Wyman v. Herard

*58 Opinion of the court by McAtee, J.: Among the questions raised by the assignment of errors are, that the trial court should not hare admitted the counter claim of the defendant; that it had no power to order an accounting by Wyman, as trustee; that the mortgages all provide for the protection of the proceeds of the sales of cattle, which were a part of the trust estate; that there could be no accounting until the proceeds, after deducting the expenses, became available; that the beneficiaries in the trust were the unpaid note holders comprehended in the second mortgage, and the other note holders and beneficiaries, along with the defendant in the third mortgage; that the court was without jurisdiction of the subject matter of the trust, or of the parties necessary to a settlement of the trust, and that the remedy by counter-claim could only be invoked in behalf of the defendant in a case in which a several judgment might be had in an action ■arising out of the contract of transaction set forth in the petition, as the foundation of the plaintiff’s claim, or connected with the subject of the action, and that this was not such a case. In support cf this position the defendant cites Lyman v. Stanton, 40 Kan. 727, a case brougtht before a justice of the peace in Shawnee county to recover money only, and in which the defendant availed himself of a counterclaim involving the foreclosure of a mortgage and the sale of real estate, and the cause having been removed to the district court and a demurrer filed to the alleged counter-claim, on the ground that the land claimed by the defendants was in Butler county, the supreme court held that the counter-claim was not proper, be *59 cause the action was an' action brought for the purpose of foreclosing a mortgage upon real estate situated outside of Shawnee county, and that the counter-claim ought to have been brought, under the provisions of the •Code, in Butler county. De Ford v. Hutchinson, 45 Kan. 318, is also relied upon. The case was • replevin, for the mortgaged property. 'The defendant answered by general denial, averring that the plaintiff had purchased the mortgaged goods from her; that an inventory and appraisement had been made under this purchase, and the value of the goods ascertained, and that thereupon the plaintiff refused to carry •out his agreement. The case was tried to a jury, which found for the defendant. It was contended by the plaintiff, upon appeal, that the defense set up by the defendant was in the nature of a counter-claim, and ,th:at as such, it could not be sustained, because it did not 'relate to the transaction and “subject of the action” set out in the petition in replevin. The court sustained the contention of the defendant and her right to set up her counter-claim, and sustained the judgment below. Thereafter, upon a rehearing by thé supreme court of Kansas, (reported in 26 Pac. Rep-. ■ 60,) the supreme court simply -said that they thought it was necessary to eliminate any reference to the counterclaim or set-off, and that the defendant had successfully maintained the sale of the goods from henself to De Ford, and had the right to Recover a judgment against him. No reason is given by the supreme court, upon rehearing, for eliminating the counter-claim and, inas-xmuch as the defendant had filed a general denial in the • cause, and under that general denial had shown that *60 the plaintiff was indebted to her, as the jury found, that it was manifestly not necessary that the court should determine in that case that the defendant had any right to prove a counter-claim under a general denial. The-case has no force in support of the plaintiff’s argument.. In the case of Taylor v. Matteson, 56 N. W. Rep. 829, a stockholder of the Hudson Lumber company had sued another stockholder of the same company, upon account, of a liability incurred by him in signing one of the obligations of the corporation, and in which a counterclaim was alleged, based upon mismanagement by the' plaintiff of the affairs and business of the corporation, it was very properly held by the court that in such an action it was impracticable and unreasonable to attempt to adjust the claims of the Hudson Lumber company, the corporation, against the plaintiff and to wind' up its affairs and take an accounting of its assets in. that action, which was a purely legal action between, individual stockholders. The case furnishes no light, upon the contention here. Several other cases are cited from different states,, but they are either under different codes of practice or-got parallel as to facts. Our Code of Civil Procedure provides, in sections 94' •and 95, p. 779, that: “The defendant may set forth in-his answer as many grounds of defense, counter-claim, set-off' and for relief as he may have, whether they be-such as have been heretofore denominated legal, or equitable, or both,” and that the counter-claim must be-one in which a several judgment might be had in an action arising out of the contract or transaction set forth-in the petition as the foundation of the plaintiffs claim,. *61 •or connected with the subject matter of the action, and that, “The right to relief * * must be a right to relief necessarily or properly involved in the action for •.a complete determination thereof, or settlement of the ■question involved therein.” For convenience, the mortgages which are most material to the discussion here may be designated as the “first mortgage,” by which is intended the mortgage ■dated July 29, 1893, by which the plaintiff was first constituted trustee for the note holders of the preceding mortgages and which amounted in all, up to that time, and'as included in that mortgage, to the sum of $29,000; the mortgage of the same date, made to the Fish & Keck •company to secure the payment of five notes of varying ■amounts, making the total sum of $19,510.72, and including 1,100 head of steers 1 year-old, may be designated as the “second mortgage;” and the mortgage dated August 12, 1893, to secure the payment of $40,-000, — $20,000 of which was due to the defendant upon a promissory note given by Baird & Ingram to Fish & Keck company, .and by them assigned to the defend■ant, may be designated as the “third mortgage.” The subject matter of the action is the recovery from the defendant of the remnant of the cattle sold to' him by contract of May 