Case Name: FARMERS' NAT. BANK et al. v. DUBLIN NAT. BANK et al.
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1932-10-07
Citations: 55 S.W.2d 567
Docket Number: No. 969
Parties: FARMERS’ NAT. BANK et al. v. DUBLIN NAT. BANK et al.
Judges: 
Reporter: South Western Reporter Second Series
Volume: 55
Pages: 567–576

Head Matter:
FARMERS’ NAT. BANK et al. v. DUBLIN NAT. BANK et al.
No. 969.
Court of Civil Appeals of Texas. Eastland.
Oct. 7, 1932.
Rehearing Denied Dec. 16, 1932.
Bryan, Stone, Wade & Agerton, of Fort Worth, and R. L. Thompson, of Stephenville, for appellants.
Fred C. Chandler and Chandler'& Keith, all of Stephenville, Arthur R. Bidson, of Hamilton, and J. A. Johnson, of Stephenville, for appellees.

Opinion:
FUNDERBURK, J.
Originally this suit was brought by the Dublin National Bank (hereinafter called the Dublin National) against R. H. Stephens upon a promissory note for the principal sum of $5,-633.15, and for foreclosure of a chattel mort'gage lien upon certain cattle. W. W. and Bart Oats (hereinafter referred to as the Oats) were also made defendants, and damages claimed against them in the sum of $3,245 for an alleged conversion of 76 head of the mortgaged'cattle. By a first amended original petition the plaintiff brought in the Farmers' National Bank of Dublin (hereinafter referred to as the Farmers' National) and Mack Morgan, sheriff of Hamilton county. The Farmers' National was joined because it claimed a mortgage on the same property and there was also asserted against it a claim for damages on the ground that it had participated in the conversion of a portion of the cattle. Injunction was sought against the Oats to restrain further prosecution of a suit which they had instituted in Hamilton county against the Dublin National, the Farmers' National,, and said Mack Morgan, sheriff, claiming a wrongful sequestration of part of the cattle by the Dublin National. In its third amended original petition plaintiff'brought in as other parties defendant Breedlove Livestock Commission Company, a partnership, and the individual members composing it (which Breedlove Livestock Commission Company, including the individual members, will hereinafter be referred to as the commission company), and besides amplifying the former allegations, charged a joint conversion by defendants R. H. Stephens, the commission company, and the Farmers' National of 56 calves covered by its mortgage, and which calves were sold by the commission company in Fort Worth, Tex., about January 8,1930.
The- commission company filed a pies of privilege, which was duly controverted by plaintiff on the ground that the Farmers' National, a resident defendant in the county of the suit, was a joint conversioner with said commission company. Subject to that plea it further answered, among other things, that R. H. Stephens, the mortgagor, sold the cattle with the consent, express or implied, of plaintiff, thereby waiving its lien, if any there was. In the alternative, by way of cross-action against the Farmers' National, it alleged facts to show a mutual mistake in the payment to the latter and acceptance by it of the proceeds' of sale of said 56 calves, or that R. H. Stephens was the agent of said bank, or that the bank had fraudulently accepted such proceeds, by reason whereof the amount of the payment was claimed as for money had and received.
The Oats answered, claiming the cattle which plaintiff had sequestered, but in the al ternative and by way of cross-action against the Farmers' National, claiming damages in the amount of $2,000, the purchase price of the cattle paid to said bank upon its representations and statement to them that it held a mortgage on said cattle, when in fact the plaintiff held the mortgage.
The Farmers' National answered, first, by a plea in abatement, because of the pendency of the Hamilton county suit against it by the Oats (i. e., the suit which the plaintiff herein sought to enjoin). Subject to its said plea in abatement, it claimed as against the plaintiff that the latter had no mortgage lien on any of the cattle; that said defendant did have a valid mortgage, and, in any event, that the mortgage of said defendant was superior to that claimed by the plaintiff. For further answer it adopted, by reference, the allegations pf its answer to the cross-action of the Oats. In reply to the cross-action of the Oats it alleged that the Oats' cause of action, if any, was against plaintiff for a number of reasons, namely: (1) Because the latter had no valid lien; (2) because it had consented for Stephens, the mortgagor, to sell the cattle, and had ratified several sales by him over a period of years, wherefore the lien was waived and plaintiff estopped to assert same; (3) that the cattle were not included in plaintiff's mortgage ; (4) that the Oats were negligent in not ascertaining the existence of plaintiff's mortgage, wherefore the payment of the $2,000 purchase price for the cattle to it was voluntary and induced by no false representations.
The plea in abatement of the Farmers' National was overruled and exception taken. A motion for continuance of the Farmers' National, on the ground that it had not been cited to answer the cross-action of the commission company and had not waived service of citation nor entered its appearance to same, so as to require it to answer ready for trial at that time, was likewise overruled and due exception taken to such action. By agreement of all parties the plea of privilege of the commission company was tried with the main case.
