International Harv. Co. v. Pott

• Decision Date: 24 June 1913
• Citation: 32 S.D. 82,142 N.W. 652
• Parties: INTERNATIONAL HARVESTER COMPANY OF AMERICA, Plaintiff and respondent, v. NICK POTT, Peter Pott, Joseph Pott, and M. Pott, dba N. Pott & Sons, Defendant and appellants.
• Court: South Dakota Supreme Court

32 S.D. 82, 142 N.W. 652 (1913)

INTERNATIONAL HARVESTER COMPANY OF AMERICA, Plaintiff and respondent v NICK POTT, Peter Pott, Joseph Pott, and M. Pott, dba N. Pott & Sons Defendant and appellants South Dakota Supreme Court Appeal from Circuit Court, Grant County, SD Hon. Frank McNulty, Judge Affirmed Thos. L. Bouck Attorney for Appellants. Thad. L. Fuller Attorney for Respondent. Opinion filed June 24, 1913

WHITING, P. J.

Respondent corporation is the manufacturer of a line of farming machinery, and the appellant is a copartnership engaged in the retail sale of farm machinery at Milbank, S.D. 'The parties entered into a contract, of which the following parts are material to the questions involved herein:

"It is further agreed, by and between the parties hereto, that the title to, and the ownership, of all goods which may be shipped under the terms of this contract shall remain in and their proceeds (in case of sale) shall be the property of International Harvester Company of America, and subject to the order of the said company until full payment shall have been made by the purchasers to said company for said goods or of any notes taken for the purchase price thereof, but nothing in this clause shall release the purchaser from making payments as above stipulated.

"Engines. Number Gas or Gasoline Engines Net Price

"Ordered Complete Each

"One 20 H.P. Type 'C' $1400.00

"25 2-Cylinder Vertical

"If still on hand unsold will accept note due 1,

8 per cent. after due. Same discount to apply 1911."

Under this contract the respondent shipped to appellants, and appellants accepted and received into their possession, the 20 H. P. type "C" engine therein mentioned, as well as other machinery. The engine remaining unsold, appellants executed and delivered to respondent under date of September 9, 1910, their promissory note for $1,400 due November 1, 1911, with interest at 8 per cent. from that date, the said note, as shown by the evidence received, being given in compliance with the above clause attached to the said contract. This note remaining unpaid, respondent brought an action to recover thereon, and the appellants defended upon the ground that, under the above contract and the facts as above stated, appellants were not liable on said note. Upon the trial, both parties having moved for a direction of verdict, the trial court took the cause from the jury, made findings of fact and conclusions of law in favor of the respondent, and entered judgment thereon. Among other things found by the trial court was that upon the giving of the note the title to the engine in question passed to the appellants. The trial court seems to have based its judgment upon the ground that by such passing of title the conditional sale terminated--the sale became absolute--and appellants' liability on the note became absolute. From said judgment and an order overruling motion for new trial this appeal was taken.

Appellants contend that the contract entered into between the parties was one for the conditional sale of personal property; that the giving of the note did not change the nature of said contract or create a new contract; that, the contract of conditional sale remaining in full force and effect, the title to the engine remained vested in the respondent corporation; and that, therefore, this cause comes under, and is controlled by, the decisions of this court in the case of Dowagiac Mfg. Co. v. White Rock Lumber & Hardware Co., reported in 18 S.D. 105, 99 N.W. 854, and, upon rehearing, in 26 S.D. 374, 128 N.W. 334. Respondent contends that, while the original contract was one of conditional sale, the giving of the note terminated the conditional sale and passed title in said engine to the appellants, thus giving respondent the right to recover upon the note.

Both parties concede that the contract entered into was one of conditional sale; this could hardly be otherwise under the authorities. Poirier Mfg. Co. v. Kitts, 18 N.D. 556, 120 N.W. 558; Bierce v. Hutchins, 205 U.S. 340, 27 S.Ct. 524, 51 L.Ed. 828; Alden v. Dyer & Bro., 92 Minn. 134, 99 N.W. 784; Freed Furniture & Carpet Co. v. Sorensen, 28 Utah, 419, 79 Pac 564, 107 Am.St.Rep. 731, 3 Ann.Cas. 634; Monitor Drill Co. v. Mercer, 163 Fed. 943, 90 C.C.A. 303, 20 L.R.A. (N.S.) 1065, 16 Ann.Cas. 214.

