Opinion
No. 29285
Decided June 30, 1943.
Contracts — Ambiguous language construed most strongly against one preparing written instrument — Conditional sale contract created, when — Court to determine whether several instruments executed as one transaction — And then determine nature of transaction and rights of parties — Court of equity will reform written instrument for mistake of fact — Clear and convincing evidence necessary that mistake of fact mutual.
1. Ambiguous language in a written instrument is to be construed and interpreted most strongly against the one who prepared the instrument and most favorably toward the one who had no voice in the selection of the language employed.
2. A contract wherein it is provided that the chattel sold is to remain the property of the vendor until the purchase money is paid is a conditional sales contract.
3. Where several written instruments were executed by the parties in selling and mortgaging personal property, and the question presented is whether the transaction constitutes a conditional sale, it must first be determined whether all the instruments were executed as part of one transaction, and if so, the court should then determine from the instruments the nature of the transaction and the rights of the parties.
4. A written instrument may be reformed in a court of equity on the ground of mistake of fact.
5. Where reformation of a written instrument is sought upon the ground of mistake of fact by the party preparing such instrument no relief will be granted in the absence of clear and convincing evidence that a mistake of fact was made and that such mistake was mutual.
APPEAL from the Court of Appeals of Mahoning county.
On May 11, 1937, Steve Bellish signed an order for a new automobile with Trinity Motors, Inc., of Youngstown, Ohio. This order designated the make and type of automobile to be purchased, its cash price with extra equipment, the trade-in allowance on an old car and the cash amount then paid by the prospective purchaser toward buying the new motor car. The order, for the most part, was a printed form used for several years by Trinity Motors, Inc. Cancellation of the order was provided for in certain contingencies and under stated conditions.
One of the clauses reads:
"The title to and right of possession of said motor car shall remain with you [Trinity Motors, Inc.] until conveyed or until the full purchase price is paid in money. It is understood that nor verbal or other representation, agreement or promise, not written in this contract will be binding upon either party."
Under date of May 24, 1937, Trinity Motors, Inc., issued a bill of sale as follows:
"Know all men by these presents:
"That Trinity Motors, Inc., * * * do hereby execute this bill of sale in duplicate and deliver to Steve Bellish * * * the possession of the following described motor vehicle, to wit: [Here follows a detailed description of the car.] The total price for which this motor vehicle was sold and delivered is $937.95. The amount of taxes paid on this sale by the purchaser is $28.14.
"In Witness Whereof," etc.
The form of this bill of sale was supplied by the clerk of courts and was the one in general use in Mahoning county at the time.
On the same day, viz., May 24th, Steve Bellish and his mother-in-law, Helen Bordjoski, executed a chattel mortgage and promissory note to Trinity Motors, Inc., covering the automobile purchased, and agreeing to pay the sum of $884.64 in 24 equal monthly installments of $36.86 each, with interest from maturity.
The mortgage stipulated that the mortgagors "do hereby grant, bargain, sell, convey and confirm unto said mortgagee * * * the following motor vehicle * * *
"To have and to hold the chattel * * * unto said mortgagee forever * * *."
On the same day Trinity Motors, Inc., for a valuable consideration, sold, assigned, transferred and set over "to C. I. T. Corporation, the within mortgage, and all right, title and interest in and to the property therein described."
In the instrument of assignment, Trinity Motors, Inc., represented "that at the time of execution of the mortgage, the undersigned had good title to said automobile and good right to transfer title thereto."
Delivery of the new automobile by Trinity Motors, Inc., to Steve Bellish was made on or about May 24, 1937. Upon acquiring the note and mortgage, the C. I. T. Corporation sent Bellish a communication, patently a form, beginning:
"We are glad to advise that we have acquired the time payment contract which you signed in connection with your recent purchase."
Bellish failed to make payments as agreed, and in June or July of 1938, after he had driven the car some 16,000 or 17,000 miles, the C. I. T. Corporation took possession of it without court action.
In the early part of 1939, the C. I. T. Corporation entered suit against Bellish to recover the difference between the amount for which it had sold the automobile after possession was taken and the balance owed on the promissory note; whereupon, Bellish countered by bringing the present action against it.
