Gould v. Bourgeois , 51 N.J.L. 361 ( 1889 )

The opinion of the court was delivered by

Depue, J.

This suit was upon a promissory note made by the defendant. The defence was the want or failure of consideration.

The city council of Holly Beach City proposed to build a breakwater. The defendant was an applicant for a contract to do the work, and prepared and sent to the city council an ■agreement with the city to that effect. Members of the city council sent word to the defendant that the city had already •entered into a contract for the building of the breakwater with Gould & Downs; that these parties could not fulfill their contract, and that, if the defendant would make a satisfactory arrangement with Gould & Downs, the city would give him the contract. The parties thereupon entered into negotiation, the conclusion of which was a contract, in writing and under ■seal, whereby Gould & Downs, for the consideration of a note for $375, and $500 in city bonds, assigned to the defendant '“all our right, title and interest in a certain contract entered Into by the authorities of Holly Beach City and ourselves to build a certain breakwater ordered built by a resolution passed April 14th, 1887.” Subsequently the city council, having obtained the opinion of counsel that the city had no power to build the breakwater, refused to ratify the arrangement of the defendant with Gould & Downs, and abandoned the project of constructing the work.

The note sued on was given in compliance with the terms of this assignment. There was no proof of an express warranty by Gould & Downs of the validity of their contract, nor any evidence from which fraud, either in representation or concealment, on their part, could be inferred. The power of the city to make the contract was not mooted until after these parties had concluded their arrangement and the assignment had been made, and if the contract was invalid its invalidity arose from the city charter, a public act equally within the knowledge of both parties.

The defendant’s contention was that, inasmuch as there was a sale of the contract, a wai’ranty that the contract was a valid contract was implied, and that the contract, being ultra vires on the part of the city and void, the consideration entirely failed. If the proposition on which the defence was rested be sound in law, the defence was appropriate in this suit. The doctrine of implied warranty of title in the sale of goods applies as well to the sale of a chose in action, and extends,, not merely to the paper on which the chose in action is-written, but embraces also the validity of the right purported to be transferred. Wood v. Sheldon, 13 Vroom 421. Nor is there anything in the nature of the alleged infirmity of the contract that would bar the defence. In the ordinary case of a suit on a breach of a warranty of title, the validity of the vendor’s title against the adverse claimant is triable if the purchaser has in fact lost title, although the transactions which determine the vendor’s title are res inter alios aeta. If the contract, which was the subject matter of the assignment, was in fact ultra vires, a foundation was laid for this defence, the city having repudiated the contract in limine on that ground.

The validity of the defence offered and overruled depends upon the fundamental proposition, Avhether, under the circumstances of this sale, a warranty of title is implied in law. " The theory on which a warranty of title is implied upon the sale of personal property is, that the act of selling is an affirmation of title. The earlier English cases, of which Medina v. Stoughton, 1 Salk 210, 1 Ld. Raym. 593, is a type, adopted a distinction between a sale by a vendor who was in possession and a sale where the chattel was in the> possession of a third person — annexing a warranty of title to the former, and excluding it in the latter. In the celebrated case of Paisley v. Freeman, 3 T. R. 51, Buller, J., repudiated this distinction. Speaking of Medina v. Stoughton, this learned judge said, that the distinction did not appear in the report of the case by Lord Raymond, and he adds: “ If an affirmation at the time of the sale be a warranty, I cannot feel a distinction between the vendor’s being in or out of possession. The tiling is bought of him, and in consequence of his assertion, and if there be any difference, it seems to me that the case is strongest against the vendor when he is out of possession, because then the vendee has nothing but the warranty to rely on.” Nevertheless, the English courts continued to .recognize the distinction with its incidents as adopted in Medina v. Stoughton to some extent, at least so far as to annex the incident of an implied warranty of title on a sale by .a vendor in possession. Later decisions have placed the whole subject of implied warranty of title on a more reasonable basis. Mr. Benjamin, in his treatise on Sales, after a full •examination and discussion of the late English cases, states ■•the rule in force in England at this time in the following ■terms : “A sale of personal chattels implies an affirmation by •the vendor that the chattel is his, and therefore he warrants the title, unless it be shown by the facts and circumstances of the sale that the vendor did not intend to assert ownership, but only to transfer such interest as he might have in the chattel sold.” 2 Benj. Sales (Corbin’s ed.), §§ 945-961. In this country the distinction between sales where the vendor is in possession, and where he is out of possession, with respect to implied warranty of title, has been generally recognized, but the tendency of later decisions is against the recognition ■of such a distinction, and favorable to the modern English rule. 2 Benj. Sales (Corbin’s ed.), § 962, note 21; Bid. War., i§§ 246, 247. The American editor of the ninth edition of Smith’s Leading Cases, in the note to Chandelor v. Lopus, after citing the- cases in this country which have held that the-rule of caveat emptor applies to sales where the vendor is out of possession, remarks that, in most of them, what was said on. that point was obiter dicta, and observes “ that there seems no-reason why, in every case where the vendor purports to sell an absolute and perfect title, he should not be held to warrant it.” 1 Sm. Lead. Cas. (Edson’s ed.) 344.

