In Schreyer, the statute at issue made it unlawful to sell a motor vehicle "unless the vendor or donor shall at or before such sale or gift execute in the presence of witnesses a bill of sale in duplicate, delivering both copies to the purchaser."Summary of this case from Thornton v. State Farm Mutual Auto Insurance Co. Inc.
Nos. 21364 and 21530
Decided May 22, 1929.
Motor vehicles — Bill of sale act — Section 6310-3 et seq., General Code — Penal statutes, and in derogation of common law, strictly construed — Contract, conveying motor vehicle without complying with statute, not unlawful — Assignment or transfer, accompanied by delivery of possession, valid between parties — Chattel mortgage executed by mortgagor without bill of sale — Valid between parties, and has priority over subsequent purchasers and mortgagees.
1. Sections 6310-3 to 6310-14, inclusive, General Code, are penal statutes and those statutes are also in derogation of the common law and should be construed according to their exact and technical meaning, and their application should be limited to cases clearly described within the words used.
2. Those sections declare it to be unlawful to sell or give away a motor vehicle unless at or before such sale or gift the seller shall execute and deliver a bill of sale therefor, and prescribe other procedure in perfecting transfer of title. They do not declare the contract itself to be unlawful if executed in a manner other than that prescribed.
3. Any assignment or transfer of a motor vehicle (not violative of the uniform sales laws of this state), which is not executed and delivered in compliance with Sections 6310-3 to 6310-14, General Code, but which is accompanied by delivery of possession, is nevertheless a valid contract between the parties thereto.
4. A note secured by a chattel mortgage upon a motor vehicle in the possession of the mortgagor at the time of the execution of the mortgage, though the mortgagor had at the time no bill of sale therefor executed in compliance with Sections 6310-3 to 6310-14, General Code, is nevertheless a valid mortgage between the parties, and, if and when said mortgage is filed with the county recorder of the county where the mortgagor resides, it has priority over subsequent purchasers and mortgagees in good faith. ( Ohio Farmers' Ins. Co. v. Todino, 111 Ohio St. 274, and Helwig v. Warren State Bank, 115 Ohio St. 182, overruled.)
ERROR to the Court of Appeals of Delaware county.
ERROR to the Court of Appeals of Fayette county.
These two causes are disposed of together because they involve the same legal questions.
Cause No. 21364 originated in the court of common pleas of Delaware county as an action in replevin to recover possession of an automobile. On October 27, 1925, the Central Ohio Peerless Company, a dealer in automobiles, sold an automobile to one Seymour. No bill of sale was delivered concurrently with the sale, but as part payment of the purchase price Seymour gave his note secured by a chattel mortgage upon the automobile. Two days later, on October 29, 1925, the dealer indorsed the note and assigned the mortgage to the Commercial Credit Company. The mortgage was recorded in Franklin county, where the mortgagor Seymour resided, on November 17, 1925. On November 1, 1925, the Central Ohio Peerless Company executed and delivered to Seymour a bill of sale, which, except as to the time of execution and delivery, was in compliance with Sections 6310-4 to 6310-14, inclusive, General Code. The bill of sale was filed in the office of the clerk of courts on May 18, 1926. Prior to June 10, 1926, Seymour delivered possession of the car to the Central Ohio Peerless Company, which company on June 10, 1926, sold the car to Schreyer and executed a bill of sale to him in the usual form, which bill of sale was filed with the clerk of the court of common pleas of Franklin county on June 14, 1926. On the same day, to wit, June 14, 1926, Seymour executed and delivered to the Central Ohio Peerless Company a bill of sale which was on the same day filed with the clerk of courts of Franklin county.
The installment payment upon the note and mortgage, given by Seymour, and later transferred to the Commercial Credit Company, not being paid, the credit company elected to and did declare the entire balance of the note and mortgage due and payable, and on October 28, 1926, demanded of Schreyer possession of the vehicle, and, upon demand being refused, brought this action in replevin. Schreyer did not give a redelivery bond, but, on the other hand, defended the action and sought recovery of judgment for the value of the automobile. Upon trial of the action, judgment was rendered in his favor in the sum of $725, the appraised value of the vehicle. The Court of Appeals affirmed the judgment.
Cause No. 21530 originated in the court of common pleas of Fayette county, Ohio, as a suit to replevin an automobile.
