Stephens v. Gifford

Opinion,

Mr. Justice Williams:

The character of the argument in this case leads us to believe that in some portions of the state there is a tendency to regard the authority of the earlier cases relating to fraud in law in the sale of personal property as seriously impaired, and to treat such sales as valid, or not, according to the finding of a jury upon the existence of fraud in fact in the transaction. It may be well, therefore, to examine our cases, in order to make their effect and the present state of the law upon this subject clear.

The distinction between real and personal property is familiar even to laymen. Such property as may attend the person of the owner is called personal. It is in his presence and possession, and under his control. The evidence of his ownership is, prima facie, in his actual hold on or possession of the articles, and proof of his possession makes a sufficient showing of title to sustain an action against a wrongdoer. A sale of a chattel is a transfer of the property in it for a consideration. It is ordinarily effected by the delivery of the thing sold to the buyer, and the delivery of the price or a security therefor to the seller. The transfer of the property in the thing is effected by the transfer of the thing itself to the possession of the purchaser. But, while this is the general rule, it is true that parties may modify it within certain limits by their contracts, and may make sales on such terms and conditions as are convenient to them. But when such terms and conditions are prejudicial to others, or are calculated to mislead the public, they will be held to be void as to those who would otherwise be injuriously affected by them. It may be convenient for the parties to agree that the title to the thing sold shall remain in the seller as a security for the price to be paid; and, so long as the rights of no persons but themselves are affected by it, the agreement may be enforced according to its terms. As to purchasers from and creditors of the buyer, however, such an arrangement gives him a deceptive appearance of ownership and a false credit, and for protection of such purchasers and creditors, the private agreement between himself and his vendor will be disregarded. The reservation of the title, notwithstanding an agreement of sale and an actual delivery in pursuance of it, may be good between the parties, but, as to all persons dealing with the buyer without notice of the reservation, it is without force and void: Rose v. Story, 1 Pa. 190; Edwards’ App., 105 Pa. 103. Such an arrangement cannot be sustained as a bailment. It is of the essence of a contract of bailment that the article bailed be returned, in its own or some altered form, to the bailor, so that he may have his own again: Benjamin on Sales, 6. In contracts of sale, however, the seller stipulates for a price as the equivalent of his goods. The buyer takes the goods as owner; the seller accepts the price in exchange for them. If the seller delivers the goods without demanding payment, he takes the risk of the integrity and solvency of the buyer. If the buyer pays the price without taking possession of his goods, he takes the risk of the integrity and solvency of his vendor, and a subsequent bona fide purchaser will take a goi^fl title. This was held in Clow v. Woods, 5 S. & R. 275, followed not long after by Babb v. Clemson, 10 S. & R. 419. The rule laid down in these cases has been recognized aud applied in a long line of decisions extending from 1819 to the present year. Among these are Streeper v. Eckart, 2 Wh. 302; Eagle v. Eichelberger, 6 W. 29; Young v. McClure, 2 W. & S. 147; Barr v. Reitz, 53 Pa. 256; Crawford v. Davis, 99 Pa. 576; Miller v. Browarsky, 130 Pa. 372.

The result of the cases seems to be that, when one comes into possession of personal property, those who deal with him on the credit of such property must inquire into the origin and nature of his possession, so as to know whether he is a purchaser or a bailee. When it is learned that he is a purchaser, his continued' possession of the same goods affords a basis for. the presumption of continued ownership, and this is a conclusive presumption in favor of bona fide purchasers and creditors. Under such circumstances, there is nothing to suggest the necessity for further inquiry into the character of the possession, and for that reason there is no duty to make it. If, therefore, the owner of goods sells them to A, but retains the possession, and afterwards sells them to B, an innocent purchaser who takes possession, the title of A is gone. It is of no conse quence that he acted in good faith and paid a fair price, nor that his reasons for leaving the goods with his vendor were such as grew out of his confidence in or desire to aid him. The fact that the goods were left in the hands of their former owner,' with nothing to indicate that his relation towards them was changed, put it in his power to sell them again for a full price to an innocent purchaser. When he makes such sale, one of the purchasers must lose the money he has paid. Assuming that both are alike honest, on which of them ought the loss to fall ? Clearly on him whose act or omission has made or contributed to make the loss possible. This result is reached by treating the neglect to take possession as a constructive fraud upon the last purchaser, without regard to the existence of fraud in fact. The failure to take possession left the former owner in the same apparent relation to his goods as before, and made it possible for him to sell them again. The consequences to the second purchaser are the same, if the title does not pass to him, as though the first sale had been contrived for the express purpose of defrauding him of his money. Looking at results, the law declares the first sale to be a fraud as to subsequent purchasers and creditors, and so fixes the loss on the person who ought to bear it.

