Cotton States Mut. Ins. Co. v. Bibbee

• Decision Date: 02 July 1963
• Docket Number: No. 12193,12193
• Citation: 131 S.E.2d 745,147 W.Va. 786
• Parties: COTTON STATES MUTUAL INSURANCE COMPANY, a Corporation, v. Gerald O. BIBBEE et al., and Union Trust & Deposit Company, a Corporation.
• Court: West Virginia Supreme Court

Page 745

131 S.E.2d 745

147 W.Va. 786

COTTON STATES MUTUAL INSURANCE COMPANY, a Corporation, v. Gerald O. BIBBEE et al., and Union Trust & Deposit Company a Corporation.

No. 12193.

Supreme Court of Appeals of West Virginia.

Submitted April 30, 1963.

Decided July 2, 1963.

Syllabus by the Court

1. Conditional sales are not favored in law, and if the instrument is doubtful as to whether it is a conditional sales contract or a mortgage the courts generally treat such instrument as a mortgage.

2. Under a conditional sales contract the seller retains the title to the property, but under a mortgage the seller or mortgagee merely has a lien on the property. The transfer of title back to the seller and retention of the property by the buyer constitute the instrument a chattel mortgage.

3. The absence of failure of consideration is no defense against a holder in due course of a negotiable promissory note; and a conditional sales contract or chattel mortgage taken in connection therewith is merely an instrument of security for the note, and rights and liabilities in such securities have no proper place in the issues where a holder in due course sues only to enforce the note.

4. The uniform conditional sales act deals with one situation and the uniform negotiable instruments act with another. They are not irreconcilable and do not conflict one with the other. Therefore, the fact that one was enacted into law after the other will not make it prevail over the other.

5. Under the West Virginia Rules of Civil Procedure it is not necessary for a waiver to be specially pleaded. Such matter can be set up in an answer or an amendment thereto. Rule 8(c) R.C.P.

6. Liberality with regard to amended and supplemental pleadings is allowed under the Rules of Civil Procedure. Rule 15 R.C.P.

7. Parties may waive their rights unless a question of public policy is involved.

McDougle, Davis, Stealey & Morris, John R. Morris, Parkersburg, for appellant.

George Shedan, Joseph J. Shedan, Parkersburg, for appellees.

BERRY, President.

This action was instituted in the Circuit Court of Wood County by the Cotton States Mutual Insurance Company, a Corporation, as the plaintiff below, against Gerald O. Bibbee et al. and the Union Trust and Deposit Company, a Corporation, as defendants below, to recover the possession of a 1960 Chevrolet automobile. This vehicle was stolen July 19, 1960 from its owner in the State of Georgia after having been insured by the Cotton States Mutual Insurance Company, which paid the owner for the value of the car after it had been stolen, and which then obtained a bill of sale for the automobile. This vehicle reappeared on a used car lot in Parkersburg, West Virginia, owned and operated by Otto V. and Richard T. Bowersock, doing business as Otto's Used Cars. It was sold to Gerald O. Bibbee and Ada M. Bibbee, hereinafter referred to as the Bibbees, on July 29, 1960 for $2900. The Bibbees traded their old car in on the purchase and were allowed $900, thus leaving a balance due of $2000, to which was added $270 for finance charges. A note was given to the seller in the amount of $2270, at which time the Bibbees also executed what is known as an Ohio Form Chattel Mortgage as security for the note. The papers used for the note and mortgage were on printed forms attached together and from their appearance were furnished as printed forms by the Union Trust and Deposit Company, a Corporation, the defendant below, who will be referred to hereinafter as the Bank. The stipulation of facts states that the mortgage was attached to the note but does not say that the Bank supplied the form. The note was endorsed to the Bank or order by the seller, Otto's Used Cars, and thus transferred to the bank, along with the mortgage which was assigned by the used car dealers after the execution of the note and mortgage at the time of the sale and after payment by the Bank to the used car dealers for the note.

Neither the Bank nor the Bibbees had any knowledge that the car in question had been stolen and that there was anything wrong whatsoever with the transaction involving the car. Both of them are innocent victims of the basic rule that title cannot be acquired to stolen property by dealings with the thief or his successors.

