General Motors Acceptance Corporation v. Thompson
| Decision Date | 11 May 1940 |
| Docket Number | 6655 |
| Citation | 292 N.W. 85,70 N.D. 99 |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1. When the owner of personal property turns possession thereof over to another whose use thereof is restricted by agreement and who agrees not to sell the property until after it has been paid for, an unauthorized sale by the person in possession creates a fiduciary relationship between the parties with respect to the consideration received from the sale of the property.
2. Money or property held in a fiduciary capacity may be followed and recovered when rights or equities of innocent third parties have not intervened.
Appeal from District Court, Grand Forks County; P. G. Swenson Judge.
Action by General Motors Acceptance Corporation against Clara Thompson, individually and as administratrix of the estate of C. T. Thompson, deceased, and the First National Bank in Grand Forks, N. D., to recover the amount of a check given to it by C. T. Thompson, deceased, before his death, and to have money in the bank account of the estate adjudged to be held in trust for the plaintiff up to the amount of the check and interest thereon. From an adverse judgment, the plaintiff appeals.
Judgment reversed, and case remanded for entry of judgment in accordance with opinion.
Emanuel Sgutt, for appellant.
When an equity action comes before the appellate court on appeal for a trial de novo as provided by law, there is no presumption in favor of the findings made by the trial court and such findings are not conclusive on the appeal. Englert v Dale, 25 N.D. 587, 142 N.W. 169.
Under a conditional sale contract the plaintiff absolutely retains title. George Dixon, Inc. v. Central Motors Co. 68 N.D. 264, 278 N.W. 648.
Under a conditional sale, possession cannot be retaken without a default; whereas in a trust receipt, possession can be retaken at any time. Re James, Inc. 30 F.2d 555.
Where a person has a lien on personal property which is sold with an understanding between owner and the person holding the lien that the proceeds of the sale will be applied toward the payment of the lien, equity will impress a trust upon such proceeds. Stegemann v. Bendixen, 219 Iowa 1190, 260 N.W. 14.
A constructive trust arises when the legal title to money or property is obtained by a person in violation, express or implied, of some duty owing to him who is equitably entitled thereto. Markworth v. State Sav. Bank, 212 Iowa 954 237 N.W. 471.
A constructive trust, unlike an express trust or resulting trust, is remedial in character. Am. Law Inst. Restatement, Trusts, p. 1249.
In its technical, legal sense a trust has been defined as the right enforceable solely in equity to the beneficial enjoyment of property, the legal title to which is vested in another. 65 C.J. 212; Brown v. Billington, 29 A. 904; Iowa Guarantee Mortg. Corp. v. General Motors Acceptance Corp. 62 S.D. 18, 250 N.W. 669.
A person who withdraws, on a trust receipt, collateral securities which he has pledged to secure a debt, holds the securities in a fiduciary capacity, as trustee, for amount of pledge. Canal-Commercial Trust & Sav. Bank v. New Orleans T. & M.R. Co. 161 La. 1051, 109 So. 834, 49 A.L.R. 274; Oil City Motor Co. v. C.T. Corp. 76 F.2d 589; Re Roublin Fils & Co. 165 F. 245; Re Fountain, 282 F. 816.
Whether or not the debtor has title to the property at the time of giving the trust receipt is the controlling fact in determining whether or not it is a true trust. Re James, Inc. 30 F.2d 555.
The respective claims of mortgagor and mortgagee in courts of common law and of equity afford a notable instance of the rise of a trust -- in a court of equity the mortgagee is treated as the mere trustee -- for the benefit of the mortgagor. 1 Jones, Mortgages, 7th ed. p. 13.
The relation between principal and agent or factor is of a fiduciary character, and the agent selling the property of his principal holds the proceeds as trustee. Commercial Invest. Trust Co. v. Stewart, 235 Mich. 502, 209 N.W. 660; First Nat. Bank v. Eastern Trust & Bkg. Co. (Me.) 79 A. 4; Harris v. Seaboard, etc. R. Co. 190 N.C. 480, 130 S.E. 319.
Where dealer giving trust receipts on automobile had authority to sell on time, or for part exchange, proceeds of cars sold, whether money or property, became property of holder of trust receipts. Hamilton Nat. Bank v. McCallum, 58 F.2d 912; Re K. Marks & Co. 222 F. 53; Mershon v. Wheeler, 76 Wis. 502, 45 N.W. 95; Brown v. Billington, 29 A. 904.
A sale of the security for an indebtedness, under the agreement either express or implied, to apply the proceeds to the payment of the indebtedness, transfers the lien from the security to the proceeds from its sale. Farmers State Bank v. Anderson, 112 Neb. 413, 199 N.W. 728; Silver v. Wickfield Farms, 209 Iowa 856, 227 N.W. 97; State v. Brown County Bank, 112 Neb. 642, 200 N.W. 866.
