Nicholson v. McDonald

PEEK, J.

Defendant McDonald appeals from a judgment in favor of plaintiff Nicholson in an action for conversion of certain personal property comprising tools and fixtures used in the operation of an automotive repair shop.

On or about September 1, 1953, McDonald sold his automobile agency, which was located in the city of Davis, to one Lowell Houghton, together with all of the equipment. As a part of the sale Houghton executed two promissory notes, one in the sum of $4,500 and the other in the sum of $6,600, both of which were secured by a chattel mortgage on the personal property located on the premises. The $4,500 mortgage was executed on September 1, 1953, and contained a clause to the effect that it was also “security for the repayment of sums that may be advanced, expenditures that may be made, or indebtedness or obligations that may be incurred subsequent to the execution hereof.” This encum

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brance was recorded. The $6,600 chattel mortgage shows two dates on its face, September 1 and September 28. However, the notarial acknowledgment shows the date of August 28. This document was never recorded.

In June or July of 1956, Houghton executed a bill of sale to Nicholson, covering all of the personal property which was security for the promissory notes previously given to McDonald. Houghton discussed with McDonald his proposed sale to Nicholson, and during this discussion he told McDonald he would use the proceeds of the sale to pay off the balance of his outstanding indebtedness. McDonald stated that he did not desire to be paid off in a lump sum, but would rather have Houghton continue his monthly payments, as provided in their original agreement. The sale was conducted in compliance with the requirements of the Bulk Sales Law (Civ. Code, § 3440.1). During the period of publication, McDonald made no claim. Immediately following the sale, Nicholson leased the property back to Houghton.

In November or December of 1957, Houghton became delinquent in his payments to McDonald on the mortgages and to Nicholson on the lease. In January of 1958, Houghton’s business was closed and the property seized by the sheriff on a levy against Houghton initiated by the State Board of Equalization. On the 24th of that month, both Nicholson and McDonald filed third-party claims, each claiming the equipment covered by the mortgages and the bill of sale. Neither claim was resisted by the Board of Equalization and the sheriff subsequently turned over the property and possession of the premises to McDonald, who still retains possession, claiming it as his own.