C. I. T. Corp. v. Seaney, Civil 4038

• Decision Date: 19 December 1938
• Docket Number: Civil 4038
• Citation: 85 P.2d 713,53 Ariz. 72
• Parties: C. I. T. CORPORATION, Appellant, v. S. W. SEANEY, Assignee for the Benefit of Creditors of CARL E. MOLLING and HERLINDA B. MOLLING, Doing Business as MOLLING APPLIANCE COMPANY, Appellee
• Court: Arizona Supreme Court

85 P.2d 713

53 Ariz. 72

C. I. T. CORPORATION, Appellant, v. S. W. SEANEY, Assignee for the Benefit of Creditors of CARL E. MOLLING and HERLINDA B. MOLLING, Doing Business as MOLLING APPLIANCE COMPANY, Appellee

Civil No. 4038

Supreme Court of Arizona

December 19, 1938

APPEAL from a judgment of the Superior Court of the County of Pima. Wm. G. Hall, Judge. Judgment affirmed.

Mr. T G. McKesson, for Appellant.

Messrs Krucker & Fowler, for Appellee.

OPINION

LOCKWOOD, J.

This is an appeal from a judgment of the superior court denying a petition of the C.I.T. Corporation, hereinafter called petitioner, for the reclamation of eighteen Servel refrigerators from the possession of S.W. Seaney, as assignee for the benefit of the creditors of Carl E. Molling and Herlinda B. Molling, doing business as Molling Appliance Company, hereinafter called the company, and from the court's order denying a new trial.

The facts of the case are not in dispute, and may be stated as follows: Carl E. Molling and Herlinda B. Molling for several years last past have been engaged in the electric appliance business in Tucson, under the name of Molling Appliance Company. The company had an agency for the sale of Servel electric refrigerators, and during the year 1937 and a part of the year 1938 arrangements were made by the company with the Servel factory at Evansville, Indiana, and with petitioner, for the handling of said agency and the financing of the company therein. This arrangement was, in substance as follows: The Servel company shipped to the company at Tucson a number of its electric refrigerators, shipper's order, bill of lading with draft attached. The company was unable to pay the draft so it paid to petitioner ten per cent. of the factory invoice price of the refrigerators, together with a sum sufficient to pay the freight charges thereon, whereupon the petitioner issued its check for the entire amount of the draft, and secured the bill of lading. At the same time the company executed certain so-called trust receipts in favor of petitioner. These trust receipts are all similar in form. On the face of the receipt is a description of the refrigerators covered thereby, together with the invoice price. On the back is found the following language:

"Trust Receipt.

"Received from C.I.T. Corporation (Hereinafter termed C.I.T.) each of the chattels described on the reverse hereof, complete with all standard attachments and equipment, in consideration whereof we agree, at our expense, to hold said chattels in trust for C.I.T. as its property, and agree to return the same on demand in good order and unused but with liberty to us to exhibit and, the written consent of C.I.T. having first been obtained, to sell the same for its account for cash for not less than, as to each chattel, the minimum sale price (the value thereof) set forth as to the respective chattel on the reverse hereof, and we further agree in the case of such sale to hold in trust for C.I.T. the proceeds separate from our funds and immediately hand such proceeds to C.I.T. without expense or cost to C.I.T. C.I.T. may at any time cancel this trust and repossess itself of said chattels or the proceeds thereof.

"We further agree to keep a separate account of all chattels delivered to us under this or any like receipt and of the proceeds thereof when sold, to report any sale to C.I.T. immediately after the same is made, and to furnish to it on demand a true and complete report for the preceding month. We will also permit C.I.T. or its duly accredited representatives to examine our books and the chattels in our possession at all reasonable times during business hours.

"Unless we have arranged with C.I.T. ourselves to provide insurance, C.I.T. shall, during the entire time said chattels are held hereunder, keep same insured against loss by fire and theft, and in the event of our failure to redeliver the same on demand we shall, until redelivery thereof, pay as damages for detention for each month or portion thereof after demand one per cent of said sale price.