This rule was stated by the courts of the United States as early as 1803, in Hamilton v. Russell, 1 Cranch 310. It had been applied by the English courts still earlier. The leading case in England seems to be Edwards v. Harben, 2 Term R. 587. The point in controversy in that case is thus stated in the opinion of the court: “ This case has been argued by the defendant’s counsel as being a case in which the want of possession is only evidence of fraud, and not such a circumstance, per se, as makes the transaction fraudulent in point of law ; ” and the court held, adversely to the position of defendant’s counsel, that a sale of personal goods without a delivery of possession was a fraud in law upon a subsequent bona fide purchaser. The controversy over the point raised in Edwards v. Harben has been continued on both sides of the Atlantic, and in some courts is still an open one. In some of the states it has been settled by statute. In New York the statute provides that “ every sale made by a vendor of goods and chattels in his possession or under his control, .... unless the same be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things sold, .... shall be presumed to be fraudulent and void as against the creditors.....of the vendor.....or subsequent purchasers in good faith; and shall be conclusive evidence of fraud, unless it shall be made to appear on the part of the person claiming under such sale.....that the same was made in good faith, and without any intent to defraud such creditors or purchasers.” Under this statute, the courts of New York must, in all cases where the conflict is between a first and a subsequent purchaser, submit the bona fides of the conduct of the first purchaser to a jury, with an instruction to sustain his title regardless of the want of a delivery, unless his conduct was fraudulent in fact. Similar statutory provisions exist in several other states, and the course of decision in such states has been controlled by them. Our own legislature has refrained from any interference with the rule so well settled by the courts, and so just and salutary in its operation. It still rests, therefore, on the same foundation on which it was originally put, as appears by the recent case of Miller v. Browarsky, decided in November last. This court said, in that case, that the law imputes fraud to the first purchaser because of his laches. His neglect to do what he ought to have done for the protection of others requires that he should be postponed in favor of those who must otherwise lose by his conduct. His motives are not material. The consequences of his neglect to take possession are none the less serious to subsequent purchasers, because no harm was intended. His liability grows out of his acts or omissions, not out of his intentions. Assuming that his conduct is free from actual fraud, yet he, or the subsequent vendee, must lose, and it is a proper case for the application of the maxim of the common law that, when a loss must fall on one of two innocent persons, it ought to fall on him whose act or omission caused it.

It is, as we have seen, well settled in this state that it is the duty of the purchaser of personal property to take possession of the goods purchased, but the question remains, what is a sufficient taking of possession to protect the purchaser ? This question has been answered in a line of cases which begins with Eagle v. Eichelberger, 6 W. 29. In that case, this court said that the duty of the purchaser was affected by the nature of the transaction, and that a delivery in accordance with the usages of the trade or business in which the sale was made was a sufficient delivery. In Hugus v. Robinson, 24 Pa. 9, it was further said that the delivery must be such as usually and naturally attends such a transaction, and that the purchaser taking such possession has fully discharged his duty to the public. Barr v. Reitz, 53 Pa. 256, presented the question on a new state of facts. The owner of household goods sold them, moved out of the house in which they were, and delivered the keys to the purchaser. We held on these facts that the previous visible relation between the owner and his goods was broken. Whether the goods were removed from the house in which the owner remained, or the owner removed from the house where the goods remained, the visible relation between them was broken, and the public was put on the duty to inquire. McMarlan v. English, 74 Pa. 296, was the case of a sale of a stock of goods in a store, of which possession was taken in bulk. This was held sufficient, and it was said that, in fixing upon the duty of the purchaser, the nature of the property, the relation of the parties to it and to each other, must he considered, and the possession taken of the stock must be such as was usual in such cases, and consistent with the nature and situation of the goods, looked at in connection with the business for which they were held. In Evans v. Scott, 89 Pa. 136, it appeared that two brothers lived together in the same house. One owned all the furniture. The other bought a carpet on credit, which was laid in the house. When the credit expired, he did not pay for it. The other then went to the seller, paid the price, and had a bill of sale made to himself. This was held to give him a title, and it was said that, in considering the question of possession, his relation to the house and its furniture must be taken into the account. The results of .these cases were summarized in Crawford v. Davis, 99 Pa. 576, where it was said that the character of the property, the use to-be made of it, the nature and object of the transaction, the position of the parties, and the usages of the trade or business are all to be considered in deciding the sufficiency of the possession taken by the purchaser. This was repeated in McClure v. Forney, 107 Pa. 414, and in Renninger v. Spatz, 128 Pa. 524.

