United States v. RD Wilmans & Sons, Inc.

• Decision Date: 21 December 1956
• Docket Number: No. 267.,267.
• Citation: 147 F. Supp. 232
• Parties: UNITED STATES of America, Plaintiff, v. R. D. WILMANS & SONS, Inc., Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

147 F. Supp. 232

UNITED STATES of America, Plaintiff, v. R. D. WILMANS & SONS, Inc., Defendant.

No. 267.

United States District Court E. D. Arkansas, N. D.

December 21, 1956.

COPYRIGHT MATERIAL OMITTED

Osro Cobb, U. S. Atty., Walter G. Riddick, Asst. U. S. Atty., Little Rock, Ark., and Dan P. Chisholm and Louis W. Bone, Attorneys, U. S. Department of Agriculture, Little Rock, Ark., for plaintiff.

Kaneaster Hodges, Newport, Ark., for defendant.

LEMLEY, District Judge.

This cause having been tried to the Court, and the Court being well and fully advised doth file this memorandum opinion in lieu of formal findings of fact and conclusions of law:

The plaintiff, United States of America, brought this action against the defendant, R. D. Wilmans & Sons, Inc., an Arkansas corporation, to hold the latter liable as a converter of 20 bales of cotton produced by one Daniels on the Maude Stephens farm in Jackson County, Arkansas, during the year 1952, which cotton Daniels sold to the defendant. The plaintiff claims that this cotton was covered by a chattel mortgage executed by Daniels on March 26, 1952, in favor of the Farmers Home Administration, an agency of the United States, hereinafter called "FHA," that the defendant was charged with constructive notice of said mortgage, and that when it purchased the cotton from Daniels, it became liable as a converter thereof.

The defendant admits that it purchased from Daniels 20 bales of cotton produced during 1952 on the Stephens farm, but it denies that such cotton was covered by the plaintiff's mortgage, and contends, on the other hand, that said cotton was subject to a chattel mortgage in its favor, executed by Daniels on April 1, 1952. It is further contended that even if said cotton was covered by the FHA mortgage, the defendant was not charged with constructive notice thereof because the instrument was executed in the name of "Ben J. Daniels," whereas the mortgagor's true name was "J. B. Daniels," under which name the defendant's mortgage was taken. It is still further contended, in the alternative, that in any event the crops grown on the Stephens farm had been released from the lien of the FHA mortgage if they were in fact ever covered thereby.

The following facts are substantially undisputed:

On March 26, 1952, Daniels, being indebted to the FHA, executed and delivered to that agency a crop and chattel mortgage whereby he granted, bargained, sold and conveyed to it "* * * the following crops or chattels all of which are located or to be located on the premises known as the Joe Davis farm or ranch, located and situated approximately 5 miles in a North erly direction from the town or city of Newport in the county of Jackson, and State of Arkansas:

"(1) All crops now standing, planted, or grown, and all crops that may be planted or grown within twelve (12) months from the date hereof on the lands above described and on any other lands cultivated by the Mortgagor in the same county(ies).

"(2) The following-described livestock (including poultry):

(Here follows a description of a horse, a mare, and a hog, with which we are not concerned.)

"(3) Other chattels described as follows:

(Here follows a list of miscellaneous farm implements and equipment not involved in this case.)

"(4) All livestock, farm equipment, machinery, tools, and other farm personal property now owned or which may hereafter be acquired by the Mortgagor during the time this mortgage is effective."¹

That mortgage was signed "Ben J. Daniels," as were other mortgages given by him to the FHA in prior years. Said instrument was duly endorsed, "To Be Filed But Not Recorded," which endorsement was signed by an agent of the mortgagee, and was duly filed with the Circuit Clerk and ex officio recorder of Jackson County, as provided by Ark. Stats. § 16-201.²

At about the same time that the foregoing mortgage was executed Daniels rented the so-called Maude Stephens farm, likewise in Jackson County, and approached the representatives of the FHA with the end in view of obtaining an additional loan to finance the making of a crop on that farm. He was advised, however, that under its regulations FHA could make him no further loan; he then inquired of the County Supervisor as to the effect of his borrowing money from someone else for the purpose stated, and he was told that the only effect that such action on his part would have would be to render him ineligible to borrow from the FHA the following year.

