Farmers' State Bank of Alva v. Kavanaugh & Shea
| Decision Date | 18 March 1924 |
| Docket Number | 13300. |
| Citation | 224 P. 525,98 Okla. 119,1924 OK 328 |
| Parties | FARMERS' STATE BANK OF ALVA v. KAVANAUGH & SHEA. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
A chattel mortgagee who consents to the sale of the mortgaged property by the mortgagor on condition that the proceeds be paid over by such mortgagor for application on the mortgage indebtedness thereby waives his lien when the property is sold pursuant to such agreement, and the lien of the mortgage does not attach to the proceeds of the sale in the hands of the mortgagor so as to defeat the lien of a general creditor who impounds the proceeds by garnishment before they are paid over.
But in such a case where a third person acts as clerk of the sale and receives the proceeds thereof for the purpose of applying same on the mortgage indebtedness, that being a condition of the mortgagee's consent to the sale, the mortgagor never having the possession or control of the funds, such clerk is a trustee of an express trust, and, since the mortgagor could not maintain an action against him for such funds except in execution of the trust, the general creditors of the mortgagor have no greater rights, and they cannot prevent the execution of the trust by garnishee process.
Commissioners' Opinion, Division No. 1.
Appeal from District Court, Woods County; Arthur G. Sutton, Judge.
Action by Kavanaugh & Shea, a partnership, and others, against R. L Benton, in which the Farmers' State Bank of Alva and another intervened. From a judgment for plaintiffs, the named intervener appeals. Reversed, with directions.
This action was commenced January 18, 1921, by Kavanaugh & Shea filing a petition in the district court of Woods county Okl., against R. L. Benton to recover upon a certain promissory note in the sum of $242.51, in which action a garnishee summons was issued and served upon C. O. Green, as garnishee. Thereafter the Farmers' State Bank of Alva intervened in the action, claiming the funds in the hands of the garnishee by virtue of a certain chattel mortgage executed by the defendant, R. L. Benton, to said bank. The case was tried in the court below upon an agreed statement of facts, which agreed statement is in substance as follows That on April 28, 1920, R. L. Benton executed to the Farmers' State Bank of Alva his note in the sum of $4,067.86, due 105 days after date and bearing 10 per cent interest, and at the same time executed to said bank a chattel mortgage upon certain personal property therein described to secure the payment of said note. That certain payments on said note had been made from time to time, and that on January 18, 1921, there was a balance remaining unpaid on said note of $2,787.46, with accrued interest. That R. L. Benton was also indebted to Kavanaugh & Shea by note dated June 23, 1920, in the sum of $242.51 with interest at 10 per cent. That on January 10, 1921, R. L. Benton advertised, both by posting and by publication, a public sale of certain goods and chattels belonging to him, said sale to be held January 18, 1921, at his residence on the S. 1/2 of the S.E. 1/4 of section 23, township 27 north, range 15 west in Woods county. That said sale was held as advertised and that C. H. Ward of Alva, Okl., was auctioneer and one C. O. Green of Alva, Okl., was clerk of said sale, and that both were paid for their services from the proceeds of said sale. That at said sale a portion of the personal property sold was property included in the mortgage of the Farmers' State Bank of Alva. That C. O. Green received the proceeds of such sale as clerk thereof. That on the same day, January 18, 1921, Kavanaugh & Shea commenced their action against R. L. Benton in the district court and served garnishee summons upon the said C. O. Green as clerk of said sale. That said sale was held and conducted with the knowledge and consent of the Farmers' State Bank of Alva. That C. O. Green, as garnishee, duly filed his answer in which it was shown that he realized from such sale the sum of $610.38 in cash, and that he held one note for $97.50, and showed to the court that claims to said funds in his hands were made by the Farmers' State Bank of Alva, by Kavanaugh & Shea, by Dimmick & Kletke, and by Amsden Lumber Company, and that he was ready to pay over the same as directed by the court. That on January 17, 1921, which was the day preceding said sale, the Farmers' State Bank of Alva served upon R. L. Benton and C. O. Green the following instrument in writing:
That on said January 18, 1921, said Farmers' State Bank of Alva took a note from R. L. Benton for the sum of $3,584.96, and to secure the payment of said note took from him a chattel mortgage covering two-thirds of 110 acres of growing wheat,...
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