C. M. Keys & Co. v. First National Bank of Claremore , 22 Okla. 174 ( 1908 )

This suit was commenced on the the 20th day of July, 1905, by the appellee, First National Bank of Claremore, by filing its complaint at law in the United States Court for the Northern District of the Indian Territory, at Vinita, against Wat Mayes, alleging that the defendant, Wat Mayes, was indebted to the plaintiff in the sum of $4,386.09 on one certain promissory note, and the sum of $371.98 upon a second promissory note, and the sum of $111.82 on account. On the same day it filed an affidavit in attachment, and caused an order of attachment to be issued against the property of Wat Mayes. After the suit was commenced and attachment levied, numerous creditors of Wat Mayes made application to the court for leave to interplead and set up their respective claims to priority in the distribution of the estate of Mr. Mayes, who, at that time, was hopelessly insolvent. The court permitted the creditors to interplead, and the cause was referred to a master in chancery to make findings of fact and conclusions of law, and report the same to the court. On the 23rd day of August the plaintiff and the various interpleaders made application to the court for the appointment of a receiver to take charge of and dispose of the attached property, and on the same day the court granted their prayer and appointed G. W. Mayes receiver, who afterwards qualified and took charge of and disposed of the attached property, and turned the proceeds thereof, amounting to $11,234.47, into court. In due time the master made his report and the court entered a decree in accordance with the recommendations therein contained, and ordered that out of the money received from the sale of the attached property there be paid by the receiver all costs, including the master's fee of $350.00, and that out of the remainder be paid the respective claims of the parties to the suit in full as far as the proceeds would extend, in the following order:

1. To First National Bank of Vinita, its claim, amounting to $4,144.42.

2. To First National Bank of Claremore, its claim, amounting to $5,413.99.

3. To Citizens' Bank of Pryor Creek, its claim, amounting to $2,083.33.

4. To J. C. Hogan, his claim, amounting to $6,801.96.

5. To Mary D. Mayes, her claim, amounting to $1,802.88.

6. To Vinita National Bank, its claim, amounting to $809.77.

7. To C. M. Keys and Company and Stock Yards Bank, their claim, amounting to $17,245.31.

From this judgment Vinita National Bank, and C. M. Keys and Company and Stock Yards Bank, prosecuted their separate appeals to the Court of Appeals of the Indian Territory, which appeals were consolidated in that court, and the cause came to this court under the terms of the Enabling Act and the schedule to the Constitution.

The grounds upon which the Vinita National Bank bases its right to a reversal of the judgment of the court below, are: That Wat Mayes, the original defendant, on the 15th day of December, 1899, was the owner of and in possession of a large herd of cattle, that were unincumbered. That in order to obtain credit at the Vinita National Bank for the sum of $4,500.00, he executed on said date his note for that sum, due 6 months after date, and as security for the payment of said note he also executed a chattel mortgage on said cattle, which said mortgage was by the First National Bank filed for record with the recorder of the Northern district of the Indian Territory. That said mortgage so filed was renewed from year to year by renewal affidavits filed in accordance with the provisions of the Statutes of Arkansas in force in the Indian Territory. That the property taken under the writ of attachment consisted of part of the cattle included in said mortgage, and that said mortgage was a valid lien against said cattle at the time the writ of attachment was issued and levied.

