291 Mass. 157 | Mass. | 1935
This is an action of tort for conversion of an automobile. The trial judge directed a verdict for the defendant. The relevant facts disclosed by the plaintiffs’ bill of exceptions are these:
The defendant, a finance company, had a general business arrangement, followed in the instant case, with one
The automobile here in question, so held by Stiles, was sold by him to the plaintiffs, who are father and son, without written consent of the defendant. The son, shortly before this time, had made an arrangement with Stiles to sell automobiles on a commission basis. The father joined with the son in the purchase by trading in an old automobile on the basis of $666 and signing a note for the balance of $741.28 together with a conditional sales contract of the usual form, making the total purchase price slightly more
In order to prevail the plaintiffs must prove that at the time of the conversion they had a complete property either general or special in the automobile, and the right to its immediate possession. Bacon v. George, 206 Mass. 566, 570. Judkins v. Tuller, 277 Mass. 247, 250. The defendant contends that under the instrument signed by Stiles it had legal title to the automobile all the time and a right to repossess it at any time, since no payments were made to the defendant, and that the plaintiffs had no title to the automobile or right to its possession.
The evidence already narrated warranted a finding that the defendant did not pay to the distributor of the automobiles, who was an intermediary for the manufacturer and Stiles, the dealer, the entire purchase price of the automobile but that Stiles paid ten or fifteen per cent of that price. We do not pause to inquire whether in these circumstances a so called trust receipt was appropriate to the transaction, or whether it was a chattel mortgage, invalid except as between the parties because not recorded. Hartford Accident & Indemnity Co. v. Callahan, 271 Mass. 556, 563. A further finding was warranted that under the course of business between the defendant and Stiles the latter made
An owner’s rights in his chattel are protected to every reasonable extent. Royle v. Worcester Buick Co. 243 Mass. 143. There are- equitable considerations in favor of a bona fide purchaser of such property entrusted by the holder of its legal title to the possession of another with authority to sell. The strong public policy in favor of such bona fide purchaser has been reflected in legislation. It is provided by the so called factor’s act, G. L. (Ter. Ed.) c. 104, § 1: “A factor or other agent intrusted with the possession of merchandise . . . with authority to sell the same shall be deemed the true owner of such merchandise, so far as to give validity to any bona fide contract of sale made by him.” This statute has been held to prevent the repossession of a motor vehicle sold to a bona fide purchaser by a dealer to whom the owner had entrusted its possession together with authority to sell it. Jeffery v. M. W. Leahy & Co. 258 Mass. 548.
The contention of the defendant is that the dealer, Stiles, was not a factor or agent, but merely one in possession of the automobile under the provisions of the so called trust receipt. When examined at large, the authorities are not in accord as to the legal consequences of such an instrument as was signed by Stiles and held by the defendant. All are in agreement that it creates no trust, because by its terms the finance company for which the automobile is held “in trust” retains legal title, which in a true trust vests in the trustee. It is not often spoken of as creating the relation of pledgor and pledgee, since the essence of the transaction is to place the possession of the automobile in the dealer and not in the finance company. It is more like a conditional sale, but the dealer is not seeking a position in which he will ever become sole owner; it is evident that the contract is one of financing rather than of sale. See New Haven Wire Company Cases, 57 Conn. 352, 383-386. Because of a natural and inherent disinclination toward such concealed ownership of chattels intended to be exposed for sale, some courts have treated the trust receipt as equivalent to a chattel
Several cases have arisen in the Commonwealth where the' decision has been reached without consideration of said c. 104. In Simons v. Northeastern Finance Corp. 271 Mass. 285, a purchaser of an automobile owned by the defendant but in possession of the dealer on an instrument somewhat resembling that signed by Stiles was protected. That decision rests on the grounds that the dealer was in truth the agent of the finance company and that the latter by its conduct was estopped to set up its title as against the plaintiff. That case is sufficient authority for the plaintiffs in the case at bar. In Tripp v. National Shawmut Bank of Boston, 263 Mass. 505, and Denno v. Standard Acceptance Corp. 277 Mass. 251, the purchasers of automobiles were protected against the claims of undisclosed prior owners partly on some provisions of the sales act. G. L. (Ter. Ed.) c. 106. See also Jordan v. Federal Trust Co. 296 Fed. Rep. (D. C. Mass.) 738. In Hartford Accident & Indemnity Co. v. Callahan, 271 Mass. 556, 563, the finance company was not allowed to replevin an automobile held on a trust receipt; it appeared that the bill of lading was made out to the dealer who thereafter delivered the trust. receipt to the finance company. This was held to be nothing more than an unrecorded chattel mortgage. On the other hand, in a recent case where the circumstances showed that the purchaser of an automobile held on an instrument somewhat like that
In some of these cases the purchasers of the automobiles have not relied on the statutory protection given by G. L. (Ter. Ed.) c. 104, but have rested upon other contentions. The undisclosed principal long has been held bound by contracts made by his general agent within the latter’s apparent authority, though outside his actual authority, even when the third person has dealt with the agent as if he were the owner. Brooks v. Shaw, 197 Mass. 376. See Am. Law Inst. Restatement: Agency, § 194, and comment. This principle of the law of agency is properly extended to automobile cases where the sale by the dealer, who is in' truth a special agent of an undisclosed principal, is conducted in the usual and ordinary course of business with one who reasonably believes the agent to be owner. Am. Law Inst. Restatement: Agency, § 201, and illustration. In the instant case the application of G. L. (Ter. Ed.) c. 104, § 1, and these principles of the common law of agency result in the protection of the plaintiffs as purchasers from the dealer, Stiles.
The defendant also contends that the plaintiffs were not bona fide purchasers of the automobile. The plaintiff Harold E. Handy, although having other employment, sold automobiles after May 28, 1931, for Stiles. That did not prevent him from buying property from Stiles. That the automobile remained part of the time in Stiles’s garage and was operated under his dealer’s registration plates might permit an inference that Stiles remained the true owner. But that inference is hardly consistent with the other undisputed circumstances indicating that the sale was completed
Exceptions sustained.
See uniform trust receipts act recently adopted in New York, Laws of N. Y. 1934, c. 574, §§ 50-58, whereby a limited kind of public notice is required before the party secured by the trust receipt will be protected.