Burnett v. Gustafson

54 Iowa 86 | Iowa | 1880

Day, J.

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I. On the 13th day of May, 1876, John E. Gustafson, to secure the debt sued upon, executed to the plaintiff a chattel mortgage upon property described as follows: “Sixty head of cattle; forty-five three years old, and fifteen two years old, steers.”

This mortgage was recorded in Webster county on the 16th day of May, 1876. About the same time the defendant Gustafson was indebted to the bank in the sum of $2,200, a portion of which debt had been renewed from time to time. At the date of the last renewal of a note of $1,000, Gustafson promised that he would pay it when he sold his cattle. On the 10th day of January, 1877, Gustafson sold, in Chicago, thirty-seven of the three year olds described in the mortgage, and received therefor a little over one thousand dollars. The defendant Gustafson deposited this sum in a bank in Chicago to the credit of the Eirst National Bank'of Boone. On the 11th day of January the defendant bank received notice of this deposit; and placed it to the credit of Gustafson in the bank. On the 29th of January, when a note of one thousand dollars matured, Gustafson came to the bank and requested a further renewal. He was then reminded of his promise at the time the former renewal was made. The money was then, with the consent of Gustafson, applied to the payment of the one thousand dollar note, and the note was surrendered.

Erom the time of the execution of the mortgage till the sale of the cattle they remained in Webster county, with the exception of five months when they were in Greene county. The cattle were never in the possession of the plaintiff. The bank had no knowledge of the existence of the mortgage until after the satisfaction of the debt, and the surrender of the note. The cashier who conducted the business for the bank supposed that the fund arose from the sale of Gustafson’s cattle, but he had no actual knowledge of that fact. Under the circumstances, we think, the bank cannot be treated as a trustee of the fund. If the bank had bought the cattle of Gustafson, then, if the description in the mortgage is sufficiently explicit, Hie record of the mortgage would have furnished the bank constructive notice of the plaintiff’s rights. But, when the bank simply received a fund, which it supposed arose from a sale of cattle, without any suspicion that a mortgage existed -upon the cattle, it was under no obligation to examine the records in another county for the purpose of ascertaining whether a mortgage upon the cattle was on record. It would greatly embarrass commercial transactions, if a party could not safely receive the proceeds of personal property without first examining the records of the one hundred counties in the State, to see whether any mortgage upon the property is recorded. The party receiving the proceeds of such property has a right to presume that the sale was proper, or, if not, that the party entitled to the lien will pursue the property itself, and not its proceeds. If the fact of the existence of the mortgage was known, and the identical proceeds could be traced, a different question might arise.

II. It is claimed that the bank must account for the money, because it received it in payment of a pre-existing debt. Whatever may be regarded as the proper rule respecting the transfer of other property in paydient of existing debts, it cannot be denied that the receipt of money in that manner is in accord with ithe usual custom of business. A want of bona fidos cannot be attributed to the party who surrenders the evidence of an existing debt, in consideration of money paid.

Aefirmed.