Opinion
November 8, 1948.
1. Conditional sales contracts.
When a conditional sales contract is made in another state with title retained to secure balance of purchase money notes payable in said other state, and under the laws of the said state this amounts to a chattel lien on the property so sold, even if taken into this state, the conditional vendor must record his conditional sales contract in the proper county in this state in order to preserve his lien against an innocent purchaser for value from the conditional sales vendee, the purchase from the conditional vendee having been made while the property was in this state. Section 870, Code 1942.
Headnote approved by McGehee, J.
APPEAL from the circuit court of Jackson County; L.C. CORBAN, J.
Mitchell Hill, for appellant.
The theory upon which appellant based his right to the peremptory instruction in the court below may be stated as follows:
(a) The contract upon which plaintiff based its right to the possession of the automobile in question was executed in the State of Alabama and being executed in that state, the construction of, as well as the effect to be given to, such contract is controlled by the laws of the State of Alabama and the construction of, as well as the effect to be given to, such contracts as determined by the courts of the State of Alabama is binding upon the courts of the State of Mississippi and will be followed by the Courts of the State of Mississippi.
(b) Under the law of the State of Alabama, the alleged "Conditional Sales Contract" upon which plaintiff based its right to the possession of the automobile in question merely constituted the retention of a lien upon the automobile in question to secure the payment of the balance of the unpaid purchase price of said automobile.
The alleged "Conditional Sales Contract" creating but a lien upon the automobile in question under the law of Alabama to secure the balance of the unpaid purchase price of said automobile, the lien so created having been executed outside the State of Mississippi and, therefore, a "FOREIGN LIEN" as far as the State of Mississippi is concerned, the alleged "Conditional Sales Contract" or a Certified Copy thereof, duly acknowledged or proved, not having been delivered to the Chancery Clerk of Jackson County, Mississippi for record and not having otherwise been recorded in the office of the Chancery Clerk of Jackson County, Mississippi, defendant being a bona fide purchaser of the automobile in question without notice of plaintiff's lien, actual or constructive, the automobile having been removed to Jackson County, Mississippi by and with plaintiff's permission and consent and having been permitted to remain there without objection thereby obtaining a situs in the State of Mississippi, it is defendant's position that every element is present in this case to warrant the full application of Section 870 of the Code of Mississippi 1942 in his favor estopping plaintiff in setting up the lien against the defendant.
That the instrument denominated "Conditional Sales Contract" upon which plaintiff based its right to the possession of the automobile in question created but a lien upon the automobile in question to secure the balance due on the purchase price of same appears to be settled under the decisions of the courts of Alabama: General Motors Acceptance Corporation v. Crumpton, 124 So. 870; General Motors Acceptance Corporation v. Hamlin, 149 So. 864.
Ebb J. Ford, Jr., for appellee.
As to appellant's citation of the two Alabama cases of General Motors Acceptance Corporation v. Crompton (Alabama, 1919), 124 So. 870, and General Motors Acceptance Corporation v. Hamlin (Alabama, 1933), 149 So. 864, an actual reading of these two cases shows that the Alabama Court called the type of conditional sale contract then in use a "lien" only for the purpose of requiring that when same was recorded the lienor was legally required, upon demand, under statutory penalty, to cancel same of record when it was paid. That was the full extent of the decision. The Alabama Code section therein involved was No. 9021 of the Alabama Code of 1923, as follows:
"Payments or partial payments of other recorded liens. — The owner or holder of any recorded lien other than those specified in the preceding section, who has received payment in full or partial payments of the debt so secured by the recorded lien, must, upon request in writing, enter on the margin of the record of such recorded lien, the amount and date of such payment and the amount of the debt which remains unpaid at that date which was so secured by the recorded lien."
