Mauldin v. Milford

121 S.E. 547, 127 S.C. 508, 1924 S.C. LEXIS 147

• Court: Supreme Court of South Carolina
• Decided: February 12, 1924
• Docket: 11425
• Status: Published

Opinion

The opinion of the Court was delivered by

Mr. JusticP Marion.

The defendant, Milford, by an exchange of property, acquired from one Charley Jones an automobile upon which there was an outstanding mortgage given by Jones to J. E. Tate. Before maturity of the mortgage debt, Milford sold or traded the car to the plaintiff, W. D. Mauldin. Thereafter Mauldin sold or traded the car to the plaintiff, George Shelor, who thereafter sold or traded the car for value to the plaintiff, W. J. Edwards. In the hands of Edwards, as the result of suit, possession of the property was recovered by the personal representative of J. E. Tate, holder of the chattel mortgage, which was outstanding when the defendant, Milford, acquired and disposed of the car. In, that suit to dispossess Edwards, the defendant, Milford, was a witness for the Tate estate. The defendant adduced evidence in the present case, to the effect that he acquired and sold the car free from the lien of the Tate mortgage, in that the mortgagee had authorized the sale by the mortgagor, The only evidence bearing directly upon the value of the car sold or the amount of damages sustained by any one as the result of the taking of the property under paramount title is the testimony of Shelor to the effect that he had been damaged $550.00, in that he was liable to Edwards, his immediate vendee, in that amount, and thought he had paid Edwards $300.00. There is no evidence that the defendant expressly warranted the title in selling to his immediate vendee, Mauldin, or that he made any representation as to title.

In that state of facts, what are the legal rights and remedies of the several parties ? The record of the trial summarized in the preliminary statement, indicates that an attempt to answer the foregoing question in the form of a statement of more or less elementary general principles may not be regarded as a work of supererogation. While the appellant’s exceptions, seven in number, are not properly framed, in that each contains more than one proposition of law or fact, in violation of Section 6, Rule 5, of this Court (Cudd v. Moore [S. C.], 119 S. E., 837), in the following discussion all points embraced in the exceptions which are deemed material to a determination of the appeal upon its merits will be disposed of.

The sale of a personal chattel in possession for a fair price implies an affirmation by the seller that the chattel is his, and, therefore, he warrants the title, unless it be shown by the facts and circumstances of the sale that the seller did not intend to assert ownership, but only to transfer such interest as he might have had in the chattel sold. Benjamin on Sales (2d Am. Ed.), § 639; 24 R. C. L., 182, § 454. Moore v. Lanham, 3 Hill, 304. Furman v. Elmore, 2 Nott & McC., 189, note. Colcock v. Goode, 3 McCord, 513 (dictum). Computing Scales Co. v. Long, 66 S. C., 379, 382; 44 S. E., 963; 65 L. R. A., 294. An exchange of property is merely a double sale and warranty of title is implied, unless there is something in the facts of the particular case to exclude the presumption of warranty. Rivers v. Grugett, 1 McCord, 100; 24 R. C. L., 183, § 454; note 62 Am. Dec., 467.

“This implied warranty is not confined to the vendor’s right to sell, but is, in substance, a warranty that his title is perfect, and free from all liens and incumbrances.” Sargent v. Currier, 49 N. H., 310; 6 Am. Rep., 524. Hodges v. Wilkinson, 111 N. C., 56; 15 S. E., 941; 17 L. R. A., 545; 24 R. C. L., 230, § 504.

The implication or presumption of warranty of title arises on proof of any sale of a chattel, and when the sale has been shown the burden is upon the party denying the warranty and resisting a recovery growing out of it to rebut the implication Hodges v. Wilkinson, supra.

