Majority
Headnote
[1] Chattel Mortgage—Execution Before Notary Public—Interested Party—Invalidity as to Third Parties.—A mortgage on a growing crop executed before a notary public who is a part owner of the note and mortgage is illegal and void as to third persons, and its recordation does not impart constructive notice to a purchaser of the crop from the mortgagor after its removal from the land. (Opinion of supreme court withheld on denial of hearing.)This is an appeal by plaintiff from a judgment of nonsuit granted at the end of plaintiff’s case on the motion of the defendants California Packing Corporation and E. Powers, who interposed their respective answers to the complaint. The defendants Kim and Hahn did not file an answer or answers to the complaint. The appeal is supported by a bill of exceptions.
The facts, in summary, may be stated as follows: Plaintiff was the owner in fee of 320 acres of ranch property which he leased to the defendants Kim and Hahn on the first day of November, 1917, for the term of one year wherein, plaintiff asserts in Ms brief, there was a stipulation that “the title to the crops shall remain in the party of the first part [plaintiff] until the entire rental is paid and the work performed.”, The complaint alleges that on the eighteenth day of March, 1918, the same defendant lessees gave to the plaintiff two promissory notes, one for $3,000 and the other for $2,000, and, to secure the payment thereof, at the same time gave to said plaintiff and owner of said real property a crop or chattel mortgage on all crops of sugar-beets, to
The court, upon the close of the plaintiff’s case, and on motion of counsel for the answering defendants, struck from the record the lease whereby the premises described in the mortgage were demised to Kim and Hahn. Immediately following the making of that order, the motion of the defendants California Packing Corporation and Powers for a non-suit was granted upon the following grounds and reasons: “First. That the crop or crops, the value of which plaintiff is suing for, were not crops included in the mortgage. Second. Because the mortgage itself is invalid. The execution of the instrument was before a person who was one-half interested in the proceeds of these crops. Third. The general principle of law of course is that cited in the section, that the crops when severed—the old law was when severed from the soil—the crop mortgage became extinguished, and later the statute went one step further and stated they had to be removed from the premises. In other words, so long as the crops are on the premises of course the mortgage still exists, but wdien removed, the mortgage becomes extinguished —here are the exceptions—and the plaintiff must show we
Upon the merits, we first remark that the ground of the nonsuit first above stated, to wit, that “the crop or crops, the value of which plaintiff is suing for, were not crops included in the mortgage,” is, to the mind of the writer of this opinion, not only very technical but of doubtful validity. The argument supporting that position is, in effect, that the language of the mortgage describing the property to which it was intended the lien should attach, being in the present tense, or having reference to crops then (at the time of the execution of the mortgage) growing and standing on the land, and that the crops, the value of which the plaintiff is suing for, not having been planted and not “being or growing or standing” on said land until several months after the mortgage was executed, the crops involved herein are not and could not be held to be affected by the mortgage lien. The judgment, however, must be affirmed for other reasons, as presently we will show, and, therefore, while it is not necessary and we will not attempt to construe the mortgage for the purpose of ascertaining its just scope and effect, we will nevertheless suggest that it is very doubtful (at least in the mind of the writer) whether the language of the mortgage referred to, although in the present tense, is required to be so construed as to compel the conclusion that the mortgage does not include, nor was intended by the parties to cover, any crops of the kind specifically mentioned in the instrument (beans, tomatoes, corn, etc.) whenever seasonably produced upon the land within the year during which the notes and mortgage were to run (year 1918), it being shown and, indeed, a matter of common knowledge, that at the date of the execution of the notes and mortgage it was not the season of the year to plant and grow such crops. That the mortgage was intended and is sufficiently definite to include the crops involved herein would certainly be not only the just but the equitable construction of the mortgage and the view that a court of equity would be strongly inclined to take in such a case before it would deny to the mortgagee the only security he in good faith believed his mortgage afforded him for the pay
The other three grounds and the reasons upon which the nonsuit was presumptively granted practically involve the same ultimate propositions, viz., whether the crops were tortiously removed from the freehold and sold, and, even if so, whether the respondents were parties to those tortious and unlawful acts. Obviously, if the crops were removed by and with the consent of the plaintiff, then they were not wrongfully or tortiously removed, and in that case the lien of the mortgage ceased upon such removal by operation of law. This proposition follows from the terms of section 2972 of the Civil Code, which reads as follows: “The lien of a mortgage on a. growing crop continues on the crop after severance, whether remaining in its original state or converted into another product, so long as the same remains on the land of the mortgagor.”
