�National Live Stock Bank of Chicago v.
�First National Bank of Geneseo
�No. 33
�Argued October 17, 18, 1906
�Decided December 3, 1906
�
203
U.S. 296
ERROR TO THE SUPREME COURT
OF THE TERRITORY OF OKLAHOMA
Syllabus
The proper way to review judgments in actions at law of the
Supreme Court of the Territory of Oklahoma where the case was tried
without a jury is by writ of error, not by appeal.
The objection that the Supreme Court of Oklahoma found no facts
upon which a review can be had by this Court is untenable where it
appears that the case was before that court a second time and that,
in its opinion, it referred to and adopted its former opinion in
which it had made a full statement and findings of fact.
The endorsement and delivery before maturity of a note secured
by a chattel mortgage by the payee transfers not only the note but,
by operation of law,
Page 203 U. S. 297
the ownership of the mortgage which has no separate existence,
and such a chattel mortgage if recorded, although the assignment
thereof was not recorded, remains a lien on the property, superior
to that of subsequent mortgages even though the original payee may,
without authority and after the transfer, have released the same,
if the law of the state in which the mortgage was given does not
require the assignment of chattel mortgages to be recorded.
Under the law of Kansas, there is no statute making it necessary
to record or file the assignment of a chattel mortgage in order to
protect the rights of the assignee thereof.
An assignee does not lose his rights under a mortgage by not
recording or filing it unless there is a law which, either in
express terms or by implication, provides therefor; where there is
no such statute, it is not necessary, nor is it the duty of the
assignee, to record or file a mortgage.
The rights of the holder of a chattel mortgage over the property
after the same has been removed to another state are determined by
the law of the state where the property was when the mortgage was
given.
This is an action of replevin, brought by the plaintiff in error
against the defendant in error in the District Court of Woodward
County, in the then Territory of Oklahoma, to recover possession of
certain cattle, once belonging to one W. B. Grimes, and by him
mortgaged. The trial resulted in a judgment for the defendant,
which was affirmed by the supreme court of the territory, and the
plaintiff has brought the case here by writ of error.
The action has been twice tried. The first trial ended in a
judgment for the plaintiff. Upon appeal to the supreme court of the
territory, it was reversed and the case remanded, and a second
trial had, resulting in the judgment for defendant now under
review. Upon the second appeal to the supreme court of the
territory, a brief opinion was given in which it was stated that,
upon appeal from the first judgment, the court had
"promulgated an opinion in which it made a full statement and
findings of facts and enunciated the law as applied thereto,
reversed the judgment of the lower court, and remanded the case,
directing a new trial. 13 Okl. 719."
The court also stated in its opinion on the second appeal that
it had been agreed upon between the parties in the trial court that
a jury should be waived and the case submitted on the record as
made
Page 203 U. S. 298
on the first trial, and that
"no new question is raised on this appeal. The record is the
same as stated in our former opinion, and we are fully satisfied
with the law as therein declared. The judgment of the lower court
is hereby affirmed at the cost of the appellant."
The following facts were found by the supreme court on the first
appeal, and were adopted by it as the facts for review on the
second appeal:
One W. B. Grimes, who at the time was a resident of Clark
County, in Kansas, executed at that place, on the twenty-seventh
day of June, 1900, and delivered to Siegel-Sanders Live Stock
Commission Company his negotiable promissory note for $11,111.23,
due November 1, 1900, with interest from maturity at the rate of
eight percent per annum. To secure the payment of this note, he
executed and delivered a chattel mortgage to the payee of the note
on 526 cattle then in the county, and the mortgage was duly filed
in the office of the register of deeds of Clark County on July 12,
1900. The note was then indorsed and delivered by the payee to the
Geneseo Bank, the defendant in error. It does not appear that there
was any separate assignment of the mortgage. No record of any
assignment was ever made in the register's office of Clark County,
Kansas. On the twenty-fourth day of November, 1900, although the
Siegel-Sanders Company had already sold and delivered the note for
$11,111.23 to the Geneseo Bank, the defendant in error, yet,
notwithstanding such sale, the president of that company, Frank
Siegel, without any authority, filed in the office of the register
of deeds a pretended release of the mortgage, in which payment of
the above debt was acknowledged.
