Allis Chalmers Mfg. Co. v. Security Elevator Co.

• Decision Date: 08 December 1934
• Docket Number: 31847.
• Citation: 140 Kan. 580,38 P.2d 138
• Parties: ALLIS CHALMERS MFG. CO. v. SECURITY ELEVATOR CO.
• Court: Kansas Supreme Court

38 P.2d 138

140 Kan. 580

ALLIS CHALMERS MFG. CO. v. SECURITY ELEVATOR CO.

No. 31847.

Supreme Court of Kansas

December 8, 1934

Syllabus by the Court.

Where mortgagor commingles mortgaged with unmortgaged wheat mortgagee has right to look to entire mass as security.

Where elevator company had constructive notice, because of recorded mortgage, that some of wheat purchased was mortgaged elevator was liable for conversion.

Mortgage entered into and recorded in Oklahoma on wheat raised in Oklahoma held valid, though executed before crop was planted (St. Okl. 1931, § 10943).

Cause of action founded in tort may be assigned where wrongdoer's estate has been enriched; measure of recovery being value of property received by wrongdoer.

1. Where a mortgagor of wheat commingles wheat that is not mortgaged with wheat that is mortgaged, the mortgagee has a right to look to the entire mass to secure his indebtedness and, where an elevator company buys wheat of the mortgagor with notice that some of his wheat is mortgaged, the elevator is liable for conversion.

2. A mortgage entered into and recorded in Oklahoma on wheat raised in Oklahoma is valid, even though it was entered into before the crop was planted.

3. A cause of action founded in tort may be assigned where the estate of the wrongdoer has been enriched, and the measure of recovery is the value of property received by the wrongdoer.

Appeal from District Court, Reno County; John G. Somers, Judge.

Action by the Allis Chalmers Manufacturing Company against the Security Elevator Company. Judgment for plaintiff, and defendant appeals.

A. C Malloy, Roy C. Davis, Warren H. White, and Frank S. Hodge, all of Hutchinson, for appellant.

Austin M. Cowan, C. A. McCorkle, J. D. Fair, W. A. Kahrs, and R. H. Nelson, all of Wichita, for appellee.

SMITH Justice.

This is an action for damages to recover for the conversion of wheat. Judgment was for plaintiff. Defendant appeals.

The wheat was sold to defendant by Mr. Booth, the man who raised it in the summer and fall of 1931. In 1930 Mr. Booth planted about 1,200 acres of wheat. Part of the land sown he owned and part he rented. He gave the assignor of plaintiff a chattel mortgage on the crop to be planted on one quarter section. When he harvested his wheat in 1931, he hauled all of it from all his different farms to his home place and piled it on the ground in one pile. He sold 4,223 bushels to defendant and sold the rest to other parties. The chattel mortgage was duly recorded at the time of the sale. The petition alleged the facts about as they have been given here. The answer of defendant was a denial that it had any knowledge that the wheat it bought was mortgaged and a denial that the wheat it bought was covered by any mortgage. The answer also alleged that before the wheat was bought by defendant the indebtedness from Booth to plaintiff had been settled. The reply denied the settlement. The action was tried by the court without a jury, and findings and judgment were in favor of plaintiff.

The first point argued by defendant is that the proof did not establish that the defendant purchased the mortgaged wheat. The basis of the argument is that the wheat in the pile was made up partly of wheat covered by the mortgage and partly of wheat not covered. No power on earth could tell the mortgaged wheat from the unmortgaged wheat once it was all piled together. The trouble about that argument is that plaintiff did not have this burden. It did prove that some wheat in the pile was mortgaged and that defendant had constructive notice of this mortgage on account of its being recorded. The rule is stated in 12 C. J. 496, as follows: "The lien of a chattel mortgage is not impaired by a commingling of the goods mortgaged with other goods without the knowledge of the mortgagee, or by the sale of such commingled property to a third party with notice."

It would be manifestly unfair to hold that a farmer might free wheat raised by him of the lien held by a third party by mingling it with wheat on which there was no lien. If this were held to be the rule, then an unscrupulous debtor would never have his goods so that a chattel mortgage could be made effective. The corollary of this would be that no one would lend money on chattels which could be easily confused with other goods. Since this is true, the next stop is to inquire about the rights of third parties. In 12 C. J. 496, the following rule is stated: "Purchasers with notice are of course in no better condition than their vendors in respect to a confusion of goods."

This rule has been followed in Farmers' Grain & Supply Co v. Atchison, T. & S. F. Ry. Co., 121 Kan. 10, 245 P. 734, 738. In that case several grain companies and a milling company had been held liable for conversion of a carload of wheat which they had sold without any right to do so. A rehearing was granted the milling company because it was stated in the opinion that the milling company had knowledge that the elevator companies did not own the wheat, when as a matter of fact the company had no such knowledge. The court in an opinion on rehearing adhered to its opinion holding the elevator liable. The court held that knowledge was not necessary to bind one who bought the wheat from one who did not own it. The court said: "It is well settled that one who obtains the possession of property without the consent of the owner, or who buys it from a party who has no ownership, or right to sell or dispose of it, and...