
    LIEN OF A WAREHOUSEMAN ON MORTGAGED CHATTELS.
    Common Pleas Court of Montgomery County.
    William E. Good v. Meyer & Mendoza.
    
    Decided, October 22, 1919.
    
      Conflicting Rights of a Warehouseman and Mortgagee of Chattels— iSection 8484 Construed.
    
    1. Where mortgaged chattels are held by a warehouseman who is demanding his charges as a condition of surrender of possession, an action of foreclosure and not of replevin is the mortgagee’s remedy on default of payment by the mortgagor.
    2. In such a case as between the mortgagee and the warehouseman, the right of possession until foreclosure is in the warehouseman.
    
      W. S. Hhotehammel, for plaintiff in error.
    
      A. 8. Schulmcm, for defendants in error.
    
      
      Affirmed by the Court of Appeals on the reasoning of the opinion of Judge Snediker. ! :
    
   Snediker, J.

This ease is before the court on error to the judgment of the municipal court where a judgment was rendered in favor of Meyer & Mendoza, the defendants in error, and against William E. Good, the plaintiff in error. The action was begun in the court below as one in replevin. An affidavit was filed by the defendants in error through their attorney in which they claimed the right to the immediate possession of certain chattel property. To the claim of the defendants in error the plaintiff in error filed an answer in which he said:

‘ ‘ This answering defendant represents' to the court that he has stored in his warehouse in the city of Dayton, Ohio, the goods and chattels set out and described in the statement of claim and affidavit in replevin herein and the bailiff’s return thereon; that second, day of September, 1916, and this answering defendant has a valid lien upon said goods for the hauling of said goods amounting to the sum of three dollars; that he has a valid, legal said goods were stored with this answering defendant on the' and subsisting warehouseman’s lien upon said goods and chattels hereinbefore described and set out for the said hauling as hereinbefore set out and for the storage at the rate of two dollars per month for each and every month from said second day of September, 1916, until his said, charges and lien have been fully paid and satisfied: This answering defendant further represents to the court that his said warehouse lien is prior to and paramount to all claims, debts or demands against said goods of every kind and description whatsoever. This answering defendant further says that he is entitled to the legal possession, control and custody of said goods and chattels hereinbefore described and set out until his said warehouseman’s lien is fully paid and satisfied. And he prays the court that his rights herein may be protected and satisfied and for such other relief as he may be entitled to in the premises.”

The facts which relate to the issue made up by the statement of claim and affidavit filed in the municipal court and by the answer filed by Good, as they appear in an agreed statement of facts filed herein, are as follows:

On the 17th day of March, 1916, Arthur B. Cudney, who is also a defendant, purchased of Meyer & Mendoza the goods here claimed in replevin, which were household goods; the entire purchase price was $389.90. On this amount there was paid to August 21, 1916, the sum of $134. At the time the goods were bought Cudney agreed to pay at the rate of four dollars a week, and executed and delivered to Meyer & Mendoza a chattel mortgage upon all the goods to secure the purchase price. This mortgage contained the following clause:

"If the said Arthur B. Cudney and Mrs. Arthur B. Cudney, his wife, shall promptly pay to Meyer & Mendoza each week hereafter, beginning on the 24th day of March, 1916, the sum of four dollars per week, until the sum of $299.60 (the balance of the purchase price), shall have been paid, then this conveyance shall become null and void; otherwise to remain in full force and effect, ”

This mortgage was filed with the recorder of Montgomery county, Ohio, on March 8th, 1916. There was due upon the price agreed to be paid by Cudney on and after August 21st, 1916, the sum of $255.90. No payments were made by Cudney nor by his wife after Aust 21st, 1916. On September 2nd, 1916, the goods were, at the request of Cudney, who was in possession, hauled to and stored in the warehouse of the William E. Good Transfer Company, here, as we understand, represented by William E. Good, and were there kept until April 18, 1917, when an affidavit in replevin was filed by these defendants in error. William E. Good, the plaintiff in error is a warehouseman within the meaning and purview of the General Code and of those sections which particularly refer to warehouses, warehouse receipts, etc.

Cudney and his wife are in default for answer or demurrer, and the question is now before the court as to which of these parties, plaintiff in error or defendants in error, is entitled to the possession of the goods and chattels in question.

The solution of what has been propounded for the court to answer involves a construction of Section 28 of the Code, passed May 9th, 1908, entitled: ' ‘ An act to establish a law uniform with the laws of other states on warehouse receipts. ’ ’ Section 28 is now Section 8484 of the General Code, and reads as follows:

“Subject to the provisions of Section 30, a warehouseman’s lien may be enforced:

(a) Against all goods, -whenever deposited, belonging to the person who is liable as debtor fob the claims in regard to which the lien is asserted; and

(b) Against all goods belonging to others which have been deposited at any time by the person who is liable as debtor for the claims in regrad to which the lien is asserted, if such person has been so entrusted with the possession of the goods that a pledge of the same by him at the time of the deposit to one who took the goods in good faith for value would have been valid. ’ ’

Section 30 of the act, now Section 8485 of the Code, has no relation to the facts before us and need not be quoted.

