Bellevue State Bank v. Hailey National Bank

• Decision Date: 28 April 1923
• Citation: 215 P. 126,37 Idaho 121
• Parties: BELLEVUE STATE BANK, Respondent, v. HAILEY NATIONAL BANK, Appellant
• Court: Idaho Supreme Court

215 P. 126

37 Idaho 121

BELLEVUE STATE BANK, Respondent, v. HAILEY NATIONAL BANK, Appellant

Supreme Court of Idaho

April 28, 1923

CHATTEL MORTGAGES-SALE OF CHATTEL-CONSENT OF MORTGAGEES-DEPOSIT OF PROCEEDS WITH SECOND MORTGAGEE-WAIVER OF LIEN-LIEN ON PROCEEDS-APPLICATION ON DEBT-AGREEMENT FOR-NOTICE OF-DIRECTIONS AS TO APPLICATION.

1. A mortgagee of a chattel, who consents to its sale, does not retain a lien upon the proceeds by virtue of the mortgage.

2. Bank A had a first mortgage, and Bank B a second mortgage, on a chattel of their common debtor C. It was sold with consent of both banks and the proceeds deposited in Bank B. If C agreed with Bank A, in consideration of its consent to the sale, to apply the proceeds on its claim, and Bank B knew of this agreement, it would be liable to Bank A if it applied the proceeds on its own claim.

3. If at the time of the deposit C directed Bank B to apply it in payment of the claim of Bank A, it would be liable for applying it on its own claim in violation of such instruction.

4. Evidence reviewed and held insufficient to support the judgment.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Raymond L. Givens, Judge.

Action for money had and received. Judgment for plaintiff. Reversed.

Judgment reversed. Costs awarded to appellant.

Sullivan Sullivan & Van Winkle, for Appellant.

Both plaintiff and defendant banks waived the lien of their mortgages, and rendered the proceeds of such sale subject to levy by other creditors of the mortgagor. (5 R.C. I., sec 94; Maier v. Freeman, 112 Cal. 8, 53 A,. St. 151, 44 P. 357; Carr v. Brawley, 34 Okla. 500, 125 P. 1131 43 L. R. A., N. S., 302 and note.)

Where the evidence is insufficient to support the verdict, the judgment or verdict must be reversed. (Kelly v. Oregon S. L. Ry. Co., 4 Idaho 190, 38 P. 404; Commercial Bank v. Lieuallen, 5 Idaho 47, 46 P. 1020; Work Bros. v. Kinney, 7 Idaho 460, 63 P. 596; Zienke v. Northern P.R. Co., 8 Idaho 54, 66 P. 828; Idaho Mer. Co. v. Kalanquin, 8 Idaho 101, 66 P. 933; Small v. Harrington, 10 Idaho 449, 79 P. 461; Wood v. Broderson, 12 Idaho 190, 85 P. 490; Hibler v. Smith, 20 Idaho 590, 119 P. 41; Furey v. Taylor, 22 Idaho 605, 127 P. 676; McDonnell v. Jones, 25 Idaho 551,. 138 P. 1123; Constantine v. McDonald, 25 Idaho 342, 137 P. 531; State v. Trego, 25 Idaho 625, 138 P. 1124; Hellebrant v. Kent, 29 Idaho 89, 157 P. 780.)

As the proceeds of the sale of mortgaged property are not impressed with a lien in favor of the mortgagee, he had no right, as against a subsequent mortgagee, to question a payment made by the mortgagor to such subsequent mortgagee in satisfaction of the latter's claim. (Smith v. Crawford County State Bank, 99 Iowa 282, 61 N.W. 378, 68 N.W. 690.)

C. S., sec. 6416, establishes a lien in favor of the Hailey National Bank on this deposit for the amount of money due the bank from Brown Brothers, and this is the first and only lien attaching to the proceeds of the sale of the cattle; following this condition C.S., sec. 5954, establishes that, in this case, the note of Brown Brothers held by the Hailey National Bank, being made payable at that bank, was in itself a written order to the bank, to pay the same for the account of Brown Brothers, it became a signed order to the bank to pay the note and charge it to the account of Brown Brothers, which was done.

J. G. Hedrick and Oppenheim & Lampert, for Respondent.

"Where a bank was the holder of a second chattel mortgage and knew of a prior mortgage on such chattels and it consented to a sale of the chattels and received the proceeds, with knowledge that such proceeds were to be applied in payment of the first mortgage, it received and held such proceeds in trust for the holder of the first mortgage." (11 C. J. 633, sec. 347; Morrison v. Elizy, 190 Ill.App. 374; Rock Springs Nat. Bank v. Luman, 6 Wyo. 123, 42 P. 874.)

