National Bank v. Goodyear

Bleckley, Chief Justice. 1. It is clear from the facts appearing in the bill of exceptions and transcript of the record, when closely! scrutinized, that the mortgage executed by Goodyear-to the bank, together with the Emerson & Fisher' Company and several others of his creditors, did not embrace or cover the goods now in controversy. And it is equally clear that the bill of sale subsequently — 722 — executed by him to' the bank alone, was not designed or understood to cover this disputed property in addition to the property embraced in the mortgage; for the consideration of the bill of sale, as shown upon its face, was only one hundred dollars, whereas the value of the property now in question was certainly very considerable and was probably over- fifteen hundred dollars. The purpose of thfe bill of sale' was to pass the mortgaged property to the bank, subject to the mortgage, that is, to make the bank owner of the equity of redemption. With this purpose the small consideration of .one hundred dollars would have some consistency, but it would have none at all (supposing the transaction to be honest and bona fide) with a design to convey to the bank not ■only the equity of redemption in the mortgaged goods, but the absolute ownership of about fifteen hundred dollars’ worth of property besides. It was known that Goodyear had failed and was apparently insolvent. He was in no condition honestly to part with assets for less than one tenth of their value, even if they had been his own and he had been willing thus to sacrifice them. Looking alone to the descriptive terms contained in the ■mortgage, the general words embraced therein, super-added to various articles specifically ¿numerated, are comprehensive enough to cover every item of property belonging to the mortgagor contained in the two stores referred to, namely, 704 Broad street and 703 Ellis street, but the parol evidence shows that although the articles now in controversy were in those stores, the mortgagor recognized the fact that they were not his property but were consigned goods, and did not intend either to mortgage or sell them. He is strongly corroborated by the fact that while the consignor, the Emerson & Fisher Company, is one of the mortgagees, the debt to that company, a debt partly by notes and partly by account, as described in the mortgage includes — 723 — none of the price or value of the consigned property which was on hand when the mortgage was executed. It is easy to believe that Goodyear did not intend to mortgage to that company what he regarded as its own property without increasing his previous debt by enough to cover some proper amount for purchase money of the same property. How could he rationally or honestly do such a thing ? There is no evidence that at the time of making the mortgage he represented himself to be the owner of these specific goods or held them out as his own. Nor did he do so at the time of executing the bill of sale. 2. The parol evidence was also sufficient to warrant the presiding judge, to whom the facts as well as the law were referred, in finding' that the bank at the time of taking the bill of sale was chargeable with notice that these goods were consigned goods, and consequently that the mortgagor did not intend to deal with them as his own either by mortgage or sale. In giving notice to the president of the bank, the value of the consigned goods may have been understated, but this did not excuse the president from inquiring as to what the goods consisted of, and to whom they belonged. He certainly had notice that there were consigned goods, and he could not have understood that he was purchasing any of these whether they were worth little or much. The bank did not purchase any consigned goods, and consequently acquired no title to these goods merely by reason of Goodyear having power and authority from the Emerson & Fisher Company to sell them in the general market. Goodyear did not intend to sell them, and the bank, or the person who represented the bank, could not rightly have believed or understood that he so intended. The real disappointment of the bank was that the consigned goods turned out to be a much larger proportion of the stock than was expected. ■ But the true proportion was — 724 — easily ascertainable, and would have been ascertained if the bank had exercised the diligence to which the notice it received was a sufficient prompting. Failure to inquire further was the sole reason why more facts did not become known. 3. The theory of the bank being that the goods in controversy are covered both by the mortgage and the bill of sale, and that theory, as we have just ruled, being unsupported by the evidence, there is, perhaps, no absolute necessity for deciding at present upon the contention, that although Goodyear acquired no title to these goods as against the Emerson & Fisher Company which he could assert, he did acquire a title which his creditors could assert so as to subject them to the payment of any debt which he contracted whilst the goods were in his possession. The question, however, has been fully argued, and we will consider it. This contention is founded upon the terms of the written contract between Goodyear (made by his father as his agent) and the company. An abstract of that contract appears in the official report, and its stipulations are briefly indicated in the third head-note prefixed to this opinion. The bank contends that failure to record the contract rendered the property covered by and delivered 'under it subject to be charged with the debts of Goodyear. The requirement as to recording is found in section 1955(a) of the code, and reads thus: “Whenever personal property is sold and delivered with the condition affixed to the sale, that the title thereto is to remain in vender of such personal property until the purchase price thereof shall have been paid, every such conditional sale, in order for the reservation of title to be valid as against third parties, shall be evidenced in writing and not otherwise. And the written contract of every such conditional sale shall be .executed and attested in the same manner as is now provided by exist — 725 — ing laws for the execution and attestation of