Court Opinion

ID: 9864758
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:09:56.462837+00
Date Added: 2024-06-11T12:31:34.552906
License: Public Domain

*408Mr. Justice Butler,
dissenting.
Because the decision and the reasons assigned therefor depart from what seems to me to be sound legal principle, it is impossible for me to concur therein. The far-reaching effect of the decision justifies, indeed calls for, a statement of the reasons for dissent. There are two reasons. They will be stated and discussed in their order.
1. Confusion in terminology, unfortunately occurring in some of our opinions, has produced a confusion of ideas, and that in its turn, has resulted, it is submitted, in an erroneous construction of our' statute concerning chattel mortgages.
Under its contract with Patterson, the Bond and Mortgage Company was not under an absolute obligation to pay the purchase price. It had an option to purchase the furniture, but it was under no obligation to do so. In Gerow v. Castello, 11 Colo. 560, 19 Pac. 505, we so construed a similar contract. See also Coors v. Reagan, 44 Colo. 126, 96 Pac. 966.
The provision of the present chattel mortgage statute (C. L., §5099), upon which the court bases its decision, provides: “Except as provided in section 5, above, the provisions of this act shall extend to all bills of sale, deeds of trust and other conveyances of personal property intended by the parties to have the effect of a mortgage or lien upon such property.” The only purpose of a mortgage or other lien is to secure some obligation; for example, the payment of a sum of money that the mortgagor or the creator of the lien is under obligation to pay. Where there is no such obligation, there can be no mortgage or lien. Nor can the parties intend that an instrument shall have the effect of a mortgage or lien unless there is some obligation to secure. If an owner' of personal property gives a bill of sale thereof to secure the payment of a sum of money that he is under obligation to pay, it may well be said, in the language of the statute, that the bill of sale is “intended by the parties to have the effect of a mortgage.” By virtue of section *409281, Code of Civil Procedure, such is the case with reference to deeds of real estate. A deed of trust or other conveyance of personal property given by the owner to secure the payment of money he is under obligation to pay comes within the terms of the chattel mortgage act.. So, also, where personal property is sold by the owner under a contract whereby the purchaser is under an unconditional obligation to pay the purchase price, and the owner reserves title in himself to secure the full payment of the purchase price, the transaction is held to be the same as though title had passed to the purchaser and he had given a chattel mortgage to secure the payment of the purchase price, and in such case the contract must be recorded as required by the chattel mortgage act. Such are the transactions intended by the Legislature to come within the provisions of the statute. To hold that a contract, such as the one before us, whereby the owner of personal property gives to another a mere option to purchase is, in effect, a mortgage, or that the parties intend' it as such, does violence alike to the letter and the spirit of the statute, and, it is most respectfully submitted, is contrary to reason and authority. In Andrews & Co. v. Savings Bank, 20 Colo. 313, 36 Pac. 902, we quoted with approval the following from the opinion in Heryford v. Davis, 102 U. S. 235: “This giving the property as a security for the payment of a debt is the very essence of a mortgage, which has no existence in a case of conditional sale. ’ ’ A mortgage without a debt or other obligation to support it is a legal solecism, or, as the Alabama Supreme Court terms it, a “myth in our system of jurisprudence.” Bell v. Shiver, 181 Ala. 303, 61 So. 881; Carroll v. Tomlinson, 192 Ill. 398, 401, 61 N. E. 484; Weltner v. Thurmond, 17 Wyo. 268, 98 Pac. 590; Bobb v. Wolff, 148 Mo. 335, 49 S. W. 996.
Before confusion arose by reason of the loose and inaccurate use by this court of the term “conditional sale,” the court recognized as sound, and enforced, the distinction just pointed out. The present chattel mortgage act *410succeeded one containing’ a provision substantially the same as the one quoted above from the present statute. It provided: “The provisions of this act shall be deemed to extend to all such bills of sale, deeds of trust, and other' conveyances of personal property, as shall have the effect of a mortgage or lien upon such property.” S. L. 1862, p. 90, §7; R. S. 1868, p. 104, §7; G. L. 1877, p. 123, §7 (130); G. S. 1883, p. 160, §169; R. S. 1908, p. 288, §521. We have held repeatedly that where there is no unconditional promise to pay the purchase price, but such payment is optional, the contract is one of conditional sale only and not a chattel mortgage or a substitute for one; that the chattel mortgage act has no application, and that the contract need not be recorded; but that a contract that in express terms imposes upon the purchaser an unconditional liability to pay the purchase price-is one of absolute, not conditional, sale; and that where such a contract reserves title in the seller until payment of the purchase price, it amounts to the reservation of a lien on the property to secure the payment of the purchase price, and, in effect, is a chattel mortgage within the meaning of the chattel mortgage act and must be recorded as such. Gerow v. Castello, 11 Colo. 560, 19 Pac. 505; Andrews & Co. v. Colorado Savings Bank, 20 Colo. 313, 36 Pac. 902; Clark, v. Bright, 30 Colo. 199, 69 Pac. 506; Turnbull v. Cole, 70 Colo. 364, 201 Pac. 887; Anglo-American Mill Co. v. First National Bank, 76 Colo. 57, 230 Pac. 118. And see Weber v. Diebold Safe & L. Co., 2 Colo. App. 68, 29 Pac. 747; First Congregational Church v. Grand Rapids School Furniture Co., 15 Colo. App. 46, 60 Pac. 948. In George v. Tufts, 5 Colo. 162, counsel stipulated that the sale was a “conditional sale,” but the fact was that it was an absolute sale, the purchaser’s unconditional promise to pay the price being evidenced by his promissory notes. The court held that in order to preserve his lien, Tuft should have recorded the contract. Notwithstanding" counsel’s mistake in calling the transaction a “conditional sale,” the court held, in effect, that *411it was an absolute sale with the reservation of title to secure the payment of the promissory notes, and correctly applied the law applicable thereto.