In his petition he alleged that the automobile was purchased under a conditional sales contract "and that at the time of the signing of the conditional sales contract, chattel mortgage and note, as hereinbefore set forth, Trinity Motors, Inc., was acting as the agent of the defendant corporation and that the defendant corporation at the time of the assignment to it of the conditional sales contract, promissory note, chattel mortgage and title to said automobile, had full knowledge of all the circumstances set forth herein."
Plaintiff further alleged that the amount he had paid was in excess of 25 per cent of the total purchase price of the automobile, and he prayed judgment for $528.92, with interest.
In its amended answer and cross-petition the defendant admitted that on or about May 11, 1937, plaintiff entered into a written contract for the purchase of the automobile in question and alleged that the note and mortgage were executed on May 24, 1937, to Trinity Motors, Inc.; that on such date, they were negotiated to it, the defendant, for a valuable consideration; and that it became the owner and holder of them in due course.
Further answering, the defendant averred that if it should be found that a conditional sales contract was executed as alleged, the plaintiff had the use of the automobile for 410 days and that the reasonable compensation for its use would be at the rate of one dollar per day, entitling the defendant to have deducted from the amount paid by plaintiff the sum of $410.
Then followed a general denial of all the allegations in the petition not admitted to be true.
It was alleged in the cross-petition that by mutual mistake the plaintiff and Trinity Motors, Inc., failed at the time of making their agreement of sale to express their real and true intent and understanding, viz., that the sale of the automobile should be final and absolute and that title should immediately vest in the plaintiff. Wherefore, the defendant asked that the agreement of sale be reformed by striking therefrom all language indicating a retention of title by the seller.
The cause was tried before a court and jury. Defendant's motions for a directed verdict and for reformation of the contract as sought in the cross-petition, made at the close of plaintiff's evidence and again at the close of all the evidence, were overruled. The court then stated:
"On the issues raised by the cross-petition wherein reformation due to a mistake of fact is asked the court cannot find that the issues are established by clear and convincing evidence and therefore the cross-petition is denied and the court finds on the issues raised by it for the plaintiff."
Relying upon the case of Yurcisin v. Commercial Credit Co., 67 Ohio App. 513, 37 N.E.2d 980 (motion to certify overruled), the court found as a matter of law that the transaction involved constituted a conditional sale, and that the only issue for the jury to determine was the amount, if any, which might be due the plaintiff. The charge was accordingly confined to such issue, and the jury returned a verdict for the plaintiff in the sum of $350, upon which judgment was entered.
An appeal on questions of law was perfected to the Court of Appeals from the trial court's ruling that there was a conditional sale as a matter of law and in submitting to the jury for determination only the amount which plaintiff was entitled to recover. The judgment below was affirmed on this branch of the case.
An appeal on questions of law and fact was taken from the ruling of the lower court on the cross-petition. The Appellate Court found "the issues joined in favor of the appellee and that the appellant's request for reformation should be and it is hereby denied."
Thereupon, the cause was "remanded to the Court of Common Pleas for execution on said judgment."
The controversy finds lodgment in this court by reason of the allowance of the motion for certification.
Other facts are stated in the opinion.
Mr. David C. Haynes, for appellee.
Messrs. Schermer Goldstein, for appellant.
In the interest of brevity in this opinion, Steve Bellish, plaintiff, appellee herein, will be designated as plaintiff, and the C. I. T. Corporation, defendant, appellant herein, as the defendant.
It is conceded that all of the written instruments executed by the parties to the transaction were prepared either by the defendant or its assignor, Trinity Motors, Inc.
The well established rule in the interpretation of a written instrument is that in case of ambiguity the document is construed most strongly against the person who prepared it and most favorably to the person who had no voice in the selection of the language employed. Farmers National Bank v. Delaware Ins. Co., 83 Ohio St. 309, 94 N.E. 834; 9 Ohio Jurisprudence, 431, Section 202.
The first major problem presented for determination is stated thus by defendant:
"The Court of Appeals erred in not reversing the judgment of the Court of Common Pleas and entering final judgment for defendant-appellant on the ground that the pleadings and the evidence did not justify the Court of Common Pleas in directing the jury to return a verdict in behalf of the plaintiff-appellee."
