Case Name: FOURTH NAT. BANK OF TULSA v. EIDSON
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1947-12-16
Citations: 205 Okla. 145
Docket Number: No. 32963
Parties: FOURTH NAT. BANK OF TULSA v. EIDSON.
Judges: HURST, C. J., and BAYLESS, WELCH, ARNOLD, and LUTTRELL, JJ., concur. DAVISON, V. C. J., and GIBSON, J., dissent.
Reporter: Oklahoma Reports
Volume: 205
Pages: 145–152

Head Matter:
FOURTH NAT. BANK OF TULSA v. EIDSON.
No. 32963.
Dec. 16, 1947.
Rehearing Denied May 22, 1951.
Second Petition for Rehearing Denied Sept. 25, 1951.
236 P. 2d 491.
Bush, Gable & Gotwals, Tulsa, for plaintiff in error.
Hughey Baker, Tulsa, for defendant in error.

Opinion:
CORN, J.
This is an appeal by defendant Bank from a judgment rendered upon a jury's verdict in the district court of Tulsa county. It is not urged on appeal that the evidence is insufficient to support such verdict and judgment, thus all questions of fact supported by any competent evidence are resolved in favor of plaintiff. Hence, it is unnecessary to set forth a lengthy recitation of the pleadings and the evidence, and the following statement may be considered as the facts of the case as determined by the jury.
Plaintiff was a merchant and rancher residing at Eagle Pass, Tex. Defendant, H. V. Weaver, was a rancher- living at Manford, Okla. For some time Weaver had handled his business affairs through the defendant bank, and had been extended considerable credit prior to, and during the course of events out of which this action arose.
About June 5, 1943, plaintiff shipped 338 steers to Weaver to be pastured in Creek county, advancing the freight bill and part (one-third) of the pasturage. Weaver was to share'in the profits of the venture in return for his efforts. The cattle did not do well and upon plaintiffs suggestion that they be shipped back to Texas, Weaver offered to buy them. November 15, 1943, plaintiff sold him the 338 steers, two to five years old, each branded with plaintiff's holding brand, a wine glass mark, on the right side, for $17,760 or $52 per head.
The purchase price was secured by a mortgage in plaintiff's favor for the full amount, such mortgage being filed in Creek county November 15, 1943, and the debt secured thereby being due August 15, 1944. In the mortgage, following description of the cattle, the following provision was typewritten:
" . . . Also in the event that I should dispose of any or all of said mentioned livestock I will remit at once all the proceeds of such sale to D. A. Eidson."
The fourth provision in the body of the mortgage form was as follows:
"No part of said mortgaged property shall be sold or disposed of in any manner by said mortgagor, without the written consent of the mortgagee."
Weaver had applied to defendant for an extension of indebtedness and an additional loan. This application showed these cattle encumbered to the extent of plaintiff's mortgage, and the security was inspected by defendant's representative. The defendant's mortgage described 261 steers, 180 cows and 40 calves, carrying different brands from the cattle covered by plaintiff's mortgage. Weaver's total indebtedness amounted to $24,500.
Early in 1944 Weaver began selling off the cattle covered by defendant's mortgage and reducing his indebtedness. When a sale was made a notation of the number of cattle sold and the amount they brought would be itemized on Weaver's note and the remaining balance shown. By July 17, 1944, a total of 439 head of cattle listed as security on defendant's mortgage had been sold, and his indebtedness reduced to $16,741.21.
July 17, 1944, and before plaintiff's mortgage was due, Weaver shipped 140 steers to Kansas City for sale. The evidence established that these cattle bore plaintiff's wine glass brand, and were thus identified and shown to be part of the cattle mortgaged to plaintiff. Of this shipment 140 steers brought $8,-727.90 net. At Weaver's direction this was deposited in a Kansas City bank to the credit of defendant. This amount was credited on Weaver's note in defendant's bank, although the customary notation concerning the number of head sold was not made.
Plaintiff finally sent a representative into this state to make inquiry about the cattle covered by his mortgage. Investigations were begun which revealed that Weaver no longer had the cattle in his possession, and that this particular lot of cattle bearing plaintiff's brand had been handled in the manner above set out. The proceeds thus were traced into defendant bank where the amount derived from the sale had been applied upon Weaver's indebtedness.
