California Supreme Court Sep 1, 1910 No. L.A. No. 2516.Published
Before: Shaw
Synopsis
The facts are stated in the opinion of the court.
SHAW, J.
Appeal from the judgment upon the judgment-roll alone.
The plaintiff sued to recover damages in the sum of ten thousand dollars for an alleged conversion to his own use by the defendant of five thousand shares of corporate stock, alleged to belong to the plaintiff.
On December 18, 1907, the plaintiff and defendant entered into a series of contracts concerning an automobile belonging to the defendant. There were three documents, each dated and signed and appearing to be separate and distinct contracts, but they were executed simultaneously, as part of the same transaction, they hear the same date and they must all be considered together as constituting the entire contract between the parties.
By the document which we will designate as the first agree
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ment, Muncy leased or hired of Brain the automobile in question for a term ending on June 30,1908. Muncy paid to Brain $29.20 at the execution of the agreement, and agreed therein to pay him the further sums of $25 on January 16, 1908, $37.50 on March 16, 1908, and $2537.50 on June 25, 1908, all of which the agreement expressly declared were paid and to be paid for the rental, hire, and use of said automobile. It further provided that if Muncy failed to pay said rent, or any part thereof when due, or to perform any of the agreements, conditions, or undertakings contained in that instrument, Brain might “demand, take and repossess said automobile, with or without process of law,” and that at the expiration of said term Muncy would return and deliver the same to Brain in good order. The last clause in this document was as follows:
“It is further understood by the parties hereto,-that in the event said party of the second part, (Muncy), complies with all the terms of this agreement, the second party shall then (but not otherwise) have the right to purchase said automobile, and the said first party shall be required to transfer and sell said automobile to said party of the second part, as hereinafter agreed and set forth.” This was immediately followed by an attestation and date and the signatures of the two parties as in execution of the agreement.
The second agreement, the one referred to in the first one by the words “as hereinafter agreed and set forth,” is as follows :—
"In consideration of one dollar and other good and valuable considerations to me in hand paid, I, hereby agree to and with R. E. Muncy, the said party of the second part, to the foregoing lease, that in the event he shall on his part well and truly perform and fulfill all the conditions of said lease and pay as they become due, the different installments of rent, and all other sums therein and herein agreed to be paid, that he will on the 3rd day of July, 1908, provided the said R. E. Muncy shall so desire sell and convey the said automobile described in said lease to the said R. E. Muncy, for the sum of $6.25 then in cash to be paid said undersigned as herein-before set out and agreed upon.
“It is expressly agreed and understood, however, that time shall be of the essence of this contract, and that unless all the conditions of the said foregoing lease shall have been fulfilled
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and performed by the said R. E. Muncy, and the said $6.25 paid as aforesaid, then the privilege to purchase said automobile hereby granted shall be waived and forfeited.
“Los Angeles, California, December 18th, 1907.
“W. C. Brain,
“R. E. Muncy.
"The conditions of the above agreement are hereby accepted.
“Los Angeles, California, December 18th, 1907.
“R. E. Muncy.”
The third agreement appears from its terms and from the findings to have been indorsed on or attached to another instrument whereby Muncy became the owner of the stock in controversy. The first agreement aforesaid was attached to the said third agreement and was referred to therein as “Exhibit A” and made a part thereof. This third agreement was, in effect, a pledge by Muncy to Brain of the five thousand shares of stock as security for the payment of the sums of money which Muncy had by the first agreement agreed to pay to Brain, that is to say, the rental accruing for the use of the automobile during the term of the lease thereof. It was signed by Muncy alone.
