The provision in each bill of lading that, in case of loss or damage sustained by the property receipted for, liability should be computed on the basis of the value of the property at the time and place of shipment, has no application. There was no loss or damage sustained by any property receipted for or any shipment of property at any time when or place where value could be assessed. There was no wheat shipped, or to be shipped, or lost, or damaged.

fendant. The defendant cannot be allowed [ficer for whose conduct the defendant must to settle the law of the case piecemeal any answer. more than it can be allowed to settle the facts in that way. Estes v. Zinc Co., 97 Kan. 774, 156 Pac. 758. Besides this, the defendant chose to defend the action on the express ground, pleaded in extenso, that the bills of lading were governed by the law of the state of Missouri, and that the rights and duties of the parties in respect to the matters complained of in the petition were defined by the Missouri law. The defendant presented this subject to this court on the first appeal and procured the following adjudication in its favor:

"In an action against a common carrier based upon bills of lading, involving no question with respect to the right of the carrier to limit its common-law liability, the rights and obligations of the parties are to be determined by the law of the place where the contract was made.'

"In an action against a common carrier to recover moneys advanced on the faith of bills of lading issued by the agents of the carrier without the actual receipt of the property, an answer which alleges that the bills were executed and delivered in the state of Missouri, that when they were issued the statutes of that state made it unlawful for a common carrier to issue bills of lading without the actual receipt of the property, and that the Supreme Court of Missouri has held and still holds, in construing the statute, that all such bills of lading are absolutely void and that no action can be maintained there on by any holder or assignee, states a good defense as against a demurrer." Railway Co. v. Hutchings, 78 Kan. 758, Syl. pars. 3, 4, 99 Pac. 230.

The contract was to deliver wheat to the plaintiff at Galveston. The breach consisted in nondelivery at Galveston, and the plaintiff's loss consisted in its advancements; such advancements being less than what the property itself would have been worth to the plaintiff at Galveston. Adopting the plaintiff's theory, however, the judgment may be sustained by applying payments received to the unsecured portion of the plaintiff's claim, as the law authorized the plaintiff to do and as the law would do in the absence of application by either debtor or creditor. Crane Co. v. Terminal Ry. Co., 158 Pac. 59.

The plaintiff's loss was due at once and was readily determinable by computation, and consequently interest was properly allowed.

Other contentions of the defendant are without substantial foundation, and the judgment of the district court is affirmed. All the Justices concurring.

(98 Kan. 261)

This adjudication was binding on the defendant and on the trial court, and the defendant could not at the subsequent trial, without asking permission to change the issue and while still asserting that the Missouri law governed, shift its defense to BROMICH v. BURKHOLDER. (No. 20016.)* some other law. Having been defeated on (Supreme Court of Kansas. the theory of the litigation which it proposed and which it induced this court to accept, the defendant is in no position to ask this court to adopt a new theory according

to which the propriety of the judgment shall be tested. It is estopped by its pleading and by the adjudications of this court in its favor based on that pleading.

There is nothing else of consequence in the case. The law of Missouri was determined on the second appeal, and that adjudication became the law of the case. Some Missouri decisions later than those considered on the second appeal are cited. If they were conclusive this court might consider the subject of modifying its former opinion, but they are not so, and the views there expressed are adhered to.

It was decided on the first appeal that the action was not barred by limitation, and nothing contained in the abstract indicates that the ruling was wrong or that the plaintiff lost its remedy through laches, which was not pleaded, or lack of diligence.

June 10, 1916.)

(Syllabus by the Court.) 1. FIXTURES 4- MACHINERY - INTENT OF PARTIES.

strongest elements in determining whether maThe intention of the parties is one of the chinery in a building has become part of the realty.

[Ed. Note.-For other cases, see Fixtures, Cent. Dig. §§ 3, 6; Dec. Dig. 4.] 2. FIXTURES

20-CHATTELS ANNEXED TO REALTY NOTICE TO PRIOR MORTGAGEE NECESSITY.

Notice to a prior mortgagee of real estate of a conditional sale agreement by which the vendor reserves title of chattels annexed to the real the vendor of the chattels. estate is not essential to preserve the rights of

[Ed. Note.-For other cases, see Fixtures, Cent. Dig. §§ 44-46; Dec. Dig. 20.]

