Forgan v. Bainbridge

• Decision Date: 26 November 1928
• Docket Number: Civil 2746
• Citation: 34 Ariz. 408,274 P. 155
• Parties: DAVID A. FORGAN, CHARLES W. FOLDS, JOHN D. LARKIN, C. W. SEABURY, B. A. McDONALD, A. E. DUNCAN, WILLIAM H. GRIMES, R. WALTER GRAHAM, and JAMES C. FENHAGEN, Operating as THE COMMERCIAL CREDIT TRUST, a Common Law Trust, Appellants, v. C. O. BAINBRIDGE, Appellee
• Court: Arizona Supreme Court

274 P. 155

34 Ariz. 408

DAVID A. FORGAN, CHARLES W. FOLDS, JOHN D. LARKIN, C. W. SEABURY, B. A. McDONALD, A. E. DUNCAN, WILLIAM H. GRIMES, R. WALTER GRAHAM, and JAMES C. FENHAGEN, Operating as THE COMMERCIAL CREDIT TRUST, a Common Law Trust, Appellants, v. C. O. BAINBRIDGE, Appellee

Civil No. 2746

Supreme Court of Arizona

November 26, 1928

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Judgment reversed and cause remanded, with instructions.

Messrs Fred Blair Townsend and Earl F. Drake, for Appellants.

Messrs Armstrong, Lewis & Kramer, for Appellee.

OPINION

LOCKWOOD, J.

Appellants herein, plaintiffs in the lower court, brought an action in replevin against appellee, defendant below, to recover the possession of a certain Cadillac automobile or the value thereof. At the time of the trial it was stipulated that the automobile was in the possession of defendant, and plaintiffs announced that they waived a return of the car and sought a recovery of its value. The case was tried upon an agreed statement of facts to the court, and judgment was rendered in favor of plaintiffs in the sum of $760, with interest. From this judgment they have appealed.

The following is the statement of facts upon which the case was determined by the lower court:

"On June 30, 1925, one Floyd Tallmadge, the then buyer of the automobile involved in this replevin action, made, executed and delivered to the seller of the car a purchase money chattel mortgage upon said car. Shortly after the execution of said mortgage, the mortgagee therein named, sold and assigned said mortgage to the plaintiffs in this action, a common law trust, legally organized and entitled to do business in the State of Illinois.

"Within ten days after the execution of said mortgage, and within the time required by law, the said assignees, plaintiffs herein, caused said mortgage to be properly recorded in the county of the place of the residence of the mortgagor.

"It is agreed that said mortgage after said recordation was according to the laws of Illinois, a valid lien on said automobile, in favor of plaintiffs, and good against any subsequent purchaser of said car within that state, and that said mortgage still remains undischarged of record.

"At the time of the commencement of the suit herein there was past due and payable to the plaintiffs in connection with the purchase money note and said mortgage aforesaid, if valid, as against the defendant herein, the sum of one thousand seven hundred twenty-two and 76/100 dollars ($1,722.76), together with interest from November 30, 1925, at seven (7) per cent. per annum.

"After making the first few payments of the purchase price, Floyd Tallmadge, the buyer of said car, without the knowledge or consent of plaintiffs, removed the automobile in question to the state of Texas, where on January 2nd, 1926, he was arrested as a fugitive from justice, by parties other than the plaintiffs. That the said Tallmadge was brought before the justice of the peace from whose court the warrant was issued, and his bail fixed in the sum of one thousand dollars ($1,000.00).

"That the said Tallmadge induced one L. Bibb to go upon his said bail bond, with one Lee Thompson, for the said sum of one thousand dollars ($1,000.00), and the said L. Bibb consented to do so in consideration of the delivery to him of the said Cadillac automobile, together with a bill of sale thereto, conditioned that in case the said Floyd Tallmadge did not appear and answer the said complaint, said bill of sale would become absolute and effective as of the date of the entering of the default of the said Floyd Tallmadge.

"That the said bill of sale was made, executed and delivered to the said L. Bibb, without actual notice of any prior existing lien or claim against said car. That the records of the county of El Paso, Texas, at that time were searched and disclosed no conditional sale contract, no chattel mortgage, nor other instrument of record showing an adverse claim or lien against the car.

"That the said Floyd Tallmadge defaulted upon the aforesaid bond, and on the 14th day of January, 1926, the default of the said Tallmadge was legally entered and a judgment ordered taken against the said L. Bibb and his co-surety, Lee Thompson, for one thousand dollars ($1,000.00).