In Andrews v. Colorado Savings Bank, 20 Colo. 313, 36 Pac. 902; Jones v. Clark, 20 Colo. 353; 38 Pac. 371, Weber v. Diebold Safe & L. Co., 2 Colo. App. 68, 29 Pac. 747, and Turnbull v. Cole, 70 Colo. 364, 201 Pac. 887, the transactions constituted absolute sales, with the reservation of a lien to secure the payment of the purchase price, which the purchaser was unconditionally liable to pay. Though in each case the court loosely applied the term “conditional sale” to the transaction, it correctly applied the law relating to absolute sales. The decision was right; the nomenclature, wrong' and misleading.
The majority opinion admits that the term “conditional sale” has been used rather loosely in some of our opinions, and that frequently where the purchaser had made an unconditional promise to pay the purchase price we have used the term “conditional sale,” when, as a matter of fact and law, the proper term would have been “absolute sale;” but declares that all this has been set at rest by the opinion in Coors v. Reagan, 44 Colo. 126, 96 Pac. 966. In that case the question principally discussed by counsel and by the court was whether the contract constituted a lease or a conditional sale. The court correctly held that it was not a lease. In that case, as is said in the majority opinion in this case, “There was no obligation upon the part of second party to pay anything whatever unless he desired to continue the use and occupancy of the premises and saloon fixtures.” The court there correctly held that the transaction constituted a conditional sale. So far, the decision was in harmony with the uniform decisions of this court and our Court of Appeals. However, misled by the repeated misuse, in some of our former opinions, of the term “conditional sale,” the court held, contrary to every decision of this court and of the Court of Appeals, that such contracts, in effect, are mortgages and must be recorded as such. *412Curiously enough, not one of the cases cited in support of that proposition sustains it. They all hold to the contrary ; that is to say, that the contracts that must he recorded are those only that impose an unconditional obligation to pay. Some of the opinions, as we have seen, erroneously called such contracts contracts of conditional sale; hence the mistake, in Coors v. Reagan, of supposing that conditional sale contracts must be recorded. In the majority opinion in the present case, it is said that the Coors-Reagan case has never been reversed, but has been followed. True, it has not been reversed; but no such question has been presented. It is equally true that that case has never been followed by this court or' by our Court of Appeals. On the contrary, in our latest case on the subject (Anglo-American Mill Co. v. First National Bank, 76 Colo. 57, 230 Pac. 118) we recognized the distinction theretofore drawn by this court between the two kinds of contracts; and held that where payment is optional, the contract is one of conditional sale, but that a contract imposing an unconditional liability to pay is an absolute, not a conditional sale, and must be recorded. In that case, we followed the cases decided prior to the Coors-Beagan case, quoting with approval from the opinion in Andrews & Co. v. Colorado Savings Bank, supra, and adding: “No option was given to the vendee as to whether or not he should pay, but he was absolutely bound to pay, * * * This transaction between buyer and seller was an absolute sale with the reservation of a secret lien thereon by the seller which made the written contracts a chattel mortgage under the law of this state and the decisions of this court in the Andrews: and other cases. Not being recorded they were void as to third persons whose rights attached while the property remained in the possession of the mortgagor vendee.” In the opinion, we took pains to make it clear that the reason why the contract must be recorded as a mortgage was that there was an unconditional obligation to pay. Obviously, *413this was a repudiation of the decision inadvertently and unfortunately rendered in the Coors-Reagan case.
