The Rawlins County State Bank v. Walters

• Decision Date: 09 May 1914
• Docket Number: 18,849
• Citation: 140 P. 864,92 Kan. 391
• Parties: THE RAWLINS COUNTY STATE BANK, Appellant, v. HENRY WALTERS, Appellee
• Court: Kansas Supreme Court

140 P. 864

92 Kan. 391

THE RAWLINS COUNTY STATE BANK, Appellant, v. HENRY WALTERS, Appellee

No. 18,849

Supreme Court of Kansas

May 9, 1914

Decided January, 1914.

Appeal from Rawlins district court; WILLIAM S. LANGMADE, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PROCEEDS FROM SALE OF CHATTEL-MORTGAGED PROPERTY--Can Not be Pursued into Hands of Innocent Third Party. A mortgagee can not pursue the proceeds of a sale of mortgaged personal property, made by the mortgagor, and received and applied by his creditor in good faith in payment of a valid debt, where the person so receiving the proceeds has no knowledge of the mortgage and is not chargeable with any notice of its existence.

2. SAME. In the situation stated above, the filing of the chattel mortgage in the proper office does not impart constructive notice to the creditor who receives and applies the proceeds of the sale, but has no lien upon or right to the mortgaged property.

Fred Robertson, of Atwood, for the appellant.

OPINION

BENSON, J.

This is an action by a mortgagee to recover the proceeds of a sale of mortgaged personal property made by the mortgagor.

The material facts found by the district court are that on October 16, 1909, John Herzog borrowed $ 512 from the defendant, for which he gave his promissory note secured by a mortgage upon horses and other personal property. On November 8, 1910, he borrowed $ 162.75 from the plaintiff, and secured the payment by his promissory note and a mortgage upon several horses, including a certain sorrel horse. Both mortgages were promptly filed in the office of the register of deeds. On April 20, 1911, Herzog sold the sorrel horse to an unknown buyer for $ 190, receiving a bank check for that amount. The defendant thereupon demanded and received the check from Herzog to apply on his note and mortgage, and so applied it without any notice of the plaintiff's mortgage other than that imparted by the record. The district court found that the defendant's mortgage did not contain a sufficient description of the sorrel horse in question, excluded the mortgage from evidence, and concluded as matter of law "that, inasmuch as the defendant applied the one hundred and ninety dollars upon a preexisting debt he is entitled to recover in this action."

The plaintiff contends that the conclusion of law was erroneous that the identical fund arising from the sale of the mortgaged property having been traced to the defendant is subject to the lien of the mortgage. The law is otherwise. A mortgagee can not pursue the proceeds of a sale of mortgaged personal property, made by the mortgagor, and received and applied by his creditor...