The jury to whom the issues of fact were submitted found: (1) That 56.calves sold by the commission company on January 8, 1930, were included in plaintiff's mortgage dated October 21, 1929; (2) that the 37 cows, 37 calves, and one bull sold by R. H. Stephens on September 5, 1930, to the Oats, were included in said mortgage, the debt secured being for thé original purchase price of said cattle; (3) that neither the said 56 calves, nor (4) the 37 cows, 37 calves, and one bull were covered by any mortgage of the Farmers' National; (5) that Joe Little for the Farmers' National participated in the sale of the cattle on September 5, 1930, to the Oats; and (6) that he participated in the sale of January 8, 1930, by the commission company; (7) that E. W. Harris, president of the plaintiff bank, did not consent (expressly or impliedly) to the sale of cattle to the Oats, nor (8) the sale of the 56 calves by the commission company; (9) that said R. H. Stephens, in the sale of the 56 calves, was not acting as agent of the Farmers' National; (10) and (11) that the sale price of .the 56 calves and of the 37 cows and 37 calves and one bull was the fair market value of same; (12) that Joe Little, cashier of the Farmers' National, stated to Bart Oats that his bank had a mortgage on the cattle the latter was proposing to buy, and that it was agreeable with said bank for Oats to purchase cattle from Stephens, provided the consideration of $2,000 was paid to said bank; (13) that by reason of such statement, the Oats were induced to pay the consideration of $2,000 to said bank; and (14) that the description of the cattle in plaintiff's mortgage was sufficient to enable one to locate and recognize the cattle by aid of inquiry based on what the mortgage itself indicated.
The judgment of the court recites an election of the plaintiff "to foreclose its mortgage and mortgage lien upon all of the cattle which it now has in its possession, by virtue of the levy of the writ of sequestration herein, and for its damages for the conversion of all the other cattle covered by its mortgage and mortgages." It was adjudged that plaintiff recover of R. H. Stephens the principal, interest, and attorneys' fees on the note, together with a foreclosure against all the defendants of the mortgage lien on 37 cows, 25 calves, and one bull, with order of sale, etc.; that plaintiff recover of the Farmers' National, the Oats, and R. H. Stephens, jointly-and severally, the market value of 13 head of calves "sold by the defendant Oats, since said calves were acquired by them, which amount is the sum of $247.00," with interest, etc. That plaintiff recover of R. H. Stephens, the Farmers' National, and the commission company, $2,333, with interest, costs, etc.; that the commission company recover over against Farmers' National the said sum of $2,333, if the former was required to pay it; that the Oats recover upon their cross-action against the Farmers' National the sum of $2,000 with costs, etc., provided the Oats pay to plaintiff bank the said sum of $247. The judgment also permanently enjoined the prosecution of the Hamilton county suit, decreeing that all matters in said suit as to all parties were litigated in the instant suit.
The Farmers' National and the commission company have appealed. The Oats did- not appeal, but have elected, as appellees, to stand upon their judgment on their cross-action against the Farmers' National.
So many propositions and counter propositions of such complicated nature are urged that we shall not undertake to state and discuss each of them separately.
The action of the court in overruling the plea of privilege of the commission company we think was correct. The jury found that the Farmers' National, a resident of Erath county, participated in a conversion of the mortgaged cattle, along with R. H. Stephens. We have concluded that the evidence did show a joint conversion by the Farmers' National and the nonresident parties charged with the conversion of the 56 calves. We omit further discussion of the matter here, as it will be taken up later.
The Farmers' National was not prejudiced by the overruling of its plea in abatement. In the Hamilton county suit it was urging its privilege to be sued in Erath county. The judgment herein permanently enjoins further prosecution of that suit. The issues involved were declared to be the same. It therefore affirmatively appears that the purposes of the plea of privilege in the Hamilton county suit were effectively accomplished and the liability of the Farmers' National has been litigated in the county of its residence. The action of the court in permanently restraining further prosecution of the Hamilton county case is not challenged in this appeal.
As a defendant in the case, the Farmers' National, having been subjected to the jurisdiction of the court so as to require it to answer or respond to the demands of the plaintiff, was required to take notice of the filing of the cross-action of its codefendant, the commission company. As we pointed out in Cornelius v. Early, 24 S.W.(2d) 757, a different rule has been recognized as applying to plaintiffs and defendants in this respect. That difference, although apparently arbitrary, was recognized and reaffirmed by the Supreme Court in Early v. Cornelius, 120 Tex. 335, 39 S.W.(2d) 6. There was therefore, we think, no error in the action of the court in overruling the motion for continuance.
