Opinion
No. 7114.
February 9, 1953.
APPEAL FROM THE CIRCUIT COURT OF BUTLER COUNTY.
Hyde Purcell, Poplar Bluff, for appellant.
Phillips Phillips, Poplar Bluff, for respondent.
This is an action in replevin, filed in the Circuit Court of Butler County, Missouri, to recover possession of a Ford automobile. The cause was tried before the court and judgment rendered for plaintiff. Defendant appealed.
The petition contains the usual allegations of replevin. The first amended answer is a general denial and an affirmative plea that defendant paid the purchase price of the automobile for one, Edward L. Himes, purchaser, and received from said Himes a bill of sale for said car and possession thereof, which car has been in defendant's possession since its purchase, in Butler County. Defendant pleads that by virtue of the bill of sale, Himes conveyed to him all rights, title and interest in and to the car to secure defendant for the purchase price, $1911.75.
The amended answer pleads that Himes agreed that if the purchase price was not paid to defendant within two months from the date of purchase, to-wit, July 29, 1950, defendant should sell the automobile to satisfy the debt; that Himes failed to pay any part of said sum.
The amended answer further pleads that Himes and defendant sent the bill of sale, received from the seller of the automobile, Cave City Motor Company, to the Director of Revenue of Missouri to secure a title in the name of Himes under an agreement between defendant and Himes; that the title was to be held by defendant until the debt was paid; that the certificate of title was obtained but not delivered to defendant as agreed.
It pleads that Himes is now confined in the penitentiary in Georgia. The amended answer then prays that the court find and decree defendant have a purchase money lien on the automobile; that it construe the bill of sale to defendant to be a purchase money mortgage on the automobile to secure the purchase price; that a trustee be appointed for Edward L. Himes and the lien foreclosed and the car sold to satisfy the debt from Himes to defendant.
The reply admits that the automobile in question was purchased, new, from W. F. Laman, d/b/a Cave City Motor Company, by Edward L. Himes, and a bill of sale executed and delivered to Himes by the vendor; that the purchase price was $1911.75, and was, at the time of sale, paid by the defendant; that the automobile has been in possession of defendant since July 29, 1950, and states that as to the other allegations in the answer, plaintiff neither admits nor denies, not being in possession of sufficient information to do so.
We will state the testimony in our decision of the issues involved.
In our opinion we will refer to appellant as defendant and to respondent as plaintiff, being the position they occupied in the lower court.
Defendant contends in his first assignment of error that the trial court erred in finding that plaintiff was entitled to possession of the car involved: that plaintiff was a purchaser in good faith without notice of any infirmities and in finding that the property was wrongfully held by defendant and that plaintiff was entitled to possession thereof before satisfying defendant's lien.
Under sub-section (a) it is defendant's position that both plaintiff and its assignor knew that the automobile had been purchased by Himes more than a month before the execution of the conditional sales contract and that the conditional sales contract was invalid when issued.
The testimony is undisputed that prior to the purchase of the automobile in question, Edward L. Himes had been employed in the Montgomery-Taylor School of Watchmaking in Poplar Bluff; that defendant owned an interest in this school; that automobiles were hard to secure and Himes had placed an order with the Cave City Motor Company in Arkansas for a Ford car; that the car had arrived and Himes had been notified that he could get delivery of it.
Defendant's testimony is undisputed that he and Himes entered into an agreement, prior to the purchase of this car, that defendant would pay for the car and would have possession thereof, allowing Himes sixty days in which to repay the loan made by defendant for the purchase price and, in case Himes failed to pay the purchase price within sixty days, the car was to belong to defendant.
It is admitted that the Cave City Motor Company refused to convey this car to anyone except Himes and that on June 29, 1950, Himes and defendant went to the Cave City Motor Company in Arkansas and there, Himes purchased the car in question for $1911.15, and received a bill of sale for the same, together with invoices on the car and delivery thereof; that defendant paid the purchase price, by check, to the Cave City Motor Company. The testimony is undisputed that Himes drove the new car back to Poplar Bluff and defendant came back in his car; that when they reached Poplar Bluff, Himes turned over the possession of the new car with invoices and bill of sale to the defendant, who stored it in the basement of his home where it remained continuously until the filing of the suit in question by plaintiff.
The testimony is undisputed that Himes executed a bill of sale conveying the car to the defendant; that defendant, later, turned over the original bill of sale to Himes for the purpose of making application for a certificate of title to the Motor Vehicle Department of Missouri; that Himes did make such application at the local office in Poplar Bluff and received a receipt showing such application was made and turned it over to defendant. The testimony shows that Himes promised to deliver to the defendant the certificate of title when received, but that he failed to do so and, after he was sent to prison, he refused to do so.
