A. H. Andrews & Co. v. Colorado Savings Bank

| Colo. | Sep 15, 1894

Mr. Justice Goddard

delivered the opinion of the court.

The question that is first presented for our consideration, and one that we regard as decisive, is whether the arrangement under and in pursuance of which the seating was furnished by plaintiffs in error constitutes a conditional sale, or an absolute sale and transfer of ownership, with a reservation of a lien to secure the payment of the purchase price. If the latter, it must be conceded that it is in effect a chattel mortgage, and void as to third parties, because not executed and acknowledgedin conformity with the chattel mortgage act.

In determining this question, the entire transaction between intervenors and Smith must be considered, and its legal effect ascertained, not alone by any particular provision of the written contract itself, but from all the stipulations and agreements contained therein, as well as in the notes given in connection therewith. When so considered, it is evident, notwithstanding the agreement itself provides that the title to the seating shall remain in Andrews & Co. until full payment in cash shall have been made therefor, thus evidencing an intent to make the sale conditional so far as the transfer of the title is concerned, that such an intention is rebutted by the terms and stipulations in the notes given in pursuance of the agreement; they being absolute obligations, making the purchaser unconditionally liable for the purchase price. The optional payment of the purchase price is as essential to constitute a transaction a conditional sale as the conditional passing of the title; and a transaction that in express terms imposes an unconditional liability upon the vendee to pay the purchase price for the property delivered, however characterized by the parties, is essentially and in legal effect an absolute, and not a conditional sale.

“ If, by the terms of the agreement, the purchaser becomes liable unconditionally for the purchase price, although by the-agreement he may never get the title and ownership of the property, then the agreement is an evasion of the registration statute, as its purpose is simply' to retain a secret lien.” Hart v. Manufacturing Co., 7 Fed. Rep. 553. In the case of Heryford v. Davis, 102 U.S. 235" court="SCOTUS" date_filed="1880-12-18" href="https://app.midpage.ai/document/heryford-v-davis-90239?utm_source=webapp" opinion_id="90239">102 U. S. 235, in discussing an agreement purporting to be a lease, but similar in its terms to the one at bar in so far as it imposed an absolute liability upon the railroad company to pay for the cars, Mr. Justice Strong, in speaking for the court, says: “ The railroad company was not accorded an option to buy' or not. They were bound to pay the price, either by paying their notes or surrendering the property' to be sold in order to make payment. This was in no sense a conditional sale. This giving the property' as 'a security for the payment of a debt is the very essence of a mortgage, which has no existence in a case of conditional sale.”

In terms, the notes executed by Smith to the intervenors made him an absolute debtor for the price of the furniture , and the stipulation therein that “A. H. Andrews & Co., or their assigns, shall have the right to assume possession at any time they may deem themselves insecure, and after maturity to sell said property', and apply the proceeds of such sale, over and above the expenses of taking and retaining possession thereof, on this note, and to collect the balance,” being manifestly for the purpose of enabling the intervenors to enforce such payment by subjecting the property' to sale for that purpose, is an attempt to reserve a lien thereon to secure the payment of the purchase price.

We are therefore clearly' of the opinion that the agreement and notes evidencing the transaction between the intervenors and Smith constituted an absolute sale, and that the attempt to reserve a lien on the property as security for the payment of the purchase price was void as to third parties, as being in contravention of our chattel mortgage act. It follows from this conclusion that the questions so elaborately and ably argued as to the validity of the transaction, considered as a conditional sale, are eliminated from the case, and we are relieved from the necessity of passing upon and determining what the rights of the respective parties would have been had the sale been of that character. The judgment of the court below is affirmed.

Affirmed.