13, 1895, upon which this suit was brought. The cattle thus sued for were all admittedly included in each of the three mortgages, and while Wyman, as trustee, was conceded to be the legal owner of the cattle, he was such only as trustee holding them for. the purpose of ■converting them into money and applying the *62 proceeds' on the indebtedness to the first, second and tihird mortgages in their proper order, and those who owned and had paid' for the notes protected by these mortgages; that the beneficiaries of the trust, and each of the beneficiaries, the defendant with the rest,. h¡aíd a right to see to it that the cattle were so converted according to fixed legal principles, and according to a priority which the trustee had no power to-vary, diminish or relinquish. The beneficiaries of the-first mortgage had a fixed' legal right to- the c'on-version of the cattle and the payment of their claims. The-beneficiaries of the second mortgage had likewise a fixed right to a proportion of the proceeds and the liqub Ration of their claims in proper order; and while the-mortgage under which the defendant claims was third amid last in order and point of time, the rights of the creditors under that mortgage were equally fixed upon the same security in all respects, except that they were-•subordinate to the prior securities; and the interest of the defendant as having a fixed interest in the cattle, and an equal right to have that interest protected, adhered to the subject of the action, as did the rights of' either of the mortgagees in the preceding- mortgages. He had a right to- assert Ms legal and equitable claims as against the trustee wherever he might find him. It cannot be said successfully, that the court here was. without jurisdiction, of the parties necessary to a settlement of the trust. After enumerating the county in which various actions should be brought, our Code of Civil Procedure declares, in section 55, that: “Every other action must be brought in the county in which the defendant, or- *63 some one of the defendants, reside; or may be summoned.” And it was said in Massey v. Watts, 6 Cranch 160, by Chief Justice Marshall, that in “cases of fraud, of trust or of contract, the jurisdiction of a court of chancery, is sustainable wherever the party be found” even “although lands not within the jurisdiction of that court may be affected by the decree.” And' it was said in Le Breton v. Superior Court of San Francisco, (Cal.) 4 Pac. Rep. 777, that when the suit is brought to reach personal property in the hands of the trustee, that that fact alone will give the court jurisdiction. And it was said in Penn v. Baltimore, 1 Vesey 444, that the foundation of this doctrine is the jurisdiction of the court over the person, which was originally the only jurisdiction of courts of equity. And in Taylor v. Stowell and Others, 4 Metc. 177, it was held that where the existence of any extraneous fact is shown, calculated to defeat or impair the efficacy of the legal remedy, such as the insolvency of the plaintiff or his assignors, the jurisdiction of the chancellor, even in cases of unliquidated damages, was unquestionable. And there would seem to be no room to raise that question, since the trustee has himself come voluntarily within the jurisdiction, seeking the exercise of the powers of the court in his own behalf, and has submitted himself and the matters of his trust, including the subject of the action, to the direction and determination of the court. *64 The bare statement of the declarations of tbe Code cf Civil Procedure upon the subject of the proper province of the counter-claim and the statement of the matter involved in this action, that is, a contention between the plaintiff and the defendant for the proceeds of' cattle covered by mortgages of which the plaintiff is trustee and in which the other is the beneficiary, all secured upon the same subject matter, would seem to require no exposition or reinforcement from authority; but authorities abound upon the question. It was held in Cragin v. Lovell, 88 N. Y. 258, in Taylor v. Mayor, 20 Hun. 292, and in Missouri in Halzbauer v. Heine, 37 Mo. 443, that the general test as to the admissibility of a counter-claim is whether, at ‘the time the action was commenced, an action, legal or equitable, could have been maintained upon the counterclaim, against the plaintiff. And it was said in Waddel v. Darling, 51 N. Y. 330, and Allen v. Shackelton, 15 Ohio St. 145, that the purpose of the creation of the counter-claim was to enable parties to settle and adjust all their cross-claims in a single action, thus avoiding a multiplicity of suits, and often securing better justice between the parties. And it was said in Hicksville, etc. R. R. Co. v. L. I. R. R. Co. 48 Barb. 355, that a counter-claim of an equitable .nature may be interposed, although the claim or demand mentioned in the petition is purely of a common law nature, or for the recovery of money only. And it was said in Tinsley v. Tinsley, 15 Mon. B. 424, that it was not necessary that the counter-claim itself should be -founded in the contract, or arise out of the *65 contract set forth in the petition, but that it was sufficient if it arose out of a transaction set forth therein, or was in some way connected with the subject of the action. It was said in Williams v. Boyd, 75 Ind. 286, that it was sufficient if there was some legal or equitable connection between the matters pleaded as a counterclaim and the matters alleged in the original complaint, and the words “subject of the action” have been construed to mean the subject matter in dispute, as was said in Chamboret v. Cogney 41, How. Pr. 125; or a violated right, as was said in Glenn Falls Mfg. Co. v. Hall, 61 N. Y. 226. And it was held in De Ford v. Hutchison; 25 Pac. Rep. 645, that: “ ‘It secures to the defendant the- full relief which a separate action at law, bill in chancery, or a cross bill would have secured to him on the same state of facts.’ (Woolen Mills v. Eull, 37 How. Pr. 301; Gleason v. Moen, 2 Duer 642.) * * ‘And for. unliquidated damages, arising' on contract, different from the contract on which the action is brought, (Lignot v. Redding, 4 E. D. Smith, 285,) and ¡of an equitable or legal nature.’ (Woolen Mills v. Eull, 37 How. Pr. 301; Currie v. Cowles, 6 Bosw. 453.) ‘It is not required that the counter-claim itself shall be founded in, or arise out of, the contract set forth in the petition, but it is sufficient that it arise out of the transaction set forth in the petition, or is connected with the subject of the action.’ (Tinsley v. Tinsley, 15 B. Mon. 454-459; Wadley v. Davis, 63 Barb. 500; Bank v. Lee, 7 Abb. Pr. 372-389; Walsh v. Hall, 66 N. C. 233-237.”) . But even if the law were otherwise, and. the counterclaim an improper one, the defendant waived the ob *66 jection by not demurring to the answer and the counterclaim of the defendant. * Section 89 of the Code of Civil Procedure provides the grounds of demurrer: “Fourth. That there is a defect of parties, plaintiff or defendant;” and “Sixth. That the petition does not state facts sufficient to constitute a cause of action.” It was abundantly manifest on the face of the-oounter-claini that other persons besides the defendant were interested in the subject of the action, 'and might,, if the plaintiff saw fit, be brought in to participate in the disposition of the cause; and likewise, the counterclaim upon its face exhibited its exact relation to the action, and upon both these grounds, if it was intended, by the plaintiff to raise them at all, it was necessary to raise them by demurrer, and if not so raised and the-plaintiff waives the advantage which might accrue to-him by demurrer, and replies, he cannot afterward take advantage of the fact that the counter-claim is insufficient, or that there are other parties to the action. It was said in Parker v. Wiggins, 10 Kan. 425, that the plaintiff, instead of availing himself of a bar to the-action on the counter-claim, provided by the code, preferred to risk a hearing upon the merits, but the court properly held that that point had been waived by neglecting to innterpose it as a defense at the proper time, and in the manner pointed out by the code. Such a defense not being upon the merits is called dilatory, aud its indulgence, except at the first favorable opportunity, is not favored in law. This point has been decided in Zabriskie v. Smith, 13 N. Y. 322, and in Merit v. Walsh, 32 N. Y. 689, so far as- *67 the same is applicable to a petition, and we think the same rules are applicable to a counterclaim .set up by way of answer, that govern a demurrer to a petition. And the declaration in the syllabus was that, where there is a defect of parties apparent on the face of the petition or counter-claim, the defect must be taken advantage of by demurrer, and if not so apparent, the issue must be made by answer or reply, and if not made in these ways, it is waived. (State v. Sapington, 68 Mo. 455.) And this declaration, of law was sustained in the case of Walker v. Johnson, 26 Minn. 147, 9 N. Y. Rep. 632, even upon a counter-claim which the supreme court held was improper; and in the trial court, the court having instructed the jury to disregard the claim asserted under the counter-claim, the supreme court reversed this ruling, saying that: “This was error. The cause of action alleged in the answer being in no way connected with the subject of plaintiffs’ action, was. not proper matter of counterclaim. But the only way to make the objection that a cause of action alleged as a counter-claim is! not the proper subject of counter-claim in the particular action, is by demurrer. If plaintiff omits to demur on that ground,' and takes issue upon the facts alleged, he waives his objection to the character of the cause of action as a counter-claim in that action, and consents that it may be tried and determined as if it were proper to plead it as a counter-claim.” And this position was further affirmed by the same court in the case of Lace v. Fixen, 39 Minn. 46, 38 N. W. Rep. 762, in which in his reply the plaintiff undertook *68 to object to the admission of a counter-claim advanced in his answer by the defendant, the court saying that: “It can require no argument to show that this so-called ‘counter-claim’ had no proper place in the case, and ought not to have been allowed to remain in it, had it been properly and reasonably objected to. The proper way to raise the question whether a cause of action is the subject of a counter-claim, is by demurr r. (Campbell v. Jones, 25 Minn. 157.) By failing to demur on this ground, the plaintiff waived all objection to the answer a® a counter-claim. (Walker v. Johnson, 28 Minn. 147; 9 N. W. Rep. 632.) Counsel asks us to reconsider our former decision on this point, but, after an examination of all the authorities cited by him, we see no reason to .change our views. The reasoning of the court in Ayers v. O’Farrell, 10 Bosw. 143, cited by u® in Walker v. Johnson, although not the opinion of a court of last resort, strikes us as sound and convincing. We think confusion has some times arisen by failure to distinguish between a case where the ‘counter-claim’ flails to .state a cause of action and a case where, although it states a good cause of action, it is one which is not the subject of counter-claim under the statute. Of course, in tie first case the defect can be taken advantage of at any timé, even after judgment, precisely a® if it were set up in a complaint. Neither do we think that the attempt of plaintiff to save the point jn his reply can avail him. A party cannot both answer and demur at the same time, and a fortiori he cannot insert a demurrer in the form of a protest in the body of an answer.” And it was said in Taylor v. Stowell and others, 4 Metc. 177, that: “The objection of the answer for The want -of parties not having been taken in either of the modes prescribed by thé Code, it was waived.” It was said by the supreme court of Missouri in the case of Mechanics Bank v. Gilpin, 16 S. W. Rep. 534, upon. *69 statutes which provide, like ours, that: “A defendant may-demur to. the petition when it shall appear upon the face thereof: * * Fourth. That there is a defect of parties, plaintiff or defendant,” and by another section, that: “When either of the orders specified do not appear upon the face of the petition, the objection may be taken by answer; and, if no such objection be taken either by demurrer or answer, the defendant shall be deemed to have waived the same, excepting only the jurisdiction of the court over the subject matter of the action,” etc. The holding of the court was that where a defect of parties plaintiff appears on the face of the petition, it will ■be deemed