Stribling Bros. Corp. v. Euclid Memphis Sales

• Decision Date: 04 May 1970
• Docket Number: No. 45722,45722
• Citation: 235 So.2d 239
• Parties: STRIBLING BROTHERS CORP., a Corp. v. EUCLID MEMPHIS SALES, a Division of Trippeer Organizations, Inc., a Corp.
• Court: Mississippi Supreme Court

Page 239

235 So.2d 239

STRIBLING BROTHERS CORP., a Corp. v. EUCLID MEMPHIS SALES, a Division of Trippeer Organizations Inc., a Corp.

No. 45722.

Supreme Court of Mississippi.

May 4, 1970.

Bell & McBee, Greenwood, for appellant.

Lott, Sanders & Gwin, Greenwood, Newton P. Allen, Memphis, for appellee.

INZER, Justice:

This is an action for trover and conversion brought in the Circuit Court of Leflore County by appellee, Euclid Memphis Sales, a division of Trippeer Organizations, Inc., a Tennessee corporation, hereinafter referred to as Euclid, against Stribling Brothers Corporation, a Mississippi corporation, hereinafter referred to as Stribling, for the conversion by Stribling of two used tractors which were the subject of a chattel mortgage owned at the time of the suit by Euclid. Upon motion by Stribling the suit was transferred to the Chancery Court of Leflore County. That court on the trial of the case held that Stribling was guilty of conversion of both tractors and a money judgment was entered against Stribling in the amount of $8,500 plus legal interest. From this decree Stribling appealed. We affirm.

The facts in this case are somewhat involved and we will reduce them insofar as possible to the basic essentials. It is admitted that on November 6, 1963, Euclid sold to Kyle and Hocutt a partnership doing business in Sunflower County, Mississippi, a new Euclid C-6 Tractor and equipment. To secure the purchase price Kyle and Hocutt executed a note and conditional sales contract in the amount of.$48,531.59 payable in installments. As additional security Kyle and Hocutt gave a chattel mortgage on two Caterpillar tractors hereinafter referred to as Tractor 9-U1 and Tractor 9-U2. These tractors were owned by Kyle and Hocutt and were located in Sunflower County, Mississippi.

On November 13, 1963, Euclid assigned without recourse the note and collateral to U. M. and M. Credit Corporation doing business in Memphis, Tennessee, hereinafter referred to as Credit Corporation. It was agreed between the parties that Credit Corporation would hold back $10,000 of the purchase price of the note, this was in effect a guaranty that Kyle and Hocutt would pay their note. On November 14, 1963 Credit Corporation duly filed for record in the office of the Chancery Clerk of Sunflower County the conditional sales contract which appellant admits had the effect of a chattel mortgage on the two tractors put up by Kyle and Hocutt as collateral.

In December 1964 Kyle and Hocutt sold without the knowledge of consent of Euclid or Credit Corporation the tractors 9-U1 and 9-U2 to W. B. Harpole, who carried them to Oktibbeha County. On September 21, 1965, Harpole traded tractor 9-U1 to appellant Stribling. Stribling made no inquiry of Harpole relative to his title to the tractor, nor did it make any search of the records.

On January 7, 1966, Kyle and Hocutt transferred and sold the Euclid tractor to Dubose of Sunflower County; this sale was with the knowledge and consent of Credit Corporation and Euclid. The transfer purported to transfer not only the Euclid tractor but also tractor 9-U1 and 9-U2. Dubose assumed the indebtedness to credit corporation but the Credit Corporation did not release Kyle and Hocutt. This assignment and assumption was immediately filed for record and recorded in Leflore County.

On March 23, 1966, Stribling sold tractor 9-U1 to Gerald Tillman for $13,000. Stribling took a security instrument on the tractor for its purchase price. A few days later Stribling assigned this note and collateral to Credit Corporation with recourse. Four days later Credit Corporation discovered that this was one of the tractors covered by Kyle and Hocutt's chattel mortgage. It immediately notified Stribling of this fact. Tillman paid Credit Corporation two installments on his note and then defaulted. Credit Corporation required Stribling to repurchase this paper. Stribling then repossessed the tractor.