C. M. Keys and Company and Stock Yords Bank base their right to reversal upon the grounds that on the 29th day of October, 1901, Wat Mayes, the original defendant herein, made, executed and delivered to said C. M. Keys and Company his promissory note for $34,804.04, payable 6 months after date, and to secure the payment of said note said defendant on said date made, executed and delivered to said C. M. Keys and Company a chattel mortgage upon 2835 head of mixed cattle and their increase and additions thereto, kept and located in the Northern district of the Indian Territory, about 3 miles southeast of Pryor Creek in said Territory. That on the 31st day of October, 1901, said C. M. Keys and Company filed said chattel mortgage for record in the office of the clerk of the United States Court, then exofficio recorder for the Northern district of the Indian Territory, at Muskogee, which mortgage was duly recorded in said office by the clerk. That said mortgage covered all the property taken under the writ of attachment. That after the date of said notes and before the same become due the said C. M. Keys and Company, for a valuable consideration, sold and transferred said note to the Stock Yards Bank by indorsement and assigned and transferred to the Stock Yards Bank said chattel mortgage given by said defendant to secure said note. That when said note became due said defendant, Wat Mayes, was unable to pay the same in full, but made settlement by paying part of the indebtedness recited in said note and by giving his note for the remainder thereof, and that from time to time thereafter said defendant, Wat Mayes, made various payments upon said note, until on, to wit, the 1st day of March, 1905, he made, executed, and delivered to said C. M. Keys and Company one certain promissory note for $12,026.74, payable to the order of said C. M. Keys and Company 6 months after date at National Stock Yards Bank. That before said last named note became due, for a valuable consideration, and in due course of business, said C. M. Keys and Company indorsed said note to said Stock Yards Bank which notes were all covered in said $34,804.04 note secured by said chattel mortgage. That on the _____ day of February, 1905, said defendant, Wat Mayes, made, executed, and delivered to said C. M. Keys and Company his promissory note for $500.00. That from time to time various payments were made upon said notes, but after deducting all of said payments so made by said defendant, a balance of $15,288.69 was still due upon said notes.

The foregoing statement of facts is in practical harmony with the undisputed evidence. Counsel for all the parties filing briefs admit that the main questions of law involved are:

1. Was it necessary for appellants, under chap. 888, U.S. Stat. at Large, approved May 27, 1902, which divided the Northern district of the Indian Territory into two parts, making the office of the clerk of the United States Court at Vinita, Indian Territory, the recording office for the Northern district, to record their mortgages at Vinita, when they had already filed or recorded them in the office of the clerk at Muskogee?

2. Was it necessary, in order to preserve their liens upon the cattle described in their mortgages filed and recorded at Muskogee, to have such mortgages indexed at Pryor Creek, Indian Territory, under chap. 707, U.S. Stat. at Large, approved February 19, 1903?

The master found that subsequent to the passage and approval of the Act of Congress of the 27th day of May, 1902, it was the duty of the appellants, if they desired to preserve their liens as against subsequent mortgagees or additional creditors, to have their mortgages filed or recorded at Vinita, Indian Territory, and after the passage and approval of the Act of Congress of the 19th day of February, 1903, supra, to index their mortgages at Pryor Creek, and, in as much as appellants had failed to do these things their mortgages were void as to subsequent attaching creditors and mortgagees.

The court, in its decree, in addition to adopting the conclusions of the master, further found that the mortgage of the appellants, C. M. Keys and Company and Stock Yards Bank, was an absolute fraud by reason of their failure to notify people of the various payments that had been made and the transfers that were made.

At the time the mortgages were made, executed, and delivered, and at all subsequent times up to the sale by the receiver, the cattle involved in this controversy were kept and located in the Northern district of the Indian Territory, about 3 miles southeast of Pryor Creek, in district number 5, Vinita and Pryor Creek, respectively, being the places of recordation after the passage of the Act of Congress dated the 27th day of May, 1902, supra, and after the passage of the Act of Congress dated the 19th day of February, 1903, supra.

It was admitted that all the creditors, except Mary D. Mayes, had actual knowledge of the existence of the chattel mortgages of the Vinita National Bank and C. M. Keys and Company.

From time to time Congress made such provisions for the recordation of mortgages in the Indian Territory as was deemed necessary to meet the needs of the people under the conditions therein existing. By the law in force at the time the mortgages herein were given, filed, and recorded Muskogee was the proper recording office for the district in which the property was situated. At that time these mortgages were filed, in the case of the Vinita National Bank, and recorded, in the case of C. M. Keys and Company, at the proper place and in the manner required by law. By the Act approved May 27, 1902, 32 U.S. Stat. at Large, 888, the Western district was carved out of the Northern district, and Muskogee remained the recording office for the Western district, and Vinita was made the recording office for the new Northern district. The language of the act concerning the recording office for the Northern district reads as follows:

"That the clerk's office at Vinita shall also be the recorder's office for the Northern district, except that the clerk's office at Miami shall continue to be the recording office for the Quapaw Indian Agency as now provided by law."