The evidence shows that on September 7, 1950, Edward L. Himes returned to plaintiff's office in Arkansas and informed plaintiff that he had purchased the Ford car in question from Mr. Laman, who operated the Cave City Motor Company, and paid cash for it. Plaintiff's witness testified as follows:
"Q. What did he talk to you about when he came in? A. Well, he just ask me about the provisions we have for making loans, what kind of loans we could make.
"Q. And he told you how much he needed, did he? A. Yes, sir.
"Q. And what did you tell him? A. I told him I could take a chattel mortgage on his automobile and loan him money and gave him the approximating figures of his monthly payments, * * *"
He testified that the monthly payments were more than Himes could pay and then gave this testimony:
"Q. Then did he ask if there was any other way it could be done? A. He asked if there was any way I could do it.
"Q. What did you tell him? A. I told him that I couldn't do it any other way.
"Q. Did you tell him to go back and see the dealer? A. No, sir.
"Q. Did he tell you he was going back to see the dealer? A. He was going back to see Mr. Laman.
"Q. And he asked about financing the automobile and you told him as far as you were concerned, it was all right with you? * * * A. Yes, sir.
"Q. Now, he told you that he had the car, didn't he? A. He said he had an automobile.
"Q. He told you he had the car since June 29th of that year, didn't he? A. I don't remember exactly when he told me he got the automobile.
"Q. He told you he had bought it at Mr. Laman's, Cave City Motor Company? A. Told me he bought the automobile from Mr. Laman.
"Q. Told you he paid cash for it? A. I believe so.
"Q. You understood that he paid cash for it? A. I was under the impression the transaction between he and Mr. Laman had been completed.
"Q. He said it was paid for? A. Yes, sir."
The witness testified that he informed Himes that his company could purchase the contract from the dealership. He stated that on the same day Mr. Laman called him and wanted to know if he would purchase a conditional sales contract on this car and he answered, "yes, sir." He stated this was the only kind of a contract that they could purchase from Mr. Laman; that is, that was the only kind of a contract they could have purchased under the circumstances. Had they made an ordinary loan, they would have had to do so by chattel mortgage.
The witness stated he didn't see Mr. Himes any more until sometime in December or January when he secured from him the certificate of title issued in Missouri, which was not endorsed or assigned. He stated no Arkansas title was issued. He testified that on September 7, 1950, Mr. Laman of Cave City Motor Company was a C. I. T. dealer.
The evidence showed that Edward L. Himes returned to the Cave City Motor Company where he executed the conditional sales contract on the Ford car which was assigned by said company to plaintiff. The contract was for a loan of $1200, showing $711.15 cash paid thereon and the cost of financing added thereto, making the conditional sales contract for $1556.86. This contract was later filed for record in Sharp County, Arkansas, by plaintiff. Plaintiff paid the Cave City Motor Company $1200 for said contract.
It is admitted by the evidence that, at the time the conditional sales contract was made, the automobile was in Poplar Bluff in the possession of defendant, having been placed there by Edward L. Himes to secure the sum of $1911.15, the purchase price. There is no question but what Mr. Laman, acting for the Cave City Motor Company, knew the car was not in the possession of Himes at the time of the execution of the conditional sales contract. The Cave City Motor Company also knew that the purchase price of this car had been paid by defendant and that the car had been taken to Poplar Bluff, Missouri. The certificate of title issued by Missouri shows date of issuance of September 25, 1950. The evidence showed that the bill of sale, issued July 29th, to the defendant at the time of the purchase of the car, was never returned to Cave City Motor Company.
This case was tried before the court so it becomes the duty of the appellate court to review the case upon both the law and the evidence as in suits of an equitable nature. The judgment shall not be set aside unless clearly erroneous, and due regard shall be given the opportunity of the trial court to judge the credibility of the witnesses. Section 510.310, Par. 4, RSMo 1949, V.A.M.S.; Bohnsack v. Hanebrink, Mo.Sup., 240 S.W.2d 903.
In the above cited case, on page 907 of 240 S.W.2d the court says:
"Upon the appeal of equity cases we consider them de novo, and where the chancellor saw and heard the witnesses we usually defer to his findings and conclusions unless they are against the clear weight of the evidence or unless the proof is insufficient in law to sustain the chancellor. * * *"
We cannot agree with defendant's first contention that a valid conditional sales contract could not have been entered into after an absolute sale of the car in question had been consummated.
