
    Griffith & Wedge v. Morrison and Matthews.
    (Case No. 1272.)
    1. Conditional sale — Mortgage.— See this case for a transaction construed to have been originally a conditional sale of an engine and mill, but to have been subsequently changed into an absolute sale, with a mortgage from the purchaser to secure the purchase money.
    2. Chattel mortgage — Registration — Removal of chattels.—Under art. 4993, Pasch. Dig., a mortgage of personal chattels having been recorded in the county where the mortgagor resided, and where the chattels were situate, this record was constructive notice to subsequent purchasers, even though the property were removed to another county, record in such other county not being necessary unless the mortgagor should also remove there.
    3. Same.— The record continued to operate as notice although the purchaser bought after the act of April 22, 1879, took effect. • R. S., Appendix, pp. 15, 16.
    4. Power of sale—Notice.— A letter from the mortgagees authorizing the mortgagor to sell for cash did not give authority to barter, and a purchaser would be chargeable with notice of the extent of the power.
    Error from Anderson. Tried below before the Hon. Peyton F. Edwards.
    This was a suit brought, by the plaintiffs below and plaintiffs in error, Griffith & Wedge, against the defendants, John D. Morrison and John A. Matthews, praying as against Morrison a personal judgment on three promissory notes, made, executed and delivered by him to the plaintiffs, and a judgment foreclosing a lien given by him to secure notes on a certain tract of land; and praying as against both defendants, a judgment subjecting a certain steam engine and saw mill also to the payment of the notes.
    The material facts of the ease are substantially as follows: Defendant Morrison, in payment of the engine and mill previously contracted to be sold to him by Griffith and Wedge, executed the three promissory notes sued on, all of date December 20, 1877; one for $266, due on or before March 15, 1878, the other two for $667 each, one due August 1, 1878, the other January 1, 1879, all bearing ten per cent, per annum interest from date, and containing a stipulation to pay ten per cent, attorney’s fees, if sued upon. Each of these notes contained the recital that it was given for part purchase money of the steam engine and saw mill that day contracted on payment of the purchase money to be sold to Morrison by Griffith & Wedge, the title, ownership and right of possession thereof to be and remain in the said Griffith & Wedge until full payment of this note; and in default of payment at maturity, they were authorized to take immediate possession of the property, with or without legal process, and to sell the same at public or private sale, and to apply the proceeds to the balance remaining unpaid.
    On March 15, 1878, the date of the maturity of the first of the three notes, Morrison, for the recited consideration of $5, paid by Griffith & Wedge, made, executed and delivered to them a deed of trust, or mortgage with power of sale, on said engine and mill with other property, to secure the payment of said notes, in the usual form of said instruments, as though he had full ownership of the property, reciting that in default of payment of any one or more of said notes, the said Griffith & Wedge were authorized to take possession and control of said property after thirty days’ notice of their intention so to do, and to sell the same after ten days’ notice, in as full and complete manner as the said Morrison could then possibly do; the proceeds, after paying the costs and expenses, to be applied to the payment of said notes, whether due or not. It was further stipulated that said instrument was to be construed to give to the said Griffith & Wedge as full, complete and ample authority thus to deal with said property as any power of attorney or other instrument could possibly do, and that the same was irrevocable. By the terms of the instrument, Morrison was to remain in possession of the property until default might be made. Morrison was then, and has continued to be ever since, a resident citizen of Henderson county, Texas, and Griffith & Wedge of the state of Ohio. On August 30, 1878, this deed of trust was duly recorded in the county of the residence of Morrison. On the day of the execution of the above deed of trust, Morrison, also for the security of said notes, executed and delivered another to George F. Alford on a certain tract of land in Henderson county. This contained substantially the same recitals as the first, with the exception that the land was to be sold as under execution. This was also recorded in that county.
    The testimony shows that about May 1,1880, the engine and mill, after having been operated in Henderson county, was, without the knowledge or consent of Griffith & Wedge, removed by Morrison into Anderson county, and that more than four, months thereafter, about October 16,1880, he sold and exchanged the same to the other defendant, Matthews, for $40 cash and a house and lot in Palestine valued at $1,000. The deed of trust was not recorded in Anderson county. There was testimony that the defendant Matthews had actual notice of the lien of Griffith & Wedge, but he testified that he did not, and also testified that he examined the records of Anderson county but did not .find any record notice of their claim.
    
