Opinion
Nov. 23, 1971.
Editorial Note:
This case has been marked 'not for publication' by the court.
Paynter, Paynter & Scull, Richard B. Paynter, Eby & Reddin, George, M. Reddin, Fort Morgan, for plaintiff-appellant.
Wells & Snydal, E. Ord Wells, Fort Morgan, for defendant-appellee.
DWYER, Judge.
This was an action to enforce chattel mortgage rights in certain personal property. The parties will be referred to by their trial court designations.
The relevant facts of this case are not in dispute. In February 1966, Harold Adams, who is not a party to this action, executed a promissory note payable to the defendant in the amount of $11,500. In March 1966, Adams executed another promissory note payable to the plaintiff in the amount of $15,000. Each of these notes was secured by a chattel mortgage covering various mechanical equipment including a porta drill and drill stem. Insofar as the two mortgages covered the same property, the chattel mortgage held by the plaintiff was junior to that held by the defendant. Subsequent to the execution of the promissory notes and chattel mortgages, the defendant took possession of the chattels covered by his mortgage. Adams then instituted an action against the defendant for conversion alleging that the defendant had wrongfully taken possession of such property. This action resulted in a judgment in favor of Adams which included $20,625 as the value of the converted property. In satisfaction of this judgment, the defendant was allowed a credit or setoff of $11,500 plus interest. Such sum constituted the full amount of the promissory note held by the defendant which was secured by his chattel mortgage. Defendant then paid the balance of the judgment and acquired the title which Adams had to the converted property.
Plaintiff subsequently instituted this action against the defendant to enforce her rights as the holder of a chattel mortgage covering the porta drill and drill stem. At the close of the evidence, the trial court, sitting without a jury, ruled as follows:
'* * * that the Defendant has title to the Porta Drill and Drill Stem subject to first chattel mortgage in favor of himself in the amount of $11,500.00 plus interest and to a second chattel mortgage in favor of the Plaintiff in the amount of $15,000.00 plus interest, and if the Plaintiff shall pay to the Defendant the sum of $12,576.65 covering both principal and interest secured by the first chattel mortgage that she shall acquire title to the Porta Drill and Drill Stem free and clear of any claims of the Defendant in said equipment. * * *'
It is from this ruling that plaintiff brings this appeal.
The trial court erred in concluding that at the time plaintiff's action was brought the defendant still held a mortgage lien against the property in question. The undisputed facts of this case disclose that the setoff or credit allowed the defendant in satisfaction of the judgment obtained against him by Adams discharged the mortgage debt. Our Supreme Court has expressly ruled that where the debt secured by a chattel mortgage is paid or discharged the interest transferred by the mortgage is extinguished. Stokes v. Kirk, 101 Colo. 591, 75 P.2d 1041. See also 14 C.J.S. Chattel Mortgages s 328. Applying this rule to the facts of this case, the lien of defendant's mortgage has been extinguished, and defendant's title to the chattels is subject to the lien of plaintiff's mortgage.
The judgment is reversed and remanded for further proceedings not inconsistent with this opinion.
ENOCH and DUFFORD, JJ., concur.