The Penalosa State Bank v. The Calista Grain and Mercantile Company

• Decision Date: 06 April 1929
• Docket Number: 28,670
• Citation: 128 Kan. 132,276 P. 70
• Parties: THE PENALOSA STATE BANK, Appellee, v. THE CALISTA GRAIN AND MERCANTILE COMPANY, Defendant; A. L. SAYLOR, Appellant
• Court: Kansas Supreme Court

276 P. 70

128 Kan. 132

THE PENALOSA STATE BANK, Appellee, v. THE CALISTA GRAIN AND MERCANTILE COMPANY, Defendant;

A. L. SAYLOR, Appellant

No. 28,670

Supreme Court of Kansas

April 6, 1929

Decided January, 1929.

Appeal from Kingman district court; GEORGE L. HAY, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. AGRICULTURE--Seed Contracts--Validity. A contract between a bank and a tenant farmer touching their respective interests in a crop of wheat to be grown from seed wheat furnished by the bank, on terms set out in the opinion, and the objections to such contract urged by an intermeddling third party considered and not sustained.

2. CHATTEL MORTGAGES--Sufficiency of Interest. Under the facts set out in the opinion a mortgage on the wheat crop given by the farmer to defendant was void.

3. TROVER AND CONVERSION--Parties Liable--Participation in Proceeds. A person who knowingly participates in the conversion of property to the extent of sharing the proceeds of such conversion and who distributes the remainder of the proceeds to others is guilty of conversion and liable for the value of the proceeds of the converted property.

C. M. Williams, D. C. Martindell and W. D. P. Carey, all of Hutchinson, for the appellant.

Clark A. Wallace and Paul R. Wunsch, both of Kingman, for the appellee.

OPINION

DAWSON, J.:

This was an action in conversion of the proceeds of a crop of wheat. The plaintiff bank claimed the crop and its proceeds by virtue of a contract with the farmer who planted, harvested and delivered it to an elevator company. The defendant, A. L. Saylor, claimed and obtained the proceeds of the crop from the elevator company by virtue of a chattel mortgage which the farmer had given him soon after it was planted.

The material facts were these: In the summer of 1926, one C. C. Cain, a Kingman county tenant farmer, was so heavily burdened with debt that he had not sufficient credit to buy seed wheat, although he held under some sort of tenure about 400 acres of land suitable for wheat growing. He was also confronted with the dilemma that if he could procure some seed wheat and sow it on his own account his more insistent creditors would attempt to subject the crop to attachment and execution as soon as it sprouted and appeared above ground. Cain owed the plaintiff bank about $ 2,200, and it held a chattel mortgage on his farming equipment. The bank also held a chattel mortgage on some 400 or 500 bushels of Cain's 1926 wheat crop which was stored on Cain's premises. To enable Cain to put out a crop in the autumn of 1926, he and the plaintiff made a written contract whereby this stored wheat held on the bank's mortgage should be surrendered to the bank as part payment on what he owed, and that the bank would furnish so much of it as would be needed to seed the wheat lands under Cain's control. The agreement provided that the crop should belong to the bank, but that as soon as it was sprouted and through the ground so as to furnish a tangible basis of security as a chattel mortgage the bank would sell Cain the wheat it had thus furnished and surrender its interest in the crop to him and take in lieu thereof a chattel mortgage on the crop in payment for its seed wheat and as further security for what he already owed the bank.

Cain set about the performance of this contract and sowed the bank's wheat, but he never sought to exercise his option to buy the wheat and thus acquire for himself the bank's interest in the crop under the terms of the contract. On the contrary, shortly afterwards Cain gave the defendant a chattel mortgage on 110 acres of this young wheat crop on the assumption and pretense that it was already his own property. Defendant recorded his mortgage; and when the crop was grown, threshed and placed in the elevator the following July, he claimed the proceeds under his mortgage, and notwithstanding the elevator company knew of plaintiff's claimed ownership of the wheat, as did the defendant (although the latter apparently did not know of such claim until after he had obtained and recorded his chattel mortgage), the elevator company handed over to defendant the entire proceeds of the wheat crop grown on this 110 acres, except the amount due the landlord, of no present concern.

