Burroughs Adding Mach. Co. v. Wieselberg

• Citation: 203 N.W. 160,230 Mich. 15
• Decision Date: 03 April 1925
• Docket Number: No. 11.,11.
• Parties: BURROUGHS ADDING MACH. CO. v. WIESELBERG.
• Court: Michigan Supreme Court

230 Mich. 15

203 N.W. 160

BURROUGHS ADDING MACH. CO.

v.WIESELBERG.

No. 11.

Supreme Court of Michigan.

April 3, 1925.

Appeal from Circuit Court, Wayne County, in Chancery; Willis B. Perkins, Judge.

Suit by the Burroughs Adding Machine Company against Paul J. Wieselberg, receiver. Plaintiff's petition was denied, and it appeals. Reversed, and case remanded, with directions.

Argued before McDONALD, C. J., and CLARK, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ. Stevenson, Carpenter, Butzel & Backus, of Detroit (William L. Carpenter, of Detroit, of counsel), for petitioner.

Paul J. Wieselberg, of Detroit, in pro. per.

WIEST, J.

The Burroughs Adding Machine Company petitioned the Wayne circuit court to direct the receiver of the Hollywood Sales & Service Company to return an adding machine or pay therefor. The receiver claims right to the machine because the contract under which it come into the hands of the Hollywood Company was in effect a chattel mortgage, and, not having been recorded, the Burroughs Company has no lien thereon or right of reclamation.

The circuit judge denied the petition, and the case is here by appeal.

April 6, 1923, and before the receiver was appointed, the Burroughs Company and the Hollywood Company entered into contract, under which the Hollywood Company ordered an adding machine, and agreed to purchase the same and pay therefor the sum of $187, with a cash payment of $18.70, the balance in nine equal monthly payments, with interest, title to remain in the Burroughs Company until the purchase price was paid in full, taxes to be paid and insurance carried for the benefit of the Burroughs Company. The contract also provided:

‘If the undersigned fails to make the aforesaid payments in cash, with interest thereon, or to observe or perform any of the above conditions and agreements by him to be observed or performed, or if the undersigned shall be adjudicated a bankrupt, or if a receiver shall be appointed for the undersigned's business, or if the undersigned shall make an assignment for the benefit of creditors, then the company either (1) may declare the entire sum remaining unpaid hereunder to be immediately due and payable, and elect to sue for the amount due, thereby vesting the absolute title in the undersigned, or (2) it may enter, with or without legal process and using such force as may be necessary, into or upon the premises where the said goods, or any part thereof, may be, or is or are believed to be, and take possession thereof, and thereafter hold them absolutely, free from all claim from the undersigned, and retain all payments made by the undersigned hereunder as and for the reasonable rental of said goods and for the use, wear and tear thereof. * * *'

If this instrument constituted a pure conditional sale, and not security in the nature of a chattel mortgage, then the property may be reclaimed from the receiver. The trial judge denied right of reclamation, on the ground that the instrument was in the nature of a chattel mortgage, and, not having been placed of record, the seller was without right to retake from the receiver. It is said the decisions of this court relative to conditional sales and conditional sales in the nature of a chattel mortgage are difficult of comprehension and puzzle the profession and perplex the courts, including the Circuit Court of Appeals of the Sixth Federal Circuit, and we are asked to make plain the distinction between a pure conditional sale and one in the nature of a chattel mortgage.

The principle underlying our decisions is simple enough, but application thereof is sometimes difficult because of language of particular instruments and the acts of parties thereto. If an instrument presents a case of securtiy in the nature of a chattel mortgage, then it is to be held, when rights of third parties intervene, to come within the law relating to the recording of such an instrument. The question turns upon whether an instrument, with rights and remedies thereunder, express or implied or by operation of law, provides security for the unconditional payment of an obligation assumed with reference to chattels. The pure conditional sale gives possession of chattels with the right to ownership upon payment of the agreed price, retaining title in the seller, with right of reclamation in case of default or the alternative of passing the title by suit for the purchase price. The right to retake the property, retain payments made, estimate wear and tear, compute damage, and look to the buyer for deficiency in the agreed price, is consonant only with remedies under instruments providing for security in the nature of a chattel mortgage; for in such a case the security is but an incident of a debt absolutely due from the buyer to the seller. As said in Perkins v. Grobben, 116 Mich. 172, 179, 74 N. W. 469, 472 (39 L. R. A. 815, 72 Am. St. Rep. 512):

‘The vendor is not entitled to the title and possession of the property, and to be paid for it also.'

The character of the instrument is to be determined from its terms, from a consideration of rights and remedies stipulated therein or allowed by law as between the parties, and to some extent in the light shed by the circumstances surrounding the transaction. If the seller is not limited to right to retake the property and retain the payments made, but after reclamation may enforce payment of the remainder of the full agreed price, and the instrument is so worded as to permit this to be done, then the courts will recognize the instrument for what it is in fact and law, security in the nature of a chattel mortgage. If the title is retained as security for the payment of the full price, and the obligation to further pay is not abated by a retaking of the property and retention of partial payments, then it is not a pure conditional sale, but an undertaking in the nature of a chattel mortgage. Instruments giving the seller the rights and remedies of a mortgagee against the buyer and chattels the subject of sale, if rights of third persons do not intervene, but so colored as to be employed in support of a claim of conditional sale only, when rights of third persons do intervene, are ab initio instruments in the nature of a chattel mortgage.

If sellers will state in the instruments the limitation of rights and remedies, there will be no difficulty in making classification. It is fair to assume that the seller intends to employ every available remedy open under law, and it is equally fair to adjudicate with such in mind. If the condition relative to title is precedent, and remains so regardless of subsequent events, except right to pass title by suit for the agreed purchase price, it is consonant with a conditional sale. But, if the condition relative to title is subsequent, to be ruled by events, and remedies are open to enforce payment of the purchase price with the chattel a security, then it is not a conditional sale, but is security in the nature of a...