Knittel v. Cushing 57 Tex. 354

H. Knittel v. E. H. Cushing.

(Case No. 3226.)

1. Sale—Rent — Registration.—A piano was delivered by (J. to N. under a written contract, reciting that N. had hired and received it of 0., N. promising, .in addition to §75 paid on its delivery, to pay §50 for each quarter it was kept, to return it on demand, not to remove it without O.’s written consent, and to keep it insured. It was also stipulated that on further payment of $350 (in addition to the §75), in monthly payments which N. agreed to make, the piano was to become the property of N. In a suit for the piano by C. against K., who had in good faith bought of N., held,

(1) That the terms of the-agreement are so inconsistent that it cannot be he'd to be both a renting and a sale.

(2) That it is not a renting, as the first part of the agreement recites it to be.

(3) If valid at all, it must be held to be a sale, and that the pretended renting was but a device to secure the remainder of the purchase money.

(4) That thus regarded, conceding its validity as between the parties, it would be contrary to the policy of the registration laws to hold the contract binding on a purchaser in good faith, for value, without notice.

*355Appeal from Washington. Tried in 1875 before the Hon. I. B. McFarlane.

Sheppard, & Garrett, for appellant.

These contracts are in restraint of the freedom of trade, and in derogation of our statute against fraudulent conveyances (Pasch. Dig., art. 3876), and the statute (Pasch. Dig., art. 4993) requiring all liens upon personal property to be recorded in the county where the property is or may be taken to.

Our court has heretofore gone further than we now ask in the protection of innocent purchasers of personal property. Davis v. Loftin, 6 Tex., 500; Neal v. Sears, 31 Tex., 114. This last case is an exceedingly strong one. A. and B. had been partners in a bar and billiard saloon. A., who owned the tables, withdrew from the firm, and notice of the dissolution was published. A. permitted his tables to remain in the saloon in the possession of B., who, a short time after-wrard, borrowed some money of C., who had no notice of A.’s title, and gave him a trust deed upon the tables to secure payment. The tables were sold under this trust. In an action by A. against the purchaser for possession, it was held that he could not recover. Having invested B. with the indicia of title, he ivas held to suffer in accordance with the equitable rule that “he who trusts most shall suffer most.” But it is not necessary to go to the same length in the case at bar. We take the position that the sale of the piano to Mrs. Heivhard was in reality a sale. Appellant having purchased liona fide, without even any notice to put him upon inquiry, took an indefeasible title. This position is supported by the following authorities: Howes v. Bell, 7 B. & C., 481; Story on Sales, §§ 200-3; id., § 313; 2 Kent’s Com., 496-8, and notes; Lickbarrow v. Mason, 1 Smith’s L. C., notes, pp. 1091-3; Vaughn v. Hopson, 10 Bush (Ky.), 337; Rose v. Story, 1 Barr, 190; Martin v. Matheott, 14 Serg. & R., 214; Haak v. Linderman, 64 Pa. St., 499 (3 Am. Rep., 612); Haggerty v. Palmer, 6 Johns. Ch., 437; Herring v. Hoppock, 15 N. Y., 409; Waite v. Green, 35 Barb. 585 (36 N. Y., 556); Smith v. Lynes, 5 N. Y. (1 Seld.), 41; Hasbrouck v. Lounsbury, 26 N. Y., 598.

Sayles & Bassett, for appellee.

Appellee insists that by the terms of the contract by which Mrs. Newhard took possession of the piano in controversy, her possession was that of bailee, pure and simple.

The contract recites that she has hired the piano, for the use of which she agreed to pay a certain sum; and the piano was to be *356returned to the plaintiff on demand, and that while in her possession it was not to be removed without his written consent, and was to be kept under insurance. Was the proviso, that the piano should become her property upon the payment of a certain sum of money, inconsistent with the contract of hiring, so as to change the character of her possession from that expressly defined in the written contract? In other words, is it impossible for parties to embrace two separate and distinct contracts in the same instrument? or, is it impossible for a party to hold a piece of property as a hire, with the privilege or with the agreement to purchase at a future day ?

