Court Opinion

ID: 3497761
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:05:17.258875+00
Date Added: 2024-06-11T14:15:38.522222
License: Public Domain

I do not agree that Allison v. Teeters, 176 Mich. 216, and similar decisions of this court, should be overruled.
In brief, the facts in this case are as follows: One Vincente Maestre, a resident of New Jersey, employed in the city of New York, purchased a new automobile in New York from a dealer; he paid part in cash from his own funds and the balance from a loan secured from plaintiff herein, a New York corporation engaged in financing automobile sales on chattel mortgage security. Maestre gave to plaintiff herein a chattel mortgage on the automobile providing for monthly instalment payments. It was provided that the purchaser might use the car in commuting daily from his residence in New Jersey to his business in New York. The chattel mortgage was properly recorded both in New York and in New *Page 411 
Jersey, but was not filed or recorded in Michigan. The automobile was properly registered under the laws of New York. About 40 days after the purchase, Maestre drove the automobile to defendant's place of business in Detroit and traded it to defendant for a new car of another make, not yet manufactured, to be delivered some months later when the new model was put on the market. The defendant is a dealer engaged in the business of buying and selling automobiles in Detroit. Defendant paid Maestre for his automobile $450 in cash and a due bill or credit memo for $450 to be applied on the purchase of the new car. Maestre defaulted to plaintiff in his payments on the chattel mortgage, absconded; plaintiff located the car, ascertained that defendant had purchased it, and brought suit for conversion claiming in substance that defendant's title was subordinate to plaintiff's chattel mortgage lien.
It is conceded that defendant had no knowledge of plaintiff's chattel mortgage, and that in accordance with New York law no notice of any lien appeared on the New York certificate of registration which was transferred to defendant along with a bill of sale from Maestre to defendant at the time of the trade-in. The court below gave plaintiff a judgment and Mr. Justice BUTZEL, in finding for affirmance, says that our earlier cases, Allison v. Teeters, supra, and those cases upon which that decision was grounded, should be overruled.
In the Allison Case, a chattel mortgage was executed and filed in a neighboring State but not in Michigan, the mortgagor sold the mortgaged property (a horse) which was removed to Michigan and sold to the defendant, a purchaser in good faith without notice of the mortgage lien. We held that, since the purchaser in Michigan obtained title in *Page 412 good faith, the plaintiff could not recover the property; that a citizen of this State dealing with property and its apparent owner in this State is not required to take notice of the records in another State; and that the defendant's rights were not affected by the existence and record of the plaintiff's chattel mortgage in another State, unknown to defendant. See, also, Boydson v. Goodrich, 49 Mich. 65.
Mr. Justice BUTZEL'S opinion would not only overrule these decisions, but, in my judgment, would put an exception into 3 Comp. Laws 1929, § 13424* (Comp. Laws Supp. 1940, § 13424, Stat. Ann. § 26.929), which the legislature did not put into this act. This statute provides that every mortgage of goods and chattels which shall not be accompanied by an immediate delivery and followed by an actual and continued change of possession shall be absolutely void as against the creditors of the mortgagor, and subsequent purchasers or mortgagees in goodfaith, unless the mortgage or a true copy thereof is filed in the office of the register of deeds of some county in this State (in which the property is located, if the mortgagor is a nonresident of this State). Mr. Justice BUTZEL would except from this statute all chattel mortgages executed and filed or recorded in a proper manner in another State. I do not question but that this might be a salutary exception as applied to motor vehicles under present-day conditions. However, it should not be put into the law of this State by judicial decision. Any such obvious amendment to section 13424 should be left to legislative enactment. Such an exception to the statute would seem to be objectionable if applied to all classes of personal property, and there would be slight protection left to a purchaser of furniture, jewelry, a *Page 413 
radio, stock, farm animals, or any other chattels covered by lien in any other State, although undisclosed to the purchaser.
I concur in the judgment of the trial court on the ground that the defendant was not a subsequent purchaser in good faith
of the automobile registered in New York. Under Michigan statute law, the chattel mortgage is declared to be void "as against subsequent purchasers or mortgagees in good faith," unless filed in the office of the register of deeds. This makes it incumbent upon the subsequent purchaser that he must be a purchaser in good faith. It is well settled in Michigan that actual payment in good faith is necessary to complete a bona fide purchase, and, in any event, a purchaser from a fraudulent vendee is protected only to the extent of payment actually made in good faith. Dixon v. Hill, 5 Mich. 404; Warner v.Whittaker, 6 Mich. 133 (72 Am. Dec. 65); Blanchard v. Tyler,12 Mich. 339 (86 Am. Dec. 57); Stone v. Welling, 14 Mich. 514;Kohl v. Lynn, 34 Mich. 360; Webster v. Bailey, 40 Mich. 641;McGraw v. Solomon, 83 Mich. 442; Zucker v.Karpeles, 88 Mich. 413; Automobile Equipment Co. v. MotorBankers Corp., 251 Mich. 220. In the case at bar, the purchaser was an automobile dealer engaged in the business of buying and selling new and used automobiles. A stranger and a nonresident of this State came to defendant offering to trade in a new high-priced automobile for another new car at a substantial reduction from the list price. This would put any experienced automobile dealer on inquiry. Furthermore, the stranger asked for a trade-in on an equally expensive car not yet manufactured and not ready for delivery for several months. Obviously, this would leave the owner without means of motor vehicle transportation during that period. Apparently the stranger wanted cash, and accepted a substantial *Page 414 
cash sum along with a due bill or credit memo to apply on the new purchase. The New York certificate of title did not require a showing as to liens. It did show the New York and New Jersey addresses of the stranger. An ordinarily prudent person, particularly an experienced dealer, would know how to ascertain whether the ownership was genuine and unencumbered. A prudent person would be put on inquiry why the stranger came from New York or New Jersey to effect a trade-in with an unknown (to him) concern in Detroit. All these facts and circumstances and inferences lead to the unescapable conclusion that the defendant was not a subsequent purchaser in good faith as against possible claims it might reasonably know could be made by someone else against the car. A mere request to Maestre to produce the bill of sale showing from whom he purchased his car would no doubt have unfolded the entire factual situation. That defendant had its suspicions is indicated by the fact it promptly disposed of the car to another used car dealer who proceeded to sell it in Indiana.
The judgment of the court below should be affirmed on the ground that the defendant was not a subsequent purchaser in good faith. Appellee to have costs.
SHARPE, C.J., and NORTH, and WIEST, JJ., concurred with BOYLES, J.
* Amended by Act No. 18, Pub. Acts 1934 (1st Ex. Sess.), and Act No. 129, Pub. Acts 1935. — REPORTER. *Page 415