Gen. Motors Accept. Corp v. Sharp Motor Sales Co.
| Decision Date | 18 March 1930 |
| Parties | General Motors Acceptance Corporation v. Sharp Motor Sales Company et al. |
| Court | United States State Supreme Court — District of Kentucky |
1. Chattel Mortgages. — Where petition to enforce superior lien on automobiles under trust receipts proceeded expressly on theory that plaintiff held only a chattel mortgage, action was governed by rule that transaction designed to hold personal property as mere security for debt is regarded as chattel mortgage, regardless of its name or form, and different legal status of trust receipt need not be considered.
2. Chattel Mortgages. — Lien of bank taking valid pledge of warehouse receipt for automobiles without notice of prior unrecorded chattel mortgage thereon and for value was superior to mortgagee's lien under Ky. Stats., sec. 496.
3. Warehousemen. — Description of automobiles in warehouse receipts by arbitrary motor and serial numbers, which were not those of automobiles, held sufficient under warehousemen statute (Ky. Stats., sec. 4769), where they were only automobiles in warehouse answering general description in receipts, and warehouseman readily identified them on presentation of receipts.
4. Warehousemen. — Property stored need not be described in warehouse receipt with same particularity as in chattel mortgage, which must contain description sufficiently definite and certain to enable public in general to identify property; such receipt being sufficient when it identifies property or furnishes sufficient data for warehouseman to ascertain and deliver it, under Ky. Stats., sec. 4777 5. Appeal and Error. — Where corporation suing to enforce superior lien on automobiles under unrecorded trust receipts as chattel mortgage did not deny allegation of defendant bank's cross-petition that mortgagor indorsed warehouse receipts for automobiles in blank on back thereof and transferred them to bank as collateral security for note in regular course of business, and bank director testified to same effect, plaintiff's argument on appeal that bank obtained no lien because receipts were not so indorsed, as required by Ky. Stats., sec. 4770, was without merit.
6. Pleading. — Plaintiff's failure to deny averments of bank's answer and cross-petition that it acquired lien on automobiles through pledge of warehouse receipts, without notice of plaintiff's lien under prior unrecorded trust receipts executed by pledgor, was controlling on question whether bank's handling of transaction wherein sight drafts were drawn on pledgor, with bills of lading and trust receipts attached, and bills delivered to pledgor when drafts were paid and notes and receipts executed, constituted notice to bank of incorrect description of automobiles in warehouse receipts.
7. Pleading. — In suit to enforce superior lien on automobiles under trust receipts, plaintiff was not entitled to rely on denials in defendant warehouse company's answer to codefendant bank's cross-petition asserting superior lien on purchase money as pledgee of warehouse receipts; issues between plaintiff and bank not being affected by cross-action against warehouse company, even if appropriate in such action under Civil Code of Practice, sec. 96. subd. 3.
8. Pleading. — A defense which is purely personal to defendant interposing it and does not defeat or destroy the cause of action does not inure to benefit of codefendant or prevent court from rendering judgment against defendants making no defense, under Civil Code of Practice, sec. 370.
9. Chattel Mortgages. — Bank, to which warehouse receipts for automobiles were pledged for value in regular course of business, without notice of prior unrecorded trust receipts executed by pledgor, was not a mere general creditor, but obtained a lien superior to that of holder of trust receipts under Ky. Stats., sec. 496.
Appeal from Daviess Circuit Court.
SANDIDGE & SANDIDGE for appellant.
ALBERT B. OBERST, LOUIS I. IGLEHEART and E.B. ANDERSON for appellees.
Affirming.
The General Motors Acceptance Corporation instituted an action in equity against the Sharp Motors Sales Company and others to enforce a superior lien upon several automobiles. The Sharp Motor Sales Company had made an assignment for the benefit of its creditors, and the assignee was made a party defendant. The National Deposit Bank of Owensboro and the Owensboro Warehouse Company were made defendants to the action and called upon to disclose whatever interests, liens, or claims they might have to the property in controversy. The First National Bank of Owensboro also was made a party because the money derived from an agreed sale of the automobiles had been deposited with it to be held subject to the rights of the respective parties as finally ascertained and adjudged. The foundation of the plaintiff's claim was several so-called trust receipts which the petition alleged were in effect chattel mortgages.
