Court Opinion

ID: 7895170
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:52:03.271516+00
Date Added: 2024-06-11T16:32:03.148192
License: Public Domain

OPINION ON REHEARING.
The opinion of the court was delivered by
Mason, J. :
This case involves the question whether commission merchants who receive mortgaged personal property sent to them for sale without the knowledge or consent of the mortgagee, and in violation of the terms of the mortgage, and who sell it and pay the proceeds, less their commission, to the consignor, without actual notice of the mortgage, which is properly of record, are liable to the mortgagee in an action upon an implied contract, the tort being waived. 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 *316correctness 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. The action was for conversion, the facts being substantially the same as in this case. There, as here, the consignor was an apparent stranger, whose possession was not clearly accounted for. It was held :
“As the mortgage was properly on file in the office of the register of deeds, and valid, the commission merchant or broker was bound to take notice of the same and of the rights of the mortgagee, and that by selling and delivering the property to others he had made himself liable to the mortgagee as for a conversion of the property.”
The weight of authority sustains the statement-made in volume 4 of the Cyclopedia of Law and Procedure, at page 1055, which applies to a factor :
“An auctioneer who sells property for one who-has no title and pays over to his principal the proceeds is liable to the real owner for the conversion, even though such auctioneer acts in good faith, and without knowledge of the defect of title.”
(See, also, 3 A. & E. Encycl. of L., 2d ed., 497, and cases cited; Flannery v. Harley, 117 Ga. 483, 43 S. E. 765; Miller v. Wilson, 98 id. 567, 25 S. E. 578, 58 Am. St. Rep. 319; Johnson v. Martin, 87 Minn. 370, 92 N. W. 221, 59 L. R. A. 733, 94 Am. St. Rep 706; Dolliff v. Robbins, 83 id. 498, 86 N. W. 772, 85 Am. St. Rep. 466; Moore v. Hill, 38 Fed. [C. C.] 330.)
(To the contrary, see 12 A. & E. Encycl. of L., 2d ed., 691.)
In most of the cases cited in support of this proposition, but not in all, the property involved came by theft, or some other wrong, into the hands of- the per*317son who delivered it to the factor, and a distinction is sometimes sought to be drawn based upon this consideration. But no reason is apparent why the rights, of the owner should be affected by the character of the possession of the consignor, so long as he has no right to sell, and the owner is not estopped to deny such right. The decision in Brown v. Campbell, supra, must therefore have been the same even if the mortgage had not been of record, unless the failure to record it would have made it void as to the defendant. Indeed, what was said in the opinion with reference to the notice imparted by the record was chiefly in response to the contention that the mortgage was void, and in effect was merely an argument that it was not invalid for want of notice.
Whether a factor to whom mortgaged property is consigned for sale, who sells it and accounts to the consignor for the proceeds, is charged with notice of the record of the mortgage depends wholly upon the statute. In the absence of a statute the recording of a chattel mortgage would be notice to no one, but the mortgage would be good as to every one with notice. It has been enacted, however (Gen. Stat. 1901, § 4244) , that an unrecorded mortgage “shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith.” The factor is neither a creditor of the mortgagor nor a subseqent purchaser or mortgagee, and, therefore, is not within the protection of the statute. As to him the mortgage is equally effective, whether of record or not. (Drumm v. Bank, 65 Kan. 746, 70 Pac. 874.) It follows that he is not affected with notice of the filing of the mortgage, for “the record imparts constructive notice to such persons only as would have been entitled to protection against *318the conveyance in case it had not been recorded.” (24 A. & E. Encycl. of L., 2d ed., 146.)
It is strongly urged in behalf of plaintiffs in error (the commission merchants) that, even conceding that the record charged them with constructive notice-of the mortgage, this would not render them liable as-upon contract; that only actual notice would have-that effect. As we hold that the record did not impart notice it is unnecessary to decide this question now, but that it may be left open for a full inquiry- and determination as it may hereafter arise, the statement in the original opinion that no distinction is to-be made in this regard between actual and constructive notice is withdrawn.
As the estate of the plaintiffs in error was not benefited by their tort, and as they paid over the proceeds of the sale of the property without notice of the rights-of the real owner, they could not be held liable in an action upon contract.
The judgment is reversed, and the cause remanded for further proceedings in accordance herewith.
All the Justices concurring.