Knowles v. Gilmer State Bank

It is urged as a fundamental error that the petition of the bank was subject to a general demurrer, as there was no allegation of the value of the mortgaged property affirmatively showing jurisdiction in the county court to foreclose the chattel mortgage lien. It is not necessary to look to that point in determining the jurisdiction of the county court and the appellant's rights, since, so far as the appellant is concerned, the suit against him was not one to subject the cotton to the lien, but to recover damages for conversion of the cotton. The allegations against him were laid as for conversion, upon a distinct count, and separable from the attempt to foreclose the chattel mortgage lien against Jim Reed, the mortgagor. The judgment against appellant would be limited to a personal judgment as for conversion. A B C Stores v. Houston Showcase Mfg. Co. (Tex.Civ.App.) 284 S.W. 332; Smith v. Wall (Tex.Civ. App) 230 S.W. 759. As to the count for conversion there was no defect of jurisdiction in the county court in the amount of damages sued for, as affirmatively appears in the allegation that the cotton at the time it was "converted by the defendant E. R. Knowles was worth the sum of $360."

It is believed that the second assignment of error should be sustained; that a peremptory instruction should not have been given against the appellant. The precise facts appearing in the record are that the appellant, a creditor of the mortgagor, and with notice of the subsisting mortgage, caused to be levied an attachment upon three bales of the mortgaged cotton then in the rightful possession of the mortgagor, and then, under judgment of the court, the three bales of cotton were duly sold at sheriff's sale. The proceeds of the sheriff's sale were received by appellant and applied to his judgment debt, the surplus amount being tendered to the mortgagee in recognition of the mortgage. There was no breach in the conditions of the mortgage at the time of the levy, and the bank does not claim to have been in possession of the cotton. The evidence does not show or indicate that the appellant was the purchaser under the sheriff's sale or the holder in possession of the cotton, or that he was in person or through an agent in any wise exercising any dominion over it. It is not shown that the cotton was removed or placed beyond the reach of the bank's lien. The burden of proof was upon the mortgagee bank to make out a prima facie case of its averments of conversion of the cotton by appellant. 38 Cyc. p. 2078. And the evidence offered does not constitute a conversion rendering appellant liable to the bank for the value of the cotton. For the mere seizure and sale by appellant of the mortgaged cotton in the rightful possession of the mortgagor, there being no subsequent misconduct on his part of wrongful dominion over the property in denial of or inconsistent with the mortgagee's rights, would not render appellant liable as for conversion. Article 3797, R. S.; Skaer v. Bank (Tex.Civ.App.) 293 S.W. 228. By force of the statute, mortgaged property is subject to be "levied upon" and "sold" on execution subject to the mortgage as long as the mortgagor retains and has the right of possession. Article 3797, R. S.; Wootton v. Wheeler, 22 Tex. 338. Having the right to so levy and sell, as appears from the special circumstances, the appellant, merely in virtue of so dealing with the mortgaged cotton, was not in the position of an intermeddler, and the mortgagee was not thereby wronged in respect to its special property or possession therein by that method of proceeding. The levy and the sale being "subject" to the existing mortgage, as expressly provided by the statute, the thing sold and that only bought and acquired by the purchaser was, as held, "the right to pay the debt * * * secured by mortgage and then to hold the property — the equity of redemption." Brooks v. Lewis, 83 Tex. 335, 18 S.W. 614,29 Am. St. Rep. 650. In legal force such levy and sale in no wise displaces the mortgagee's lien. The mortgagee can still foreclose his lien against the purchaser, which is unimpaired in legal force. Therefore the responsibility of appellant must rest, if at all, upon subsequent misconduct respecting the cotton. There is no sufficient evidence in that respect. He was not shown to be the purchaser or holder of the cotton, refusing to surrender it or pay the mortgage debt or to make or be connected with making wrongful disposition of it after the judgment "sale." He is not shown to have had any connection or relation with the cotton from and after the sheriff's sale. The mere unexplained circumstance that he received and applied to his judgment debt the proceeds of the sheriff's sale of the cotton would not render him liable to the mortgagee for the value of the cotton. As against the mortgagee appellant would have the right to receive and apply to his debt the price the purchaser at the sheriff's sale paid for "the equity of redemption." The mortgagee had no legal interest or concern in the "equity of redemption," whatever price it may have sold for. Estes v. McKinney (Tex.Civ.App.) 43 S.W. 556; Elevator Co. v. Thresher Co., (Tex.Civ.App.)189 S.W. 1018.

The judgment is reversed and the cause is remanded for another trial. The cost of appeal is to be taxed against the appellant bank.

Jim Reed not having appealed, the judgment against him will remain undisturbed.