It is in order first to inquire whether, assuming for the purposes only of such inquiry that Kim and Hahn wrongfully removed the crops from the land, the answering defendants knew, before or at the time they purchased the crop, that such removal was tortious, and the first step to that end is to ascertain whether they had either actual knowledge or legal notice of the existence of the mortgage at the times designated. As to actual knowledge, it is to be said that there is no evidence showing or even remotely tending to show that they had any such knowledge of the mortgage, and if, therefore, they are to be charged with any wrong in the transaction culminating in the sale of the tomatoes and com to them, they can only thus be bound because
[1] The contention of the respondents is, and so the court below expressly held in its decision of the motion for the nonsuit, that the mortgage was not legally recorded and, consequently, did not impart constructive notice of its existence to third parties for the reason, so it is asserted, that the evidence shows that T. F. Emerson, the notary public before whom the instrument was acknowledged, was a partner and joint beneficiary with the plaintiff in the notes and mortgage securing the same at the time of and subsequent to the execution of those instruments.
The law is, as is well understood, that every instrument required to be recorded, with the exception of those belonging to the class mentioned in sections 1159, 1160, 1202, and 1203 of the Civil Code, cannot be recorded unless its execution is acknowledged by the person executing it, “or if executed by a corporation, by its president or secretary, or other person executing the same on behalf of the corporation, ’ ’ etc. (Civ. Code, sec. 1161.) But it is the settled law in this state as well as in other jurisdictions “that an acknowledgment taken before a grantee, or one standing in the position of a beneficiary under a conveyance, or other written instrument, is void, and does not entitle an instrument to be recorded.” (Greve v. Echo Oil Co., 8 Cal. App. 275 , 284, [ 96 Pac. 904 ]; Merced Bank v. Rosenthal, 99 Cal. 39 , [ 31 Pac. 849 , 33 Pac. 732 ]; Lee v. Murphy, 119 Cal. 364 -370, [ 51 Pac. 549 , 955] ; Murray v. Tulare Inv. Co., 120 Cal. 311 , [ 49 Pac. 563 , 52 Pac. 586 ; Henrici v. South Feather Land etc. Co., 177 Cal. 442 , 446, [ 170 Pac. 1135 ].) While, as between the parties to a mortgage so acknowledged, the mortgage is in full force and of binding efficacy, the record of the instrument doeá not impart any notice to third persons of the mortgagee’s right under it. {Lee v. Murphy, 119 Cal. 370 , [ 51 Pac. 955 ], and cases there cited.)
The evidence in this case shows, without conflict, that at the time of the execution of the notes and mortgage, and, in fact, at all times, Emerson was not only a partner of the plaintiff in the real estate business in the city of Stockton but was interested as a partner of and beneficiary with plaintiff in the notes and mortgage in question here. The
Emerson, while denying that he had any interest in the land described in the mortgage, did not deny owning an interest in the crops grown thereon and the notes and mortgage. From his testimony generally, however, the inference appears to be justified, if not irresistible, that he was interested in the crops to the extent of the mortgage lien thereon. It was Emerson who personally prosecuted efforts to secure the payment of the note secured by the mortgage after the tomatoes and corn had become ready for harvesting. He testified that he saw said crops while they were growing; that he saw them after they had been harvested, and that he kept in such touch with the situation as to know that portions of said crops had been severed from the land and sold to the two answering defendants. He talked with Kim and Hahn about the crops and told them that they (plaintiff and himself) desired to secure payment of the note from the sale of said crops; that after he found out that the crop of tomatoes had been sold to the defendant Packing Company he “talked with Mr. Kim about it, and he was to make some payment upon the note for rent—this mortgage note; and I had been after him on that right along, because we wanted to get it fixed up. I asked him how soon he could pay something, and he said that he could pay just as soon as they remitted to him—the cannery company.” He further testified that, after considerable effort to obtain an interview with Mr. Davis, the local manager at Stockton of the Packing Corporation, after the latter had purchased the tomatoes and before paying for them, he met him (Davis) in the month of October, 1918, when “I told him that Mr. Kim owed us some money, and we had been after
Obviously, if the answering defendants had no actual knowledge or any notice of the existence of the mortgage at the time they purchased the crops in question, they were innocent purchasers and cannot be bound by the acts of Kim and Hahn in removing the crops from the freehold, even if such removal was tortious and unlawful.
