Helen Lumber Co. v. Industrial Loan & Investment Bank , 67 Ga. App. 767 ( 1942 )

1. An agreement made in connection with a conditional-sale contract, which in effect provides for a forfeiture of the rights of the buyer in payments made on the contract by an agreement that payments made on the property purchased shall be applied as rent, is void.

2. The burden of proof in a claim case arising out of the foreclosure of a bill of sale to secure debt as a mortgage is on the plaintiff in execution, and the burden is not carried by proof that the title held by the maker is no more than a title retained as security for a debt which is not such an interest as is subject to levy.

3. The court erred in overruling the claimant's motion for new trial.

DECIDED JULY 16, 1942. ADHERED TO ON REHEARING JULY 30, 1942. Industrial Loan Investment Bank foreclosed a bill of sale to secure debt as a mortgage on certain sawmill equipment, under a bill of sale executed and delivered to the bank by Lawrence J. Pace on April 26, 1935. Some of the property alleged to have been described in the bill of sale was levied on by the sheriff of White County, Georgia; the levy, dated September 24, 1936, recited that the property levied on was found in the possession of Miller and Maloof (the partners constituting the Helen Lumber Company). The Helen Lumber Company filed a claim to the property, which was returned to the superior court of Rabun County. The trial resulted in the direction of a verdict in favor of the plaintiff in execution. The Helen Lumber Company excepted to the overruling of its motion for new trial.

The burden was on the plaintiff in execution to prove title in the maker of the bill of sale, Lawrence J. Pace, and at a time when the bill of sale foreclosed would have been effective to convey it to the bank. The title necessary in such a case is one which renders the property subject to levy. The evidence showed that John R. Craig sold the property alleged to have been described in the bill of sale foreclosed, to D. S. Pace on November 8, 1933, by conditional-sale contract; that D. S. Pace sold the property to W. V. Lawrence on November 27, 1933, subject to the contract next above described, by conditional-sale contract; that Craig sold the property to Lawrence J. Pace on April 30, 1935, subject to above-described conditional-sale contract between Craig and D. S. Pace of November 8, 1933; that in the contract between Craig and Lawrence J. Pace the latter was substituted for Craig in the contract between Craig and D. S. Pace, dated November 8, 1933; that D. S. Pace, by bill of sale dated February 10, 1940, conveyed the property to Lawrence J. Pace, the instrument reciting that it was to take the place of a bill of sale previously executed and delivered which had been lost by Lawrence J. Pace, conveying all rights, title, interest, and equity of D. S. Pace in and to the property.

The following agreement was stated in the brief of evidence to have been introduced in evidence: a contract between J. R. Craig, W. V. Lawrence and D. S. Pace to the effect "that J. R. Craig has recently foreclosed a retain-title contract on the herein described property; sawmill and equipment; that a levy has been made on part of said mill and equipment, and Will Lawrence and D. S. Pace desire to get the levy released in such manner as to enable Will Lawrence to move the engine into Union County, Georgia, but said Craig being unwilling to release the levy, but does consent for the mill to be set up in Union County, Ga. Therefore the parties to this agreement are J. R. Craig and D. S. Pace through his agent in the person of Clark Johnson and Will Lawrence, as follows: That in consideration of the cross obligations, that D. S. Pace is due as a balance of the purchase money of the said sawmill and equipment the sum of $600.65 as principal and $5.90 as interest, besides other costs; that the retain-title contract shall remain and be as is without any change and that the only change made in said other contract is the time for the payments to be made, and this contract provides as follows: that in case Will Lawrence shall fail to make the said payment, this agreement terminates and the title to the said sawmill and equipment absolutely vests in J. R. Craig, and by the terms of this agreement said Craig is authorized to take possession of all of the sawmill and equipment, time being of the essence of the agreement, and the payment which shall have been made on the mill and equipment shall be considered as rent on said property; that the foreclosure of the retain-title contract shall be of full force until the terms of this agreement shall have been terminated by payment to said Craig."

The contract between Craig, D. S. Pace, and W. V. Lawrence was void in so far as it sought to provide a forfeiture of W. V. Lawrence's interest in the property in the event he did not make the payments therein referred to. Standard Motors Finance Co. v. O'Neal, 35 Ga. App. 727 (134 S.E. 843); Lytle v.Scottish American Mortgage Co., 122 Ga. 458 (50 S.E. 402). Under this stipulation the contract could have been forfeited because of the failure to pay the last purchase-money installment when due. The result of this ruling is that the maker of the bill of sale to secure debt, Lawrence J. Pace, did not have an absolute title to the property, but merely succeeded to the rights of Craig and D. S. Pace under their conditional-sale contracts. Lawrence J. Pace was simply the owner of the title to the property to secure debt. The ultimate title and right of possession was in W. V. Lawrence, and the property was subject to levy only in a proceeding against him. Since no title was shown to be in Lawrence J. Pace which rendered the property subject to levy in this case a verdict for the claimant was demanded. In view of this ruling it is not necessary to pass on the other questions raised.

The court erred in overruling the motion for new trial.

Judgment reversed. Stephens, P. J., concurs.