On April 1, 1952, Daniels borrowed certain moneys from the defendant to enable him to cultivate the Stephens place, and to secure that indebtedness he executed a crop and chattel mortgage covering the 1952 crops on that farm, which mortgage was signed, "J. B. Daniels," and was, as in the case of the FHA mortgage, duly endorsed "To Be Filed But Not Recorded," which endorsement was signed by the mortgagee, and was duly filed with the Circuit Clerk on a date subsequent to the filing of the FHA mortgage.

Daniels harvested 20 bales of cotton from the Stephens farm and sold them to the defendant; neither Daniels nor the defendant ever accounted to the FHA for the proceeds of such sale, and it is upon this sale that the plaintiff bases its claim that the defendant is liable to it as a converter, Daniels being still indebted to the plaintiff.

After the foregoing transactions had taken place, the County Supervisor in consideration of a cash payment of $450 made by Daniels released the chattels covered by the mortgage; but the Supervisor had no authority to release any mortgaged crops, except to a limited extent not here applicable, nor did he purport to do so. Nor did the Supervisor have any authority to vary the terms of the mortgage.

While the parties have stipulated that the "Ben J. Daniels," who executed the FHA mortgage, and the "J. B. Daniels," who executed the mortgage to the defendant, are one and the same person, there is a dispute as to his correct name, the plaintiff contending that his correct name is "Ben J. Daniels," whereas the defendant asserts that "J. B. Daniels" is the correct designation of the mortgagor.

The overwhelming weight of the evidence discloses that the correct name of the mortgagor is "Joseph Benny Daniels" or "J. B. Daniels." That fact is established not only by his own testimony, but also by the fact that for many years prior to the inception of the instant controversy he has signed checks and other documents as "J. B. Daniels," and that his marriage certificate, issued in 1927, shows his name to be "J. B. Daniels." We are satisfied that his designation in the FHA mortgage and in the files of that agency as "Ben J. Daniels" stems from an error made in the Newport office of the FHA when Daniels first began doing business there, whereby his initials were transposed, and that he has signed FHA documents as "Ben J. Daniels" merely to conform to the erroneous designation just mentioned. Daniels was known only to the FHA as "Ben J. Daniels"; and, as a matter of fact, the officials of that agency were on notice of the fact that he customarily signed his name as "J. B. Daniels." They continued, however, to erroneously designate him as "Ben J. Daniels."

While it is true that Daniels' correct name is "J. B. Daniels," the evidence also establishes that Daniels was generally known in Jackson County simply as "Ben Daniels," without any initial preceding or following the name "Ben," and that he was so known to Mr. R. D. Wilmans, the head of the defendant corporation prior to the time that he made his loan and prior to the time that he purchased the cotton grown on the Stephens farm; and there is no evidence that there was any other person in Jackson County known as "Ben Daniels" or by either of the other two names that have been mentioned.³

From the record before us and the briefs of the parties, it appears that there are two questions for decision: First, whether or not the crops produced on the Maude Stephens farm were covered by the FHA mortgage; and, Second, if so, whether or not the defendant was charged with constructive notice of that fact. If both of those questions are answered in the affirmative, then the plaintiff is entitled to prevail, otherwise not.

While from a logical standpoint those questions should be discussed in the order named, the view that we take of this case renders it desirable to consider the second one first.

Although there is no evidence here as to whether or not Mr. Wilmans or anyone else acting for the defendant actually searched the chattel mortgage records before the defendant made its loan to Daniels or bought from him the cotton in question, the defendant was, of course, charged with knowledge of such facts as those records disclosed and such additional facts as would have been disclosed by such investigation as the records would have suggested to a person of ordinary prudence. Fincher v. Hanegan, 59 Ark. 151, 159-160, 26 S.W. 821, 24 L.R.A. 543; see also In re Greer College and Airways (Greer v. Klein), 7 Cir., 53 F.2d 585, 586 and cases there cited.

In view of the fact that the mortgagor was generally known in Jackson County as "Ben Daniels," as well as by the name of "J. B. Daniels," and particularly in view of the fact that Mr. Wilmans prior to doing business with him knew him as "Ben Daniels," we are satisfied that a person of ordinary prudence in Mr. Wilmans' position examining the records and seeing the name "Ben J. Daniels" appearing therein as one who had executed a crop and chattel mortgage in favor of the FHA would have been moved to inquire, before lending money to or buying cotton from Daniels, whether or not the "Ben J. Daniels" appearing in the records was the same person known to him simply as "Ben Daniels." And we are also of the opinion that had such inquiry been made, it would have revealed that the two names referred to one and the same person. Hence, we conclude that the defendant was charged with constructive notice of the...