Court Opinion

ID: 7916825
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:12:04.801253+00
Date Added: 2024-06-11T16:32:51.351698
License: Public Domain

Hoch, J.
(dissenting): Time presently available permits only a sketchy and incomplete statement of the reasons which impel me to dissent from this decision. The appeal being here from an order overruling plaintiff’s demurrer to certain portions of the answer, and upon stipulation as to the issues thus raised, the essential facts are not in dispute.
Jones, a resident of Dallam county, Texas, gave a mortgage on cattle to a Dalhart, Tex., bank, the appellant here. The cattle were not then in Kansas, but subsequently were brought to Meade county, Kansas, branded, and the mortgage was there recorded on August 4, 1945. In October, 1945, the cattle were shipped by Jones to the Union Stock Yards at Wichita, consigned to the appellee for sale. The Wichita stockyards is regulated under the packers and stockyards act, hereinafter referred to as the act. The appellee is a market agency registered with and licensed by the secretary of agriculture, to operate on the Wichita stockyards in the buying and selling of livestock on commission, pursuant to the terms and conditions of the act. The cattle were received by the market agency, sold, and the net proceeds promptly forwarded to Jones, the shipper and consignor. The market agency had no notice or knowledge of the mortgage. It had no notice or knowledge that the plaintiff or anyone else other than the shipper and consignor had any interest in the livestock. Under the allegations of the answer, to which the demurrer was directed, the market agency is required by the act to receive and sell, without discrimination, all livestock consigned and shipped to it for sale, at rates and charges for such service, approved by the secretary of agriculture.
This decision holds that the market agency is liable to the mortgagee, under the facts stated, on the ground that the recording in Meade county gave it constructive notice of the mortgage. Furthermore, it is said in the opinion that if the cattle, while located in Texas, had been mortgaged and the mortgage there recorded where the mortgagor and mortgagee were residents, and the cattle had later been brought into this state, without the consent of the mortgagee, the mortgage lien would be here recognized even though the mortgage had not been recorded in Kansas, this being done under the rule of comity between the states (citing Handley v. Harris, 48 Kan. 606, 29 Pac. 1145).
The primary question here presented is whether the imposition of such a liability upon the market agency constitutes a valid *110exercise of police power by the state, or whether it constitutes, under the law and the realities of the situation, an unlawful burden upon interstate commerce.
It would be pertinent in determining this question to review the expanding exercise by the congress in recent decades of its regulatory power under the commerce clause of the constitution. That would require an extended discussion of various federal enactments and a collection and analysis of federal cases not now feasible. In the brief of appellee are cited some of the leading decisions upholding various enactments which constitute this legislative chain. Special attention is called to Stafford v. Wallace, 258 U. S. 495, 66 L. Ed. 735, 42 S. Ct. 397, in which the validity of the packers and stockyards act (42 Stat. 159, 7 U. S. C. A., §§ 181-229) was upheld, and to which further reference will presently be made. In the opinion in the Stafford case, extended reference is made to the Swift case. (Swift and Company v. United States, 196 U. S. 375, 49 L. Ed. 518, 25 S. Ct. 276.) It was there said that “The principles of the Swift case have become a fixed rule of this court in the construction and application of the commerce clause,” and the case of Lemke v. Farmers’ Grain Co., 258 U. S. 50, 66 L. Ed. 458, 42 S. Ct. 244, was cited as the then latest expression on the subject. It was said further in the Stafford case: “It is manifest that congress framed the packers and stockyards act in keeping with the principles announced and applied in the opinion in the Swift case.” And that “the act deals with the same current of business, and the same practical conception of interstate commerce.” (Italics supplied.)
An oft-quoted statement from the Swift case, supra, is as follows:
“Commerce among the states is not a technical legal conception, but a practical one, drawn from the course of business. When cattle are sent for sale from a place in one state, with the expectation that they will end their transit, after purchase, in another, and when in effect they do so, with only the interruption necessary to find a purchaser at the stock yards, and when this is a typical, constantly recurring course, the current thus existing is a current of commerce among the states, and the purchase of the cattle is a part and incident of such commerce.” (p. 398.)
In the Stafford case, supra, upholding the validity of the act, it was further said:
“The object to be secured by the act is the free and unburdened flow of live stock from the ranges and farms of the West and the Southwest through the great stockyards and slaughtering centers on the borders of that region, and thence, in the form of meat products, to the consuming cities of the country in the Middle West and East, or, still as live stock, to the feeding places and *111fattening farms in the Middle West or East, for further preparation for the market.
“The stockyards are not a place of rest or final destination. Thousands of head of live stock arrive daily by carload and trainload lots, and must be promptly sold and disposed of and moved out to give place to the constantly flowing traffic that presses behind. The stockyards are but a throat through which the current flows, and the transactions which occur therein are only incident to this current from the West to the East, and from one State to another. Such tranactions cannot be separated from the movement to which they contribute, and necessarily take on its character. The commission men are essential in making the sales without which the flow of the current would be obstructed, and this, whether they are made to packers or dealers. The dealers are essential to the sales to the stock farmers and feeders. The sales are not, in this aspect, merely local transactions. They create a local change of title, it is true, but they do not stop the flow; they merely change the private interests in the subject of the current, not interfering with, but, on the contrary, being indispensable to, its continuity.