      The defendants read in evidence a letter dated Zanesville, Ohio, March 8, 1880, written by the plaintiffs, Griffith & Wedge, addressed to the defendant John D. Morrison, Henderson county, Texas, in reply to a letter from Morrison of March 3, 1880. After replying to what Morrison said about his renting the machinery to another party, they say: “We must have our money, Mr. Morrison, and we are needing it now. Would advise you to sell out to some responsible person and pay us off. We have heard indirectly that Mr. A. W. Thompson, of Tennessee colony, Anderson county, Texas, would buy your machinery, and if you can sell to him, get part cash, and his notes for balance, with security, we will cancel your debt on receipt of money and said notes enough to pay us what you owe us.”
    The jury returned a verdict for the plaintiffs, Griffith & Wedge, against the defendant Morrison, for the debt, with a foreclosure of the trust deed on the land, and in favor of the defendant Matthews for the mill, assessing its value at 01,040, and judgment accordingly.
    From that judgment this writ of error was prosecuted.
    
      R. A. Reeves, for plaintiff in error,
    used the first assignment of error as a proposition, citing Act of April '22, 1879, B. S. App., p. 15; Act of February 5, 1840,.B. S., art. 4341; Act May 12, 1846, B. S., art. 4294; Rogers v. Watrous, 8 Tex., 62; Tunstall v. Wormley, 54 Tex., 480.
    II. The title to the engine and mill is in the plaintiffs, Griffith & Wedge, and Morrison had no authority to make the sale, and no title passed to Matthews, as his purchase was subject to plaintiff’s mortgage, as shown by the notes and mortgage, and the verdict was against law and the evidence. Sacra v. Semple et al., from Grayson county, Austin term, 1881, by Com’rs of Appeals; Deal v. Smith, Tex. Law Jour., Ho. 42, p. 663, June 29, 1881, by Com’rs of Appeals; 1 Pars, on Con. (5th ed.), 538; Story on Sales, secs. 1, 300; 32 Me., 28; 7 Ark., 253; 20 Barb., 368; 21 Barb., 582.
    III. After charging the jury, if they found that Matthews had notice or was put on inquiry, to find for the plaintiffs against him, the court erred in qualifying the charge as follows: “ unless you find that the letter to Morrison from Griffith & Wedge was written to give said Morrison power to sell the property, and by such sale waived the lien of Griffith & Wedge, and that said Morrison so received and acted upon said letter in making the sale; and if you so find in regard to the letter, you will find for the defendant Matthews, whether he had notice of the lien or not; ” when the letter shows that Griffith & Wedge did not waive their lien, and the evidence shows that the conditions on which defendant Morrison ivas authorized to sell, if he had such authority, were not complied with, and the finding of the jury ivas against law and the evidence. . . .
    The defendant Morrison testified for himself and Matthews that he was acting under authority of the above letter when he sold the property to Matthews, and that he told Matthews there ivas no claim or lien of any kind on the property, and that he had the right and power to sell it, and that he sold it for its value to Matthews for $1,040,—forty dollars in cash, and the balance in a house and lot in Palestine, which he afterwards sold, and that he had not paid the proceeds to the plaintiffs. It. K. Murphy testified that the property was worth about $1,500. The original petition was filed June 30, 1881. Trial and judgment, December 10, 1881.
    
