McLeod-Nash Motors, Inc. v. Commercial Credit Trust
| Decision Date | 16 December 1932 |
| Docket Number | 28,811 |
| Citation | 246 N.W. 17,187 Minn. 452 |
| Parties | McLEOD-NASH MOTORS, INC. v. COMMERCIAL CREDIT TRUST |
| Court | Minnesota Supreme Court |
Action in the district court for St. Louis county to recover $2,577.88 as damages for the conversion of six automobiles. The case was tried before Magney, J. and a jury. Plaintiff recovered a verdict in which its damage was assessed at $2,010, and defendant appealed from an order denying its alternative motion for judgment or a new trial. Affirmed.
Chattel mortgage -- transaction evidenced by trust receipt and time draft.
1. The court correctly ruled that the transaction evidenced by a trust receipt, executed by plaintiff to defendant, and the acceptance by plaintiff of a time draft to defendant's order, was a chattel mortgage upon the automobiles named in the trust receipt. The recital in the trust receipt does not estop plaintiff from proving it was given as security; hence a chattel mortgage.
Chattel mortgage -- conversion by mortgagee.
2. The sale of the automobiles by defendant without a foreclosure was a conversion.
Chattel mortgage -- conversion by mortgagee -- measure of damages.
3. The measure of damages, under the evidence, was correctly submitted as the market value of the cars at Duluth, the place where they were converted, less the amount due on the time draft.
Stinchfield Mackall, Crounse, McNally & Moore, Perry R. Moore, and Heitmann, McCabe, Gruber & Clure, for appellant.
Fryberger Fulton & Boyle and Arthur W. Hunter, for respondent.
The appeal is from the order denying defendant's motion in the alternative for judgment notwithstanding the verdict or a new trial.
Both parties are corporations. Plaintiff was a retail dealer of Nash automobiles at Duluth. Defendant was in the business of financing automobile dealers. Plaintiff sues defendant for the conversion of six automobiles which were in plaintiff's place of business on December 1, 1930, and which with plaintiff's consent defendant moved to another garage in the city, but which were the next day, without plaintiff's knowledge or consent, sold and removed to Superior, Wisconsin. This is substantially established by the evidence:
Plaintiff would order certain cars from the Northwest Nash Motors, Inc. at Minneapolis, the distributor of that make of cars in the territory. The Northwest Nash Motors delivered the cars ordered to a railroad at Minneapolis for shipment to Duluth, drew a draft on plaintiff payable to the order of the First National Bank of Minneapolis through its correspondent, the Morgan Park State Bank of Duluth, and attached the bill of lading with directions to notify plaintiff. When so notified, plaintiff went to the bank holding the draft in Duluth, gave its check for the amount, received the draft and bill of lading, and obtained the cars upon surrendering the bill of lading to the carrier. The invoices for the cars appear to have been sent direct to plaintiff by the Northwest Nash Motors. When plaintiff gave its check to the bank for the draft, there were not as a rule enough funds to cover it. The arrangements with defendant were that it would advance 90 per cent of the invoice of a car upon plaintiff's delivering a trust receipt therefor and accepting a time draft payable to the order of defendant in three months from date. The draft included seven per cent interest and one per cent commission, and after maturity bore the highest rate of interest allowed by law. The advance made by defendant was in the form of a check delivered to plaintiff, payable to the order of Morgan Park State Bank, and was deposited in that bank by plaintiff. Such a deposit would cover any overdraft in plaintiff's deposit account created by its checks given in payment of drafts for cars ordered of Northwest Nash Motors. The important part of the trust receipt states:
"Received from Park State Bank of Duluth, acting for" defendant, the following motor vehicles (describing them):
This was signed and acknowledged by plaintiff. Three transactions are involved. The trust receipts and accepted time drafts are in the same terms. The transactions differ slightly as to matters immaterial to the questions presented.
The trial court held the transactions between plaintiff and defendant evidenced by the trust receipts and time drafts were loans secured by the cars named in the receipts, and hence, in legal effect, chattel mortgages. This is assigned as the main error. The cashier of the Morgan Park State Bank of Duluth, also named for short the Park State Bank, the correspondent of the First National Bank of Minneapolis, to whose order the drafts drawn upon plaintiff by the owner and seller of the cars were payable, testified that plaintiff had a line of credit at the Duluth bank; that the witness attended personally to the three drafts covering the three shipments of cars in which were the six cars in question; that he accepted the checks of plaintiff drawn on his bank in payment of the drafts and surrendered the bills of lading to plaintiff. He did this notwithstanding there was not enough in the deposit account of plaintiff to cover the check. There is no contradiction of this testimony. The manner in which the dealings between Northwest Nash Motors and plaintiff were actually transacted confirms this. Defendant had nothing at all to do with the sale of the cars to plaintiff, nor did it have any arrangement with either the seller of the cars or the Morgan Park State Bank of Duluth or the First National Bank of Minneapolis in respect to the payment of the drafts for the purchase of the cars or the bills of lading covering them. When the drafts for the purchase price were paid by the checks of plaintiff, the bills of lading attached to the drafts turned over to it, and the cars received from the carrier by plaintiff, the title was vested in plaintiff. There was then no outstanding right, title, or interest in defendant or any other party to the cars. So defendant's sole claim to title must arise out of the transaction with plaintiff wherein defendant gave its checks and in return received the accepted time drafts and trust receipts from plaintiff. This in law cannot be considered otherwise than a loan to plaintiff secured by its cars. In chattel mortgages the borrower transfers the legal title to the security to the lender. So here we may say that plaintiff, by the trust receipts, transferred the title to the cars as security to defendant.
But the statute, G.S. 1923 (2 Mason, 1927) §§ 8345-8359 contemplates that a chattel mortgage must be foreclosed in order to eliminate the mortgagor's right of redemption. The mortgagee may not arbitrarily take and dispose of the property mortgaged, as was done here in violation of the agreement under which plaintiff surrendered possession to defendant. Whether or not defendant's manager had authority to make that agreement does not matter, for defendant undertook to dispose of the security without a foreclosure, which must be construed as a conversion of plaintiff's equity of redemption in the property. It is true that this action is between the parties to the instruments; and rights under the recording acts, or of third parties, are not involved. But the legal status of the parties must be ascertained from the transactions had and the writings evidencing the same, and their rights determined accordingly. Plaintiff borrowed money of defendant, securing the same by personal property. The transaction must be classified as a chattel mortgage. The cars under the transactions here cannot be considered in bailment, because title and possession was in plaintiff when the deals between the parties took place, and therefore plaintiff could not bail the cars to itself and retain possession. Not so in General Motors Acceptance Corp. v. Hupfer, 113 Neb. 228, 202 N.W. 627, and Holcomb & Hoke Mfg. Co. v. N.P. Dodge Co. 123 Neb. 142, 242 N.W. 367. In the first case the plaintiff purchased the automobiles from the manufacturer. Prior to unloading and prior to delivering the bill of lading to Trotter, a local dealer, Trotter executed a trust receipt to the plaintiff for the cars. Prior to the arrival of the cars Trotter gave a chattel mortgage upon them to the defendant. It will be noticed that title was there in the...
To continue reading
Request your trial