3. FIXTURES 20, 22-CONDITIONAL SALEREPLEVIN.

sion of a tubular boiler which had been sold by In an action in replevin to recover possesplaintiff and installed in a mill upon which the defendant held a prior real estate mortgage, the contract between the plaintiff and the owner of the realty reserving title in plaintiff until full payment of the purchase price, it is held, The proof was ample that the bills of lad- following Eaves v. Estes, 10 Kan. 314, 15 Am. ing were issued by the authority of an of-Rep. 345, that the boiler, regardless of the naFor other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

*Rehearing denied July 12, 1916.

ture of its attachment to the mill, never became I was built about it, and four pipes connected a part of the realty, and, it appearing from the it with the mill. The smokestack stood on a evidence that it might be removed from the prop- brick pier outside the boiler house, and it erty without defeating or impairing the security of the defendant, the plaintiff is entitled to re- would not have been necessary to destroy cover its possession. the smokestack in order to remove the boiler. Witnesses for the plaintiff testified that the removal of the boiler would not injure 20-MACHINERY-CONDITION- the property to which it was attached, and

The opinion then quotes from the leading and which was removed to make room for case (Ford v. Cobb, 20 N. Y. 344, 348): the machinery in question. To the same effect see Hill v. Sewald, 53 Pa. 271, 91 Am. Dec. 209.

The opinion cites and approves Eaves v. Estes, supra. In the North Carolina case the prior real estate mortgage contained an express provision that it should cover future additions and improvements made upon the property. Other cases sustaining the rights of the conditional vendor as against a pur-fied with the reasoning upon which Chief chaser on foreclosure of a prior mortgage are Tifft v. Horton, 53 N. Y. 377, 13 Am. Rep. 537; Campbell v. Roddy, 44 N. J. Eq. 244, 14 Atl. 279, 6 Am. St. Rep. 889.

[4] The foregoing cases also hold that the execution of a chattel mortgage by the owner of the realty upon machinery which he afterwards places in a building thereon is an unequivocal declaration of an intention that the machinery shall be regarded as personalty. In Page v. Edwards, 64 Vt. 124, 23 (Supreme Court of Kansas. June 10, 1916.) Atl. 917, it is held that machinery sold in this way will retain its character of personalty against the holder of an existing mortgage on the land, notwithstanding it is used to replace other machinery which was there when the real estate mortgage was executed

(Syllabus by the Court.)

1. MONEY RECEIVED 9-RIGHT TO RECLAIM -FRAUD-PRE-EXISTING DEBT.

Money which has been obtained by fraudulent means cannot be reclaimed after its payment to one receiving it without notice of the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 158 P.-5 *Rehearing denied July 12, 1916.

fraud, although it is applied upon a pre-existing
debt without the surrender of any security.
[Ed. Note. For other cases, see Money Re-
ceived, Cent. Dig. § 31; Dec. Dig. 9.]

2. BILLS AND NOTES 363-PROCEEDS OF
DRAFT-RIGHT TO RECLAIM-FRAUD-PRE-
EXISTING DEBT.

Where one who has fraudulently obtained a check or draft delivers it to his creditor, although without indorsement, to be applied upon an existing debt, its proceeds when collected and so applied are subject to the same rule. [Ed. Note. For other cases, see Bills and Notes, Cent. Dig. §§ 790, 791, 960, 962; Dec. Dig. 363.]

3. BILLS AND NOTES 525-BONA FIDE PUR

CHASER
DENCE.

NOTICE SUFFICIENCY OF EVI

-

The circumstances held not such as to charge a bank with notice that a draft delivered to it had been obtained by fraud.

[Ed. Note. For other cases, see Bills and Notes, Cent. Dig. §§ 1832-1839; Dec. Dig. 525.]

[1] 1. No contention is made that the bank knew of the mortgage. The claim against it is based on the theory that, as it applied the proceeds of the draft to its claim against Lockner, parting with nothing of value and being placed in no worse position by reason of the transaction, its right to retain the money was no stronger than Lockner's. One who by fraudulent means has been induced to part with the ownership and possession of ordinary personal property may follow it (upon rescission of the contract by which the title passed where that is necessary) into the hands of a third person who has obtained it without notice of the fraud, but in consideration only of a pre-existing indebtedness. Schulein v. Hainer, 48 Kan. 249, 29 Pac. 171; note 36 L. R. A. 161. In the case of money, however, a different rule obtains. Although procured by fraud, it cannot be reclaimed

Appeal from District Court, Anderson after it has been used to pay an existing County.

