Jones v. Home Sav. Bank of Kiron

• Decision Date: 15 December 1925
• Docket Number: No. 36597.,36597.
• Citation: 206 N.W. 107,200 Iowa 1186
• Parties: JONES v. HOME SAV. BANK OF KIRON ET AL.
• Court: Iowa Supreme Court

200 Iowa 1186

206 N.W. 107

JONES

v.HOME SAV. BANK OF KIRON ET AL.

No. 36597.

Supreme Court of Iowa.

Dec. 15, 1925.

Appeal from District Court, Crawford County; E. G. Albert, Judge.

Action in equity to impress a trust upon certain funds in the hands of the defendants which are the proceeds of the sale of certain personal property upon which the plaintiff had a chattel mortgage. A decree was entered in favor of the plaintiff, and the defendants appeal. Affirmed.P. W. Harding, of Denison, and Robertson & Robertson, of Council Bluffs, for appellants.

Conner & Powers, of Denison, for appellee.

FAVILLE, C. J.

One Gust Anderson executed and delivered to appellee a chattel mortgage upon 28 head of steers. The mortgage was executed February 27, 1920, and was recorded the same day. On or about March 1st Anderson moved upon a farm owned by the defendants Johnson, Swanson & Baker, and moved said mortgaged property to said premises. He had other cattle on the farm. About a year later Anderson shipped the cattle, except one steer which had died, with other cattle, to a commission house in Chicago, where they were sold. On the day that the stock was sold, Johnson, who is cashier of appellant bank, wrote two letters to the commission firm in Chicago instructing said firm to send the proceeds of the shipment of said cattle to the said savings bank. This was done. Anderson accompanied the shipment of stock to Chicago, and upon his return to Kiron called at the savings bank, and was requested by Johnson to settle the indebtedness which he was then owing to the said bank and also to Johnson, Swanson & Baker. It is the contention of appellee that Anderson then informed Johnson, who was acting for the bank and for the partnership of Johnson, Swanson & Baker, that appellee had a mortgage on 27 head of the cattle which had been sold in Chicago, and instructed Johnson that appellee's mortgage must be paid out of the proceeds of said sale. It appears that at said time Johnson made out three checks for Anderson to sign. Anderson is a man of very limited education, and he signed the checks without reading them. It afterwards transpired that one of the checks was made payable to Johnson, Swanson & Baker, and that each of the other checks was made payable to the Home Savings Bank of Kiron. Swanson and Baker were both officers of the savings bank. Before the cattle in question were shipped to Chicago appellants Johnson, Swanson & Baker, took a chattel mortgage upon certain cattle which Anderson then had upon their farm, and included in said chattel mortgage all of the cattle Anderson had upon the premises, except the 27 head that were covered by appellee's chattel mortgage. They never at any time had any chattel mortgage upon said cattle, and any landlord's lien which they may have had thereon was subject to appellee's rights under his chattel mortgage which was executed and duly recorded before the cattle were taken upon the leased premises by Anderson. Appellants urge that, where the mortgagor of chattel property sells the same without the consent of the mortgagee, the lien of the mortgage does not attach to the proceeds of such sale, and the proceeds cannot be followed by the mortgagee, and a lien enforced against them. This is undoubtedly the general rule and one frequently recognized by this court. Waters v. Cass County Bank, 65 Iowa, 234, 21 N. W. 582;Casady v. Des Moines German Sav. Bank, 159 Iowa, 149, 140 N. W. 401;Smith v. Clark, 100 Iowa, 605, 69 N. W. 1011;Smith v. Crawford County State Bank, 99 Iowa, 282, 61 N. W. 378, 68 N. W. 690;Harlan v. Ash, 84 Iowa, 38, 50 N. W. 41. Appellee concedes this well-established rule.

[1] As we view it, however, this rule is not applicable to the instant case. Appellee's actionis not at law for conversion, but is in equity to impress a trust upon certain funds in the hands of appellants, which, it is contended, are the proceeds of the sale of property upon which appellee had a chattel mortgage, and it is claimed that appellants were charged with actual knowledge of the fact that said funds were the proceeds of the property upon which appellee had a lien under his chattel mortgage. A careful examination of the record satisfies us that the trial court was correct in reaching the conclusion that the evidence satisfactorily shows that appellants did have actual knowledge of the fact that the funds which they received from the commission house in Chicago were the proceeds of the...