[2] But, aside from the above' considerations, it is very plain that the nonsuit was properly granted for the reason that the evidence clearly shows that the understanding between the parties was that Kim and Hahn were to remove and sell the crops and with the proceeds pay their mortgage indebtedness to plaintiff and Emerson. From the testimony of Emerson, some of which is referred to in connection with the above consideration of the question of the validity of the acknowledgment of the mortgage, it is clear that he knew, before the removal of the crop, that Kim and Hahn intended to remove and sell the same. Emerson admitted that he knew that certain portions of the crop had been removed from the premises and sold, and that the mortgagors intended to remove and sell the remainder; yet neither the plaintiff nor his partner took any steps to prevent such removal and sale. But there was, evidently, according to Emerson’s uncontradicted testimony, no intention on the part of plaintiff and Emerson to object to such removal and sale—that, indeed, the removal and sale of the crops by the mortgagors
[3] Even if it were necessary to concede here that there was no other showing of an abandonment of the mortgage security by the plaintiff and Emerson but the circumstances to. which we last above refer, it is very clear that the judgment of nonsuit would have to stand; for, at the time of the purchase of the tomatoes by the Packing Corporation and the corn by Powers, the lien of the mortgage had prima facie been extinguished by the removal of those crops from the land on which they were grown (Horgm v. Zanetta, 107 Cal. 27 , 30, 31, [ 40 Pac. 22 ]; Gates v. Tom Quong, 3 Cal. App. 443 , 446, [ 85 Pac. 662 ]), and it rested upon the mortgagee, if he would still enjoy the benefit of his mortgage security, to rebut that presumption by showing 'that .the crops were removed without his knowledge and consent and that it was, therefore, a tortious removal. And, as before declared, even if it had been shown that the mortgagors had wrongfully removed the crops and sold the same to a third party, it would still be necessary, to bind the latter in an action for damages for such wrongful removal or for
The authorities cited by the appellant have to do with the eases in which the evidence clearly discloses a tortious removal of the mortgaged crop, and, of course, are not in point here.
The other assignments to which attention will be given involve objections to the action of the court in refusing to strike from the answers certain denials contained therein and heretofore referred to and in striking from the record the lease, previously received in evidence, whereby the premises on which the crops in question were grown were demised to Kim and Hahn by plaintiff.
1. As stated above, when considering the matter of the suggestion of the diminution of the record, the particular denials of the answer to which the motion to strike out was addressed were upon information and belief, and related to those allegations of the complaint which referred to the execution of the notes, the execution of the mortgage, the good faith thereof, the acknowledgment and recordation of the mortgage, that no part of the promissory note described in the mortgage has been paid, except a certain specific amount, and other like averments.
The disallowance of the motion to strike out the denials referred to was proper. The matters in the complaint to
2. The lease which was received in evidence and subsequently stricken from the record was, as seen, from the plaintiff to Kim and Hahn and demised to the latter, for a certain specified consideration, the premises upon which the crops in question, were grown. That lease, however, had been modified or changed in vital particulars, and was, consequently, not the lease under which Kim and Hahn were holding the property at the time that the said crops were removed from the premises and sold. But, waiving a consideration of that proposition, we cannot perceive wherein the order of the court striking the lease from the record, even if in any view erroneous, can be held prejudicial. The only purpose the lease could have served as evidence in the case would be to show that Kim and Hahn held possession of the land thereunder as tenants of the plaintiff. If it was important under the issues that this fact should be known, the reply is that the answering defendants conceded at the trial that the land was held by Kim and Hahn under a lease from plaintiff. But it seems to us that whether Kim and Hahn held possession of the land as tenants of the plaintiff or held such possession as tenants of some other person or themselves were the owners of the land is wholly without significance here if, as is conceded by all parties hereto be true, and which is the theory upon which the complaint was framed and the issues were joined and tried, they owned the crops which are referred to in the mortgage. The question whether the mortgagors of the crops held possession of the land could have no bearing on the case unless their ownership of the crops and right to mortgage them was made an issue, and no such question was raised in the case either by the pleadings or the proof.
The cases mentioned by appellant as in support of his position that the ruling striking out the lease from the record was error and prejudicial to his rights promulgate very sound and wholesome rules, but, while applicable in proper cases, have no application to the instant case upon the theory upon which its issues were framed and tried.
The judgment is affirmed.
Prewett, P. J., pro tern., and Burnett, J., concurred.
A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on April 19, 1921, and the following opinion then rendered thereon:
—The application for a hearing in this court after decision by the district court of appeal of the third appellate district is denied, without reference to or intimation of view on our part relative to the correctness of the discussion in the opinion on the question of the proper construction of the chattel mortgage as covering the personal property here involved, and the question of the validity of the notary’s acknowledgment in the matter of such chattel mortgage. The opinion' shows that the nonsuit was properly granted in that the removal and sale of crops here involved was not tortious, and also that the trial court did not err in denying motion to strike out certain denials of the answer, or in striking out the lease theretofore received in evidence.
All the Justices concurred.
Cases cited
- Greve v. Echo Oil Co. 8 Cal. App. 275 at 284 p. 523
- Merced Bank v. Rosenthal 99 Cal. 39 p. 523
- Lee v. Murphy 119 Cal. 364 p. 523
- Murray v. Tulare Irrigation Co. 120 Cal. 311 at 314 p. 523, p. 525
- Henrici v. South Feather Land & Water Co. 177 Cal. 442 at 446 p. 523
- Horgan v. Zanetta 107 Cal. 27 at 30, 31 p. 528
- Gates v. Tom Quong 3 Cal. App. 443 at 446 p. 528