State Sav. Bank, Sharpsburg v. Universal Credit Co.
| Decision Date | 06 April 1943 |
| Docket Number | 46139. |
| Citation | 8 N.W.2d 719,233 Iowa 247 |
| Parties | STATE SAV. BANK, SHARPSBURG, v. UNIVERSAL CREDIT CO. |
| Court | Iowa Supreme Court |
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C. Glenn Garten and James M. Stewart, both of Des Moines, for appellant.
O J. Kirketeg and Flick & Lucas, all of Bedford, for appellee.
Ed Bray doing business as Bray Motor Company, was a retail Ford automobile dealer, at Bedford, Iowa. He banked with a branch of appellee bank, at Gravity, Iowa, six miles distant from Bedford. He had what is designated as a floor-plan arrangement with appellant, Universal Credit Company (Des Moines office), whereby he secured cars from Ford Motor Company on conditional sale contracts, which contracts Ford Motor Company sold and assigned to appellant.
The automobile in controversy was one of a rail shipment of four automobiles from Ford to Bray Motor Company, at Bedford, in October, 1940. The invoice listed each automobile by description, factory number and price. On the back thereof was a conditional sale contract to Ford Motor Company "of the property described on the reverse side hereof." The bill of lading and invoice were sent by Ford Motor Company to the Gravity branch of appellee bank with instructions to collect $31.04, and secure the signature of Bray Motor Company to the conditional sale contract. An employee of the bank secured the signature of Bray Motor Company, and, as notary public, executed the certificate of acknowledgement. Then the bank delivered the bill of lading to Bray Motor Company and sent the $31.04, invoice and contract to Ford Motor Company, Des Moines. For said services appellee was paid 25¢ by Bray Motor Company. Upon receipt of the signed conditional sale contract, Ford Motor Company sold and assigned the same to appellant. It was not filed nor recorded.
In December, 1940, Bray Motor Company made a conditional sale contract of the automobile to Mr. Lucas, one of its salesmen, and, on the same day, sold and assigned the Lucas note and said contract to appellee bank, at Gravity. In May, 1941, appellant took possession of the automobile. Thereupon appellee instituted this replevin suit. The principal issue is whether or not appellee's rights, under the assignment and the conditional sale contract (Ex. A), held by it, are superior to those of the prior unrecorded conditional sale contract (Ex.1), held by appellant finance company.
I. The subsequent conditional sale contract, Ex. A, between Bray Motor Company, vendor, and Lucas, vendee, was regular upon its face. There was also a negotiable note from Lucas to Bray Motor Company, Ex. B, covering the installments. It was the practice of Bray Motor Company to have Lucas (and other salesmen), execute contracts as vendees of automobiles used by Lucas as demonstrators. These automobiles were kept at Lucas' home, or at Bray Motor Company garage, as was most convenient for its business, and were usually in the actual custody of Lucas. Bray Motor Company sold and assigned the notes and contracts and made the payments thereafter maturing thereon. Lucas paid nothing. When such a car was resold to a purchaser other than a salesman, Bray Motor Company would sell the car direct. Mr.
Bray testified, "The whole arrangement was simply for the convenience of handling these demonstrators." In other words, this was merely an accommodation note and contract, which the parties thereto intended should acquire legal vigor by assignment from Bray Motor Company to a third party and payment therefor to Bray Motor Company.
As long as Bray Motor Company held the contract it was of no force and effect because the parties did not so intend. However, Bray Motor Company's retention of possession of the automobile would not in itself render the contract invalid. This court has said that to constitute a conditional sale within the terms of the statute, there must be a delivery of possession to the purchaser, with the intention of passing immediate ownership, subject only to the reservation of title to the seller as security for the purchase money. Greenlease-Lied Motors v. Sadler, 216 Iowa 302, 249 N.W. 383; Donnelly v. Mitchell, 119 Iowa 432, 436, 93 N.W. 369, 371. The phrase "within the terms of the statute" refers to Section 10016, Code of Iowa 1939, which provides that no conditional sale of personal property shall be valid against any creditor or purchaser of the vendee, without notice, unless the same be recorded or filed. This provision is for the protection of the rights of creditors or purchasers from the vendee. "It is very clear that this statute in no manner changes, as between themselves, any of the rights of the immediate parties to a conditional transfer of property which are created or reserved by their contract." Warner v. Johnson & Hakeman, 65 Iowa 126, 21 N.W. 483, 484.