On the twenty-fifth day of February, 1901, the Chicago Cattle
Loan Company caused its agent to examine the records of Clark
County as to chattel mortgages against Grimes, and upon this
examination he found the record clear, except as to a mortgage
executed by Grimes to the Siegel-Sanders Live Stock Company,
October 24, 1900, and by it assigned to the
Page 203 U. S. 299
Chicago Cattle Loan Company, and True so reported to the
last-named company.
On April 17, 1901, Grimes executed two other notes to the
Siegel-Sanders Company for $7,694.70 each, due October 27, 1901.
These notes were probably renewals of notes previously given. To
secure the payment of these two notes, Grimes at the same time
executed and delivered a chattel mortgage to the Siegel-Sanders
Company on the cattle in question and other cattle. The two notes
thus given were then sold by that company to the plaintiff in error
for the amount named in the notes, and the plaintiff believed at
the time it bought these notes that the mortgage securing them was
the first lien on the cattle, and it secured this information
through its agent, who personally examined the record.
It is further stated in the finding that there was practically
no dispute as to the facts, and that the trial court expressly
found that both parties to this action acted in good faith.
The release of the first mortgage, signed by the president of
the Live Stock Commission Company and filed in the office of the
register of deeds, as above stated, on November 24, 1900, was not
acknowledged.
After the execution of these various instruments, and between
the twenty-fifth of April and the first of May, 1901, without the
knowledge or consent of either of the banks, parties to this suit,
Grimes, the original owner of the battle, moved them from the State
of Kansas to the County of Woodward, in the Territory of Oklahoma,
at which latter place, between the nineteenth and twentieth of May,
1901, they were seized and taken possession of by the Geneseo Bank,
the defendant. The plaintiff, within one year from the filing of
the first mortgage, dated June 27, 1900, in the office of the
Register of Deeds of Clark County, Kansas, commenced this suit in
replevin in the District Court of Woodward County, Oklahoma, to
recover possession of the cattle, claiming under the mortgage which
was executed and delivered to the Siegel Sanders Company on April
17, 1901, and by it sold to plaintiff, while the
Page 203 U. S. 300
defendant claimed under the mortgage dated June 27, 1900, a
pretended release of which had been filed as already stated, but
after the assignment to defendant.
Upon these facts, as found by the Supreme Court of Oklahoma,
judgment was rendered for the defendant in error.
Page 203 U. S. 305
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
The defendant in error at the outset, objects to the
jurisdiction of this Court on the ground that the plaintiff should
have brought the case here by appeal instead of by writ of error,
because the case was tried without a jury, and therefore the writ
of error was improper. There is nothing in this objection, as in
actions at law coming from the Territory of Oklahoma, it has been
held that the proper way to review the judgments of the Supreme
Court of that territory was by writ of error.
Comstock v.
Eagleton, 196 U. S. 99;
Oklahoma City v. McMaster, 196 U.
S. 529;
Guss v. Nelson, 200 U.
S. 298.
Further objection is made that the court below found no facts
upon which a review can be had in this Court. The foregoing
statement disposes of this objection also, and shows it to be
untenable.
On the merits, the question arises which of these two parties
shall sustain the loss occasioned by the improper act of the
president of the Live Stock Commission Company in signing this
pretended release, and acknowledging the payment of the $11,000
note, as above stated? The plaintiff in error contends that the
defendant bank should bear the loss because of its failure to
record or file the assignment to it of the first mortgage, securing
the $11,000 note. The defendant opposes this view and insists that,
being the holder and the owner of the $11,000 note, secured by a
first mortgage duly executed on the twenty-seventh of June, 1900,
and duly filed in the register's office, it has the prior right to
the cattle, and that the statutes of Kansas do not require that it
should file or record the assignment to it of the note and
mortgage, and its claim should not therefore be postponed.
Page 203 U. S. 306
The note executed by Grimes for eleven thousand and some odd
dollars was negotiable, and the chattel mortgage was given at that
time to secure the payment of the note. The indorsement of the note
and its delivery before maturity to the defendant by the payee of
the note transferred its ownership to the defendant bank. This
transfer also transferred, by operation of law, the ownership of
the mortgage, which was collateral to the note. Such a mortgage has
no separate existence, and when the note is paid, the mortgage
expires, as it cannot survive the debt which the note represents.
Carpenter v.
Longan, 16 Wall. 271;
Burhans v.