      Greenwood & Gooch, for defendants in error.
    I. The court charged the law applicable to this case in this: “ That the mortgage or deed of trust on the engine not being recorded in Henderson county within four months from the time the property was removed into Anderson county, it ivas not constructive notice to Matthews,” the purchaser from Morrison who had possession. Dallas v. Loftin, 6 Tex., 499; R. S., art. 4341; Act April 22, 1879, sec. 7; R. S. App., p. 18.
    IX. The act of April 22, 1879, did not repeal art. 4341 of the Revised Statutes, as said act did not legislate upon the removal of .mortgaged property; but if so, it did not affect the rights of persons claiming under or against mortgages recorded under prior laws. R. S., art. 4341; Act April 22, 1879, sec. 7.
    III. A bona fide purchaser of personal property, who purchases from a vendee holding possession under a conditional sale, and pays value without notice of the conditions, will acquire the title. Neale v. Sears, 31 Tex., 105; Haggerty v. Palmer, 6 Johns. Ch., 437; Keeler v. Field, 1 Paige, 315; Smith v. Hynes, 1 Seld., 41; Rose v. Story, 1 Barr (Pa.), 190; Martin v. Mathiot, 14 Serg. & R., 214.
    IY. This suit was not for the possession of the property under claim of ownership; but appellants confirmed the sale as absolute, by taking a mortgage on the engine, etc., "and on other property, and by electing to sue for the debt and not the property; and they are estopped from disputing Morrison’s title.
    Y. If the law is that Matthews was chargeable with constructive notice of the deed of trust on the engine, etc., Morrison nevertheless had authority to sell; or if he did not, Griffith & Wedge treated Morrison as having "authority to sell; and, in either event, appellants cannot, after Matthews has purchased and paid for the property, dispute the authority or the title. Harrison v. Boring, 44 Tex., 256; Myer’s Dig., vol. I, sec. 11, p. 363.
   Bonner, Associate Justice.

The first assigned error is as follows:

“ First. After charging the jury that ‘ the record of a mortgage in the proper county is notice to all persons, whether they actually knew of the record or not, by what is called constructive notice,’ the court erred in charging that the mortgage or deed of trust on the engine not being recorded in Anderson county within four months from the time the property was removed into that county, was not constructive notice to Matthews; making the plaintiff’s' right to recover against the defendant Matthews depend on the inquiry whether or not he had actual notice of the plaintiff’s lien, or was in possession of such facts as would put a man of reasonable judgment upon inquiry, so that by the use of diligence, by pursuing his investigations, he could have ascertained the fact of the existence of the lien; and in further charging as follows: ‘If you do not find that said Matthews either had actual -notice of the plaintiff’s lien, or knew such facts as would put him upon inquiry by which he could have ascertained such lien existed by making proper inquiries, you will find in favor of said Matthews, and inquire no further as to him.’ ”

Upon the case as made by the record, the following legal questions arise:

First. Was the original contract between Griffith & Wedge and defendant Morrison, as evidenced by his promissory notes, a conditional sale of the steam engine and saw mill for the purchase money of which the notes were given?

Second. If so, was its character not changed to a mortgage by the subsequent execution of the deed of trust, or mortgage with power of sale, in the absence of any evidence to the contrary ? And if thus changed to a mortgage, was it necessary to record the same in Anderson county within four months after the removal of the property into that county, to constitute constructive notice to defendant Matthews, the legal effect of the verdict being that he did not have actual notice?

Third. What was the effect' of the written instructions to Morrison to sell, contained in the letter to him from Griffith & Wedge?

I. We are of - opinion that the original contract, as evidenced by the notes sued on, was a conditional sale, by "which the payment of the notes was a condition precedent to the vesting title to the engine and mill into Morrison.

The authorities are numerous to the effect that, when a sale of chattels is conditional in the sense that the right of property therein does not pass until the performance of a condition precedent, as that the title shall remain in vendor until payment of the purchase money, the mere possession by the vendee will not amount to such apparent ownership as will enable him to give to a second purchaser a title superior to that by which he himself holds, although this second purchaser may have no notice of the want of title in his vendor. Wade on Motice, § 72; Benjamin on Sales (3d Am. ed.), by Bennett, 285, both citing numerous authorities in notes.

II. We are, however, further of opinion that the subsequent transaction between Griffith & Wedge and Morrison changed the character of the original contract from that of a conditional sale to that of a mortgage, in which Morrison, as the recognized owner of the property, became the mortgagor, and Griffith & Wedge the mortgagees. The inducement to this was doubtless the failure of Morrison to pay the first note at maturity, and the additional security given by the deed of trust on the land.