In Wood v. Sheldon, supra, Chief Justice Beasley, in delivering the opinion of the court, adopted, in terms, the rule-stated by Mr. Benjamin, and made it the foundation of decision. The precise question now under discussion did not then arise. In Eichholz v. Bannister, 17 C. B., N. S., 708, 721, Erle, C. J., said : “ I consider it to be clear upon the ancient authorities that if the vendor of a chattel, by word or conduct-,, gives the purchaser to understand that he is the owner, that tacit representation forms part of the contract, and that if he-is not the owner his contract is broken. * * * In almost all the transactions of sale in common life, the seller, by the-very act of selling, holds out to the buyer that he is the-owner of the article he offers for sale.” It that case it was-held, that on the sale of goods in an open shop or warehouse,, in the ordinary course of business, a warranty of title was implied. But there is a line of English cases holding that where the facts and circumstances show that the purpose of the sale, as it must have been understood by the parties at the time, was not to convey an absolute and indefeasible title, but only to transfer the title or interest of the vendor, no warranty of title will be implied. In this proposition, the fact that the-vendor is in or out of possession is only a circumstance of more or less weight, according to the nature and circumstances-of the particular transaction. Thus, in Morley v. Attenborough, 3 Exch. 500, the holding was, that, on a sale by &• pawnbroker at public auction, of goods pledged to him in the way of business, there was no implied warranty of absolute-title, the undertaking of the vendor being only that the subject of the sale was a pledge, and irredeemable by the pledgor;. In Chapman v. Speller, 14 Q. B. 621, the defendant bought goods at a sheriff’s sale for £18. The plaintiff, who was present at the sheriff’s sale, bought of the defendant .his bargain for £23. The plaintiff was afterwards forced to give up the goods to the real owner. He then sued the defendant, alleging a warranty of title. The court held that there was no implied warranty of title nor failure of consideration; that the plaintiff paid the defendant, not for the goods, but for the right, title and interest the latter had acquired by his purchase, and that this consideration had not failed. In Bagueley v. Hawley, L. R., 2 C. P. 625, a like decision was made, where the defendant resold to the plaintiff a boiler the former had bought at a sale under a distress for poor rates, the plaintiff having knowledge at the time of his purchase that the defendant had bought it at such sale. In Hall v. Condon, 2 C. B., N. S., 21, the plaintiff, by an agreement in writing, by which, after reciting that he had invented a method of preventing boiler explosions, and had obtained a patent therefor within the United Kingdom, transferred to the defendant “ the one-half of the English patent,” for a consideration to be paid. In a suit to recover the consideration the defendant pleaded that the invention was wholly worthless, and of no public utility or advantage whatever, and that the plaintiff was not the true and first inventor thereof. On demurrer the plea was held bad, for that, in the absence of any allegation of fraud, it must be assumed that the plaintiff was an inventor, and there was no warranty, express or implied, either that he was the true and first inventor within the statute of James, or that the invention was useful or new; but that the contract was for the sale of the patent, such as it was, each party having equal means of ascertaining its value, and each acting on his own judgment. A like decision was made in Smith v. Neale, 2 C. B., N. S., 67.