Hence this lawsuit; jury waived; trial by the court; findings of fact and conclusions of law in favor of the bank; judgment accordingly.

Defendant appeals, his main contention being that the bank did not own the wheat. In determining this point it seems necessary to quote at length from the agreement between Cain and the bank:

"This agreement made and entered into this July 30, 1926, by and between C. C. Cain, party of the first part, the Penalosa State Bank, Penalosa, Kansas, party of the second part.

"Witnesseth: That party of the first part [Cain] is indebted to the second party and is desirous of putting out a wheat crop during the fall of 1926; and that party of the first part is indebted to other parties who are threatening attachment proceedings upon first party's property; that said second party has certain wheat first party has delivered in his bin and to said second party, which second party desires to have sown; that said second party will not furnish as seed wheat to said party to sow as his own wheat.

"In consideration of the above and mutual covenants herein contained, first party agrees to sow 460 acres more or less of wheat for said second party on the following-described land, to wit:

"110 acres on S. E. 1/4 section 10-27-9.

[And other lands described.]

"Second party to furnish sufficient seed. First party agrees to sow said wheat for second party as early as possible and in a good workmanlike manner; that said wheat when sown shall be the absolute and sole property of the second party. Upon completion of the sowing of the said wheat as above described, said party of the second part agrees to sell same to party of the first part who agrees to buy same, and to pay second party in cash therefor or to execute a first and prior mortgage thereon in payment of said wheat and which mortgage shall also secure other indebtedness owing second party by first party and the sale price of the said wheat shall be the reasonable value of the same."

Defendant asserts that this contract was void for four reasons--want of consideration, fraudulent as to Cain's creditors, unconscionable, and never intended to be fulfilled.

Touching these points in order, it can hardly be said that the contract was wanting in consideration. By entering into it and sowing the bank's wheat Cain obtained an option to buy the bank's interest at a very moderate figure, and by the exercise of that option he would acquire a crop of wheat which might go far towards the extinguishment of the burden of debts which were paralyzing his farming activities. Neither does it seem proper to characterize the contract as fraudulent in its tendency to assist Cain to defeat his creditors. How could the contract have that effect? Unless the bank would furnish the wheat there would be no crop planted, and consequently no possibility of a harvest and wherewithal to pay any of Cain's creditors. It seems that the contract could not be otherwise than beneficial to Cain's creditors, at least to one or more of them, and it certainly could not result detrimentally to any of them. Defendant's argument on this point takes it for granted that Cain could and would have acquired some seed wheat of his own and sown it for the general benefit of all his creditors if the bank had not consented to have him sow its wheat, but there was no evidence to that effect, and the contract itself recognized the circumstances which had put a period on Cain's farming operations except under some such arrangement as he effected with the bank.

It is also urged that the contract was unconscionable. Why so? There is nothing particularly invidious nor unusual in our wheat-growing sections about a contract where one party risks his seed wheat against the other party's labor of preparing the ground and planting it, both parties to have an interest in the crop, if there is one. Here it seems the bank was somewhat more generous than the usual run of men who furnish seed wheat on shares. It stipulated that as soon as the young crop was far enough along to be a proper subject of sale and hypothecation it would sell its interest to Cain for the fair price of its seed wheat, provided he would pledge the crop to the bank to secure the large sum of money he already owed it. If the seed had died of drought Cain would have been out nothing, and the bank could charge off the value of its seed wheat to profit and loss. There is nothing in law or morals or common fairness which would forbid that sort of a contract. Courts look with favor upon contracts which encourage the growing of crops, "which being a public benefit," as the old law writers declared "tending to the increase and plenty of provisions ought to have the utmost...