The deed of trust; or mortgage with power of sale, on the engine and mill ivas duly recorded in Henderson county, which was then, and has since continued to be, the residence of Morrison, prior to the sale to Matthews; and the latter must, by virtue of this record, be charged' with constructive notice of the lien of Griffith & Wedge, unless the failure to record it in Anderson county, within four months after the removal of the engine and mill into that county, had the effect to impair that notice.

It is said by a learned author that “ the object in requiring the record of the mortgage is to give publicity to it, and to provide a source of information common to all persons, so that they may determine with some degree of facility, convenience and certainty, the question of title to the property, whenever they may be interested to know it; while at the same time it is not among the purposes of the recording acts to subject a bona fide mortgagee to the inconvenience of the constant vigilance and ceaseless watching which would be requisite to guard and secure his interests, if he were obliged to record his mortgage in every town into which the mortgagor might see fit to remove with the property. If he was required to do this, his security would be well nigh worthless; for before he could do this, a creditor of the mortgagor might seize the property by process of law, or the mortgagor himself might pass the title to it by way of a sale to an innocent purchaser.” Jones on Chattel Mortgages, § 260.

The statutes providing for chattel mortgages have generally required the record to be made in the county of the residence of the mortgagor, as the most appropriate place and source of this information, common to all persons. Id., § 250.

This is the rule "adopted both by our statutes in force when the deed of trust in this case was recorded and when the sale to Matthews was made. Pasch. Dig., arts. 4985, 4993; E. S., App., 16, secs. 1-7. By the former, intended for the protection both of the mortgagee and innocent third parties, it is provided that “ every deed respecting the title of personal chattels hereafter executed, which by law ought to be recorded, shall be recorded in the clerk’s office of the county court of that county in which the property shall remain ; and if afterwards the person claiming title under such deed shall permit any other person in whose possession such property may be, to remove with the same or any part thereof out of the county in which such deed shall be recorded, and shall not, within four months after such removal, cause the deed aforesaid to be certified to the county court of the county in which such other person shall so have removed, and to be delivered to the-clerk to be there recorded, such deed, for so long as it shall not be recorded in such last mentioned county, and for so much of the property aforesaid as shall have been removed, shall be 'void in law as to all purchasers thereof for valuable consideration, without notice, and as to all creditors.” Pasch. Dig., art. 4993.

The statute in force when the sale to Matthews was had, required the mortgage to be recorded in the county where the property was situated at the time, or if the mortgagor or person making the same be a resident of this state, then in the county of which he shall at the time be a resident. It further provided that nothing contained in that act shall in any manner affect the rights of any person under any instrument heretofore recorded as required by law. E. S., Appendix, 16, secs. 1-7. The statute first above quoted (Pasch. Dig., art. 4993) evidently intended by the phrases, “ shall permit any other person in whose possession such property may be, to remove with the same or any part thereof out of the county,” etc., and “ cause the deed aforesaid to be certified to the county court of the county in which such other person shall so have removed,” that the record in the county of the residence of the mortgagor at the time of the execution of the mortgage, would be notice to any subsequent purchaser, even though the property itself might be removed to another county; and that it was not necessary to record it in that county unless the mortgagor might also have removed there.

[Opinion delivered October 31, 1882.]

In this case, although the engine and mill were, without the consent of Griffith & Wedge, removed into Anderson county, the mortgagor, Morrison, himself continued to reside in Henderson county.

We are of opinion that the record in Henderson county was constructive notice to Matthews, and that the court erred in charging the jury that it was not such notice.

III. If defendant Matthews rests his claim under the authority to sell given to Morrison by the letter to him from Griffith & Wedge, then he is in law chargeable with notice of its contents and of the extent of the power therein conferred. At most this was a power to sell for cash or its equivalent, and was not a power to barter or exchange for lands. Therefore the exchange for the house and lot in Palestine was without authority, and not binding on Griffith & Wedge.

Reversed and remanded,  