Federal Land Bank of New Orleans v. Southern Credit Corporation

• Decision Date: 08 January 1940
• Docket Number: 33924
• Citation: 192 So. 827,188 Miss. 192
• Court: Mississippi Supreme Court
• Parties: FEDERAL LAND BANK OF NEW ORLEANS v. SOUTHERN CREDIT CORPORATION

192 So. 827

188 Miss. 192

FEDERAL LAND BANK OF NEW ORLEANS v. SOUTHERN CREDIT CORPORATION

No. 33924

Supreme Court of Mississippi, Division B

January 8, 1940

APPEAL from chancery court of Washington county HON. J. L. WILLIAMS Chancellor.

Suit by the Federal Land Bank of New Orleans against the Southern Credit Corporation for conversion of the proceeds of cotton or to recover on ground that the defendant had breached its trust. From a judgment in favor of the defendant, the plaintiff appeals. Judgment affirmed.

Affirmed.

H. P Farish and William C. Ready, both of Greenville, and B. C Adams and T. M. Hedgepeth, both of New Orleans, La., for appellant.

Appellant seeks to hold appellee liable for the unpaid rent of 1936 on two grounds: (1) That appellee, participating in the negotiation and sales of the cotton, acted in disregard of the rights of appellant, a junior lien holder, although it had notice of the junior lien, and is, therefore, liable for conversion. (2) That appellee, having possession of the proceeds of the cotton sold by the tenant, Criswell, with knowledge that they were trust funds, was under a duty to distribute those funds to the landlord to satisfy the rent claim, and in failing so to do, paid to the tenant at its own peril.

Appellant contends that appellee, a senior lienholder to the extent of $ 1800, was without the right to assist in disposing of the crops, receiving the proceeds therefor, and paying the same to the tenant in disregard of the rights of appellant, a junior lienholder, whose lien was known to appellee.

It is an established principle that, as to a junior mortgagee of which he has notice, the senior mortgagee cannot act with regard to the mortgaged property so as to impair the rights of the junior mortgagee; and if such acts are committed, the first mortgagee is liable for the excess over and above his own claim.

43 A L. R. 393; 10 Am. Jur. 835; 11 C. J. 591, 592; 3 Pomeroy's Equity Jurisprudence (4 Ed.), p. 2916.

It cannot be disputed that this court has repeatedly held that in the absence of a waiver of the lien, those who purchase the crops on which there is a landlord's lien, or those into whose hands the proceeds of the crop sales are delivered, take the crops or the proceeds thereof subject to the rights of the landlord as superior lienholder. Here it is conceded that the lien of appellant was junior to the lien of appellee until the satisfaction of the latter's account with the tenant. To this extent, and to this extent only, the landlord's lien was subordinated. After the payment of appellee's account for advances, the landlord's lien again became first and paramount as to all the world.

Appellant submits, in the alternative, that appellee, having come into possession of the proceeds of the Criswell cotton, took them as trust funds and was under a duty to act as trustee with regard to the interest of both landlord and tenant. In paying all of the proceeds over to the tenant, appellee violated the duty imposed by law in favor of appellant. We contend that the relationship between appellant and appellee, as mortgagees, and the circumstances under which appellee received the sales proceeds implied a trust upon the funds so received in favor of appellant.

26 R. C. L. 1200; McKee v. Lamon, 159 U.S. 315, 40 L.Ed. 165; Bolivar County v. Bank of Cleveland, 170 Miss. 555.

The court has often held that the sale of mortgaged property transfers the lien to the proceeds, and anyone taking said funds with notice of that lien is bound to satisfy the lienholder.

Bolivar County v. Bank of Cleveland, 170 Miss. 555; Watson v. Carolina Portland Cement Co., 93 Miss. 553, 46 So. 707; Bank of Hickory v. McPherson, 102 Miss. 852, 59 So. 934; Newman v. Tillman, 71 Miss. 26, 12 So. 934; Eyrich v. Bank, 67 Miss. 60, 6 So. 615; Armour v. Bank, 69 Miss. 700; Sillers v. Lester, 48 Miss. 513.

Appellee's defense in this case will be built largely upon the contention that appellant, by its course of dealing with its tenants, waived or lost its landlord's lien and that appellant thereby appointed Criswell as its agent to sell the cotton and to receive the proceeds thereof. As to what constitutes a loss of the landlord's lien, Judge McGowen has declared in a recent case as follows: "In order to constitute a waiver of a landlord's lien, the evidence must preponderate that the landlord either affirmatively agreed, or, by his conduct and course of dealing, permitted a tenant to deal with the agricultural products as though they had been freed from his lien."

Tenn. Joint Stock Land Bank v. Bank of Greenwood et al. (Miss.), 172 So. 323.

