Clarke Bros. v. McNatt

26 L.R.A.N.S. 585, 64 S.E. 795, 132 Ga. 610, 1909 Ga. LEXIS 371

• Court: Supreme Court of Georgia
• Decided: May 13, 1909
• Status: Published

Opinion

Lumpkin, J.

(After stating the foregoing facts.)

1. Objection was made to the admission of the contract in evidence, on the ground that it was not signed by McNatt. Section 2776 of the Civil Code, on the subject of conditional sales, declares that “every such conditional sale, in order for the reservation of title to be .valid as against third parties, shall be evidenced in writing, and not otherwise. And the written contract of every such conditional sale shall be executed and attested in the same manner .as mortgages on personal property.” It is not required that the vendor as well as the vendee shall sign the. written instrument. Smith v. DeVaughn, 82 Ga. 574 (9 S. E. 425). If the personal property is delivered into the possession of the vendee, the object is to provide a method of putting third parties on notice that the apparent title thus evidenced by possession is not in fact such, but that the title'rests in the vendor until the condition of the sale shall be fulfilled. As against creditors or persons claiming under the vendee it does not fequire the signature of the vendor. The contract is in some degree analogized, in the section of the code, to' a mortgage. An instrument of the latter kind is signed by the mortgagor, and a bill of sale to secure a debt is signed by the debtor. If the property should remain in the possession of the vendor, and it were sought to set up notice as against his creditors or persons holding under him, a different question might'be- presented.

The instrument in the présent case contains some indication that the vendor should have signed it, as agreements by him are stated- in it; but in the latter part it apparently contemplates only the signature of the vendees. If a contract is intended -to be signed by-both parties, and so appears on its face, it is not complete until thus signed. Delaware Ins. Co. v. Pennsylvania Fire Ins. Co., 126 Ga. 388 (55 S. E. 330), and citations. But as it is'not'clear that both vendor and vendees intended to sign the contract before it should become effective, and as both have acted under the instrument, and the lumber has been cut and sold by the latter, a failure of the vendor to sign will not be held to operate so as to convey complete title to the vendees, who did sign the instrument, which was duly attested and recorded.

2. The court charged the jury as follows: “If, however, notwithstanding the original agreement between McNatt and McBride and Petersen, [another was made] bjr the terms of which the original agreement in that respect was varied, and that McNatt should take the money, and did take the money received from timber sold by McBride and Petersen, and by their direction or consent applied it first to the extinguishment or partial payment of any debt due to McBride and Company, why, McNatt would have the right to so apply it, if it was with the consent and direction of McBride and Petersen; and if he did so apply it, whatever portion was left after being so applied to’ the indebtedness of McBride and Company, the rest would be applied to the payment of the lien. You will ascertain how much has gone to- the paymént of the original price of .the timber. If sufficient to discharge, it, why, as I say, the plaintiff can not recover. If not sufficient to discharge it, provided that you find that the subsequent contract has been satisfactorily proven, why, then the plaintiff should recover, because his lien would still be in existence; he would have a tight ahead of the rights of Clarke Brothers, or any other purchaser of timber.” This charge was erroneous. If the reservation'of .'title was good as against purchasers of the timber from McBride and Petersen, and if they were charged with notice of the contents of the contract, and the conditions and agreements contained therein, to .allow those conditions and agreements to be varied as against them by a parol agreement between' McÑatt and McBride and Petersen wonld be substantially to allow a" parol reservation of title instead of a written one. The ¿aturé of this contract of conditional sale will be considered later; but for the present it is enough to say that .‘if McNatt could rely on the written contract as affecting the rights of purchasers from McBride and Petersen, he could not' also injuriously affect those rights by means of a subsequent parol agreement or understanding with his immediate vendees. Suppose that Clarke Brothers had bought enough of the timber to have paid the entire purchase-money to McNatt after deducting what should go to the payment of expenses, and had made a cheek payable to McNatt in strict accordance with the terms of the written agreement between' him and McBride and Petersen. McNatt could not, with the assent or agreement of McBride and Petersen, have applied such a payment to other indebtedness than the purchase-money of the timber, an'd still háve recovered the timber from Clarke Brothers. Tinder the charge of the court above quoted, this would have been possible. That payments by purchasers from McBride and Petersen were made at different times, or that McNatt treated checks not made to his order as sufficient by accepting and applying them, wonld not authorize him to insist on the terms of the written instrument as against purchasers from McBride and Petersen, even though bona fide and without notice other than sUch as the record of the paper might carry, and at the same time vary the terms of such instrument by parol agreement with McBride and Petersen, and set up the variance also as against the rights' of such purchasers, who were not shown to have had any knowledge thereof or to have acquiesced therein. The error contained in the charge above set out entered into several other portions of the charge which were made grounds of the motion for a new trial, It 'was hot an ordinary question of application- of payinénts between debtor and creditor, which could' be controlled by agreement, or when' in the absence of agreement the creditor could make the application, or in the absence of this the law would make it for the parties. Civil Code, §3722. It was an effort to setup the' strict terms of a written contract between vendor and vendee,' tnth 'reservation of title in the former, against third persons, but' to bind such persons also by á departure from'the contract. If McNatt received enough from sales of timber by McBride and, Petersen to pay the purchase-money in full in accordance with the terms of the written agreement,- he could not set up as against third parties an agreed diversion of such purchase-money to the payment of other indebtedness of McBride and Petersen to him or to the firm of which he was a member.