It is said that the plaintiff clothed the person in possession with all the indicia of ownership, and thus enabled her to perpetrate a fraud. But is not the bailee, in every case of bailment, clothed with the indicia of ownership by the mere possession of personal property? Suppose that Mrs. Eewhard had been in possession of the piano under the contract of hiring, and that there had been no stipulation for a sale, would she not have been clothed with precisely the same evidence of ownership? Did the stipulation that she might purchase the property upon a certain condition add anything to the indicia of ownership? Did that stipulation in any way add to her ability to perpetrate the fraud she committed in selling that which wras not hers to sell? -The purchaser did not know of the existence of such a stipulation. He acted solely upon the ground that she was in possession, when he knew that possession alone' was not evidénce of ownership. He was misled by no act of the plaintiff, because the fact which he says conferred upon Mrs. Hewhard the right to sell was not known to him. . . . After giving extracts from the opinion in Dodd v. Arnold, 28 Tex., 98, the brief proceeds:

The doctrine that possession carries with it the evidence of property, so as to protect a person acquiring property in the usual course of trade, is limited to cash, bank bills and bills payable to bearer. Saltus v. Everett, 20 Wend., 287. And our statute has declared that the possession of property, held under a loan, or subject to a reservation or limitation, shall not be deemed evidence of title, unless it has continued for the space of three years, without demand made and pursued by due process of law. Pasch. Dig., 3876.

In the ordinary business transactions, men necessarily place trust and confidence in others, Avhich is often violated or betrayed. The laAV, in determining Avhere the loss shall fall, cannot go into an investigation. of the facts of each particular case to decide Avhich of the parties is the most negligent, but applies to its solution certain gen*357eral rules; and in cases of the character of the one now under consideration, the test is the character of the possession; was it that of a bailee, or of an owner?

If the owner has delivered his property to another, under a contract of bailment, he has not invested him with the right to sell it. On the other hand, if he has sold the property and has delivered possession under a sale, the vendee can be treated as the owner, although the sale is subject to a defeasance. But so long as the contract of sale remains an executory agreement, the power of disposition does not pass; and whether the contract is one of bailment, of an executed, or an executory sale, is to be determined by the agreement of the parties. “ The agreement is just what the parties intended to make it. If that intention is clearly and unequivocally manifested, cadAt qumtio.” Benj. on Sales, 228. In the case at bar, the ability of Mrs. Mewhard to defraud the plaintiff or defendant in this case, is precisely the same whether she held the piano under a hiring or under a sale; and to determine where the loss shall fall, both parties being equally prejudiced by the misconduct of the possessor, the law only determines whether she held the property as a bailee or as owner.

The contract itself in this case shows that she came into possession by hiring, and the character of that possession has not been changed by the happening of the only event that could change it. She never became the owner by the payment of the purchase money. The contract of sale was an executory agreement, to become an absolute sale only upon the payment of the purchase money; and until then, by the express contract of the parties, the property was held under the contract of bailment.

“ If, by the terms of the agreement, the property in the thing sold passed immediately to the buyer, the contract was termed, in the common law, ‘ a bargain and sale of goods; ’ but if the property in the goods was to remain for the time being in the seller, and only to pass to the buyer at a future time, or on the accomplishment of certain conditions, then the contract was called in law an executory agreement.” Benj. on Sales, 3. “ The distinction between the two contracts consists in this: that in a bargain and sale, the thing which is the subject of the contract becomes the property of the buyer the moment the contract is concluded, and without regard to the fact whether the goods be delivered to the buyer or remain in possession of the vendor; whereas, in the executory agreement, the goods remain the property of the vendor. In the one case, A. sells to B.; in the other, he only promises to sell. In the one case, as B. becomes *358the owner of the goods themselves as soon as the contract is completed by mutual assent, if they are lost or destroyed, he is the sufferer. In the other case, as he does not become the owner of the goods, he cannot claim them specifically; he is not the sufferer if they are lost, cannot maintain trover for them, and has at common law no other remedy for breach of the contract than in an action for damages.” Benj, on Sales, 227.

