Opinion
06-12-1935
MOREHOUSE et al. v. KEYPORT AUTO SALES CO., Inc.
Applegate, Stevens, Foster & Reussille, of Red Bank, for receiver. Edward R. McGlynn, of Newark, for petitioner De Cozen Motor Co. Matlack & Lautman, of Asbury Park, for petitioner General Credit Corporation. J. Frank Weigand, of Keyport, for petitioner Coastal Properties, Inc.
Syllabus by the Court.
1. Delivery of goods in exchange for payment by check is conditional; and, in the absence of a contrary intent manifested by the conduct of the parties, title does not pass until the check is paid.
2. Under such circumstances, if the check is presented for payment promptly and is not paid, the rights of third parties not intervening, the vendor, acting with diligence, may retake the goods.
3. Seven days' lapse of time between execution and recording of a chattel mortgage held not to be a compliance with the requirements of the Chattel Mortgage Act (1 Comp. St. 1910, p. 463, et seq., § 1 et seq.).
4. A landlord executing a distress warrant prior to the appointment of a receiver for an insolvent corporate tenant is entitled to a preference for rent in arrears, not exceeding one year.
Suit by Mary G. Morehouse and others against the Keyport Auto Sales Company, Inc.
Decree in accordance with opinion.
Applegate, Stevens, Foster & Reussille, of Red Bank, for receiver.
Edward R. McGlynn, of Newark, for petitioner De Cozen Motor Co.
Matlack & Lautman, of Asbury Park, for petitioner General Credit Corporation.
J. Frank Weigand, of Keyport, for petitioner Coastal Properties, Inc.
BERRY, Vice Chancellor.
This proceeding seeks the determination of the rights of the various petitioners to certain funds in the hands of the receiver of the defendant corporation, representing the proceeds of the sale by the receiver of two certain automobiles, one a Plymouth and the other a Chrysler. The facts, which are stipulated, vary as to the two cars and for that reason each set of facts will be discussed separately.
First, as to the Plymouth: On May 10, 1932, De Cozen Motor Company sold and delivered to Keyport Auto Sales Company, Inc., hereinafter referred to as the dealer, the automobile in question, and on the same date received from the dealer its check drawn on the Keyport Banking Company of Keyport, New Jersey, for the full amount of the purchase price. Said check was deposited on May 11, 1932, in the Fidelity Union Trust Company of Newark, N. J., and on May 13th was protested by the bank on which it was drawn, by reason of insufficient funds. On May 20, 1932, De Cozen Motor Company made a written demand forpossession of the automobile upon Coastal Properties, Inc., the dealer's landlord, which had, on May 18, 1932, distrained on all the goods and chattels of the dealer, including the automobile in question. Also, on May 20, 1932, a writ of replevin at the suit of De Cozen Motor Company was issued to the sheriff of Monmouth county.
On May 10, 1932, Finance Corporation of America loaned the sum of $576.60 to the dealer for the purpose of enabling the latter to purchase the automobile in question. To secure this loan the dealer, on the same day, executed and delivered a chattel mortgage covering this particular car. The mortgage was recorded on May 25, 1932. Thereafter the finance company assigned its chattel mortgage to the petitioner, General Credit Corporation.
On May 23, 1932, this court appointed a receiver for the dealer. Pursuant to an order of this court made on July 12, 1932, the receiver sold all the assets of the dealer, including the Plymouth automobile, free and clear of all liens.
The proceeds of the sale of the Plymouth automobile are now claimed by the receiver; by De Cozen Motor Company, which asserts that title to the car never passed from it to the dealer; by General Credit Corporation by virtue of the chattel mortgage given to Finance Corporation of America; and by the landlord under its distraint.
It may first be settled that the transaction between De Cozen Motor Company and the dealer was a cash sale. General Credit Corporation contends that in accepting the dealer's check the seller extended credit to the buyer at least for the period between the time when the check was accepted and the time it was presented for payment. To that contention there is no merit, for the generally accepted rule is that the acceptance of a check "does not imply an extension of credit, or preclude the exercise of the right of reclamation in the case of its non-payment upon timely presentation." People's State Bank of Michigan Valley v. Brown, 80 Kan. 520, 103 P. 102, 23 L. R. A. (N. S.) 824, citing Hodgson v. Barrett, 33 Ohio St. 63, 31 Am. Rep. 527; National Bank v. Chicago, B. & N. R. Co., 44 Minn. 224, 46 N. W. 342, 560, 9 L. R. A. 263, 20 Am. St. Rep. 566; Johnson-Brinkman Commission Co. v. Central Bank, 116 Mo. 558, 22 S. W. 813, 38 Am. St. Rep. 615; Hall v. Missouri Pacific Ry. Co., 50 Mo. App. 179; Mathews v. Cowan, 59 Ill. 341; Canadian Bank v. McCrea, 106 Ill. 281; Peoria & P. U. R. Co. v. Buckley, 114 Ill. 337, 2 N. E. 179; Charleston & W. C. R. Co. v. Pope, 122 Ga. 577, 50 S. E. 374. See also Claudian Leatherbury v. Connor (Err. & App.) 54 N. J. Law, 172, 23 A. 684, 33 Am. St. Rep. 672.
