Fry Brothers v. Theobold

• Decision Date: 21 October 1924
• Citation: 205 Ky. 146
• Parties: Fry Brothers v. Theobold.
• Court: Kentucky Court of Appeals

205 Ky. 146

Fry Brothers v. Theobold.

Court of Appeals of Kentucky.

Decided October 21, 1924.

Appeal from Jefferson Circuit Court (Common Pleas Branch, Fourth Division).

HUMPHREY, CRAWFORD & MIDDLETON for appellants.

DAVIES, PAGE & DOWNING for appellee.

OPINION OF THE COURT BY JUDGE McCANDLESS — Appeal granted and reversed.

This is a suit to recover possession of a Ford automobile, under an order of claim and delivery. A demurrer was sustained to the petition and plaintiff declining to plead further, his action was dismissed, and he is seeking an appeal in this court.

It is substantially alleged in the petition that on February 1, 1921, the plaintiff, a corporation, made a conditional sale of the machine in question to one Weir, for the sum of $500.00. $50.00 in cash and execution of nine promissory notes of $50.00 each, payable monthly, each of which contained a provision retaining title in plaintiff, and authorizing it in case of default to take possession of the machine without legal process. The contract was made at Columbia, Tenn., both parties and the machine being present at the time, and the contract provided that the property was not to be removed from that state. It is also pleaded that the validity of such contracts is recognized by statute and upheld by the courts of that state, it being a felony for the purchaser to remove such property from the state before full payment.

The courts of this state do not recognize conditional sales, and have uniformly construed contracts of that character as passing title to the purchaser, with a lien in favor of the seller for the unpaid consideration, which may be enforced between the parties. Welch v. National Cash Register Co., 103 Ky. 30; Johnson v. Parker, 67 Ky. 149; L. & N. R. R. Co. v. Burkhardt, 154 Ky. 92. Such liens, however, are not favored in this jurisdiction, it being considered against public policy to carry secret liens, and they will yield to the claims of purchasers and creditors without actual notice. Aultman, &c. v. Mead, 121 Ky. 241; Wender B. G. C. Co. v. Louisville Property Co., 137 Ky. 339; Singer Sewing Machine Co. v. Dyer, 156 Ky. 156; Wicks Bros. v. McConnell, 102 Ky. 435; Mont. Rheim Music Co. v. Beuris, 160 Ky. 557. This principle has been crystalized in section 496 Ky. Statutes, which reads:

"No deed or deed of trust or mortgage conveying a legal or equitable title to real or personal estate shall be valid against a purchaser for a valuable consideration, without notice thereof, or against creditors, until such deed or mortgage shall be acknowledged or proved according to law and lodged for record. . . ."

Thus taking the allegations of the petition as true, there is a conflict in the laws of the two states, and a determination of the case turns upon which law should be applied in the enforcement of the contract.

Proceeding upon the lines of judicial comity, the authorities are uniform in holding that the validity of the contract is to be determined by the laws of the state in which it is made, and that the remedies to be enforced are those provided by the state in which the suit is brought.

Ordinarily, if at the time of a conditional sale the chattel sold is not in the state in which the sale is made, the laws of the state in which it is situated will determine the effect of the contract. 24 R. C. L. — Sales — section 749.

The same rule applies to conditional sales of property present at the time of sale, if it is made with the intention of both parties, that the property shall immediately be removed to and have its operation in another state, in which event the laws of the latter control. Ibid 750; Barney & Smith Mfg. Co. v. Hart, 8 K. L. R. 223; Greer v. Church & Co., 13 Bush 431; Boyer v. Knowlton Co., 38 L. R. A. (N. S.) 224; case note 64 L. R. A. 833. Naturally, if recordation is required in the state in which the contract is made, a failure to observe this would be fatal to the seller's remedy against an innocent purchaser or creditor elsewhere.

Where a valid conditional sale is made at the situs of the property, and the purchaser, without the knowledge or consent of the seller, removes it into a state in which such sales are not recognized, it is generally held that the seller may recover such property. As between the parties this rule is seldom questioned. According to the weight of authority it applies even against innocent purchasers and creditors of a conditional vendee under contracts made in the latter state. Ibid 760; Gross v. Jordan, 83 Me. 383; Harper v. People, 2 Col. App. 177; Baldwin, &c. v. Hill, 4 Kan. App. 168; Studebaker Bros. v. Mau, 14 Wyo. 68; Wharton on Conflict of Laws, section 355b. But as to this there is a conflict of authority.

In jurisdictions where by statute conditional sales made out of the state are required to be recorded within the state, in order to be effective against subsequent purchasers and creditors, the original vendor who has not complied with that regulation is held to be estopped from asserting title. Pulaski Mule Co. v. Haley & Koonce, 187 Ala. 533; Turnbull v. Cole, 70 Colo. 364; Brandon Printing Co. v. Bostick, 126 Ala. 247; North v. Goebel, 138 Ga. 739.

As to failure to comply with the law of recordation, unquestionaly a state may, by positive enactment, define the terms upon which conditional sales made in other states will be upheld, or forbid their enforcement at all, and if those laws are violated the courts will not overturn them as a matter of courtesy to another state having different laws.

The only enactment we have is the statute quoted supra. If appellant's title was valid in Tennessee, in order to estop him from claiming title in this state, he must have failed to comply with that statute, and the question of estoppel must be determined from the wording of the statute. The exact question here raised has not been heretofore presented to this court, but a construction has been given in an analogous case. Cabell Piano Co. v. Lewis, 195 Ky. 666, involved a Georgia contract. While in form a conditional sale, it also retained a lien on the property. It had been regularly recorded in Georgia. The purchaser had removed the property into this state and sold it without any recordation of the instrument here. As to whether conditional sales are valid in Georgia...