Opinion
Helmick, Evans & Conover, John Robert Evans, Ronald J. Miller, Denver, for plaintiff in error.
Simon, Kelly, Hoyt & Malone, Robert F. Kelley, Richard Simon, Englewood, for defendant in error.
SILVERSTEIN, Chief Judge.
This case was originally filed in the Supreme Court of the State of Colorado and subsequently transferred to the Court of Appeals under authority vested in the Supreme Court.
Plaintiff in error (plaintiff below) sued to recover from the defendant the possession of a 'water wagon', a piece of heavy construction equipment, claimed by plaintiff by virtue of a chattel mortgage executed by one Fincham, the then owner of the equipment. Defendant, Winslow Construction Co. (Winslow) asserted that the chattel mortgage was invalid and that he had purchased the equipment from Fincham in the ordinary course of business in good faith for value and without knowledge of the mortgage, if any. The trial court found that Fincham had made false statements to both parties; that the chattel mortgage was invalid; and that Winslow had purchased the equipment in December 1965. It held plaintiff had failed to sustain the allegations of its complaint, and that the equipment was the property of the defendant. It thereupon dismissed the complaint.
We agree with the result and therefore affirm the judgment.
The evidence showed that plaintiff had obtained a chattel mortgage from Fincham, which was duly filed for record, on a water wagon which it developed was already covered by a mortgage. So plaintiff and Fincham executed a supplementary agreement which amended plaintiff's mortgage by substituting identification numbers of a different 'wagon' for the original numbers. This document was also recorded with appropriate reference to the original mortgage. Approximately one month after the second recording Winslow purchased the latter water wagon from Fincham.
After obtaining the supplemental agreement plaintiff left the 'wagon' in Fincham's possession under an oral agreement that it was not to be sold without notice to plaintiff but could be rented. Plaintiff knew that Fincham was in the business of buying and selling new and used equipment as well as the leasing thereof. The equipment was not segregated in any way nor was there any marking which distinguished the water wagon from the rest of Fincham's stock in trade.
Under these circumstances Moore v. Ellison, 82 Colo. 478, 261 P. 461, controls. There plaintiff held a duly recorded chattel mortgage on an automobile owned by a retail automobile dealer. The mortgage stated that the automobile was to be used for demonstration purposes and was not to be sold. However, the mortgagee allowed the demonstration automobile to be kept with the rest of the dealer's stock in trade. The automobile was purchased in the regular course of trade and the Supreme Court held that the purchaser took free of the mortgage. The court said,
'Where a mortgagor is a retail merchant engaged in selling articles of merchandise of the same kind as the mortgaged property, and the mortgagee permits the mortgagor to keep the mortgaged property in his salesroom, among such other articles constituting his stock in trade, which he is selling in the regular course of trade, in such case, even though the permission is coupled with the proviso that the mortgaged property may be used for purposes of demonstration only, one who purchases the mortgaged property at the mortgagor's salesroom, in the regular course of trade, without notice of such limitation on the use of the prpoerty, obtains good title unincumbered by the mortgage.'
Therefore the controlling issue in this case is whether Winslow bought the equipment in the ordinary course of business for value in good faith and without Actual knowledge of the chattel mortgage, if any. Although the evidence is conflicting as to some of Winslow's dealings with Fincham, the testimony establishes that Winslow bought the 'wagon' in December 1965, in the regular course of business for value and without actual knowledge of the claimed mortgage. The trial court correctly held that Winslow took title to the equipment free and clear of the claim of plaintiff.
Plaintiff strongly urges that the sale, if any, did not tkae place until August 1966, at which time Winslow had full knowledge of the claimed chattel mortgage. The evidence does not support this assertion.
Further, plaintiff claims that the trial court erred in finding that its chattel mortgage was a nullity. Since the asserted mortgage had no validity as against Winslow for the reasons hereinbefore stated, this issue need not be determined.
The judgment is affirmed.
DWYER and ENOCH, JJ., concur.