Handley Motor Co. v. Wood

Annotate this Case

75 S.E.2d 312 (1953)

237 N.C. 318

HANDLEY MOTOR CO., Inc. v. WOOD et al.

No. 98.

Supreme Court of North Carolina.

March 18, 1953.

*315 Gardner, Connor & Lee, Wilson, for plaintiff, appellant.

Carr & Gibbons, Wilson, for defendant, appellee.

PARKER, Justice.

All the evidence shows that all the transactions as to the sale of the new Ford automobile described in the complaint between the plaintiff and James P. Junghans, Jr., and the delivery of it by the plaintiff to Junghans took place in the District of Columbia. Therefore, the sale in its substantive features is governed by the laws of the District of Columbia, and such laws on the doctrine of comity in the forum will be enforced in North Carolina, unless contrary to the public policy of this State. Price v. Goodman, 226 N.C. 223, 37 S.E.2d 592; 11 Am.Jur., Conflict of Laws, Sec. 140.

The District of Columbia in 1937 adopted the Uniform Sales Act. D.C.Code 1940, Secs. 28-1101 to 28-1608. Sec. 18 of the Uniform Sales Act, which is Sec. 28-1202 of the D.C.Code 1940, is as follows: "Property in specific goods passes when parties so intend. (1) Where there is a contract to sell specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties, usages of trade, and the circumstances of the case."

*316 In Daine v. Price, D.C.Mun.App.1949, 63 A.2d 767, 768, the Court said: "In the case of a so-called cash transaction in which the passage of title depends upon payment, a check is generally considered conditional payment only and does not operate to effect payment unless the check is itself paid." The District of Columbia Court cites in support of its statement "Standard Inv. Co. v. Town of Snow Hill, N.C., 4 Cir., 78 F.2d 33; see also Publicker Commercial Alcohol Co. v. Harger, 129 Conn. 655, 31 A.2d 27." In the Town of Snow Hill case [78 F.2d 36], Parker, Circuit Judge, speaking for the Court said: "The rule that a check of a debtor is merely conditional payment applies to obligations arising out of immediate transactions, as well as to payment of antecedent debts; and, where there is a sale for cash on delivery, and payment is made by check of the buyer, such check constitutes only conditional payment. Until the check is itself paid, the title, as between the parties, passes only conditionally; and, upon dishonor of the check, the seller may rescind the transaction and reclaim that with which he has parted", citing many authorities in support.

All the evidence in this case tends to show that the sale of this car to Junghans was a cash sale, and that Junghans gave for the purchase price a worthless cheque. If a jury should so find from the evidence then under the laws of the District of Columbia no title to the car passed to Junghans, but the plaintiff retained the legal title.

Such law will be enforced in the courts of North Carolina, because such is the law of this State. Parker v. First-Citizens Bank & Trust Co., 229 N.C. 527, 50 S.E.2d 304, which cites many authorities to support its ruling. See also Davidson v. Diamond Furniture Co., 176 N.C. 569, 97 S.E. 480.

Title like a stream cannot rise higher than its source. The general rule is that a seller of personal property without title cannot transfer a better title than he has, unless some principle of estoppel comes into operation, where the owner by some direct and unequivocal act has clothed the seller with the indicia of ownership. It is also the general rule that the fact that the owner has entrusted someone with the mere possession and control of personal property is not sufficient to estop the real owner from asserting his title against a person who has dealt with the one in possession on the faith of his apparent ownership or authority to sell. It is also well settled that when the owner of personal property in any form clothes another with the apparent title of power of disposition, and third parties are thereby induced to deal with him, they shall be protected. 46 Am.Jur., Sales, Sec. 458 and Sec. 460; Cowdrey v. Vandenburgh, 101 U.S. 572, 25 L. Ed. 923; Asheville Supply & Foundry Co. v. Machin, 150 N.C. 738, 64 S.E. 887; American National Bank v. Dew, 175 N.C. 79, 94 S.E. 708; American Exchange National Bank v. Winder, 198 N.C. 18, 150 S.E. 489; Atlantic Discount Corp. v. Young, 224 N.C. 89, 29 S.E.2d 29; Parker v. Trust Co., supra.

While Mrs. Cross testified that the plaintiff gave Junghans no records or papers of any kind, and Junghans testified the plaintiff gave him a receipt that he paid $1,875.50 for the car and a ten day temporary registration card, there is no evidence that Goldberg ever saw such a receipt and temporary registration card, and they were not introduced in evidence. There is no evidence, if the plaintiff gave Junghans such papers, Goldberg was induced thereby to buy the car from Junghans relying upon such papers; Lee Motors, Mozes Autos and the defendants knew nothing about any such papers according to the evidence. There is no evidence to estop the plaintiff from asserting its legal title. Further, the defendants have not pleaded an estoppel, as they are required to do to be available to them as a defense. Laughinghouse v. Great Nat. Ins. Co., 200 N.C. 434, 157 S.E. 131; Keen v. Parker, 217 N.C. 378, 8 S.E.2d 209; Aldridge Motors v. Alexander, 217 N.C. 750, 9 S.E.2d 469. "The lex fori also governs the rules of pleading." 11 Am.Jur., Conflict of Laws, p. 502; Central Vermont R. Co. v. White, 238 U.S. 507, 35 S. Ct. 865, 59 L. Ed. 1433.

