Columbia Trust Co. v. Farmers' & Merchants' Bank

• Decision Date: 23 May 1933
• Docket Number: 4903
• Citation: 82 Utah 117,22 P.2d 164
• Parties: COLUMBIA TRUST CO. v. FARMERS' & MERCHANTS' BANK et al
• Court: Utah Supreme Court

22 P.2d 164

82 Utah 117

COLUMBIA TRUST CO. v. FARMERS' & MERCHANTS' BANK et al

No. 4903

Supreme Court of Utah

May 23, 1933

Appeal from District Court, Fourth District, Utah County; M. M Larson, Judge.

Action by the Columbia Trust Company against the Farmers' &amp Merchants' Bank and another. Judgment for defendants, and plaintiff appeals.

AFFIRMED.

C. D Moore, of Salt Lake City, for appellant.

Robinson & Robinson, of Provo, for respondents.

ELIAS HANSEN, Justice. STRAUP, C. J., and FOLLAND, EPHRAIM HANSON, and MOFFAT, JJ., concur.

OPINION

ELIAS HANSEN, Justice.

Plaintiff brought this action to recover for the alleged conversion by the defendants of the crops which were grown on the farm of W. H. Homer, Jr., during the year 1927. Homer's premises are situated near Pleasant Grove, in Utah county, Utah. The crops involved consisted of alfalfa hay, apples, peaches, apricots, pears, plums, potatoes, and grain. Defendants denied the conversion. A trial was had before the court sitting without a jury resulting in a judgment in favor of the defendants. Plaintiff prosecutes this appeal. It contends that the evidence received at the trial was such as to entitled it to a judgment. The following facts are established by the evidence which is remarkably free from conflict: On May 31, 1921, W. H. Homer, Jr., and his wife, Philena F. Homer, executed and delivered to the defendant Farmers' & Merchants' Bank a real estate mortgage upon the premises of Mr. Homer as security for the payment of a note in the sum of $ 10,000. The mortgage contained a provision that if the "property is left vacant said mortgagee, its successors or assigns, are authorized to occupy the same to keep the insurance valid and prevent damage to the property." The mortgage was recorded on June 2, 1921, in the office of the county recorder of Utah county, Utah.

On May 13, 1926, W. H. Homer, Jr., and his wife, Philena F. Homer, executed and delivered to the Columbia Trust Company, plaintiff herein, a crop mortgage on "all their crop which is now growing and any crop which may be hereafter grown (on the premises covered by the real estate mortgage in favor of defendant Farmers' & Merchants' Bank) until the debt secured by this mortgage is fully paid." The crop mortgage provided that the mortgagors would properly care for and protect the crop until the same was ready for harvest, and then harvest and deliver the same to the mortgagee, and that if the mortgagors failed to properly care for the crop the mortgagee was "empowered to enter upon the premises * * * and to take possession of said crop, and to take such measures as it may deem necessary for the care, protection, harvesting, or marketing thereof." The crop mortgage was given as security for the payment by the mortgagors to the mortgagee of a promissory note in the sum of $ 3,450. Plaintiff's crop mortgage was filed for record in the office of the county recorder of Utah county, Utah, on May 27, 1926. During the year 1926 the sum of $ 750 was paid on the note secured by the chattel mortgage. No other payments were made thereon. On December 17, 1926, defendant Farmers' & Merchants' Bank brought suit in the district court of Utah county, Utah, to foreclose its mortgage on the Homer property. The Columbia Trust Company, plaintiff herein, was not made a party to that suit and so far as appears neither of the defendants herein had any actual knowledge of the crop mortgage held by the plaintiff herein. Under date of March 28, 1927, W. H. Homer, Jr., filed (in the cause whereby the Farmers' & Merchants' Bank was seeking to foreclose its mortgage upon the premises of Mr. Homer) a petition requesting that the court appoint a receiver to take charge of the crop to be grown upon that property during the season of 1927. The petition recited that the petitioner was the legal owner of the property covered by the mortgage of the Farmers' & Merchants' Bank; that he was not residing thereon and was unable to care for the same during the season of 1927; that there was about 65 acres of the premises planted to hay and a similar area planted to orchard; and that the orchard and hay needed immediate care and attention. the petitioner suggested that H. A. Dixon, one of the defendants herein, be appointed such receiver. On March 29, 1927, a decree of foreclosure was made and entered in the mortgage foreclosure suit theretofore brought by the Farmers' & Merchants' Bank. On April 12, 1927, the court made and entered an order appointing H. A. Dixon receiver of the Homer property with authority to care for and market the crop to be grown thereon during the year 1927. On April 27, 1927, the Homer property was sold by the sheriff of Utah county pursuant to the decree of foreclosure. The Farmers' & Merchants' Bank was the purchaser at the sheriff's sale for the sum of $ 12,477, the same being the amount of their mortgage and the cost of the foreclosure proceedings. In the summer of 1927 the Farmers' & Merchants' Bank entered into a contract with two brothers by the name of Taylor for the sale of the Homer property for the sum of $ 23,000. The contract of sale was to be effective only on condition that the property was not redeemed. Nothing was paid on the contract. It was later canceled, apparently because within the period allowed by law for redemption the property was redeemed by the Columbia Trust Company, plaintiff herein, on account of a judgment in its favor against W. H. Homer.

