Case Name: J. E. Greer et al. v. J. W. Newland et al.
Court: Kansas Supreme Court
Jurisdiction: Kansas
Decision Date: 1904-06-11
Citations: 70 Kan. 310
Docket Number: No. 13,677
Parties: J. E. Greer et al. v. J. W. Newland et al.
Judges: All the Justices concurring.
Reporter: Kansas Reports
Volume: 70
Pages: 310–318

Head Matter:
J. E. Greer et al. v. J. W. Newland et al.
No. 13,677.
(77 Pac. 98.)
SYLLABUS BY THE COURT.
Chattel Mortgage — Constructive Notice — Commission Merchant Held Liable on an Implied Contract. A commission merchant who receives mortgaged cattle sent to him for sale without the consent of the mortgagee, and in violation of the terms of the mortgage, and who sells them and pays the proceeds to the consignor without actual notice of the mortgage, but with constructive notice imparted through its record, is liable to the mortgagee in an action upon an implied contract to pay him the proceeds of the sale.
Error from Wyandotte court of common pleas; William G. Holt, judge.
First opinion filed June 11, 1904.
Affirmed.
Rehearing granted July 7, 1904. Second opinion filed December 1, 1904.
Reversed.
Mvckle, Hayward & McLane, for plaintiffs in error.
Botsford, Deatheroge & Young, and McFadden & Morris', for defendants in error.

Opinion:
The opinion of the court was delivered by
Mason, J. :
The owner of certain cattle in Wilson county executed chattel mortgages on them, securing two notes. The mortgages were properly recorded. Afterward the mortgagor turned the cattle over to another person who, without the consent of the mortgagee, and in violation of the terms of the mortgage, shipped them to Greer, Mills & Co., commission merchants at East St. Louis, for sale. The commission merchants sold the cattle and remitted the proceeds, less charges and expenses, as directed by the consignor, without actual notice of the mortgages. The notes and mortgages remained unpaid and were transferred to J. W. Newland and D. R. Newland, who sued the commission merchants, not for damages resulting from the conversion of the cattle, but upon the allegation of an implied promise by them to pay to plaintiffs their net proceeds, the tort being expressly waived. Plaintiffs recovered a judgment which defendants seek to reverse.
Upon the facts stated it is clear that defendants would have been liable in an action for conversion, and the fact that they had no actual notice of the claim of the mortgagees would have constituted no defense. (Brown v. Campbell, 44 Kan. 237, 24 Pac. 492, 21 Am. St. Rep. 274.) But defendants claim that they were not liable in an action upon contract for the reason that in the transaction they acted only as the agents of the real wrong-doer, the person who shipped the cattle to them, and that their own estate was not intended to be benefited, and was not in fact benefited, by the sale — -that they never acquired or claimed the beneficial title to the cattle or their proceeds. It is true that the rule is well established that "if no benefit accrues to the tort-feasor by reason of the tort committed, assumpsit will not lie. He cannot be charged as on an implied contract unless some benefit has actually accrued to him." (15 A. & E. Encycl. of L., 2d ed., 1115. See, also, ch. 3, Keen. Quasi-contr., and Fanson v. Linsley, 20 Kan. 235, and cases cited.) It is also true that the title of property consigned by the owner to a commission merchant for sale, and of its proceeds, is in the consignor, and no title vests in the factor except as trustee. (12 A. & E. Encycl. of L., 2d ed., 695, 696.)
In considering whether these principles protect the defendants from an action upon an implied contract to pay the mortgagee the price of the cattle, it must be borne in mind that no distinction is to be made between an actual knowledge by the consignee that goods sent to him belong to another than the shipper and the constructive knowledge of that fact given him by the public records. The effect of the notice imparted by the record does not depend upon the form of action. In the case cited it was held equivalent to actual notice in an action for conversion ; it is so in an action upon an implied contract. The case must therefore be treated as though defendant had had actual notice of the existence of the mortgages.
If a factor, while still holding the proceeds of goods sold by him, knows they were stolen, he cannot assert, as a protection against the claims of the real owner, what is untrue in fact, that -the title is in the one who has stolen them ; and, having in his hands money belonging to another, in the absence of a reason to justify his holding it himself or making some other disposition of it he is liable to the owner upon an implied contract to pay it to him.
