Cole-McIntyre-Norfleet Co. v. Du Bard

Holden, J., delivered the opinion of the court. The suit was commenced by a garnishment proceeding against the Staple Cotton Go-operation Association by the judgment creditor Du Bard, appellee, seeking to recover the proceeds from the sale of certain cotton placed in the hands of the cotton association by one Mr. Stokely, the judgment debtor, and member of the association, who had. placed the cotton to be sold under the rules and regulations of the associhtion. The appellant, Cole-Mclntyr e-Norfleet Company, claimed the cotton and the proceeds under a deed of trust given by the said Stokely prior to the judgment against Stokely in favor of appellee Du Bard. From a judgment in favor of the garnishing creditor, this appeal is prosecuted. The question in the case is whether or not the claim of the garnishing judgment creditor against the proceeds of [29] the cotton in the hands of the cotton association is superior to the claim of the mortgagee in a prior deed of trust given on the cotton by the judgment debtor and duly recorded in the county where the crop was raised, where the cotton was moved to another county and placed in the hands of the cotton association to be sold by it, and the mortgage was not recorded in that county until more than a year after the cotton was delivered to the association, the mortgagee having no knowledge of such removal nor permitted or consented to it, and the cotton association took the cotton from the debtor under a contract that it should handle and sell it and that the mortgagee holding a lien upon the cotton should stand in the place of the grower, and that the association would satisfy the mortgage by paying over to the mortgagee the proceeds from the sale of the cotton as the mortgagee’s interest might appear. The agreed statement of facts in the case shows the appellant, Gole-Mclntyre-Norfleet Company, was given a deed of trust by Stokely on the cotton grown by him during 1922 to secure an indebtedness due by Stokely to appellant. The deed of trust was duly recorded in Tallahatchie county, where the' crop was produced, but it was not recorded in Sunflower county, where Stokely, as a member of the cotton association, delivered the cotton to be handled and sold by the association. Appellant mortgagee had no knowledge of the removal of the cotton from Tallahatchie county to Sunflower county and did not permit or consent to such removal, and, when it received notice of the removal in the latter part of 1922, it then made demand upon the cotton association for the proceeds from the sale of the cotton delivered by Stokely. Appellant recorded its deed of trust in Sunflower county within a year after receiving notice of the removal of the cotton to that county. The cotton association, under its contract with Stokely, commenced to pay the proceeds to appellant mortgagee from the different sales of. the cotton after notice from [30] the mortgagee in November, 1922, the association having received the cotton from Stokely with the understanding and agreement that it would pay over the proceeds to any mortgagee as such interest might appear, and that any mortgagee, for such purpose, would stand in the place of Stokely. This is the agreement between the association and its members as shown by the last paragraph in section 8 of the Marketing Agreement of the Staple Cotton Co-operation Association in this state. Some time after the mortgage was executed by Stokely to the appellant, the appellee, Du Bard, obtained a judgment against Stokely for about seven hundred dollars in Sunflower county, where the cotton.was stored with the cotton association, and upon this judgment garnishment was issued against the association, and the association answered that it was indebted to Stokely in the sum of several thousand dollars on account of the proceeds of the cotton it had sold for him, but the association suggested that the appellant company would claim the proceeds of the sale of the cotton by virtue of a deed of trust executed by Stokely. The ease was heard upon claimant’s issue between appellant and appellee which resulted in a judgment for appellee. The judgment creditor, appellee, contends: First, that his claim was superior to that of the mortgagee because under section 2289, Hemingway’s Code (section 2785, Code of 1906), the mortgagee was required to record its mortgage in the county where the property was removed to, and the failure to do so invalidated the mortgage so far as creditors were concerned. And, second, that the mortgagee waived its lien as to the proceeds from the sale of the cotton by consenting to its sale by the cotton association, and that the garnishment having reached the proceeds first, the right to apply them to the judgment was paramount, the argument being that the case comes under those decisions which hold a mortgagee waives his lien when he consents to a sale of the mortgaged property by the mortgagor. [31] It is our judgment the contentions of appellee are not maintainable, and the lower court erred in not so holding. There is no merit in the first contention because the mortgagee did not consent to, and had no knowledge of, the removal of the cotton from Tallahatchie county to Sunflower county; therefore the statute has no application, and appellant was not required to record its deed of trust in Sunflower county upon the removal of the cotton there. The statute provides, in part, that if the mortgagee “shall permit any . . . person ... to remove the [property] . . . out of the county in which the writing is recorded, and shall' not, within twelve months after such removal, cause the writing to be duly certified to the county into which the property may be removed, and to be delivered to the clerk of the chancery court, to be recorded, the writing, for so long as it remains without being recorded or delivered for record in the last-mentioned county, and for so much of the property as may have been removed, shall be void as to all purchasers for a valuable consideration without notice, and as to all creditors. ’ ’ This court held in Bogard v. Gardley, 4 Smedes & M. 302, that the statute has no application unless the mortgagee “is shown to have consented and permitted the removal.” The undisputed proof in this record is the mortgagee did not consent or permit the removal of the cotton from Tallahatchie county to Sunflower county, that he had no knowledge of such removal until in November, 1922, and that he recorded his mortgage in Sunflower county within twelve months after he had knowledge of the removal. The decisive point, however, is that the statute does not apply unless the mortgagee consents to the removal. On the second proposition, we do not hesitate to say the mortgagee did not waive his lien in this case for several reasons, two of which we will give, namely: He had no.knowledge that Stokelv had stored the cotton with the association to be sold by it until the latter part of [32] 1922, and did not. authorize Stokely, the mortgagor, to sell the cotton (in fact, Stokely did not actually sell it), but appellant merely accepted payment of a portion of the proceeds from the association after he discovered the cotton and proceeds were in the hands of the association. And, again, Stokely, under his contract with the association, placed the cotton with the association with the understanding that the mortgagee was to be paid from the proceeds of the sale as its interest might appear. The association is a sales agency, and it took the cotton to handle and sell to the best advantage for Stokely with the agreement that the proceeds would be turned over to the mortgagee until the mortgage was fully satisfied. Therefore the association held the cotton, and the proceeds from the sale of it, for the mortgagee, appellant, and the cotton and the proceeds were at all times the property of the mortgagee, by virtue of the lien to be delivered by the association to satisfy the mortgage. The amount of the proceeds, under these circumstances, could not be successfully reached by garnishment in favor of the judgment creditor. The deed of trust was valid in Sunflower county as against the subsequent judgment creditor and was superior to his claim either for the cotton or for its proceeds, because the mortgagee was entitled to the thing sold, and as said in Watson v. Cement Co., 93 Miss. 553, 46 So. 707, “and the money arising from the sale of the thing stands in the place of the thing sold.” In view of these conclusions, the judgment of the lower court is reversed, and judgment entered here for the appellant. Reversed, and judgment here for appellant. Reversed.