Associates Discount Corp. v. Gear

• Decision Date: 03 September 1952
• Docket Number: No. 62,62
• Citation: 54 N.W.2d 687,334 Mich. 360
• Parties: ASSOCIATES DISCOUNT CORP. v. GEAR.
• Court: Michigan Supreme Court

Page 687

54 N.W.2d 687

334 Mich. 360

ASSOCIATES DISCOUNT CORP. v. GEAR.

No. 62.

Supreme Court of Michigan.

Sept. 3, 1952.

James B. Stanley, Kalamazoo, for appellant.

Jackson, Fitzgerald & Dalm, Kalamazoo, for appellee.

Before the Entire Bench, except NORTH, C. J.

BUSHNELL, Justice.

This is an action on a promissory note. Plaintiff Associates Discount Corporation, a foreign corporation, maintains a branch office at Kalamazoo, through which it loans money, secured by chattel mortgages and conditional sales contracts. One of its accounts was with Wallace R. Ewing, a used car dealer in Kalamazoo, operating under the name of Kalamazoo Auto Mart. Edward J. Schludecker, the manager of Associates in Kalamazoo, testified:

'Our company has been dealing with Mr. Ewing long before June of 1948 which was when I came here. I have been servicing Mr. Ewing's accounts personally. * * * I would go to his place daily, sometimes twice a day. I would handle the financing of the paper in his office on his lot. There might have been an occasion when he brought a deal in but that was very rare. In servicing a dealer we furnish a complete line of financing and furnish them with forms for their business such as defendant's.'

According to Schludecker, Associates had hundreds of transactions with Ewing, part of which was 'floor-planning automobiles.' He said:

'Floor-planning means loaning money to the dealer to finance his purchase of that automobile so that he may place that car on his floor or sale lot, for sale, and when he sells the car then he floor-plan is paid off and at that time we take a retail paper from the purchaser. When we floor-plan an automobile we take a chattel mortgage and a bill of sale from the dealer which is represented in this case by Exhibit B. During the time that we have the car floor-planned, the evidence of title or ownership is in our office and it is our practice to keep that evidence of ownership until the car or the floor-plan is paid off. In this case we had a bill of sale in our office.'

On May 4, 1949, Associates floor-planned a 1949 convertible Cadillac coupe for Ewing, taking a chattel mortgage for $2,800 and a bill of sale. Nothing was said at the time about the title or a title certificate. Schludecker said the Cadillac looked like a new car, and that Ewing said it was a new car. The name of the Werner Motor Company of Goshen, Indiana, was on the bill of sale. Schludecker thought that, since the car had never been sold at retail, no title had yet been issued. Ewing testified that he told Schludecker that the title was in Indianapolis being processed and that he would have it in a few days.

On May 6th defendant Harold W. Gear purchased a 1949 convertible Cadillac coupe from Ewing. In order to be sure about the interest rate, Ewing called Schludecker and asked him if he would handle a note bearing 4 per cent interest, which was lower than the usual rate. Schludecker agreed, but stated on the witness stand that he did not know at that time what particular car Ewing was selling. Gear had signed a note and chattel mortgage blank and left them in Ewing's hands. When Schludecker went to Ewing's office that same day to discuss the details of the transaction, he (Schludecker) filled in these blank forms, taking the necessary information from the sales tax slip made out by Ewing. In the sales agreement the car was described as a 1949 new convertible Cadillac coupe. Schludecker gave Ewing, Associates' check for $3,100, and Ewing gave Schludecker a check for $2,800, which Schludecker said 'was to pay off the floor-plan.' Ewing then had about 18 cars on the floor-plan with Associates, but only one Cadillac. On cross-examination, Schludecker admitted that when he got back to his office he knew that the Cadillac car floor-planned on May 4th was the one sold to Gear on May 6th.

The record is not too clear, but it seems undisputed that the Cadillac was taken from Gear by someone, because it was admitted by Associates that, as between Gear and Ewing, there was a total failure of consideration. After the close of the proofs, Associates' counsel stated in the presence of the jury that

'the car involved in this case was a used car in the sense that there had been issued to the car for the car a certificate of title which was in existence on and prior to May 4, 1949. * * * as a matter of fact that it was not a new car which had not yet acquired a certificate of title.'

However, counsel claimed that at the time of the transaction, Schludecker was not aware that it was a used car.

Motions for directed verdicts were denied and the case was submitted to the jury under the Empson act. Act No. 217, P.A.1915, C.L.1948, Sec. 691.691 et seq. Stat.Ann.1951 Cum.Supp. Sec. 27.1461 et seq. The jury's verdict in the sum of $3,348 in favor of plaintiff was set aside and a judgment in favor of Gear was entered notwithstanding the verdict. In a memorandum opinion the trial judge said in part:

'Plaintiff, through its agent, Schludecker, is charged with knowledge of the fact that Ewing was a used car dealer and did not have a new car dealer's license. These facts were known to witness, Schludecker, * * * when he purchased the note in question, he understood that the note covered the sale of a new car, and not a used car. * * *

'Under the law Ewing had no right as a used car dealer to sell new cars, and the plaintiff is not a holder in due course.'

Plaintiff argues on appeal that the circuit court may not consider or grant a motion for a directed verdict (or enter a judgment notwithstanding the verdict) where no grounds are stated in the motion.

The state of the record is this: At the close of plaintiff's proofs, counsel for defendant Gear said:

'At this time I would like to move the court for a directed verdict on the ground that the plaintiff has failed to make out a case, and the court should direct a verdict of no cause of action.

'The Court: I will reserve decision on the motion.'

At the close of all the testimony plaintiff's counsel suggested that he had a motion to make, which he would like to discuss with the court not in the presence of the jury. After the jury had retired, counsel stated that the undisputed testimony indicated that plaintiff was a holder in due course, there was no question of fact in dispute, and, therefore, Associates was entitled to recover the full amount of the note. This motion was with the reservation that, in the event of its denial, Associates could still go to the jury.

Defendant's counsel then stated: 'I would like to make a motion for a directed verdict, but I would like to have a ruling on the other first.' After some colloquy,...