General Motors Acceptance Corp. v. Greene County Union Bank

• Decision Date: 28 March 1936
• Citation: 95 S.W.2d 948,20 Tenn.App. 93
• Parties: GENERAL MOTORS ACCEPTANCE CORPORATION v. GREENE COUNTY UNION BANK.
• Court: Tennessee Court of Appeals

95 S.W.2d 948

20 Tenn.App. 93

GENERAL MOTORS ACCEPTANCE CORPORATION v. GREENE COUNTY UNION BANK.

Court of Appeals of Tennessee, Eastern Section.

March 28, 1936

Certiorari Denied by Supreme Court July 3, 1936.

Appeal in Error from Circuit Court, Greene County; Shelburn Ferguson, Judge.

Action by the General Motors Acceptance Corporation against the Greene County Union Bank. Judgment for defendant, and plaintiff appeals in error.

Reversed and remanded.

Swingle & Hardin, of Greeneville, for plaintiff in error.

Susong & Parvin, of Greeneville, for defendant in error.

PORTRUM Judge.

The plaintiff, General Motors Acceptance Corporation, replevied one Pontiac automobile in the possession of the Greene County Union Bank, claiming title to the same and the right to possession under a trust receipt, hereinafter referred to. This car was originally delivered to the dealer, King Motor Company of Greeneville, Tenn., for display in the dealer's show room, and as we shall hereafter show, for sale, under the trust receipt. And the dealer having failed in business, the plaintiff seeks to reclaim the car under and by virtue of its receipt from the defendant, Greene County Union Bank, who had acquired the possession of the car under some arrangement not shown in the record. At the conclusion of the plaintiff's evidence, the trial judge directed a verdict in favor of the defendant, and therefore, it does not appear under what claim of right the defendant asserts ownership in the car. The trial judge was of the opinion that this-trust receipt was not voidable, but void ab initio, and he ruled accordingly. He held that the enforcement of the contract, trust receipt, was against the sound public policy of the state, basing his holding upon the line of cases holding conditional sales and chattel mortgages of goods sold for resale void as against public policy. Some of these cases are as follows: Star Clothing Manufacturing Co. v Nordeman, 118 Tenn. (10 Cates) 384, 387, 100 S.W. 93; Bank of Cookville v. Brier, 95 Tenn. 331, 338, 32 S.W. 205; Mayer v. Catron (Tenn.Ch.App.) 48 S.W 255, 257, and Sanders v. Farmers Union Co., 5 Tenn.App. 560, 572. Star Clothing Manufacturing Company v Nordeman, supra, states the rule that a conditional sale of personal property means one in which title is retained in the vendor with no right in the vendee to sell the property, and in which the property is not subject to a debt of the vendee, and the foregoing characteristics of sale do not preclude the idea, however, of a very distinct interest in the vendee. And the case holds that these two characteristics are inconsistent with the sale made to a retail merchant of goods to be resold by him in the ordinary course of his business. The court then states that the retention of title under such circumstances is nugatory, as the goods belonged to the vendee and passed into the hands of its trustee in bankruptcy.

The distinction between a trust receipt and a conditional sales contract must form the basis of the inapplicability of the rule as laid down in these cases. If the distinction is unsubstantial and illusive, then the rule of public policy as defined in the aforementioned cases should be applied. And according to the holding in the Star Clothing Manufacturing Company Case, the rights of general creditors are superior to the vendor, and perhaps the vendee's title is perfect, for the court held the conditional sale nugatory.

Trust receipts are a species of security that have a comparative recent origin; they first came to the attention of the courts in 1872, or about that time, and were used by importers as temporary security for the payment of the goods imported. The courts recognized the utility of this species of security, and the essential requirements to perfect the security have been defined in the decisions of the courts. The manufacturers of automobiles have utilized the trust receipts in the financing and sale of automobiles, and the majority of the courts have sanctioned this new use of the trust receipts. The court has been cited to no reported case of the state courts of Tennessee dealing with this question, but the federal courts within the state have dealt with the question, and we have a reported opinion of the Circuit Court of Appeals for the Sixth District going up from the federal court of the Eastern District of Tennessee, Hamilton Nat. Bank v. McCallum, 58 F. (2d) 912, in which it is held that the receipt is binding and creates a superior lien to that of general creditors or the bankrupt's trustee's lien acquired upon the adjudication in bankruptcy. This case will be discussed later; the court desiring first to set out the bill of sale and accompanying trust receipt.

The Pontiac Motor Company, manufacturers, executed a bill of sale to the car in question, reading in part as follows:

"Know all men by these presents, that the undersigned for valuable consideration does hereby grant, sell, transfer and deliver unto the General Motors Acceptance Corporation, the motor vehicle described above: To have and to hold all and singular the said goods and chattel to said grantee, its successors and assigns.***"

To obtain possession of this car, the dealer, King Motor Company, executed a trust receipt to the General Motors Acceptance Corporation reading as follows:

"Received of General Motors Acceptance Corporation the motor vehicle described above.

"I (we) hereby acknowledge that said motor vehicles are the property of the said General Motors Acceptance Corporation, and agree to take and hold the same, at my (our) sole risk as to all loss or injury, for the purpose of storing said property; and I (we) hereby agree to keep said motor vehicles brand new and not to operate them for demonstration or otherwise, except as may be necessary to drive said motor vehicles from freight depot or from above city to my (our) place of business with all due care at my (our) risk en route against loss and damage to said motor vehicles, persons or property, and except as I (we) may be allowed by you in a special case to use the same for demonstrating upon our compliance with the conditions expressed in your instructions to us, and return said motor vehicles to said General Motors Acceptance Corporation or its order upon demand at any time and for any reason; and pay and discharge all taxes, encumbrances and claims relative thereto. I (we) hereby agree not to sell, loan, deliver, pledge, mortgage, or otherwise dispose of said motor vehicles to any other person until after payment of all amounts shown on dealer's record of purchase and release of like identification number herewith. I (we) further agree that the deposit made of amounts shown on the dealer's record of purchase and release of like identification number herewith. I (we) further agree that the deposit made by me (us) in connection with this transaction, may be applied for reimbursement for any expense and/or loss incurred by General Motors Acceptance Corporation, in the event of breach of this trust or the repossession of said motor vehicles."

Originally these receipts were used to finance importation, and to secure drafts drawn for the payment of the goods. In case the draft was not paid, the...