354 [ 9 Pac. (2d) 907 ], wherein it is stated: “We are satisfied that the prima facie evidence of the certificate of acknowledgment was sufficient to support the finding of due execution even though contradicted by the oral testimony of appellant. This holding not only "accords with all the authorities but is in line with the recent decision of our own Supreme Court in Smellie v. Southern Pacific Co., 212 Cal. 540 [ 299 Pac. 529 ].”

In his opening brief counsel for appellant presents two points which admittedly were not raised in the court below. It is now urged for the first. time that the mortgage is fatally defective for two reasons: (1) that the due date of the obligation is omitted; and (2) that the description of the mortgaged property is insufficient. In an effort to avoid the well-known inhibitory rule with reference to

For the reasons herein stated the judgment is affirmed.

Knight, Acting P. J., and Cashin, J., concurred.