National Ass'n of Credit Men, Montana-Wyoming Unit v. Moss
| Decision Date | 16 February 1960 |
| Docket Number | No. 2910,MONTANA-WYOMING,2910 |
| Citation | 349 P.2d 202 |
| Parties | NATIONAL ASSOCIATION OF CREDIT MEN,UNIT, Appellant (Plaintiff below), and Lone Star Boat Company, Appellant (Plaintiff below), v. Keith MOSS, doing business as the Pioneer Sporting Goods, Defendant, Wyoming Hardware Company, Appellee (Intervener below). |
| Court | Wyoming Supreme Court |
Henry A. Burgess and Bruce P. Badley, Sheridan, for appellant.
Leonard McEwan, Sheridan, for respondent.
Before BLUME, C. J., and PARKER and HARNSBERGER, JJ.
This is an appeal by plaintiffs, who are judgment creditors of defendant, from a judgment awarding the intervener-mortgagee the proceeds of an auction sale held December 12 and 13, 1958, of merchandise subject to its recorded chattel mortgage, which permitted sale of the merchandise in the course of mortgagor's business.
The undisputed facts are that on the 19th day of December, 1958, plaintiffs, as judgment creditors of defendant, simultaneously garnisheed the proceeds of the auction sale which had been deposited in a bank by the clerk of the auction sale in an account designated as 'Keith Moss Sale Account'. The account was not under the control or subject to withdrawal by the mortgagor. The appellee was permitted to intervene and at the trial established its mortgage, and the fact that prior to the sale the clerk and the defendant were notified in writing that the mortgagee claimed the proceeds of the auction sale by virtue of its recorded chattel mortgage and that payment of the sale proceeds to anyone other than the mortgagee prior to determination of priority of payment would be at the risk of the clerk serving in the capacity of a trustee.
Appellants say the only issue involved in their appeal is whether the trial court erred in holding the mortgagee's lien followed the proceeds of the sale and insist the record clearly shows the mortgagee unconditionally consented to the sale of the mortgaged property and hence was without a prior claim to the proceeds. Appellee disputes this, calling attention that its letter of December 12, 1958, conditioned the sale upon the clerk as trustee paying over the proceeds only in accordance with determined priority. We are inclined to think appellee's position is well taken, inasmuch as the written notification of its claim to the proceeds of the auction sale, coupled with directions as to their disposition, had the effect of conditioning the mortgagee's consent upon the clerk's applying the proceeds of the sale according to priorities which, of course, meant that the proceeds would be applied upon the mortgage debt. Under such a circumstance the consent given to defendant and the clerk was not unconditional.
In jurisdictions where there is no statutory declaration on the subject, the authorities are in conflict as to the effect upon the rights of other creditors of a chattel mortgage which permits sale of the mortgaged property in the course of business. In this State, however, such mortgages are authorized by statute and their validity does not depend upon the existence of any agreement for an accounting. See Carroll v. Anderson, 30 Wyo. 217, 225, 218 P. 1038.
Section 34-255, W.S.1957, formerly § 59-114, W.C.S.1945, reads:
But the auction sale in this case was not made under the statutory permission given in the mortgage. Had the sale been one which the mortgagor could have justified only because made in the course of business by virtue of the statutory permission contained in the mortgage, the mortgagee might have been left to rely solely upon the bare promise of the mortgagor that the sale proceeds would be properly applied. See General Credit Corporation v. First Nat. Bank of Cody, 74 Wyo. 1, 17, 283 P.2d 1009, 1014; Carroll v. Anderson, supra. However, in this instance, the sale was circumscribed by the express limitation placed upon it by the mortgagee's letter to defendant and the auction sale clerk. In other words, the sale was not made under the permissive clause contained in the mortgage, but was made under a condition laid by the mortgagee and agreed to by the tacit acquiescence of the mortgagor and auction clerk in proceeding with the sale after the mortgagee's notification was received by them. This is further evidenced by the manner in which the proceeds were deposited by the clerk.