The transaction between the seller and the dealer being a sale of a specific chattel, the question as to when title passed is to be determined by the intention of the parties as manifested by their conduct and all the attendant circumstances. That no conditional sales agreement was entered into, that no other security for deferred payment was taken, and that the dealer gave to the seller a check for the full amount of the purchase price at the same time the car was delivered, all indicate beyond question that the transaction was intended by the parties to be a sale for cash. A sale for cash is a conditional sale, and as between the parties no title vests thereunder by delivery without payment unless the delivery be made under such circumstances as to evince a waiver of the condition. Hirsch v. C. W. Leatherbee Lumber Co., 69 N. J. Law, 509, 55 A. 645; National Bank of Commerce v. Chicago, B. & N. R. Co., 44 Minn. 224, 46 N. W. 342, 9 L. R. A. 263, 20 Am. St. Rep. 566; Young v. Harris-Cortner Co., 152 Tenn. 15, 268 S. W. 125, 54 A. L. R. 516. Central Union Trust Co. v. Willat Film Corporation, 99 N. J. Eq. 748, 133 A. 780, is to the effect that payment by check is not complete until the check is paid and that a receipt is no receipt unless the check is honored. By analogy, delivery is no delivery (at least for the purpose of passing title), unless the check is paid. Pending payment the delivery is conditional only. It was definitely held in National Bank of Commerce v. Chicago, B. & N. R. Co., supra, that the delivery of a check is not payment, but is only so when the money is received on it; and that there is no presumption that a creditor take a check in absolute payment arising from the mere fact that he accepts it from his debtor.
Under such circumstances, if the check is presented for payment promptly and is not paid, the rights of third parties not intervening, the vendor, acting with due diligence, may retake the goods for title has never passed from him. Hirsch v. C. W. Leatherbee Lumber Co., supra; Leatherbury v. Connor, supra; Frech v. Lewis, 218Pa. 141, 67 A. 45, 11 L. R. A. (N. S.) 948, 120 Am. St. Rep. 864, 11 Ann. Cas. 545; 31 A. L. R. 586, citing In re Perpall (C. C. A.) 256 F. 758. It was, of course, competent for the parties to make any agreement they saw fit as to when the absolute title to the car should pass. But in the absence of anything to indicate the contrary, the transaction between them must be taken to have been the ordinary one of the sale of a specific chattel for cash; delivery being made in the expectation of immediate payment. People's State Bank of Michigan Valley v. Brown, supra.
It being determined that the dealer never obtained title, it is unnecessary to pass upon the validity of the chattel mortgage, which is questioned by the receiver and by the landlord. Nor is it necessary to treat of the landlord's claim other than to say that the Distress Act does not authorize the landlord to distrain on chattels in the tenant's possession belonging to strangers. 2 Comp. St. 1910, p. 1940, § 8.
The proceeds of the sale of the Plymouth automobile will accordingly be awarded to the petitioner, De Cozen Motor Company.
Second, as to the Chrysler: The vendor of this car is making no claim here and it is assumed that the Chrysler was fully paid for by the Keyport Auto Sales Company and that title thereto vested in that company, although the stipulation of facts is silent on this point. Other material facts relating to the Chrysler automobile which differ from those applying to the Plymouth are as follows:
On March 16, 1932, the dealer executed and delivered to Finance Corporation of America a chattel mortgage covering the Chrysler. This chattel mortgage was filed March 23, 1932, in the Monmouth county clerk's office in Book 14 of Conditional Sales Agreements. It was not then nor has it since been recorded as a chattel mortgage. This instrument was also assigned to General Credit Corporation; the assignment being unrecorded.
The validity of the chattel mortgage is attacked on several grounds of which it is necessary to discuss only one; namely, that it was not recorded forthwith in accordance with the requirement of the Chattel Mortgage Act (1 Comp. St. 1910, p. 463 et seq., § 1 et seq.). It appears that the instrument was not delivered to the Monmouth county clerk's office until seven days after the date of its execution. This lapse of time is not a compliance with the statute, and the mortgage is therefore void as to creditors. Hardcastle v. Stiles & McClay, 69 N. J. Law, 551, 55 A. 104, affirmed 70 N. J. Law, 828, 59 A. 1117; Brockhurst v. Cox, 71 N. J. Eq. 703, 64 A. 182; Bollschweiler v. Packer House Hotel Co., 83 N. J. Eq. 459, 91 A. 1027; Stanber v. Sims Magneto Co., 98 N. J. Eq. 38, 129 A. 710, affirmed Heine v. Hayden, 99 N. J. Eq. 455, 132 A. 922; Pincus v. United States Dyeing & Cleaning Works, 99 N. J. Eq. 160, 133 A. 66.
As between the receiver and the landlord, the latter is entitled to a preference. The distress levied by the landlord, on May 18, 1932, was prior to the appointment of the receiver in this cause, which took place on May 23, 1932. An order of the court of chancery appointing a receiver and directing him to take possession of the goods and chattels of an insolvent corporate tenant falls within the limits of section 4 of the Landlord and Tenant Act (3 Comp. St. 1910, p. 3066, § 4), which provides that no goods or chattels on the leased premises shall be liable to be taken by virtue of execution, attachment, or other process, unless prior to such removal all rent due for the premises at the time of taking, not to exceed one year's rent, is paid. Wood v. McCardell, etc., Co., 49 N. J. Eq. 433, 24 A. 228; Franz Realty Co. v. Welsh, 86 N. J. Eq. 228, 98 A. 387. Consequently, the landlord is entitled to be paid by the receiver rent in arrears, not exceeding one year, out of the proceeds of the sale of the Chrysler automobile, and as preferred claim. Whitehead v. Whitehead Pottery Co., 115 N. J. Eq. 257, 170 A. 830.
I will advise a decree in accordance with these conclusions.