mortgages on personal property: Provided, nevertheless, that, as between the parties themselves, the contract as made by them shall be valid, and may be enforced whether evidenced in writing or not. The existing statutes and laws of this State in relation to the registration and record of mortgages on personal property, shall apply to and affect all conditional sales of personal property as defined in this section.” This statute, as we think, has no application, for the reason that there was no sale, conditional or absolute, to Goodyear, of property delivered to him under this contract. He was to receive, hold, sell, account, and pay over proceeds, less his compensation as agent. Cash sales by him, and none others, were contemplated. He was to pay over to his consignor a fixed suna out of the proceeds of any article sold as soon as the sale was made, and until that was done all the proceeds were to belong to the consignor, and each article was to remain in the consignee’s hands on consignment till thus sold and paid for. Sale, payment by the purchaser, delivery to him and remittance to the consignor were to be simultaneous acts. We can see no indication that it was expected or intended that Goodyear should become the owner of the property or any of it at any time or on any condition whatever. If he had fraudulently converted any of it to his own use before sale, or had, after sale, failed to pay over the proceeds on demand, to the extent of invoice prices, we see not why he would not have been subject to indictment tor larceny after a trust delegated, under section 4422 of the code. The onerous and unusual terms to which he assented in order to get the agency, did not convert the transaction into a purchase, conditional or otherwise. He was to pay all charges, keep the property insured for the consignor’s benefit, and take upon himself all risk of its loss or damage from any cause — 726 — whatsoever. He agreed to do this in order to get the pi’ivilege of selling it as the consignee’s agent, with the further privilege of retaining as his compensation the difference in price between what he might receive from purchasers and the invoice or contract price at which he was required to settle with his consignor. What this difference was or was likely to* be we know not, but he was the judge of its sufficiency, and we have no knowledge of any law or rule of public policy that would forbid him to assume whatever burdens he pleased, and measure his compensation for the whole, including his services in caring for and selling the property, by sharing in the proceeds of sale to the extent stipulated. An agent to sell -might as well be paid by giving him the surplus proceeds over and above a fixed sum, as by allowing him a commission upon the gross proceeds. McCullough v. Porter, 4 W. & S. 177. Such a basis of compensation is perhaps unusual, but is not unlawful. In determining the nature of the contract, we should look at how it would work in practice on the assumption that its terms were complied with on both sides, according to the true intent and understanding of the parties. It- seems to us clear that there was no design or purpose that Goodyear should ever become the owner of a single article of this property, but tha^ his relation to it was to be and remain that of a bailee and agent for making sale of it, receiving the proceeds and paying over the same, less his share thereof, to his consignor, and that the latter was to be-and remain the sole owner until the sale, and then instantly become the sole owner of the proceeds, and so remain until his share thereof was actually paid over to him, after which the residue would belong to Goodyear. This residue would not be fully earned by the latter until this last service had been rendered. The stipulation that if any of the goods were removed from the consignee’s place of business — 727 — they should be paid for immediately, was not intended as a permission to remove them before they were sold and paid for, but to indicate the very contrary, and to make their disappearance from that place evidence as between the parties that they had been sold and ought to be represented by cash proceeds in the hands of the consignee. Whenever the consignor could not find an article of the goods where it ought to he, he would have a right under this stipulation to treat it as sold for cash, and call for the production of the money. The stipulation was designed as a check both upon credit sales, and upon putting any of the stock out of sight without having sold it. None of the eases cited in the argument are fairly applicable to the present. Each one of those most nearly in point is distinguishable from it by some substantial and material element. In Bastress v. Chickering, 18 Ill. App. 198, notes were given at the end of each month for the price of all goods received during' the month; the relation of debtor and creditor was es-, tablished between the parties, and that these notes were called “advances” did not negative the theory of sale, especially as the invoices declared that the pianos “ were bought and sold” upon conditions, and that customers engaged in selling them “were not agents in any sense known to the law.” In re Linforth, 4 Sawyer, 370, the agreement was that the consignees would give their notes at sixty days from the dates fixed for rendering accounts of sales, and thus to settle for all goods sold or shipped from their warehouse, and with this further stipulation : | to settle for such goods as might be on hand at the expiration of the year for which 'the contract was to run, by giving their note payable in six months, if so required. The great fact which seems to characterize this case is, that the consignees made themselves liable to pay ultimately for the goods whether — 728 — they were sold or unsold when the term of consignment expired, if the consignors so required. This would entitle the consignors to exact payment for unsold goods, and thus force the consignees to retain them as purchasers. Moreover the contest was not as to goods remaining unsold, the court saying: “No question is made as to the goods remaining in the bankrupt’s possession at the time of the bankruptcy.” The last fact is also true of Nutter