. . . Counsel cited and quoted from 1 Hilliard on Torts, p. 538, sec. 28; also Stevens v. Ellis, 48 Me., 501; Rawson v. Tuel, 47 Me., 506; Palmer v. Hand, 13 Johns., 433; Clark v. Wells, 45 Vt., 4; Zuchtman v. Roberts, 109 Mass., 53, and proceed:

In Crist v. Kleber, 2 Weekly Not. Cas., 158, reported in the Albany Law Journal, vol. XIII, No. 3, January 15, 1876, the rights of a bona fide purchaser, at a judicial sale, of chattels sold as property of bailee, was considered by the supreme court of Pennsylvania.

A. rented a piano to B., with the privilege of purchasing during the term, A. reserving the right to retake the instrument at any time for non-payment of rent. B. neither paid rent nor purchased. It was subsequently sold as B.’s property, at a constable’s sale for unpaid taxes, to C. A. brought replevin against 0. to recover the instrument. C. offered to prove that A. had permitted possession by B. eight months after the term; that B. had declared that he had purchased it, and that, on a former -execution, it had been set apart to B., under the exemption laws. This evidence was held to be properly excluded.. The court, in delivering the opinion, said: “ Possession under a mere bailment for hire is not a constructive fraud, otherwise much of the business of men would be ended, and the poorer the bailee the less would be his ability to hire the use of property needful to him.” To which we add, that the privilege of purchasing given to a bailee did not add an iota to his ability to defraud the public. The indicia of ownership, from possession under a contract of bailment, is precisely the same as when the privilege of purchase is superadded.

It being admitted that a bailee cannot convey a title by sale, why should the fact that he has the privilege of purchase, upon certain conditions with which he has not complied, change the character of his illegal act? The character of his possession remains the same; as between the original parties the contract continues to be a bailment. And, as said by the supreme court of Hew York, in Palmer v. Hand, above cited, “ In a contract betiveen two honest men, who shall be the dupe of a swindler, the strict rule of law must be applied.”

*359Counsel commenting on Hasbrouck v. Lounsbury, 26 N. Y., 598; Smith v. Lynes, 5 N. Y., 41; Austin v. Dye, 46 N. Y., 500, and Maynard v. Anderson, 54 N. Y., contended that they were not in conflict with their position, and that Wait v. Green, 35 Barb., 585, and 36 N. Y., 556, were overruled by subsequent cases in the same court. The brief proceeds:

In Haak v. Linderman, 64 Pa. St., 499 (3 Am. Rep., 612), the judgment rests expressly upon the grounds that, by the terms of the contract, there was an actual sale, accompanied with an actual delivery of the car, and that the contract, by its terms, simply gave a lien to the vendor for the purchase money. The court say: “Hot one of the cases cited by the plaintiff sustains this as a bailment. The furthest they go is, when the contract is a clear bailment, with a superadded condition that, at the end of it, or during its continuance, the bailee should have option to purchase. Such was the ease, of Chamberlain v. Smith, 8 Wright, 431. The possession was, in that case, parted with only on the footing of a bailment. Before the option was exercised, the bailee then parted with the property by sale, and it was sold on execution against his vendee. The bailor gave notice of title, and sued the parties and sheriff seizing the same, and recovered. That accords with the principle stated in the outset of this opinion, and is supported by all the authorities. The other cases cited by the plaintiff in error stand on the same footing. The delivery of the property was on a contract of bailment with a stipulation to purchase. Here the delivery was on a contract of sale, with a reservation of a right of reclamation if not paid for. This right could be exercised only on the grounds of a lien existing in favor of the vendor, which was void as against creditors.”