Wilson v. Commercial Finance Co., 749

• Decision Date: 29 January 1954
• Docket Number: No. 749,749
• Citation: 239 N.C. 349,79 S.E.2d 908
• Parties: WILSON, v. COMMERCIAL FINANCE CO. et al.
• Court: North Carolina Supreme Court

Page 908

79 S.E.2d 908

239 N.C. 349

WILSON, v. COMMERCIAL FINANCE CO. et al.

No. 749

Supreme Court of North Carolina.

Jan. 29, 1954

John D. Slawter and Womble, Carlyle, Martin & Sandridge, Winston-Salem, for plaintiff Eugene H. Wilson, appellee.

William S. Mitchell, Winston-Salem, for defendant Commercial Finance Co., appellant.

ERVIN, Justice.

The defendant insists initially that it is entitled to a reversal of the judgment because all of the testimony disproves the plaintiff's claim. The defendant advances these four independent and successive arguments to sustain this position:

1. The entire evidence compels the single conclusion that the plaintiff, acting through his agent, accepted Bush's check as absolute payment of the purchase price of the Chrysler, and that in consequence the ownership as well as the possession of the automobile passed to Bush at the time of its delivery to him.

2. The entire evidence compels the single conclusion that the plaintiff waived the immediate cash payment of the purchase price of the Chrysler by his conduct after learning of the dishonor of Bush's check, and in that way permitted the title to the automobile to pass to Bush, even if the contract between the plaintiff's agent and Bush did contemplate a cash sale of the Chrysler, and even if the plaintiff's agent did originally take Bush's check as a mere conditional payment of its purchase price.

3. The entire evidence compels the single conclusion that the defendant took its chattel mortgage on the Chrysler from Bush in good faith, for value, and without notice of the plaintiff's claim, and that in consequence it is entitled to be treated as a bona fide purchaser and as such protected against the claim.

4. The entire evidence compels the single conclusion that the plaintiff entrusted the possession of his Chrysler to Bush; that the plaintiff also invested Bush with an indicium of title to the Chrysler, namely, its registration card; that the defendant took its chattel mortgage on the Chrysler from Bush for value in reliance on Bush's possession of the Chrysler and its registration card; and that in consequence the plaintiff is estopped to claim ownership of the Chrysler as against the defendant.

In passing on this phase of the appeal, we must read the testimony in the light of the relevant rules of law. These rules are stated in the numbered paragraphs which immediately follow.

1. A cash sale is one in which the title to the property and the purchase price pass simultaneously, and the title remains in the seller until the purchase price is paid, even though possession of the property is delivered to the buyer. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Little v. Fleishman, 177 N.C. 21, 98 S.E. 455; Davidson v. Diamond Furniture Co., 176 N.C. 569, 97 S.E. 480; Hughes v. Knott, 138 N.C. 105, 50 S.E. 586; Williston on Contracts (Rev.Ed.), §§ 730-733; 77 C.J.S., Sales, § 262. See, also, in this connection: Grandy v. Small, 48 N.C. 8; Grandy v. McCleese, 47 N.C. 142.

2. The seller may waive his contractual right to the immediate cash payment of the purchase price in a sale for cash and permit the title to pass to the buyer before the payment of the purchase price is made by language or conduct manifesting an intention on his part to abandon or relinquish his contractual right rather than to insist upon it. 46 Am.Jur., Sales, § 446; 77 C.J.S., Sales, §§ 232, 262; 67 C.J., Waiver, § 6. See, also, in this connection: H. M. Wade Manufacturing Co. v. Lefkowitz, 204 N.C. 449, 168 S.E. 517; Murphy v. Lafayette Mutual Life Insurance Co., 167 N.C. 334, 83 S.E. 461. But he does not waive his contractual right by taking a check, which subsequently proves to be worthless, in payment for the property sold for cash. Johnson v. Iankovetz, 57 Or. 24, 102 P. 799, 110 P. 398, 29 L.R.A., N.S., 709.

3. In the absence of an agreement to the contrary, the delivery and acceptance of a check does not constitute payment of the item covered by it until the check itself is paid by the bank on which it is drawn. South v. Sisk, 205 N.C. 655, 172 S.E. 193; Andrews-Cooper Lumber Co. v. Hayworth, 205 N.C. 585, 172 S.E. 194; Raines v. Grantham, 205 N.C. 340, 171 S.E. 360; Moore & Dawson v. Highway Enginerring & Construction Co., 196 N.C. 142, 144 S.E. 692; Dewey v. Margolis & Brooks, 195 N.C. 307, 142 S.E. 22; Hayworth v. Philadelphia Life Insurance Co., 190 N.C. 757, 130 S.E. 612; Commercial Casualty Ins. Co. v. Durham County, 190 N.C. 58, 128 S.E. 469; Graham v. Proctorville Warehouse, 189 N.C. 533, 127 S.E. 540; Federal Land Bank v. Barrow, 189 N.C. 303, 127 S.E. 3; Thomas v. Prudential Ins. Co. of America, 4 Cir., 104 F.2d 480. It necessarily follows that where the seller contracts to sell a chattel to the buyer for cash, and the seller accepts a check from the buyer as a means of payment of the cash and delivers the chattel to the buyer in the belief that the check is good and will be paid on presentation, no title whatever passes from the seller to the buyer until the check is paid; and the seller may reclaim the chattel from the buyer in case the check is not paid on due presentation. Weddington v. Boshamer, 237 N.C. 556, 75 S.E.2d 530; Parker v. First Citizens Bank & Trust Co., 229 N.C. 527, 50 S.E.2d 304; 28 N.C.L.Rev. 132-137.

