Case Name: William L. Payne v. Richard S. Parker, Trustee
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1909-03
Citations: 95 Miss. 375
Docket Number: 
Parties: William L. Payne v. Richard S. Parker, Trustee.
Judges: 
Reporter: Mississippi Reports
Volume: 95
Pages: 375–395

Head Matter:
William L. Payne v. Richard S. Parker, Trustee.
[48 South. 835.]
1. Sales. Conditional. Reservation of title. Seller’s rights. Prerequisites to.
In order for a seller of personal property to enforce title thereto' reserved hy him to secure its purchase price:
(a) He must have been in fact the owner of the property at the time of the sale; and
(5) He must have made a real, not a mere formal, sale to a real, not a mere formal, purchaser; and
(c) The actual possession of the property must in fact have passed by the sale.
2. Same. Yerbal mortgage. Case.
Where a debtor intending to secure his debt, verbally sold his personal property to his creditor and, as a part of the same transaction, the creditor verbally resold the property to the debtor, reserving the title until the indebtedness should be paid, there being no other than a mere constructive delivery in each instance, the transaction amounted only to a verbal mortgage.
From the circuit court of Lee county.
Hon. Eugene O. Sykes, Judge.
Payne, appellee, was plaintiff in the court below; Parker, trustee, appellant, was defendant there. From a judgment-predicated of a peremptory instruction in plaintiff’s favor defendant appealed to the supreme court.
Parker, the appellant, was trustee in a deed of trust executed by one James Little for the benefit of Thompson & Son, the deed of trust conveying two mules and a mare. As trustee Parker took possession of the animals; whereupon Payne, the appellee, instituted this replevin suit to recover their possession. Payne’s claim was based upon an alleged reservation of title by him as seller of the property until the full amount of the purchase price due from Little, the alleged buyer, should be paid.
The facts are fully stated iu the opinion, of the court.
Anderson & Long, for appellant.
We do not contend that under the law of this state, the seller of personal property cannot reserve the title until the same is paid for, and neither do we contend that any writing is necessary for this purpose, but we do contend, that, in order for a seller of personal property to reserve the title, or to be a seller thereof, he must be the owner of the property at the time of the sale and must have the title thereto, and also must have possession or right to the possession at the time he sells it or at some future time. In this case, appellee had neither the title, possession nor right to possession of the mules and mare at the time he claims to have sold them to Little and to have reserved the title in himself. According to his testimony, which is all there is on this point, he contends that in one conversation or verbal contract he bought from, and sold back the mare and mules to Little, and that Little sold to him and bought back the same property. In other words he claimed that both of them in one conversation, or deal, were buyers and sellers of the same property.
In order to constitute a transaction a sale there must be a subject matter, a purchaser and a seller; and the purchaser must acquire the title to the subject matter and the possession or right to the possession, either present or in the future. Under appellee’s testimony he never did acquire the possession of the mules and mare, it was not 'intended for him to have the possession thereof, nor did he get the right to the possession, either present or in the future; for in one offer he bought and sold, and in one acceptance Little sold and bought. Had appellee asked Little for the possession, Little’s reply would have been: “You are not entitled to the same, and have never been entitled to anything except the $325 when it is due.” Had the mules and mare dropped dead prior to the conversation, during the time of it, or afterwards, the property would have been Little’s and whatever loss there would have been would have fallen upon Little and not upon appellee. Little would still have owed appellee the amount of money due him, for which appellee could have sued him, and realized the amount by judgment and execution, and there was never a time in the whole transaction when the property was appellee’s, and when Little would have been absolved from liability to pay appellee the amount of the debt Little owed him. There never was a time in the whole deal when appellee could have sold the live stock to a third party, and when Little could have been forced to surrender the possession of the same, nor was there ever a time that appellee •could have replevied the stock from Little, and have claimed the property, instead of the $325 due him.
The doctrine by which sellers of personalty are allowed to reserve the title therein as against innocent third persons without placing such reservation of record, operates as a hardship on the purchasers thereof in good faith and on bona -fide encumbrancers, and such doctrine will not be extended to cases not strictly within the terms and letter of the law. The only reason why this doctrine is supposed to be fair and just'is, that, as the seller of personal property has lately had possession of the property and parted with the same, this is presumed to be notice of how it is held by his vendee. In this case appellee .never had at any time the possession of the mules and never had the title thereto, and it had been, according to his testimony, three years •or more since he had had the mare in his possession; and during this time he had taken a note and deed of trust on the mare, placed it of record, and had marked it satisfied of record, thus leading the'public not only to decide that Little was the owner, but that he, the appellee, had been paid in full for her.