waived, under those statutes unless a demurrer is filed. And it was said by the supreme court of the same state in Boland v. Ross et al. 25 S. W. Rep. 524, that where a petition by one partner for relief, because of the alleged destruction of the partnership property fails to state ground for equitable relief against some, of the defendants), an objection to their joinder must be taken by demurrer. And in Loufer v. Stottlemyer, 44 N. E. 1008, the supreme court of Indiana, upon reference to many cases' in that state, held that: “A defect of parties', if apparent on the face of the pleadings, is waived by failure to demur on that ground.” And generally, the statement of la.w as made in the Encyclopaedia of Pleading and Practice, vol. '6, p. 375, is that: “The objection that there is a defect of parties must be taken by demurrer at the proper time, when the deficiency appears upon the face of the record, or it will be waived. And the rule applies equally whether the *70 defect is one of panties plaintiff or of parties ‘defendant.” A multitude of authorities is cited to the proposition, including among others, decisions from the supreme courts of Kansas, California, New York, Wisconsin, Minnesota -and Nebraska. Mr. Justice Story, in his work on Equity Pleading, section 543, said that: “A demurrer for want of necessary parties must show who are the parties, from the facts as stated in the bill; not, indeed, by name, for that might be impossible, but in such a manner as to point out to the plaintiff the objection to the bill, and to enable him to amend it by making proper parties.” No demurrer was filed, and the solitary statement in the ■reply, upon which any 'Objection- can be founded to the jurisdiction of the court or to defect of parties, or that the court was without jurisdiction of the subject matter of the trust, is the averment of the • reply, that “the defendant ought not to have and maintain his alleged counter-claim herein, upon his amended cross-petition for an accounting, for the reason that, in order to make such an accounting, it is necessary for the money due plaintiff, as trustee, from the defendant, to be entered and considered therein, and the respective portions of the beneficiaries' under said several deed® of trust ascertained. None of these benefiearies are parties herein, nor are they necessary parties in this action.” This discussion and citation of authorities has been thus extended, because of the strenuous urgency of the plaintiff’s brief that the court is without jurisdiction of the subject matter of the trust, and that there is a defect of parties, but it is manifest, from the solitary averment *71 of the reply upon which the plaintiff’s contention must stand, that he has not only waived the defect of parties, if any, by failure to demur or to set up the defect in his pleading, but that he has expressly waived it, if it had been a defect, and that the averment which is intended to cover and exclude the jurisdiction of the court upon the subject matter of the action, goes no farther than an objection to the court making a final determination of the matter, if it should be found, upon examination, that this was impossible, by reason of the absence of the several other beneficiaries from participation in this cause. Ajnd the trustee may invoke the presence of the bene-ficaMes in the trust, or dispense with their presence, as parties, since the rule that the beneficiaries, if their interests are involved, should be before the court, is one which has been established for the protection of the trustee, and' in order to avoid the repeated vexation of the trustee of a multiplicity of suits. 'It was said in Perry on Trusts, section 881, that: ■“The trustees ought not 'to be twice vexed where it is possible to determine all the rights of the parties in one suit.” It was argued by the plaintiff that the judgment of the court that, upon the sale of cattle the proceeds were eo msta/uti a payment of the notes- secured' by the first and second mortgages; and that the liability under those mortgages was extinguished to the extent -of such proceeds was- erroneous; and that in fact the relation of Fish & Keck company to- the transaction, 'as expressed in the trust deed of July 29, 1893, and in the assignment of the second and third mortgages, was nothing more than *72 that this corporation was designated as the factor or commission merchant for the disposal of the cattle that were to he marketed from time to time, and that there is absolutely nothing in the contracts which create it the common agent of both parties. It is also argued, in support of this contention, that unless expressly stipulated, an agent cannot represent both parties; that if there was any misappropriation of the proceeds, the note holders cannot be held bound thereby on any theory of agency, nor can they be held to have sacrificed or lost any part of their security, for the obvious reason that their mortgages covered all the cattle, and they were entitled to the security afforded by the lien until it was fully paid; and that, inasmuch as sales were made by the Fish & Keck company before the maturity of any of the notes, that therefore the prior mortgages ought not to be bound by an- interpretation of the law which shall hold that they have received payment so far as this defendant, one of the beneficiaries under the third mortgage, is concerned, and that, inasmuch as the money came into the hands of the factor before the notes were due, that that fact would preclude the application of the receipts then had from operating by law, as a payment of the notes. But this is not, we think, the correct view. It is true that Fish & Keck company were agents, in a certain general sense, of the mortgagors, but they were agents limited by the terms and conditions of their appointment. They were factors for the selling of the cattle mortgaged, appointed by the mortgagors and accepted by the mortgagees, and when the various notes under the several mortgages having been taken from Baird & Ingram by *73 Fish & Keck company, and subsequently negotiated and assigned by that corporation, they carried with them to the assignees respectively such rights as had been stipulated for by the mortgagors in the execution of the mortgages, and such as- had been accepted by the mortgagee, the Fish & Keck company, and no ‘other or further rights