"One who through design or misdirection of another receives money belonging to a third person cannot retain it to apply on his own debt due from the one who gave it to him." (3 Sutherland, Code Practice and Forms, p. 2883, sec. 5043; White Pine Co. v. Sadler, 19 Nev. 98, 6 P. 941; Union Stock Yards Nat. Bank v. Gillespie, 137 U.S. 411, 11 S.Ct. 118, 34 L.Ed. 724; People's Nat. Bank v. Myers, 65 Kan. 122, 69 P. 164.)

"The action of general assumpsit is an equitable one, being in the nature of a bill in equity, and therefore is subject to the rule of moral obligation which binds the conscience." (2 R.C.L. 746, sec. 5; 5 C. J., p. 1380, sec.4.)

MCCARTHY, J. Dunn and Wm. E. Lee, JJ., concur. Budge, C. J., dissents.

OPINION

MCCARTHY, J.

Respondent brought this action to recover $ 3,507, the proceeds of a sale of mortgaged property, claimed to have been wrongfully converted by appellant. In March, 1919, Brown Bros., a copartnership, gave respondent a mortgage on 150 head of cattle as security for a $ 6,000 note. Appellant held a second mortgage on 205 head of Brown Bros.' cattle including the 150 head mortgaged to respondent. In September, 1919, Brown Bros. shipped and sold two carloads of the cattle covered by the mortgages. Both appellant and respondent consented to the sale. Wm. F. Brown, who represented Brown Bros. Throughout the transaction, notified respondent of the sale by telegram. The money realized was deposited to Brown Bros.' account in the appellant bank, where they did their general banking business. There is no evidence as to the conditions upon which respondent and appellant consented that the sale might be made. Wm. F. Brown testified that, before he shipped the cattle, Mr. Ensign, appellant's cashier, asked him if he was going to apply the money on the first mortgage or any part of it, and that he said "Yes." Brown volunteered the information that he expected the cattle would bring more money than they did. Again, in response to a question as to what directions he gave appellant or any of its officers in regard to the application of the proceeds of the sale, he answered: "The only thing that there was was the day when the cattle were shipped. Mr. Ensign asked me if I was going to apply any of this money on to the mortgage of the Bellevue Bank and I told him I was."

On the second or third of October, after returning from Omaha where the cattle were sold, Wm. F. Brown saw Mr. Ensign. The money had not arrived and the latter said they would wait until it came. The money reached appellant October 3d. In the meantime Wm. Brown had fallen ill with the "flu," and Ensign, upon learning this, said to him: "Well, just let it go then until you get on your feet. You come up as soon as you can." On October 1st, Ensign had a conversation with T. D. Perry, vice-president of respondent. He asked Ensign if he proposed to pay off the balance of respondent's first mortgage, to which Ensign replied that he would not give an answer at that time, but would take the matter up with Will Brown when he returned and they saw how his affairs checked up, but possibly they would want to do it. While Brown was sick, without waiting to hear further from him or from respondent, Ensign applied the money on Brown Bros.' indebtedness to his bank. The indebtedness to respondent on account of the note and first mortgage was $ 3,433 at the time appellant applied the money to its own claim. The verdict and judgment are for that amount. Ensign, testifying for appellant, denied that he made the above statements attributed to him by Brown and Perry. The jury must have believed that he did. While the evidence is conflicting, there is substantial evidence in the record to establish the facts above outlined. The principal specification of error and the only one which we find it necessary to expressly discuss is that the evidence is insufficient to sustain the verdict and judgment.

By consenting to the sale respondent waived its mortgage lien on the cattle. Having consented to the sale, the mere fact that it had a mortgage on the cattle did not necessarily imply ownership, part interest in, or a lien upon, the proceeds. (Durkee v. National Bank, 102 F. 845, 42 C. C. A. 674; Fairweather v. Nelson, 76 Minn. 510, 79 N.W. 506; Maier v. Freeman, 112 Cal. 8, 53 Am. St. 151, 44 P. 357; Carr v. Brawley, 34 Okla. 500, 125 P. 1131, 43 L. R. A., N. S., 302; Waters v. Cass County Bank, 65 Iowa 234, 21 N.W. 582.)

The complaint alleges in effect an agreement to apply the proceeds...