March 13, 1945, plaintiff brought this action against Weaver and the bank to recover $10,643 plus interest, upon the theory Weaver kept part of the cattle in Creek county and defendant had actual and constructive notice of plaintiff's rights under the mortgage, that acting together they caused the cattle to be sold and the proceeds applied upon Weaver's note; that defendant's claim was inferior to plaintiff's and under the terms of the mortgage Weaver became trustee of the proceeds for plaintiff's benefit as against defendant, the funds from the sale having been received by defendant with knowledge of their source and trust character.
Defendant denied Weaver was its agent or that it acted with him in the sale, and denied any credits upon his indebtedness resulted from a sale of plaintiff's security, or that the money received from Weaver was trust funds upon which plaintiff had a lien; and if he ever became a trustee of the funds (derived from the sale) defendant had no knowledge thereof. The pleadings were amended to conform to the proof and defendant offered evidence that it forebore exercise of a valuable right (due to eight months lapse before plaintiff brought suit) in that defendant was lulled into a sense of security and having no knowledge the funds were trust funds, by accepting the payment made, forebore exercise of its right of proceeding against Weaver in July when the note was due, which defendant would have done had it known this money was trust funds and that Weaver was unable to pay upon this indebtedness.
The case was submitted to the jury under instructions from the court and a verdict was returned for plaintiff for $8,727.90.
The assignments of error upon which defendant predicates its claim for reversal of this judgment are presented under three propositions. It is first contended that where mortgaged property is sold by the mortgagor without consent of the mortgagee, the proceeds of such sale are not trust funds. This may be a true statement of the rule applicable when the facts justify the finding that the mortgagee did not consent to the sale. However, under the facts reflected by this record such rule has no application.
46 O. S. 1941 §71 provides as follows:
"Every mortgagor of personal property in this state, who with the consent of the mortgagee, or his assignee, shall sell such mortgaged property, or any part thereof, while the mortgage remains in force and unsatisfied, shall be deemed and conclusively held to be the trustee of the funds received upon the sale thereof, for the benefit of such mortgagee, or assignee, to the extent of the indebtedness secured thereby, or any balance due thereof."
The pertinent provisions of the plaintiff's mortgage are set forth above. The question resolves itself into a matter of determining whether by the typewritten provision of the mortgage plaintiff impliedly gave his consent to a sale of the cattle by Weaver without the written consent mentioned in the body of the mortgage. It seems that this undoubtedly was the intention of the parties.
All provisions of a contract must, if possible, be given effect. Rushing v. Manhattan Life Ins. Co., 224 Fed. 74; Fairbanks, Morse & Co. v. Miller, 80 Okla. 265, 195 P. 1083.
In Sperry et al. v. Renner et al., 194 Okla. 285, 149 P. 2d 781, we considered a mortgage clause providing that upon any sale by the mortgagee the proceeds were to be applied in discharge of indebtedness, and any surplus was then to be paid to the mortgagor.
Therein we held that such provision in a chattel mortgage, considered in connection with the evidence, established that the mortgagee gave implied consent to a sale of the mortgaged property, upon the condition that the proceeds be applied to the mortgage debt. Cited in support of such holding: Jones Chattel Mortgages and Conditional Sales, Bowers Edition, section 457; 10. Am. Jur. 845; Babbitt Bros. Trading Co. v. Morely, 28 Ariz. 589, 238 P. 392. To the same effect see 11 C. J., Chattel Mortgages, §340; 14 C.J.S., Chattel Mortgages, §262 (b).
The typewritten provision of the mortgage controls over the printed condition requiring written consent of the mortgagee before sale. See Witt v. Westheimer, 182 Okla. 645, 79 P. 2d 250; Bartley v. Summers, 187 Okla. 16, 100 P. 2d 847. The terms of the mortgage impliedly gave Weaver permission to sell the cattle at his own discretion, subject only to remitting the proceeds to plaintiff.
Defendant cites and relies upon Oklahoma State Bank of Davis v. First Nat. Bank of Muskogee, 142 Okla. 50, 285 P. 117, and Bank of Jefferson v. First Nat. Bank of Medford, 158 Okla. 37, 12 P. 2d 540, as sustaining its contention. Consideration of these decisions reveals both are cases holding that where mortgaged chattels are sold without the mortgagee's consent, the proceeds of the sale are not trust funds. Thus these cases are inapplicable to the present case.
Having concluded that under the mortgage Weaver had the implied right to sell the cattle, it follows that under the terms of the statute, supra, the proceeds derived from the sale of the mortgaged steers were trust funds. It is recognized as a sound rule that where property is impressed with a trust, a change in the state or form does not divest the property of its trust character, so long as it remains capable of clear identification. Ward v. U. S. (Okla.) 139 F. 2d 79. Equity will follow trust funds through any number of transmutations and restore it to the owner so long as it can be identified. 65 C.J. Trusts, §891; Pollock v. Leonard & Braniff, 112 Okla. 276, 241 P. 158; Fidelity National Bank v. Copeland, 138 Okla. 19, 280 P. 273.
