General Securities Corp. v. Reo Motor Car Co.

WOOD (W. J.), J.,

pro

tem.

Defendant was at the time of the transaction which gave rise to this litigation engaged in the business of selling automobiles to dealers and plaintiff was engaged in the business of buying conditional sale contracts on automobiles from dealers who were selling automobiles to purchasers on such contracts. The car handled by defendant was known as the “Reo,” and one F. S. Stewart was the Reo dealer in the city of Santa Barbara. Stewart conducted a business establishment in that city in which he was engaged in the business of buying and selling automobiles and in which he displayed automobiles for sale to the general public. On January 23, 1922, defendant sold to F. S. Stewart the automobile described in the complaint by conditional sale contract. This automobile was delivered to Stewart and by him displayed for sale in Ms place of business at Santa Barbara. On February 8, 1922,

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Stewart drew up a conditional sale contract purporting to sell the ear to one L. C. Simmons, the contract reciting a valuable consideration. Thereafter, Stewart, in the ordinary course of business and for a valuable consideration, sold the Simmons conditional sale contract to plaintiff. At that time plaintiff did not know that Stewart did not own the automobile or that it had been purchased under conditional sale contract by Stewart, but believed that Stewart was the owner of the automobile and entitled to sell it. Most of the facts are stipulated by the parties. The court found, upon evidence which fully sustains the findings: “That during said period of time said F. S. Stewart bought from the defendant herein many Reo automobiles on conditional sales contract, and that defendant during all of said times knew of, permitted, allowed and directed the said F. S. Stewart to re-sell in his own name on conditional sales contract to the general public ears which it, the said defendant, had sold to him, the said F. S. Stewart, on conditional sales contract before he, the said F. S. Stewart, had paid it, the said defendant herein, the balance due on said conditional sales contract; and permitted and allowed the said F. S. Stewart during all of said times to hold himself out to the general public as being owner of and also as being entitled to sell said ears in his own name, and convey clear title thereto. That the said F. S. Stewart, with the knowledge of the defendant, did not have sufficient money or means to finance or carry on his business or to pay the defendant for cars purchased by him on conditional sales contract, or otherwise, without re-selling such cars so purchased and selling all conditional sales contracts taken by him, the said F. S. Stewart, on the re-sale of said cars to the general public. That this defendant knew at all of said times that the said F. S. Stewart was in his own name re-selling all of the cars sold to him by it on conditional sales contract to the general public on" conditional sales contract, and in order to obtain money to pay the balance due it, the said defendant, he, the said F. S. Stewart, was selling said conditional sales contracts so taken by him in his own name on such re-sales to some finance company, who was in the business of purchasing paper of that kind; and that during said period of time he did sell to the plaintiff herein many of said conditional sales contracts and turned