The evidence of the case at bar fails to show anywhere an affirmative agreement or an actual consent on the part of appellant to allow Criswell to sell the cotton freed of the lien.

It will doubtless be contended that because J. H. Calhoun, the field representative of appellant, knew that Criswell was selling his cotton, such notice is chargeable to appellant, and that appellant, having this knowledge, could not idly stand by without making protest and then be heard to say that Criswell lacked the authority to sell the cotton and to receive the proceeds from appellee. This argument is, according to the undisputed facts of the record, wholly without merit for the reason that Calhoun lacked authority to bind the bank in any way whatsoever regarding a waiver of appellant's lien as landlord.

2 C. J. 863.

This court has repeatedly held that where one deals with an agent he must know his powers and is bound, at his peril, to inquire and ascertain the extent of the agent's authority.

Busby v. Y. & M. V. R. R. Co., 90 Miss. 13, 43 So. 1; Philip Gruner Lbr. Co. v. Algonquin Lbr. Co., 123 Miss. 157, 85 So. 191; Royal Feed & Milling Co. v. Thorn, 142 Miss. 92, 107 So. 282; Wellford et al. v. Arnold, 162 Miss. 786, 147 So. 220.

Even if this court might say that the evidence does show that appellant knowingly permitted some of the cotton to be sold by its tenants, it fails to show, as it must, that appellant knowingly permitted the tenant Criswell, or any of its tenants, to sell all of the cotton grown by them in breach of the contract.

Schmitt v. Fed. Compress & Warehouse Co. (Miss.), 153 So. 815.

We think that the case of Marine Bank & Trust Co. v. Greenville Savings Bank & Trust Co., 133 Miss. 91, 97 So. 526, shows that no matter what tenants might do with the cotton, the landlord cannot be estopped, nor his lien affected, unless he knows what is being done with the cotton and fails to take proper steps in restricting the actions of his tenants.

A waiver may be express, or may be inferred from actions or conduct; but all the attendant facts, taken together, must amount to an intentional relinquishment of a known right, in order that a waiver may exist.

27 R. C. L. 908; 13 C. J. 671.

Appellant admits that where the contract or lease is silent in regard to a custom, the proof of custom may, upon proper showing, be read into the contract or lease.

4 Jones, Commentaries on Evidence (2 Ed. 1926), p. 2886; Planters' Compress & Warehouse Co. v. Ireys (Miss.), 16 So. 386; Fireman's Fund Ins. Co. v. Williams, 170 Miss. 199, 47 So. 380.

But by equal authority, it is also a well-settled principle of law that where the contract or lease, by express terms, provides against a right claimed by custom, then the custom cannot be shown.

4 Jones, Commentaries on Evidence, p. 2886; 10 R. C. L. 1077.

When the terms of a contract are clear, unambiguous and valid, they must prevail, and no evidence of custom can be permitted to change them.

Postal Telegraph-Cable Co. v. Willis, 93 Miss. 540, 47 So. 380; Bank of Forest v. Capital Nat. Bank, 173 Miss. 99, 160 So. 578; Burbridge v. Gumbel, 72 Miss. 371, 16 So. 792; Weil Bros. v. Yazoo Yarn Mills, 36 F.2d 942; D. S. Pate Lbr. Co. v. Weathers, 167 Miss. 228, 146 So. 433.

That the appellee knew of the lease there can be no doubt, in view of the fact that the rent waiver was obtained at the express wish of the appellee, and having knowledge of the lease, the appellee was chargeable with knowledge of the express provision of the lease that Criswell could not sell the cotton grown on the premises without the written consent of the appellant.

46 C. J. 551.

Appellant submits that appellee is liable for the 1936 rent lien either on the ground of conversion or on the ground of breach of trust, as the evidence of this case does not show a loss, expressly or impliedly, of the landlord's lien held by appellant.

Wynn, Hafter & Lake and Chas. S. Tindall, Jr., all of Greenville, for appellee.

Appellee cannot be held liable for Criswell's unpaid rent for 1936 either upon the theory of conversion or upon the theory of trust set out in appellant's brief.

The evidence shows that appellant expressly represented to appellee that Criswell had authority to sell his cotton and receive the proceeds, this representation constituting an express waiver as between appellant and appellee of any objection to the tenant's selling his own cotton.

The evidence further shows that, even in the absence of such express waiver in appellee's favor, appellant by its conduct waived its right to object to its tenant's selling and receiving the proceeds for his cotton, and such waiver inures to appellee's benefit.

In the first place, the appellant by the rental waiver that it executed in favor of appellee not only subordinated its lien to appellee's but gave express notice to the appellee that its tenant, Criswell, should be entrusted with the crops and the proceeds; and in effect the appellant constituted the tenant as agent and trustee to look after its interest in the crop.

And this express representation of the tenant's authority is made...