than those which had been made by tbe mortgagors, on one side, and had been accepted by Fish & Keck company, mortgagees-, on the other. One of these stipulations was that the cattle “should be kept upon the range in the Indian Territory until the maturity of the notes, unless sooner marketed, with the consent of the trustees, and when marketed, if the notes' shall not be fully paid, said cattle shall be shipped and consigned for sale to said Fish & Keck Commission company. * * And the proceeds of such sale shall be applied to the payment and discharge of all of said notes remaining unpaid, and in the or,der of priority as herein-before stated.” ■ We think the court below properly held that, inasmuch as this trust mortgage so provided, and the notes were taken by the respective assignees with full notice of it, and the security contained in the respective mortgages was encumbered with this provision, that the cattle should be shipped to the Fish & Keck company, and that the proceeds of such sale should be applied to the payment and discharge of all said notes remaining unpaid in the order of priority, that the note holders who- took the assignment of the subsequent notes and mortgages, had a right to have the proceeds of the sale of the cattle ®o applied, and that, if the proceeds- should be misapplied by the commission company, that yet, the law would *74 make the application “in the order of priority” as provided in the trust mortgage. Similar provisions have been frequently interpreted by the courts, and uniformly, so far as we have been able to find, as the trial court determined in this cause. It was said in Hunt v. Newer, 32 Mass. 504, that it was a general rule that where collateral securities were received for a debt, with power to convert the security into money, this is specifically applicable to the payment of such debt, the same person has the power to pay and receive, no act is necessary, and the law makes the application; if the proceeds equal or exceed the amount of ■the debt, it is de facto paid; no action would lie for it, and proof of these facts would support the defense of payment. It was said in Weill v. First Natl. Bank of Wilmington, (N. C.) 11 S. E. Rep. 277, in a case in which a mortgage had been given by a firm to secure promissory notes and the mortgaged property delivered to one of the firm, as agent of the mortgagee, who was authorized as such agent only to sell and dispose of the property and appropriate the proceeds of the sales to the payment of the notes, that the mortgage was discharged upon a sale of ■sufficient of the property by the agent to satisfy the notes, whether the proper credits were entered or not, and the money having been so received, the contract at once appropriated it. And in the case of Conkling v. Shelly, 28 N. Y. 360, which is strongly in point, the court said that: “But the supreme court ordered a new trial in this case, on the ground that the sales made and proceeds *75 received by the mortgagors, under such an arrangement between them and the mortgagees, should have been applied in payment and satisfaction of the mortgage, whether the money was actually paid over to the mortgagees or not. In this I think they were right. Such ■an agreement made the mortgagors agents of the mortgagees. It was as if the latter had taken possession, and placed a third person in charge as agent to sell and account to them. They could not have escaped from crediting on their indebtedness the proceeds of sales made by such an agent, because he had fraudulently or •dishonestly misapplied or employed the money. * * It is not a question between the mortgagees and the mortgagors, who of course could pot take advantage of their own wrong, and who remain liable to the plaintiffs for the money received and misapplied by them. But the question .here is between the mortgagees and other ■creditors who have obtained a lien or an interest in the mortgaged property after the satisfaction of the mortgage. The mortgagees have made the mortgagors their agents, and their dealings with the property, under the agreement constituting them such, must be considered as the acts of agents, and not of mortgagors, and will ■•affect their principals accordingly. The moneys received by them from sales were in legal effect received by the mortgagees. (Carter v. Stevens, 3 Denio, 33; Bragalman v. Daue, 69 N. Y. 69; Hunt v. Nevers, 15 Pick. 500.) It clearly appears from the facts found by the court thht ■the agent of the defendant sold the mortgaged property, and received the money therefor, greatly more than -sufficient to pay the mortgage debt, and thus, as we have seen, it was, in legal effect, discharged. The defendant must be treated as having received the money through its agent.” And it was said by the same supreme court in Brackett v. Harvey, 91 N. Y. 215, that: “This case went upon the .ground that such sale and application of proceeds is *76 the normal and proper purpose of a chattel mortgage,, and within the precise boundaries of its lawful operation. It does no more than to substitute the mortgagors as the agent of the mortgagee, to do exactly what the latter had a right to do and what it was his privilege and', duty to accomplish. ' It devotes, as it should, the mortgaged-property to the payment of the mortgaged debt.”' And further that: “If the mortgagor sells and actually pays over the whole proceeds, nobody is harmed, for that only has happened which is the proper and lawful operation of the mortgage. If, on the other hand, such proceeds have not been paid over, the adverse lien is still, unharmed, for as against it such proceeds are deemed, paid over and applied in reduction of the mortgage debt,, although as between the mortgagor and mortgagee the-debt remains and is still unpaid.” And this doctrine is affirmed in Jones on Chattel' Mortgages, section 401, with the statement that: “As. against an adverse lien, the proceeds of mortgaged goods-received by the mortgagor, under an agreement allowing, him to se'll for the mortgagee’s benefit, are to be deemed to be applied to the payment of the mortgage debt, -and then it is impossible that any fraud or injury to another-can be imputed to such an agreement.” And after citing the New York cases, as above, the-supreme court of South Dakota, in Davenport v. C. B. & N. R. Co., 45 N. W. Rep. 215, said that: “This doctrine-seems so