It is often difficult to decide whether a transaction is a conditional sale or a mortgage, and the usual ruling is that where one party owes the other a debt and property is used for the security of the payment of the debt and the debt is kept alive, the transaction is a mortgage and not a conditional sale. The intention of the parties, to be gleaned from all of the facts in the sale, is also a controlling factor in deciding 'whether the deal is a mortgage or a conditional sale: Bewail v. Henry 9 Ala. 33; Rockwell v. Humphreys, 57 Miss. 410; Weatherly v. Weatherly, 40 Miss. 462; Lawson’s Nights & Practice, sec. 3076.
If this transaction between appellee and Little is held to be a conditional sale of the property from appellee to Little, and to bind bona fide purchasers and encumbrances, then the giving of trust deeds on personal property for the security of the money in any case is a waste of time, labor and expense for recording fees. All a creditor would have to do- would be, in one breath to buy his debtor’s property and then sell it back to the debtor and reserve the title, without any change of possession, or right to’ possession, and without anything existing, to give the public any notice of such rights. Or if one person should desire to borrow money from another, and hold personal property for security, all he would have to do would be to say: “I sell you this horse for $100 and buy him back for $100’ and he is yours until paid forand on the purchaser’s handing over the money the transaction would be complete.
Who can reserve the title? No one except the owner. Who is the owner? That person having the title and the right to dispose of property. In this case, as we have said above,' Payne, the appellee, was never the owner of the mules or mare and never had the light at any time to dispose of them, and at best, 'from all of the testimony, he only had an equitable claim or mortgage, not shown of record, against the mules and mare, and of which Thompson & Son had absolutely no- notice or knowledge. The deal or transaction between Payne, the appellee, and Little, the owner of the mules and mare, is almost exactly the same as the deal between the parties in the case of Barnes v. Holcomb, 12 Smed. & M. 306, except that in the case cited the instrument which was attempted to be declared a conditional sale instead of an equitable mortgage and the accompanying papers which were given with such instrument, were all in writing, but yet the facts and intentions of the parties in the Barnes case, supra, were identically the same as the intentions and conduct of the appellee and Little here. In the Barnes case, the transaction was declared to- be a mortgage and not a conditional sale, and it was also held that an absolute purchase-under the facts of the case could have hardly been contemplated by the vendee. Of course, no absolute purchase of the mules and mare was ever contemplated or had by Payne, theappellee, in the present case.
In Klein v. McNamara, 54 Miss. 90, the following 'is laid' down as a test of whether an instrument or a transaction is a. mortgage or a sale: “(1) Was the treaty in reference to a borrowing and lending of money, and was the obligation to repay incurred? (2) Did the relation of creditor and debtor exist before the conveyance, and did that relation continue ?' (3) Was there great disparity in the price of the property?”
In case of doubt, the court leans in favor of a mortgage,, rather than a sale. 6 Am. & Eng. Ency. of Law (2d ed.) 443, notes. The distinction between a mortgage and a conditional' sale is, that when the relation of debtor and creditor still remains as to the money to be used in the repurchase or redemption the transaction is a mortgage; otherwise it is a conditional sale. Hoopes v. Bailey, 6 0. 325.
The operation of the principle contended for by appellee would result in the state of Mississippi and the different counties being swindled out of hundreds of thousands of dollars of taxes due b'y a host of money sharks and tax-dodge-rs.
Olaylon, Mitchell & Glayton, for appellee.
The only question in this case is whether with reference to-third parties there was a valid sale of this property. Appellee was the only witness before the court, who could have known the facts about the sale, and his testimony is very clear as to-the terms of the sale. He testified that Little came to him and proposed to sell to him the mules and said that if Payne would pay him $50 cash and pay off the deed of trust on the mules, the mules would be Payne’s. Payne agreed to this proposition and at the very instant in which he did so the title to the mules became vested in appellee. Appellee then sold the mules back to Little for $200 with ten per cent, added, at the same time reserving the title. That is, they agreed at this time to draw up a note to such effect at any time appellee might desire. Appellant questions the rights of parties to buy and sell in the same transaction, but the business world can furnish many examples of valid trades in which the same parties buy and sell personal property in one deal. As to the mare, the evidence shows that the title to her was originally in appellee, that he ■sold her to Little and took a deed of trust from Little to secure the payment of the purchase price, that appellee held this deed of trust while Little lived on another man’s land; that when Little moved back on appellee’s land they cancelled the deed of trust, and that appellee took the mare back, and afterwards sold her to Little again as shown by the note. We can find nothing wrong with this deal. Appellee testifies very clearly that there was a sale and his testimony was uneontradicted. Appellant’s counsel base almost all of their argument upon the hypothesis that the note operated as a mortgage and not as a sale. In determining this question the first thing the court must look to is the instrument itself. Of course this is not conclusive, but must be given great weight by the court. In this case there is no room for any doubt arising from the face of the instrument. It is clearly and unmistakably a note reserving title. Then, if it was intended otherwise, such intent must be shown by parol. The record is silent as to any other intention. The only party to the transaction who testified averred that the parties intended it just as written, that he intended to take just this kind of a note, and that the other paxfiy intended to make the contract as written. But the appellant insists that appellee took the note as security for the purchase price. What else would he have to take it for? Surely not just for sport. This court has said several times that the purpose of a note reserving title is only for security of the purchase money. This was decided in Dedericlc v. Wolfe, 68 Miss. 500 ; Tufts v. Stone, 70- Miss. 54; Foundry Go. v. Ice Go., 72 Miss. 608. Prom the standpoint of reason we insist that this could be the only purpose of taking such a note.
