United States v. Humberd

• Decision Date: 28 January 1929
• Docket Number: No. 5318.,5318.
• Citation: 30 F.2d 413
• Parties: UNITED STATES v. HUMBERD.
• Court: U.S. District Court — Panama Canal Zone

30 F.2d 413 (1929)

UNITED STATES v. HUMBERD.

No. 5318.

District Court, D. Kansas, First Division.

January 28, 1929.

Leo Erskine Wyman, Asst. U. S. Atty., of Topeka, Kan.

Gamble, Browne & Allen, of Kansas City, Mo., for intervener.

McDERMOTT, District Judge.

The intervener is a company engaged in buying paper from automobile dealers. The facts are that the automobile dealer, the Kritzler Motor Company, sold a Reo car to one Humberd, a bootlegger of parts, and offered the paper to the intervener, who declined to buy it because of Humberd's reputation. Being advised of that fact, and reluctant to lose the sale, the dealer, through a salesman, sold the car again to Humberd, but had the papers made out in the name of one Smith, a brother-in-law of Humberd. Smith did not enjoy the reputation of Humberd; the intervener had no knowledge that the Smith paper was a blind for the Humberd sale, and bought the paper.

Smith and his wife signed a "conditional sale contract," which reserved title in the Kritzler Motor Company until the car was paid for. It recited a cash payment of $612 and 18 deferred monthly payments of $80.42 each. The purchaser took possession and assumed the risk of ownership; the contract provided for repossession by the seller if payments defaulted, or the car was used for illegal purposes, or if the seller deemed himself insecure, and other provisions common to chattel mortgages, except that the buyer waived any right to accounting for the proceeds in case the car was repossessed and sold.

The dealer assigned this contract to the intervener, for full value, warranted the genuineness of this paper, and that the dealer had no knowledge of any facts which would impair the validity or value of the paper.

The question presented is: May the intervener recover this car, which was seized while being used by Humberd in his liquor business, under section 26 of title 2 of the National Prohibitory Law? 27 USCA § 40. The dealer, the original holder of the sale contract, had guilty knowledge; the intervener is innocent. It will be seen at once that the question is of first importance. It is important to the finance companies, for, if they cannot recover liquor cars, notwithstanding their personal innocence, they want to know it, so they can protect themselves against dealers by an agreement of indemnity in case the dealer is knowingly taking boot-legger paper; it is important to the government to know whether the forfeiture provisions of the liquor laws can be safely evaded by the simple device of selling the paper to an innocent person. No case in point has been cited.

It probably should be determined first whether the assignee of such paper is an "owner" or a "lienor." While what we are ultimately driving at is an interpretation of these words as used in the federal statute, the common acceptation of these contracts under the state law is persuasive. The Kansas statute has recognized these contracts, so far as to provide that they must be recorded as chattel mortgages (R. S. Kan. 1923, 58 — 314), and that the provisions of the chattel mortgage statute as to releases shall apply to such contracts (Id. 58 — 315). The Supreme Court of Kansas has held they are not chattel mortgages within the meaning of the criminal statute making it an offense to sell mortgaged property. State v. Webb, 105 Kan. 407, 184 P. 715. The Supreme Court of Kansas has also held that there is only a "theoretical, * * * but no practical," distinction between a conditional sale and a chattel mortgage (Christie v. Scott, 77 Kan. 257, 94 P. 214), and that the reservation of title in such a contract is "an incident to the obligation to pay" (Nat. Bond & Investment Co. v. Evans, 118 Kan. 656, 236 P. 447), and that it is, "in effect, a chattel mortgage" (Minneapolis Mach. Co. v. Nash, 103 Kan. 871, 176 P. 628).

I am of the opinion that, whatever may be the precise classification of these instruments for other purposes, the holder of them is more nearly a "lienor" than he is an "owner." As a practical proposition, every one knows that they are taken to secure the payment of the balance of the purchase price; the buyer of the car can pay it at any time, and his ownership is complete. The contract itself puts all the risks of ownership on such buyer. Probably Congress used the word "lienor," instead of "mortgagee," in order to cover all transactions where, in truth and in fact, a lien was retained, whether by mortgage or conditional sale contract. The intervener himself considers his conditional sale contract a mortgage, just as every one does, for in his application he says that default has occurred in the "mortgage," and in his intervening petition describes himself as "the mortgagee," and refers to the entire amount of the "mortgage," and to the defendant as the "mortgagor"; that the intervener "has a bona fide lien," and prays for the balance of his "mortgage debt." With these...