Where chattels subject to mortgage were sold and proceeds turned over to receiver of corporate mortgagor, mortgagee is entitled to have lien of its chattel mortgage follow and be impressed on such proceeds, no part of which belongs to receiver nor is subject to costs of receivership. Silver v. Wickfield Farms, 209 Iowa 856, 227 N.W. 97; Baker v. New York Nat. Exch. Bank, 2 N.E. 452.
It is error for the trial judge to allow an amendment of an answer where motion for same was not made until after the close of plaintiff's testimony. Ennis v. Retail Merchants Asso. Mut. F. Ins. Co. 33 N.D. 20, 156 N.W. 234; Wood v. Pehrsson, 21 N.D. 357, 130 N.W. 1010.
It is not abuse of discretion to refuse to allow amendments introducing new defenses after the evidence is all in. Prefontaine v. G.N.R. Co. 51 N.D. 158, 199 N.W. 480.
The rule that the pleadings will be amended to conform to the proof does not apply when the evidence which it is claimed tends incidentally to establish a fact outside of the issues was competent and relevant on the actual issues in the case. Buxton v. Sargent, 7 N.D. 503, 75 N.W. 811.
C. J. Murphy, T. A. Toner, and F. Kilgore, for respondent First National Bank; J. A. Alphson and T. B. Elton, for respondent Thompson.
In its technical, legal sense a trust has been defined as a right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which is vested in another. 65 C.J. 212.
Under the law of bailments, there can be no question that the remedy of the bailor for the sale, transfer, or destruction of the property bailed is an action for conversion against the bailee. 6 Am. Jur. 252.
If an agreement contains a promise by purchaser, express or implied, to pay for goods delivered, the transaction is a sale and not a bailment. 6 Am. Jur. 162.
The courts are inclined to look through the form of the instruments to the real purpose of the parties, and in that connection to consider all the facts and circumstances, including the other instruments executed as a part of the same transaction. Habegger v. Skalla (Kan.) 34 P.2d 113; Handy v. C.I.T. Corp. (Mass.) 101 A.L.R. 447.
Where a party who executed a trust receipt enters into an absolute promise to pay the purchase price, by either executing a promissory note or sight draft, the transaction is either a chattel mortgage or conditional sale. Motors Bankers Corp. v. C.I.T. Corp. 258 Mich. 301, 241 N.W. 911; McLeod Nash Motors v. Com. Cr. Trust, 187 Minn. 452, 246 N.W. 12; Ahrens Refrigerator Co. v. Williams, 54 P.2d 200; G.M.A.C. v. Seattle Asso. of Cr. Men (Wash.) 67 P.2d 882.
The most infallible test by which to determine under which class the contract falls is to ascertain whether there is a promise by the purchaser to pay for the goods delivered. If there is such a promise, then, no matter under what form the transaction is disguised, it is held to be a conditional sale, and not a bailment. Re Sweet, 224 Iowa 589, 277 N.W. 712.
The controlling principle in determining an application to amend is, or should be, whether the proposed amendment, if allowed, would further the ends of justice, and, further, that an amendment should be allowed if it be in the interests of justice and if it does not change substantially the claim or defense. Leach v. Nelson, 48 N.D. 1046, 189 N.W. 251; Morgridge v. Stoeffer, 14 N.D. 430, 104 N.W. 1112; Rae v. Railway Co. 14 N.D. 507, 105 N.W. 721; N.W. Mut. Sav. & L. Asso. v. White, 31 N.D. 384, 153 N.W. 972; Patterson Land Co. v. Lynn, 27 N.D. 391, 147 N.W. 256.
It is the policy of the law to permit amendments to pleadings with the utmost liberality in the interests of justice, and the allowance of amendments should be the rule and refusal the exception. Continental Supply Co. v. Syndicate Trust Co. 52 N.D. 209, 202 N.W. 404; Christilaw v. First Nat. Bank, 55 N.D. 913, 215 N.W. 470; Schantz v. N.P. Railroad Co. 47 N.D. 1, 180 N.W. 517.
Constructive trusts are such as are raised by equity in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it. 26 R.C.L. 1232.
This is an appeal from a judgment entered after trial by the court without a jury. The court found in favor of the defendant for a dismissal of the plaintiff's cause of action.
The facts disclose that on November 10, 1937, C. T. Thompson was engaged in business as a dealer in automobiles under the trade name of Thompson Motor Sales at Northwood, North Dakota. On that date the...
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