It further appears from the evidence that H. A. Dixon consented to act as receiver of the property involved at the solicitation of Mr. Homer and a Mr. Beesley who held a second real estate mortgage on the property. Mr. Dixon testified that at the time he was appointed receiver he was the managing officer of the defendant Farmers' & Merchants' Bank; that Mr. Homer stated that he was without means to operate the farm; that he hoped to be able to redeem the farm within the time allowed by law; and that he (Mr. Dixon as receiver) was trying to protect the interest of Mr. Homer, of his bank, and of Mr. Beesley. Prior to the time Mr. Dixon was appointed receiver, the sap began to flow in the fruit trees and the alfalfa began to grow.

As soon as Mr. Dixon was appointed receiver he made arrangements to care for the property here involved. He borrowed $ 3,000 from the Farmers' & Merchants' Bank. He purchased from Mr. Homer horses and farming implements and paid therefor the sum of $ 500. He employed a Mr. Porter at a salary of $ 100 per month to operate the farm. The house on the farm was painted and repaired. Mr. Porter and his family moved into the house. Some of the water right which had been used to irrigate the farm had been sold under a mortgage foreclosure. Mr. Dixon rented water to replace that which had been sold. The orchard had not been pruned for several years. It was pruned under the direction of Mr. Dixon and the limbs which were pruned from the trees were removed. The alfalfa land was marked off so that it could be properly irrigated. Some of the land was plowed and planted to grain and potatoes. During the summer the fruit trees were sprayed six times, the fruit was thinned, and in due time marketed; the farm was irrigated; the hay and grain harvested and marketed. After the season's operations were finished the horses and farming implements were sold for $ 500, which was the amount paid for them. At the trial Mr. Dixon gave a detailed account, supported by vouchers, of the money which he had received and expended in the operation of the property. The account showed that he had received $ 6,910.23, all of which was expended in his operations of the farm. The receipts from the crop were insufficient to fully pay all the expenditures. After paying all of the expenses and applying the amount available to the $ 3,000 note which Mr. Dixon gave the Farmers' & Merchants' Bank, there remained unpaid on that note the sum of $ 356.49.

No claim is made by appellant that the account rendered by Mr. Dixon was inaccurate or that the expenditures made by him were excessive. It is urged that in no event were the costs of insuring and repairing the improvements on the premises a proper charge against the crop grown thereon. It is unnecessary to discuss that phase of the case, because the money expended for insurance and repairing the improvements was considerably less than the amount remaining unpaid on the $ 3,000 note. Thus, even though the costs of those two items be disallowed, there was more money expended in the farming operations than was received from the crop raised. It is also suggested that the purchase of the horses and farming implements was an improper expenditure by the receiver, but as they were resold for the same price as was paid for them and the amount so received accounted for, nothing was lost and probably considerably saved by that transaction.

Plaintiff contends that it is entitled to have sufficient of the money realized from the sale of the crops applied to the payment of the amount owing upon its note and mortgage without regard to the costs of producing the crop. Respondents contend to the contrary. That is the ultimate question upon which the parties divide. In support of its position plaintiff urges First, that the order of the court below appointing Mr. Dixon as receiver was void and as such subject to attack in this proceeding; and, second, that the delivery of the chattel or crop mortgage constituted a constructive severance of the crop, and vested in plaintiff a first lien upon such crop which lien continued during the period allowed by law for the redemption of the property, and until the issuance of a sheriff's deed. In support of its contention that the appointment of Mr. Dixon as a receiver was void, appellant cites...