This statute was construed in accord with its companion statute now appearing as Section 131, Title 47 of the 1940 Code of Alabama as follows:
"Conditional sales, leases, etc., to be recorded. — All other contracts for the conditional sale of personal property, by the terms of which the vendor retains the title until payment of the purchase money and the purchaser obtains possession of the property, and all contracts for the lease, rent, or hire of personal property on condition that it shall belong to him whenever the amount paid shall be a certain sum, or the value of the property, the title to remain in the other party until such sum or value shall have been paid, are, as to such conditions void against purchasers for a valuable consideration, mortgages, landlords with liens and judgment creditors without notice thereof, unless such contracts are in writing and recorded in the office of the judge of probate of the county in which the party so obtaining possession of the property resides, and also the county in which such property is delivered and remains; and if before the payment of the purchase money or the sum or value stipulated, the property is removed to another county, the contract must be again recorded within three months from the time of such removal, in the county to which it is removed; and if any such property is brought into this state while subject to such condition, the contract of sale, lease, hire, or rent, must within three months thereafter be recorded in the county into which the property is brought and remains; but where such contracts are for less than two hundred dollars in amount and also run for two years or less, and relate exclusively to household or kitchen furniture, goods, appliances or equipment, so long as such personal property remains in the county in which the vendor or lessor resides or has an established place of business, they need not be filed for record as provided in this section, and provided further that in counties having a population of more than 80,000 inhabitants according to the last federal census, or any subsequent federal census, no contract covered by this section for less than two hundred dollars in amount need by filed for record as provided herein."
As a matter of fairness it would certainly be only right to require a lienor to cancel his recorded lien when it had been paid. That is naturally nothing new in the law and is nothing extraordinary. Here in Mississippi we have a similar statute, Mississippi 1942 Code Section 876, requiring satisfaction to be entered of record by mortgagees when the mortgages have been paid, and further providing a $50.00 penalty for failure to enter such satisfaction.
Also, appellee points out that the conditional sale contract in the case at bar is different from the General Motors contract used in these Alabama cases, particularly in two respects: (1) The Universal contract (Record 9) recites that Dixon was a "customer", not a maker of a mortgage; and (2) This Universal contract recites that title to the car is "retained" instead of some sort of a reservation.
Naturally, a retention of title is far different from some sort of legal reservation. And this of course means that the customer is not furnished with any documentary muniments of title with which he might deceive innocent third parties. These facts and differences in the contracts involved serve also to differentiate the case at bar from the Mississippi Case of Superior Laundry v. American Laundry, 170 Miss. 450, 155 So. 186, as the contract in that Superior case was one where title was "reversed" and was merely a situation in which the Court held that a seller's rights to a purchase money lien were not waived by accepting a conditional sale contract.
On October 31, 1946, the Mobile Motors, an automobile agency of Mobile, Alabama, sold to Elzie Dixon of Pascagoula, Mississippi, a Chevrolet Sedan Automobile, 1941 year model, known as a Master Model, at and for the purchase price of $1,086.15, of which the sum of $294 was paid in cash, leaving a balance of $792.15 payable at the Mobile, Alabama, office of the appellee herein, Universal C.I.T. Credit Corporation, in fifteen successive monthly installments, under the terms of a conditional sales contract duly signed by the said purchaser, Elzie Dixon, at Mobile, Alabama, where the automobile was delivered to him at the time of the purchase thereof.
The conditional sales contract by its terms contemplated that the same would be forthwith assigned by the Mobile Motors to the appellee, Universal C.I.T. Credit Corporation, which was accordingly done at the same time the car was sold and delivered to the said Dixon. This contract disclosed on its face that the purchaser resided at Pascagoula, Mississippi, and the proof discloses without dispute that both the seller and its assignee of the contract then knew that the automobile was to be brought into this State to be kept and used here.
The primary question now involved on this appeal is whether or not the contract of sale in question has the effect of creating in favor of the holder thereof a lien under the Alabama law so as to render applicable Sec. 870 of the Mississippi Code of 1942, which provides that: "Mortgages, deeds of trust, and other liens on personal property executed out of this state shall only be binding on such property in or when removed into this state, as against creditors and bona fide purchasers without notice, from the time such mortgage, deed of trust, or other instrument, duly acknowledged or proved, or a duly certified copy of the record thereof, shall be delivered to the proper clerk in this state for record."
The contract provides that "title to the car is retained by the holder hereof . . ., until said balance is fully paid in money. The car shall be at customer's risk. The holder as creditor of customer is authorized to purchase fire, theft and such other insurance in such forms and amounts as the holder may require. Customer hereby assigns to the holder any moneys not in excess of the unpaid balance hereunder which may become payable under such insurance, . . ." It contains the further stipulation that if default is made in the payment of the indebtedness the holder of the contract may take possession of the automobile and sell the same at private or public sale, and that the net proceeds shall be credited on the unpaid indebtedness, and that the customer shall receive any surplus thereof. On the back of the said conditional sales contract there is endorsed a guaranty, duly executed by the Mobile Motors, in favor of the said finance company in the following words: "If you repossess the car, we shall upon demand pay you the then unpaid balance, provided the car is offered to us within 90 days after maturity of the earliest installment remaining unpaid."