obviously well founded in reason, and has been so often recognized and followed in other states, that its •adoption by this court needs no further justification than a reference to the following cases-, in addition to the New York cases before noticed.” * * *77 We must, therefore, conclude that when the mortgaged cattle passed into the hands of Fisk & Keck company as factors for their sale, under the provision of the mortgages, that the proceeds were immediately, and by operation of law, applied to the discharge of the mortgage liabilities in their priority. It is, however, argued by the plaintiff in error that by the deposition of F. O. Fish, introduced and taken by the defendant, that the cattle, amounting upon sale to $14,-•430.36, as found in the second finding of fact made by the court, were not covered by the mortgage's, and that they were other cattle and of other ages. A careful examination of Mr. Fish’s testimony, as to the major portion of those cattle, does not justify this contention. Mr. Fish did not, in any instance, by any statement, commit 'himself to the fact that .as to such major portion of such cattle included in those sales, they were not covered by the mortgage. He says that: “On August 14 there were 303 cattle, which I judge to be threes;” on August 31 there was a sale of 59 cattle, which “I judge” to be threes, and on September 4 there was a sale of 294 cattle in St. Louis, which “I judge” to be threes, and on September 26 there was a sale of 240 cattle which “I understand from Mr... Keck” were fours and fives. There is no statement in Mr. Fish’s testimony stronger than these statements, concerning those cattle. His statement that “I judge” over and over again has no further weight than the statement of a guess. It is ■certainly not a statement of knowledge, and when he «•ays, in order to support the contention that 240 head of *78 cattle were fours and fives and therefore not included in the mortgage, he says only that “I understand from Mr. Keck” that they were fours and fives. This is an important item. It involves the disposition of $3,889.85. The sole information upon which it is sought to divert this 240 head of cattle from the appropriation of their proceeds to the discharge of the mortgage indebtedness is upon Mr. Fish’s “understanding” from Mr. Keck, and when Mr. Keck was called to testify no questions were-asked him concerning these cattle or their ages. These cattle claimed to be fours and fives, and therefore not included in the mortgage indebtedness, 240 in. number, sold on September 26, 1893, at an average price-of $14.12294 cattle which Mr. Fish “judged” to be 3 years old, sold at an average of $14.92. On August 21, 1893, 59 head of cattle, which he “judged” to be 3 years-old, sold for an average price of $18.65, and on the 14th day -of August preceding, 303 head of cattle, which he also “judged” to be 3 years -old, sold for an average price-of $15.12. The inference to be drawn from a comparison of these-average prices does not support the conclusion sought for by the plaintiff in error, that the 240 head of cattle sold September 26, 1893, were, in fact, 4 and 5 years old, nor are any of -the statements upon which any off these cattle described by Mr. Fish and their ages, sufficient, standing alone, to- support any rational conclusion at -all concerning the ages of the respective lots -of cattle,, sold at the various dates -specified. The whole case was heard in the trial court, much of it being upon oral evidence, and we do not find- in this. *79 testimony of Mr. Fisb any assertion of fact to contradict or vary, or justify us in setting aside the finding of the trial court, which should be, in our judgment, affirmed except as hereinafter excepted. But the court also- refused to find, at the request of the plaintiff in error, “that the plaintiff have credit for the amount paid upon the $5,000 note and mortgage on the 4 and 5-year-old steers, dated August 30,1894, the amount so paid being, the sum of $4,966.67,” a finding upon the point involved here having also been impliedly included in the affirmative findings of fact, and this refusal also assigned for error. The mortgage having been in fact executed, its effect and force could not have been set aside by the court, except upon the conclusion that it had been executed in fraud of the rights of creditors whose claims- attached under the pre-existing mortgages which have been recited. These mortgages, as has been -seen, covered and included 6,400 head of cattle, 1 and 2 years old at the time of the execution of the mortgages. Mr. Baird, of-the firm of Baird & Ingram, testified that at the time of the sale of the cattle upon the ranch of Baird & Ingram, there were about 6,500 head of cattle upon it, not according to actual count, but according to estimates made up solely from the amount of purchases which the firm of Baird & Ingram had at various times made prior thereto, and deducting therefrom the cattle which they had actually shipped into market at Kansas City or had otherwise sold, and leaving out of view entirely the looses, which appeared to have been very large, from theft, and from cattle wandering off the *80 range. He testified that subsequent to that time, 400 or 500 head of cattle, that he knew of, had died. Mr. Fish testified that at the time of the purchase of the ranch by the incorporated firm, from Baird & Ingram, that there were 6,300 head of cattle on the range, and which were the subject of the purchase. Thereafter, in the fall of 1893, 900 head of cattle were sold from the range, which were claimed by the Fish & Keck Commission company to have been 3-year-old cattle, and exempt from the 'Operation of the prior mortgages: If, therefore, there had been at the time of the purchase of the Brown ranch -by Fish & Keck company, from Baird & Ingram, 6,500 head of cattle upon the range, of which 900 were sold, not subject to the mortgages, there were then upon the range, to the knowledge of the parties executing the mortgages', but 5,400 head of cattle to do service for mortgages reciting that 6,300 head of cattle were upon the range. It turned out upon the final liquidation of the concern, that the total number of cattle ever found upon the range were but 3,503 head, and that its mortgage liabilities, prior to the execution of the instrument which is set up as a mortgage security for $5,000, dated