Chief Justice Erie, in his opinion in Eichholz v. Bannister, describes Morley v. Attenborough, Chapman v. Speller, and Hall v. Condon, as belonging to the class of cases where the conduct of the seller expresses, at the time of the contract, that he merely contracts to sell such title as he himself has in the thing. The opinion is valuable in that, while it rescues the common law rule of implied warranty of title from the assaults of distinguished judges who held that caveat emptor applied to sales in all cases, and that in the absence of express warranty or fraud the purchaser was remediless — it also placed the rule under the just limitation that it should not apply where the circumstances showed that the sale purported to be only a transfer of the vendor’s title. Expressions, such as “ if a man sells goods as his own, and the title is deficient, he is liable to make good the loss” (2 Bl. Com. 451), or, “if he sells as his own, and not as the agent of another, and for a fair price, he is understood to warrant the title” (2 Kent 478), as statements of the principle on which the doctrine of implied warranty of title rests are not inconsistent with the principle adopted by Chief Justice Erie. Stating the principle in the negative form, adopted in Morley v. Attenborough, that there is no undertaking by the vendor for title unless there be an express warranty of title, or an equivalent to it by declaration or conduct, affects only the order of proof. It was conceded in that case that the pawnbroker selling his goods undertook that they had been pledged and were irredeemable by the pledgor, and, if it be assumed, as I think it must be, that the act of selling amounts to an affirmation of title of some sort, but that its force and effect may be explained, qualified or entirely overcome by the facts and circumstances connected with the transaction, the difference between Morley v. Attenborough and Eichholz v. Bannister will rarely be of any practical importance.

The limitation above mentioned upon the doctrine, that the act of selling is an affirmation of title, has been adopted in this state. In Bogert v. Chrystie, 4 Zab. 57, 60, this court held that the general rule, that the vendor of goods, having possession and selling them as his own, is bound in law to warrant the title to the vendee, did not apply where the vendor sells with notice of an outstanding interest in a third party, and subject to that interest. In Hoagland v. Hall, 9 Vroom 351, the vendor agreed, in writing, to assign a lease he held upon certain premises, and to sell and transfer goods and chattels mentioned in a schedule. The premises were a licensed inn and tavern, and in the schedule of the articles sold were enumerated “ the licenses of the house.” The law under which the license was granted prohibited the transfer of a license, and in the purchaser’s hand it would be void and valueless. The court held that that circumstance did not justify the purchaser in withdrawing from his contract; that there was no warranty by the vendor that the license, when ■assigned, would be of any value to the purchaser, and that the latter, having obtained by the assignment what he had bargained for, could not annul his contract, unless he showed fraud or misrepresentation with respect to the subject matter ■of the contract.

In National Bank of Northampton v. Massachusetts Loan and Trust Co., 123 Mass. 330, the defendant had a contract with B., pledging to him certain tobacco, in which it was recited that the tobacco was B.’s own property, and free from all encumbrances, and made an assignment to the plaintiff of all his right, title and interest in and under the contract, with all the property therein mentioned.” The tobacco was then in the defendant’s possession, and was delivered by him to the plaintiff. Afterwards a third person demanded and recovered of the plaintiff part of the tobacco as his property, which had been pledged to the defendant without right. The plaintiff then sued the defendant on an alleged implied warranty of title. The court ruled adversely to the plaintiff’s claim. In the opinion the court said, that the written assignment did not purport to be a sale of the goods, but of all the defendant’s right under the contract, and its obvious purpose was to substitute the plaintiff in the place of the original pledgee, and that the fact that at the time of the transfer to the plaintiff the goods were in the actual possession of the defendant did not vary the case.

In the case in hand, the circumstances connected with the assignment, independent of the words “ all our right, title and interest,” &c., contained in it, preclude the implication of a warranty of the validity of the contract. Taken in connection-with the words' of the assignment, the intention of the parties-is free from doubt-.

The contention that the plaintiff was in fault, in that he-made no delivery of the contract to the defendant, is without substance. The contract was neither produced at the negotiation between the parties, nor was it required. The transaction was the purchase of Gould & Downs’ interest to consummate an arrangement whereby those parties were to be got-rid of, that the city might give the defendant a contract.. The defendant obtained by the assignment all he bargained, for.

The defence was properly overruled, and the rule to show cause should be discharged.