Champa v. Consolidated Finance Corp.

110 N.E.2d 289, 231 Ind. 580, 36 A.L.R. 2d 185, 1953 Ind. LEXIS 152

• Court: Indiana Supreme Court
• Decided: January 30, 1953
• Docket: 29,011
• Status: Published

Opinions

Draper, J.

This is an action in replevin, brought by the appellee finance company, to obtain possession of a certain DeSoto automobile in the possession of appellant, complaining that the appellant unlawfully detained the same from said appellee, the conditional vendor’s assignee.

Appellant filed answer under the rules, and also filed a cross-complaint against the appellee and one Barnett, conditional vendee of the vehicle, which alleged that the appellant held the automobile for a mechanic’s and repairman’s bill and storage lien ordered and authorized by the lawful owner, and praying a judgment for the amount of his bill and that the lien be foreclosed and the automobile ordered sold to satisfy the lien.

The trial court found for the appellee finance company, awarding nominal damages and possession of the vehicle.

The court made no finding on appellant’s cross-complaint. The Appellate Court nevertheless reviewed the case (98 N. E. 2d 925) pursuant to the provisions of Rule 2-8.

The appellant assigns as error the overruling of his motion for new trial, which specifies that (1) the decision and finding of the court is not sustained by sufficient evidence, and (2) the decision and finding of the court is contrary to law.

The evidence shows that on January 7, 1949, Otis Barnett purchased a 1941 DeSoto sedan from an Indianapolis automobile dealer, paying part cash and entering into a conditional sale contract with the seller for the balance. The conditional sale contract, which was immediately assigned by the seller to the appellee finance company, provides that the title to said motor vehicle shall remain in said seller or his assignee until the contract is fully performed, and that the vendee shall not attempt to sell or encumber said vehicle during the life of the contract. The contract is silent as to the making of repairs on the automobile or as to the maintenance of said vehicle, in good operating condition.

On January 11, 1949, Barnett’s application for title and his newly issued certificate of title both contained the conditional lien of the appellee finance company. The certificate of title was mailed to and retained by the company. Barnett used the car for pleasure purposes only.

In September, 1949, the automobile was taken to appellant’s garage and the repairs were ordered by Barnett. This was done without the knowledge or authorization of appellee finance company. The cost of the repairs was higher than Barnett could pay and he notified the finance company that the car was held at the appellant’s garage for the repair bill, that he was defaulting on the contract and releasing all interest in the vehicle. Barnett did not advise the appellant of the existence of any lien on said vehicle when he ordered the repairs. The appellant did not ask him concerning that. The appellant made no attempt to ascertain whether such a lien existed.

At the time Barnett took the automobile to appellant’s garage he still owed the finance company more than $400 on the conditional sale contract. The repairs were extensive. Among other things the appellant tore down the engine and replaced the crank shaft. The repair bill was $206.33. On December 31, 1949, four months after the car was repaired, it was sold at public auction for $175.

The question presented is whether the appellee finance company was entitled to possession of the automobile by virtue of the fact that it held the conditional sale contract thereon, or whether the appellant, who was claiming possession by virtue of an unpaid repairman’s and mechanic’s lien on the automobile, was entitled to retain possession thereof.

There is no claim that the appellant relied upon or in any way undertook to secure or enforce a lien according to the provisions of Acts 1927, ch. 189, being Burns’ Stat., §43-801 et seq. He relies for reversal upon the proposition that Barnett, the conditional vendee, was the “owner” of the car, and the appellant therefore had a mechanic’s lien thereon because of the provisions of Acts 1925, ch. 213, §56, being Burns’ Stat., §47-552. That section provides in part that a mechanic who does repair work on an automobile at the request of the owner thereof is given a lien on the vehicle to the reasonable value of the charges for such labor, materials, storage or repairs, and if the charges are not paid within thirty days after the vehicle is left for repairs, the mechanic may advertise and sell the vehicle to the highest bidder for cash, deduct his charges and advertising costs and pay the overplus to the owner. That act provides in §1 thereof, that “ ‘Owner’ shall be construed to also include any person, firm, association or corporation renting or leasing a motor vehicle and having exclusive use-thereof for a period longer than thirty (30) days.”¹

To establish his status as the “owner” of the vehicle under §47-552 the appellant relies on Acts 1939, ch. 48, §11, being Burns’ 1952 Repl., §47-1811 (d), which defines the “owner” of a motor vehicle as follows:

“Owner. A person who holds the legal title of a vehicle, or in the event a vehicle is the subject of an agreement for the conditional sale or lease thereof with the right of purchase upon performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee, or in the event a mortgagor of a vehicle is entitled to possession, then such conditional vendee or lessee or mortgagor shall be deemed the owner for the purpose of this act.” (Emphasis supplied.)

