White Truck Sales of Indianapolis, Inc. v. Shelby Nat. Bank of Shelbyville
| Decision Date | 20 May 1981 |
| Docket Number | No. 2-780A225,2-780A225 |
| Citation | 420 N.E.2d 1266 |
| Parties | 32 UCC Rep.Serv. 165 WHITE TRUCK SALES OF INDIANAPOLIS, INC., Appellant (Defendant Below), v. The SHELBY NATIONAL BANK OF SHELBYVILLE, Indiana, Appellee (Plaintiff Below). |
| Court | Indiana Appellate Court |
Stephen A. Gross, Burris & Gross, Indianapolis, for appellant.
Stephen C. Moberly, Shelbyville, John G. Forbes, Forbes, Mercer & Pennamped, Indianapolis, for appellee.
White Truck Sales of Indianapolis, Inc. (White) appeals a judgment rendered against it in favor of the Shelby National Bank of Shelbyville, Indiana (Shelby) based on White's failure to perfect a lien on the Certificate of Title of a truck sold by White to a third party who defaulted, claiming, inter alia, that White's endorsement on the check requiring recognition of Shelby's lien was not an enforceable contract.
We affirm.
The facts most favorable to the judgment of the trial court are:
On March 22, 1976 Jack Gevedon (Gevedon) agreed to buy a used 1973 Auto-Car tractor truck from White. He arranged financing with Shelby, which issued a check for $21,575.00 payable to White and Gevedon. The endorsement form placed by Shelby on the back of the check reads as follows:
This check together with the down payment in cash and or trade-in constitutes payment in full for 1-1974 Auto-Car, Serial No. AB006HB071483
By endorsing, each payee warrants and covenants that an application has been or promptly will be filed for a certificate of title to said property in the name of William J. Gevedon subject to a lien in favor of
49 Public Square
Both Gevedon and White endorsed the check and it was cashed by White. Gevedon took possession of the truck.
In assigning the Certificate of Title to Gevedon, White failed to mark Shelby as a lien holder. Consequently, Gevedon was issued a clear Certificate of Title by the Bureau of Motor Vehicles.
On September 20, 1976, Gevedon approached Shelby and obtained a second loan of approximately $6,000.00 to pay for repairs to the truck. Shelby did not have the Certificate of Title to the truck in its possession. Nevertheless, the second loan was approved and consolidated with the first. At the date of consolidation, the amount owing on the first loan had been reduced to $20,903.66. The first loan was merged into the second. Shelby assumed the loan was secured by the collateral of the truck.
As we have seen, however, that assumption was wrong. Armed with a clear title, Gevedon sold the truck and stopped making payments. Shelby later acquired a default judgment against him, but has been unable to collect because he skipped.
Shelby therefore proceeded against White under the terms of the check endorsement. Following a bench trial, Shelby was awarded the amount owing on the original loan ($20,903.66) plus interest thereon, for a total judgment of $26,765.11. White perfected this appeal.
White presents the following issues for review:
1. Was an independent, enforceable contract created between Shelby and White by White's endorsement and negotiation of the check?
2. Was any contract created by White's endorsement and negotiation void by operation of I.C. 9-1-2-1 (the Auto Title Statute)?
3. Did Shelby waive its rights against White?
4. Was a novation effected thereby extinguishing White's duty to create a lien in favor of Shelby?
5. Did Shelby mitigate damages?
ISSUE ONE Was an independent, enforceable contract created between Shelby and White by White's endorsement and negotiation of the check?
CONCLUSION A binding contract between Shelby and White was created by White's endorsement and negotiation of the check.
Our inquiry is guided by general contract principles. Although the check in question is negotiable paper, the form of endorsement as accepted by White falls within the provisions of I.C. 26-1-3-119:
Other writings affecting instrument. (1) As between the obligor and his immediate obligee or any transferee the terms of an instrument may be modified or affected by any other written agreement executed as a part of the same transaction, except that a holder in due course is not affected by any limitation of his rights arising out of the separate written agreement if he had no notice of the limitation when he took the instrument.
(emphasis added).
We deal here only with parties to the transaction itself: no holders in due course are involved. Accordingly, we consider the endorsement as a simple contract between the parties.
Furthermore, I.C. 9-1-2-1 (the Auto Title Statute) provides for the method of perfecting liens on vehicles and prescribes the conditions necessary to perfect such liens. It therefore controls in the face of the more general lien perfection language contained in Indiana's enactment of the U.C.C. (Ind. Code Title 26). Indiana Waste Systems, Inc. v. Board of Commr's. of the County of Howard (1979), Ind.App., 389 N.E.2d 52.