"We further agree to pay all taxes, costs, charges, expenses and disbursements, including a reasonable attorney's fee (15% of sale price of said chattels, if permitted by law) should C.I.T. find it necessary to protect its property in same by legal proceedings involving the employment of an attorney-at-law, and that the waiver of any default shall not operate as a waiver of subsequent defaults, but all rights hereunder shall continue notwithstanding any one or more waivers. We acknowledge receipt of a true copy of this agreement, which shall be construed according to the laws of the State of California.

"The chattels above referred to are listed on face of this form. The acceptance of Time Draft in the above amount shall not be effective to terminate this trust. At C.I.T.'s election any interest of ours in said chattels shall terminate."

Attached to the trust receipt, but with a line perforated so that it might easily be detached therefrom, was the following document:

"Time Draft.

"$1,344.00

Tucson, Arizona, May 17, 1937

"On or before August 17, 1937 pay to order of C.I.T. Corporation, One Thousand Three Hundred Forty-four and no/100 Dollars $1,344.00, together with a reasonable attorney's fee (15% if permitted by law) should the holder place this draft in the hands of an attorney for collection. Value Received (without recourse on us) and charge to Servel, Inc. Evansville, Indiana.

"To Molling Appliance Company

"Tucson, Arizona."

And on the face of the document was endorsed "Accepted, Payable at office C.I.T. Corporation, 52 Market St., San Francisco, Calif.," which acceptance was signed by the company in proper form. None of these trust receipts were ever filed or recorded in the office of the county recorder of Pima county. The Servel company also executed and delivered to petitioner a bill of sale directly covering the refrigerators involved herein. The refrigerators were then taken possession of by the company and placed on its floor for sale to purchasers in the ordinary manner.

Thereafter, and on the 21st day of March, 1938, the company made an assignment for the benefit of creditors, under the provisions of chapter 6 (section 176 et seq.), Revised Code 1928, and S.W. Seaney was appointed as assignee under the statute, and duly qualified and took possession of the eighteen refrigerators which were the subject matter of this proceeding, whereupon petitioner filed its petition claiming ownership and right of possession thereof, and a judgment being finally rendered against it on its petition, brought the matter before us for review.

There are two questions of law for our consideration. The first and most important is as to the nature of the trust agreement above set forth. It is the contention of petitioner that it was either a consignment for sale by petitioner to the company, or a bailment. It is the position of the assignee that it was either a chattel mortgage or a conditional sale agreement. If the document be of the nature contended for by petitioner, it was the owner of the refrigerators and entitled to their possession as against an assignee for the benefit of creditors. If, on the other hand, it was an unrecorded chattel mortgage or conditional bill of sale, it was not entitled to such possession or ownership as against innocent purchasers and bona fide creditors, by virtue of the provisions of sections 2890, 2891 and 2330, Revised Code 1928, which read as follows:

"§ 2890. Conditional sales; validity. Every provision in a conditional sale reserving property in the seller after possession of the goods is delivered to the buyer, is valid as to all persons, except as hereinafter otherwise provided; it is void as to any purchaser from or creditor of the buyer, who, without notice of such provision purchases the goods or acquires by attachment or levy a lien upon them, before the contract or a copy thereof be filed as hereinafter provided; and is void as to all persons except the buyer unless such contract or copy is so filed within ten days after the making of the conditional sale."

"§ 2891. Place of filing. The conditional sale contract or copy shall be filed in the office of the county recorder in the county in which the goods are first kept for use by the buyer after the sale; it is not necessary to its validity, or to entitle it to be filed, that it be acknowledged or attested. This section shall not apply to sales of railroad or automobile stage equipment or rolling stock."

"§ 2330. Without change of possession mortgage void as against third persons unless recorded. A chattel mortgage or other instrument of writing intended to operate as a...