Upon default in the payment of the greater part of the amount due as deferred payments, an affidavit in replevin was filed on behalf of the appellee in the Circuit Court of Jackson County at Pascagoula, Mississippi, against Elzie Dixon, Billy Ray Fisher and the appellant John W. Patterson, wherein the automobile was described as bearing motor number AA13044, being the same number appearing in the description thereof in the conditional sales contract. It was likewise so described in the writ of replevin, and in the judgment appealed from herein, which ordered the restoration of the automobile to the appellee, motor number AA 13044, or the payment of its value in the sum of $800.
The automobile seized by the officer under the writ of replevin bore the motor number of AC13044, and the proof disclosed that the number had not been changed thereon. The automobile was seized while in the possession of the appellant John W. Patterson, who had purchased the same in Jackson County, Mississippi, on March 15, 1947, from his codefendant Billy Ray Fisher under a written bill of sale reciting that it was free of all indebtedness. It was further shown that Billy Ray Fisher had likewise purchased the automobile on December 21, 1946, from Marlin Fisher.
This conditional sales contract had not been filed for record in the Chancery Clerk's office, at Pascagoula, in Jackson County where the car had been kept and used in the meantime, and it is undisputed that the appellant John W. Patterson was an innocent purchaser thereof for value without notice.
(Hn 1) If the conditional sales contract constituted a lien on the automobile within the meaning of the decisions of the Supreme Court of the State of Alabama where it was executed and where the automobile had been sold and delivered, it would follow that the appellant John W. Patterson would be protected as an innocent purchaser for value without notice for the reason that the lien, so executed out of this state, was not recorded as required by Section 870, of the Mississippi Code of 1942, supra, which we have hereinbefore quoted in full. Being an Alabama contract, the question of whether or not it would constitute a lien on the automobile as security for the unpaid purchase price is to be governed by the laws of that State.
In the case of General Motors Acceptance Corp. v. Crumpton, 220 Ala. 297, 124 So. 870, 871, the Alabama Court had under consideration the question of whether or not the said finance company was the holder of a lien and liable for a penalty of $200 provided for under Section 9021, Alabama Code of 1923, Code 1940, Tit. 47, Sec. 176, in favor of the purchaser of an automobile under a conditional sales contract (wherein the holder of such contract had retained title until the unpaid balance of the purchase price was paid) for the failure, upon request by such purchaser in writing, of the finance company to "enter on the margin of the record of such recorded lien, the amount and date of such payment and the amount of the debt which remains unpaid at that date which was so secured by the recorded lien."
The conditional sales contract there involved provided that "title to said property shall not pass to the purchaser until said amount (the unpaid balance of the purchase price) is fully paid in cash." The Court held that although the statute thus invoked by the purchaser of the automobile for a recovery of a penalty of $200 for the failure to enter on the margin of the record of a recorded lien the amount and date of payment, etc., was a highly penal statute, the finance company was liable as a lien-holder for the penalty so provided for. In that case the court said that under the stipulation of facts and on the face of the contract "the Farrell Motor Company sold and delivered to the plaintiff an automobile, for $892.50, of which sum $282.50 was paid in cash, and the balance secured by a written contract, denominated a `conditional sale contract,' which was written on a form furnished by the defendant, `General Motors Acceptance Corporation'; that it was contemplated by the parties that said contract, when executed, together with all of the rights of the seller in the contract, the debt secured thereby, and the property described therein, was to be immediately transferred to defendant, and was so transferred. The contract stipulates that the vendee shall remain liable for the debt in case of loss or destruction, that he shall insure for the benefit of the vendor, and, in the event he fails or refuses to do so, the vendor may insure the property and charge the cost thereof against the vendee and the property. The contract also stipulates that the vendor, or its assigns, in case of default on any of the payments or at any time it deems itself insecure, may repossess the property and sell the same, with or without notice, at the risk of the vendee, and apply the proceeds of the sale to the payment of the debt, and hold the vendee liable for any deficiency that may remain unpaid, and, in the event the proceeds of the sale are more than sufficient to pay the debt, the surplus shall be paid to the vendee.
"In the transfer executed by Farrell Motor Company to defendant, the former guarantees the payment of all deferred installments `and covenants in default of payment of any installment or performance of any requirement thereof by purchaser to pay full amount remaining unpaid to General Motors Acceptance Corporation upon demand.'