Action by Ralph Benjamin against the Welda State Bank. From judgment for plaintiff, defendant appeals. Reversed and remanded, with directions.

F. T. Woodburn and E. D. Woodburn, both of Holton, and A. E. Crane, of Atchison, for appellant. J. G. Johnson, of Garnett, for appellee.

MASON, J. On March 5, 1913, W. E. Lockner, being the owner of 148 steers, executed a chattel mortgage upon them for $5,200, which was properly filed for record. A week later he sold 99 of them to Ralph Benjamin for $3,651.73. Benjamin paid for them by giving a sight draft on a Kansas City commission company for the amount, on which was written the statement that it was "for 99 head of two year old steers." This draft was made payable to the order of Lockner, but, without being indorsed by him, was handed by Benjamin to the cashier of the Welda State Bank, to which Lockner was indebted upon an overdraft-the result of its having honored the check with which he had paid for these cattle, with others. The draft was paid on the next day by the bank receiving credit for the amount with its Kansas City correspondent, and it at once applied the proceeds in reduction of Lockner's indebtedness. Benjamin did not know of the mortgage until about the 13th of the next month, and some 60 days later he was required to pay and did pay $2,849.52 to procure the release therefrom of the cattle he had purchased. Lockner was doubtless insolvent at the time of the sale. Upon proceedings begun in the latter part of April, 1913, he was within a few weeks adjudged a bankrupt. On February 16, 1915, Benjamin sued the bank for the amount he had paid the mortgagee, and recovered a judgment, from which it appeals.

creditor who accepted it in good faith. Kimmel v. Bean, 68 Kan. 598, 75 Pac. 1118, 64 L. R. A. 785, 104 Am. St. Rep. 415, and cases there cited; 39 Cyc. 568, 569. See, also, Bank v. Walters, 92 Kan. 391, 140 Pac. 864. The reason for the distinction has been thus stated:

"It is absolutely necessary for practical business transactions that the payee of money in due course of business shall not be put upon inquiry at his peril as to the title of the payor. Money has no earmark. The purchaser of a chattel or a chose in action may, by inquiry, in most cases, ascertain the right of the person from whom he takes the title. But it is generally impracticable to trace the source from which the possessor of money has derived it. It would introduce great confusion into commercial dealings if the creditor who receives money in payment of a debt is subject to the risk of accounting therefor to a third person who may be able to show that the debtor obtained it from him by felony or fraud. The law wisely, from considerations of public policy and convenience, and to give security and certainty to business transactions, adjudges that the possession of money vests the title in the holder as to third persons dealing with him and receiving it in due course of business and in good faith upon a valid consideration. If the consideration is good as between the parties, it is good as to all the world." Stephens v. Board of Education, 79 N. Y. 183, 187 (35 Am. Rep. 511).

[2] 2. If the draft is regarded as the property obtained in the present case, the bank cannot be regarded as a holder in due course under the rule applicable to negotiable instruments, not because it was not a purchaser for value, but because no indorsement was made by the payee. We think however, the transaction should not be regarded as the purchase of the draft by the bank from Lockner, but as the use of the draft by Benjamin as a means for causing the amount due for the cattle to be paid by the commission company to Lockner, coupled with Lockner's consent that the money should go to the bank and be applied on his debt. If Lockner had personally collected the draft and paid the resulting cash to the bank, there could be

no doubt of its right to retain it against | case of the payment of a debt an inquiry as to Benjamin. And this is substantially what took place. Lockner, in effect, authorized the bank to collect the money for him and apply it on his overdraft. The draft, upon its payment, whether that was accomplished by delivering currency to the bank or by the commission company causing the bank to be credited with the amount in some acceptable depositary, ceased to have any bearing upon the matter; its function had been performed, and the situation was the same as though the actual cash had changed hands. This is an action to recover the money, not the draft. Many of the cases in which the rule as to the negotiable character of money has been applied were, in fact, based upon payments made by check or draft. In a typical instance the court said:

