Cole-Mcintyre-Norfleet Co. v. Du Bard

• Decision Date: 31 March 1924
• Docket Number: 23996
• Citation: 99 So. 474,135 Miss. 20
• Court: Mississippi Supreme Court
• Parties: COLE-MCINTYRE-NORFLEET CO. v. DU BARD

99 So. 474

135 Miss. 20

COLE-MCINTYRE-NORFLEET CO. v. DU BARD

No. 23996

Supreme Court of Mississippi

March 31, 1924

Division A

(Division A.) January 1, 1920

1. CHATTEL MORTGAGES. Mortgagee not required to record mortgage in county to which mortgaged property removed without consent.

Under section 2289, Hemingway's Code (section 2785, Code 1906) the mortgagee in a trust deed is not required to record his mortgage in the county where the mortgaged personal property has been removed to, unless he consented and permitted such removal.

2. CHATTEL MORTGAGES. Mortgagee's lien not waived where mortgagor places property for sale without his knowledge.

The mortgagee does not waive his lien upon the mortgaged personal property where the mortgagor places it in the hands of a cotton association to be sold advantageously without the knowledge or consent of the mortgagee.

3. CHATTEL MORTGAGES. Placing by mortgagor of cotton with association for sale held not waiver of mortgagee's lien.

Nor does mortgagee in such case waive his lien where the cotton is placed with the association under agreement that the proceeds are to be applied to the satisfaction of any mortgage on it as such interest may appear, the association being a sales agency treating any mortgagee as standing in the place of the grower. Section 8, Marketing Agreement of Cotton Association.

4. CHATTEL MORTGAGES. Proceeds of mortgaged property stand in place thereof as to rights of mortgagee.

The mortgagee in such case being entitled to enforce his unwaived prior lien against the cotton, the thing mortgaged, the proceeds of the sale of the thing stand in the place of the thing sold.

HON. S F. DAVIS, Judge.

APPEAL from circuit court of Sunflower county, HON. S. F. DAVIS Judge.

Proceedings between the Cole-McIntyre-Norfleet Company and W. H. Du Bard. From the judgment rendered the former appeals. Reversed and judgment rendered.

Judgment reversed.

Ward Allen, for appellant.

The only question to be decided by this court is whether or not the claim of a judgment creditor, who garnished the Staple Cotton Co-operative Association, is superior and paramount to the claim of the holder of a bona-fide and valid deed of trust on the cotton which was placed by the debtor in the association. We respectfully submit that on no possible ground can the lien of a judgment creditor be superior to that of a mortgagee creditor and that for this court so to hold would have a disastrous effect on the entire crop financing and marketing system which has arisen in conjunction with the operation of the Staple Cotton Co-operative Association. If it be true that the claim of a judgment creditor is superior to the claim of the holder of a valid deed of trust, then no bank or merchant can take a deed of trust on the cotton crop of one of its customers and with any degree of safety allow the customer to put his cotton in the association, lest the customer owe something to someone else, who might secure a judgment, garnish the association and thus defeat the deed of trust.

I. Appellee relies for the affirmance of this case on section 2785, Code of 1906 (section 2289, Hemingway's Code). This section was never intended to apply to the handling of cotton in the due course of business at various compresses located in various counties of the state by such an organization as the Staple Cotton Co-operative Association, which is merely a marketing agency seeking to serve its planter members.

But our argument here, however, is really superfluous, as the statute does not cover the facts in this case. The deed of trust in question was filed for record in Tallahatchie county, Mississippi, on the 18th day of March, 1922. The cotton which it conveyed, was removed from Tallahatchie county to Sunflower county at various times during the fall months of the year, 1922, beginning with the month of September, but appellant, the mortgagee, had no knowledge of, nor gave its consent at any time to such removal. Appellant had no knowledge of delivery even to the cotton association until November 10, 1922. The deed of trust was then filed for record in Sunflower county, Mississippi, on September 13, 1923, less than twelve months after consent or permission to move by mortgagee, if any consent or permission were ever given. No such permission or even knowledge on the part of mortgagee is shown by the record in this cause, and without permission or knowledge, the statute does not apply. Bogard v. Gardley, 4 S. & M. 302. It has been held also in this state that permission granted before the expiration of twelve months from the time of removal does not defeat the lien. Elson v. Barrier, 56 Miss. 394.

