Schneider v. Daniel
| Decision Date | 29 June 1921 |
| Docket Number | 23,998 |
| Citation | 131 N.E. 816,191 Ind. 59 |
| Parties | Schneider v. Daniel et al |
| Court | Indiana Supreme Court |
From Marion Circuit Court (24,283); Louis B. Ewbank, Judge.
Action by Harry Daniel and others against John F. Schneider. From a judgment for plaintiff against the defendant named, he appeals. (Transferred from the Appellate Court under § 1394, cl. 2, Burns 1914, Acts 1901 p. 565.)
Affirmed.
James Bingham and Remster A. Bingham, for appellant.
A. M Bristor and W. B. Waddell, for appellees.
A. W Fenstermacher, Amicus Curiae.
Travis J. Ewbank, J., not participating. Townsend, C. J., dissents.
The subject of this case involves the construction of a certain agreement in writing between the appellee and one Robert Brent. Is this instrument a chattel mortgage or a conditional sale contract?
Appellee Harry Daniel, on May 12, 1914, delivered unto Robert Brent the possession of certain cattle, and as a part of the transaction Brent executed the instrument in question and delivered it to appellee. The cattle were shipped to Spencer, Indiana, for Brent, and were taken to his farm where they remained until July, 1914. About said time Brent sold the cattle to a stock buyer and later the cattle were shipped to Indianapolis, where they were sold on the live stock market to the appellant.
The nature of this action is a suit by appellee Daniel against appellant and others who were coappellees with Daniel, to recover damages for the alleged conversion of the cattle in question. A trial by jury resulted in a verdict in favor of all the defendants save appellant, Schneider, and a verdict and judgment was rendered against him for $ 350 in favor of appellee Daniel. The questions here in issue arise upon appellant's motion for a new trial, for the reasons that the verdict is not sustained by sufficient evidence and is contrary to law.
The written instrument executed by Brent in favor of appellee Daniel was in the form of the usual conditional sale note, but had in addition thereto the following condition:
* * *."
Contracts of conditional sale may take such form as the parties choose to give them, but the legal aspect depends not upon the name which the parties may have given to the contract, nor upon the form of the instrument, but upon the intention as evidenced by the entire contract. A chattel mortgage is a security for a debt; and a conditional sale is a purchase for a price paid or to be paid, to become absolute upon a particular event, or a purchase accompanied by an agreement to resell upon particular terms. It is the latter that runs so nearly into a mortgage. Courts lean toward construing them as mortgages. There is no rule of law that the sale shall not be made conditional. In a case from another jurisdiction under consideration, it was held that the deed of sale was absolute on its face, but it bore the following indorsement: The court said the clause may well consist with a contract of either description, and that it is equivocal in itself. Poindexter v. McCannon (1830), 16 N.C. 373, 18 Am. Dec. 592.
The usual earmarks of a mortgage are: (1) That there is a previous debt; or a present advance of money upon loan, for which some evidence is taken, obliging the borrower personally, to the absolute payment; (2) There is a bond for the debt, or a covenant in the mortgage deed for the payment.
It is always a question--whether mortgage or no mortgage--Whose loss will it be if the thing is destroyed? If that of the maker of the deed, then it is a mortgage; but if it be the loss of the payee, it is a conditional sale.
In the case at bar it seems that Brent continued bound for the debt if Daniel so elected, when considering the following words taken from the instrument, "And I hereby agree to pay the deficiency if said proceeds shall fail to satisfy said debt," which is in favor of treating the transaction as a mortgage, but where the security is much greater than the debt, as in this case, the transaction should be treated as a conditional sale as named in the instrument, and against the general policy of law which leans toward treating such transaction as a mortgage where the distinguishing feature is not vividly apparent.
And where the transaction was founded upon a preexisting debt or upon money loaned, the general rule is that the transaction is a mortgage; but in the absence of such surroundings the transaction will be held as denominated in the instrument, which in the present case is a conditional sale.
In this case the question is extremely close in this feature: If Daniel holds his transaction to be a conditional sale, he would be the loser if the chattels were destroyed; on the other hand, he could retake the cattle, sell them, and if the proceeds of such sale were less than the sale price to Brent he could still sue the purchaser Brent for such balance which, as held by some cases, is incompatible with a conditional sale.
Daniel did not stand a chance to lose in any event, except upon the bankrupt condition of Brent--which does not control--for Brent's promise to pay is absolute, should the proceeds of the sale of chattels as provided for in the instrument itself fail to pay the debt. If Brent was the party who lost in the event the chattels were destroyed, such chattels were his property, and his written obligation was a mortgage. In this sense the cattle were security for the debt for the reason that Daniel was to retake the cattle only for the purpose of selling them to make proceeds to pay his debt, backed by an unconditional promise of Brent in writing to pay any deficiency.
In this case, as between vendor and vendee, the vendor may have had two remedies: (1) Treat the sale as absolute and sue for the purchase price; or (2) the right of election to retake the property. This is a proper interpretation of the sale agreement between the parties to the original sale, as held in the case of Smith v. Barber (1899), 153 Ind. 322 at page 328, 53 N.E. 1014.
Conditional sales are dangerous transactions, in that the innocent purchasers from the original vendees are likely to become involved in just such transactions as the one at bar. Such purchasers cannot by any ingenuity protect themselves except to refrain from buying anything from any one, because usually the only persons privy to the agreement are the vendor and vendee, and the only way that the vendee can make a sale of the property under temptation of distress is to declare to a prospective buyer his absolute ownership and his absolute right to sell.
Different positions taken by different courts upon this subject are well illustrated by the case of Turk v. Carnahan (1900), 25 Ind.App. 125, 57 N.E. 729, 81 Am. St. 85--where the court says: "The law will not permit a vendor of property, who retains the legal title in himself to take possession of it upon default of payment, sell, or otherwise dispose of it, and then sue the vendee for the balance of the purchase price."
As between the parties to the contract, they had their eyes open, and could be or were legally charged with knowledge of the effect of their act; but equity, it seems, ought not to permit the blind to be led into legal traps, without power, either legal or equitable, to come to their aid to extricate them.
It would seem almost that the vendor in the case at bar, according to his contract, had a lien upon the cattle for the amount they would sell for upon a sale made for the purpose of making assets to pay or partly pay the note or obligation in question, with the unconditional promise over by the vendee to pay any deficiency. Such language reads like a mortgage, wherein the mortgaged property shall be sold to pay the debt, coupled with the unconditional promise of the mortgagor to pay the debt evidenced by the note in any and all events. Andrews & Co. v. Colo. S. Bank (1894), 20 Colo. 313, 36 P. 902, 46 Am. St. 291; Palmer v. Howard (1887), 72 Cal. 293, 13 P. 858, 1 Am. St. 60; Hart v. Barney, etc., Co. (1881), 7 F. 543.
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