Mohr v. First National Bank

Prior to the commencement of this action G. Frank Prough had been adjudged a bankrupt and the above-named C. E. Mohr had been appointed trustee of the bankrupt's estate. Plaintiff seeks to recover six new automobiles and two new trucks, alleged to be a part of the assets of the estate, and which were in Prough's possession when the trustee took over the assets of the estate and were thereafter taken by the defendant under a claim of ownership. The defendant had judgment and the plaintiff has appealed.

Prough was the proprietor of a garage at Hanford and was engaged extensively in buying and selling Oldsmobile and Chevrolet automobiles and trucks. The Oldsmobile cars in controversy were purchased from J. W. Leavitt and Company and the Chevrolet cars from the Chevrolet Motor Company. The court found that neither company conveyed title to Prough but that the cars were all "billed to G. Frank Prough and that each of said companies held a trust receipt for each and all of said above described property. . . . That subsequent to billing said cars to G. Frank Prough by J. W. Leavitt and Company and Chevrolet Motor Company, that the First National Bank of Hanford, a national banking association, paid the indebtedness against said cars and took up the trust receipts and bills of lading and the rights of the said J. W. Leavitt and Company andthe Chevrolet Motor Company in and to the personal propertydescribed in plaintiff's complaint was subrogated to the First NationalBank of Hanford, defendant herein, and the title of said personal property . . . was transferred by said J. W. Leavitt and Company and Chevrolet Motor Company to the First National Bank of Hanford, defendant herein. . . . That subsequent to the paying of the money by the defendant herein for the personal property described in plaintiff's complaint, said G. Frank Prough ratified the acts of the defendant in paying said money to the companies by giving to said defendant . . . a trust receipt signed by said G. Frank Prough in favor of the defendant." It is not necessary to determine whether the defendant was legally subrogated to the rights of the two companies mentioned in the findings by the mere payment of Prough's indebtedness to them. If those parts of the findings which relate to subrogation, and are herein italicized, were omitted, the other facts found show a conventional subrogation, and it may be presumed that a conventional subrogation was meant by the language used in the findings. The only question then to be determined is whether the evidence supports the findings. In addition to the trust receipts referred to in the findings as having been given by Prough to the defendant, he at the same time gave the defendant promissory notes for the amounts paid by it on each car. These promissory notes and trust receipts were in the following forms, differing only in dates, amounts and descriptions:

"$1700.00. Hanford, Calif., Oct. 13, 1920.

"On demand after date, for value received, we promise to pay to the order of The First National Bank of Hanford, Cal., at their office in this city One Thousand Seven Hundred Dollars only, with interest from date hereof, at the rate of 8 per cent per annum until paid, interest payable monthly, and if not so paid both principal and interest to become immediately due and collectible at the option of the holder of this note. This note is secured by a bill of sale for one Oldsmobile Sedan Model 37, Motor No. 22385, Body No. 1579 having an estimated market value of $2578.20 Dollars.

"In case suit be instituted to collect this note or any portion thereof we promise to pay all attorney's fees in addition to the costs allowed by law, and any other expenses incurred in the collection of this note."

"Received in trust for the First National Bank of Hanford the instruments enumerated below, which the undersigned agrees to hold for the benefit of, on account of, and subject to the order of said First National Bank of Hanford, for the purpose of collecting, selling, transferring, exchanging for other securities or commercial paper, or chattels or otherwise dealing with the same, or any part thereof and paying the proceeds thereof to said First National Bank of Hanford, or its order or holding the chattel or securities for which the same may be exchanged in all respects as the originals, as said bank may direct; and the undersigned acknowledged itself to be a bailee of said instruments for the said First National Bank of Hanford and that the said bank is the owner of said instruments and chattels regardless of the party named therein, or in any endorsement thereon, as payee, endorsee or obligee.

"Dated: October 13, 1920. "Nature of Securities "Oldsmobile Sedan No. 37 "Motor No. 22385 "Value $2578.20."

The evidence does not show the form of trust receipts which the court found were held by J. W. Leavitt and Company and the Chevrolet Motor Company and which were taken up by the defendant. [1] Since the burden of proof was on plaintiff to show title in Prough, in the absence of evidence showing the nature of the trust receipts given to these companies, it may be presumed in support of the findings that they were of the same character as those given to defendant. So viewing the transactions between these companies and Prough, they constituted conditional sales reserving title in the vendors. (Vermont Marble Co. v. Brow, 109 Cal. 236 [50 Am. St Rep. 37, 41 P. 1031].) "It has been said that the absolute liability for the price and putting that liability in the form of a note or the like are consistent with the retention of title until the note is paid. Parties can agree to pay the value of goods upon what consideration they please and when a buyer has possession and the right to gain the title by payment, he cannot complain of a bargain by which he binds himself to pay and is not to get the title until he does." (24 R. C. L. 447;Bierce v. Hutchins, 205 U.S. 340 [51 L.Ed. 828, 27 Sup. Ct. Rep. 524, see, also, Rose's U.S. Notes]; Segrist v. Crabtree, 131 U.S. 287 [33 L.Ed. 125, 9 Sup. Ct. Rep. 687]; Liver v. Mills, 155 Cal. 459 [101 P. 299]; Van Allen v. Francis, 123 Cal. 474 [56 P. 399];Ross v. Thomas, 24 Cal.App. 734 [142 P. 102].) "The reservation of title in the seller is valid against levying creditors of the buyer, and even as against bona fide purchasers for value without notice of the buyer's want of title." (24 R. C. L. 455; Liver v. Mills, supra; Van Allen v.Francis, supra.)