The contention that the mortgage of the Dublin National Bank was not sufficient as constructive notice, because the copy filed in Hamilton county was witnessed by C. E. Beatherwood, cashier and stockholder of the mortgagee bank, cannot be sustained. We regard the law as settled that the fact of interest of a subscribing witness in the subject-matter not appearing by the mortgage itself, does not prevent the registration of the mortgage from constituting constructive notice. No question is presented of the validity of the mortgage, nor of its admissibility in evidence. The question is whether or not the effect of the registration of the mortgage as constructive notice could be destroyed by parol testimony that one of the subscribing witnesses was cashier and a stockholder of the Dublin National. We regard the question of the validity of constructive notice, under the conditions and circumstances here presented, as having been settled, since the decision in Titus v. Johnson, 50 Tex. 224. See, also, 1 C. J. 773, § 55; Coffey v. Hendricks, 66 Tex. 676, 2 S. W. 47; Southwestern Mfg. Co. v. Hughes, 24 Tex. Civ. App. 637, 60 S. W. 684; Henke v. Stacy, 25 Tex. Civ. App. 272, 61 S. W. 509; Hartley v. Frosh, 6 Tex. 208, 55 Am. Dec. 772; Peterson v. Lowry, 48 Tex. 408.
The most important question in the ease, measured by its effect upon the various issues involved, and the proper judgment to be rendered, is that arising upon the contention of the appellant Farmers' National, to the effect that the undisputed evidence showed that R. H. Stephens, the mortgagor, made the two different sales of the cattle — one of 37 cows, 37 calves, and one bull, to the Oats, and the other of 56 calves to unknown parties by and through the commission company— with the consent of the mortgagee, Dublin National. We have concluded that, as to the sale of the 56 calves, there being no evidence of express consent, the evidence of facts from which consent could be implied was not such as to show implied consent as a matter of law. We understand the rule to be that, when the ultimate fact in issue is one to be determined as an inference or implication from other facts in evidence, it is only when but one reasonable inference can be drawn from the undisputed facts that the court is warranted in holding the inferred fact to be conclusively shown as a matter of law. The jury would, we think, from the undisputed evidence of the custom of permitting mortgagors of cattle to make sales and pay over the proceeds in discharge of the mortgage debts and the admitted course of dealing covering about three years between Stephens and the Dublin National in conformity with that custom and practice, have been warranted in finding that the mortgagee impliedly consented that Stephens sell the cattle. But we are not prepared to hold that such consent was established, as a matter of law, contrary to the finding of the jury.
On the other hand, as to the sale of the cattle to the Oats, we have concluded that the undisputed evidence showed express consent of the mortgagee to the sale of the cattle. Mr. E. W. Harris, president of the mortgagee bank, testified, in effect, that, about the first of September, 1930 (i.- e., about four days before the sale in question was made), he had a conversation over the telephone with Mr. James, of a Hamilton bank, in which he told Mr. James to tell Mr. Stephens to go ahead and sell those cattle and bring the check in; that James did not tell him'whom he proposed to sell the cattle to, and he did not ask him; that the proposed sale price was such as to yield about $2,000, a satisfactory price, and the price the cattle were sold for. While, it is true, Mr. James was making the inquiry in behalf of two other prospective purchasers, the evidence conclusively shows that the consent to sell was not limited to any particular persons, and therefore, we think, consent to the sale of the cattle for the price for which they were sold is clearly shown. This being true, the Oats acquired good title to the cattle and the fact that they paid the purchase price to the Farmers' National is of no controlling importance. Under such circumstances, neither the Oats nor the Farmers' National could be held liable for a conversion of the cattle.
The appellee Dublin National contends that there was no pleading of a waiver of its lien by appellant Farmers' National. To this we are unable to agree, since said appellant expressly adopted as a part of its pleading its answer to the cross-action of .the Oats, which clearly alleged the facts to constitute a waiver. But since every part of the judgment under attack in this appeal is one for a conversion of the mortgaged property, we are of opinion that no pleading of a waiver was necessary. A conversion is a tort. It was necessary for plaintiff to prove that the sale of the cattle to the Oats was without its consent. Ewing & Phillips Hdw. Co. v. Cage-Sparks Hdw. Co. (Tex. Civ. App.) 297 S. W. 568. As said in 11 C. J. p. 624: "Where the mortgagee sues a purchaser from the mortgagor for a wrongful conversion of the mortgaged property, the burden is on plaintiff to show that the purchase was without his consent." Since, if the cattle were sold with the consent of the mortgagee, there would be no conversion, the defendant charged as a conversioner had the right under its general denial to introduce any evidence to show that there had been no conversion, for such would be clearly rebuttal testimony. By such testimony the defendant could show that it was not a wrongdoer, and without proof that it was a wrongdoer there could be no recovery.