"Where the defendant is proved to have in his hands the money of the plaintiff, which, ex sequo et bono, he ought to refund, the law conclusively presumes that he has promised so to do. . . . The count for money had a"d received, which in its spirit and objects has been.likened to a bill in equity, may, in general, be proved by any legal evidence, showing that the defendant has received or obtained possession of the money of the plaintiff, which, in equity and good conscience, he ought to pay over to the plaintiff. And where the defendant has tortiously taken the plaintiff's property and sold it, or being lawfully possessed of it, has wrongfully sold it, the owner may, ordinarily, ivaive the tort, and recover the proceeds of the sale under this count. So, if the money of the plaintiff has in any other manner come to the defendant's hands, for which he would be chargeable in tort, the plaintiff may waive the tort, and bring assumpsit upon the common counts." (2 Green. Ev. §102, 117, 120.)
"Where money has been paid to a factor for the use of the principal, to which the latter is discovered after-wards not to be entitled, the factor will be liable to an action at the suit of the person from whom he received such money, as for money had and received to his use, unless he has, before action brought, actually paid over the money to his principal." (Weld v. Shaw, 2 La. Ann. 559.)
He who holds money that he knows belongs to one person cannot voluntarily pay it to another and claim exemption from contractual liability on the ground that he acted merely as an agent and derived no personal benefit from the transaction. When he knows who is entitled to receive the money in his hands he owes that person a duty from which the law implies a contract to pay it to him, and he can no more escape that liability, or alter the character of it, by a payment to the person from whom he received it than by making any other disposition of it. The case of Hindmarch v. Hoffman, 127 Pa. St. 284, 18 Atl. 14, 4 L. R. A. 368, 14 Am. St. Rep. 842, was an action of assumpsit, and it was there said :
"As found by the learned judge, the money sued for as money had and received by defendant to the use of plaintiff, never belonged to Savanack, nor could he have legally recovered any part of it. On the contrary, it was plaintiff's money, stolen from him by Savanack, and by the latter left with the defendant. While it was thus in his custody and under his control, he was fully informed of the theft, and also that plaintiff, as owner of the money, claimed it. Under these circumstances, it was clearly his duty to hold it for plaintiff, and, upon satisfactory proof of ownership, to pay it over to him. From the existence of that duty the law raised an implied promise by defendant to do so, but, in disregard of his duty in the premises, he paid it over, on the order of the thief, to parties who had no right whatever to receive it. Justice demands that he should now be compelled to pay the amount to the rightful owner, and there is no good reason why it should not be recovered in the present form of action."
"Where a factor is notified that cotton consigned to him by a third person was made on plaintiffs' plantation and belongs to them, and is directed not to pay over the proceeds without their consent, the notice will render the factor liable for any subsequent payment made to the consignor, not depending on a superior right." (Ledoux v. Anderson, 2 La. Ann. 558.)
The situation is substantially the same as though cattle belonging to plaintiffs had been stolen and shipped to defendants for sale, and defendants had sold them and paid the proceeds to the consignor after learning of the theft. In such a case the defendants could say with as much force as they do now that they derived no personal benefit from the transaction —that their estate was not benefited by it; but under such circumstances this statement would not be a sufficient answer to plaintiffs' claim upon the implied contract to pay the money to the real owner ; nor is it here.
The judgment is affirmed.
All the Justices concurring.
(78 Pac. 835.)
SYLLABUS BY THE COURT.
1. Chattel Mortgage — Commission Merchants, without Notice, Held Not Liable on Implied Contract. A commission merchant who receives mortgaged cattle sent to him for sale without the knowledge or consent of the mortgagee, and in violation of the terms of the mortgage, and who sells them and pays the proceeds, less his commission, to the consignor, without notice of the mortgage, does not derive such a benefit from the transaction as to authorize the mortgagee to waive the tort and recover in an action upon an implied contract.
2. - Record Held Not to Impart Constructive Notice. The filing of a chattel mortgage for record does not impart constructive notice to a commission merchant to whom the mortgaged property is sent for sale and who sells it and pays the proceeds, less his commission, to his consignor.