As this court itself, in the Coors-Beagan case, was misled by our misuse, on former occasions, of the term “conditional sale, ” it is not surprising that another court and also a text writer' have been misled in a similar manner in attempting to state the law as announced by this court. For example, in Burroughs Adding Machine Co. v. Bogdon, 9 Fed. (2d) 54, cited in the majority opinion, the court said: “If the contract here is a conditional sale, then it had, under the Colorado decisions (which govern in this character of question, Bryant v. Swofford, 214 U. S. 279 * * *) the effect of a mortgage or lien within the meaning of the above state statute (Turnbull v. Cole, 70 Colo. 364 * * *; Coors v. Reagan, 44 Colo. 126 * * *; Andrews v. Colo. Savings Bank, 20 Colo. 313 * * *; George v. Tufts, 5 Colo. 162; also see Weber v. Diebold S. & L. Co., 2 Colo. App. 68 * * *).” In each of those Colorado cases, excepting only the Coors-Reagan case, the transaction was not a conditional sale at all, but an absolute sale with the reservation of title to secure payment of the purchase price, which the purchaser unconditionally promised to pay. It was, in effect, a chattel mortgage. In each, the opinion mistakenly called the transaction a “conditional sale.”
In the present case, the court, after quoting from the testimony given by Patterson’s salesman, in which he referred to the contract as a “sale” and also spoke of another transaction as a “second mortgage,” remarks: “It will thus be seen that in the county court, plaintiff took the position that his ‘Lease of Goods’ agreement was a conditional sale contract, and we will confine him to that position in this court.” Under our decisions, as we have seen, that is exactly what it was, but the majority opinion here gives the term a different meaning. With reference to the contract heading’, “Lease of Goods,” and the declarations in the contract that the goods were “leased” and that, “No agreement of sale of said goods is implied,” *414the court cited authority for the proposition — a sound one — that it is immaterial what name the parties choose to give the contract; that the terms of the contract control. The legal character of an instrument, of course, is to be determined from the terms, conditions, and operation of the instrument itself, and not from the oral opinions or declarations of the parties as to its legal character. Indeed, if the law were otherwise, the contract involved in this action would be a lease, for the contract calls it that.
The fact that the Bond and Mortgage Company was put in possession of the furniture did not estop Patterson to assert his title. Its possession was as conditional purchaser, not as owner. In Clay, Robinson & Co. v. Martinez, 74 Colo. 10, 218 Pac. 903, it was argued that since the plaintiffs put Jordan in the ostensible position of owner, they were estopped to deny his ownership. “VVe said: “The answer is that they put him in the position of bailee, not owner. Control, apparently as owner by reason of possession, is an incident of every bailment, yet every one deals with a bailee at his peril * * *. No indicium of ownership was conferred in the present case except possession.” Possession under a conditional sale, such as the one involved in this action, stands on precisely the same footing. “Possession under a conditional sale, with the right of the vendee to use the property as his own, does not clothe the latter with such indicia of ownership as to estop the owner from asserting title as against a bona fide purchaser from the conditional vendee. Sanders v. Keber, 28 Ohio St. 630. The court says that the converse of this rule would place goods and chattels on the same ground as commercial paper before due, instead of requiring the buyer to rely on the implied warranty of title by the vendor.” 25 L. R. A. (N. S.), 772, note. And see Simpson v. Shackelford, 49 Ark. 63, 4 S. W. 165. See also cases collected in note, 25 L. R. A. (N. S.), 770 et seq. Such is the law, even where contracts are made or money is paid or loaned on the *415strength of ostensible ownership by virtue of possession. Much less can estoppel be r’elied upon in the present ease, for the lease was given before the furniture was in the office room, or otherwise in the Bond and Mortgage Company’s possession; and there is no pretense, and there could be none, that the lease was given in reliance upon ostensible ownership of this furniture by the Bond and Mortgage Company.