Because of the conclusions stated it will be necessary to reverse the judgment of the court below, in so far as it awarded recovery in favor of plaintiff against the Farmers' National for a conversion of some of the cattle sold to Oats and render judgment for the latter: It also becomes necessary to reverse the judgment in favor of the Oats against the Farmers' National upon the cross-action for $2,000 and render judgment for Farmers' National. Unfortunately, we are without power to correct the judgment in so far as it awarded recovery against the Oats for a part of the cattle taken under sequestration and awarded damages for conversion of 13 head of cattle; they not having appealed. Smith v. First State Bank (Tex. Civ. App.) 255 S. W. 511; Fife v. Ins. Co. (Tex. Civ. App.) 283 S. W. 645; Traders' National Bank v. Clare, 76 Tex. 47, 13 S. W. 183. That part of the judgment must remain undisturbed.
We are unable to sustain the assignment that there was no evidence to justify submission of the issue of whether the Farmers' National, by its cashier, participated in. the sale of the 56 calves. A general statement of the law applicable to the question is found in 38 Cyc. 2054, as follows: "Every person is liable in trover who personally or by agent commits an act of conversion, or who participates hy instigating, aiding or assisting another (italics ours) or who benefits by its proceeds in whole or in part." The authorities cited in support of the clause, "or who benefits by its proceeds in whole or in part," do not seem to us to support it. We do not believe that a case of conversion can be made out by proof only of the receipt and appropriation of the .proceeds of the converted property. In fact, the same authority (38 Cyc.' 2019) in effect so states, as follows: "A receipt of the proceeds or a part thereof, of goods which have been wrongfully converted by a third person, is not a conversion unless defendant participated in the wrongful act or took such proceeds in accordance with a prior agreement, which related to the act of conversion, as well as to the sharing in the proceeds." We cannot agree with the trial court that Farmers' National had no mortgage on the cattle. The undisputed record evidence shows that it did have mortgages on all the cattle owned by Stephens in Hamilton county. All the evidence showed that the cattle were in Hamilton county. The good faith therefore of the Farmers' National must be treated as conclusively shown.
But, regardless of the consent or want of consent to the sale of the cattle by the senior mortgagee, Dublin National, Stephens could not have made a lawful sale without the consent of the Farmers' National. R. S. 1925, art. 5496. In recognition of this fact he got such consent prior to the sale; Without such consent no title could have passed by the sale free of the lien of the Farmers' National. But with such consent good title did pass, so far as the last-named bank was concerned. Coupled with the consent was the implied agreement that the proceeds would be used, at least in part, to reduce Stephens' indebtedness secured by the mortgage. Under the circumstances shown by the evidence this was so clearly implied that it would perhaps have required an express agreement to the contrary to have repelled the inference. The Farmers' National- had constructive notice of the senior mortgage. We therefore think the conclusion is inescapable that, charged with such knowledge, by giving its consent to the sale, with the implied understanding that the proceeds should be applied, either wholly or in part, to the debt of Stephens to said bank, and in pursuance of that consent and understanding, the actual receipt and appropriation of a part of the proceeds in that way necessarily resulting in a deprivation of the Dublin National of the benefit of its security, constituted such a participation on the part of the Farmers' National as amounted to a conversion within the principles of law above quoted.
In regard to the judgment in favor of the commission company against the Farmers' National for the amount of the proceeds of the sale of 56 calves, the check for which was sent to the Farmers' National, we have concluded that the law and the evidence does not support the right of such recovery. Both parties were equally chargeable with constructive notice of plaintiff's lien. Each was without actual knowledge of such lien. Contrary to the finding of the jury, we hold, as said before, the undisputed evidence shows that the Farmers' National had a mortgage on the cattle. There is, therefore, no question of the good faith of the Farmers' National in crediting the proceeds of the check to the mortgagor, R. H. Stephens, and receiving a portion of its proceeds in discharge of the indebtedness of R. H. Stephens to the bank. An action for money had and received does not lie for the all-sufficient reason, among others, that the money did not belong to the commission company. The money belonged to the plaintiff or R. H. Stephens. The Farmers' National having received such proceeds under a good-faith claim of right, there could be no implication of an agreement to return it to the commission company (27 Cyc. 859; Id., p. 863; Pumphrey v. Hunter [Tex. Civ. App.] 270 S. W. 237, 240), and certainly could not maintain that action when it had no right to the fund.
We are therefore of opinion, in addition to the disposition of the case already indicated, that the judgment of the plaintiff against the commission company, the Farmers' Na-. tional, and R. H. Stephens' for conversion of 56 calves must be affirmed, and that the judgment for recovery over by the commission company against the Farmers' National must be reversed and rendered for the latter, all of which is accordingly so ordered.