Handy v. C.I.T. Corp.
| Decision Date | 27 June 1935 |
| Citation | 291 Mass. 157,197 N.E. 64 |
| Parties | HANDY et al. v. C. I. T. CORPORATION. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Exceptions from Superior Court, Worcester County; Hall Judge.
Action of tort by George E. Handy and others against the C. I. T Corporation. Verdict for defendant, and plaintiffs bring exceptions.
Exceptions sustained.
W. M. Quade, of Gardner, and A. W. Plotkin, of Athol, for plaintiffs.
G. A. Bacon, N. P. Wells, and S.W. Weltman, all of Springfield, for defendant.
This is an action of tort for conversion of an automobile. The trial judge directed a verdict for the defendant. The relevant facts disclosed by the plaintiffs' bill of exceptions are these:
The defendant, a finance company, had a general business arrangement, followed in the instant case, with one Stiles, a retail dealer in automobiles. An automobile would first be received by the distributor in Boston from the factory. Stiles would go to Boston to take possession of the automobile. The distributor would make out a bill of sale to the defendant; eighty-five to ninety per cent. of the purchase price would be paid by the defendant and the balance by the dealer; Stiles would sign an instrument termed a ‘ trust receipt’ acknowledging receipt of the automobile from the defendant and agreeing to hold it, or, if sold, its proceeds, as the defendant's property. That so-called ‘ trust receipt’ would be taken by the defendant. The automobile would then be driven off by Stiles and with the defendant's knowledge displayed for sale in his garage without any indication that the defendant had any claim upon it. The so-called ‘ trust receipt’ contained Stiles' agreement to return the automobile ‘ on demand in good order and unused but with liberty to us to exhibit and if the written consent of C. I. T. has first been obtained to sell the same for its account for cash for not less than $915.00,’ and it provided that ‘ C. I. T. may at any time cancel this trust and repossess itself of said motor vehicle or the proceeds thereof.’ The defendant knew that it was customary for Stiles to sell such automobile to the public, that the trust receipt was not recorded in any place and that no member of the public had means of knowing that the defendant had any claim on the automobile. The defendant was aware that Stiles was selling automobiles thus obtained by him to the public and that they were displayed for sale and that no method was used by the defendant to notify anybody that the defendant had a claim on such automobiles.
The automobile here in question, so held by Stiles, was sold by him to the plaintiffs, who are father and son, without written consent of the defendant. The son, shortly before this time, had made an arrangement with Stiles to sell automobiles on a commission basis. The father joined with the son in the purchase by trading in an old automobile on the basis of $666 and signing a note for the balance of $741.28 together with a conditional sales contract of the usual form, making the total purchase price slightly more than $1407. The plaintiffs neglected to register the automobile but kept dealer plates of Stiles on it. It was sometimes kept in Stiles' garage, and sometimes at the plaintiffs' home. The plaintiffs took general care of the automobile though Stiles often borrowed it for use for display purposes. It cannot be inferred that they had knowledge of the defendant's claim. Stiles assigned the conditional sales agreement and note to the Greenfield Loan & Acceptance Corporation, and never paid the defendant anything on the automobile. On August 26, 1931, the defendant repossessed the automobile from Stiles and refused a demand from the plaintiffs that it be returned to them. The plaintiffs continued to make payments to the Greenfield Loan & Acceptance Corporation on their note, and on October 27, 1931, paid the balance due on it. Stiles furnished none of the money so paid by the plaintiffs. This action was begun by writ dated October 23, 1931.
In order to prevail the plaintiffs must prove that at the time of the conversion they had a complete property either general or special in the automobile, and the right to its immediate possession. Bacon v. George, 206 Mass. 566, 570, 92 N.E. 721; Judkins v. Tuller, 277 Mass. 247, 250, 178 N.E. 540. The defendant contends that under the instrument signed by Stiles it had legal title to the automobile all the time and a right to repossess it at any time, since no payments were made to the defendant, and that the plaintiffs had no title to the automobile or right to its possession.
The evidence already narrated warranted a finding that the defendant did not pay to the distributor of the automobiles, who was an intermediary for the manufacturer and Stiles, the dealer, the entire purchase price of the automobile but that Stiles paid ten or fifteen per cent. of that price. We do not pause to inquire whether in these circumstances a so-called trust receipt was appropriate to the transaction, or whether it was a chattel mortgage, invalid except as between the parties because not recorded. Hartford Accident & Indemnity Co. v. Callahan, 271 Mass. 556, 563, 171 N.E. 820. A further finding was warranted that under the course of business between the defendant and Stiles the latter made sales of automobiles financed as was this one without first receiving any written consent from the defendant.
An owner's rights in his chattel are protected to every reasonable extent. Royle v. Worcester Buick Co., 243 Mass. 143, 137 N.E. 531. There are equitable considerations in favor of a bona fide purchaser of such property intrusted by the holder of its legal title to the possession of another with authority to sell. The strong public policy in favor of such bona fide purchaser has been reflected in legislation. It is provided by the so-called Factor's Act, G. L. (Ter. Ed.) c. 104, § 1: ‘ A factor or other agent intrusted with the possession of merchandise * * * with authority to sell the same shall be deemed the true owner of such merchandise, so far as to give validity to any bona fide contract of sale made by him.’ This statute has been held to prevent the repossession of a motor vehicle sold to a bona fide purchaser by a dealer to whom the owner had intrusted its possession together with authority to sell it. Jeffery v. M. W. Leahy & Co., 258 Mass. 548, 155 N.E. 638.
The contention of the defendant is that the dealer, Stiles, was not a factor or agent, but merely one in possession of the automobile under the provisions of the so-called trust receipt. When examined at large, the authorities are not in accord as to the legal consequences of such an instrument as was signed by Stiles and held by the defendant. All are in agreement that it creates no trust, because by its terms the finance company for which the automobile is held ‘ in trust’ retains legal title, which in a true trust vests in the trustee. It is not often spoken of as creating the relation of pledgor and pledgee, since the essence of the transaction is to place the possession of the automobile in the dealer and not in the finance company. It is more like a conditional sale, but the dealer is not seeking a position in which he will ever become sole owner. It is evident that the contract is one of financing rather than of sale. See New Haven Wire Co. Cases, 57 Conn. 352, 383-386, 18 A. 266,5 L.R.A. 300. Because of a natural and inherent disinclination toward such concealed ownership of chattels intended to be exposed for sale, some courts have treated the trust receipt as equivalent to a chattel mortgage and required it to be a matter of public record. General Motors Acceptance Corporation v. Berry, 86 N.H. 280, 167 A. 553; McLeod-Nash Motors, Inc., v. Commercial Credit Trust, 187 Minn. 452, 246 N.W. 17, 87 A.L.R. 296. That hardly seems a logical position for these reasons: Where the finance company secured its legal title from the wholesale automobile distributor, the dealer's position under a trust receipt cannot be that of a mortgagor for he never had legal title and never conveyed it to the so-called mortgagee. Moreover, the mortgagee may regain possession only on default,...
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