"We think the question as to whether the state was a holder of the draft for value or not does not arise in this case. Murray, as county treasurer, was behind in his payment of the taxes due from Orange county to the state. In order to discharge his obligation he transmits the draft in question. The state, through its officer, receives it and presents it to the bank upon which it is drawn, and that bank pays it, and the state, having received the money, thereby discharges the obligation of Murray, and the taxes due from Orange county are thereby paid. The transaction is closed, and it cannot be that the drawer of the draft that has thus been paid can open up the whole matter, and claim to recover back the money which the state received in payment of the taxes due it. If the cashier, instead of sending this draft, bad taken the money directly from the bank and paid the same to the state in satisfaction for the amount due for the taxes, I think no one would contend that the bank could recover it back from the state on the ground that the act of the cashier in taking the money was a fraud upon it or even a felony, and that the state had parted with no value at the time of the receipt of the money. I do not see that in this respect the case is altered by the interposition of the draft instead of the payment of the money in the first instance. The state receives in good faith (as we must assume on this point) the written direction of the claimant to a third party to pay the money to the state upon demand, and the state makes the demand accordingly, and the money is paid and the debt extinguished. The interposition of the draft makes no difference in principle after it has been paid. It is then the same as if the money had been originally paid instead of an order given for its payment. The order having been complied with, and the original debt thereby satisfied, the transaction is closed, and may not be reopened on this ground." G. N. Bank v. State, 141 N. Y. 379, 384, 36 N. E. 316, 317.

And in another:

"If Mills, Robeson & Smith, on receiving the check of Ferris & Kimball, had at once collected it and turned it into money, and then had paid that money to the bank in discharge of their debt to it, and the bank had accepted that payment in ignorance of the source from which the money had been derived, and had surrendered the notes and discharged their debtors' liability in entire good faith, the owner of the stolen money would have had no right of recovery against the bank. Justh v. Bank, 56 NY. 478: Stephens v. Board of Education, 79 N. Y. 183 [35 Am. Rep. 511]. This doctrine goes upon the ground that money has no earmark, that in general it cannot be identified as chattels may be, and that to permit in every

the source from which the debtor derived the money, and a recovery if shown to have been dishonestly acquired, would disorganize all business operations and entail an amount of risk and uncertainty which no enterprise could bear. The rule is founded upon a sound general policy as well as upon that principle of justice which determines as between innocent parties upon whom the loss should fall under the existing with the money, and with it had paid his debt circumstances. If, therefore, Smith had come over the counter, the amount could not have been recovered by the plaintiff, although admitted to have been actual proceeds of the stolen certificate. I think the situation was not at all changed because the debtor came with Ferris & Kimball's check, which the bank collected. Smith had brought that and the bank had accepted it as cash or conditionally upon its proving good, the result would have been the same. The debt would have been paid and the money become the absolute property of_the_bank." Hatch v. National Bank, 147 N. Y. 184, 191, 41 N. E. 403, 404.

If

The cases from which these quotations are made are peculiarly applicable here because of the refusal of the New York courts to regard as an innocent purchaser for value one who accepts a negotiable instrument in payment of an existing obligation, without surrendering some security (4 A. & E. Encycl. of L. 288), while giving that standing to a creditor to whom money is paid under similar circumstances. This distinction is pointed out in one of the cases already quoted from in these words:

"It is said that the case is to be governed by the doctrine established in this state that an antecedent debt is not such a consideration as will cut off the equities of third parties in respect of negotiable securities obtained by fraud. But no case has been referred to where this doctrine has been applied to money received in good faith in payment of a debt." Stephens v. Board of Education, 79 N. Y. 183, 187 (35 Am. Rep. 511).

[3] 3. It is suggested that the cashier acted as the agent of the owner in regard to the sale of the cattle, and therefore that the bank was chargeable with all the facts known to Lockner. The draft was delivered by Ben. jamin to the cashier in accordance with the direction of the clerk of the sale, which was public. Lockner testified that he left the settlement for the cattle to the bank. The only connection the bank was shown to have had with the sale was in receiving the proceeds at the direction of Lockner. The arrangement seems to have contemplated their application to the overdraft, but no specific authority to that effect was necessary. Gunn v. Bank, 97 Kan. 404, 155 Pac. 796. Knowledge on the part of the bank that the draft was given in payment for the cattle had no tendency to charge it with notice of any fraud. It naturally looked to their proceeds for the payment of its claim against Lockner, since he had used its money in paying for them.

The bank seeks to invoke the rule that one who has voluntarily parted with the title to property, although induced to do so by fraudulent representations, can recover it from a third person only after a rescission of