Opinion
(Filed October 1, 1901.)
1. CHATTEL MORTGAGES — Claim and Delivery — Replevin — Possession — Assignments.
The assignee of a chattel mortgage is entitled to the possession of the property before the mortgage becomes due.
2. COUNTER-CLAIM — Claim and Delivery — Damages.
A counter-claim does not arise in an action for possession of mortgaged chattels by reason of the wrongful seizure of the property.
3. DEMAND — Chattel Mortgages — Claim and Delivery.
Where it is obvious from the defense set up that a demand would have been futile before instituting claim and delivery for mortgaged chattels, demand was unnecessary.
4. CHATTEL MORTGAGES — Possession — Assignment — Notice.
Where an assignee of a chattel mortgage acquires the note for value before maturity, he is not, in the absence of notice thereof, bound by an agreement between the mortgagor and mortgagee that the former is to retain possession until the note is due.
ACTION by L. M. Satterthwaite and others against W. S. Ellis, heard by Judge A. L. Coble and a jury, at Fall Term, 1900, of the Superior Court of CRAVEN County. From a judgment for the plaintiffs, the defendant appealed.
No counsel for the plaintiffs.
W. D. McIver, for the defendant.
The plaintiff, who is the assignee of a note and mortgage made by the defendant, brought this action to recover possession of the personal property conveyed in the mortgage before the maturity of the debt, and at the time of the issuing of the summons seized the property under a proceeding in claim and delivery. The defendant, in his answer, resisted the plaintiff's claim, averring that there was a verbal agreement between the mortgagee and himself, at the time of the execution of the mortgage, that he should be allowed to remain in possession of the property until the note should fall due, and also set up a counter-claim and prayed for judgment for a return of the property and for damages for the wrongful taking and detaining the same. Amongst the issues submitted was one (the fifth in number) as to whether demand was made under the mortgage and note on the defendant for possession of the property before the action was commenced, and another (9th) as to the value of the use and possession of the property seized from the date of its seizure to the trial — both issues submitted under the plaintiff's objection. The jury responded "No" to the fifth issue, and "$110" to the ninth. His Honor, notwithstanding the finding of the jury on the two issues, gave judgment that the plaintiff recover the property absolutely, the jury having found in response to the first issue that the plaintiff was entitled to the property.
His Honor instructed the jury, amongst other matters, that, "If the jury should find that the plaintiff purchased the note and mortgage from Mitchell (the mortgagee) for value and before it was due, unless they should find that the plaintiff had had notice of the agreement between Mitchell and Ellis (the defendant), that Ellis should retain possession of the property (if they should find there was such an agreement), the plaintiff would not be bound by the agreement, and that the jury should find that the plaintiff was the owner and entitled to the possession of the property, and answer `Yes' to the first issue; and that the fact that the defendant was then in possession of the property was not notice of such an agreement."
The defendant excepted to the charge, and the contention of his counsel here was, that the plaintiff as assignee of the mortgagee had no authority or right to have possession of the property, that being the privilege of the mortgagee only, and that that right belonged to the mortgagee, because, and only because, of the legal title being in the mortgagee — the legal title drawing the right of possession. But it seems to us that the better view is that the assignee was entitled to possession of the property. Under numerous decisions of this Court it is held that the assignee of a note secured by a mortgage is entitled to all the rights and privileges which the mortgagee had, except to sell the property under the mortgage, and in Jones on Chattel Mortgages, section 501, it is said: "The legal effect of the assignment is to transfer the entire interest of the mortgagee in the property to the assignee, who thereupon, in place of the mortgagee, becomes the general owner. If the mortgagee was entitled to the possession of the property, the legal effect of his assignment is the same as if he had been in the possession of the property, and had sold and delivered it to the assignee. His assignee may recover possession in the same manner that the mortgagee himself might have recovered it." And so also it is said in Jones on Chattel Mortgages, section 506: "An assignment by a mortgagee not in possession has the same legal effect as an assignment by a mortgagee in possession. It passes his entire interest in the property, and the assignee becomes entitled to all the rights of the mortgagee. If the latter is entitled to possession, his assignee in like manner is entitled to possession."
The defendant also excepted to the judgment, first, because it was for the absolute possession of the property; second, because the defendant was not allowed the amount found by the jury under the ninth issue; and also because the jury found that no demand had been made by the plaintiff on the defendant for the property before the action was commenced.
We think the judgment is correct. The action was not for the debt and foreclosure of the mortgage, but simply for the possession of the property. The debt was not due. If the action had been for foreclosure and there had been a verdict of the jury ascertaining the debt, and it had appeared that the property was largely in excess of the debt, the Court might have rendered a judgment for the recovery of the property with a proviso that the same should have been relieved of the lien and liability to seizure and sale by the payment of the sum actually due with interest and costs. Taylor v. Hodges, 105 N.C. 344.
But as we have said, the action was for the possession of the property itself and the plaintiff had the right to that, notwithstanding the debt was not due. Hinson v. Smith, 118 N.C. 503; Jackson v. Hall, 84 N.C. 489.
As to the second exception of the defendant to the judgment, it may be said that if the demand for such damages as are embraced in the ninth issue could be considered as a counter-claim (the same not having been set out in the answer, but only in the demands for judgment), it ought not to have been allowed in the judgment. It did not exist at the time of the commencement of the action, nor did it arise out of the same cause of action. It grew out of an alleged wrongful procedure in the present action — the seizure of the property by claim and delivery — and not out of the cause of the action. Kramer v. Electric Light Co., 95 N.C. 277; Snow v. Commissioners, 112 N.C. 335; Phipps v. Wilson, 125 N.C. 106.
In respect to the third exception to the judgment, it is sufficient to say that no demand was necessary for the possession of the property before the action was commenced. The answer shows, as we have pointed out, that the demand would have been useless. The defendant intended to resist the claim of the plaintiff. Buffkin v. Eason, 112 N.C. 162; Moore v. Hurtt, 124 N.C. 27. In the last-mentioned case it is said: "The sole purpose in requiring a demand before action is that the defendant shall not be taxed with costs when the plaintiff could have obtained the object of his action by simply making demand. When, therefore, the defendant set up a defence to the action, it appearing that a demand would have been futile, the courts do not hold that the omission to make demand is fatal."
Affirmed.