Naomi Anderson was married to James H. Anderson on January 28, 1927, in New York City. As part consideration of the marriage contract James H. Anderson gave Naomi Anderson an automobile. James H. Anderson resided in Fayette county, Ohio, and at the time of making said gift mailed an application from New York to the auto club of Fayette county for a license in the name of his wife. The license was issued February 10, 1927, and at the same time the secretary of the club mailed to Anderson in Now York a bill of sale to be executed, and the bill of sale was in fact executed, though imperfectly, and verified, though imperfectly, and delivered to Naomi Anderson in New York state, February 14, 1927. At the time of the delivery of the bill of sale, witnesses had not signed it, and the grantor had not signed the verification. When it was forwarded to the auto club with instruction to file it in the clerk's office, the clerk refused to file it. When Anderson and his wife returned to Fayette county the sheriff levied an execution upon the automobile, as the property of Anderson, to recover upon a judgment theretofore rendered against him in that county. Naomi Anderson thereupon brought an action in replevin. Glen L. Smith, the execution creditor, was substituted for the sheriff, and the cause proceeded. No redelivery bond was given by the defendant Smith. The defects in the bill of sale were not cured until after the levy of execution.
All these matters being developed at the trial, motion was made at the close of all the evidence to direct a verdict in defendant's favor. The motion was granted as to the issue of ownership and possession of the automobile, and the case was submitted to the jury to determine the value of the car. Judgment was thereupon rendered in favor of the defendant in the sum of $975.
In directing a verdict the trial court found that by reason of the bill of sale being defectively executed, and no proper bill of sale having been delivered or filed with the clerk of court prior to execution, the transaction was void, and that no title passed. The Court of Appeals affirmed the judgment. The record has been certified to this court on the ground of public interest.
Mr. W.B. McLeskey, for plaintiff in error in cause No. 21364.
Mr. J.R. Selover and Mr. H.D. House, for defendant in error in cause No. 21364.
Messrs. Rankin Rankin and Mr. A.C. Patton, for plaintiff in error in cause No. 21530.
Mr. Troy T. Junk, for defendant in error in cause No. 21530.
The judgment in the court of common pleas and the affirmance of the judgment in the Court of Appeals in cause No. 21364 were rendered upon the theory that the failure to execute a bill of sale in favor of Seymour at the time of his purchase, and the consequent failure to file a bill of sale with the clerk of the court within three days thereafter, gave Seymour no title to the automobile, and therefore gave no validity to the chattel mortgage executed by him, and that the Central Ohio Peerless Compay was therefore free to give a bill of sale to Schreyer at a later date.
This case turns entirely upon the legislative intent in the enactment of Sections 6310-3 to 6310-14, inclusive, General Code. Those sections were enacted April 29, 1921, (109 Ohio Laws, 330), and the purpose of the act was, as expressed in its title: "To prevent traffic in stolen cars, require registration and bill of sale to be given in event of sale or change in ownership of motor vehicles." Section 6310-4 declares it to be "unlawful to sell, convey, give away, transfer, exchange, receive, purchase or obtain any 'motor vehicle' or 'used motor vehicle' within this state, except in the manner and subject to the conditions hereinafter provided." Section 6310-5 declares it to be unlawful to sell or give away a motor vehicle unless the vendor or donor shall at or before such sale or gift execute in the presence of two witnesses a bill of sale in duplicate, delivering both copies to the purchaser. That section also provides in detail what the bill of sale shall contain. Section 6310-9 requires such bill of sale to be verified by the seller before a notary public or other officer before the delivery. It further provides that any bill of sale not verified before delivery "shall be null and void and of no effect in law." Section 6310-10 provides for filing a bill of sale with the clerk of courts "within three days immediately thereafter." Section 6310-13 provides: "No person residing in this state shall drive, use or operate, a motor vehicle or 'used motor vehicle' upon the public highways thereof, without having a 'bill of sale' for the motor vehicle as defined in this act, or without having first filed, with the clerk of courts, of the county in which his residence is established, a sworn statement containing the name," etc., and having obtained from said clerk a certified copy of such statement. Section 6310-14, as amended in 1923, 110 Ohio Laws, 402, provides severe penalties for violation of the provisions of the act, the minimum penalty being a fine of $25, and the maximum $5,000, or imprisonment for not more than five years, or both.
The problem in these cases is one of interpretation of statute. There is no question of legislative power. It is not doubted that the legislature in the exercise of the police power may impose severe restrictions, not only upon the manner of executing contracts, but also upon the right to enter into certain kinds of contracts at all. The most familiar example of the latter is the prohibitions against gambling contracts, and, of the former, the statute of frauds and perjuries. We are here concerned with a question of legislative intent to be determined by applying well-settled canons of interpretation. There is no language of doubtful meaning to be construed, or contradictory provisions to be reconciled. We need only ascertain the policy and purpose of the act, the occasion and necessity of its enactment, and the mischief to be suppressed. Fortunately the legislature has furnished an aid in stating in the title that it is to prevent crime and to require registration as a means to that end. While the title is no part of the substantive law, it is proper to look to the title to ascertain the legislative purpose and intent, and, if the body of the act contains no language which is in conflict with that expressed purpose, the inquiry is greatly facilitated. The force to be given to a title as a factor in interpretation of a statute in the state of Ohio surpasses that to be given in some of the states, because Section 16, Article II, of our Constitution, requires: "No bill shall contain more than one subject, which shall be clearly expressed in its title." This rule is declared in United States v. Fisher, 6 U.S. (2 Cranch), 358, at page 386 ( 2 L.Ed., 304); and again in United States v. Palmer, 16 U.S. (3 Wheat.), 610, at page 631 ( 4 L.Ed., 471). In Coosaw Mining Co. v. South Carolina, ex rel. Tillman, 144 U.S. 550, at page 563, 12 S.Ct., 689, 692 ( 36 L.Ed., 537), it is stated: "This rule is especially applicable in states whose constitutions, like that of South Carolina, provide that 'Every act or resolution, having the force of law, shall relate to but one subject, and that shall be expressed in the title' " — citing Myer v. Western Car Co., 102 U.S. 1, 11, 12 ( 26 L.Ed., 59).
