Inland Finance Co. v. Inland Motor Car Co. , 125 Wash. 301 ( 1923 )

Fullerton, J.

The appellant, J. I. Case Threshing Machine Company, is a manufacturer of automobiles, having its factory and principal place of business at Racine, Wisconsin. It maintains a branch establishment in the city of Spokane, Washington, for .the wholesale marketing of its product in the northwest. The defendant Inland Motor Oar Company is a corporation now in the hands of a receiver. While a going concern, this company was engaged in the retail sale of automobiles, maintaining establishments in both the city of Spokane and the city of Yakima for that purpose. A part of its business was the retail 'sale of automobiles manufactured by the appellant. These it generally purchased outright from the appellant, usually in car load lots. The respondent, Inland .Finance Company, was engaged in the business of financing retail dealers in automobiles, and sometimes lent its aid to the defendant in financing its purchases from the appellant.

In August, 1920, the Inland Motor Car Company wrote to the appellant at Racine, Wisconsin, calling its attention to the fact that an interstate fair was soon to be held at Spokane, to be followed later by a state fair at Yakima, and urged the advisability of shipping a car load of certain makes of its cars to be unloaded at its branch office at Spokane for exhibition at these fairs. The appellant complied with this request, thereafter shipping three cars for that purpose, which were exhibited at the fairs mentioned. One of these- cars was a'coupe, and, near the close of the fair at Yakima, the motor car company sent the. following telegram to the appellant at Racine:

“Will you allow coupe now oh exhibition at Yakima to remain in our show rooms at Yakima on consignment instead of driving ear back to Spokane. We will positively pay for coupe within thirty days. Wire.”

■ The appellant did not reply directly to the motor car company, but by' telegram advised its Spokane manager of the request, and authorized him to use his judgment with respect to the matter. The manager concluded to grant the request, and the automobile was left with the motor car company and placed in its show rooms at Yakima. Stating the agreement under which the car was left, the manager used this language:

“I arranged with him [meaning the manager of the motor car company] that the car should remain at Yakima on the sample floor of the Inland Motor Car Co. for the specific purpose, not to be taken from the floor, and with the understanding that when the car was sold it was to be paid for.”

. On December 17, 1920, the Inland Motor Car Company mortgaged the automobile to the Inland Finance Company, to secure a promissory note, • bearing date upon that day and payable on March 17, 1921, for the sum of $2,386.30, with interest at the rate of one per cent per month. . On July 20, 1921, the appellant took the car from the possession of the Inland Motor Car Company in Yakima county and drove it to its place of business at Spokane. The mortgage was not recorded in the county of Spokane. .

On August 31,1921, the Inland Finance Company began the present action to foreclose the mortgage-. In addition to the .Inland Motor-Car Company, it made the. appellant a party defendant, alleging that it claimed some interest in'the automobile, but that such interest, if any it had, was subsequent and inferior to the lien of the mortgage. The appellant took issue on the complaint, and contested the mortgagee’s right to foreclose. The trial resulted in a judgment of foreclosure, and this appeal is from judgment entered to that effect.

The trial court rested its conclusion on the ground that the transaction between the appellant’s agent and the Inland Motor Car Company, by means of which the latter company obtained possession of the car, was a contract of conditional sale, and from this drew the conclusion that, since the contract was not reduced to writing, signed by the parties, and filed in the auditor’s office in accordance with the terms of the statute (Rem. Comp. Stat., § 3790) [P. C. § 9767], it was a sale absolute as to all bona fide purchasers, pledgees, mortgagees, encumbrancers and subsequent creditors; holding further that the respondent was a bona fide mortgagee, and that in consequence its mortgage is valid. "With reference to the failure of the respondent to file its mortgage in Spokane county after the mortgaged property had been removed to that county, it held that the appellant was not in a position to make the objection; that, since the title to the property as to it' became absolute in the motor car company because' of the failure to properly file the contract of conditional sale, the title was likewise absolute as to it in the county of Spokane; that it is only against subsequent purchasers or lien holders that the mortgages need to be recorded in the county to which the property is removed, and that the appellant is not within either of these classes.

It is our opinion that the trial court was in error in holding the agreement between the appellant and the motor car company to be a contract of conditional sale. A conditional sale, as the very terms imply, is a sale in which the transfer of the title to the buyer, or his retention of the title, is made dependent upon , some condition. Usually the condition imposed is the payment of the purchase price, but, whatever may be its nature, to constitute a conditional sale there must be a contract between the parties by which the one party agrees to sell and the other party agrees to bny. This is not only the general understanding of snch a transaction, but it is the transaction the statute regulates. The wording of the statute is (see Rem. Comp. Stat., § 3790) [P. C. § 9767] :

“That all conditional sales of personal property, or leases thereof, containing a conditional right to purchase, where the property is placed in the possession of the vendee, shall be absolute . . . unless . . . a memorandum of such sale, stating its terms and conditions . . . shall be filed . . .”

These words plainly imply an agreement to sell on the one part and to buy on the other, and just as plainly imply that without such an agreement there is no conditional sale.

Turning to the record, it is at once apparent that there was no contract on the part of the appellant to sell, nor any contract on the part of the respondent to bny, the automobile here in question. The contract between them was a contract of consignment, under which the motor car company had the right to sell the automobile for and on behalf of the appellant. But it carried no right in the consignee to mortgage, pledge, barter or exchange the property for its own purposes, nor to sell it for a prior debt of its own, and hence the consignee’s attempt to mortgage it was invalid. Eilers Music House v. Fairbanks, 80 Wash. 379, 141 Pac. 885.

Nor can we agree with the contention of the respondent that the mortgage' can be sustained on the doctrine of • estoppel. An estoppel operates only in favor of those who have been misled to their injury (Smith v. King County, 80 Wash. 273, 141 Pac. 695), and the burden of proof is upon the party who asserts the estoppel. Blanck v. Pioneer Mining Co., 93 Wash. 26, 159 Pac. 1077. Here there was no evidence that the mortgagee had been in any way misled by the conduct of the appellant, much less a showing that it had been misled .to its injury. There is a presumption, of course, that every business transaction is a transaction in good faith, but the presumption never outlives a positive showing that it is not so. When it was shown that this transaction was in fraud of the appellant’s rights,- it was at least incumbent upon the mortgagee, if it is to maintain an estoppel, to show that it was not an active participant therein. This it made no attempt to do; it did not even show that the note and mortgage evidenced a new loan made by it to the mortgagor, and this,'notwithstanding the very strong presumption arising from the instruments themselves, and from the transaction as a whole, that there was but an attempted security of an antecedent debt.

Our conclusion is that the judgment must be reversed with instructions to dismiss the action. It is so ordered.

Main, C. J., Mackintosh, and Bridges, JJ, concur.