McArthur Bros. Mercantile Co. v. Hagihara

194 P. 336, 22 Ariz. 100, 13 A.L.R. 1038, 1921 Ariz. LEXIS 108

• Court: Arizona Supreme Court
• Decided: January 10, 1921
• Docket: Civil No. 1812
• Status: Published

Opinion

BAKER, J.

(After Stating the Facts as Above.)— The principal inquiry involved in this case is a very narrow one. The question is whether the contract recited shall be treated as a conditional sale of the automobile, or an absolute sale with a so.-called mortgage back as security for the purchase price, as evidenced by the promissory notes. I think that the intention of the parties contemplated only a conditional sale until the payment of the purchase price.

“It is a distinguishing feature of the so-called conditional sale that the title to or property in the goods remains in the seller until payment of the price. . . . The security retained by the seller is not a lien, but a reservation of title and the right to pursue the property in specie.” 35 Cyc. 652, 653.

Now, the contract in this case appears to have been carefully drawn, and it contains all of the elements of a conditional sale. There is a vendor and a vendee, an agreed price, an obligation of the ven-dee to pay the price, and an obligation of the vendor that upon condition that the vendee pays the agreed price, but not otherwise, the vendor shall execute to the vendee a bill of sale for the automobile and thus vest the title in the vendee. The provision in the contract that when the purchase price is paid in full a bill of sale will be given is utterly inconsistent with the claim that the title was to pass when the agreement was made or that there was an absolute sale. Boon v. Moss, 70 N. Y. 465, 473; Fennikoh v. Gunn, 59 App. Div. 132; 69 N. Y. Supp. 12.

Moreover, the contract in clear and distinct terms provides that the title to the automobile shall remain in the vendor until the purchase price, as evidenced by the several installment notes, shall be fully paid. This stipulation was perfectly lawful. Wm. W. Bierce, Ltd., v. Hutchins, 205 U. S. 340, 51 L. Ed. 828, 27 Sup. Ct. Rep. 524; Harkness v. Russell, 118 U. S. , 30 L. Ed. 285, 7 Sup. Ct. Rep. 51 (see, also, Rose’s U. S. Notes). In National Cash Register Co. v. Dehn, 139 Mich. 406, 102 N. W. 965, it is very aptly said:

“If a man is willing to contract that he shall be liable for the whole value of a chattel before the title passes, there is nothing to prevent his doing so, and thereby binding himself to pay the whole sum.”

The provision of the contract, last cited, discloses beyond cavil that the intention of the parties was to impose the precedent condition that the vendee should pay the full purchase price before title to the automobile should pass to him, thus clearly and distinctly evidencing a conditional sale. The provision could have been inserted for no other purpose, and it can have no other effect, and, unless there be found some other term or clause in the contract nullifying or qualifying this clear provision, this language of itself is of controlling force in the construction of the contract. I have to the utmost of my ability closely analyzed and critically examined the contract, but have been unable to discern, or find, any provision therein existing inconsistent with the idea that a conditional sale was intended by the parties, or that nullifies or qualifies the distinct provision that the title to the automobile should remain in the vendor until the vendee shall have paid the full purchase price.

It is argued that because the vendee was absolutely bound to' pay the notes, and had no option to pay or refuse to pay, the contract became one of absolute sale. This can hardly be true. There can be no sale at all without an agreement, express or implied, to pay. The purchaser’s promise to pay is always absolute, otherwise there is no sale, but only an option. It is well settled that requiring the vendee to give promissory notes for the deferred installments of the purchase price is not inconsistent with the retention of title in the vendor pending payment of the notes, because the obligation to pay the notes is absolute. Bailey v. Baker Ice Machine Co., 239 U. S. 268, 60 L. Ed. 275, 36 Sup. Ct. Rep. 50 (see, also, Rose’s U. S. Notes); Bierce v. Hutchins, supra; Harkness v. Russell, supra; Dunlop v. Mercer, 156 Fed. 545, 86 C. C. A. 435. The Supreme Court of Colorado, however, seems to take an opposite view. Andrews v. Colorado Savings Bank, 20 Colo. 313, 46 Am. St. Rep. 291, 36 Pac. 902; Clark v. Bright, 30 Colo. 199, 69 Pac. 506.

Neither can it be said, under this contract, that the installment notes were received in payment of the automobile. The contract expressly declares that “the payments to be. made” shall be evidenced by the notes, thus repelling the idea that the notes themselves constituted payment for the automobile. Van Allen v. Francis, 133 Cal. 474, 56 Pac. 339. For this reason the authorities cited, to the effect that the taking’ by the vendor from the vendee of negotiable instruments operates in some cases as the payment of the debt, are not at all applicable.

It is the contention of Hagihara that the security by way of retention of title was waived by the taking of the notes indorsed by a responsible surety. It is stated in 35 Cyc. 657, that —

“As a general rule, if the seller takes a mortgage or other security for the price, such act will be regarded as a waiver of the condition reserving the title and an election to consider the sale as absolute. ’ ’

I venture to express a doubt that this is a correct statement of the rule of law. The great weight of authority is to the contrary. I think it safe to say that by the taking of security, personal or collateral, the vendor does not waive his retention of title. Bierce v. Hutchins, supra; Monitor Drill Co. v. Mer cer, 163 Fed. 943, 16 Ann. Cas. 214, 20 L. R. A. (N. S.). 1065, 90 C. C. A. 303; Kimball v. Costa, 76 Vt. 289, 104 Am. St. Rep. 937, 1 Ann. Cas. 610, 56 Atl. 1009; Pettyplace v. Groton etc. Co., 103 Mich. 155, 61 N. W. 266; Standard Steam Laundry v. Dole, 22 Utah, 311, 61 Pac. 1103; First National Bank v. Reid, 122 Iowa, 280, 98 N. W. 107; Champenois v. Tinsley, 90 Miss. 38, 42 South. 89; McDonald Automobile Co. v. Bicknell, 129 Tenn. 493, Ann. Cas. 1916A, 265, 167 S. W. 108; Dillon v. Grutt, 38 Nev. 46, 144 Pac. 741; Brown Carriage Co. v. Dowd, 155 N. C. 307, 71 S. E. 721.

It is not necessary to decide whether the defendant can recover on the two installment notes remaining unpaid. That question is not involved in the case.

The action being trover for the conversion of the automobile, it was necessary for the plaintiff to establish title. This he failed to do. Under the express terms of the contract, the defendant had the right to .retake the automobile as his own property upon-the default of Hagihara to pay the installment notes when due; time being the essence of the contract.

The contract in this case was executed on the twenty-sixth day of November, 1917, and therefore the Uniform Conditional Sales Act of this state (Sess. Laws Ariz. 1919, p. 38) can have no application to its terms. It is so expressly provided in the act,

I know of no rule of law or principle of public policy forbidding the sort of a contract under consideration, because it may reserve unusual advantages to the vendor or impose unusual burdens upon the vendee, and I can see no reason why the contract should not be valid and binding upon the parties thereto. Indeed, it seems to me that good faith and good morals demand that the contract be carried out as the parties were content to make it.

It follows that the judgment of the lower court must he reversed, with directions to enter a judgment for the defendant.

BOSS, O. J., and MoALISTEB, J., concur.