3, 4. It was urged that the verdict was contrary to law and evidence,, because, under the undisputed evidence and under the written instrument which was introduced, McNatt was not authorized to recover. In Jordan v. Jones, 110 Ga. 47 (35 S. E. 151), where a landowner agreed with a laborer to allow the latter to cut timber from the land and transport.and deliver the logs to a second person, who, by agreement, was to reserve from their sale a certain amount per thousand feet for the landowner, the contract was sustained, and it was held that the title to the logs did not pass to the laborer; and that when he abandoned the contract and left on the land certain logs which had been cut by him, they were not subject to levy as his property. It was said that the contract was a peculiar one, and that the relation between the landowner and the laborer had some of the elements of an executory agreement, some of a partnership, some of a conditional sale, and some of a bailment. A contract of sale of growing trees concerns an interest in realty. Corbin v. Durden, 126 Ga. 429 (55 S. E. 30). An agreement for the sale of property attached to the soil, but which -is to be severed therefrom and converted into personalty before the title to the property is. to pass to the purchaser, is an executory sale of personal property, and not of an interest in land. Graham v. West, 126 Ga. 624 (55 S. E. 931). Under these.rulings, the contract now before us should be treated as dealing with personal property rather than with realty, at least as to the timber which was to be cut and sold. It was not a bailment, but a sale. It was not a method of paying persons, who should cut the timber and prepare it for market, for their'services, as in Jordan’s case, supra.