The only question remaining to be considered is whether title passed from these companies to the defendant. If title passed from them to Prough, then any transfer of title by him to the defendant was void as against creditors, for want of delivery and change of possession. (Civ. Code, sec. 3440) Neither, in that case, would the transactions between Prough and the defendant constitute valid chattel mortgages as against the rights of creditors, because not executed or recorded as required by law. (Civ. Code, sec. 2957)

The eight cars in controversy were but a few of many machines handled by Prough through the defendant bank under a general arrangement between them. The officers of the bank were unable to give the details of each particular transaction. Samuel Shannon, who was president of the defendant bank during the transactions relative to the property in question, but who, it seems, was not an officer thereof at the time of the trial, testified that in 1920 and 1921 he "was familiar with the different transactions that took place in the bank. . . . I couldn't have an independent recollection of all the transactions of the First National Bank to save my soul. . . . To have personal knowledge of all these transactions would be impossible; I don't think it is humanly possible." He further testified: "There were different methods of handling these transactions between the bank and Mr. Prough. Now in some instances Mr. Prough would have some cars billed to him here at Hanford and he would have sufficient money in the bank to pay for them, and therefore, would draw a check upon his own account; that was one method. In other instances there were cars shipped here to Mr. Prough with a bill of lading and draft, and which the bank would pay for them cars, understand, and take a trust receipt for the cars. Then there was another method that was employed, and that was where Mr. Prough had contracted for certain cars with Leavitt and Company, or the Chevrolet Company, where he had evidently made a certain payment upon the cars, and which he had up to a certain date in which to pay for those cars. Now then, if he took up certain of these cars, why he would pay Leavitt and Company, or whoever it was . . . and the balance of the money coming due, they would send up that trust receipt which they held, and we would pay for the cars, and then we would take a trust receipt in evidence of paying for the cars. The cars were already here in the possession of Mr. Prough and held under trust receipts by these other people." Relative to one of the cars, a Chevrolet truck, Prough testified: "That was bought through another finance company, and the contract ran out with them and I went over to the bank and got the bank to take it over and pay off the finance company." The evidence shows that the other cars in controversy were delivered to Prough from three to eight months prior to the dates of the corresponding promissory notes and trust receipts given to the bank. The inference follows that these cars were handled under either the first or the last method described by the witness Shannon, because if the bank paid for the cars as they were shipped to Prough the dates of the notes and trust receipts would agree with the dates of shipment.

Shannon testified: "When we paid this money to these various companies or banks they evidently sent us the trust receipt they had made to them. They sent us all the papers they had, and then we had Prough enter into some kind of an agreement or trust receipt with us as to the same cars; not as to them same cars, understand, because they in the shuffle and everything got all shuffled around, but the cars we still had against him for certain sums of money, and in those cars were these cars in question, these came in that business. . . . These notes which accompanied these trust receipts were given in evidence of the fact that we paid that money to the factory or to whoever billed the cars. . . . The people that had the cars under a trust receipt drew on our bank a certain amount that was due them under that trust receipt. . . . The Union Trust Company, in the instances we sent them money, had a trust receipt for the car, and we paid them what they held against the car, they sent the trust receipt down and we got another trust receipt from Mr. Prough, and that also applies to each one of those transactions where we drew drafts, and in the meantime, and at the time the check was drawn, the car was in the possession of Mr. Prough." Prough testified: "These trust receipts that I signed, as far as I remember now, have any knowledge, they were the cars — the money was advanced by the First National Bank on the dates that these receipts show here." He also testified that "these cars that was originally bought through some other company and eventually I got the First National Bank to take over, they weren't always billed to this company; they were sometimes billed to me, but the bill of lading, the possession of the cars, went through their hands before I had an authority to unload them, at all. Those billings were not always to the finance company; those billings were not always to the bank, but those papers always came through the bank."

Shannon's testimony is uncertain as to whether in every instance, when the bank took up a trust receipt held by some other company for a particular car, it received a trust receipt from Prough for the same car. [2] The witness, however, was stating only the general course of business pursued by the bank with Prough and disclaimed any recollection of what was done in each particular transaction. Since the burden of proof was on plaintiff, it may be presumed that the ordinary course of business was followed in the transactions in controversy and that the bank followed a course which would protect its rights in the property. There is no evidence that the bank transferred to Prough the title which it received from the holders of the first trust receipts. [3]It cannot be held that the evidence as a whole does not support the finding that title to the property in suit was in the defendant at the commencement of the bankruptcy proceedings, even if it be conceded that there is sufficient evidence to sustain a contrary finding. It is not contended that either the bank or Prough was guilty of fraudulent conduct or that they did not act in the utmost good faith in all the transactions in question. [4] The bank's title did not originate in the trust receipts given it by Prough. Those receipts were but an acknowledgment by Prough of the bank's title theretofore acquired to the property then in his possession.

The references in the promissory notes to bills of sale, and similar references in the testimony of some of the witnesses, evidently had relation to the trust receipts, because the evidence does not show that the bank received any contracts from Prough other than such notes and trust receipts.

The judgment is affirmed.

Plummer, J., and Hart, J., concurred.