August 30, 1894, was $85,000, as testified to by Ingram. It was in this financial condition of the concern, the Fish'& Keck company, that the court was asked to believe that while' the cattle, 3,503- in number, of 1 and 2-year-old steers, were made by the management of the Fish- & Keck company and the trustee, Wyman, to carry an indebtedness of $85,000 from July 'and August, -of 1893, and while the Fish & Keck company were laboring in *81 tbis slough of insolvency, -apparently ready and willing to mortgage everything in existence and under their control, that they had upon the Brown or Baird & Ingram iramge, 300 head of mature cattle, 4 and 5 years of age, bearing the “Box X” brand, the brand belonging to the company, which had not before been used as an instrument to obtain credit for the company. In this condition of things the trial oou-rt found itself confronted with the fact that no positive -testimony on the subject could be procured, and its opinion was., doubtless, formed from a close scrutiny and comparison of the facts testified to, and of the value and weight of the testimony -of the witnesses, as the court could observe it. And in making up its judgment upon the testimony it was compelled to observe that if there were any 4 or 5 year-old cattle upon the range at the time that the mortgage for $5,000 was executed on t]ie 30th day of August, 1894, that they were included in the only sales which were afterwards made from the -ranch, to-wit, either in the sale of December 21, 1894, of 387 head of cattle, which were sold at $19.95 each, or else in the sale of December 31,1894, of 349 head of cattle, which were sold at an average price of $20.07 each; while at the same time, on the 7th day of August, 1894, the Fish & Keck company had sold 1,000 head of 3-yea-r-old cattle at $20 each, -and had sold, on August 30, 1894, 300 head of 3-year-old cattle at $20 each, and the inference of the court would, therefore, be that the sales of December 21 and December 31, and of August 7 and August 30, were of the same class of cattle, and that, if the cattle sold on August 7 and August 30, respectively, were *82 3-year-old cattle, so also were the cattle which were sold upon, December 21 and December 31, of the same age and class. It was shown in evidence that it was the duty of Mr. Fish to keep the books of the concern, and that it was the duty of Mr. Keck to manage the “outside” business, that is, to receive and make the sales of cattle. This being so, Mr. Fish testified upon the whole business, so far as he v^as examined, and speaking of the various sales was able to give no* information, which was- entitled to be considered as legal evidence, except upon a small portion of the cattle hereafter mentioned, and when asked touching the ages and these various sales of cattle, he answered invariably that “I judged” and that “I understand from Mr. Keck” that the cattle were of a certain age. Mr. Keck also appeared upon the witness' stand, had seen the cattle, sold them, 'had personal knowledge of them, and did not testify concerning them at all. Mr. Ingram had gone out of the firm at the time of the sale of the cattle to the Fish & Keck company; Mr. Baird had died about -the 1st of November, 1894; Mr. Fish had no knowledge of the matter; Mr. Keck was the only person living, apparently, who could testify positively as to the ages of the various shipments of cattle sold by him as the “outside” representative of the Fish & Keck company, and yet he was not asked a single question upon and did not testify upon, the point. In addition to these facts, the sales of cattle were all credited upon the general account of the Fish & Keck Commission company, which included all of the indebtedness represented by the notes and secured by the mort *83 gages executed prior to August 30, 1894. The 300 head of cattle claimed to have been mortgaged as “fours” and “fives” under the mortgage of the last named date, were ■never at any time attempted to be segregated, if such cattle were in existence or ever entitled to be segregated, froan the other cattle on the range, neither on the range, nor in shipments, nor in sales, nor in the accounts of the company, but the sales of December 21 and December 31, 1894, in which those 300 head of f our’s and five’s, if such cattle were in existence, must have been included, were,, as to previous sums of money received from the sale of cattle upon the Brown range, merged in the general mortgage account of the Fish & Keck company, which included on the other side of the account all the liabilities set out and represented in these proceedings'. We have examined the record carefully; the whole management of the business indicates, as these facts indicate,' that the finding and conclusion of the trial court was correct. Such a finding must have been forfeited by the conduct of the trustee. It was Wyman’s ■ duty to have taken charge of these cattle immediately upon the execution of the first trust deed, and upon his acceptance of the trust, and to have seen that the cattle covered and secured by the mortgages should be applied to' the payment of the mortgage debts created and secured by them. The plaintiff Wyman was first appointed trustee in the mortgage of July 23, 1893. He accepted the trust, but he took no share in the management, took no possession of the ranch, exercised no supervision of the sales, and did not commence the active discharge of his duties under the 'trust until November, 1894. In the meantime $40,- *84 667.28 in value of the property from the Broivn ranch and of the Baird & Ingram cattle were sold by the Fish & Keck company. Concerning these acts he seemed to have paid no attention, made no inquiries, demanded no account and knew nothing of the management of the concern or the disposition of the porperty. The mortgages or deeds of trust under which he was appointed and which ke accepted were, so far as he was concerned, no more than cloaks to deceive creditors. It was- said in Perry on Trusts, that: “When trustees have accepted the office, they ought to bear in mind that the law knows no such person as a passive trustee, and that they cannot sleep upon their trust;” that they should make themselves “acquainted with the nature and circumstances of the property,” and that if “a loss occurs from any want of attention, care or diligence in him after his acceptance, he