*317 If the jury found as all the evidence tends to show that the plaintiff's sale to Junghans was a cash sale, and Junghans paid for the car with a worthless cheque, the title is still in the plaintiff, and as there is no evidence nor defense in the answer that the plaintiff is estopped to assert its title, then under those circumstances it is an elementary general rule, which is incorporated in the Uniform Sales Act, Sec. 23, that no one can transfer a better title than he has, and, with certain well-known exceptions, an innocent purchaser for value from one without title does not acquire title as against the true owner. 46 Am.Jur., Sales, Sec. 458; Vold, Sales, pp. 174-176; Williston on Sales, Rev.Ed., Vol. 2, Sections 346a and 346b.

Williston, ibid., Sec. 346a, says: "Sometimes after a bargain for a cash sale the buyer gives in payment of the price a worthless check, and it has been held that such a false check is no payment; and that not only does no title pass to the fraudulent buyer, but that the seller may assert his title against an innocent purchaser from the buyer," citing many cases in support of such statement. Williston criticizes such decisions as unsound, but says ibid., p. 346, "it must be admitted that so far as the cases on worthless checks are involved the author's analysis is not supported by the weight of authority."

Void, ibid., p. 174, says: "Payment by check is without special agreement commonly regarded as only conditional payment until cashed. Following this analysis it is held by the great weight of American authority that delivering the goods to the buyer and taking his check for the price is not a waiver of the condition of payment in cash but that the property passes when the check is cashed. If, then, the check is dishonored on presentation, as for instance where it was forged or where the drawer had no funds, it is held that the goods still belong to the seller unless the seller is shown to have accepted the check in absolute payment, and that he can recover them from subsequent purchasers from the buyer even when they are purchasers in good faith for value without notice." In support of the statement "he can recover them from subsequent purchasers from the buyer even when they are purchasers in good faith for value without notice." Vold cites: Barksdale v. Banks, 206 Ala. 569, 90 So. 913; Clark v. Hamilton Diamond Co., 209 Cal. 1, 284 P. 915; Johnson v. Iankovetz, 57 Or. 24, 28, 102 P. 799, 110 P. 398, 29 L.R.A., N.S., 709; Young v. Harris-Cortner Co., 152 Tenn. 15, 268 S.W. 125, 54 A.L.R. 516, Rehearing Denied, 152 Tenn. 34, 268 S.W. 1120; John S. Hale & Co., v. Beley Cotton Co., 154 Tenn. 689, 290 S.W. 994.

In Young v. Harris-Cortner Co., supra [152 Tenn. 15, 268 S.W. 127], the Court said: "We feel safe in saying that, as a matter of custom and convenience, most of the cash transactions of the country are paid with checks. A farmer brings his cotton, tobacco, or wheat to town for sale and sells same, and, as a general rule, is paid by check, although all of such sales are treated as cash transactions. If, in such a case, the purchaser can immediately resell to an innocent party and convey good title, it would follow that vendors would refuse to accept checks and would require the actual money, which would result in great inconvenience and risk to merchants engaged in buying such produce since it would require them to keep on hand large sums of actual cash. This would result in revolutionizing the custom of merchants in such matters."

"It is a general, well-established principle that no one can transfer a better title than he has. No person can by his sale"in 135 N.E. the preceding word "sale" is left out "transfer to another the right of ownership in a thing in which he has not the right of property, except in the case of cash, bank bills, checks, and notes payable to bearer, or transferable by delivery in the ordinary course of business to a person taking the same bona fide and paying value for it. [Citing authorities.] The purchaser of property wrongfully taken by his vendor from the true owner can obtain no more perfect title to the property purchased than the vendor himself possessed, and an innocent purchaser without notice of a wrongful taking can acquire no better title to property than his vendor had. 24 R.C.L. *318 374." Drain v. La Grange State Bank, 1922, 303 Ill. 330, 135, N.E. 780, 782.

Our General Assembly has added another exception to the general rule by exempting therefrom Warehouse Receipts. G.S. § 27-51.

"It is an elementary principle of the common law as to sales that one cannot transfer title to property in which he has no title or interest." Coolidge v. Old Colony Trust Co., 1927, 259 Mass. 515, 156 N.E. 701, 703; Hooper v. Britt, 1951, 35 Ala.App. 612, 51 So. 2d 547.