As between the seller and his immediate vendee the weight of authority is to the effect that there is no breach of the warranty of title until the possession of the purchaser is disturbed by the assertion of paramount title on the part of the true owner. 24 R. C. L., 231, § 506; notes, collating authorities, 35 Am. Dec., 607, and 16 Ann. Cas., 62, 63. But a breach of the warranty is sufficiently shown if a purchaser “is compelled to pay to discharge” an incumbrance in order to retain the property. 24 R. C. L., 231, § 504; 16 Ann. Cas., 63. Close v. Crosland, 47 Minn., 500; 50 N. W., 694.

A buyer having established a breach of his immediate vendor’s warranty of title, the measure of damages is the price paid for the property, with interest from the date of purchase, and in a proper case the expenses reasonably incurred in attempting to defend his title. Ware v. Weathnall, 2 McCord, 413. Glover v. Hutson, 2 McMul, 109. Computing Scales Co. v. Long, 66 S. C., 382; 44 S. E., 963; 65 L. R. A., 294. Smth v. Williams, 117 Ga., 782; 45 S. E., 394; 97 Am. St. Rep., 220.

But the warranty of title of personal property does not run with the property. Such warranty “is personal to the purchaser of the property to whom the warranty is made, and a subsequent sale of the property by such purchaser does not operate to vest in a subsequent purchaser any right of action which the former might have against the original seller for a breach of the warranty.” 24 R. C. L., 159, § 432; note, 51 L. R. A. (N. S.), 1111, collating and reviewing the authorities. As was said by Mr. Justice Lamar in Smith v. Williams, 117 Ga., 782; 45 S. E., 394; 97 Am. St. Rep., 220:

“A warranty does not run with the article sold. If the title is not good, the vendee must look to him from whom he purchased, and to whom he paid the consideration. * * * The remedy of the subsequent purchaser is against his immediate seller, and not against the original owner.”

The rule thus stated is obviously predicated upon the theory that there is no such privity, either of contract or estate, between the remote subpurchaser and the original seller as will support such a right of action. Its application, of course, is not to be extended to causes where there has been a novation of the contract of warranty, and where the liability of the original seller and warrantor, such as the manufacturer of food products, articles inherently noxious or dangerous, etc., rests essentially upon the doctrine of negligence. See 51 L. R. A. (N. S.), 1111; 19 L. R. A. (N. S.), 923.

In the case of Davis v. Wilbourne, 1 Hill, 27; 26 Am. Dec., 154, it was held that the doctrine of voucher, applicable to cases involving the warranty of the title to real estate, was so far applicable to “cases involving the rights of personal property” that if “one sued for a personal chattel” gives notice to “his warrantor” to come in and defend the action, such “notice to the warrantor” makes him a privy to the record, and he is bound by it to the extent to which his rights have been tried and adjudged. See Middleton v. Thompson, 1 Speers, 67, 69. Allen v. Roundtree, 1 Speers, 80. Robertson v. Curlee, 59 S. C., 458; 38 S. E., 116. And in the case of Smith v. Moore, 7 S. C., 209; 24 Am. Rep., 479 (Willard, A. J.) there is a dictum, apparently predicated upon the case of Allen v. Roundtree, supra, to the effect that a warranty of title to personal property affects all persons succeeding to the ownership under the principle of “privity of estate.” But the effect of the rule as applied in Davis v. Wilbourne and in Allen v. Roundtree is merely to assign a certain artificial force by way of estoppel to the extension of a notice of the suit as between a seller or warrantor and his immediate buyer or warrantee. . Conceding that the warrantor so notified by his immediate vendee could extend the notice to his vendor or warrantor, and that the notice thus transmitted back to the original seller or warrantor would operate by way of estoppel to preclude him from disputing a breach of the warranty of title in the event the remote subpurchaser is dispossessed of the property under a claim of title against which the original seller warranted, it does not follow that there is any such “privity of estate” between the last buyer and the original seller as will support a right of action by the last or any intermediate buyer against the original seller. The rule of “notice” applied prior to the adoption of the present Code practice in cases involving title to personal property, does not, as we apprehend, require that conclusion. That a buyer is not divested of his right of action for a breach of his seller’s warranty of quality by a resale of the property was expressly recognized in Ellison v. Johnson, 74 S. C., 202 ; 54 S. E., 202; 5 L. R. A. (N. S.), 1151. If the cause of action for the breach of such a warranty remains in the buyer, and is not transferred by a resale to the subpurchaser, obviously the prior seller’s liability by virtue of his warranty is to the immediate buyer, who retains the right of action thereon after a resale. See 24 R. C. L., 240, § 516. We conclude, therefore, that the proposition that a warranty of title of personal property does not run with the property, and that the right of action and the remedy of a subsequent purchaser are against his immediate seller, is not in conflict with prior adjudications of this Court.

