Manley Auto Co. v. Jackson

• Decision Date: 28 July 1925
• Citation: 115 Or. 396,237 P. 982
• Parties: MANLEY AUTO CO. v. JACKSON.
• Court: Oregon Supreme Court

237 P. 982

115 Or. 396

MANLEY AUTO CO. v. JACKSON.

Supreme Court of Oregon

July 28, 1925

Department 2.

Appeal from Circuit Court, Multnomah County; Walter Evans, Judge.

Suit by the Manley Auto Company against A. C. Jackson to foreclose a conditional sales contract for an automobile. Decree for plaintiff for the amount of the note with interest and attorney's fees, and defendant appeals. Affirmed.

Botts & Winslow, of Tillamook, for appellant.

Will H Masters, of Portland, for respondent.

BEAN J.

The contract was executed May 11, 1921, due in one year from date in favor of E. L. Glaisyer, or his assigns, and was assigned to plaintiff. No payment having been made on the contract the plaintiff, soon after it became due, took possession of the automobile under and by virtue of the conditional sales contract, for the purpose of foreclosing the same. The contract provided that, in case of default by defendant in the payment of the contract or note, the holder thereof would have the right--

"in case of default in the payment of any amount due as above provided * * * the second party is authorized to enter any place where said property may be found, and take or remove the same, or any property found in or attached to said property, and retain all of the same, and likewise retain all sums paid in part performance of this contract, as compensation for any depreciation or other expense arising on account of the use of the property by the undersigned, and as payment for the use of said property, and as liquidated damages for the breach of this agreement, and elect any legal or equitable remedy for recovering the balance of the purchase price."

Defendant pleads and contends that the plaintiff "took possession of said automobile as full payment upon said instrument * * * and as full liquidated damages for the breach of said agreement," and that such taking exhausted plaintiff's remedy, and that plaintiff cannot recover any balance that may remain due on the note after applying the value of the automobile.

Defendant who resides in Tillamook county, Or., by his son delivered the automobile to plaintiff at Portland, Or., when plaintiff executed a receipt to defendant acknowledging receipt of the automobile under the conditional sales note--

"for the purpose of foreclosing said conditional sales notes and selling said automobile and applying the proceeds from said sale towards the payment of said note, it being understood that the Manley Auto Company, in accordance with the terms of said note, will look to said A. O. Jackson for the payment of any balance remaining unpaid."

When the car was purchased by defendant, another car was taken by the seller in part payment. The defendant executed a promissory note unconditionally promising to pay the sum of $1,350, with interest at 6 per cent. per annum, payment to be made on May 11, 1922. The note provided for a reasonable attorney's fee in case of suit on the note. Then attached to the note is the conditional sales contract containing the usual stipulations as to care of the car, insurance, taxes etc., and the clause quoted above in regard to default.

The chief criterion as to the character of such a contract is the intention of the parties, as disclosed by the entire contract. 24 R. C. L. 446. It is competent for the parties to stipulate, with particularity, what shall be the effect of a default by the vendee, and what shall be the respective rights and duties of the parties thereafter. Mechem on Sales, § 606. Under a conditional sales contract, recovery of possession is not necessarily the only remedy of such a seller. Where the buyer absolutely agrees to buy and pay for the property, the seller may have personal remedies, in lieu of, or in addition to, his remedy against the chattel. Mechem on Sales, § 614.

If the seller treats the title to the property reserved by the conditional sales contract as security for the payment of the price, he may file his bill in equity to obtain a judicial sale. In re Nat. Cash Reg. Co., 174 F. 579, 582, 98 C. C. A. 425. This case was cited and the rule approved and followed in the case of McDaniel v. Chiaramonte, 61 Or. 403, 408, 122 P. 33. In the opinion in the latter case, Mr. Chief Justice Eakin mentions the four remedies named in Mechem on Sales, § 615, which under varying circumstances the vendor would be entitled to pursue in case of default of the vendee. The fourth remedy mentioned is as follows:

"He may, if the contract permits it, without rescinding, take possession of the goods and hold them as security for the fulfillment of the contract."

The McDaniel-Chiaramonte Case, which applied the fourth remedy named, was a suit to foreclose a conditional sales contract similar to the one at bar. The essential features of the conditional sales contract involved were similar to those in the case in hand.

In the present case, the defendant, by his promissory note, which is a part of the conditional sales contract, absolutely promised to pay the $1,350 with interest. It is stipulated that upon default of the vendee, the vendor could take and retain the car and likewise retain all sums paid in part performance of the contract, "and elect any legal or equitable remedy for recovering the balance of the purchase price." The latter clause can have no meaning unless the buyer is thereby obligated to pay such balance of the purchase price. The terms of the contract in the event of default are somewhat obscure. The fact that the conditional sales contract, among the several provisions made in case of default, mentions that the payments made by the vendee might be retained by the vendor "as liquidated damages for a breach of this agreement," would not necessarily change the situation of the parties. The general rule is that, if the amount stated is denominated as liquidated damages or as a penalty, it is not conclusive. 17 C.J. 944, note 95, citing Chicago, etc., R. Co. v. Dockery, 195 F. 221, 224, 115 C. C. A. 173. On page 945 of 17 C.J. it is stated:

"Where it appears that the amount fixed was evidently not intended to be a full compensation for a breach of contract, or would be grossly inadequate as such, it will, as a rule, be considered as a penalty."

In the...