Behm

This appeal involves a contest between two secured creditors of Cobb Garner Vaughn who are competing for the proceeds from the sale of mortgaged cattle. To avoid confusion, we shall hereafter refer to the appellant corporation as “Fireside,” to respondent Walter A. Behm as “Behm,” and to the debtor, Cobb Garner Vaughn, as “Vaughn.”

The pertinent facts are these: In December 1961 Fireside loaned Vaughn $27,200 to purchase a dairy ranch and 68 head of cattle. Vaughn gave Fireside a deed of trust on the ranch and a chattel mortgage on the cattle as security for the loan. However, the ranch was initially owned by Behm and was purchased by Vaughn subject to a first deed of trust in favor of Behm. Moreover, at the time of the sale the 68 head of cattle were also mortgaged to Behm to secure a pre-existing promissory note in favor of Behm, but by a separate agreement with Vaughn, dated December 29, 1961, Behm agreed to accept a new note and chattel mortgage from Vaughn in place of the pre-existing note and chattel mortgage and to subordinate the new chattel mortgage to the Fireside chattel mortgage. Thus, in January 1962 when the sale of the ranch and cattle to Vaughn was consummated,…