Underlying the foregoing propositions is the basic postulate that an action for breach of warranty sounds in contract. 24 R. C. L., 242, § 518. Bryce v. Parker, 11 S. C., 337. But, where the warranty is false and fraudulent, the buyer has the option to sue in contract for the breach of the warranty or in tort for the deceit. 35 Cyc., 363. Bryce v. Parker, supra. Where the complaint contains allegations appropriate to an action upon contract and also to an action in tort, and such allegations are not separately stated as distinct causes of action, certainly, in the absence of an election by plaintiff, “every intendment is in favor of regarding the action ex contractu.” Randolph v. Walker, 78 S. C., 157, 165; 59 S. E., 856.

Applying the foregoing principles to the case at bar, we think the complaint, liberally construed, states a cause of action in contract on behalf of the plaintiff, W. D. Mauldin, for a breach of warranty of title. There are allegations to the effect (1) that a personal chattel was sold by defendant to Mauldin under a representation that it was free of incumbrances; (2) that there was an outstanding mortgage thereon under which possession of the property was subsequently recovered from a subpurchaser by the mortgagee; and (3) that damages were sustained by the plaintiffs. The sale in itself carried the implied warranty of title which included the warranty against incumbrances. In the view that the representation that the property was free of incumbrances constituted an express or qualified warranty upon which Mauldin was bound to recover, if entitled to recover at all, the breach alleged was a breach of that warranty. The facts alleged as to dispossession by the holder of an outstanding mortgage were sufficient to establish a breach, and the general allegation of damage was a sufficient averment of injury. Welborn v. Dixon, 70 S. C., 108, 114; 49 S. E., 232; 3 Ann. Cas., 407. As to the plain tiff, Mauldin, therefore, a cause of action was stated, and there was no error in failing to sustain defendant’s demurrer on that ground, to the original complaint. •

But the amended complaint, in which Shelor and Edwards joined as parties plaintiff, stated no cause of action in favor of either Shelor or Edwards as against the defendant, Milford. In the view that such right of action would be assignable, there is no allegation that either of these parties had acquired by assignment from Mauldin his complete cause of action against Milford. See authorities collated, note 51 L. R. A. (N. S.), 1114. In so far as the complaint disclosed the facts, the plaintiff Edwards’ right of action was against his coplaintiff, Shelor, and the plaintiff’s, Shelor’s, right of action was against his coplaintiff, Mauldin. After joinder of Shelor and Edwards, as plaintiffs, therefore, the complaint merely stated the cause of action alleged prior to their joinder, viz., a cause of action by Mauldin against the defendant, Milford. In that state of the case there was merely a misjoinder of parties plaintiff, not a “defect of parties” which would render the complaint demurrable on that ground. Lowry v. Jackson, 27 S. C., 318; 3 S. E., 473. Wright v. Willoughby, 79 S. C., 438; 60 S. E., 971. And if the complaint stated no cause of action by either Shelor or Edwards against the defendant, Milford, there was no misjoinder of causes of action which would render the complaint demurrable on that ground. The demurrer interposed to the amended complaint was to the complaint as a whole, and, since it stated a cause of action on behalf of one of the plaintiffs against the defendant, it cannot be held that there was a technical error of law in overruling the demurrer. Lowry v. Jackson, supra.

