Brunswick Corporation v. J & P, INC.

• Decision Date: 20 March 1970
• Docket Number: No. 271-69.,271-69.
• Citation: 424 F.2d 100
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: BRUNSWICK CORPORATION, Appellee, v. J & P, INC., an Oklahoma corporation, Lucille Greer and Jack Greer, Appellants.

424 F.2d 100 (1970)

BRUNSWICK CORPORATION, Appellee, v. J & P, INC., an Oklahoma corporation, Lucille Greer and Jack Greer, Appellants.

No. 271-69.

United States Court of Appeals, Tenth Circuit.

March 20, 1970.

F. Paul Thieman, Jr., Tulsa, Okl., for appellee.

Granville Tomerlin of Tomerlin & High, Oklahoma City, Okl. (Allan Sasser of Burton, Sasser & Burton, Lawton, Okl., on the brief), for appellants.

Before MURRAH, Chief Judge, and HILL and HICKEY, Circuit Judges.

HILL, Circuit Judge.

This appeal is from a summary judgment granted in favor of appellee, Brunswick Corporation, in a diversity suit applying the law of Oklahoma.

Appellee Brunswick brought suit alleging inter alia that appellants purchased bowling equipment from Brunswick; that appellants executed a conditional sales contract and a promissory note for the purchase price of the equipment; that appellants defaulted on the monthly installment; and that an unpaid principal balance of $229,367.20 plus interest and finance charges was due and owing. Brunswick filed an affidavit for replevin and a replevin bond with the original complaint, and pursuant to the Oklahoma replevin statutes,¹ the United States Marshal, under a writ of replevin, took possession of the equipment in the bowling alley building by rendering it inoperative by removing some essential parts. After holding the property for 24 hours, and in the absence of a redelivery bond executed by appellants, the Marshal made constructive delivery of the equipment to Brunswick. Ten days after the filing of the complaint, Brunswick notified appellants that it intended to hold a public auction to sell the personal property involved to the highest bidder. After advertisement in the newspaper, the sale was held twenty-two days after the complaint was filed. The sale took place after execution of the writ but before judgment was obtained in the replevin action and Brunswick was the highest bidder at the auction, purchasing the equipment outright for the sum of $95,000.

By their answer appellants admitted the indebtedness and the facts were subsequently stipulated so that the only question before the trial court was the legal issue raised by appellants' offset and counterclaim. The counterclaim alleged that Brunswick, by reason of the sale of the personal property involved before judgment was rendered in the replevin action, converted the property under the Oklahoma doctrine of custodia legis. Consequently under the collateral principle of conversion, custodia legis, appellants sought to recover the fair market value of the property at the place and time of its conversion and to offset that amount against the indebtedness admittedly owing to Brunswick. This offset would be in lieu of reducing the indebtedness in the amount obtained at the foreclosure sale.

There being no factual questions, the trial court on Brunswick's Motion for Summary Judgment proceeded to consider the legal question posed by appellants' counterclaim. Ultimately the trial judge dismissed the counterclaim and granted summary judgment on the grounds that the principle of conversion, custodia legis is inapplicable to a conditional vendor, because a conditional vendor (unlike a chattel mortgagee) has title to the goods.

The doctrine of custodia legis essentially provides with respect to a replevin action that when personal property is repossessed under a writ of replevin, the property is considered to be in the custody of the court. And until judgment in the replevin action finally determines whether the replevining party or the prior holder is entitled to possession, the property remains in the custody of the court although actual possession may be in either of the parties to the replevin action. The corollary "conversion, custodia legis" simply means, converting property in the custody of the court.