v. Wheeler, 2 Lowell, 346. In Heryford v. Davis, 102 U. S. 235, notes were given for the price, with option to purchase within four months on payment of the notes. In Peek v. Heim, 127 Pa. St. 500, there was an absolute stipulation to pay at a fixed price within a given time or return the property at the expiration of that time. “There is nothing upon the face of the papers to indicate that Hill was to sell the pianos for the account of Peek & Son, as their factor. On the contrary, it was manifestly a sale to Hill with an agreement that the title was to remain in Peek & Son until the price was paid.” In Hervey v. R. I. Locomotive. Works, 93 U. S. 664, the contract was in the form of a lease with an absolute agreement to pay rent partly in cash down and the balance covered by several promissory notes. This so-called rent was in fact purchase money. Hays v. Jordan, 85 Ga. 741. Although Powell v. Brunner, 86 Ga. 531, cites Nutter v. Wheeler, 2 Lowell, 346, supra, the citation was only for some of the dicta in the opinion of Lowell, J., in the latter case. The facts of the two cases were not alike. The decision in the former rests mainly on the fact that the mortgage was prior to the consignment. That this was rightly ^ controlling consideration, see United States v. New Orleans Railroad, 12 Wall. 362; Fosdick v. Schall, 99 U. S. 235; Fosdick v. Car Co., Ib. 256; Myer v. Car Co., 102 U. S. 1. Granting that in Powell v. Brunner there was a conditional sale, the prior mortgagee was affected by the — 729 — condition, for the mortgage could not take effect on property acquired by the mortgagor subsequently to its execution save in so far as he actually acquired it. As he had an option to purchase at a fixed price on paying the price, it might be held that delivery to him on such a contract was a conditional sale, but that would give the prior mortgage no absolute lien until the option was exercised on the stipulated terms. In the present case there was no option to purchase contemplated or provided for. (a) The evidence, taken as a whole, is satisfactory that the goods now in controversy were all furnished to Goodyear- by the Emerson & Fisher Company for sale under the contract which we have been considering. That the invoices which accompanied the consigned goods said they were “sold” to him, some saying “terms contract,” some “terms contract” and “terms spot cash,” others “terms when sold” and one “terms........,” would not constrain a court or a jury to find that the invoices rather than the written contract represented the true nature of the transactions which took place under that contrae-t. It is not uncommon'for merchants and other dealers to make out bills, or put entries on their books, the letter of which is not accurately descriptive of their real agreements. Why they should do this, and persist in doing it, is hard to understand; but it would not be just to make them forfeit their substantial rights merely because they are prone to indulge in such foolishness. For my own part I heartily wish they would quit it, but am well aware they never will. For the sake of protecting them against their own folly, courts have to treat such loose and inaccurate bills as mere memoranda, and not take them as literally correct. They-are admissions which are not absolutely binding. They may be explained and put to silence by all the facts and circumstances characterizing the true import — 730 — of the dealings to which they refer. Thompson v. Barnum, 49 Iowa, 392. We are not to be understood as intimating that the mere letter of a contract purporting to be a contract of consignment is always to prevail. That species of contract, like any other, may be used as a„false color to disguise a real sale. We simply hold that there is no decisive evidence that it was so used in this instance. Had the trial court found that the bills which were sent with the goods were literally true in saying the goods were sold, it would probably have been our duty to acquiesce in such finding. But the belief of the trial court, in view of all the facts before it, was the other way; and this belief was warranted by the evidence. 4. What was the effect of taking Goodyear’s notes for goods which he had sold, and for which, according to the terms of his contract, he ought to have paid in cash out of the proceeds of sale ? Bid this vary the contract as to goods not sold, or was anything waived as to them by the consignor, the Emerson & Fisher Company? We think not. Surely an agent to sell does not become a purchaser of unsold goods by his principal accepting notes for the price of goods which have been sold. That this practice was pursued would bear on the question of whether there was a consignment for sale or a real sale in the beginning, but.for any other purpose it would be irrelevant. There-is no suggestion in the evidence that any of the notes taken from Goodyear covered any part of the goods which he had failed to sell. It has never been heard of as law that a principal -may not settle with his agent, and take a note in lieu of cash for which the latter is liable, without breaking up the agency so far as business not yet transacted is concerned. Such an adjustment would not convert the agent into a purchaser even as to goods sold by him for and on account of his principal, much less as to those remaining unsold. — 731 — 5. It being ascertained that the receiver had no right to retain the property in controversy as the property of Goodyear, could he, before restoring it to the Emerson & Fisher Company, exact repayment of the amount ($242.25) which Goodyear had expended upon it for freight, storage and other expenses ? The contract answers this question. It says, “all goods remaining unsold in said second party’s hands are to be subject to the order of said first party free of all charges.” No failure or fault is attributable to the “first pai’ty,” the Emerson & Fisher Company. Goodyear, the “second party,” was allowed opportunity to make his compensation and expenses out of these goods by selling them, but did not do so. He could not urge successfully this claim against his consignor, and we see not whence the receiver could derive the right if not from him. There was no error. Judgment affirmed.