Appellants call our attention to Rock Springs National Bank v. Luman, 5 Wyo. 159, 38 P. 678, reversed, 6 Wyo. 123, 42 P. 874; Id., Wyo., 43 P. 514; Id., Wyo., 47 P. 73, and correctly say the trial court found that where the proceeds of mortgaged property were traced to a bank which converted the money to its own use, the bank having knowledge and actual notice of its trust character, such proceeds belonged to the mortgagee. But appellants attempt to distinguish that case from the instant one by contending that they are in a position dissimilar to that of the bank in the Rock Springs National Bank case because the appellants in the present case were without actual knowledge of the existing chattel mortgage. To the extent the sale proceeds in the Rock Springs National Bank case were in the possession of the bank which converted them to its own use, whereas here the proceeds were in the possession of a disinterested party, there was a difference. There is also the difference that in the cited case the bank converting the funds to its own use had knowledge of their trust character, whereas here the money was sought to be obtained by garnishment at a time when plaintiffs disclaimed any knowledge of the trust character of the funds. Assuming plaintiffs in this matter were without knowledge or actual notice that the moneys were burdened with trust at the time the garnishee levy was attempted, does that lack of knowledge or notice serve to subject bank deposits not owing to, under the control of, and not subject to withdrawal by the debtor, to plaintiffs' garnishment? We think not. The money in the bank was not the unrestricted property of the defendant, but was money subject to the burden of the trust imposed upon it by the letter of December 12, 1958, as was indicated by the designation given to the deposit. This deposit by the auction-sale officials was not made to the account of the defendant-debtor, but was deposited to a sales account. That this account bore the defendant's name is immaterial, for that was merely a means of identifying the source from which the money came. The deposit was more part of a process for the payment of the sale proceeds to the mortgagee in partial satisfaction of the mortgage debt. In that sense, it was not the money of the judgment debtor but was the property of the mortgagee. When the sale proceeded after both the defendant-mortgagor and the sale officials had received the written notice of the conditions imposed by the mortgagee, the sale officials were acting substantially as the mortgagee's agents and trustees with the mortgagor's approval. This view is not altered by the fact that ordinarily the mortgagee could not have sold the merchandise except in the course of business without foreclosure. It amounted to a sale made under a special agreement between mortgagor and mortgagee providing that the sale proceeds would be applied upon the mortgage indebtedness.
The Rock Springs National Bank case, supra, has also been cited by some courts as deciding that where a chattel mortgage contains a statutory provision permitting mortgagor to sell mortgaged property in the course of business and the mortgage is properly filed or recorded, the mortgage is constructive notice, not only that its described property is encumbered by mortgage, but also notice that proceeds of any sale in the hands of the mortgagor are held in trust. See Martz v. Big Horn Glass Co., Mo.App., 269 S.W. 697, 699, where the Missouri court interpreted § 4698, C.S.1920, now § 34-255, W.S.1957, as subjecting proceeds of the sale of mortgaged property sold under the provisions of the statutory permission contained in the mortgage to the mortgagee's lien, predicating its decision upon the authority of McCord, Brady & Co. v. Albany County Nat. Bank of Laramie City, 6 Wyo. 507, 46 P. 1093; 7 Wyo. 9, 48 P. 1058, and Rock Springs National Bank v. Luman, supra. This conclusion is possibly due to the syllabus appearing in 6 Wyo. 123. However, what was said in the opinion in 6 Wyo. 130 and 42 P. 874 is:
'* * * Under express provisions of our statute, the mortgage contained a provision permitting the mortgagor to sell and dispose of the mortgaged sheep, or any portion thereof, in the due course of business, or to preserve and care for the same, and to replace such property sold with other property of like kind and...
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Miller & Miller Auctioneers, Inc. v. G. W. Murphy Industries, Inc.
...were Willey's is, we think, settled by two previous decisions of this court, National Association of Credit Men, Montana-Wyoming Unit v. Moss, Wyo., 349 P.2d 202 (1960). In that case Moss had given a chattel mortgage to the intervenor in the action and later arranged to have a public auctio......