Aside from legislative acts regulating conditional sales and their record, such sales have been productive of much litigation. Starting with the maxim that no one can convey a title which he does not own,' a variety of modifications and limitations of its .application have resulted from the conduct of the parties. It was at one time a subject of controversy as to whether an owner of personal property who placed it in possession of another under a contract of conditional sale, and thus invested the purchaser with prima facie evidence of ownership, could assert his title as against a bona Me purchaser without notice from such person, or against a creditor of the person so entrusted. As to bailments, it was clear that the bailor could not be held to have lost his property by merely entrusting it to the bailee for a specific purpose. As to conditional sales, the view generally prevailed, that, while possession of personalty was prima facie evidence of ownership, it was only prima facie so, and was subject to be rebutted by proving the actual title; and that therefore, where a conditional sale was made with reservation of title in the vendor until the condition should be performed, such as the payment of purchase-money, the mere delivery of possession to the vendee, without more, did not destroy the right of the vendor to assert his title even as against a bona fide purchaser without notice, from the vendee. But if the vendor went further and conferred upon the vendee the actual or apparent right of sale, the right of a bona fide purchaser without notice would prevail. Thus in Leigh v. Mobile & Ohio R. Co., 58 Ala. 165, Brickell, C. J., said: “Another class of cases forming an exception to the general rule is, when the owner, by his own act or consent, has given another such evidence of the right to sell, or otherwise dispose of his goods, as according to the customs of trade, or the common understanding of the world, usually accompanied the authority of sale, or of disposition. Then, if the person entrusted with the possession of the goods, and with the indicia of ownership, or of authority to sell, or otherwise dispose of them, in violation of his duty to the owner sells to an innocent purchaser, the sale will prevail against the right of the owner. He ought to bear the loss which may follow from his misplaced confidence, rather than the bona fide purchaser, who relied on the evidence of propertj7, or of authority with which he clothed the possessor.” In 1 Mechem on Sales, §601, it is said: “But the rule permitting the conditional vendor to retake his goods in case of default, even from a bona fide purchaser from his conditional vendee, very obviously should not, and does not, apply in those cases in which the goods have been delivered to the conditional vendee for the. very purpose of being resold to such a purchaser; as where a retail dealer' obtains goods from a wholesale dealer upon the agreement that the title to the goods as a bulk shall remain in the latter, but the retail dealer is impliedly, if not expressly, permitted to sell from the bulk in the usual course of trade. ' A sale of the goods in bulk might be deemed unauthorized and pass no title, but the retail purchaser in the usual course of business would, where such resales were expressly or impliedly authorized, obtain a good title, though the retail dealer might fail in paying for the goods.” See also, on the general subject, Winchester Wagon Works and Mfg. Co. v. Carman, 109 Ind. 31, 9 N. E. 707, 58 Am. R. 382 (a case involving a conditional sale-of a car-load of twenty wagons by a manufacturer to a dealer); Columbus Buggy Co. v. Turley & Parker, 73 Miss. 529 (19 So. 232, 32 L. R. A. 260, 55 Am. St. R. 550); Fitzgerald v. Fuller, 19 Hun (N. Y.), 180; Ludden v. Hazen, 31 Barb. (N. Y.) 650; Wilder v. Wilson, 16 Lea (Tenn.), 548; Rogers v. Whitehouse, 71 Me. 222; Devlin v. O’Neil, 6 Daly (N. Y. Com. Pl.), 305; Brinton v. Gerry, 7 Ill. App. 238; McCombs v. Guild, Church & Co., 9 Lea (Tenn.), 81; Pickering v. Busk, 15 East, 38 (a ease which has been thought to go quite far as to what would constitute an implied authority to sell); Loving Publ. Co. v. Johnson, 58 Tex. 273 (4 S. W. 532). Some of these authorities apply the rule in favor of creditors as well as bona fide purchasers.

Under our present law in regard to the execution of contracts of conditional sale (codified in §2776 of the Civil Code), it is provided as follows: “Whenever personal property is sold and delivered with the condition affixed to the sale, that the title thereto is to remain in the vendor of such personal properly until the jrarchase-priee thereof shall have been paid, every such conditional sale, in order for the reservation of title to be valid as* against third parties, shall be evidenced in writing, and not otherwise. And the written contract of every such conditional sale shall be executed and attested in the same manner as mortgages on .personal property; as between the parties themselves, the contract as made by them shall be valid, and may be enforced, whether evidenced in writing or not.” By section 2777, conditional bills of sale are required to be recorded within thirty days from their date. This law provides for the making of a sale with reservation of title in the vendor until the purchase-money shall have been paid, and that such contracts may be good not only between the 'parties but also against third parties, even innocent purchasers without actual notice, if they are executed and recorded in accordance with the statute. It does not provide generally for affecting the world with notice of all contracts of bailment, agency or partnership. A contract for the retention of title in a vendor until payment, though the possession of the- chattel is delivered to the vendee, normally contemplates a lack of authority in the vendee to sell until payment, at least to sell more than such interest as he has. Authority to sell the entire title to a third party is inconsistent with its retention by the vendor. Where, therefore, a vendor, who reserves title until payment, confers upon his vendee the power to sell the chattel, he confers a power to destroy his retention of title.

