Herring & Co. v. Cannon

• Decision Date: 26 April 1884
• Citation: 21 S.C. 212
• Parties: HERRING & CO. v. CANNON.
• Court: South Carolina Supreme Court

21 S.C. 212

HERRING & CO. v. CANNON.

Supreme Court of South Carolina.

April 26, 1884

1. A merchant purchased and received possession of an iron safe with his name painted thereon by the vendor, and for the purchase money gave to the vendor two notes, to each of which was added the stipulation that " in accordance with the terms of an agreement for the purchase of the safe, said vendors do not part with any title thereto until the purchase money has been fully paid." Held , that this was " an instrument of writing in the nature of a mortgage," which, under the second section of the act of 1843, required recording to be valid against subsequent creditors or purchasers for valuable consideration without notice. Cases reviewed and Talmadge v Oliver , 14 S.C. 522, explained.

2. The act of 1843 was intended to embrace such conditional sales and to render all secret liens, whether verbal or written invalid as against the rights of subsequent creditors or purchasers for valuable consideration without notice.

3. Such safe having been attached and sold as the property of the vendee, at the suit of subsequent creditors without notice the purchaser at such sale has good title to the safe, although having notice of the vendor's claim. McKnight v. Gordon , 13 Rich. Eq. , 223, recognized and followed.

Before WALLACE, J., Orangeburg, May, 1883.

The opinion states the case.

Messrs. James F. Izlar and S. Dibble , for appellants.

Messrs. DeTreville & Glover , contra, cited 1 Chit. Cont. , 538 (11th Am. edit.); 1 Pars. Cont. , 537; Benj. Sales , § 320; 14 S.C. 522; 1 Bay , 312; 4 Mass. 269; 4 Wash. C. C. , 79, 588; 20 S.C. 17.

OPINION

MR JUSTICE MCGOWAN.

This was an action for the recovery of possession, and for damages for the detention, of one patent Champion Iron Safe, claimed by the plaintiffs, valued at $105.69, and alleged to be illegally detained by the defendant, Peter G. Cannon. It appeared that in August, 1880, the plaintiffs sold the safe to one E. S. Griffin for $105.63, payable January 1 and April 1, 1881. The plaintiffs delivered the safe to the purchaser, with the name " E. S. Griffin" conspicuously painted on it. Notes were given for the purchase money, with a condition embodied in these words: " This note having been given to said Herring & Co. in part payment for a safe, and in accordance with the terms of an agreement for the purchase thereof, said Herring & Co. do not part with any title thereto until the purchase money has been fully paid."

Some time after the purchase of the safe, and while it was in his possession, the said Griffin contracted debts with Steffens & Werner and P. H. Hanes & Co., who had no notice whatever of the claim of Herring & Co. to the safe. These creditors sued Griffin, and recovered judgment against him, having in the meantime attached the safe, which was sold by the sheriff under an order of court in said process. At the time of the sale, the sheriff had been notified of plaintiffs' claim, but no public notice was given of it on the day of sale. James F. Izlar, Esq., who had also heard of the claim of plaintiffs, became the purchaser at the price of $55, which was paid upon the judgments of said creditors. Izlar afterwards sold and delivered the safe to the defendant, who was sued for the same.

The Circuit judge charged the jury that the condition on the note being in writing was effective " not only between the parties, but as to all other persons whatsoever; that at the time this contract was made, the law did not require that it should be recorded, or that notice should be given of its existence." Under this charge, the jury found a verdict for the plaintiffs, and the defendant appeals to this court upon the following exceptions:

1. " Because it being in evidence that one E. S. Griffin purchased the safe from the plaintiffs, and gave for the purchase money thereof two notes, to each of which was added the condition [as before stated], and thereupon the safe was delivered to him, with his name, E. S. Griffin, conspicuously painted thereon, and remained in the possession of the said Griffin until seized under an attachment at the suit of subsequent creditors of the said Griffin, his honor, the presiding judge, erred in instructing the jury that ‘ at the time this contract was made, the law did not require that it should be recorded, or that notice should be given of its existence.’