Muncy paid the small sums falling due in January and March, but did not pay the $2,537.50 due on June 25, or any part of it. Thereafter, on September 4, 1908, Brain sold the pledged stock at public auction in the manner required by law. (Civ. Code, secs. 3000 to 3005), to satisfy his demand for the aforesaid unpaid rent. To whom it was sold does not expressly appear, but as it is admitted that Brain was in possession of it after the sale we may assume that he was himself the purchaser, if the fact is material. The value of the stock did not exceed the amount of rent unpaid. Muncy did not pay the $6.25 mentioned in the second agreement as the price to be paid by him for the automobile as a condition of the sale thereof by Brain to him on July 3, 1908, but at some time before this action was begun (September 26, 1908), he offered to do so. On June 28, 1908, after Muncy’s failure to pay the rent, Brain demanded possession of the automobile, which Muncy refused to deliver. He did not deliver the automobile to Brain on June 30, 1908, as the first agreement provided he should do, but retained possession thereof. On July 11, 1908, Brain, in an action of claim and delivery against Muncy, ob-
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tamed possession thereof. Judgment in said action was thereafter given in favor of Brain. After Brain sued for possession of the automobile, Muncy demanded of him the possession of the pledged stock, which was refused. Thereupon Muncy, claiming this to be an unlawful conversion of the stock to his •own use by Brain, began the present action to recover the value thereof as damages for the alleged conversion.
Brain, by way of counterclaim, alleges that the stock sold for only fifteen hundred dollars at the sale by him as pledgee, and that after applying this sum on the rent there remained unpaid a balance of $1,072.53, for which he asked judgment. The court made no findings on the facts stated in this counterclaim, but stated as a conclusion of law that defendant was not entitled to recover anything thereon, and gave judgment that plaintiff take nothing by his action and that each party pay his own costs.
It is not asserted that the execution of these contracts was induced or procured by any misapprehension of their effect, or by fraud, mistake, coercion, or undue influence. Muncy entered into the transaction and signed them with accurate knowledge of their terms. His contention is that the several instruments, constituting, as they do, but one contract, did not provide for a lease of the automobile for a fixed term upon a certain rental, with an option, available only after, and in the event of, performance of the prescribed precedent condition, to buy the automobile for $6.25, but that, although in form of the effect just stated, their true legal effect was to provide for a conditional sale of the automobile for the price of $2,635.70, being the aggregate of the several sums named as rental and the $6.25 stated as the price in the third agreement.
Upon this theory of the effect of the contracts he claims that Brain had but two alternatives upon a failure of performance by Muncy; he could either take the automobile back, or he could leave it with Muncy and obtain- payment of the price by a sale of the pledged corporate stock, but could not, after having elected to retake the automobile, retain his right as pledgee, or recover the amount due by the contract nominally as rent, but really, as is claimed, as the price thereof.
The eases hold that where there is a contract which by its terms, or by the liberal interpretation sometimes to that end
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indulged by the courts, constitutes an agreement for the sale of personal property, the title to pass only upon the condition that the price is paid and not until then, the title in the mean time remaining in the seller, possession being given to the buyer, and providing that the seller may retake possession upon default in payment, the seller, upon such default, is put to his election either to retake possession and relinquish all right to the price, or to recover the price and relinquish the right to retake possession, and that if he pursues one remedy he loses his right to the other.
(Parke & Lacy Co.
v.
White River L. Co.,
101 Cal. 37, [35 Pac. 442];
Holt Mfg. Co.
v.
