Home Finance Corp. v. Cox

• Decision Date: 08 December 1962
• Docket Number: Nos. 42937 and 42954,s. 42937 and 42954
• Citation: 376 P.2d 884,190 Kan. 553
• Parties: HOME FINANCE CORPORATION, Inc., Appellant and Cross-Appellee, The State Bank of Satanta, Satanta, Kansas, Appellant and Cross-Appellee, v. Charles R. COX; Irma M. Cox Shimek; L. E. Woolley, C. K. Glenn, Sallie Glenn, Eleanor Patterson and Charles R. Glenn, D.B.A. Auto Finance; the First State Bank of Osborne, Kansas, Appellees.
• Court: Kansas Supreme Court

Page 884

376 P.2d 884

190 Kan. 553

HOME FINANCE CORPORATION, Inc., Appellant and Cross-Appellee The State Bank of Satanta, Satanta, Kansas, Appellant and Cross-Appellee, v. Charles R. COX; Irma M. Cox Shimek; L. E. Woolley, C. K Glenn, Sallie Glenn, Eleanor Patterson and Charles R. Glenn, D.B.A. Auto Finance; the First State Bank of Osborne, Kansas Appellees.

Nos. 42937 and 42954.

Supreme Court of Kansas.

Dec. 8, 1962.

Syllabus by the Court

1. Under the rules of comity, the general rule is that where a chattel mortgage has been properly filed in the state in which it was given, the courts of other states will recognize such chattel mortgage where the property is removed from the state in which the mortgage was given, and that the constructive notice imparted by the filing of the same is not confined to the county or state where the mortgage was executed and the property then was, but covers the property wherever it is removed.

2. There is a well-recognized exception to the general rule of comity and that is, it is not applicable if the mortgagee or conditional vendor knows of or consents to the removal of the property to another state, or having subsequently acquired knowledge of the removal acquiesces therein and fails to file the lien in the state to which the property has been removed.

3. In determining whether the exception to the general rule of comity should be applied, the real test is whether the property was removed with the knowledge or consent of the mortgagee, and the form or manner of filing the chattel mortgage in the state from which the property was removed is immaterial.

4. To preserve the lien of a chattel mortgage on a motor vehicle against subsequent purchasers or mortgagees for value, the vendor-mortgagee or his assignee is required to deposit the mortgage or a true copy thereof in the office of the register of deeds of the county where the mortgagor resides and note the lien or encumbrance on the certificate of title.

5. The record is examined, and it is held: (1) The district court did not err in adjudging that the liens of the chattel mortgages of Auto Finance and the First State Bank of Osborne were first and prior to the lien of the appellant, Home Finance, and (2) the district court erred in failing to find that the written agreement and the bills of sale of August 8, 1960, executed by defendants Cox in favor of the State Bank of Satanta, were intended by the parties to be a mortgage.

Robert Osborn, Stockton (Lloyd C. Bloomer, Osborne, on the briefs), for appellant, Home Finance Corporation, Inc.

D. O. Concannon, Hugoton (Arthur B. McKinley, Hugoton, and O. D. Gregory and Donald D. Gregory, Osborne, on the briefs), for appellant, The State Bank of Satanta.

W. McCaslin, Stockton (Louis D. James, Wichita, on the briefs), for appellees, L. E. Woolley, C. K. Glenn, Sallie Glenn, Eleanor Patterson and Charles R. Glenn, D/B/A Auto Finance; The First State Bank of Osborne, Kansas.

FATZER, Justice.

This was a replevin action involving the rights of various parties under chattel mortgages to the possession of a house trailer, or its value.

The district court adopted the agreed statement of facts of the parties as its findings of fact and adjudged that the appellees doing business as Auto Finance and the appellee The First State Bank of Osborne recover judgments against the defendants Cox in the sums of $1,941.24 and $410.40, respectively, together with interest, and adjudged their liens to be first and prior and that they be first satisfied out of funds impounded from the sale of the house trailer. It further adjudged that The State Bank of Satanta take nothing except such balance, if any, which might remain after satisfaction of the judgments of Auto Finance and The First State Bank of Osborne, and after satisfaction of the claim of the appellant, Home Finance Corporation, Inc., upon a determination of the sum owing appellant by defendants Cox.

The facts pertinent to this appeal are summarized: Home Finance claimed the right to possession under a chattel mortgage given by Charles R. Cox and Irma M. Cox, husband and wife, to Roush Mobile Home Sales of Grand Island, Nebraska, on October 27, 1959. The sale was made and the chattel mortgage given in Nebraska. The chattel mortgage was assigned to Home Finance and recorded on the certificate of title issued to defendants Cox for the house trailer in Nebraska in accordance with Nebraska law, but was not recorded in Kansas. It showed that defendants Cox were residents of Oberlin, Kansas. The house trailer was delivered to them in Kansas by Roush Mobile Home Sales on November 6, 1959.