The purpose expressed in the title to the act of 1921 is in perfect harmony with the text of the act. The act requires vendors and purchasers of motor vehicles to observe certain prescribed formalities in transferring and registering such vehicles, and imposes severe penalties upon non-observance. It is therefore in every sense a penal statute, and yet it relates to a subject-matter which is highly respectable and a business which employs more capital and labor than almost any other kind of property or business. The statute does not seek to discourage or limit or control the volume or character of the business, but rather to encourage it by affording additional protection from fraud and theft to those who deal in such property. Being a penal statute, it must be strictly construed. That is to say, it should be construed according to its exact and technical meaning, recognizing nothing that is not expressed, and limiting its application to cases clearly described within the words used. A careful study of the act shows that it does not declare any contract to be unlawful, but that it shall be unlawful to proceed in any except a prescribed way in executing the contract. The authorities divide such statutes into two classes: First, those which forbid certain contracts to be made, or certain acts to be done; and, second, those which prescribe a certain mode and manner of doing the act, or the procedure to be followed in making the contract. The greater weight of authority holds that, if the act or contract is not prohibited, and the act is done otherwise than in the manner prescribed, or if the contract is made in form other than that provided, the unlawful manner may be punished, but the transaction itself is held to be legal. This court has rather recently had occasion to deal with this subject in the case of Warren People's Market Co. v. Corbett Sons, 114 Ohio st., 126, 151 N.E. 51. That case had under interpretation Section 6373-1 et seq., General Code, known as the "Blue Sky Law," which makes rather exacting requirements as to the mode and manner of issuing securities in this state. This court held that it was not the purpose of the legislature in imposing express penalties for violation of the law to render void any contract based on the prohibited act. The case of Tod v. Wick Bros. Co., 36 Ohio St. 370, discusses the same proposition.
There is another rule of interpretation applicable to these cases. Ordinarily a contract of purchase and sale of a motor vehicle is not different from a contract relating to any other kind of personal property. At common law, a motor vehicle can be bought and sold by parol contract. Any statute, therefore, which limits, or prescribes a different form of contract, or a different procedure, is in derogation of common right and of the freedom of contract, and for that reason the statute is subject to the rule of strict construction. The former decisions of this court clearly establish this rule. Wright v. Munger, Wright, 614; State, ex rel. Whiteman, v. Chase, Gov., 5 Ohio St. 528; Pittsburg, C. St. L. Ry. Co. v. Hine, Admx., 25 Ohio St. 629, 634; Felix v. Griffiths, 56 Ohio St. 39, 45 N.E. 1092; Palace Hotel Co. v. Medart, 87 Ohio St. 130, 138, 100 N.E. 317, Ann. Cas., 1913E, 860; Miller, Exr., v. Kyle, 85 Ohio St. 186, 97 N.E. 372. Subjecting the act of 1921 to this test of interpretation, we have again carefully analyzed the statute to ascertain to what extent, if at all, it limits the right of contract, and again it must be stated that we find no provision even tending to impose a limitation.
Nowhere in the act do we find any express provision or any language which may fairly be interpreted to mean that a sale or gift otherwise than in compliance with the act shall render the sale void and of no effect. Nowhere in the act do we find an express provision or language capable of being interpreted to prohibit sales or gifts otherwise than in compliance with the statute, or creating any civil liability for such failure. The act is in every sense a penal statute imposing severe penalties, and for the avowed purpose, as expressed in its title, to prevent crime. This court has considered the provisions of this act in three previous decisions.