Conversion, custodia legis as recognized in the decisions of the Supreme Court of Oklahoma, has characteristically been applied to a chattel mortgagee who, upon the mortgagor's default, replevins the property and sells it before judgment is rendered in the replevin action. In such cases where the replevined property is held under bond in custodia legis and is sold so as to amount to a conversion, Oklahoma case law permits the defendant to the replevin action to void the sale and prove the reasonable market value of the property at the time and place of the conversion. Upon such proof, the defendant-chattel mortgagor is entitled to credit his indebtedness for whatever amount he is able to show the property was reasonably worth.²

Our research and that of counsel herein have not revealed any case wherein the Oklahoma Supreme Court has determined whether a conditional vendor, who has replevined the goods upon his vendee's default, is likewise converting when he sells the goods prior to judgment in the replevin action. On this state of the law, appellants take the view, (1) conversion, custodia legis is equally applicable to a replevining conditional vendor who unlike a chattel mortgagee retains title to the goods and (2) the Oklahoma Courts would have so held even before the Uniform Commercial Code became effective in Oklahoma in 1963, had the question been presented to them. Alternatively and more strongly, appellants urge that the Uniform Code has reduced a conditional vendor to the same status as a chattel mortgagee. And on this basis, the principle of conversion, custodia legis should now apply also to a conditional vendor, regardless of whether the pre-code courts would have applied the principle to a conditional vendor as well as a chattel mortgagee. On the other hand, Brunswick, besides supporting the trial court's opinion, argues that the U. C.C., far from requiring that conversion, custodia legis be applied to conditional vendors too, abrogates the whole doctrine.

The trial judge, upon considering this question so lacking in precise authority on the point, concluded that the basis for doctrine of conversion, custodia legis is that the title to the property involved is in the mortgagor and a mortgagee's replevin bond alone and without judgment confers only a right to possession and does not affect the title. And without title, a sale by the replevining party is a conversion, even if it is a foreclosure sale by a mortgagee. The trial court relied on Scott v. Standridge, 117 Okl. 111, 245 P. 591 (1926) and Federal Nat. Bank v. McDonald, 129 Okl. 75, 263 P. 105 (1927) for support for this proposition. Certain parts of these opinions do support a distinction based upon whether title is in the replevining party. In Scott, the Oklahoma Supreme Court reviewed the prior cases establishing custodia legis and in effect held that the property under bond in a replevin action conditioned on redelivery in the event that the replevining party fails, is in custodia legis the same as if actual possession was with an officer of the court. The court in Scott went on to say that no title to the property vests in the replevining mortgagee on its delivery to him, but it remains in the custody of the law and cannot pass even to a bona fide purchaser from plaintiff or be levied upon under attachment or execution. Implicit in the opinion is the reasoning that since title does not vest in a replevining party who holds the property in custodia legis, to sell the property is to convert it and no title passes to the purchaser.³

The McDonald case lends far less support for an application of the doctrine based upon where technical title lies, but the case of Tingley v. Smith, 181 Okl. 84, 72 P.2d 729, at 731 (1937) does appear to rely somewhat upon the whereabouts of title to find a conversion: "Since in such replevin cases the plaintiff chattel mortgagee does not have legal title to the property, his conversion thereof prior to the determination of the right to possession is a conversion of the defendant's property * * *."

Besides the previously cited cases, we have exhaustively researched the Oklahoma cases dealing with conversion, custodia legis⁴ and we have found not a single application of the doctrine to a conditional vendor. The cases are not entirely consistent in explicating the doctrine, nor are they clear in explaining why the doctrine has not been applied to a conditional vendor. Appellants have seized upon the lack of clarity in the state law to dispute the trial judge's distinction between a replevining chattel mortgagee and a replevining conditional vendor. Appellants suggest other explanations for the doctrine and advance other reasons why the Oklahoma Courts have not previously applied the doctrine to conditional vendors, with the conclusion that Oklahoma Courts would apply the doctrine to conditional vendors. It may well be that the Oklahoma Courts simply have had no occasion to consider a case in the posture of our case since pre-U.C.C. conditional vendors had significantly different rights compared to a chattel mortgagee and therefore conditional vendors rarely found it advantageous to replevin.⁵ Or perhaps the different rights of a conditional vendor resulted in an absence of an appropriate party to recover for a conditional vendor's conversion,⁶ and this accounts for why ...