After Credit Corporation found out that Kyle and Hocutt had disposed of the two tractors it contacted them and demanded payment in full of the balance due on their debt, it then being in default. Credit Corporation then knew that neither Kyle, Hocutt or Dubose had possession of the tractors 9-U1 and 9-U2. Then it began proceedings to replevin the Euclid tractor then in possession of Dubose. On June 24, 1966, Credit Corporation wrote Euclid that it was attempting settlement of the suit against Dubose and it could get $17,905 for the Euclid tractor and that it would take this amount and this, together with the $10,000 withheld by it, would pay in full the amount due Credit Corporation. Euclid replied to this letter stating that such action by Credit Corporation would be considered by Euclid to be a breach of the agreement relative to the holdback of $10,000. Euclid contended that Credit Corporation could not apply the $10,000 until it had exhausted all of its security. On September 21, 1966, Credit Corporation accepted $17,000 from Dubose and released the Euclid tractor to him. On November 10, 1966, Credit Corporation applied the $10,000 of Euclid under the holdback agreement on its books so as to pay itself in full. On November 22, 1966, Euclid filed suit against Credit Corporation in the Chancery Court of Shelby County, Tennessee, on the grounds that Credit Corporation bad no right to apply the $10,000 without first having repossessed tractors 9-U1 and 9-U2 and applied the proceeds to the indebtedness of Kyle and Hocutt.

On November 17, 1966, W. B. Harpole traded tractor 9-U2 to Stribling, although Stribling had knowledge that there was a lien on the other tractor Harpole had sold it, made no inquiry relative to the title to this tractor and did not ask Harpole where he had acquired the tractor.

The manager of Stribling admitted that at the time Stribling made this trade with Harpole that it knew that the previous tractor it had purchased from Harpole had a claimed lien on it to Euclid and Credit Corporation. Stribling also know of the transfer and assumption agreement between Kyle and Hocutt and Dubose, knew of the litigation between Euclid and Credit Corporation, and further knew that there were two tractors on the chattel deed of trust held by Euclid and that Stribling had purchased one of those tractors from Harpole.

On May 29, 1967, Stribling sold tractor 9-U2 to Harold Coleman and on November 13, 1967, Stribling sold tractor 9-U1 to Olen Dixon.

The Chancery Court of Shelby County, Tennessee, construed the agreement between Euclid and Credit Corporation to be an absolute guaranty by Euclid and that Credit Corporation had a right to apply this sum to the indebtedness of Kyle and Hocutt in their discretion. The Court further held that Euclid, having paid $10,000 of Kyle and Hocutt's indebtedness, was entitled to be subrogated to all rights of Credit Corporation, and directed that Credit Corporation assign the note and collateral to Euclid.

Euclid then made demand upon Stribling for payment of the fair market value of the two tractors, claiming that Stribling was liable for conversion of the tractors. Stribling denied any liability and Euclid filed this suit.

The first assignment of error is that the trial court erred in finding that appellant was guilty of conversion of the two tractors because the findings were contrary to the law and to the evidence in this case. Under this assignment appellant argues several propositions. It is first contended that the chancellor was in error in failing to hold that the application of the $10,000 holdback satisfied the debt to Credit Corporation and released all obligors on the note. We find no merit in this contention. The chancellor correctly held that the last $10,000 of the indebtedness of Kyle and Hocutt had not been paid and that the application of Euclid's $10,000 to satisfy the amount due Credit Corporation was clearly not intended to satisfy Kyle and Hocutt's debt. What actually happened was that Euclid as guarantor paid to Credit Corporation the last $10,000 that Kyle and Hocutt owed to Credit Corporation on their note and under these circumstances Euclid was entitled to be subrogated to all rights of the holder of the note and the security. We are unable to see how the...