There can be no doubt, however, that the trial of the case upon the theory that Shelor and Edwards could be joined with Mauldin as parties plaintiff, entitled to a joint recovery, was erroneous, and that the error involved was prejudicial. While the allegations of fact as to Shelor’s and Edwards’ connection with the subject of the action did not state causes of action against the defendant, they were sufficient clearly to indicate the existence of causes of action on the part of Edwards against Shelor and on the part of Shelor against Mauldin. To permit a combination of these grievances upon a trial by jury for the jurpose of a joint recovery against Milford was inevitably to confuse the issues properly joined upon the one valid cause of action stated— that of Mauldin v. Milford. The nature of the prejudice resulting was analogous to, if not identical with, that brought by an improper joinder of causes of action. See Hellams v. Switzer, 24 S. C., 39. Thus the verdict for substantial damages recovered in the case at bar would seem to be referable to evidence adduced tending to sustain Shelor’s cause of action against Mauldin, rather than to that tending to establish Mauldin’s cause of action against the defendant, Milford. We are, therefore, of the opinion that the order of the Circuit Judge authorizing the joinder of Shelor and Edwards as parties plaintiff was erroneous, and the exception directed to imputation of error in that regard is sustained.

The defense upon which defendant mainly relied, however, was that the mortgagee, Tate, had authorized the mortgagor, Jones, from whom the defendant bought, to sell the property, and had thereby released the lien of the mortgage, and that, having acquired the property free from the lien of the mortgage, he transferred a good title, and could not be held liable by his purchaser or any subsequent transferee for a breach of warranty title. Appellant’s position here is that the evidence established that defense as a matter of fact to the exclusion of any other reasonable inference, and that his motion for a directed verdict should have been granted upon that ground. The general proposition,, to which appellant’s counsel cites authority, that, when a mortgagee expressly or impliedly consents, to a sale of the mortgaged property, he waives his lien and the buyer takes the title free from the lien of the mortgage is well settled. 11 C. J., 624. Martin v. Jenkins, 51 S. C., 42; 27 S. E., 947. Flenniken v. Scruggs, 15 S. C., 88. If such buyer resells and is sued for breach of warranty of title, proof of the fact that the mortgage was released and that a title free from the lien thereof was acquired and transferred by him would constitute a valid and complete defense, subject to the following limitations: If such seller is notified by his immediate purchaser of a suit against the latter by one claiming the property under the mortgage against which the seller warranted, and is requested and given reasonable opportunity to defend such suit, whether he defends or refuses to defend, the judgment therein will be conclusive against such seller in a subsequent action by the buyer who has been judicially evicted. Davis v. Wilbourne, 1 Hill, 27; 26 Am. Dec., 154. Allen v. Roundtree, 1 Speers, 80. Jordan v. Van Duzee, 139 Minn., 103; 165 N. W., 877; L. R. A. 1918B, 1136. And whether such seller has received formal notice of a suit against his immediate purchaser or a subpurchaser, and has been called upon to defend or not, when advised of the pendency of a suit seeking to assert superior title to the property under a mortgage against which he warranted, such seller is bound in common honesty and fair dealing, if afforded reasonable opportunity therefor, to inform the defendant in such suit of the facts as to the release which render the adverse claim invalid. Certainly, he may not in such circumstances, in equity and good conscience, actively assist by word or deed in the assertion by the adverse claimant of a title under a mortgage against which he as seller warranted, and afterwards successfully defend an action against himself for breach of warranty of title upon the ground that the adverse mortgage claim was invalid. Since the degree of credence to be attached to the testimony tending to establish that the defendant acquired and transferred a title free from the lien of the mortgage was for the jury, and there was some evidence tending to establish that the defendant was estopped to rely on such defense, the motion for directed verdict upon the ground that the evidence was open to no other reasonable inference than that the defendant had acquired and transferred a title free from the lien of the mortgage was properly overruled.