"Taking the contract as a whole, while it provides that `title to said property shall not pass to the purchaser until said amount is fully paid in cash,' the reservation is of a special property — as a charge on the property as a security for the balance due on the purchase price — vesting in the vendee the general and beneficial ownership with the right of possession and use until default, and though it be conceded that all the indicia of a mortgage are not present, the contract constitutes a lien within the meaning of section 9021 of the Code. Ex parte State (State v. White Furniture Co.), 206 Ala. 575, 90 So. 896."
Again, the Alabama Court in the case of General Motors Acceptance Corp. v. Hamlin, 25 Ala. App. 522, 149 So. 864, held that a conditional sales contract covering the sale of a Frigidaire, and securing the deferred payments due on the purchase price of the same, "served to constitute a lien upon the said Frigidaire within the purview of the Code section (9021, Code 1923 [Code 1940, Tit. 47, Sec. 176]) hereinabove quoted. General Motors Acceptance Corp. v. Crumpton, 220 Ala. 297, 124 So. 870."
However, the appellee cites and relies upon, among other cases, Harrison v. Broadway Motor Co., 128 Miss. 766, 91 So. 453, 454, 25 A.L.R. 1148, wherein a Tenessee seller retaining the title to an automobile for the balance of the purchase price due under a conditional sale, was permitted to recover the same in an action of replevin against the defendant Harrison in Itawamba County, Mississippi, an innocent purchaser for value thereof in this State. In that case this court stated that the seller "did not rely upon a Tennessee lien, but relied upon his title to the car to sustain him in recovering the possession thereof. The vendor of personal property can only convey such title as he has, and if the title be in another he conveys none, and the purchaser gets no title." The opinion of the court further declares that "Innocent purchasers for value without notice are not protected in this state or Tennessee against the owner of personal property. Burkhalter v. Mitchell [ McLendon], 107 Miss. 92, 64 So. 967. . . .
Certainly the owner of an automobile may follow it into this state and here enforce his right to possession as against a bona fide purchaser for value without notice the same as could be done between resident citizens of our state. Ownership of personal property is not required to be registered in this state, nor Tennessee, and the rule of caveat emptor applies."
In the report of the above mentioned case we are not advised as to all of the material provisions of the conditional sales contract but the contention of the seller in its brief therein is that the automobile was removed from Tennessee without the knowledge and consent of the seller, and in direct violation of the criminal law of that state, Shannon's Tenn. Code, Sec. 3670a2, and such contention is unchallenged. Whereas, in the case at bar the automobile was moved into this State with the knowledge and consent of the seller and to be permanently kept and used here. Nor are we advised by the briefs in the case now before us, or otherwise, that the Tennessee Court had then ever construed the contract which was before this court in Harrison v. Boardway Motor Co., supra, to constitute a lien as security for the unpaid purchase money, as the Alabama court has construed the contract similar to the one here involved to be.
In the Burkhalter case, cited, as above shown in Harrison v. Broadway Motor Co., supra, the court pointed out that the contest there was between the maker and the payee of a retained title note, although the opinion stated by way of dicta that contracts of this kind are enforcible even against innocent purchasers for value without notice where there is a bona fide and actual conditional sale. Moreover, the retained title note was executed in this State where the sale and delivery of the mule in question took place. There was no question there in regard to the failure of the holder of a conditional sale contract executed out of this state to have the same recorded in this state in order to be protected against bona fide purchasers here without notice. In other words, the right of a vendor of personal property in this state, under a retained title contract executed here, to recover possession of same either against the purchaser or an innocent purchaser thereof for value is not involved in the case now before us.
We are, therefore, of the opinion that since a conditional sales contract, similar in all material respects to the one involved in the instant case was construed by the Supreme Court of Alabama in the case of General Motors Acceptance Corp. v. Crumpton, supra, to constitute a lien, the title being retained as security, the rights of the appellant John W. Patterson as an innocent purchaser for value are protected by the said Section 870, Mississippi Code of 1942.
We, therefore, do not reach the question as to whether or not this replevin suit would lie without the conditional sales contract being first reformed so as to describe the automobile as motor number AC13044, which was evidently intended to be described therein and which was actually seized under the writ of replevin herein.
The judgment of the trial court must be reversed and the suit dismissed on the sole ground that the purchaser of the automobile is protected under the said Sec. 870, Mississippi Code 1942, as an innocent purchaser for value without notice.
Reversed and judgment here for the appellant.