4. Even a bona fide purchaser of a chattel acquires no property right in it at common law or in equity as against the true owner, if it is sold by a third person who, although in possession, has no title to it, unless the true owner authorizes or ratifies the sale, or is precluded by his own conduct from denying the third party's authority to make it. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Ellison v. Hunsinger, 237 N.C. 619, 75 S.E.2d 884; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312; Green River Land Co. v. Bostic, 168 N.C. 99, 83 S.E. 747; Lance v. Butler, 135 N.C. 419, 47 S.E. 488; Millhiser v. Erdman, 98 N.C. 292, 3 S.E. 521; Belcher v. Grimsley, 88 N.C. 88; 56 Am.Jur., Sales, § 464; 77 C.J.S., Sales, § 295.

5. 'In determining what protection is afforded to a bona fide purchaser of goods obtained by fraud, the nature and effect of the fraud practiced, rather than the mere presence or existence of fraud, are controlling.' 77 C.J.S., Sales, § 294. This is true because in the absence of an estoppel, one is not entitled to protection as a bona fide purchaser unless he holds the legal title to the property in dispute. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Williams v. Lewis, 158 N.C. 571, 74 S.E. 17; Durant v. Crowell, 97 N.C. 367, 2 S.E. 541; Wharton v. Moore, 84 N.C. 479; Winborn v. Gorrell, 38 N.C. 117, 40 Am.Dec. 456; Polk v. Gallant, 22 N.C. 395, 34 Am.Dec. 410; Jones v. Zollicoffer, 4 N.C. 645, 7 Am.Dec. 708; 46 Am.Jur., Sales, § 464; 77 C.J.S., Sales, § 288. As a consequence, an owner who is induced by the fraud of the buyer to part with the possession of his chattel, and no more, can reclaim it from a bona fide purchaser from or under the fraudulent buyer, unless the bona fide purchaser can bring himself within the protection of some principle of estoppel. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Ellison v. Hunsinger, supra; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312; 42 Am.Jur., Sales, § 470; 77 C.J.S., Sales, § 294. But an owner who is induced by the fraud of the buyer to part with the legal title to his chattel cannot recover if from a bona fide purchaser from or under the fraudulent buyer. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Thomas E. Hogan, Inc., v. Berman, 310 Mass. 259, 37 N.E.2d 742; Williston on Contracts (Rev.Ed.,) § 1531; 46 Am.Jur., Sales, § 471; 77 C.J.S., Sales, § 294; Restatement of the Law of Restitution, § 13. See, also, in this connection this decision: Norfolk Southern R. Co. v. Barnes, 104 N.C. 25, 10 S.E. 83, 5 L.R.A. 611. A mortgagee may occupy the status of a bona fide purchaser within the purview of these rules. 'Accordingly, it is well established that, where a sale of personal property is induced by fraud, and the fraudulent purchaser mortgages the property to one who takes without notice of the fraud, and for a present consideration, the mortgagee occupies the position of a bona fide purchaser, and will be protected against the claim of the defrauded seller to the extent of the mortgage debt. * * * Where, however, title to the property did not pass to the mortgagor, the mortgagee does not occupy the position of a bona fide purchaser and will not be protected against the claim of the rightful owner, at least where the owner has not clothed the mortgagor with the indicia of ownership to the extent of estopping him as against a mortgagee of the one in possession.' 14 C.J.S., Chattel Mortgages, § 307.

6. A conflict of authority exists in the several jurisdictions whose courts have had occasion to make direct pronouncement on the subject as to whether the seller can reclaim a chattel from a bona fide purchaser from or under the buyer where the seller delivers the chattel to the buyer under an agreement for a cash sale and takes from the buyer for the cash payment a check which afterwards proves to be worthless. 'The first line of authority declares that, nothing else appearing, where a chattel is sold for cash, and a check is tendered as the cash payment, and the seller delivers the chattel to the buyer, no title whatever passes from the seller to the buyer until the check is paid or honored; and that in the absence of some estoppel on his part, the seller can reclaim the chattel from a bona fide purchaser from or under the buyer, or from a subsequent purchaser from or under such bona fide purchaser, in case the check is not paid or honored on due presentation. * * * The second line of authority holds that, nothing else appearing, where the parties bargain for the cash sale of a chattel which the seller delivers to the buyer, and payment of the purchase price is made by a...