Defendant's second contention is as follows:
"A trust beneficiary may bring an action at law against the trustee for wrongful conversion of funds or an action against a third person to recover the fund and enforce the trust upon such fund in equity, but since the same are inconsistent remedies they cannot be pursued in the same lawsuit, and it is reversible error for the court to refuse to require the plaintiff to elect between such inconsistent remedies."
The purpose of the doctrine of election of remedies is said to be, not prevention of recourse to any remedy, but the prevention of double redress for any single wrong. In 18 Am. Jur., Election of Remedies, §10, is found the following statement.
"Election is predicated on the existence of a state of facts that furnishes the party an option to do either the one thing or the other. There must be the possibility of the adoption or rejection of a theory of action. This principle applied to the doctrine under consideration gives us the well-established proposition that an election of remedies presupposes a right to elect. There must be present such a condition of facts as affords the party a choice of remedies inconsistent in character, as where a choice lies between remedies at law and in equity or where a suit may be brought on a given state of facts either on contract or in tort or by attachment or replevin. If in truth there is only one remedy, and not a choice between two or more, the doctrine of election does not apply, as where a party misconceives his remedy and the one on which he expected to rely was never available to him. . . ."
Plaintiff obviously could not proceed against Weaver for conversion, having given his consent to the sale of the cattle. The proceeds of the sale passed out of Weaver's hands and into defendant's possession where they were applied upon his indebtedness. Plaintiff alleged a concerted action between Weaver and defendant, resulting in trust funds being placed in defendant's hands, and was able to prove the transaction and trace the identical funds. But, the trustee no longer had the money when plaintiff discovered the facts of the matter. Thus it was necessary to proceed against him as trustee, and against the defendant as holder of the funds under him.
The third proposition urged by defendant is that having received trust funds in payment of a debt, without knowledge of the trust character, and relying upon such payment failed to proceed with a remedy that might have resulted in collection of the debt from other assets, the bank became a bona fide purchaser and the funds are not subject to recovery by the trust beneficiary.
It is defendant's argument that because of the receipt of the proceeds from the sale and the crediting thereof to Weaver's indebtedness, defendant was lulled into a sense of security and forebore exercise of its right to call his note and force collection of the debt until after defendant learned this money was claimed as trust funds, at which time the debt was uncollectible. We are of the opinion the evidence disclosed by the record is sufficient to preclude application of the rule urged.
Plaintiff's mortgage was filed in Creek county and gave defendant constructive notice of the existence thereof. Drum Standish Commission Co. v. First Nat. Bank & Trust Co., 168 Okla. 400, 31 P. 2d 843. The financial statement, made by Weaver for the purpose of securing extension of his indebtedness, stated that 338 head of cattle listed thereon were encumbered by a mortgage.
The court instructed the jury that the fund representing the sale price of the cattle covered by the plaintiff's mortgage constituted trust funds and would be such in the hands of the defendant, the Fourth National Bank; that said Bank would be liable to the plaintiff as trustee for such funds coming into its possession if it had knowledge of the source thereof. The jury by its verdict determined under this instruction that the bank received from the sale price of the cattle covered by plaintiff's mortgage the sum of $8,727.-90. The evidence reasonábly supports such determination.
The trial court correctly held that Weaver sold the cattle covered by plaintiff's mortgage with consent, and the sale price thereof constituted trust funds. The jury found under the foregoing instruction of the court that $8,-727.90 of the sale price of such cattle was appropriated by the Fourth Na tional Bank. This appropriation was made without consent. The bank had no lien on the cattle which the foregoing sale price represented. The cestui que trust could follow the sale price of the cattle and the liability of the defendant bank as a trustee thereof could be asserted at any time within the statutory period, the plaintiff having done nothing to lead the bank to assume an adverse position. The bank is liable without actual knowledge of the trust character of the funds under the circumstances maintaining here. After it pays the trust fund received by it to the plaintiff, it will be in the same position that it was in before Weaver wrongfully made the payment to it.
Judgment affirmed.
HURST, C. J., and BAYLESS, WELCH, ARNOLD, and LUTTRELL, JJ., concur. DAVISON, V. C. J., and GIBSON, J., dissent.