"That said Floyd Tallmadge has never surrendered himself upon the aforesaid complaint, and said L. Bibb is not aware of his whereabouts, nor where he may be found.

"That thereafter, on the 18th day of February, 1926, in the city and county of El Paso, state of Texas, said Tallmadge failing to appear and make any claim to said car, said L. Bibb executed a bill of sale to the defendant, C. O. Bainbridge, to the aforesaid car, and at said time delivered said car to C. O. Bainbridge.

"That at the time of the transfer and sale of the said automobile described in the aforesaid bill of sale to the defendant, C. O. Bainbridge, there was upon record in the office of the county recorder of El Paso county a copy of the chattel mortgage in question.

"That said mortgage provides that the mortgagee shall have the right to the possession of the said automobile as soon as any default in the payment of said mortgage shall have occurred.

"Subsequently defendant brought said automobile to Maricopa county, Arizona, where plaintiffs located it in the possession of defendant, and after demand and refusal filed this action for its recovery or the value thereof.

"It is agreed that at the time of the commencement of this action the automobile was reasonably worth seventeen hundred sixty dollars ($1,760.00), in accordance with the valuation in the automobile dealers 'Blue Book' for the month of April, 1926, it being the intention of the parties that said Blue Book estimate shall be the sole basis for calculation of value."

It is the contention of plaintiffs that their mortgage, having been properly recorded in the state of Illinois, was a valid and prior lien on the automobile, superior to any rights arising through the bill of sale made by Tallmadge in the state of Texas. Defendant insists, on the contrary, that, under the laws of Texas, the place where the bill of sale was executed, the latter was superior to the Illinois mortgage. The question is of considerable importance, and involves the public policy of the state of Arizona, in regard to the application of the rule of comity.

It is the law in almost every state of the Union that, where a chattel mortgage on personal property is duly recorded in the state where the property is located at the time, and the owner of the property removes it to some other state without the consent of the holder of the mortgage, such holder may follow the property into the other state and recover it from an innocent purchaser for value without notice in the same manner as he could in the state where the mortgage was given. 11 C.J. 424, and cases cited. In so far as we can determine, there are but four states which do not recognize this doctrine, among them being the state of Texas. Therein it is held that the rights of the innocent purchaser are superior to those of the holder of the foreign mortgage. Consolidated Garage v. Chambers, 111 Tex. 293, 231 S.W. 1072; Wooten v. Arnett Auto Parts Co., (Tex. Civ. App.) 286 S.W. 667. The state of Illinois follows the general rule on the subject. Mumford v. Canty, 50 Ill. 370, 99 Am. Dec. 525; Wolf v. Shannon, 50 Ill.App. 396; Armitage-Herschell Co. v. Potter, 93 Ill.App. 602.

The question has never been before the courts of Arizona in this precise form. We have, however, held that a conditional vendor may recover his property under like circumstances from an innocent purchaser of the property in Arizona in conformity with the provisions of the Uniform Conditional Sales Act. Bradshaw v. Kleiber Motor Truck Co., 29 Ariz. 293, 241 P. 306. It is true this particular decision was based upon the language of the statute. The legislature, however, by adopting this statute, has impliedly approved of the principle of the majority rule, and we see no reason logically why, if it applies to conditional sales, it should not to chattel mortgages. The effect, if the Texas rule were generally adopted, is well set forth in the following quotation from Bonin v. Robertson, 2 Terr. L. 21-30; 11 C.J. 425:

"If the contention of the plaintiff here were to prevail, then once chattels come across our boundary it is only a question of speed between the mortgagee in his pursuit after the fly-by-night mortgagor and this usually alert individual in finding an innocent purchaser obligingly ready to purchase without too much inquiry or too many troublesome questions, the property he has brought with him in his flight."

The same principle is well stated in Motor Inv. Co. v. Breslaver, 64 Cal.App. 230, 221 P. 700:

The same principle is well stated in Motor Inv. Co. v. Breslaver, 64 Cal.App. 230, 221 P. 700:

"A state may, it is true, refuse to recognize the rule of comity in such cases, but should it do so, it would become a party to every such fraudulent transaction. It is not going too far to say and to hold that it is preferable and more desirable that an innocent purchaser or encumbrancer of personal property brought into a state under such circumstances as those characterizing the transaction with which we are here concerned should suffer loss, which possibly his own improvidence or want of diligence has brought to him, than that the state should assume and maintain an attitude towards such transaction which would necessarily stigmatize it as an accessory after the fact to the fraud inhering therein."

We therefore hold the law of Arizona to be in consonance with that of the great majority rule, to the...