Auto Finance claimed the right of possession under a chattel mortgage given by defendants Cox at Osborne, Kansas, on December 9, 1959. The house trailer was located at Long Island, Kansas, at that time. That chattel mortgage was later recorded in Norton and Decatur Counties. No liens were of record in any county in Kansas against the house trailer when that chattel mortgage was given. The First State Bank of Osborne claimed the right of possession under a chattel mortgage given by defendants Cox at Osborne, Kansas, on December 18, 1959. That chattel mortgage was subject to the chattel mortgage of Auto Finance, and it was also recorded in Norton and Decatur Counties.

Appellant-cross appellee, The State Bank of Satanta, claimed the right of possession under bills of sale given it on August 8, 1960, by defendants Cox, which were recorded in Decatur County. Its claim was conceded to be inferior to the claims of Auto Finance and The First State Bank of Osborne.

Defendants Cox were never residents of Nebraska during any of the time mentioned; they were residents of Decatur and Norton Counties, Kansas, and the house trailer has been located in Decatur and Norton Counties since Mobile Sales delivered it at Oberlin on November 6, 1959.

Home Finance first contends the district court erred in holding that its chattel mortgage was not a first lien and prior to the claims of Auto Finance and the Osborne bank. As previously indicated, its chattel mortgage was recorded on the certificate of title to the house trailer. In Securities Credit Corp. v. Pindell, 153 Neb. 298, 44 N.W.2d 501, the supreme court of Nebraska interpreted Sec. 60-110, Revised Statutes of Nebraska, 1943 (Reissue of 1960), and held that the Certificate of Title Act of that state eliminated the practice of filing and recording chattel mortgages on motor vehicles in the chattel mortgage records and substituted the recording of such mortgages on the certificate of title itself. Hence, the validity of Home Finance's chattel mortgage and the procedure of recording it under applicable Nebraska law presents no question in this appeal.

With commendable frankness Home Finance concedes that the principal question presented is whether, having a valid chattel mortgage under the laws of Nebraska, its lien is entitled to recognition and enforcement in the courts of Kansas. Under rules of comity between states, the general rule is that where a chattel mortgage has been properly filed of record in the state in which it was given the courts of other states will recognize such chattel mortgage where the property is removed from the state in which the original mortgage was given upon the basis that the constructive notice imparted by the recording of such mortgage is not confined to the county or state where the mortgage was executed and the property then was, but covers the property wherever it is removed. This rule has been the settled law in Kansas since the case of Handley v. Harris, 48 Kan. 606, 29 P. 1145, 17 L.R.A. 703, was decided in 1892. See, also National Bank v. Massey, 48 Kan. 762, 30 P. 124.

In Hess-Harrington, Inc., v. State Exchange Bank, 155 Kan. 118, 122 P.2d 739, which involved the priority of a chattel mortgage given and recorded in Missouri on an automobile subsequently brought into Kansas and mortgaged to the defendant bank, this court said that when the property was removed from Missouri with the knowledge and consent of the mortgagee it was then necessary to record the mortgage in Kansas to preserve its lien. It was held:

'The general rule is that where a chattel mortgage has been properly filed and thereby priority of lien is preserved, upon the removal of the mortgaged property to another state, it is not necessary in order to preserve the lien that the mortgage be filed in the state to which removal has been made.

'The above rule is subject to a well recognized exception, and that is it is not applicable if the mortgagee knows of or consents to the removal.' (Syl. pp1 and 2.)

Since that decision, the question has not been squarely before this court, but in Citizens State Bank v. Farmers Union Livestock Cooperative Co., 165 Kan. 96, 193 P.2d 636, Hess-Harrington was cited with approval as being the law of this state, and we reaffirm the exception to the general rule of comity as announced in that decision. See 13 A.L.R.2d 1312, where the exception to the general rule of comity is well annotated.

The district court applied the exception to the general rule of comity as stated in Hess-Harrington, and Home Finance advances two reasons why the exception to that rule is not here applicable. It first contends that Hess-Harrington was based on chattel mortgage registration laws and did not involve a law similar to Sec. 60-110, Revised Statutes of Nebraska, 1943, which provides for the recording of chattel mortgages on certificates of title to motor vehicles, and second, that Auto Finance, the Osborne bank, and the Satanta bank had implied knowledge of its chattel mortgage because it was recorded on the certificate of title, making it unnecessary to record the mortgage in Kansas. With respect to the first contention, it cites and relies upon Hinton v. Bond Discount Company, 214 Ark. 718, 218 S.W.2d 75, 13 A.L.R.2d 1354, and Universal C. I. T. Credit Corp. v. Vogt, 165 Neb. 611...