Witnesses for appellee testified appellee did not know Ex. A was not bona fide. There was some testimony to the contrary. Apparently, Bray Motor Company collected and remitted to the bank payments on various bona fide contracts purchased by the bank as well as payments due on salesmen's contracts, which it had sold to the bank. Appellee paid Bray Motor Company for this contract $745, which was its face value. Appellee subsequently collected $50 thereon.
The assignment of Ex. A to appellee is in part: "For value received, the undersigned (Bray Motor Company) does hereby sell, assign and transfer to the bank above named, its right, title and interest in and to the within contract and the property covered thereby and authorizes said Sharpsburg State Savings Bank to do every act and thing necessary to collect and discharge the same."
The Lucas note, Ex. B, was indorsed to appellee.
It is the general rule that where a conditional sale contract and note are unconditionally sold and assigned by the vendor to a purchaser, said assignee becomes vested with the title to the property covered by said contract. 55 C.J. 1330, 1331, 24 R.C.L. 478. The assignee acquires not only the right to collect the unpaid purchase price but also all the vendor's right, title and interest in the property.
Such assignment is in the nature of a bill of sale of such right, title and interest. Of course, it recognizes the interest of the conditional vendee who, for most purposes, is the owner of the property. See Hansen v. Kuhn, 226 Iowa 794, 285 N.W. 249. The assignee is a purchaser within the contemplation of the recording act. See Slimmer & Thomas v. Lawler, 205 Iowa 813, 218 N.W. 516; Central Trust Co. v. Stepanek, 138 Iowa 131, 115 N.W. 891, 15 L.R.A.,N.S., 1025, 128 Am.St.Rep. 175, which involve assignments of chattel mortgages.
It should be remembered that the rights of subsequent purchasers as against Ex. A are not here involved. The contest is between the subsequent contract, Ex. A, in the hands of appellee as assignee, and appellant's prior unrecorded contract, Ex. 1. See Swayne v. Tillotson, 148 Iowa 501, 127 N.W. 667.
Under the recording act a prior conditional sale is to be regarded as invalid, as such, against a purchaser, in the absence of notice, actual or constructive. As to such purchaser from the vendee, the condition is void and the title is considered as having passed from the prior conditional vendor to the vendee. Pash v. Weston, 52 Iowa 675, 3 N.W. 713. The question here is whether the assignment to appellee of the accommodation contract gave it the status of a purchaser as to whom appellant's prior unrecorded contract was void in the absence of notice.
As between the original vendor and vendee, the acts of the latter, in making and assigning the subsequent contract, may have been wrongful or fraudulent. But sales or mortgages, by the original vendee, are frequently wrongful or fraudulent as against his vendor. That circumstance will not defeat the rights of the purchaser without notice. The recording act declares the prior secret transfer invalid against the subsequent purchaser without notice. National Cash Register Co. v. Zangs, 127 Iowa 710, 104 N.W. 360. It does not except transfers by the party who was vendee in the prior secret contract which was wrongful or fraudulent against his vendor.
Transactions similar to those of Bray Motor Company have been passed upon by various courts. It is worthy of note that appellant, for one defense in this case, pled another conditional sale contract covering this automobile, between Bray Motor Company and Lucas, made in April, 1941, and assigned to appellant, under which appellant asserted its right to hold the automobile. This defense was subsequently withdrawn.
In support of its contention that appellee's rights as assignee of Ex. A are not superior to Ex. 1, appellant relies in part upon decisions from other jurisdictions. Such decisions show much variance due in part to differences in statutes. Appellant cites Iowa Guarantee Mortgage Corp. v. General Motors Acceptance Corp., 62 S.D. 18, 250 N.W. 669; Rogers Lamb Co. v. Coast Securities Co., 58 Cal.App. 744, 209 P. 246; California Standard Finance Corp. v. Riverside Finance Co., 111 Cal.App. 151, 295 P. 555; Forgan v. Gordon Motor Finance Co., 350 Ill. 445, 183 N.E. 462.
None of these cases turns upon statutes which invalidate the conditions of prior secret sales. In California and Illinois (as formerly in Iowa) recordation of conditional sale contracts was not required. A number of California decisions state that the conditional vendee has not the capacity to transfer, even to a purchaser for value without notice, a right superior to that of the conditional vendor.
The doctrine relied upon to defeat the prior contract in the foregoing cases and in most of the cases from other jurisdictions hereinafter cited (with some variations in different jurisdictions) is that where...
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