Congress did not consider it necessary to provide by the act forming the Northern district and providing that the clerk's office at Vinita should be the recorder's office therein, that mortgages theretofore recorded in the Northern district before division should again be recorded in the new district in order to preserve and continue the public notice given by the original recordation. Congress merely divided the district, leaving Muskogee, which had been the recording office for the whole district prior to the division, the recording office for the Western district and making Vinita the recording office for the Northern district. No provision was made for re-recording instruments covering property which after the division would be in the new Northern district, at Vinita. Under such circumstances it cannot be said that it was incumbent upon mortgagees herein, having complied with the law as it was at the time they took their mortgages, to re-file or re-record them at Vinita, after the division of the district, in order to give constructive notice to subsequent purchasers or incumbrancers.

"Where the deed is deposited for record in the office of the recorder of the county in which the land is located at the time, and by a subsequent sub-division the land falls within the boundaries of another county, such change will not affect the validity of the registration." (Wade on Notice, sec. 195.)

In Melton, et al. v. Turner, 38 Tex. 81, Mr. Justice Walker says:

"The record of a deed in a county where the land lies, though upon subdivision of the county subsequent to the record of the deed the land may fall within the new subdivision, is notice to purchasers."

The foregoing authorities seem to be decisive of the first proposition involved in this case.

On the second proposition we are of the opinion that that part of the "Act providing for record of deeds and other conveyances and instruments of writing in Indian Territory," which provides that "such instruments heretofore recorded with the clerk of the United States Court of the Indian Territory shall not be required to be again recorded under this provision, but shall be transferred to the indexes without further cost, and such record heretofore made shall be of full force and effect, the same as if made under this statute," casts no additional burdens or duties upon the mortgagees in relation to transferring to the indexes mortgages which had theretofore been properly filed or recorded in the proper recording office. We do not believe that a fair construction of the language above quoted will justify the interpretation sought to be given to it by counsel for the appellees or the conclusions of law drawn from the facts by the court below. The language of the act does not in so many words make it the duty of the mortgagees to transfer their mortgages to the indexes; neither does it directly cast this burden upon the clerks of the court, but we believe the implication is much plainer that it was intended that the clerk should do such work than that it should be performed by the mortgagees. The act of Congress specifically provides, "such instruments heretofore recorded with any clerk of the United States Court shall not be required to be again recorded under this provision, — and such record heretofore made shall be of force and effect the same as if made under this statute." The part of the act that caused the original plaintiff and the interveners to attack the mortgages of C. M. Keys and Company and the Vinita National Bank is that part enclosed in the above clause by commas, which reads: "But shall be transferred to the indexes without further costs." We have no doubt that the indexes referred to had reference to the system of recordation prescribed by the laws of Arkansas, as modified by acts of Congress, which were then in force in the Indian Territory, and that it was the intention of Congress that the transferring to the indexes should be done by the same officer who under said laws had charge of such indexes.

Section 5560, Mansfield's Digest, supra, provides that:

"When any deed, mortgage, deed of trust, bond, conveyance or other instrument of writing authorized by law to be recorded shall be deposited in the recorder's office for record, the recorder shall enter in a book to be provided for that purpose, in alphabetical order, the names of the persons and date and nature thereof, the time of delivery for record," etc.

Section 5565, provides that:

"Each recorder shall, in like manner, make, keep and preserve a full and perfect alphabetical index to all books of record in his office wherein all deeds and instruments of writing in relation to personal property, marriage contracts, certificates of marriage and all other papers are recorded," etc.

It will be noticed that wherever "indexes" or "indexing" is mentioned, such work is always to be done by the recorder, and never by the mortgagor or mortgagee. Another indication, to our mind, that the recorder was to transfer these instruments to the indexes is the statement that it should be done "without further cost." The recorder is the person who ordinarily does such work and who is always paid for it. The act above quoted made it the duty of someone to do this clerical work without further cost, which evidently meant that the proper person to do it would be the person who had hitherto been entitled to receive fees for like services in relation to the same class of instruments.

Furthermore, Section 4743, Mansfield's Digest, provides that:

"Every mortgage, whether for real or personal property, shall be a lien on the mortgaged property from the time the same is filed in the recorder's office for record, and not before; which filing shall be notice to all persons of the existence of such mortgage."