It is uniformly held that the giving of a note to represent the purchase price does not change a contract which would otherwise be one for conditional sale to one of absolute sale. This has even been held when such note was given upon a settlement had after the contract had been entered into and where such contract made no provision for such method of settlement. Freed Furniture & Carpet Co. v. Sorensen, supra, wherein the court held, as shown by the syllabus: The fact that subsequent to a sale of goods shown to be conditional by the note taken for the purchase price the parties ascertain and adjust their accounts, and the vendee makes a new note for the balance due, does not make the transaction an absolute sale with security for the debt. See note following above case. A reference to the contract involved in this action will show that a settlement by a note was contemplated by the contract itself, such contract providing that for machinery unsold the purchasers at their option might give the very note that they did give in this case; and such contract specifically provided that the title to the unsold property should remain in the vendors until the payment of the note so given. This brings this case directly in line with the facts in Monitor Drill Co. v. Mercer, supra, wherein the court said:

"The taking of the notes for the purchase price, and the taking of collateral security, did not in any way qualify the conditional sale features of the contracts. This was expressly held in Bierce v. Hutchins, 205 U.S. 340, 27 S.Ct. 524, 51 L.Ed. 828. ... But it is urged that the effect of the settlement in August was a novation of contract. Such contention has no force, as it was provided in the contract that a settlement should he had and notes given as was done. It would only be natural for the parties, even when the sale was conditional, to provide that at the close of the sale season a settlement should be made and an account taken to determine what portion of the goods had been sold by second party and an adjustment made with respect thereto."

It follows, therefore, that the trial court was in error in holding that, upon the giving of the note, title passed to the purchaser--the giving of such note effected no change except that it determined the balance due for the unsold engine.

It is conceded that the possession of this engine was delivered to and accepted by the purchasers under and by virtue of such contract. It therefore follows that section 2303, Civ. Code, has no application to the facts of this case. Said section reads as follows:

"The detriment caused by the breach of a buyer's agreement to accept and pay for personal property, the title to which is not vested in him, is deemed to be: (1) If the property has been resold, pursuant to section 2151, the excess, if any, of the amount due from the buyer, under the contract, over the net proceeds of the re-sale; or (2) If the property has not been resold in the manner prescribed by section 2151, the excess, if any, of the amount due from the buyer, under the contract, over the value to the seller, together with the excess, if any, of the expenses properly incurred in carrying the property to market, over those which would have been incurred for the carriage thereof, if the buyer had accepted it."

Appellants, relying upon the decisions of this court in the Dowagiac-White Rock cases, supra, contend that, under such decisions--this contract still remaining a conditional sale--section 2303 is controlling as to the amount respondent was entitled to recover, and that, respondent having offered no evidence showing any damages under such section, verdict herein should have been directed for appellants. It is unfortunate that this court did not make clearer the grounds for its holding in the two Dowagiac-White Rock decisions. It seems perfectly clear to us that section 2303 applies as well in cases where title has not passed for reasons other than that the contract was one of conditional sale as where it was such an one. Such statute would certainly apply under the facts found in McCormick Harvesting Mach. Co. v. Balfany, 78 Minn. 370, 81 N.W. 10, 79 Am.St.Rep. 393, and in the vast number of cases cited in notes to 17 L.R.A. (N.S.) 807. The one controlling and essential element, the existence of which is necessary in order for either section 2302 or section 2303 to apply, is that said contract shall still be executory, in that the purchaser has not accepted the property under the contract. If he has not accepted the property, but title has vested in him, section 2302 applies; if he has not accepted the property and title has not vested in him--no matter why it has not vested--then section 2303 applies. It follows that the only theory upon which the views of the majority of the court in the two Dowagiac-White Rock cases can be supported is that defendant became possessed of the goods under the prior commission contract, and that, although it entered into the subsequent conditional sale contract covering these same goods, yet that it had never accepted such goods under such contract. See Sioux Falls Adj. Co. v. Aikens, 32 S.D. 152, 142 N.W. 651, decided this term.

In those states where there is no statute controlling there will be found an irreconcilable conflict as to the proper rule of damages where there has been a breach of a buyer's agreement to accept and pay for personal property, especially is this true in those cases wherein title to the property had not vested in the purchaser. Both 35 Cyc. 592, and 24 Am. & Eng. Ency. of Law (2d Ed.) 1118, state the general rule to be...