Conditional sales contracts in Ohio are governed by Sections 8568 to 8572, both inclusive, General Code.
A contract which provides that the chattel sold is to remain the property of the vendor until the purchase money is paid is a conditional sale. Speyer Co. v. Baker, 59 Ohio St. 11, 51 N.E. 442; 35 Ohio Jurisprudence, 999, Section 260.
If the intent of the parties is that the title shall not pass to the buyer until the condition of payment is met, the transaction is a conditional sale. No matter what may be the form of the transaction, parol evidence is admissible to determine the intention of the parties.
The provision in the order that the title to the motor car was to remain in vendor has been heretofore quoted in the statement of facts.
Another provision of the order is:
"This order is not transferable nor valid or binding on either party until accepted by the president of the company [Trinity Motors, Inc.]."
The order was never so accepted.
On May 24, 1937, the company did accept the order by the delivery of the car described in the order, to the plaintiff, and that day executed the bill of sale.
On the same day the plaintiff and his mother-in-law executed the promissory note and chattel mortgage upon the automobile to Trinity Motors, Inc.
Later in the same day, Trinity Motors, Inc., negotiated the note and mortgage to the defendant.
From the exhibits, the order, a communication from defendant to plaintiff, the bill of sale, and the note, chattel mortgage and assignment, the intention of the parties must be determined.
A most casual consideration of these documents discloses ambiguity and the need for interpretation.
The order for a car provides that the title to the motor car shall remain in the vendor.
The bill of sale provides that Trinity Motors, Inc., is delivering possession of the motor car to the plaintiff, and later provides that the motor car has been sold and delivered.
The note, chattel mortgage and assignment were printed as one single document. In the assignment, Trinity Motors, Inc., represents that at the time of the assignment it had good title to the autombile described in the mortgage.
This assignment of necessity was made after the execution of the note and mortgage by plaintiff.
We are unable to agree with the contention of defendant that because the order was dated May 11, 1937, and the note and chattel mortgage were dated May 24, 1937, the transaction could not in law be construed as a conditional sale. The order dated May 11, 1937, never having been accepted until May 24, 1937, by delivery of the car, it was on this latter date that it became a contract of sale. The other instruments were executed the same day. We think these facts bring the case squarely within the rule announced in paragraph one of the syllabus in Speyer Co. v. Baker, supra, and warranted the conclusion that the execution of all of these instruments constituted one transaction.
It was the duty of the trial court to construe these instruments most strongly against defendant and in favor of the plaintiff. There being no dispute that these instruments constituted the entire transaction between the parties, it was equally the duty of the trial court to determine as a matter of law whether the transaction was a conditional sale.
In our opinion the trial court was correct in concluding as a matter of law that this transaction constituted a conditional sale; and that no error was committed by instructing the jury to return a verdict for plaintiff after finding what amount plaintiff had paid in and deducting therefrom reasonable compensation for the use of the motor car by plaintiff.
The second major problem for determination is stated in this language by defendant:
"The Court of Appeals erred in not reversing the judgment of the Court of Common Pleas and entering a judgment directing reformation of the contract, eliminating any clause indicating a retention of title to the automobile by the seller."
The defendant contends that the Court of Appeals committed prejudicial error in rendering judgment in favor of plaintiff on the cross-petition filed by defendant.
The relief sought by the cross-petition was reformation of the order signed by plaintiff, dated May 11, 1937, to which reference has heretofore been made. The ground for seeking reformation was mistake of fact.
A court of equity may reform a written instrument upon the ground of mistake of fact. However, the trial court found that the defendant had failed to prove by clear and convincing evidence that a mutual mistake of fact existed and denied relief. Defendant filed an appeal upon questions of law and fact in the Court of Appeals and that court disposed of that appeal in its judgment entry as follows:
"The court coming now to consider the matters contained in the appellant's cross-petition for reformation and which question is in this court by way of appeal on questions of law and fact, the court finds the issues joined in favor of the appellee and that the appellant's request for reformation should be and it is hereby denied."