Another line of cases began with Linton v. Butz, 7 Pa. 89, in which it was held that the purchaser was not bound to take actual possession, where the vendor was not in possession at the time of the sale. In that case, the article sold was in the hands of a bailee, and the delivery of an order on him for it was held to be a sufficient delivery of the article. So, goods in the hands of a carrier or stored in a warehouse may be delivered by a delivery of the bill of lading or the warehouseman’s receipt: Bond v. Bunting, 78 Pa. 210. All these cases recognize the rule, while they qualify it as the circumstances require in order to make its application just. The general rule undoubtedly is that the purchaser of goods must, for the protection of the public, take such possession as is usual and reasonable in view of all the circumstances of his purchase. If he neglects this obvious duty, then, as between himself and subsequent vendees or creditors, he must bear the loss resulting from his neglect.

Such being the law in this state, it only remains to apply it to the case before us. The property in controversy is a pair of horses, harness, and wagon. The former owner was Mulkie ; the present claimant is Stephens. Mulkie owned an oil refinery in Corry which was enclosed with a high fence. Among the buildings in the enclosure was one used as a barn, in which the horses, harness, wagon, and some other property of Mulkie were kept. The horses were groomed and driven by Keefer, an employee of' Mulkie, who also carried a key to the barn. Stephens was a cooper, living in Titusville, who supplied the refinery with barrels. In May, 1888, he met Mulkie in the street in Corry, who proposed to sell him the horses, harness, and wagon to apply on his account for barrels. The property was not present, and Stephens did not go to see it or make any bargain for it. On the 29th of May, as he testifies, he wrote from Titusville proposing to take the property on account at $550. Three days later a fieri facias was issued against Mulkie, and the property was seized and sold by the sheriff as his. When seized the property was in Mulkie’s barn on the refinery property, under the care of Keefer. Stephens brought this action to recover the value of the property. It is not alleged that he ever took possession of the property in person, or that he sent any one to take possession for him, but he claims to have been in actual possession by force of the following circumstances, viz.: (a) That he had an arrangement with Mulkie for the use of the stables until be should be ready to move the property; (6) that he had an arrangement with Keefer to continue to care for it; (V) that Keefer carried the key to the barn. By virtue of these arrangements he urges that he became a lessee of the barn, an employer of Keefer, and a purchaser in actual possession of the property. But what change had taken place in the relation between Mulkie and his property? The barn remained within his enclosure. The property remained in the barn. Keefer remained in care of it. There was not the slightest visible change in any particular in the relation of Mulkie to the barn, the personal property, or the employee in charge of it. Keefer carried the key and drove the team, after the letter of May 29th, just as before. The team was kept in the same place inside the refinery yard, and Mulkie was in the same visible possession of the refinery. The property was capable of an actual delivery, and was such as usually and naturally passes to a purchaser by delivery. It was the duty of Stephens to take possession of it in the manner that is usual upon a sale of such articles, so that the visible relation between the former owner and the goods should be changed. Failing to do this, he must not complain of the consequences.

The law was well stated in the defendant’s fourth, tenth, eleventh, and twelfth points, by which an instruction to the jury was asked to the effect that, if there was no visible change of possession, the sale was fraudulent in law, notwithstanding the jury might find that Stephens and Mulkie had acted honestly in the transaction. The learned judge refused so to charge, and in answer to defendant’s third point told the jury that the public was bound to make “ proper inquiry ” about the title to the property, overlooking the fact that the evidence disclosed no reason for inquiry, or for doubting the continued ownership of Mulkie. This instruction seems to have been influenced by a supposed analogy between this case and Barr v. Reitz, 53 Pa. 256. In that case the seller moved out of the house in which he had been living and in which the goods were, and delivered the keys of the house to his vendee. His former relation to his goods was visibly broken, and the public was thereby put upon inquiry. In this ease, Mulkie remained in possession of tbe refinery; tbe property remained in tbe stable witbin tbe enclosure; tbe key was carried by tbe same person, wbo went out and in just as before; and, so far as the public could see or know, there was no change in the relation previously existing between Mulkie and bis stable, or tbe property in it, or tbe hired man in charge of it. There was no delivery of possession to Stephens, and, as against subsequent purchasers and creditors, be bad no title.

The judgment is reversed.