First Nat'l Bank of Geneseo v. Nat'l Live Stock Bank of Chi.

• Decision Date: 04 March 1904
• Citation: 1904 OK 26,76 P. 130,13 Okla. 719
• Parties: FIRST NATIONAL BANK OF GENESEO, ILL., v. NATIONAL LIVE STOCK BANK OF CHICAGO, ILL.
• Court: Oklahoma Supreme Court

1904 OK 26

76 P. 130

13 Okla. 719

FIRST NATIONAL BANK OF GENESEO, ILL., v. NATIONAL LIVE STOCK BANK OF CHICAGO, ILL.

Supreme Court of Oklahoma

Decided: March 4, 1904

Syllabus

¶0 1. REPLEVIN--Assignment of Chattel Mortgage, not Necessary to Record Acknowledgment of Release--Assignees and Incumbrances in Good Faith. Sec. 9 of chapter 120, vol. 2, of Webb's Annotated Statutes of Kansas, which provides that. "where any mortgage of personal property shall have been fully paid or satisfied, it shall be the duty of the mortgagor, his assignee or personal representative, to enter satisfaction, or cause satisfaction thereof to be entered of record, in the same manner as near as may be, and under the same penalty for a neglect or refusal, as provided in the case of the satisfaction of mortgages of real estate," does not authorize or require one who purchases a negotiable promissory note, which is duly transferred by an assignment on the back thereof, before maturity, to also take a formal assignment of a chattel mortgage given to secure it, and have it filed in the office of the register of deeds. The transfer of such note carries with it the assignment of the mortgage, there being no law authorizing an assignment of a chattel mortgage, given to secure negotiable paper, to be placed of record; and such assignee, although he has no record title, will be protected against subsequent purchasers and incumbrances in good faith, and may recover against them in a replevin action involving the property included in his mortgage.

2. SAME--Notice. A separate instrument executed by a mortgagee acknowledging satisfaction of a chattel mortgage and payment of the debt secured thereby, but which is not acknowledged before some officer named in the statute and certified to as provided therein, is not entitled to record, and the filing or recording thereof imports no notice.

3. PENAL STATUTES. Duties imposed by implication are only those which are necessarily connected with the subject to which the statute relates, and, if they are penal, they are to be construed strictly, which means that they are not to be so extended by implication beyond the legitimate import of the words used in them as to embrace acts not clearly described by such words.

4. SAME--Assignment of Mortgage--Notice. The mere fact that a mortgagee in Kansas, in the absence of a contract to the contrary, owns the legal title to the property mortgaged, does not require an assignment of such mortgage to be placed of record, there being no statute imposing such duty.

Error from the District Court of Woodward County; before John H. Burford, Trial Judge.

Botsford, Deatherage & Young and Houston & Marum, for plaintiff in error.

Winston, Babcock, Strawn & Shaw and Stanley, Vermilion & Evans, for defendant in error.

BURWELL, J.:

¶1 W. B. Grimes, who lives in Clark county, Kansas, on June 27, 1900, executed to Seigel-Sanders Live Stock Commission Company his negotiable promissory note for $ 11,111.23, due November 1st. 1900, with interest from maturity at the rate of 8 per cent. per annum. To secure the payment of this note, at the same time, he duly executed a chattel mortgage to the payee of the note, on five hundred and twenty-six cattle, and this mortgage was filed in the office of the register of deeds of Clark county on July 12, 1900. This note was then assigned by the payee to the Geneseo bank.

¶2 On October 24, 1900, and after the note just described had been assigned to the Geneseo bank, Grimes executed to Seigel-Sanders Live Stock Commission Company two other notes, one for $ 7,033.24 and one for $ 7,000.00, due six months after date, and gave a chattel mortgage to the commission company on 633 head of cattle (which included the cattle described in the first mortgage) to secure these two notes, which were assigned to the Chicago Cattle Loan Company.

¶3 On November 24th, 1900, although the Siegel-Sanders Live Stock Commission Company had sold the note for $ 11,111.23 to the Geneseo bank, it, through its president, Frank Siegel, without any authority filed in the office of the register of deeds a pretended release, in which payment of the note was acknowledged.