II. Appellee also insists that appellant has waived the lien of his deed of trust by allowing Stokely to deliver his cotton to the association to be marketed pursuant to his contract with the association. The record does not show anywhere that appellant knew that Stokely was delivering his cotton to the association until November 10, 1922, on which date they seem to have been informed of the garnishment levied by appellee on the association. Appellant therefore never gave its consent for Stokely to market his cotton through the association but it thereafter accepted the proceeds of this cotton as it was remitted by the association.

We admit that there are many cases which hold acceptance of the proceeds of the sale of mortgaged crops to constitute a waiver of mortgagee's lien. There is a formidable line of authorities to the effect that permission on the part of a mortgagee to the mortgagor to sell and deliver his cotton to a third person waives the lien of the mortgage on the cotton, and that the lien of the mortgage does not follow the money proceeds of the cotton. If this line of authorities were in point, we would not argue this case for a moment, but we do not find a single case along this line of reasoning which could possibly apply to the facts in the case at bar. Delivery to the association is not delivery to a third person in the sense that these cases apply.

The association in its last analysis is nothing else but a selling agent of its members. Therefore, in permitting the association to market cotton on which appellant had a mortgage, appellant was merely stepping into the shoes of the grower, and the association became the selling agent of the mortgagee, appellant herein. This money in the hands of an agent should be and is just as safe as if in the hands of the principal and by no process of reasoning can we conceive but that the court below committed gross error in holding that acceptance by appellant of distributions from the association constituted a waiver of the rights of the mortgagee, and that a judgment creditor could come in and attach the proceeds in the hands of the association and that the claim of the judgment creditor was paramount to the claim of a mortgagee.

Alfred Stoner, for appellee.

I. By consenting to the sale of the cotton, the claimant waived its lien, and claimant stood in relation to its proceeds, just as any other creditor. It would be impossible for claimant to have a deed of trust on the money, because that is too fleeting. Both claims are equally just and it is only a question of priority. It would be rather odd to say that claimants, by virtue of their deed of trust, could put the money up at public outcry and sell it to the highest bidder for cash. It would be equally as odd to say that a deed of trust is so flexible that when a mortgagee releases the mortgaged property, the deed of trust will snap on to the proceeds from a private sale of the mortgaged property. Claimants took their deed of trust on the cotton--nothing more. After the cotton was picked and ginned, they agreed that it might be disposed of by selling it to third parties at private sale, and when that cotton, by consent of claimants, passed by sale beyond the reach of claimants, their specific lien on the cotton was waived, and claimants stood in relation to the proceeds, just as any other creditor.

Du Bard held his judgment subject only to the provisions of the recorded deed of trust. The deed of trust does not say that the mortgagee can sell or have the cotton sold at private sale, and that the mortgagee shall still have lien on the proceeds. The agreed statement of facts shows that claimant knew the cotton had been sold to the association; they consented to the sale at a time when there was still a large part of the remaining fifty-two bales of the cotton in the hands of the association, and necessarily by consenting to the sale of the cotton, they waived their lien on it. 5 R. C. L., page 459, section 94; Carr v. Brawley (Okla.), 125 P. 1131, 43 L. R. A. (N. S.) 302; Fry v. Rose (Miss.), 83 So. 179; Garbutt v. Mayo, 13 L. R. A. (N. S.) 58. See, also, White Mountain Bank v. West, 46 Main 15; Saxton v. Breshears, 21 Idaho 333, 121 P. 567; Maier v. Freeman, 112 Cal. 8, 44 P. 357, 7 Cyc. 48-49.

The cases also go so far as to hold that the mortgagee, by accepting a part of the proceeds of a sale of the mortgaged property, knowing its source, waives the lien of the mortgage. Planters Compress Co. v. Howard, 41 Tex. Civ. App. 285, 92 S.W. 44; McCollum v. Wood (Tex.), 33 S.W. 1087; LaFayette County Bank v. Metcalf, 40 Mo.App. 494.

Our own court has held that consent by the lien-holder to a sale of the mortgaged property waives the lien of the mortgage. Seavey & Sons v. Godbold, 99 Miss. 113, 54 So. 838; Phillips v. Thomas, 91 So. 420; Bank of Hazlehurst v. Goodbar, 19 So. 204; Harmon v. Hoskins, 56 Miss. 142; Joseph v. Levi, 58 Miss. 845; Britton v. Creswell, 63 Miss. 394; Johnson v. Tuttle, 65 Miss. 495; Maier v. Freeman, 112 Cal. 8.

II. The claimant, by allowing Stokely to handle the cotton and...