may be held responsible for not taking such action as was called for,” and that “he is bound to discharge his duties,” and that “he will be responsible for any mismanagement,”, that “the first duty of a trustee, after his appointment and qualification to act, is to secure the possession of the trust property, and to protect it from loss or injury;” that “a trustee must use the s&ime care for the safety of the trust fundi, and for the interests of the cestui que trust, that he uses for his own property and interests,” and that lie “will be responsible for any loss that may occur to the trust fund.” (Perry on Trusts, secs. 401, 438, 441 and 444.) I't is manifest that the trustee wholly failed to discharge any of the duties of his trust until November, 1894, according to- his own account. *85 It is shown in the evidence that he did not pretend to take possession of the range until after the death of Baird, or sixteen months after he had himself accepted the trust. He accepted the trust in July, of 1898, and took charge of the range and of the subsequent sales from it in November, 1894. All of the notes which, after the acceptance of the trust, it became his duty to see paid, had matured for more than a' year before he took control of the trust property. The 300 head of cattle covered by the mortgage of August 30, 1894, if they were in existence at the time of the execution of the mortgage, and there is no evidence that they were, were by him permitted to become inextricably confused with all the other cattle sold from the range, and having been thus mingled with the trust property, it became his duty toi point out to the court clearly and satisfactorily the identical property which was covered by his trust, and that which he claimed to be not .so affected, so that the court might, by a proper , order, be able to clearly distinguish that which was trust property from that which was not. This was not done. But, on the contrary, the court would have been justified by the condition of the evidence, in concluding that, inasmuch as the mortgage of August 30, 1S94, was executed between the persons 500 miles from the range where the cattle were, who had no knowledge of their i condition or of whether there were any such number of 4 and 5-year-old cattle on the range or not, after all the other cattle of supposed less market value had! been mortgaged for much more than all they were worth, for more than a year previous to that time, and that the mortgage was executed solely as a cover and pretext for taking *86 out tbe sum of $5,000 from tbe trust fund and applying it to other purposes, for which there was no proper justification, and that there were, in fact, no such cattle. There having been evidence in the case to reasonably . support the findings of fact made by the trial judge, it will not, upon this subject, be disturbed here. As has been shown, the plaintiff in error requested tbe court below to make special findings .of fact. Tbis request resulted in a careful and elaborate “findings of fact,” as they appeared to tbe court. At their conclusion, and upon the 12th day of August, ’3897, the plaintiff filed his motion in the court to set aside the findings of fact as made by .the court and his exceptions 'thereto, and also made a special request for findings of fact. The motion to set aside was overruled, and the findings of fact were refused. And thereupon, on August 26, 1897, the plaintiff again made request for .special findings of fact, which was refused, and thereupon, on August 26, 1897, the plaintiff filed his motion, dated August 23, 1897, to “dismiss his action herein without prejudice to another suit.” Thereupon the court proceeded to. enter judgment on August 31, 1897. This is assigned as error, the plaintiff in error claiming that upon the filing of Ms motion to dismiss the cause, it became immediately effective, and that the cause was no longer in court for consideration. Under similar circumstances, plaintiff in Oberlander v. Confrey, 28 Kan. 462, made a like motion, upon a Code of Civil Procedure whose provisions have been *87 adopted here. It was there held, that: “Dismissals under the civil code are judgments, which neither of the parties, nor the clerk, nor all together, but 'only the court, can render,” and that, “ A plaintiff, without any order or judgment of the trial court, cannot actually dismiss his case from the court.” But our Code of Civil Procedure, section 411, Statutes of 1893, provides, that: “In any place where a set-off or counter-claim ha© been presented, the defendant shall have the right of proceeding to the trial of his claim, although the plaintiff may have dismissed his action or failed to appear.” And it was, therefore, not erroneous for the court to proceed to a final determination of the matter upon the petition and counter-claim. We find, however, that in the second finding of fact, the trial court has included the following items: October 17, 1893, 24 cattle, sold for $619.44; November 2, 1893, 29 cattle, sold for $439.07. The only testimony given upon the case touching these items wa© that of Mr. Fish, who says that “they were bulls and cows.” Bulls and cows are not covered by a mortgage which undertakes to include only 1 and 2-year-old steers. This finding was therefore error, for which the case should be reversed. The total sum of these ©ales amounted to $1,058.51, and the cause is remanded, with direction to the trial court to give to the plaintiff in error credit for this sum, and to reform the final judgment -of the court of August 31, 1897, and to make the same -state that “the said plaintiff is chargeable with, *88 accountable and liable for, the sum of $10,367.12, less tbe sum of $1,058.51, or, to-wit, the sum of $9,308.61. The said defendant is accountable in this action for the said sum of $8,758, and is entitled to be credited in this action with one-half of the aggregate of the two sums last named, that is, the sum of $9,033.30, and that the defendant is entitled to recover of and from the plaintiff the sum of $275.30; and that the court, therefore, finds on the issues joined in said cause in favor of the defendant and against the plaintiff, and assesses the amount of the recovery of the said defendant at the sum of $275.30.” With this exception the judgment is affirmed, since we find no other error in the record. All of the Justices concurring.