But that definition of “owner” is laid down for the express purpose of the 1939 Act, which act, as expressed in the title, is for the purpose of regulating traffic on highways, defining certain crimes in the use and operation of vehicles, and other related subjects. It has nothing to do with the 1925 Act concerning the lien of a mechanic for repairs to motor vehicles.

The definition of “owner” found in Acts 1945, ch. 304, §2(o), being Burns’ Stat., §47-2402 (o), is much like the definition of owner as found in §47-1811 (d) above referred to. It too is a definition of “owner” which has been furnished for the sole purpose of the Act of which it is a part, which Act creates a bureau of motor vehicles, and provides for the registration and licensing of vehicles and the operators thereof. No mention of liens of mechanics is made in either the title or body of the 1945 Act.

In construing statutes, words and phrases are given their plain, ordinary and usual meaning unless a different purpose is clearly manifest by the statute itself. R. L. Shirmeyer, Inc. v. Ind. Revenue Bd. (1951), 229 Ind. 586, 99 N. E. 2d 847. The word “owner” does not ordinarily include a conditional vendee. If it did, it would have been unnecessary for the legislature to define a conditional vendee as an “owner” in the enactments above mentioned. Recognition of the fact that a conditional vendee is not an “owner” is found in §2 of the Uniform Conditional Sales Act, Burns’ Stat., §58-802, which provides that the buyer “shall . . . have the right to acquire the property in the goods on the performance of the conditions of the contract.” We hold that Barnett, the conditional vendee, was not the “owner” of the automobile within the meaning of Acts 1925, ch. 213, §56, being Burns’ Stat., §47-552. See Hartford Accident & Indemnity Co. v. Spofford (1927), 126 Maine 392, 138 Atl. 769; General Motors Acceptance Corporation v. Sutherland (1932), 122 Nebr. 720, 241 N. W. 281; Cache Auto Co. v. Central Garage (1923), 63 Utah 10, 221 Pac. 862, 30 A. L. R. 1217. In Sundin v. Swanson (1929), 177 Minn. , 225 N. W. 15, relied on by appellant, the statute extended a lien right to those furnishing services at the request of the owner or legal possessor of any personal property. Similar provisions are found in the statutes of several states. It must be presumed that, had our legislature intended that others than owners should come within the protection- of §47-552, supra, it would have said so.

As above stated, the appellee finance company had no actual knowledge or notice of the making of the repairs. It did not expressly authorize or consent to the making of them. The appellant insists that his right to the satisfaction of his claim is superior to the rights of the appellee as conditional vendor, on the theory that the appellee impliedly consented to the making of the repairs.

As a general rule, the rights of an artisan making repairs to a chattel at the instance of the conditional vendee are subordinate to those of a conditional vendor. Partlow, etc., Car Co. v. Stratton (1919), 71 Ind. App. 122, 124 N. E. 470; General Motors Acceptance Corporation v. Sutherland, supra; Restatement “Security”, §76. But in some jurisdictions, including this one, it has been recognized, usually in chattel mortgage cases, that the rights of the artisan may be superior to those of the mortgagee where the mortgagor has impliedly consented to the making of the repairs. Personal Finance Company v. Flecknoe (1940), 216 Ind. 330, 24 N. E. 2d 694, and cases cited. Both parties to this appeal assert that the logic of the chattel mortgage- cases applies equally to conditional sale transactions so far as the element of implied consent is concerned, and it has been so held. Partlow, etc., Car Co. v. Stratton, supra; Hartford Accident & Indemnity Co. v. Spofford, supra.

