McDaniel v. Chiaramonte

Opinion by Mr. Chief Justice Eakin.

1. The first question relates to the character of the transaction as disclosed by the complaint, whether it is a conditional sale or a chattel mortgage.

“The term ‘conditional sale’ is, however, commonly applied to a class of transactions where, by the terms of the contract, the possession of the goods is delivered to the buyer; but the property in them is to remain in the seller until the payment of the price.” 35 Cyc. 652.

The transaction' is none the less a conditional sale, because the defendant is obligated absolutely to pay the price, as that is a condition alike of absolute and conditional sales. Freed Furniture, etc., Co. v. Sorrensen, 28 Utah, 419 ( 79 Pac. 564 : 107 Am. St. Rep. 731 : 3 Ann. Cas. 637, and note) ; 35 Cyc. 654.

2. Here defendant agreed to buy and unconditionally to pay the purchase price of the machine. Plaintiff retained title to the machine as security for the payment of the purchase price, and on default of payment he was authorized to take possession, and at his election *407 declared all notes due and proceeded immediately for the collection thereof. This is, without doubt, a conditional sale. The apparent diversity of utterance by the courts as to the effect of the reservation of title by the seller is largely due to the diversity in the form or terms of the sale. Whether the transaction is a conditional sale depends, not upon the name given to it by the parties, or the form of the instrument evidencing it, but upon the ruling intention of the parties, gathered from all language of the contract. 35 Cyc. 654; Henryford v. Davis, 102 U. S. 235, 244 ( 26 L. Ed. 160 ) ; Parke, etc., Co. v. White River L. Co., 101 Cal. 37, 39 ( 35 Pac. 442 ) ; Hamilton v. Highlands, 144 N. C. 279 ( 56 S. E. 929 : 12 Ann. Cas. 876).

3. If the title to the property remains in the seller, then the transaction is not a mortgage. In case of mortgage, the title passes to the buyer, and a lien on the property is created in favor of the seller. 25 Cyc. 652-654, 658, 659; 6 Am. & Eng. Ency. Law (2 ed.) 446.

In the case of Harkness v. Russell, 118 U. S. 663 (7 Sup. Ct. 51: 30 L. Ed. 285 ), an appeal from Utah, there was an agreement to sell certain goods; the buyer undertaking absolutely to pay the price. It was specified in the notes that the title was to remain in the seller until the price was fully paid, reserving the power to declare all notes due upon default as to one; and that the seller might repossess himself of the property, sell it, and apply the proceeds upon the notes and recover any balance due. It was held that the transaction was not a mortgage, but a conditional sale, and valid. See, also, Freed Furniture, etc., Co. v. Sorensen, 28 Utah 419 ( 79 Pac. 564 : 107 Am. St. Rep. 731 : 3 Ann. Cas. 634) ; Frick v. Hilliard, 95 N. C. 117 .

4. The difficulty in this case is not so much in ascertaining the character of the transaction as in determin *408 ing what is the seller’s remedy. It has been held in some cases that of the sale is on credit and the title to the property remains in the seller, upon breach of the conditions, he may have an election of two remedies: (1) He may treat it as an absolute sale and sue for the price, or (2) he may treat the sale as a nullity and retake the property; but that he cannot do both. See Sanders v. Newton, 140 Ala. 335 ( 37 South 340 : I Ann. Cas. 267, and note).

In some forms of the conditional sale, this statement is quite applicable; but in 1 Mechem, Sales, § 615, it is said that the seller has four remedies, namely:

“(1) He may treat the contract as rescinded, upon default of the buyer, and recover the goods. In that event, that is his only remedy. (2) He may treat the contract as in force, but broken by the buyer, and, if by the transaction the buyer contracts to pay, the seller may retake the goods and recover damages for the breach. (3) He may, if the buyer agreed to pay the price, waive the return of the goods and sue for the price. (4) He may, if the contract permits it, without rescinding, take possession of the goods and hold them as security for the fulfillment of the contract.

This classification is cited with approval in Herring-Marvin Co. v. Smith, 43 Or. 321 ( 72 Pac. 704 : 73 Pac. 340 ).

The case before us comes clearly within the fourth remedy, as the contract provides that the seller shall retain the title as security for the payment of the' price. In discussing the remedies in such a case, it is stated in 1 Mechem, Sales, §§ 621-623, that by retaking the goods the seller does not in effect rescind the contract; but holds the property still subject to the contract; and the buyer is not thereby excused from performance. See, also Tufts v. D’Arcambal, 85 Mich. 185 ( 48 N. W. 497 : 12 L. R. A. 446: 24 Am St. Rep. 79) ; Latham v. Sumner, 89 Ill. 233 ( 31 Am. Rep. 79 ) ; Dederick v. *409 Wolfe, 68 Miss. 500 ( 9 South. 350 : 24 Am. St. Rep. 283 ).

The only contention of defendant is that plaintiff has a complete remedy at law; and therefore there is no jurisdiction in equity. But, as we have seen, plaintiff retained the title to the automobile as security for the price. When he repossessed himself of the goods, he did not thereby make the property his own. Defendant still had an equitable interest therein, to the extent of the purchase price paid, namely, $951.25, and that interest cannot be cut off by the act of the seller retaking possession; but the buyer can be protected best in equity.

It is not necessary here to determine whether or not plaintiff can sell the property at public or private sale, as he may see fit, as there is no provision made in the instrument for the manner of terminating defendant’s equity. In Foundry Co. v. Pascagoula, Ice Co., 72 Miss. 608, 615 ( 18 South. 304 ), it is said that the reservation of the title is but as security for the purchase price, and if the property is recovered by the seller he must deal with it as security and with reference to the equitable right of the purchaser; and that the jurisdiction of chancery to enforce conventional liens is too well recognized to require argument or the citation of authorities. In Campbell Print. Press Co. v. Powell, 78 Tex. 53, 63 ( 14 S. W. 245 ), where the title to goods was retained by the seller, it was held that the seller was entitled to a decree for the sale of the property; and in Re National Cash Register Co., 174 Fed. 579, 582 ( 98 C. C. A. 425 ), it is said that, if the seller treats the title to the property, reserved by the contract, as security for the payment of the price, he may file his bill in equity to obtain a judicial sale. By that course, the equity of the buyer was protected by the conscience of the court and its power of control over the sale. That the seller had the right to proceed in that manner the court thinks cannot be doubted, and we think that *410 the plaintiff was properly in the equity court.

5, 6. By the complaint in this case, plaintiff alleged that the agreement was intended to be and is a chattel mortgage. As is well said in defendant’s brief, this is but an allegation of a conclusion of law. The facts are fully set forth which, for the purpose of this demurrer, are admitted and disclose the transaction to be a conditional sale, the title being retained by plaintiff as security until the purchase price is paid; and the relief prayed for can well be granted upon those facts.

The decree is affirmed.

Affirmed: Rehearing Denied.