Dobbins v. Martin Buick Co., 1950, 216 Ark. 861, 227 S.W.2d 620, 623, follows the general rule. The Martin Buick Company of Cookeville, Tennessee, brought this action of replevin to recover an automobile to which it claimed title. Title was also claimed by Dobbins. One Atkinson on 5 February 1948 purported to purchase this car from the Buick Company at its place of business in Tennessee, and fraudulently gave a cheque on a nonexistent account in a Georgia bank in payment for the car. Atkinson, at once, took possession of the car, and the Buick Company gave Atkinson an invoice identifying the car and stating the price $1,825. Nothing in the invoice indicated that the price had been paid. No bill of sale was issued to Atkinson, it being the Buick Company's purpose to execute a bill of sale only after the cheque had cleared. The cheque was worthless. Atkinson immediately brought the car to Arkansas, and secured on 9 February 1948 an Arkansas State license and a certificate of registration. Shortly thereafter Atkinson sold the car to the Baker Automobile Company, automobile dealers at Searcy, Arkansas, who bought it in good faith and for value in reliance upon the invoice and the Arkansas certificate of registration bearing Atkinson's name. The Baker Automobile Company in turn sold the car to Dobbins, who was likewise an innocent purchaser. Those facts were established by stipulation of the parties. It was held that the law of Tennessee governed as to the purported sale of the car, and that under the Tennessee law the title remained in the defrauded seller. Dobbins contended that the Martin Buick Company was estopped to deny that the Baker Automobile Company and subsequently himself acquired good title to the car by the bona fide purchase from Atkin son. It was held that whether such an estoppel is to be applied against the Martin Buick Company is to be determined by the law of Arkansas. The Court concluded as follows: "That under the law of Arkansas Martin [Buick Company] did not vest Atkinson with such indicia of title to the car as to estop Martin [Buick Company] from setting up his own valid title against an innocent purchaser of Atkinson's non-existent title."

Our authorities which we have been able to find, while not on all fours, seem to support the general rule. In Jones v. Zollicoffer, 4 N.C. 645 at page 660, the Court said: "When a bill, therefore, is filed by one who has the legal title, but who comes into equity because he cannot be completely relieved at law, it is no defense for the defendant to plead that he is an innocent purchaser for a valuable consideration without notice, because the complainant is not seeking to disarm him at law, the defendant at best having but a wooden sword, incapable of protecting him against the assault of a legal claimant."

In Lance v. Butler, 135 N.C. 419, 47 S.E. 488, it was held that where one who was an agent for the sale of goods for another allowed them to be mixed with his stock of goods and then gave a mortgage on the entire stock, the mortgagee obtained no better title than the mortgagor had. See also American Exchange National Bank v. Winder, supra.

There is no plea of estoppel in the answer, nor evidence to support such plea, if it had been made. Therefore, if the jury finds from the evidence that the transaction between the plaintiff and Junghans was a cash sale and that Junghans paid the purchase price for the car with a worthless cheque, then no title passed to Junghans and the legal title remained in the plaintiff. In that event these interesting questions arise on the pleadings and the evidence, which are not before us for decision: First, are the defendants innocent purchasers for value and without notice, and if so, is that a defense against the plaintiff's legal title, *319 according to the laws of the State of Pennsylvania, where the defendants made their contract with Mozes Autos and received delivery of the car; Second, if the defendants are innocent purchasers for value and without notice, and that is not under the laws of the State of Pennsylvania a defense against plaintiff's legal title, or if the defendants are not innocent purchasers for value and without notice, were Goldberg, Lee Motors and Mozes Autos, or either of them innocent purchasers for value and without notice of this car, and if so, is it a defense against the plaintiff's legal title in the states or state where such sales, or any one such sale, was executed; Third, if the defendants can prevail in any of these contentions, is it against the lex fori to enforce such a defense against plaintiff's legal title to the car? According to Junghans' testimony the executed sale of the car by him to Goldberg occurred in the District of Columbia, according to Goldberg's testimony in Maryland. The defendants allege in their answer that they are innocent purchasers for value and without notice. The burden is upon them to establish such defense. Inferences can be drawn from the evidence that neither defendants, nor Goldberg, nor Lee Motors, nor Mozes Autos are bona fide purchasers for value and without notice, therefore, a peremptory instruction that the defendants or Goldberg or Lee Motors or Mozes Autos were bona fide purchasers for value and without notice under the evidence in this case would be error. Price v. Goodman, supra; 11 Am.Jur., Conflict of Laws, Sec. 140; Morris v. Tate, 230 N.C. 29, 51 S.E.2d 892.

The issues submitted to the jury are not determinative of the controversy between the parties and the judgment signed is erroneously entered. Merchants' Nat. Bank v. Carolina Broom Co., 188 N.C. 508, 125 S.E. 12; Braswell v. Johnston, 108 N.C. 150, 12 S.E. 911. For the reasons stated above the Court's peremptory instruction to the jury on the first issue was error, and the plaintiff's assignment of Error No. 6 to such charge is sustained.

Under the facts of this case G.S. §§ 44-38.1, 47-20 and 47-23 have no application.

It is not necessary to consider the other assignments of error as to the admission of evidence, for they may not arise when the case is tried again.

The defendant Wood testified he received the car on January 8, and sold it January 10. The replevin bond is not in the record, but in the stipulation it is stated "defendants' replevin bond need not be printed as a part of the record on case on appeal." In paragraph 6 of the defendant's answer it is stated: "It is admitted that the defendants are in possession of said automobile and that they refuse to turn it over to the plaintiff."

There must be a new trial, and it is so ordered.

New trial.