Ewing,
109 Cal. 353, [42 Pac. 435].)
The question whether or not the transaction was, in legal effect, a lease or a conditional sale, is not necessarily involved in the determination of this appeal, and therefore we need not consider it. Conceding, for the sake of the argument, that it was a conditional sale, it would nevertheless be a sale upon the conditions stated in the contracts, and not upon any other terms or conditions. Although Muncy may even now have the right to buy, he can only do so upon the terms and at the price fixed by the contract, and, in the mean time, his right to possession of the automobile, his obligations' to pay the sums agreed on, and the rights of Brain concerning the same, are all to be determined by the provisions of the contract in that behalf. The sum of $2,537.50 was to be paid on June 25. The obligation to pay it at that time was not dependent on any conditions, concurrent or otherwise, but was absolute, and such payment did not operate to transfer title. Immediately upon default in such payment, Brain became entitled to enforce payment, and this right was neither 'dependent nor concurrent upon the delivery or retention of the possession of the automobile, nor upon any other act or event. Brain was therefore within his contract rights when he enforced payment
pro tanto,
by a lawful sale of the pledged stock. "With regard to the possession of the automobile, the provision was that it should be delivered to Brain on June 30th. Muncy’s right of possession ceased on that day absolutely and unconditionally. The prompt payment of the $2,537.50 on June 25th would not relieve him from the obligation to deliver the automobile in good order to Brain on June 30th. He could not, under the conditions of the contract, again acquire a right to
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possession until July 3, in any event, and then only upon full payment of the price and an exercise of the option given by the second instrument. He does not claim that he offered to exercise that option prior to the suit of Brain in claim and delivery, or that he ever, under the terms of the contract, gained a right to exercise it. Hence, he never was entitled to the possession after June 30th, and Brain was, from and after that day, entitled thereto. His conduct in retaking possession, whether by suit or not, was not a violation of the rights of Muncy under the contract. Nor was it inconsistent with Muncy’s right to purchase.
(Miller
v.
Steen,
30 Cal. 407, [89 Am. Dec. 124];
Liver
v.
Mills,
155 Cal. 463, [101 Pac. 299].) A right of the buyer to complete a purchase may exist, notwithstanding the fact that the seller has possession. If the provisions making time of the essence of the contract, and limiting the right to buy to the very day fixed, are to be taken literally and strictly enforced, then the other provisions are to be given like force and there was no agreement of sale at all, but a lease, accompanied by a mere option to buy, an option never exercised and dependent upon conditions which have never occurred, in which case the money- would be due absolutely as rent and not upon a purchase, and Brain would have a clear right to sell the pledged stock for its payment. If they are not to be so construed or enforced, but taken as a conditional sale, then the provisions making time of the essence, and requiring the option to be exercised on the precise day fixed, were waived by Brain when he elected to take the price, after it was past due, and, although he was entitled to possession of the automobile after June 30th, by virtue of the provision to that effect, he would hold it subject to the right of Muncy to complete his purchase by paying the balance due Brain upon the price after deducting the sum realized by the sale of the pledged stock.
(Liver
v.
Mills,
155 Cal. 463, [101 Pac.
299]; Miller
v.
Steen,
30 Cal. 407, [89 Am. Dec. 124].) In either alternative the sale by Brain of the pledged stock was lawful and not inconsistent with his right to take possession of the automobile and hold it, at least until a proper offer to buy was made by Muncy. The rule laid down in the decisions first above cited, that upon a conditional sale the seller cannot retake the property and also recover the contract price, applies where the property is given
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into the buyer’s possession by virtue of the contract of sale until the time when payment is to he completed and the passing of the title to the buyer is concurrent with and dependent upon the payment of the price. It does not apply where the contract declares that the seller shall retain the possession, or where, as here, it provides for its redelivery to him at a fixed date, different from the time for the completion of the sale and passing of title, and not dependent thereon. In cases of the latter character the seller may recover the price and retain possession until full payment thereof is made. There was, therefore, no unlawful conversion of the stock.
.The judgment is affirmed.
Sloss, J., and Angellotti, J., concurred.
Hearing in Bank denied.
Beatty, C. J., dissented from the order denying a hearing in Bank.
AI Brief
AI-generated · verify before citing
Holding. A seller who holds a security interest in pledged property may lawfully sell that property to satisfy an unpaid debt even if the seller also retakes possession of the underlying goods, provided the contract terms allow for both possession and payment recovery.
Issues
Whether a seller's repossession of goods and sale of pledged stock constitutes an unlawful conversion of the stock.
Whether the rule prohibiting a seller from both retaking possession and recovering the price in a conditional sale applies to this contract.
Disposition. affirmed
Quotations verified verbatim against the opinion
“In either alternative the sale by Brain of the pledged stock was lawful and not inconsistent with his right to take possession of the automobile and hold it, at least until a proper offer to buy was made by Muncy.”
“There was, therefore, no unlawful conversion of the stock.”