Again, the Bond and Mortgage Company could not transfer to the Building Company, or encumber, a title that it did not have. In the purchase of personal property the rule of caveat emptor ordinarily applies. Thus, a lessee of chattels cannot, as against the lessor, pass title by sale thereof even to a bona fide purchaser without notice of the lessor’s title. Singer Manufacturing Co. v. Converse, 23 Colo. 247, 47 Pac. 264. Nor can a bailee, as against his bailor, even though the bailee also has an option to purchase the property. Clay, Robinson & Co. v. Martinez, 74 Colo. 10, 218 Pac. 903. Nor can a pledgee, as against the pledgor. Newton v. Cardwell Blue Print and Supply Co., 41 Colo. 492, 92 Pac. 914. Nor can an agent, as against his principal. Morsch v. Lessig, 45 Colo. 168, 100 Pac. 431. Nor can one to whom property is loaned, as against the lender. 25 L. R. A. (N. S.), 778, note. Nor can a mortgagee in possession under an unrecorded mortgage, as against the mortgagor. 25 L. R. A. (N. S.), 785. The same reason exists' and the same rule applies in the case of conditional sales. The lessee, the pledgee, the bailee and the conditional purchaser all have possession of property, and the agent and the mortgagee in the cases supposed also have possession of property, but they do not have title and cannot transfer it. In Couse v. Tregent, 11 Mich. 65, the court says: “What right has a purchaser of chattels from a conditional purchaser, as against the absolute owner, that he would not have if the purchase were from a bailee? The possession is the same, and the ownership the same substantially; certainly the same opportunity for the perpetration of *416fraud exists in the one case as in the other.” And in Homans v. Newton, 4 Fed. 880, the court said: “If I lend a horse to my neighbor, he may be able to deceive' an innocent purchaser. The cases are precisely parallel, for one who has agreed for a conditional purchase has no more apparent possession than a borrower. The common law, as maintained in a great majority of the states, undoubtedly is that in the absence of actual fraiid, or laches, on the part of the true owner, the possessor of a chattel, in a case of this kind, can only dispose of his own title.” In a note in 25 L. R. A. (N. S.), 763, it is said: “In a few places, the rule is that the owner will be safe when he has made a bailment, but not when he has let a conditional vendee have the chattel; but the view taken almost everywhere is that the conditional vendor, in the absence of statute, hazards nothing, as against a third person, by parting with possession.” In W. F. Zimmerman Lumber Co. v. Elder (Miss.), 29 So. 466, a conditional seller was held entitled to recover the property from one who purchased it from the buyer’s landlord, who had held it as security for rent. In 24 R. C. L., 455, discussing conditional sales, the rule is stated in these words: “In the absence of statutory provisions to the contrary, it is generally held that 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. This is in pursuance of the general rule that one in possession of a chattel as bailee or the like can transfer to a third person no greater right or interest than he himself possesses * * And see 25 L. R. A. (N. S.), 760, et seq., 782, et seq.
If it is desirable to require the recording of conditional sale contracts, such as the one involved in this proceed-^ ing, it would be better to accomplish the purpose by act of the Legislature, as has been done in some states, rather than for a court to resort to the expedient of creating such an abnormality as a mortgage securing the *417performance of an obligation that does not exist — securing the payment of a sum of money that no one has promised to pay. Such abnormality was injected into our jurisprudence by the Coors-Reagan decision. If it was not effectually expelled, as I believe it was, by the decision in Anglo-American Mill Co. v. First National Bank, supra, it should be eliminated now.
2. Desiring to engage in business in the United States National Bank building, the Bond and Mortgage Company leased from the Building Company an office room in that building. In order to do business there, it was necessary, of course, to equip the room with office furniture. After securing the lease, the Bond and Mortgage Company arranged with Patterson for the use of the furniture described in their contract, made at the time, and the furniture was thereupon delivered to the Bond and Mortgage Company and placed in the leased room. The Building Company says that when the furniture was placed in the room, it immediately, by virtue of the lease theretofore executed, became subject to the lien for rent, not only as against the Bond and Mortgage Company, but also as against Patterson. That is a mistake. Even if the Bond and Mortgage Company had obligated itself absolutely to pay the price and actually had given Patterson a chattel mortgage to secure the payment thereof, the Building Company would not be entitled to the possession of the furniture as against Patterson.
The lease contemplated the future installation in the vacant office room of furniture owned by the tenant, and that when the tenant’s furniture was placed in the room a lien thereon should attach to secure the payment of rent. The transaction is analogous to the case of a mortgage or other lien covering after-acquired property. Robinson v. Wright, 90 Colo. 417, 9 P. (2d) 618. If the Patterson contract constituted, in effect, a chattel mortgage, it was a purchase-money mortgage, and the lien thereof was created, contemporaneously with the sale of the furniture and as part of the same transaction. When *418the furniture was placed in the office room, the Building Company’s lien attached thereto, subject, however, to the lien of the purchase-money mortgage theretofore given Patterson. Robinson v. Wright, supra; Emery v. Ward, 68 Colo. 373, 191 Pac. 99; Indian Greek Coal Mining Co. v. Home Savings & Merchants’ Bank, 80 Colo. 96, 249 Pac. 499; United States v. New Orleans & O. Railroad Co., 12 Wall. 362; Fosdick v. Schall, 99 U. S. 235; Harris v. Youngstown Bridge Co., 33 C. C. A. 69, 90 Fed. 322; Frank v. D. & R. G. R. Co., 23 Fed. 123; Hammel v. First National Bank, 129 Mich. 176, 88 N. W. 397. And the fact that the contract was not recorded does not affect the result; registry laws do not apply in such a case. Robinson v. Wright, supra; United States v. New Orleans & O. Railroad Co., supra; Harris v. Youngstown Bridge Co., supra.
Reason and precedent, I submit, require the affirmance of the judgment.
■ Mr. Justice Moore and Mr. Justice Hilliard authorize me to say that they concur in this opinion.