Hutcheson, 25 Kan. 625;
Mutual Benefit Life Insurance
Company v. Huntington, 57 Kan. 744;
Swift v. Bank of
Washington, 114 F. 643.
The mortgage therefore is a prior lien upon the cattle, as
security for the payment of the note, unless defendant has lost it
by its failure to record an assignment of the mortgage. Whether it
has or not is to be determined by the law of Kansas.
There is no express provision in the statutes of Kansas for the
filing or recording of assignments of chattel mortgages. Paragraph
36, section 4251, General Statutes of Kansas for 1901, by Dassler,
may be found in the margin.
* It is said this
statute by implication provides for the recording of an assignment
of a chattel mortgage.
Assuming that the statute makes provision for such recording, it
is then argued that it is the duty of the assignee to do
Page 203 U. S. 307
so, and his failure takes away a right of priority of lien which
he might otherwise have. This reasoning is not satisfactory. We
cannot make the assumption that the statute cited does make
provision for the recording of the assignment, and we fail
therefore to find its necessity. That necessity depends upon
statute, and, without some statutory provision therefor, the
necessity does not exist. Uncertain and doubtful implications
arising from portions of a statute not requiring the recording of
an instrument are not to be regarded as furnishing a rule upon the
subject. There are statutory provisions for recording assignments
of real estate mortgages to be found in the Kansas statutes.
See paragraph 19, section 4234, and paragraph 26, section
4241, General Statutes of Kansas for 1901, by Dassler. Paragraph
19, above, provides for the acknowledgment of assignments of real
estate mortgages by the assignor, and paragraph 26 provides that,
on presentation of such assignment for record, it shall be entered
upon the margin of the record of the mortgage by the register of
deeds, who is to attest the same, as therein provided. Now, in
relation to chattel mortgages and the assignment thereof, there is
no such provision or anything similar to it. Provision is made for
the satisfaction of a chattel mortgage when paid by the mortgagee,
assignee, etc., but that does not make it necessary to record or
file the assignment of a chattel mortgage in order to protect the
assignee.
The Supreme Court of Kansas has held that there is no statute
making it necessary to record an assignment of a chattel mortgage
in order to protect the rights of such assignee, and that it need
not be recorded or filed.
Burhans v. Hutcheson, 25 Kan.
625;
Wiscomb v. Cubberly, 51 Kan. 580;
Mutual Benefit
Life Insurance Company v. Huntington, 57 Kan. 744. It is true
that these cases refer to real estate mortgages, but the reasoning
sustains the statement as to chattel mortgages.
The first of the above cases (
Burhans v. Hutcheson)
holds that, where a mortgage upon real estate is given to secure
payment of a negotiable note, and before its maturity the note
Page 203 U. S. 308
and mortgage are transferred by indorsement of the note to a
bona fide holder, the assignment, if there be a written
one, need not be recorded. This is held even where there was an
express statute as to the record of such an assignment. The statute
was held not to apply to the case of a mortgage given as collateral
to a negotiable note.
The second case (
Wiscomb v. Cubberly) has reference
also to a mortgage on real estate, and involves much the same
principle.
In the third case (
Mutual Life Insurance Benefit Co. v.
Huntington), it was again held that, after the assignment and
delivery by the payee of a negotiable promissory note, before
maturity, together with the mortgage on real estate, given as
collateral security for its payment, the original mortgagee had no
power to release or discharge the lien of the mortgage, and a
release made by him without authority, even though the assignment
was not recorded, would not affect the rights of the assignee.
These cases would seem to establish the rule in Kansas that it
is not necessary to record the assignment of a mortgage even upon
real estate, when given to secure payment of negotiable notes,
although there is a statute which, in general terms, provides for
the recording of assignments of real estate mortgages. Still
stronger, if possible, is the case of a chattel mortgage given to
secure the payment of negotiable notes, when there is no statutory
provision for the recording of the assignment of such mortgage. It
is probable that, in the large majority of cases, the only evidence
of an assignment of a negotiable note and a chattel mortgage given
to secure its payment is the indorsement of the note and delivery
thereof to the purchaser. In such a case, there would be no
assignment to record, and there is no provision in the statute for
filing a copy of the note with its indorsement, together with a
statement that it had been delivered to a third party as the
purchaser or assignee thereof.