It is apparent from the agreed statement of facts that at the time of the filing of this action in replevin, Cudney, who had deposited the goods with the plaintiff in error, was in default for payment, and the chattel mortgage given by him to the defendants in error, had become absolute. There remained to Cudney but one interest or right in the goods and chattels covered by the mortgage. That interest or right was the equity of redemption. There is not in Ohio any section of the Code giving the mortgagor a right to redeem. So that he has but the equitable right to do so. So considered,

“redemption is an equitable process by which a mortgagor or other person interested in personal or real property, subject to a mortgage or incumbrance, may recover the absolute ownership thereof upon certain terms which are usually the payment of the principal amount due with interest thereon and the costs of the mortgages.” * * “Wherever there is a right to foreclose there must of necessity be a right to redeem, because foreclosure is in default of redemption. An equity of redemption is the right which the mortgagor has of redeeming his property after it has been forfeited at law for the non-payment of the mortgage debt, or money secured.by the mortgage at the time stipulated and agreed upon by such mortgage, by paying, the amount of debt, interest and costs. It is the mere creature of a court of equity, founded upon the principle, that a mortgage is nothing but a pledge for the purpose of securing the payment of the amount for which the mortgage is given to the mortgagee, the ownership of the property being considered, upon the principles of equity and justice, to be in the mortgagor, subject only to the legal title of the mortgagee as far as such title may be necessary for his security.” Herman on Chattel Mortgages, pp. 459-460.
“The title of a mortgagee, on default, can not become so far absolute as to deprive the mortgagor of all his right or interest in the property. In those states where it is held, that upon default the title is perfected in the mortgagee, the doctrine is also well settled, that the mortgagor, in equity, has his right of redemption, and the 'absolute title’ which it is held that the mortgagee acquires, which is so constantly used by the courts, is an absolute legal title, and that, notwithstanding default, there is a right, or, as it is called, an equity of redemption remaining in the mortgagor.” Herman on Chattel Mortgages, page 463.

In 87 Ark., page 502, quoting 11 Amer.-Eng. Ency. of Law, 2nd Ed., 209, 210, we find:

.“An equity of redemption is an asset in the mortgaged property, and is subject to all the incidents of ownership. It may be conveyed or devised; it descends to the owner’s heirs or personal representatives according to the nature of the mortgaged property. ’ ’

As at the time when this mortgage became, as we ordinarily say, absolute, Cudney had this right, this interest in these chattels, our question is, is this such an interest, the property being in the possession of Cudney, that a pledge of the same by him at. the time of his deposit of the goods with the warehouseman, would have been valid?

It is the law that “it is not necessary that the pledgor be the absolute owner of the thing pledged. He may have only a limited interest therein.” Hale on Bailments and Carriers, page 113.

In the 36 Conn., in the case of Robertson v. Wilcox, page 426-430, the Supreme Court, in discussing the questions before it, say:

‘ ‘ Sometimes the pledgor has only a limited title to the property pledged. He may have only an interest for life, or for a term of years, or he may have simply a lien, or a right by a former' pledge; still he may pledge the property to the extent of his interest.
“A debtor may pledge any interest that he owns in property.” 31 Cyc., page 794.

We are led to conclude, therefore, that at the time these goods were stored by Cudney, he could make a pledge of the same to the extent of the interest which he then had, and such pledge would be valid. If the deposit was made under these conditions, what are the respective rights of the parties here represented? As we have said, the defendant below instituted proceedings in replevin, and claimed the right to possession; and Good, the plaintiff in error, then claimed the same right. No question could have been made as to the right of the defendant in error, except for the fact that this deposit of the goods had been made with the warehouseman.

What are the rights of the warehouseman who is entitled to hold the goods as security for his services as against the defendants in error? The same authority which we before quoted (36 Conn.), defines the rights of a pledgee under such circumstances and follows what has already been recited with these words:

‘ ‘ But the pledgee in all such cases has no right to sell the property on the non-fulfillment of the contract, although he may pursue the proper course for the purpose, for the pledger has no such right to confer. The pledgee must content himself in such ease with holding the possession of the property till his debt is paid, or the interest of his pledger in the property has expired. ”

And in 31 Cye., already referred to, after what we have quoted, we find, "and the pledgee will take such property subject to the liens, whether legal or equitable, of other parties, existing at the time.”

The rights of a warehouseman are no greater when his depositor has but a limited interest. When would this interest of Cudney, or his right to an equity of redemption, expire ?

Plainly only upon foreclosure of the mortgage by the defendant in error, and until such foreclosure Cudney is entitled, by availing himself of the right to the equity of redemption, to redeem his goods. Kent (Vol 2, pages 634-635) defines the lien of a warehouseman, as a particular lien favored in law. Possession is not only necessary to the creation, but to the continuance, of such a lien. The court may not find the right of possession to the chattels so held by the warehouseman in the mortgagee, when the lien which exists, and which the law favors, can only be preserved by possession of the warehouseman. Foreclosure will terminate both the interest of the mortgagor (Cudney) and the lien of the plaintiff in error, and this is the proper remedy of the defendant in error. At the commencement of this action plaintiff in error had the right to hold the property to preserve his lien. This being true, and no foreclosure having been brought by the defendant in error up to this time, it is our opinion that the court below erred in finding for the defendant in error and against the plaintiff in error.  