National City Bank v. Adams

Jenkins, P. J. 1. In this State a valid mortgage may be created upon a stock of goods and merchandise exposed for sale in the regular course of business (Civil Code of 1910, § 3256) ; but a mortgage upon certain articles particularly described therein, though valid as such, is not a mortgage upon a stock of goods changing in specifics, so that the lien would be lost upon such mortgaged articles as might be disposed of in the regular course of trade. 2. Except as to negotiable paper, it is the general rule that a seller can convey only such title as he himself owns, and that property included within the lien of a duly recorded mortgage remains subject thereto against the claims of a subsequent bona fide purchaser for value without actual notice or knowledge of such lien; but where the sale by the mortgagor is effected under and by virtue of an express or clearly. implied authority from the mortgagee, the purchaser is protected, so far as the right of such consenting mortgagee is concerned, [220] and tlie latter must look to the one whom he himself has thus selected and entrusted to account for the proceeds arising under such an authorized sale. Decided April 18, 1923. 3. Where, by the agreed statement of facts, the lien of a mortgage upon certain particularly described articles was taken with the knowledge and intent on the part of the mortgagee that such particular articles would become a part of the mortgagor’s stock of goods, and, as such, “ would be exposed and offered for sale to the general public ” in the ordinary course of trade, the record of the mortgage would not defeat the title of a subsequent purchaser, acquired from the mortgagor in the usual course of trade, unless such purchaser was a party to a fraudulent disposition of the proceeds arising thereunder, since it is not incumbent upon such a purchaser to see to the proper application of the purchase-money by the mortgagee’s agent; but the mortgagee, by the grant of such authority, having assumed the risk of his agent’s want of fidelity, must look to him, and upon the breach of the trust thus imposed the one entrusting him must suffer the loss. Civil Code (1910), § 4537. Nor would the rule be different by reason of the further provision contained in the agreed statement of facts that the mortgagor “ had no authority from the [mortgagee] to sell the [article in question] free from the lien of the mortgage.” Such latter provision can not be taken to dispute or disclaim the mortgagor’s right and authority to sell, but, on the contrary, presupposes such authority, and, consequently, this provision, when taken in connection with the preceding portion of the agreed .statement of facts, must he taken to mean that the mortgagee did not extinguish his lien for the benefit of the mortgagor, but that as between themselves the latter would be acc'ountable to the one who had trusted him for a proper disposition of the proceeds arising from such an authorized sale. It can not properly be taken to mean that the holder of the lien, after giving to the mortgagor an express authority to sell or by conferring such evidence of the right of disposition “ as according to the custom of trade or the common understanding of the world usually accompanies the authority of disposal ” (Civil Code, § 4537), can nevertheless require that all persons acting upon such invitation by dealing with the agent in his authorized capacity shall 'make good to the principal any loss which he has suffered on account of the agent’s dereliction in duty in failing to account for the proceeds of such authorized sale. See also: Crenshaw v. Wilkes, 134 Ga. 684, 687 (68 S. E. 498); Mason v. Farmers Cotton Oil Co., 29 Ga. App. 418 (116 S. E. 123), case note in 8 L. R. A. (N. S.), 404; Boice v. Finance Corp., 127 Va. 563 (102 S. E. 591, 10 A. L. R. 654). Judgment affirmed. Stephens and Bell, JJ., concur. Paul F. Alcin, Willingham, Wright & Covington, for plaintiff. Porter & Mebane, contra.