First Nat. Bank v. Siman

• Decision Date: 05 October 1937
• Docket Number: 8046.
• Citation: 275 N.W. 347,65 S.D. 514
• Parties: FIRST NAT. BANK OF PIPESTONE v. SIMAN et al.
• Court: South Dakota Supreme Court

275 N.W. 347

65 S.D. 514

FIRST NAT. BANK OF PIPESTONE v. SIMAN et al.

No. 8046.

Supreme Court of South Dakota

October 5, 1937

Appeal from Circuit Court, Minnehaha County; Lucius J. Wall, Judge.

Action by the First National Bank of Pipestone against Raymond E Siman and others, as copartners carrying on business under the firm name of Steele-Siman & Co. From a judgment dismissing the complaint, plaintiff appeals.

Reversed.

Krause & Krause and Ervin P. Van Buren, all of Dell Rapids, for appellant.

Caldwell & Burns, of Sioux Falls, and Myers & Snerly, of Chicago Ill., for respondents.

RUDOLPH Presiding Judge.

On December 22, 1934, one Harry Harms borrowed from the plaintiff bank $2,595.30, and to secure the payment thereof executed and delivered to the plaintiff a chattel mortgage covering certain sheep located in Moody county, S.D. This mortgage was duly filed with the register of deeds of Moody county. The mortgage provided that, if default be made in any of its terms, or if any attempt be made to remove, dispose of, or injure said property by the mortgagor or by any other person, then the mortgagee would be entitled to take immediate possession of the property covered by the mortgage for the purpose of realizing on its security. On February 7 1935, while the mortgage was still in force and without the knowledge or consent of the plaintiff, the said Harms transported the sheep from Moody county to Sioux City, Iowa, and there delivered them to the defendants who were commission merchants operating in the Sioux City stockyards. The defendants sold the sheep and realized therefrom the sum of $1,870.76, out of which sum the defendants paid $44.25 as yardage and insurance, $32 commission to themselves, and $73.08 to the truckers for transporting the sheep from Moody county to Sioux City. The balance was paid over to Harms. The defendants had no actual knowledge of the indebtedness owing by Harms to the plaintiff, or of the chattel mortgage covering the said sheep, until some time after the entire transaction was completed, and, at the time of the sale and at the time of delivering the proceeds of the sale to Harms, the defendants believed that Harms had a lawful right to sell the sheep. The plaintiff did not learn of the sale of the sheep until about June 1, 1935, and thereafter made demand upon the defendants for the sheep or the proceeds derived from the sale thereof. The plaintiff in this action seeks to hold the defendants liable for the wrongful conversion of the said sheep. The trial court, after finding the facts, as above set out, held that the defendants were not liable to the plaintiff, and this is an appeal from the judgment dismissing plaintiff's complaint.

In this state a breach of the conditions of the mortgage, coupled with and which gives the right to possession to the mortgagee, gives the mortgagee such a qualfied ownership as will enable him to maintain an action for conversion. Northern Finance Corporation v. Midwest Commercial Credit Co., 59 S.D. 282, 239 N.W. 242; Hanover National Bank v. Farmers' & Merchants' State Bank, 55 S.D. 598, 227 N.W.67; First National Bank v. Baldridge, 37 S.D. 606, 159 N.W. 130; La Rue v. St. Anthony & Dakota Elevator Co., 17 S.D. 91, 95 N.W. 292; Smith v. Donahoe, 13 S.D. 334, 83 N.W. 264; La Crosse Boot & Shoe Mfg. Co. v. Mons Anderson Co., 13 S.D. 301, 83 N.W. 331. See, also, Forbush v. San Diego Fruit Co., 46 Idaho 231, 266 P. 659, and cases therein cited; 26 R.C.L. 1136, and cases cited. So in this case, where the mortgagee is given right to take possession upon the removal or sale of the property, its removal or sale vests in the mortgagee the right to maintain an action for a conversion of the property.

The question for our consideration, therefore, is whether or not the defendants acted in such a manner as to make them liable in conversion to this plaintiff. It is first contended by respondent that the filing of the chattel mortgage in Moody county imparted no notice thereof to these defendants. Our statute section 1584, Rev. Code 1919, provides as follows: "The filing of a mortgage of personal property, in conformity to the provisions of this article, operates as notice thereof to all subsequent purchasers and incumbrancers of so much of said property as is at the time mentioned in the preceding section situated in the county or counties wherein such mortgage or authenticated copy thereof is filed."

Respondent contends that these defendants, being merely factors or commission merchants, are neither "subsequent purchasers or incumbrancers" within the meaning of the above section of our Code. With this contention of respondent we are inclined to agree. However, we are of the opinion that the question of notice or knowledge of the mortgage by these defendants is not decisive of their liability in this case. If the defendants were not purchasers of these sheep, and we agree with respondent that they were not, they were the agents of Harms in selling and disposing of the sheep to the packing company. By the great weight of authority an agent who assists his principal in converting property of a third person to the use of the principal or master is personally liable to the true owner for the loss thereby inflicted. See many cases cited in annotation in 20 A. L. R., commencing on page 120. Under our decisions it is no longer subject of dispute that as between Harms, the mortgagor, and this plaintiff, the mortgagee, Harms wrongfully converted these sheep, and rendered himself liable to the plaintiff in an action for the wrongful conversion. That the defendants assisted Harms in the...