In 78 C.J.S., Sales, § 565, p. 274, the law is stated:
"* * * The contract may, by agreement of the parties, be modified so as to make it one of absolute sale; and, conversely, an absolute sale may, as far as the rights of the parties are concerned, be converted by agreement into a conditional sale, provided the intention of the parties to do so is clearly shown; but the conversion of an absolute sale into a conditional sale, at least if not accompanied by change of possession, ordinarily is of no effect against creditors, mortgagees, or purchasers from the buyer without notice."
Under the law as stated, there is no question but what an absolute sale, as was the case at bar, could be converted into a conditional sale by the agreement of the parties. International Harvester Co. v. Threlkeld, 226 Mo.App. 600, 44 S.W.2d 182.
Under sub-section (b) defendant raises the question that plaintiff was a party to the agreement whereby the actual sale was modified and converted into a conditional sale, and, therefore, was not an innocent purchaser.
The evidence in this case shows that plaintiff's agent, on the day that the conditional sales agreement was made, was informed by Himes that he was the owner of the automobile in question. Himes had tried to secure a loan from plaintiff on this car. Plaintiff admitted that the only way he could finance Himes was by taking a chattel mortgage on the car. Plaintiff's agent, who acted for and in behalf of plaintiff in the purchase of the conditional sales contract, testified that Himes informed him that he had purchased the car from Mr. Laman, the Cave City Motor Company, and had paid cash for it; that he knew Himes was going back to change the contract from an absolute sale to one of a conditional sale and that he informed Himes he could handle such a transaction from the seller and then this same agent testified that, before the absolute sale was modified into a conditional sale contract, the Cave City Motor Company called, by telephone, and asked plaintiff if it would handle the conditional sales contract and it informed him that it would.
Now, under the law as above stated in 78 C.J.S., Sales, § 565, the general rule is that where an absolute sale is converted into a conditional sale and not accompanied by change of possession, such conditional sale is of no effect against creditors, mortgagees or purchasers from the buyer without notice. Helena Wholesale Grocery Co. v. Interstate Grocery Co., 196 Ark. 454, 118 S.W.2d 857; Brooks v. Superior Oil Co., D.C.Ark., 96 F.Supp. 641, 646.
Unquestionably, defendant was a creditor of Edward L. Himes. He loaned the money to Himes to buy the car in question. He testified he could not take title to the car at the time of the loan because the seller absolutely refused to convey the title to anyone but the purchaser. This condition of affairs was not unusual at the time of the purchase of this automobile because cars were hard to get and only customers could get them and Himes had had an order in for this car for some time and it was only natural that the seller would convey only to the ones who had had orders for cars. But to protect himself, defendant took possession of the automobile and kept possession of it continuously to the date of the lawsuit. The seller knew that the car was not in the possession of Himes when this contract was reconverted into a conditional sales contract and he was informed that the car was in Poplar Bluff, Missouri, and he acted in total disregard of the rights of others by making such a change in the contract without having possession of the car or without making a change of possession, so we hold that under the law the rights of creditors were not affected and that if defendant had any rights plaintiff cannot recover in this lawsuit. He was sufficiently informed of the facts to place him in the same position the Cave City Motor Company was in and it got no more rights under the conditional sales contract than the Cave City Motor Company had under the conditional sales contract.
The trial court held that the bill of sale, executed at Poplar Bluff when the possession of the car was turned over to the defendant, gave defendant no rights because such conveyance did not comply with the laws of Missouri as to the conveyance of motor vehicles. It, likewise held that defendant was not entitled to possession of the car because of a pledge or a resulting trust.
We fully agree with the trial court that the conveyance did not constitute a chattel mortgage, either in law or equity. We, likewise, hold that it did not constitute a resulting trust. There never was any intention between the defendant and Himes that Himes was to have the title such as to constitute a resulting trust. Clearly, from the testimony, defendant made a straight out loan to Himes under an agreement that he was to have possession of the automobile until the loan was repaid; that Himes was to have sixty days to make such repayment or the car was to belong to defendant. Dee v. Sutter, Mo.App., 222 S.W.2d 541.
Defendant did acquire an interest in the automobile as against Himes and a right that he could have enforced in equity, whether it be a pledge or what not. Certainly no court would hold that where defendant furnished the purchase price to Himes and was holding the property as security therefor that Himes could take it away from him without paying the debt. Therefore, since an actual sale was converted into a conditional sale when the automobile was not in the state of Arkansas and there was not a change of possession of the car, defendant's rights were not affected and plaintiff was not entitled to the possession of this car at the time it filed its suit under the conditional sales agreement it purchased.
Judgment reversed with directions to enter judgment for defendant.
VANDEVENTER, P. J., concurs.
BLAIR, J., not sitting.