This court is not required to weigh evidence, but will examine the record to determine whether there is any substantial evidence to support the judgment and whether the correct rule as to quantum of proof has been applied. The documentary evidence heretofore referred to makes it abundantly clear that there was substantial evidence to support the judgment.
We conclude that the Court of Appeals did not err in the judgment entered upon either branch of the case; and that the action of the Court of Appeals should be and hereby is affirmed.
Judgment affirmed.
WEYGANDT, C.J., MATTHIAS and TURNER, JJ., concur.
HART and ZIMMERMAN, JJ., dissent.
WILLIAMS, J., not participating.
I do not agree with the majority of the court that the transactions involved in the pending case can be declared a conditional sale as a matter of law.
In examining the record, several significant facts appear. The order for the automobile, bearing date of May 11, 1937, and containing the printed statement that the title to and right of possession of the motor vehicle should remain with the seller until conveyed or until the full purchase price was paid, also contained the printed statement that the terms of sale were upon an advance deposit, with balance payable on delivery. It definitely appears that the defendant, the C. I. T. Corporation, knew nothing about such order or its phraseology. The bill of sale issued by Trinity Motors, Inc., to the plaintiff was of the form in general use in. Mahoning county at the time.
On May 24, 1937, thirteen days after the order for the automobile was signed, plaintiff and his mother-in-law executed a promissory note and chattel mortgage to Trinity Motors, Inc., covering the motor vehicle purchased, in which they agreed to pay the sum of $884.64 in equal monthly installments, with interest from maturity. The chattel mortgage contained recitations to the effect that ownership of the mortgaged vehicle was in the plaintiff. Both the plaintiff and Mark Ohl, manager of Trinity Motors, Inc., testified that it was intended and understood that plaintiff was the owner of the automobile, subject to the payment of the mortgage. It is certainly true that the sale of the automobile would not have been completed except for the money furnished by the C. I. T. Corporation in exchange for the plaintiff's note and mortgage.
In the annotation in 95 A. L. R., at page 334, it is remarked:
"* * * a reservation of title under a contract of conditional sale is lost by the taking of a chattel mortgage covering the same property, the title reserved in the seller being superseded by the lien of the mortgage. This view is supported by the great weight of authority." See 24 Ruling Case Law, 448, Section 745.
And in Chicago Cottage Organ Co. v. Crambert, 78 Ohio St. 149, 84 N.E. 788, the court stated that the execution of notes and a chattel mortgage by the buyer is foreign to the consummation of a conditional sales contract.
Reliance is placed upon the case of Speyer Co. v. Baker, 59 Ohio St. 11, 51 N.E. 442, in support of the proposition that where chattels are sold under a conditional sales agreement and later repossessed by reason of default in the payment of the purchase price, the right of the buyer to take advantage of Section 8570, General Code, requiring the seller to return a portion of the money paid on such a contract, is not affected by the fact that he executed to the seller a chattel mortgage on the goods purchased. However, in the Speyer case the mortgage was executed simultaneously with the purchase, and the Supreme Court affirmed the judgment of the Circuit Court, which reversed the judgment of the trial court for the defendant and awarded a new trial. See 35 Ohio Jurisprudence, 672, Section 8.
In the present case it is important to remember that thirteen days elapsed between the time the order for the automobile was signed and the chattel mortgage was executed, and it could be found, under the evidence, that the chattel mortgage was substituted for the conditional sale suggested by the order for the automobile. 95 A. L. R., 349, annotation.
In my opinion, it became at least a jury question as to whether the conditional sale contemplated by the order did not develop into a transaction whereby transfer of title to the buyer was mutually understood and intended with the taking of a chattel mortgage as security for the balance owed. And I am not so sure there should not have been a directed verdict for the defendant on the theory that plaintiff, by voluntarily executing a negotiable note and mortgage, which were sold to the defendant corporation for a valuable consideration subsequent to the date of the order for the automobile, estopped himself from reliance upon a conditional sale as against the defendant.
I therefore dissent from the judgment of affirmance herein.
HART, J., concurs in the foregoing dissenting opinion.