The policy of the State of Kansas seems to be not alone to
Page 203 U. S. 309
give to a negotiable promissory note all the qualities that
pertain to commercial paper, but also to clothe mortgages given as
collateral security for the payment of such notes with the same
facility of transfer as the note itself, to which it is only an
incident.
The plaintiff, however, contends for the opposite doctrine, and
cites, among others,
Lewis v. Kirk, 28 Kan. 497, as its
authority. In that case, the question was which should suffer, a
bona fide purchaser of the real estate which had been
mortgaged or the
bona fide purchaser of the mortgage, who
had failed to have his assignment recorded. The court held in favor
of the purchaser of the real estate, and distinguished
Burhans
v. Hutcheson, supra, though not assuming to overrule it. The
mortgage in the
Lewis case was upon real estate, and would
not therefore necessarily affect the case of a chattel mortgage,
where there is no statute for recording an assignment of the
mortgage.
But in
Insurance Company v. Huntington, 25 Kan.,
supra, the case of
Burhans v. Hutcheson, 25 Kan.,
supra, was cited, and the doctrine that a
bona
fide holder of negotiable paper, transferred by him by
indorsement thereon before maturity and secured by a real estate
mortgage, need not record the assignment of mortgage, was again
approved.
In
Thomas v. Reynolds, 29 Kan. 304, cited by plaintiff,
it was held that an action to recover the penalty provided for by
the statute for refusal to enter satisfaction of a chattel mortgage
when it had been paid could not be sustained against the assignee
of the mortgage without proof of the assignment of record, as the
purpose of the statute was to clear the record, and therefore the
defaulting party must have record title or his satisfaction would
apparently be an impertinent interference by a stranger. That
action did not raise the question herein presented, and the court
made no reference to the case of
Burhans v. Hutcheson,
supra. It is quite clear that it did not intend to overrule
that case. In any event, as already mentioned, the
Burhans
case has been approved in 57 Kan. 744,
Page 203 U. S. 310
above cited. We cannot treat the rule which we have stated above
as having been at all shaken by the two cases from 28 and 29
Kansas,
supra.
The counsel for plaintiff contends that, assuming there was no
statute providing for the recording of an assignment of a chattel
mortgage in the State of Kansas, yet there was no law of that state
which prohibited the Geneseo Bank from recording its assignment. It
is not necessary that there should be a law to prohibit the
recording of such assignments. There must be a law which provides
for their record, either in express terms or by plain and necessary
implication from the words stated. Where the statute does not so
provide, it is not necessary, nor is it the duty of the assignee to
record or file his assignment. There must be some legal duty
imposed upon the assignee before the necessity arises for the
recording of the assignment.
Counsel have cited many cases from states other than Kansas in
which the rights of assignees of mortgagees as against subsequent
mortgages or conveyances have been discussed and decided. In many
cases, the question has arisen in regard to the recording of
assignments of mortgages upon real estate, where the states had
provided for the recording of such assignments, and where, in the
absence of such recording, the assignee has failed in obtaining
priority of rights under his mortgage, which he would have had if
the assignment had been recorded. But, as the owner of the cattle
mentioned herein resided in Kansas at the time the mortgages were
given, and the cattle were then in that state, and the mortgages
were filed there, the transactions are to be judged of with
reference to the law of that state, and we decide this question
with reference to such law. Under that law, the assignee of the
first mortgage of June, 1900, has a superior lien to the assignee
of the second mortgage of April, 1901, although such assignee of
the first mortgage did not have his assignment recorded.
Judgment is
Affirmed.
* Paragraph 36, Section 4251, General Statutes of Kansas for
1901, by Dassler, provides as follows:
"When any mortgage of personal property shall have been fully
paid or satisfied, it shall be the duty of the mortgagee, his
assignee or personal representative, to enter satisfaction or cause
satisfaction thereof to be entered of record in the same manner as
near as may be, and under the same penalty for a neglect or
refusal, as provided in case of the satisfaction of mortgages of
real estate. The entry of satisfaction shall be made in the book in
which the mortgage is entered, as hereinbefore provided, and any
instrument acknowledging satisfaction shall not be recorded at
length, but shall be referred to under the head of 'Remarks' and
filed with the mortgage or copy thereof, and preserved therewith in
the office of the register."