2. " Because his honor erred in instructing the jury that such a contract, at the time above mentioned, was valid against subsequent purchasers for valuable consideration without being recorded or actual notice.

3. " Because his honor erred in instructing the jury that the decision in Talmadge v. Oliver must necessarily conclude this case."

Conditional sales of personal property delivered, annexing a secret condition to a visible transaction appearing to the world unconditional, gave rise, for many years, to much discussion and some difference of opinion in our courts. It may be safely stated that there was a general concurrence that such contracts might be enforced between the parties who made them; but as possession is prima facie evidence of title in relation to personal property, there were obvious difficulties as soon as they touched the rights of subsequent creditors and bona fide purchasers, who dealt with the apparent owner on the faith of title, springing from his unexplained possession. Such conditions in sales, whether verbal or in writing, were held valid as to the parties themselves and their subsisting creditors down to 1839. See Dupree v. Harrington, Harp. , 391; Reeves v. Harris , and Bailey v. Jennings , 1 Bail. , 563. But in that year was decided by a divided court the case of Bennett v. Sims, Rice , 426, which may be regarded as the leading case in sustaining such secret conditions, as it went so far as to hold that there was really no difference between a verbal and written condition, and in that case sustained one that was merely verbal.

That case, however, expressly excepted and reserved the question as to subsequent creditors and bona fide purchasers. In delivering the judgment of the majority of the Court of Errors, Judge Earle said: " It is a remarkable coincidence in all the cases, beginning with Dupree v. Harrington, supra , down to the case under consideration, that neither the rights of subsequent creditors nor the rights of subsequent purchasers without notice are at all involved. *** In regard to subsequent creditors, it will be time enough to provide for them when they complain. Whenever the vendor's right shall come in conflict with the claims of those who become creditors after the transfer of possession, then the court will endeavor so to modify the rule, or restrict its operation, as to protect the rights of bona fide creditors who may have trusted the supposed purchaser on the faith of the property in his possession."

In 1839 the law was thus announced, with a doubtful judicial saving as to the rights of subsequent creditors and bona fide purchasers, and immediately thereafter the legislature (possibly moved thereto by the decision in Bennett v. Sims ) interposed, and passed the act of 1843, " To amend the law in relation to recording mortgages and to regulate the lien thereof" (11 Stat. , 256), afterwards substantially embraced in the general registry act of 1876, and re-enacted as section 2346 of the general statutes. This act has three sections. The first provides that " no mortgage or other instrument of writing in the nature of a mortgage of real estate shall be valid so as to affect the rights of subsequent creditors or purchasers, & c., unless the same shall be recorded," & c. The second provides that " no mortgage or instrument of writing in the nature of a mortgage of personal property, shall be valid so as to affect the rights of subsequent creditors or purchasers, & c., unless the same shall be recorded," & c. And the third declares " that every verbal agreement between the vendor and the vendee of personal property, whereby the vendor, who has parted with the possession thereof to the vendee, shall reserve to himself any interest in the same, shall be null and void as to subsequent creditors or purchasers for valuable consideration without notice."

It is insisted for the defendant that the paper in contention here is an " instrument of writing in the nature of a mortgage," which by the act was required to be recorded and, not having been, is null and void as to the subsequent creditors of Griffin, the vendee. By the contract the vendors, who parted with the possession of the safe to Griffin, undertook to reserve to themselves an interest in the same, and therefore it is precisely such a contract as is denounced by the third section of the act, and if it were merely verbal would certainly be void. But as it is in writing the question is, whether it is such an " instrument in the nature of a mortgage" as is required to be recorded by the second section of the act. It is plain that the purpose of the act in all its sections was to protect the rights of subsequent creditors and purchasers against secret liens, and the third section shows that such contracts as the one before us was, in the contemplation of the framers of the act. ...