“The stockyards and the sales aré necessary factors in the middle of this current of commerce.

“The act, therefore, treats the various stockyards of the country as great national public utilities to promote the flow of commerce from the ranges and farms of the West to the consumers in the East.” (Italics supplied.) (p. 514.)
Statements of like import might be quoted from many other decisions.
Under the authority and direction of the act, Wichita market has been designated as a public market and made subject to federal regulation. Each market agency there operating must be registered (§ 203), must give bond (§ 204), and must furnish reasonable stockyard services “without discrimination” (§ 205), at rates or charges that are “just, reasonable and nondiscriminatory” (§206), which rates and charges must be filed with the secretary of agriculture and subject to his approval (§ 207). I do not understand that the appellant questions these statements as to the provisions of the act. The public stockyards, so designated under the act, and the market agencies there operating have been repeatedly declared to be public utilities. (See among many cases that might be cited, the Stafford case, supra; Farmers’ Livestock Commission Co. v. United States, 54 F. 2d 375, and the many cases therein cited, p. 379; U. S. v. Am. Livestock Co., 279 U. S. 435, 73 L. Ed. 787, 49 S. Ct. 425; Atchison Ry. v. United States, 295 U. S. 193, 79 L. Ed. 1382, 55 S. Ct. 748.) A market agency rendering services under the act thus performs, as a public *112utility, a necessary service incident to a continuous flow of livestock from producer to consumer. The market agency is not free to act as it will. It cannot choose those from whom it will take consignments or those to whom sales will be -made. It must of necessity act promptly. As stated in the Stafford case, supra, the thousands of head of livestock which arrive daily must be promptly disposed of “to give place to the constantly flowing traffic that presses behind.” It cannot buy and sell with such profit as it can obtain. Its transactions are at rates whose fairness and reasonableness may be determined by federal authority.
So much for the purposes and the provisions of the act which, in my opinion, have not been given proper weight by this decision.
Now let us look for a moment at the practical aspect of the situation. By this decision we say that a market agency, operating within the limitations imposed by the act, with no knowledge that anyone anywhere has a mortgage lien upon livestock consigned to it for sale, and with no reason to suspect that the shipper and consignor does not have the right to sell the cattle, is bound by constructive notice not only of a mortgage on the cattle recorded in any county in Kansas, but recorded in Texas, New Mexico, or elsewhere from which the constant flow of cattle conies. That view ignores realities. How can the market agency, before accepting the cattle “without discrimination” as it must, protect itself by any sort of inquiry, within any reasonable time? To say that it must do so in one case is to say that it cannot be safe unless it does so in all cases. In my opinion, that places a very heavy burden upon the market agency in the discharge of its duties under the act.
It is conceded that common carriers are not liable to lienholders in the absence of actual knowledge. They are not bound by constructive knowledge of recorded mortgages. The same immunity applies to grain warehousemen who perform services incident to interstate movements of grain. Appellant distinguishes the cases on the ground that in the case of common carriers and warehousemen, title does not pass. It is said in the instant opinion that it was made clear in the Stafford case, supra, that the “purchase or sale of livestock by commission companies at the stockyards was a transfer of title to the livestock.” Certainly, if the market agency is itself a buyer of livestock it takes title, and passes title when it subsequently sells. But I do not at all read the Stafford case as saying that in cases where the market agency receives for sale upon com*113mission it takes title. The statement in the opinion that “the sales . . . create a local change of title, it is true, but they do not stop the flow” relates to sales made by the market agency. The sales, it is there said, ‘do not stop the flow . . . not interfering with, but, on the contrary, being indispensable to its continuity.” Further, more, the appellant here does not contend that title passes to the market agency. It says in its brief:
“The transaction here in question is not a mere bailment but more in the nature of a consignment for sale and has many of the elements of sale. We do not mean by this that title passes to the commission merchant, but certainly the title passes through him . . (Italics supplied.)
However, even if we assume, and that only, that title resides, during a brief transitory period, in the market agency, that is wholly incidental to the intermediary service which it renders. I see no fundamental reason, if we are to be realistic, for relieving the railroads from liability and imposing it upon the market agency. Both are essential links in the chain of commerce. In fact, there appears to be less reason to impose constructive notice upon the market agency than upon the railroad. With much less trouble, the railroad can make inquiry to find, at least, whether there are any recorded liens in the county where the traffic originates before accepting the livestock for shipment. The market agency necessarily handles livestock coming often from far distant points, in many states.