Appellant’s counsel are not altogether consistent in their argument of this case. In the first part of their brief they insist that appellee never at any time had title to the mules, and in the second division they argue that appellee sold the mules to Little and that instead of reserving title he took a mortgage-on the property for the purchase price. Both positions cannot be sound. Their argument concedes the sale, admits that the title was in appellee and that he sold the property to Little before he could have taken a mortgage to secure the purchase price. But all this argument about this instrument being a-mortgage falls when the light of this record is turned on, because it is shown to be what it purports to be — a note reserving title.
It is argued for appellant that the courts are inclined to declare an instrument a mortgage, if possible, in a doubtful ease. But such is only the case where there is a controversy as to what the parties really mean by the contract, as where one party to the contract claims that the transaction was a conditional sale, and the other claims it to be a mortgage. This is shown very clearly in the case of Barnes v. Holcomb, 12 Smed. & M. 306, cited by appellant. In that case two instruments were construed by the court to be mortgages. One party to the contract contended there that the instruments were intended by the parties as a mortgage, and the other party claimed the transaction to be a conditional sale with power given to redeem within a certain time. The court in that case very properly held the instruments to be mortgages, because this was shown to have been the intention of the parties, both by the face of the instruments and by the testimony of the parties concerned. But the court can readily see that there is no authority for appellant’s contention in this present case. The case is not similar in any particular to the Barnes case. There is no dispute here as to what the parties intended. No right to redeem is mentioned in this contract, and no borrowing of money is ■shown. None of the ear-marks of a mortgage as pointed out by the courts can be found in this case, with reference tó the notes in question. Appellant cites Klein v. McNamara, 54 Miss. 90, in which the tests of whether an instrument is a mortgage or a sale, are set out. We ask the court to notice those tests in the light of this record, and it will he driven to the conclusion that this authority is against appellant’s contention rather than in his favor: “(1) Was the treaty in reference to :a borrowing and lending of money and was the obligation to repay incurred?” The record in this case answers that question in the negative. “(2) Did the relation of creditor and ■debtor exist before the conveyance and did that relation continue ?” The record shows that no such condition as there in•dicated existed here. “(3) Was there a great disparity in the price of the property ?” There is not even a hint of such a thing .as this in the case at bar.
Thus we see that the three tests announced by the court in .the case cited by appellant are fully met in the case at bar.
We rely in this case upon the general doctrine announced by •this court in the case of Dulce v. Shackleford, 56 Miss. 552, and reaffirmed in many subsequent cases, in which the court has held that the purpose of a note of this character is to secure the purchase money.
The modern doctrine as to what constitutes a sale is very clearly announced in the recent case of Baker v. McDonald (Neb.) 1 L. B. A. (N. S.) 474, citing Newmark on Sales, 159.
We insist that W. M. Thompson & Son are not bona fide encumbrances in this case. The evidence shows that the deed of trust which they held on the property was given in their favor .by Little to secure a pre-existing debt and the evidence further shows that they then had knowledge of some indebtedness of Little to appellee. A reasonable prudent man would, under the circumstances, have been led to make such inquiry as would have shown the time facts.
The case was by the supreme court affirmed, without written opinion.
Anderson S Long, for the appellant, thereupon filed a suggestion of error, and in support thereof contended as follows: The turning point in this case depends upon whether the appellee was the owner of the property at the time when he claims to have sold the property back to Little with reservation of title. If the appellee at the time did not have the absolutely unconditional title to the property he could not legally sell it as he claims he did. If he were the owner, his title was derived from Little. Tet, can it be held that the transaction between him and Little was sufficient to pass the title from Little to him? We insist that it could not.
The definition of a sale, as laid down in Benjamin on Sales (2d ed.), page 1, is “a transfer of the absolute or general property in a thing for a price in money.” And see 24 Am. & Eng. Ency. of Law (2d ed.) 1022.