In Personal Finance Company v. Flecknoe, supra, the authorities were reviewed and the following was evolved as the applicable rule of law in this jurisdiction:

“The majority of the courts have granted priority to the mechanic as against the mortgagee only in those cases (1) where the repairs would constitute a real benefit to the mortgagee by preserving the chattel covered by the mortgage, (2) where the mortgagee had a beneficial interest in the continued use of the mortgaged chattel and the repairs were necessary to such continued use, or (3) where the mortgagee had actual knowledge of the repairs being made or there were circumstances, or language in the mortgage, from which such knowledge could be presumed. An artisan claiming priority for his lien must bring his case within one of these classes. The burden is upon him to show facts from which the consent of the mortgagee may properly be implied.” p. 338, 339 of 216 Ind.

The chattel mortgage in that case was silent upon the subject of any repairs being made on the automobile, as was the conditional sale agreement in this case. The 1931 automobile involved in that case was “badly in need of repairs” and “could no longer be operated or driven about as an automobile.” The repair bill was $67.76. It was not paid. The mechanic retained possession of the car and the mortgagee filed suit to replevy it.

After announcing the rule above quoted, the court said:

“In the instant case the evidence fails to show such a benefit to the mortgagee as to justify the court in presuming its consent to the making of the repairs and to the subordination of the mortgage lien. There is no showing that the repairs were necessary to preserve the automobile for the mortgagee. The evidence did show that the repairs were necessary to the continued use of the automobile but there was no attempt to show that the continued use of the automobile would earn funds with which to pay the mortgage debt or would in any other manner benefit the mortgagee.

“The mere fact that it might be inferred that the repairs in question added some value to the automobile is not sufficient. If this were enough a mechanic might paint the automobile and add all new tires. This would undoubtedly increase the value of the automobile but the cost of such repairs made in 1937 on a 1931 automobile might well amount to more than the total value of the automobile after such repairs were made. To imply the consent of a mortgagee to the making of repairs which might cause him to have no margin of value left for his security would be beyond reason. The repairs must be reasonably necessary for the preservation of the automobile or necessary to a continued use in which the mortgagee has an interest.

“There is no contention in this case that the mortgagee had actual knowledge of the making of the repairs, nor is there any provision in the mortgage requiring repairs to be made by the mortgagor. It is contended by the appellee that since the automobile was left in the possession of the mortgagor it must be assumed that it would be used by him and that, therefore, his consent to the making of such repairs as were necessary to keep it useful must be assumed. With this contention we can not agree. To imply the consent of the mortgagee we must have a state of facts where we might assume that if the mortgagee knew all of such facts he would give his consent. It would be a violent assumption to assume that the mortgagee would consent to the making of repairs which might endanger his security when such repairs were only for the purpose of continuing a use in which he, as mortgagee, was not interested. Nor do the facts of this case require us to grant the mechanic priority for his lien on any ground of commercial convenience or necessity.”

We have quoted so extensively from the Flecknoe case because we feel that the language there used is peculiarly applicable to this case and that the application of that language to the facts of this case is decisive. It is apparent that the appellant has not brought his case within one of the classes outlined in the rule laid down in the Flecknoe case, and that the appellee can not be held to have impliedly consented to the making of the repairs.

There is one important difference, however, between the Flecknoe case and the case at bar. That case had to do with a chattel mortgage under a statute which fixed priorities, and the chattel mortgage in that case had been duly recorded prior to the making of the repairs. This case involves a conditional sale contract which was not recorded. Therefore, the constructive notice afforded by the recording of the mortgage in that case is absent here.

In adopting the Uniform Conditional Sales Act, the legislature of this state omitted that part of the Uniform Law which provides for the filing of conditional sale contracts. Compare Burns’ Stat., §58-801 to 829 with §5 of the Uniform Act as set out in 2 U. L. A. at p. 6. At common law, and in the absence of statute requiring it, the filing or recording of a conditional sale contract is not essential to its validity against third persons, and it is generally held that statutes which provide for the filing and recording of chattel mortgages, deeds of trust, and bills of sale do not require the filing or recording of conditional sale contracts. 78 C. J. S., Sales, §577, p. 300, and authorities cited.

But there are statutory provisions in Indiana which pertain especially to security interests in automobiles. Acts 1945, ch. 304, §11, being Burns Stat., §47-2501, provides for the issuance of a certificate of title upon application which shall contain a statement of any liens or encumbrances thereon. “The certificate of title shall be delivered to the owner (as defined in §47-2402 (o)) in the event no lien or encumbrance appears thereon. Otherwise the certificate of title shall be delivered to the person named to receive the same in the application for such certificate.” Sec. 15 of the Act, being Burns’ Stat., §47-2505, makes it unlawful for one having possession of a certificate of title by reason of having a lien or encumbrance thereon, to refuse to deliver such certificate to the owner upon the satisfaction or discharge of the lien or encumbrance.

