
    The S. Hammill Company, Appellant, v. Gideon Van Loon and William Van Loon.
    Mortgage: fraudulent payment, wiiat is not. The failure to file a chattel mortgage does not render a mortgagee liable for the proceeds realized on a sale of the mortgaged property by the mort- ‘ gagor with his permission, and received by him under arrangement with the latter, to creditors whose claims accrued after the mortgage and before the sale, but who acquired no lien on the jnortgaged property.
    
      
      Appeal from Lucas District Court. — Hon. Robert Sloan, Judge.
    Saturday, October 16, 1897.
    
      WillB. Barger and Hughes & Roberts to? appellants.
    
      Stuart & Bartholomew for appellees.
   Kinne, C. J.

Plaintiff firm, being creditors of the defendant Gideon Yan Loon, bring this action in equity, wherein they ask to have a mortgage held by the defendant William Van Loon upon the stock of goods of the defendant Gideon Van' Loon set aside as fraudulent and void as to them, and for personal judgment against said William Van Loon. Their claim is that the said William Van Loon, by withholding his said mortgage from record, induced them- to extend credit to said Gideon, which would not have been extended had they had notice of the existence of said mortgage. The facts disclosed by the pleadings' .and evidence are substantially as follows: Gideon Van Loon was in 1894 engaged in the grocery business at Qhariton, Iowa. In December of that year, Gideon gave to William a note for two hundred and fifty dollars, payable April 1, 1895, and a mortgage on Ms stock securing the same. March 20,1895, William, upon the promise of Gideon to pay the note, canceled the mortgage of record. Afterwards, and on the same day, Gideon concluded not to- pay the note at that time. William informed him that he (William) had already canceled the mortgage supposing he was going to. pay the debt. Finally Gideon gave William a new note and mortgage for the same debt. William neglected to-file this mortgage for record until September 20, 1895. On that day he filed for record the mortgage above mentioned, and also another mortgage, the consideration of which was a debt paid by William for Gideon, and the securing the repayment of one hundred dollars which William had loaned to- Gideon. Afterwards Gideon mortgaged his stock of goods to- another creditor, which mortgage was- purchased by William. About September 20, 1895, William Yan Loon had an arrangement with Gideon whereby the latter agreed to p-lace the proceeds from the sale of the goods in a bank to the credit of said William, and William was to apply such proceeds on the mortgage -debts he had, which he did. In this way the two first mortgages were paid, and a small amount was paid on the last mortgage. Gideon- retained possession of the goods, and sold all of them. Plaintiff firm- extended credit to Gideon Yan Loon, .after the cancellation -of the mortgage, for certain goods, which have not been- paid for, and for which they now have a judgment against Gideon Yan Lo-on. The district court -dismissed plaintiff’s petition at their costs, and they -except and appeal.

Much is said in argument touching the effect of the failure of William Yan Loon to record- his mortgage, and it is contended by appellants that thereby a legal fraud was perpetrated upon- them, -and that, therefore, the defendant should be prevented from asserting any right under his mortgage. They also- insist that the acts of William Yan Loon constitute an estoppel as to him, and in favor of the appellants. W-e do not find it necessary to decide these questions. The evidence before us -does not show that William- Yan Loon- ever took possession of the goods covered by the mortgage; hence he cannot be liable in this action. True it is- that he has -received, by reason o-f the arrangement with Gideon Yan Loon, sufficient of the proceeds of the sale of the goods to- satisfy the mortgage which it is- claimed he negligently failed to record; but by such an arrangement William did not take possession of the goods or' exercise any dominion over them. Gideon had a perfect right to pay his debt in the way he did, — by depositing the proceeds of the sales of the goods in the bank to the credit of William Van Loon. Plaintiff, having no lien on the goods, cannot complain that their proceeds were actually applied on other debts owing by the mortgagor. As we have said, the debtor had a right to pay him in preference to plaintiff who had no lien upon the goods. The decree below is affirmed.  