The National Deposit Bank filed an answer and cross-petition, in which it asserted a superior lien to the fund in controversy by virtue of a pledge of warehouse receipts for the automobiles which had been issued to the Sharp Motor Sales Company by the Owensboro Warehouse Company. It also sought to hold the warehouse company liable to it in the event its claim of superior lien by virtue of the warehouse receipts was not sustained. It averred that it had no knowledge or information concerning plaintiff's pocket mortgage on the automobiles described in the warehouse receipts, and that it was an innocent purchaser, and entitled to preference over plaintiff because plaintiff's chattel mortgage was not recorded. The Owensboro Warehouse Company and the First National Bank filed answers to the cross-petition, but, on the present appeal by the General Motors Corporation, no notice of them is necessary.
There was an agreed statement of facts showing that the Oakland Motor Car Company had executed and delivered to the General Motors Acceptance Corporation two separate bills of sale covering the motorcars in controversy; that these motorcars had been delivered to the Sharp Motor Sales Company; that upon receipt of the automobiles the Sharp Motor Sales Company executed and delivered to the plaintiff several promissory notes, and the trust receipts exhibited with the petition, and that no part of the notes had been paid. The correct motor number and serial number of each automobile was stated.
The automobiles involved had been delivered to the Owensboro Warehouse Company to be stored and warehouse receipts therefor were issued by it. This was done before the maturity of the notes given by the Sharp Motor Sales Company to appellant. The trust receipt was in substance an acknowledgment that the automobiles received were the property of the General Motors Acceptance Corporation, and an agreement to take and keep them at the risk of Sharp Motor Sales Company, and to refrain from selling, lending, pledging, or otherwise disposing of the vehicles. It contained a number of covenants and conditions not necessary to enumerate. A promissory note was executed simultaneously for the portion of the agreed consideration for the cars not theretofore paid.
Upon the stipulated facts and the evidence heard the court adjudged a prior lien to the National Deposit Bank of Owensboro which exhausted the fund and left nothing for the plaintiff. It appeals from the judgment, insisting (1) that the court erred in adjudging a prior lien to the National Deposit Bank of Owensboro, because the trust receipts vested title in the appellant and the storage by the Sharp Motor Sales Company of the automobiles and a pledge of the warehouse receipts could not affect it, although the trust receipts were unrecorded; (2) and that, if not correct in its first contention, the appellant nevertheless had a lien on the cars superior to that of the bank for several reasons to be separately stated and considered.
1. Argument is advanced to the effect that the trust receipt occupies a different legal status from chattel mortgages. Numerous opinions are cited in which the character of security afforded by the trust receipts is expounded. In re A.E. Fountain, Inc. (C.C.A.) 282 F. 816, 25 A.L.R. 319; In re Ford-Rennie Leather Co. (D.C.) 2 F. (2d) 750; Century Throwing Co. v. Muller (C.C.A.) 197 F. 252; In re James, Inc. (C.C.A.) 30 F. (2d) 555. We are relieved of the necessity of considering the question, however, for the reason that plaintiff's petition proceeded expressly upon the theory that it held only a chattel mortgage and asserted a superior lien by reason thereof. It set up no other character of claim. The action was based upon and governed by the Kentucky rule to the effect that, whatever may be the name or form of a transaction, when it is designed to hold personal property as a mere security for a debt, it is regarded as a chattel mortgage. Fry Bros. v. Theobald, 205 Ky. 146, 265 S.W. 498; Wicks Bros. v. McConnell, 102 Ky. 435, 43 S.W. 205, 20 Ky. Law Rep. 84; Welch v. National Cash Register Co., 103 Ky. 30, 44 S W. 124, 19 Ky. Law Rep. 1664. And, since the instrument was not recorded, it was invalid against a bona fide purchaser, or creditor without notice, Ky. Stats., sec. 496. If the National Deposit Bank had a valid pledge of the warehouse receipts taken without notice of the unrecorded mortgage, and for value, its lien was undoubtedly superior to that of the appellant. Starr Piano Co. v. Petrey, 168 Ky. 530, 182 S.W. 624; Mason, etc., v. Scruggs, 207 Ky. 66, 268 S.W. 833.
2. It is argued that the warehouse receipts held by the National Deposit Bank did not sufficiently identify or describe the automobiles to create a lien thereon by a pledge of the receipts. The vice assumed to exist in the warehouse receipts is that arbitrary numbers were inserted therein which were not the motor numbers or serial numbers of the automobiles. The warehousemen statute (Ky. Stats.,...
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