It has been said this law was enacted for the protection of the owner of motor vehicles, of those holding liens thereon, and of the public. Guaranty Discount Corp. v. Bowers (1932), 94 Ind. App. 373, 158 N. E. 231; Nichols v. Bogda Motors (1948), 118 Ind. App. 156, 77 N. E. 2d 905. There can be no doubt that the above quoted provisions were intended to furnish a method whereby artisans, as well as owners, conditional vendors, mortgagees, prospective purchasers, and perhaps others could be protected in transactions involving motor vehicles. “Such certificates do not convey title and they are not conclusive proof of title in him who is therein- designated as the owner. Meskiman v. Adams (1925), 83 Ind. App. 447, 149 N. E. 93. They are, however, evidence of title upon which purchasers and others interested have come to put great reliance.” Nichols v. Bogda Motors, supra.

It is common knowledge that bankers and finance companies generally retain possession of the certificate of title upon which their interest in the vehicle is shown.² They do so, of course, to avail themselves of the protection afforded them by the terms of the statute.³ Implicit in this legislation is the idea that when one in possession of an automobile is unable to exhibit a certificate of title therefor, artisans and others are put upon notice that the possessor of the vehicle may have no title thereto, or that his title may be subject to the prior rights and interests of others.⁴

In this case Barnett did not have the certificate of title in his possession. He did not claim to have it. He was not asked whether he had it nor was he asked to produce it. The appellant made no effort to ascertain whether a lien existed. The appellee did everything it could do to protect itself and others. Availing itself of the law, it retained the certificate of title upon which its interest had been noted. If the appellee had not protected itself here, we know of no practical way under our law by which it could do so.⁵ The appellant failed to take the simple precaution of determining, at no inconvenience or expense to himself, whether he could safely invest time and materials in the automobile. We must hold that the appellant was chargeable with notice of the prior rights of the appellee finance company.

Even if it could be considered that the appellant is an innocent party despite his lack of care, we think the rule should prevail, as it has prevailed in the past in these cases, that where one of two innocent parties must suffer a loss, it must be borne by him whose act or omission made the loss possible. Nichols v. Bogda Motors, supra; Guaranty Discount Corp. v. Bowers, supra; LaPorte Discount Corp. v. Bessinger (1930), 91 Ind. App. 635, 171 N. E. 323; Universal C. I. T. Credit Corporation v. Walters (1949), 230 N. C. 443, 53 S. E. 2d 520. Or, as better stated to fit the circumstances of this case: “(W)here one of two innocent persons must suffer a loss, it should fall on him who, by reasonable diligence or care, could have protected himself, rather than on him who could not.” Nat. Savings Bank v. Creswell (1880), 100 U. S. 630, 25 L. Ed. 713.

We conclude that the rights of the appellant, under the issues joined and evidence presented, must be held inferior to those of the appellee, and that the judgment must be affirmed.

1 No question concerning the constitutionality of this statute has been presented or considered.

2 See 25 Ind. Law Journal, pp. 337, 339.

3 In Associates Investment Co. v. Shelton (1952), 122 Ind. App. 384, 105 N. E. 2d 354, the court said that a finance company, by failing to have its lien shown on the certificate of title, which would have safeguarded its interests, is estopped from asserting ownership and legal title against innocent purchasers.

In Central Finance Co. v. Garber (1951), 121 Ind. App. 27, 97 N. E. 2d 503, the certificate of title, bearing the assignment to the purchaser and showing appellant’s lien thereon was delivered to the purchaser of the vehicle. By erasing the lien and making a false affidavit the purchaser obtained a new certificate of title issued in his name which showed no lien. The purchaser sold to an innocent third party for value. Held that the appellant, having protected himself as best he could under the law, would prevail as against the innocent third party.

4 See exhaustive discussion of the problem at hand in Vol. 16 Law and Contemporary Problems, p. 197.

5 The annual volume of sales of these contracts to bankers, finance companies and others in Indiana approximates $100,000,-000. See Department of Financial Institutions v. Holt (1952), 231 Ind. 293, 108 N. E. 2d 629.