Jordan v. Wilkerson & Carroll Cotton Co.

Humphreys, J. This is a suit in replevin, instituted by appellee against appellants in the iCross 'Circuit Court to recover possession of two mules. The cause was submitted to the court, sitting as a jury, upon the pleadings and an agreed statement of facts, which resulted in a judgment awárding possession of the mules to appellee, from which is this appeal. The statement of facts is as follows (omitting formal parts): “It is agreed that on the 23rd day of December, 1919, the Lansing Company sold to Prince Jackson two mules for the sum of $340. Jackson gave his notes for this sum, due on March 1, and November 1,1919, and to secure the payment of the same, he executed to said Lansing Company a chattel mortgage upon the mules so purchased, a copy of which mortgage and notes is attached hereto. This mortgage was filed in the office of the recorder for Cross County on January 15, 1920, and recorded in Book R at page 261. No part of the purchase price was ever paid by Prince Jackson, and the mortgage was not released of record. On the 16th of March, 1920, George W. Jordan, having obtained possession of said mules from Prince Jackson without knowledge of the Lansing Company, represented to plaintiff, Wilkerson & Carroll Cotton On., that he was the owner of said mules, and mortgaged the same to the plaintiff for the sum of $330, extending* a note for that amount, and a chattel mortgage upon the two head of mules, which said mortgage was filed in the office of the recorder of Cross County on the 18th day of March, 1920, and recorded in Book R, page 424. Nothing has been paid upon this indebtedness, and the mortgage has not been released of record. Copies of the note and mortgage are attached hereto. On the 26th day of March, 1920, Prince Jackson returned the mules to the Lansing Oomnanv, who on the same day sold the mules to Geo. W. Jordan for the sum of $340, the said Geo. W. Jordan executing a note for said amount to the Lansing Company, which note recites the title to said mules is retained in the Lansing Company; and also executed a chattel mortgage upon said mules to secure the same. This mortgage was filed for record in the office of the recorder for Cross County on the 31st day of March, 1920, and was duly recorded in record book R, page 544. This note has not been paid, and the mortgage has not been released of record. Copies of note and mortgage are attached hereto. It is further agreed that the Lansing Company is located at Parkin, Arkansas, fourteen miles from Wynne, Arkansas, the county seat of Cross County, and on a direct railroad line, and that mail placed in the postoffice at Parkin should reach Wynne within twenty-four hours. It is also agreed that the mules which are the subject of this litigation are now in the possession of the Lansing Company, and were at the beginning of this suit, and that they are of the total value of $150.” Under the agreed statement of facts, it is apparent that appellee based its right to recover the possession of the mules upon an after-acquired title of its mortgagor, .George W. Jordan. George W. Jordan mortgaged the mules to it on the 16th day of March, 1920, and did not acquire the title to them until six days thereafter, at which time he purchased them from the Lansing Company, appellant herein. The Lansing Company took a note from Jordan for the purchase money and retained the title in itself to them, and also took a mortgage on them to secure the purchase money, but did not record the mortgage until five days thereafter. There is nothing in the agreed statement of facts to indicate that appellant had actual knowledge of appellee’s mortgage at the time it took the mortgage from George W. Jordan to secure the purchase money of the mules. So it must be presumed that it had constructive notice only of the existence of appellee’s mortgage. Appellee acquired an equitable, and not the legal, title to the mules under its mortgage, as its grantor acquired the title to them subsequent, to the execution of the mortgage. An after-acquired title of a mortgagor creates an equitable lien or charge upon the property in favor of his mortgagee, and such a lien cannot be enforced by replevin in a court of law, but must be enforced by foreclosure proceedings in a court of equity. Apperson Co. v. Moore, 30 Ark. 56; Jarratt v. McDaniel, 32 Ark. 598. No objection, however, was made to the jurisdiction of the court to proceed with the cause, and no error was committed in doing so. But equity principles should have been applied in the adjudication of the issue involved. In other words, the superior lien in equity, as between the mortgagees, appellant and appellee, should have been declared the paramount and prevailing lien. The fact is, appellant was the owner of the mules and sold them to appellee’s mortgagor, George W. Jordan, retaining the title until the purchase money should be paid. Immediately thereafter, and in ignorance that Jordan had executed a mortgage on the mules to appellee, appellant also took a mortgage to secure the purchase money, which it neglected to record for five days. The consideration of the mortgage from Jackson to appellee was paid before, and not after, the sale of the mules to Jackson by appellant. Appellee was not misled to its disadvantage by the transaction between appellant and Jackson. It is manifest that appellant would not have accepted a mortgage in lieu of the retention of its title in the mules if it had actually known that its vendee had theretofore executed a mortgage on them to appellee. Under these circumstances appellant, in good conscience and equity, should have been restored to its rights under the note and contract in which it retained title to the mules. This equitable principle was applied by this court in the restoration of a senior mortgagee’s prior lien where the senior mortgagee, through ignorance of an intervening mortgage to a third party, had taken a renewal mortgage and satisfied the first or original mortgage of record. Wooster v. Calender, 54 Ark. 153. The same doctrine was reannounced in the later case of Shurn v. Wilkinson, 131 Ark. 167. For the error indicated the judgment is reversed, and the cause dismissed.