Motor Contract Co. v. Citizens & Southern Nat. Bank
| Decision Date | 18 October 1941 |
| Docket Number | 29127. |
| Parties | MOTOR CONTRACT CO. v. CITIZENS AND SOUTHERN NAT. BANK. |
| Court | Georgia Court of Appeals |
Hester & Clarke, of Savannah, for plaintiff in error.
Hinton Booth, of Statesboro, and Lee, Congdon & Fulcher, of Augusta, for defendant in error.
The Citizens and Southern National Bank filed three petitions for foreclosure of three bills of sale to secure debt on three described automobiles. After levy thereupon by the sheriff the Motor Contract Company filed three claims to the respective automobiles, alleging title in itself. Upon the trial of the issues the three claim cases were consolidated as one case, and the court, presiding without the aid of a jury, rendered judgment for the claimant. A new trial was granted, and on the second hearing judgment was rendered for the plaintiff in foreclosure. The exception here is to the judgment overruling the claimant's motion for new trial.
The following case is made by the record, as stated in the briefs of counsel, and agreed to by them. The Motor Contract Company is engaged in the automobile financing business, but is not engaged in selling automobiles. From time to time it financed automobiles for J. H. Grumbine, who was an automobile dealer in Guyton, Georgia, operating as Guyton Motor Company. The automobiles here involved were ordered from the manufacturer by Grumbine for purposes of resale, and this fact was known to Motor Contract Company. It is customary in the automobile business for cars to be financed for dealers by finance companies. The method of financing used in this case is in general use. The Motor Contract Company is notified by the manufacturer that cars ordered by the dealer are ready for shipment, and the Motor Contract Company instructs its bank to make payment for the cars out of its funds in bank. Upon payment to the manufacturer the cars are delivered to a transportation line, which transports them directly from the plant of the manufacturer to the dealer. The cars do not come into the possession of the Motor Contract Company. Before the money is transferred to the manufacturer the dealer executes "trust receipts" in blank, merely describing the automobile by make, the motor number and serial number not being at that time known. After the cars reach the dealer's place of business, new papers are executed by the dealer and are substituted for the blank "trust receipts." These new papers specify the amounts paid and describe the cars specifically by make and number. The instruments are executed by the dealer to the finance company and are divided into three portions, one of which is designated as a "bill of sale," another a "trust receipt," and the third a "promissory note." The promissory note is separated from the rest of the writings by a perforated line. These papers are not recorded by the finance company unless the dealer becomes involved financially to the knowledge of the finance company or is threatened with bankruptcy.
Three cars are here involved. After the dealer had executed to the finance company such papers as are above mentioned and the three cars in question were in the possession of the dealer the latter approached a representative of the Citizens and Southern National Bank in Statesboro, Georgia, and, without informing this representative, W. W. Woodcock, of any claim by Motor Contract Company to the cars, stated to him that the three automobiles were in his possession and that he desired to obtain loans thereon. Woodcock did not see the automobiles at the time, and did not examine the records in the office of the clerk of the superior court of the county of the dealer's residence to ascertain what these records might show, but, relying upon the representations of Grumbine that the automobiles were in his possession, belonged to him, and were free from liens, the Citizens and Southern National Bank lent to him various sums of money, taking as security therefor bills of sale to secure debt and also "trust receipts." Such bills of sale and promissory notes executed to the bank were in evidence, but not the "trust receipts." These bills of sale to secure debt were duly recorded and thereafter the cars were checked by Woodcock. The bank had no notice, actual or constructive of the rights of the finance company at the time its loans here involved were made. The papers executed by Grumbine to the finance company had not been recorded. The Motor Contract Company's papers, which were executed to it by Guyton Motor Company, were recorded subsequently to those which were executed in favor of the Citizens and Southern National Bank. Woodcock, when he lent the money to Guyton Motor Company on behalf of the bank, did not ask for or see any bills of sale or other instruments in connection with the financing of the cars in Guyton's possession, though he testified "I might have presumed that some one else had been previously financing him, because practically all dealers do finance their cars."
More specifically the papers executed by Guyton Motor Company to Motor Contract Company may be described as follows: A bill of sale in which was described the automobile conveyed "for valuable considerations" and also the amount due thereon by Guyton Motor Company. Following this writing and on the same sheet of paper was set out a "trust receipt," in which the dealer acknowledged receipt from Motor Contract Company of a described automobile and in which it was recited: Following this "trust receipt" was a promissory note, separated from the other writings by a perforated line, signed by Guyton Motor Company for the principal amount shown in the bill of sale. All three writings bore the same date of execution.
It appears from copies of claimant's exhibits in the record that as to two of the cars in question the claimant caused its bank in Savannah to wire the purchase price to a bank in Detroit, Michigan, the point of shipment, for payment to the manufacturer "for account of Guyton Motor Company," with instructions to release the car to a transportation line for delivery to Guyton Motor Company at Guyton, Georgia. As to the third car, a truck, the Savannah bank wired the Detroit bank to pay the manufacturer the purchase price of the truck for account of "Jackson Motor Company," with instructions to release the truck to a transportation line for delivery to Guyton Motor Company at Guyton, Georgia.
The issue here presented is whether or not under the papers executed to the finance company by the dealer it held a title superior to that of the bank under the bills of sale which it held as security for the loans made by it to the dealer on the cars in question. To determine this question it is necessary to decide whether or not the "trust receipts" executed by the dealer to the finance company are such instruments as come within the provisions of the Code, § 67-2501, which provides: "Deeds, mortgages, and liens of all kinds, which are required by law to be recorded in the office of the clerk of the superior court, shall, as against the interests of third parties acting in good faith and without notice, who may have acquired a transfer or lien binding the same property, take effect only from the time they are filed for record in the clerk's office." There is no provision in this State for the recordation of a true trust receipt, and if under the facts of this case the finance company held the full legal title to the automobiles and the "trust receipt" here involved was such an instrument as evidenced and recognized such title to be in the finance company, and that the dealer had mere permissive possession of the cars with the right to become, for the first time, the legal holder of the title thereto by paying to the finance company a sum of money as a consideration for such property, it must naturally follow that the bank would not be protected as an innocent purchaser under the bills of sale executed to it by the dealer, notwithstanding the fact that the papers held by the finance company were recorded subsequently to those of the bank. If, however, the dealer held title to the cars which, after receipt of funds from the finance company, were...
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