The essentials of a sale are, first, a mutual agreement; second, competent parties; third, a money consideration; fourth, a transfer of the absolute or general property in the subject of sale from the seller to the buyer. 2 Blackstone, Comm. 446; 2 Kent, Comm. 468; Atkinson on Sales, 5; Story on Sales, 1.
We insist that what happened between appellee and the negro Little, at the time when appellee claims to have purchased and resold the property, did not vest in appellee the absolute or general property in the mules and mare. Appellee only loaned some money to the negro Little and the transaction was in part the continuation of a pre-existing debt, with the mules and mare held by appellee as a security for the payment of the debt. Appellee’s claim on the mules and mare conld be nothing more than an equitable mortgage good only as between the original parties.
Two persons cannot each be the absolute and sole owner of the same thing at the same time. To consummate a sale there must be an offer and an acceptance, and immediately upon the acceptance of the offer and not before, the contract of sale becomes complete and binding upon both parties. 24 Am. & Eng. Ency. of Law (2d ed.) 1029, note 4.
When Little made his proposition of sale to appellee, appellee had no rights in the property whatever before his acceptance of the proposition; and after such acceptance appellee had only the right, as between him and Little, to subject the property to his unrecorded claim against Little. Appellee could not retain a greater right or claim against the property than he had parted with to Little.
ITence, the recent judgment of affirmance by this court is erroneous.

Opinion:
Eletcher, J.,
delivered the opinion of the court in response to the suggestion of error.
The learned circuit judge gave a peremptory instruction to find for the appellee upon the following state of facts: One Little, late in thé year 1906, became Payne's tenant, and moved upon his plantation. At the time Little owned two mules, upon which a third party held a trust deed for about $135. It appears that Mr. Payne had been advised by his attorney that personal property could be sold conditionally and the title thereto reserved to the vendor, and that the lien so reserved would be superior to any subsequent incumbrance by the conditional purchaser. Payne testifies that he acted in the transaction upon the idea that such an arrangement was a convenient, safe, and economical method of securing his debt, since it would obviate the need for recording fees and other expenses. Little was anxious for his landlord to take up the debt, and desired a fur ther advance of $50 in cash. Thereupon Payne and Little entered into an agreement by 'which Little was to sell Payne the mules for $185 and Payne was to immediately resell the property to Little and reserve the title. This was done; the entire transaction resting in parol. Subsequently Little mortgaged the property to W. M. Thompson & Son by a trust deed, in which Parker is substituted trustee. The former trust deqd, which was paid by Payne, was satisfied, so that, when Thompson & Son took their security, no incumbrance against the property appeared of record. It is shown that Little, with Payne's knowledge, obtained supplies from Thompson & Son throughout the year, and, indeed, Payne admits that he encouraged Little to buy from Thompson all the supplies he needed; that, to use his own phrase, he said to Little that "he missed it in not going and loading up on him." '
We have no disposition to depart from the rule, now thoroughly established in this state, that personal property may be sold with verbal retention of title, and that the claim of the vendor to the purchase money will prevail over the claim of subsequent grantees. But we cannot hold as a matter of law that Payne ever actually owned the mules here in controversy. The whole transaction must be examined. The mules were not purchased from Payne in the first instance. They were bought from one Lawson. The sole purpose of the alleged sale to Payne was that title might momentarily vest in him for the purpose of an instantaneous resale, in order that the relation of the vendor and conditional purchaser might exist. The whole transaction might well be considered as nothing more than a verbal mortgage — an effort to substitute for a trust deed a pretended sale and resale, whereby innocent purchasers and incumbrancers would be defrauded. If this transaction is to be upheld, chattel mortgages will disappear. All borrowers upon personal property as security will simply agree with the lender to make a sale, accompanied by constructive delivery of the property, and buy the property back in the same transaction. We bare here an illustration of a most flagrant wrong committed to tbe manifest injury of an innocent supply merchant. It is true that, under tbe previous decisions of this court, one taking a trust deed upon personal property must see to it that tbe person from whom tbe property was purchased has not reserved tbe title, or that be has been paid; but be cannot be defeated by constructive sales and resales, bad between persons who in reality sustain no other relation than that of creditor and debtor. We will not push tbe doctrine one inch further than it has already gone. In order for tbe seller to enforce bis claim, be must be in fact tbe owner of tbe property, and make a bona fide sale thereof to a bona fide purchaser, by which sale tbe actual possession of tbe property shall be in truth changed. Tbe peremptory instruction should have been given for tbe appellant, and not for tbe appellee.
Tbe suggestion of error is sustained, tbe former judgment vacated, and tbe cause reversed and remanded.
Reversed and remanded.