It is of course well settled that no state can place any undue burden upon interstate commerce. In the Lemke case, supra, the state of Minnesota attempted to regulate the buying of grain at the great grain markets in that state, through which most of the grain moved in interstate commerce. It was contended that the regulations were valid as an exercise of police power by the state. But the United States supreme court, following the principle and its limitations as stated in The Minnesota Rate Cases (230 U. S. 352, 57 L. Ed. 1511, 33 S. Ct. 729) that “this principle has no application where the state passes beyond the exercise of its legitimate authority and undertakes to regulate interstate commerce by imposing burdens upon it,” invalidated the state act.
The appellant does not discuss the question of whether the imposition upon the market agency of the constructive notice, here at issue, would burden interstate commerce. We shut our eyes to the conditions under which marketing operations at the great livestock *114markets are of necessity conducted, involving integrated and fast-moving transactions, if we visualize no real burden by such an imposition. The required acceptance of consignments of livestock often crowding the market and demanding expeditious handling, permits no substantial delay if the service of bringing buyer and seller together is to be well performed. What sort of inquiries must it make in order to escape liability to some unknown mortgagee? How wide a territory must it include in the scope of its delaying inquiries? Only in Meade county in the instant case, or in other Kansas counties as well? Or also in Texas, although this record does not show that it knew the shipper ever lived in Texas? I submit that the burden here imposed upon the interstate operations of the regulated markets is a grave one, tending to delay and impede the service they are instituted to perform. Market agencies cannot be expected to perform expeditious service at the constant risk of great and unknown liabilities. If so, all buyers and sellers must assume the burden of commission fees on an insurance basis to cover the risk. I do not believe any such result was contemplated by the act.
Attention must be given to one other important matter in this case. In its original brief, the appellant cited and quoted at some length from Brown v. Campbell, 44 Kan. 237, 24 Pac. 492, in support of its contention that under our decisions a commission merchant handling cattle without actual notice of a mortgage lien is bound by constructive notice of a recorded mortgage and becomes liable to the mortgagee as for a conversion of the property. But the Brown case loses all force on the point here at issue in view of what was said in the later case of Greer v. Newland, 70 Kan. 315, 78 Pac. 835. In that case there was a rehearing and second opinion, the first opinion being reported at 70 Kan. 310, 77 Pac. 98. In its reply brief, appellant seeks to minimize the import of the opinion in the Greer case, and quotes largely from what was said in the first opinion. The case did involve, as noted by appellant, the question of whether a commission merchant, under the facts there shown, derives such a benefit from selling mortgaged cattle, without actual notice, as to authorize the mortgagee to waive the tort and recover upon an implied contract. But the case dealt directly with the question of constructive notice. What had been said on that question in the first opinion was the very thing that led to the rehearing. In the opinion upon rehearing it was said:
*115“Upon a former hearing it was held that they derived no such benefit from the act of conversion as to make them liable in assumpsit by reason thereof, but that, under the authority of Brown v. Campbell, 44 Kan. 237, 24 Pac. 492, 21 Am. St. Rep. 274, the record operated to give them constructive notice of the mortgage, and that this had the same effect as actual notice, and rendered them liable as upon contract for .their failure to pay the proceeds of the property to the real owner. A grave doubt as to the correctness of this view of the effect of the record led to the granting of a rehearing.
“Upon fuller consideration, we are convinced that all that is said in the case cited regarding the notice imparted by the record of the mortgage is dictum.” (pp. 315, 316.)
The court then went on to discuss specifically the question of whether under our mortgage registration law the recording of a chattel mortgage imparts constructive notice to a commission merchant to whom the mortgaged property is sent for sale. It was held, for reasons not necessary here to recite, that he is not so bound under our recording statutes. Syllabus 1, which deals with the question referred to by appellant, as above stated, was modified to conform to the opinion upon rehearing, and syllabus 2 was added, reading as follows:
“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.”
As far as we have been able to discover, Greer v. Newland, supra, has never been overruled or modified and has stood unchanged for forty-four years. In connection with somewhat different issues but bearing directly upon limitations as to constructive notice under our recording statutes it was cited with approval in Bank v. Walters, 92 Kan. 391, 140 Pac. 864, and in Farmers State Bank v. Bank of Inman, 123 Kan. 238, 254 Pac. 1038.
If a commission merchant prior to enactment of the packers and stockyards act, who handles livestock on a commission, was not bound by constructive notice of a recorded mortgage, how much more must that be true as to a commission market agency now operating as a public utility within the limitations of the act? Appellant calls attention to the fact that Brown v. Campbell, supra, repudiated in the Greer case, supra, as to constructive notice was later cited with approval in Lumber and Grain Co. v. Eaves, 114 Kan. 576, 220 Pac. 512. Examination of the Eaves case will show that such citation has little, if any, pertinency here. In the Eaves case a lumber com*116pany was held to be bound by notice of a recorded mortgage being in possession of facts which fairly put it upon inquiry. No such circumstances are present here.
This statement must be concluded without discussion of other issues involved in the instant case.
The judgment of the trial court should be affirmed.
Mr. Justice Wedell and Mr. Justice Bxjrch concur in the foregoing dissent.