Section 4750, Mansfield's Digest, provides that:

"Whenever any mortgage or conveyance, intended to operate as a mortgage on personal property, or any deed of trust upon personal property, shall be filed with any recorder in this state, upon which is indorsed the following: 'This instrument is to be filed but not recorded,' and which indorsement is signed by the mortgagee, his agent or attorney, the said instrument, when so received, shall be marked, 'Filed' by the recorder, with the time of filing upon the back of such instrument; and he shall file the same in his office, and it shall be a lien on the property therein described from the time of filing, and the same shall be kept there for the inspection of all persons interested; and said instrument shall be thenceforth notice to all the world of the contents thereof without further record, except as hereinafter provided."

The mortgage of Vinita National bank was filed under the provisions of the first section, and the mortgage of C. M. Keys and Company was recorded at length; these were the recognized ways, under the Laws of Arkansas in force in the Indian Territory, of giving constructive notice to the world of the existence of chattel mortgages. The act of Congress that provided that chattel mortgages so recorded shall be transferred to the indexes without further cost did not annul the filing or recording required by the laws of Arkansas, nor can it be said to have made such "filing" less efficacious to give constructive notice to the world than it was before. It is "filing," and not "recording," or "transferring to the indexes," that constitutes notice under the law, and as these mortgages, at the time they were made, were "filed" according to the laws then in force, it must be held that they were notice to all persons of their existence, and that they continued to be so notwithstanding the foregoing changes of the recording acts.

Counsel for Citizens Bank et al. argue in their brief:

"Again, if it is the duty of the clerk, let us inquire what particular clerk's duty it is, so that we may fix responsibility on somebody. Surely not the duty of the clerk at Pryor Creek, for how is he to know that appellants have a mortgage on record at Muskogee which should be indexed at Pryor Creek? Surely not the clerk at Muskogee, for he has no control over the Pryor Creek records."

We do not believe the above objections to be insuperable barriers to the performance of the duties required of the recorder by the act of Congress, and such excuse for non-performance was not urged by him as a reason for non-performance. In answer to a question put to him at the trial as to why he had not transferred all such mortgages to the indexes, he answered: "Simply because the act of Congress — there was no appropriation for it." And that was probably the real reason why it was not done; that it was not his duty to have done so seems never to have occurred to him. It is a universal rule that omissions by a public officer in the mode of complying with forms prescribed to him by the law as his duty, are not permitted to affect other parties who are not in fault. The following cases are cited by counsel for the Vinita National Bank to support this proposition: Oats v. Walls, 28 Ark. 245;Case and Co. v. Hargadine, 43 Ark. 144; U.S. v. Castillero, 2 Black, 1-95; Jones on Chattel Mortgages, 3rd. Ed., Secs. 271-2.

There is no question of actual fraud in this case, nor is there claimed to be any. The court below found that the original plaintiff was indebted to all the parties in amounts they alleged, and that their various promissory notes and chattel mortgages were perfectly valid and legitimate. The First National Bank of Claremore started the proceedings on the theory alone that the mortgages of C. M. Keys and Company and Stock Yards Bank and Vinita National Bank were not constructive notice to subsequent purchasers and incumbrancers because they had not been transferred to the indexes, and commenced its attachment suit, and all the other creditors came in and got such security as they could for the amounts due them, and the only question of serious dispute was the order in which each creditor should be paid out of the proceeds arising from the sale of the cattle. We believe the mortgages of the appellants, The Vinita National Bank and C. M. Keys and Company and Stock Yards Bank, were perfectly valid instruments and their acts in placing them of record and keeping them alive were in substantial compliance with the laws relating to recordation. Believing this and finding no reversible error in the remaining contentions of appellees, it follows that all the claims should be paid in the order of their respective dates, viz: First, the Vinita National Bank; second, C. M. Keys and Company and Stock Yards Bank; the other creditors taking their places after the Vinita National Bank and C. M. Keys and Company and Stock Yards Bank for the amounts and in the order decreed by the court below.

Let the judgment of the court below be modified to conform with this opinion.

All the Justices concur.

ON REHEARING. Opinion Filed September 14, 1909. Former opinion, as herein supplemented, adhered to.