Can a vendor of personalty, who retains title until payment of the purchase-money, authorize the vendee to sell all or a part of the property, and impose upon the purchaser the duty of seeing that he is paid the proceeds of the sale ? And will it bind a bona fide purchaser, without notice, from the original vendee, if such a provision is inserted in and recorded as a part of the contract of conditional sale? In Guill v. Northern, 67 Ga. 345, a deed conveyed land to the wife of the grantor for her use for life, together with her children, and provided that at her death it should be divided among the children. It contained a power in the wife, “at any time in her discretion, to sell and convey the said property by deed, provided the proceeds of such sale are invested in other real estate for the uses expressed.” It was held that a bona fide purchaser from the wife acquired a good title, and was not bound to see to the application of. the proceeds. In Tucker v. Mann, 124 Ga. 1003 (58 S. E. 504), one person executed to another a promissory note which contained a clause conveying to the payee the title to a certain mule as security. The payee had the note duty recorded. Before it was fully paid, he authorized the debtor to sell the mule and turn the proceeds of the sale over to him. The debtor sold the mule, but failed to pay the proceeds to the creditor, and the latter brought an action of trover against the purchaser. The court charged that if the plaintiff gave the maker of the note permission to spll the mule, coupled with the condition that the maker was to pay him the money received from the sale, and the defendant bought the mule in good faith without knowledge of this condition, then the plaintiff could not recover; and that the •defendant would not be required to see that the condition was complied with, and would get a good title to the mule regardless ■of it. This court held that the charge was not erroneous, and that, the evidence showing the fact as stated, a verdict for the defendant was proper. It will be seen that in the ease of Guill v. Northern, supra, the recorded deed included the power of sale and ■conveyance, “provided” the proceeds should be reinvested. But this attempt to place the burden of seeing to the reinvestment upon the purchaser was held not to accomplish that result. In the •case of Tucker v. Mann, supra, the-recorded contract, in the nature of a bill of sale to secure payment of a debt, contained no power of sale at all. The debtor therefore had no authority to make any Sale except such as was given him outside of the writing. The creditor undertook to make the authority to sell conditional upon his receiving the money. But this court held that, as,against ■a bona fide purchaser without notice, he could not do so. In the ■case before us the effort was made to authorize the vendee in a ■conditional sale to prepare the lumber and carry it to a distant market and there sell it, but to impose on the purchaser substantially the duty of seeing that the original vendor received the proceeds. This was not stated in so many words, as in the two cases above cited, but the effort was made to accomplish the same result by saying that the vendees under the conditional sale might sell to a buyer who would make the cheek payable to the original vendor. The law does not contemplate that one who reserves title as security can authorize his vendee to sell the property, but charge a bona fide purchaser without notice with the duty of seeing that he receives the proceeds; nor does the record of the contract of conditional sale convey notice to purchasers under the original vendee of any such duty or impose it upon them. If McNatt could, by inserting such a provision in his contract, make the validity of the title acquired by purchasers under McBride and Petersen depend ■on their making payment in the form of a check to him, there would seem to be no reason why he could not say that they would acquire title if they made payment in gold, or in bills of the denomination of one hundred dollars, or in any other form which ho might think likely to reach him through the hands of the vendees whom he had authorized to make the sale.

'It also appears 'from the evidence that MeNatt did not require of McBride and Petersen a strict compliance with this portion of the agreement, even as between themselves, but recognised drafts- or ehejeks not payable to him as sufficient in sales of other portions-of the lumber. It may be a question as to whether he did not waive a strict compliance even as between him and Ms vendees. Whether Clarke Brothers were bona fide purchasers without notice,, aside from the mere record of the contract, is a question of fact, and we deem it best to return the case for a trial upon the issues,, under proper instructions from the court.

Judgment reversed.-

All the Justices concur.