¶4 On February 25th, 1901, the Chicago Cattle Loan Company caused its agent, a Mr. True, to examine the records of Clark county as to chattel mortgages against Grimes, and on this examination he found the record clear, except as to the mortgage held by his company, and so reported to it. On April 17, 1901, Grimes executed two other notes to Siegel-Sanders L. S. Com. Co., for $ 7,694.77 each, due October 27, 1901, and to secure the payment of these two notes, he, at the same time, executed a chattel mortgage on 606 of the cattle in question. These two notes were then sold to the National Live Stock Bank of Chicago for $ 15,389.54, and it believed at the time it bought these notes that the mortgage securing them was a first lien on the cattle, and it secured this information through Mr. True, who personally examined the record. It is insisted that these notes were given as a renewal of the second set of notes taken by the Siegel-Sanders Co., but perhaps that is not material under our view of the law.

¶5 Grimes moved these cattle to Woodward county, Oklahoma, between April 25th and May 1st, 1901, without the knowledge or consent of either of the parties to this suit. They were seized by the Geneseo bank between the 19th and 20th of May, 1901, and the Chicago bank, within one year from the filing of the first mortgage in the office of the register of deeds of Clark county, Kansas, commenced this suit in replevin in the district court to recover possession of the cattle, claiming under the mortgage which was executed to the Siegel-Sanders L. S. Com. Co. on April 17th, 1901; and the Geneseo bank claiming under the mortgage dated June 27th, 1900, which was released by the Siegel-Sanders L. S. Com. Co. after its assignment to the Geneseo bank. There is practically no dispute as to the facts; and the trial court expressly held that both the parties to this action acted in good faith. It was agreed that the court should take into consideration all of the laws of Kansas, the same as though they had been formally introduced in evidence and copied into the record; and as each party is still insisting upon this agreement, this court will adhere to it.

¶6 A number of questions are argued in the briefs, and while we will not discuss all of them, we have considered them all, and will discuss those which we think are con- trolling.

¶7 The note dated June 27th, 1900, was assigned to the Geneseo bank for value in the ordinary course of business long before maturity, and this assignment of the note carried the security with it, without the execution of a formal assignment of the mortgage. (Burhans v. Hutcheson, 25 Kans. 625; Mutual Benefit Life Insurance Company et al. v. Huntington, 57 Kan. 744, 48 P. 19; Swift v. Bank of Washington, 104 F. 643; Daniels on Negotiable Instruments, vol. 2, sec. 655; Jones on Chattel Mortgages, sec. 503.) And in the case of Carpenter v. Logan, 16 Wall. 271, the supreme court of the United States said:

"All the authorities agree that the debt is the principal thing and the mortgage an accessory. Equity puts the principal and accessory upon a footing of equality, and gives to the assignee of the evidence of the debt the same rights in regard to both. There is no departure from any principle of law or equity in reaching this conclusion. There is no analogy between this case and one where a chose in action standing alone is sought to be enforced. The fallacy which lies in overlooking this distinction has misled many able minds, and is the source of all the confusion which exists. The mortgage can have no separate existence. When the note is paid the mortgage expires. It cannot survive for a moment the debt which the note represents. This dependent and incidental relation is the controlling consideration, and takes the case out of the rule applied to choses in action, where no such relation of dependence exists."

¶8 It follows therefore that the Siegel-Sanders Live Stock Commission Company had no legal or moral right to release the mortgage securing the note which it had assigned to the Geneseo bank. And the execution and filing of the purported release was a fraud upon that bank. The bank never appointed the Siegel-Sanders Company its agent to collect this money, nor did that company have any express or implied authority to do so, or to release the chattel mortgage which secured the same.

¶9 It is true that the Siegel-Sanders Company is not a party to this suit, and that it has had no opportunity to be heard or make any explanation as to its connection with the transaction; still the court must take the record as presented, and determine the rights of the parties therefrom; and even if that company thought it had a right to release the mortgage, and intended to apply the proceeds of the second loan to the payment of the first, its belief in the premises would not change the law, nor do its acts in failing to apply the proceeds of the second loan to the payment of the first argue good intentions. But it is insisted that it is immaterial as to whether the Siegel-Sanders Company acted in good faith, or had authority for executing the release of the Geneseo mortgage; that it was the duty of the plaintiff in error when it bought its note from the Siegel-Sanders Company to also take and file an assignment of the mortgage securing it, and that, by not doing so, the Geneseo bank was guilty of negligence, and that the Chicago bank having bought on the record as it found it, has a better right than the appellant, and counsel cites a long list of cases to support this position; in fact, the array is so formidable, were it to be conceded that the statutes of Kansas require the transfer of a chattel mortgage given to secure the payment of a negotiable promissory note to be evidenced by a formal assignment duly...