This action was instituted in October, 1960 by the Insurance Company to obtain possession of the automobile after the New Rules of Civil Procedure in this State became effective. The Bibbees, as defendants, filed an answer to the complaint and a cross-claim against the defendant Bank. The Bank answered the complaint and cross-claim and asserted a cross-claim against the Bibbees, who in turn filed an answer or reply to the Bank's cross-claim. Various motions to dismiss were made by the parties during the procedure. The possession of the automobile in question was given to the plaintiff below, The Cotton States Mutual Insurance Company, by the trial court, in accordance with the relief sought for its complaint. The defendants below, the Bibbees and the Bank, did not question this disposition on the part of the court. Therefore, the Insurance Company is not involved in the appeal to this Court.

The case was heard by the trial court in lieu of a jury on a stipulation of facts filed by the parties. The Bibbees took the position that the Bank was the holder of a non-negotiable instrument and that since good title to the automobile could not be given the Bibbees owed the Bank nothing. The Bank took the position that it was the holder in due course of a negotiable instrument on which the Bibbees were liable regardless of the transaction with regard to the automobile and the failure of the Bibbees to obtain good title thereto. It also took the position that the Bibbees had waived any defense of lack or failure of consideration by additional statements made in writing in connection with the transaction.

After the case was submitted to the trial court in lieu of a jury, as stated above, all parties moved for a judgment and the trial court found that the Bank was the holder in due course of the note, and that the Bibbees were liable for the unpaid balance due thereon, but further held that the Bibbees were entitled to possession of an automobile which the Bank could never deliver and that when they paid the note in full to the Bank for the amount of the note, they were entitled to be paid by the Bank for the value of the automobile because of the breach of warranty of title. The court also found that the Ohio Chattel Mortgage was a conditional sales contract, and that the Bibbees could not rescind the contract made with Richard T. Bowersock, doing business as Otto's Used Cars, and demand a refund of that portion of sale price paid by the Bibbees to Bowersock. Judgment was entered in favor of the Bank in the amount of $6.00, the difference between the value of the car at the time it was taken from the Bibbees and the amount of the note. Upon application by the Bank to this Court an appeal and supersedeas to the judgment of the trial court of January 30, 1962, were granted on October 15, 1962.

The Bank assigns as error on the part of the trial court the fact that the court, after finding that it was a holder in due course of the note in question, then proceeded to contradict this concept by holding that the Bank was liable to the Bibbees for the value of the automobile at the time it was taken from them, which in effect held the Bank liable for a breach of warranty on a collateral contract. The Bank also assigns as error the holding of the trial court that the Ohio Chattel Mortgage was a conditional sales contract and that the buyer could not rescind the sale and obtain his money back from the seller, and assigns as error the order requiring the Bank to pay the costs of the action.

It is conceded that both the Bank and the Bibbees are innocent parties in connection with this entire transaction, and it will be noted that the used car dealer who was responsible for this unsavory deal, was not made a party to this action, nor has any claim been made against said dealer.

When the case was argued it was indicated by the parties that the used car dealer was insolvent. However, this does not explain why there was no attempt made to obtain a judgment against the apparent wrongdoer in connection with the transaction involved in this case.

The contract of sale was made and the papers signed in West Virginia in connection with the transaction involved in this case and therefore the laws of West Virginia would be applicable. At the time of this sale Ohio did not have the uniform conditional sales contract, but it was, and is now, a part of the West Virginia law. Although the stipulation of facts calls the security a chattel mortgage, the trial court found that it was in fact a conditional sales contract. The chattel mortgage used in the instant case contains the following language:

'KNOW ALL MEN BY THESE PRESENTS, that Gerald O. Bibbee (Purchaser) Mortgagor, residing at Coolville, Box 254 in _____ County of Athens, State of Ohio, does hereby grant, bargain, sell, assign, transfer, and set over unto Otto's Used Cars Mortgagee, its personal representatives, successors and assigns the following described property and being in good condition in the possession of the mortgagor, to-wit:' The amount paid for and a description of the automobile purchased followed the above quoted.

It is true that this chattel mortgage in the last paragraph thereof gives to the mortgagee the right of repossession of the automobile purchased and that this is one of...