A contract requires offer and acceptance to be enforceable. J. Calamari, J. Perillo, The Law of Contracts (1970) §§ 11-37. Indiana courts recognize this basic precept. State ex rel. Crooke v. Lugar (1976), 171 Ind.App. 60, 354 N.E.2d 755; Cal Hirsch & Sons Iron and Rail Company v. Peru Steel Casting Company (1911), 50 Ind.App. 59, 96 N.E. 807.
The trial court, acting upon the evidence placed before it, found that by endorsing and cashing the check White accepted the benefit of Shelby's financing Gevedon, and accepted the detriment of the duty of placing a lien on the Certificate of Title in favor of Shelby. Sufficient evidence was presented to allow the court to find that any contract between White and Shelby was supported by consideration in the form of the financing arrangements making it possible for Gevedon to buy the truck. The express wording of Shelby's endorsement states that "(b)y endorsing, each payee warrants and covenants that an application ... promptly will be filed for a Certificate of Title ... subject to a lien in favor of ... Shelby." (emphasis added). The hackneyed maxim that "courts will not make a contract for the parties" prevails. Standard Land Corp. of Indiana v. Bogardus (1972), 154 Ind.App. 283, 289 N.E.2d 803.
The trial court properly refused to re-interpret the clear language of Shelby's endorsement. Shelby's offer to pay the check was conditioned on White's (as well as Gevedon's) promise to secure a lien for it on the Certificate of Title. "Each" payee covenanted to do so. Under the plain language of the contract each is bound.
White also argues that even if the endorsement created a contract, it is ineffective because the endorsement described the truck as a "1974 Auto-Car" yet a 1973 model was the subject of the transaction. Another venerable maxim of contract law states that a contract will be read as a whole. Walb Construction Company v. Chipman (1931), 202 Ind. 434, 175 N.E. 132. Because this contract contains the correct serial number of the truck which was actually sold, White is hard-pressed to show how the mistake regarding the model year could possibly have misled it in this transaction. The parties intended to facilitate the conveyance of a 1973 truck and did so. A clerical error will not defeat the otherwise clear contract. Russell v. Merrifield (1891), 131 Ind. 148, 30 N.E. 957.
A final consideration causing us to reject White's invitation to void the contract on the grounds of the mistake in model year is based on the evidence within record showing that Shelby made that mistake by relying on information telephoned to it by White's sales clerk. This establishes that both parties at all times were considering the same truck, and also that it would be unjust to deny Shelby recovery on the basis of White's mistake.
ISSUE TWO Was any contract created by White's endorsement and negotiation void by operation of I.C. 9-1-2-1 (the Auto Title Statute)?
CONCLUSION The contract was not voided by operation of this statute.
White says that if a contract was created, it was voided by the operation of I.C. 9-1-2-1, the statute providing for the issuance of motor vehicle titles. White extracts a portion of that statute which provides that the application of title shall be acknowledged under oath, "with a statement of the applicant's title, and of any liens or encumbrances ...," and that therefore the commitment was Gevedon's, and White could not be penalized for failing to do another's duty. This is hardly an equitable position and certainly not a persuasive legal one.
The same statute (I.C. 9-1-2-1) White relies on in its policy argument against enforcement of the contract provides that if there is a lien, "title shall be delivered to the person named to receive the same in the application for such certificate." The fact this statute provides for delivery to a third person supports the trial court's conclusion that the contract formed between Shelby and White is enforceable. Additionally, according to facts found by the trial court, such arrangements benefiting third parties are consistent with trade practice. (R. at 131). However, the mere fact the statute imposes a duty on the applicant (Gevedon) to state his title and any liens on the vehicle is not in the slightest inconsistent with White's independent duty by contract (the endorsement) to cause the Certificate of Title to be issued subject to Shelby's lien. It was on this basis that White was paid. No language in this statute explicitly or implicitly voids the endorsement. 1
Additionally, courts are not eager to declare contracts void. "The parties of a contract are free to include any provisions therein they desire which do not offend the public policy of our state." University Casework Systems, Inc. v. Bahre (1977), 172 Ind.App. 624, 362 N.E.2d 155, 159. Testimony before the trial court established that the supervision by a vehicle dealer of the execution of applications for title is a common...
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