278 P. 224

ADVANCE-RUMELY THRESHER COMPANY, a Corporation, Appellant and Cross-respondent, v. J. F. BRADY, Respondent and Cross-appellant.

No. 5092.Supreme Court of Idaho.
June 6, 1929.

Page 727

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action to recover deficiency due after foreclosure of chattel mortgage. Judgment for defendant. Affirmed.

H.R. Turner, for Appellant, cites no authorities on points decided.

F.E. Tydeman, for Respondent.

Unless the chattel mortgage was foreclosed in the manner provided by statute, plaintiff is not entitled to recover any deficiency.

In Rein v. Callaway, 7 Idaho 634, 65 P. 63, this court held, “a mortgagee, who by his own illegal acts disposed of the mortgaged personal property cannot maintain an action for any balance due on the mortgage debt.”

The provisions of law relative to the summary foreclosure of chattel mortgages must be strictly followed. If there is a deviation therefrom, and the property is sold by or through the acts or procurement of the mortgagee, without such compliance with the statute, he cannot thereafter maintain any action to collect a deficiency. (First Nat. Bank v. Poling, 42 Idaho 636, 248 P. 19.)


Respondent purchased a tractor from appellant in May, 1925, giving in payment three notes secured

Page 728

by a chattel mortgage. The first note was due in November, 1925. Default having been made in its payment and by the terms of the notes the entire amount having thereby become due, appellant sought, by notice and sale, to foreclose the chattel mortgage and thereafter brought this action to recover a deficiency judgment.

Respondent in his answer set out three affirmative defenses and also counterclaimed on three causes of action. For a first defense he alleged that the chattel mortgage had not been legally foreclosed. For a second defense he alleged that a new agreement had been made by the parties in December, 1925, whereby the tractor which he had purchased in May was to be traded for a new one, he to pay the difference in price between the old and the new tractor and be allowed as a credit on the new the payments which he had made on the old. The third defense was based on alleged false representations made to respondent by appellant’s agents concerning the condition of the tractor, its power and performance.

In his cross-complaint respondent stated three causes of action. The first alleged a conversion of the tractor by reason of the alleged illegal foreclosure. The second cause was, in effect, based on alleged false representations made to respondent by appellant’s agents concerning a difference in the cost and effectiveness of plowing with horses and with a tractor. The third cause in the cross-complaint was based on the failure of appellant to deliver the tractor, as the result of which respondent suffered loss from his inability to cultivate his crops.

In its instructions the trial court withdrew from the consideration of the jury the third affirmative defense and the three causes of action in the cross-complaint on the ground that there was no evidence to support them. The only questions submitted concerned the legality of the foreclosure and the existence of the alleged new agreement. The jury found for the respondent. Appellant and respondent have both appealed, appellant from the judgment and respondent from the action of the trial court in withdrawing from the consideration of the jury his third affirmative defense and the allegations of his cross-complaint.

Page 729

The evidence conclusively shows that the new contract, on which respondent bases his second affirmative defense, was not to become effective until accepted by appellant at its home office, and that it was not so accepted. All evidence relating thereto should have been stricken. Appellant, however, was not prejudiced by the failure of the court in this respect since respondent recovered nothing on account of such evidence having been introduced.

The third affirmative defense was based on alleged false representations made orally to respondent by appellant’s agents. It did not allege fraud, nor a breach of implied warranties, nor a breach of any valid express warranties. By the terms of the contract, express warranties, to be binding, had to be in writing, and consequently allegations and proof of a breach of oral express warranties failed to state a good defense to an action based on the contract. The court did not err in withdrawing this defense from consideration by the jury.

The first cause of action in the cross-complaint, like the first affirmative defense, is based on the alleged illegal foreclosure of the chattel mortgage. Respondent, alleging a conversion of the tractor by appellant, seeks to recover damages for such conversion.

Respondent challenged the foreclosure proceedings and set up conversion (Marchand v. Ronaghan, 9 Idaho 95, 72 P. 731) on two grounds: first, that no demand had been made of the mortgagor for possession of the property prior to the foreclosure by notice and sale, and secondly, that the new purchase agreement superseded the chattel mortgage and extended the time for payment, and therefore the appellant had no right to foreclose.

Failure to foreclose in compliance with the statute deprives the mortgagee of the right to any deficiency. (Garrett v. Soucie, 46 Idaho 289, 267 P. 1078.) Conceding but not deciding that, because of failure to demand possession prior to foreclosure, respondent was entitled to urge conversion, the measure of damages in such case would be the value of the converted chattel at the time of the conversion. (Unfried v. Libert, 20 Idaho 708, 119 P. 885; Hoover v.

Page 730

Brookshire, 32 Okl. 298, 122 P. 171; Swank v. Elwert, 55 Or. 487, 105 P. 901; 24 Cal. Jur. 1052.) But the damages may be mitigated by offsetting against them the amount of any lien outstanding against the property at the time of the conversion. (Zarillo v. Le Mesnager, 51 Cal.App. 442, 196 P. 902; Jones v. Horn, 51 Ark. 19, 14 Am. St. 17, 9 S.W. 309; Jacobson v. Aberdeen Packing Co., 26 Wn. 175, 66 P. 419; 38 Cyc. 2103; 24 Cal. Jur. 1042.)

The tractor sold for $800 shortly after the alleged conversion, which was considerably less than the amount of the appellant’s lien. Respondent offered no evidence to show that the machine was worth more than that, or that the sale, as conducted, was not a fair one. While the question of the value of a converted chattel is ordinarily one for the jury, there being, in this case, no evidence of value, we conclude that no error was committed by the trial court in withdrawing this question from the jury.

Likewise, the court did not err in withdrawing from the jury the second cause of action in the Cross-complaint. It was based on oral representations made by appellant’s agents and in view of the terms of the contract, as pointed out in the discussion of the third affirmative defense above, did not state a cause of action.

The third cause of action in the cross-complaint was properly dismissed because there is no evidence that respondent made any complaint to the home office of appellant for its failure to deliver the tractor at Bancroft as the contract provided. Conceding that such a provision might have been satisfied by notice to the local agent of appellant, the evidence fails to disclose any such notice. The complaints made dealt not with the failure to deliver but rather with the failure of the tractor to operate after delivery.

The judgment is affirmed.

No costs awarded.

T. Bailey Lee, Wm. E. Lee and Varian, JJ., and Baker, D.J., concur.

Page 731