W.A. Patterson Co. v. People's Loan & Savings Co.

• Decision Date: 16 June 1924
• Docket Number: 4239.
• Citation: 123 S.E. 704,158 Ga. 503
• Parties: W. A. PATTERSON CO. v. PEOPLE'S LOAN & SAVINGS CO.
• Court: Georgia Supreme Court

123 S.E. 704

158 Ga. 503

W. A. PATTERSON CO. v. PEOPLE'S LOAN & SAVINGS CO.

No. 4239.

Supreme Court of Georgia

June 16, 1924

Syllabus by the Court.

Where the owner and vendor of personal property takes from the purchaser thereof his note for the purchase price, in which the title to the property is retained in the vendor until the purchase price is paid, and thereafter transfers the note and title to the property to a third person, the title to such property passes from the vendor to his transferee.

After such transfer, the vendor has no title or interest in the property which he can mortgage to a third person.

The rule that the retention of possession of property by the vendor, after he has sold the same to another, is per se fraudulent and void as to a subsequent bona fide purchaser from him, is not of force in this state; but the rule in this state is that if the vendee takes an absolute conveyance of property, and leaves the same in the possession of the vendor, it is prima facie evidence of fraud, but such prima facie presumption may be rebutted.

The true owner of personal property can lose his title thereto in favor of an innocent purchaser for value without notice, only where he "has given to another such evidence of the right of selling his goods as, according to the custom of trade or the common understanding of the world, usually accompanies the authority of disposal, or has given the external indicia of the right of the disposition of his property."

The prima facie presumption that the possession of the property by the vendor was fraudulent, and therefore void as to a subsequent bona fide mortgagee, is explained and rebutted under the facts stated in the first question propounded by the Court of Appeals.

The record of a duly attested retention of title note is constructive notice to a mortgagee, taking from the vendor a mortgage upon the property to which title is retained by him in such instrument, of the title of another, who may have previously taken in good faith and for value a transfer of such note and title, although at the time of the execution of the mortgage the vendor was in possession of the property and the mortgagee takes subject to the title previously acquired by the holder of the outstanding retention of title note.

Certified Questions from Court of Appeals.

Action between the W. A. Patterson Company and the People's Loan & Savings Company. Judgment for latter, and former brought error to Court of Appeals, which certified questions to the Supreme Court. Questions answered.

True owner of personal property can lose title thereto in favor of innocent purchaser for value without notice only where he has given to another such evidence of right of selling his goods as, according to custom or common understanding, usually accompanies authority of disposal, and has given external indicia of right of disposition.

The Court of Appeals requested instruction from the Supreme Court upon the following questions, answers to which are necessary to a decision of this case:

"(1) Where one holding title to personal property sells it and takes from the purchaser a retention of title note for the purchase money, but, under an arrangement with the purchaser, retains possession of

the property and does not deliver it to the purchaser, and transfers the note and also the title to the property to a third person, who buys the note from him and acquires title to the property by reason of the transfer, but in ignorance of the fact that his transferor at the time had possession of the property and had not delivered it to the purchaser, will a fourth person, who afterwards takes from the original owner, who still has possession of the property, a chattel mortgage covering the property, when such fourth person in so doing has no notice of the title to the property in the transferee of the note, but has constructive notice from the record of the execution of the retention of title note, be protected in his title thus acquired, as a bona fide purchaser for value, against the title of the person taking the transfer of the note? See 24 Am. & Eng. Enc. Law (2d Ed.) 1164, and cases there cited.

(2) If the transferee of the note, instead of acquiring title to the property in ignorance of its possession by the transferor, in fact knew, at the time of taking the transfer of the note and the title to the property, that the property was at the time in the possession of the transferor and had not by the transferor been delivered to the original purchaser, would a different rule be applicable?"

R. B Blackburn, of Atlanta, for plaintiff in error.

Etheridge, Sams & Etheridge, of Atlanta, for defendant in error.

HINES J.

1. Where the owner of personal property sells it, takes the note of the purchaser for the purchase price, in which he retains the title to the property until it is paid for, and thereafter transfers the note and the title to the property to a third person, the title to such property passes from the vendor to his transferee. English v. Hill, 116 Ga. 415, 42 S.E. 717; Cade v. Jenkins, 88 Ga. 791, 15 S.E. 292; Townsend v. Southern Product Co., 127 Ga. 342, 56 S.E. 436, 119 Am.St.Rep. 340; West Yellow Pine Co. v. Kendrick, 9 Ga.App. 350, 71 S.E. 504; Jordan Mercantile Co. v. Brooks, 149 Ga. 157, 99 S.E. 289.

2. After such transfer the original vendor has no title or interest in the property. The seller can convey no greater title than he has himself. Civil Code 1910, § 4118. After such transfer of the title the vendor had no interest which he could mortgage to a third person. The purchaser would get no better title than the vendor had. His mortgage would create no lien upon such property, as he had no title or interest which he could mortgage. Such mortgagee would stand in the shoes of the mortgagor, and would be in no better position than the mortgagor. The mortgagee acquired no lien upon any interest in the property, as the mortgagor did not have any on which the mortgagee could operate. No one can transfer a better title than he has, or mortgage property to which he has no title, or in which he has no interest, unless some principle of estoppel comes into operation against the person claiming under what would otherwise be the better title. 24 R.C.L. 373, §§ 662, 663.

3. What was the effect of the retention of possession of this property by the vendor under the undisclosed terms of the arrangement between him and the purchaser? Would this fact estop the assignee of the vendor from asserting his title to this property, which he acquired by the vendor's transfer to him of the purchase-money note and the title to the property therein retained, in ignorance of the fact that the original vendor at the time had possession of the property and had not delivered it to the purchaser, and when said note was duly executed, attested, and recorded? Many courts hold that the mere retention of possession of property by the vendor, after he has sold the same to another, is per se fraudulent and void as to a subsequent bona fide purchaser from him, and that a sale to such subsequent purchaser would defeat the title of the original purchaser. There are many authorities which hold that where the vendor of personal property is allowed by the vendee to continue in possession thereof, and thus to give a colorable appearance of continued ownership, the title of a subsequent bona fide purchaser from such vendor will be upheld as against the first vendee. 24 Am. & Eng. Enc. Law, 1164; Flanigan v. Pomeroy, 85 Minn. 264, 88 N.W. 761; Streeper v. Eckart, 2 Whart. (Pa.) 302, 30 Am.Dec. 258; Barr v. Reitz, 53 Pa. 256; Clow v. Woods, 5 Serg. & R. (Pa.) 275, 9 Am.Dec. 346; Babb v. Clemson, 10 Serg. & R. (Pa.) 419, 13 Am.Dec. 684; Miller v. Browarsky, 130 Pa 372, 18 A. 643; Ticknor v. McClelland, 84 Ill. 471; Norton v. Doolittle, 32 Conn. 405; Weeks v. Prescott, 53 Vt. 57. The reason given for this rule is that such retention of possession permits innocent purchasers to be misled by the apparent ownership of goods, where the real ownership does not exist, through an undisclosed transfer to another; and that public policy requires that while the goods remain in the possession of the former owner, with the consent of the purchaser, they should, as to innocent purchasers, be treated...