Nor was the defendant entitled to a nonsuit or a directed verdict upon the ground that the plaintiff, Mauldin, had not actually paid to his immediate buyer and warrantee, Shelor, any sum of money on account of his liability as warrantor. It has been held in other jurisdictions that an intermediate purchaser is not entitled to maintain suit and to recover damages against his seller until he has refunded to his buyer the amount received by him for. the chattel. Myers v. Bowen, 3 Colo. App., 537; 34 Pac., 585. Burt v. Dewey, 40 N. Y., 283; 100 Am. Dec., 482; and see Close v. Crossland, 47 Minn., 500; 50 N. W., 694. That rule, however, is announced in Burt v. Dewey, supra, is apparently predicated upon the assumption that the possessor of a chattel deprived of possession under a paramount title, as in cases of covenant^ of warranty running with land, would have a right of action against and to satisfaction from any prior seller or covenantor, and hence that an “intermediate vendee or covenantee could not be permitted to maintain an action against his immediate warrantor or covenantor, in the absence of fraud, without proof of damage by loss of property or compulsory payment of money.” But, since the warranty of title to personalty does not run with the property, and the buyer’s right of action is confined to action against his immediate seller, upon proof of the breach of warranty it would seem clear that his right to recover substantial damages should be referred to and governed by the general rule of damages, applicable to a recovery for any breach of. contract. Under that rule, in an action by an intermediate buyer against his warrantor, we think that proof that the plaintiff has assumed the payment for the sum for which he is legally liable in damages to his subpurchaser for a breach of his warranty of title is admissible as tending to establish the quantum of his loss, flowing from his own seller’s breach of warranty as a consequence fairly within the contemplation of the parties to that contract, and will support a recovery by the plaintiff of substantial damages to the extent of the liability by him thus assumed, if such amount is not in excess of the purchase price paid to his seller and warrantor, with interest thereon, etc. Ware v. Weathnall, supra. In the English case of Randall v. Raper, E. B. & E., 84; 27 L. J. Q. B., 266, cited and reviewed by Mr. Benjamin in his work on Sales (2d Am. Ed., § 903), where subvendees sowed seed which were sold under a warranty of quality, and made claim on their vendees for damages, which the vendors agreed to satisfy, in actioñ by these vendors against their warrantors the plaintiffs were allowed to recover for the amount they were deemed liable to pay, but had not actually paid, their subvendees. See Wolcott v. Mount, 36 N. J., Law, 262; 13 Am. Rep. 438, and 17 C. J., 803, § 129. While it is doubtful if the evidence afforded a sufficient basis for the application of the correct measure of damages as between Mauldin and the defendant, Milford, in that the amount of the purchase price paid to Milford by Mauldin does not appear, there was evidence tending to establish a breach of the defendant’s warranty of title, and the consequent right to recover at least nominal damages.

Appellant’s further contention that the defendant was absolved from liability to either of the three plaintiffs, by reason of the fact that he bought and sold the automobile prior to the maturity of the mortgage debt, and before condition broken, is likewise untenable. That defense, as we apprehend, was interposed in the view that the plaintiffs were seeking to hold the defendant in tort for a conversion of the property. However pertinent and valid such a defense might be in an action by the mortgagee, or one claiming under him, to charge Milford with liability for a conversion, it is obviously unavailable in an action predicated upon a breach of warranty of title. By his sale of the car Milford warranted that there was no outstanding incumbrance upon the property. If there was a breach of that warranty, it is manifestly immaterial whether at the time the warrantor sold the property any condition of the outstanding mortgage had been broken or not.

The judgment of the Circuit Court is reversed, and a new trial ordered.

Reversed.

Messrs. Justices Fraser and Cothran concur. Mr. Justice Watts dissents. Mr. Chief Justice Gary did not participate.