The first was the case of Ohio Farmers' Ins. Co. v. Todino, 111 Ohio St. 274, 145 N.E. 25, 38 A. L. R., 1118, in which a strict interpretation was made, and in which it was held that a policy of insurance, containing a provision that the insurer would not be liable if the insured be not the sole and unconditional owner of the automobile, would not be enforceable if the owner had not complied with the provisions of these statutes. In that case a husband had given the automobile to his wife, but did not at the time execute a bill of sale to her. This court held that, by reason of that omission, the wife was not the sole and unconditional owner of the automobile. There was no other defect in her title to the car. Those statutes were before this court in that case for the first time, and it seemed to this court at that time that the legislative intent could only be made effective by a strict interpretation of the statute. The next consideration given by this court was in the case of Helwig v. Warren, State Bank, 115 Ohio St. 182, 152 N.E. 298. In that case a bill of sale had been executed, not for the purpose of transferring title, but in the nature of a chattel mortgage, although no defeasance clause was written into the bill of sale. The bill of sale was filed with the clerk, and the statute fully complied with in every way. Inasmuch as Section 6310-10 provided for the execution of a bill of sale to one "to whom title has in any manner been passed to a motor vehicle," it was held in that case by a divided court that this was notice to the world that the bank had some rights, and that any subsequent purchaser took title subject thereto. The only question in that case was whether the bill of sale should also have been filed as a chattel mortgage, in order to comply with the laws governing mortgages of personal property. It was therefore held that the bank holding the bill of sale had such title that its claim was required to be paid before the purchaser would have a clear title.
The third case to be considered by this court was Metropolitan Securities Co. v. Warren State Bank, 117 Ohio St. 69, 158 N.E. 81. That case differed from the Helwig case only in the fact that the Helwig case related to conflicting claims of persons each of whom held a bill of sale. In the Securities Co. case, one claimant held bills of sale given as security for loans, but containing no defeasance clause, properly executed and filed in the office of the clerk of courts, as required by the act of 1921. The other claimant, also a creditor, held chattel mortgages which disregarded the act of 1921, but were executed in full compliance with the chattel mortgage laws. It was decided that the chattel mortgage laws have application to mortgages of all goods and chattels, including motor vehicles, and that a bill of sale intended to operate as a mortgage must therefore be filed in the office of the county recorder. In giving priority to the chattel mortgages, this court departed to some extent from the rigor of the two earlier cases. It is quite certain that the conclusions reached in the third case could not have been reached without a departure from the strictness of interpretation applied in the first two cases.
We have examined the decisions of other states having automobile registration laws and find that the courts of California, Colorado, Iowa, Texas, Minnesota, and Montana have placed a liberal interpretation upon their laws and hold the contracts not to be void, even though an omission to comply with the laws is an unlawful act and therefore punishable. The states of Kansas, Missouri, New Jersey, and Oregon have held to a more strict interpretation of their statutes. It will be found, however, that the statute in Missouri declares the sale to be fraudulent and void unless the statute is complied with. The New Jersey statute is strictly a penal statute, and, while it is held that the instrument is not effective to convey title, it has nevertheless enough vitality to be the basis of an action for specific performance. The Oregon courts hold the sale to be invalid, yet hold that the vendor may replevin and recover the value of its use, though he could not recover on the note given to evidence the purchase price. The decided weight of authority in the decisions of other states is in favor of interpreting the statutes as penal statutes, but not affecting the title or right of possession. The state of Colorado, having a statute quite similar, in Forney v. Jones, 76 Colo. 319, 231 P. 158, held that a secondhand car could be conveyed by a valid bill of sale, notwithstanding the bill of sale to the first buyer was not recorded as required by the statute. The same court in Williams v. Stringfield, 76 Colo. 343, 231 P. 658, held that the failure to record an assignment of an automobile did not prevent passing of title, and that, because the statute contained a provision for a penalty, but no provision for avoidance of the contract, sales in violation thereof would not be void. In Dunlop v. Mercer, 156 F., 545, the United States Circuit Court of Appeals of the Eighth Circuit had under consideration a statute of the state of Minnesota relating to conditional sales, and it was held: "The general rule that illegal contracts are void is not of universal application. It is qualified by the exception that where a contract is not evil in itself, and its invalidity is not denounced as a penalty for its violation by the express terms of the statute, or by rational implication from the language of the statute which it violates, and that statute prescribes other specific penalties, it is not the province of the courts to do so, and they will not thus affix an additional penalty not intended by the law making power. The true rule is that the court should carefully consider in each case the entire statute which prohibits an act under a penalty, its object, the evil it was enacted to remedy, the effect of holding contracts in violation of it to be void, for the purpose of ascertaining whether or not the legislature intended to make agreements violative of it void, and if from all these considerations it is manifest that the legislature had no such intention, such contracts should be sustained and enforced; otherwise, they should be adjudged void."
In Harris v. Runnels, 53 U.S. (12 How.), 79, 13 L.Ed., 901, the United States Supreme Court laid down a rule which has never been overruled, but which has been followed in a variety of cases: "Where a statute prohibits an act or annexes a penalty to its commission, it is true that the act is made unlawful, but it does not follow that the unlawfulness of the act was meant by the legislature to avoid a contract made in contravention of it."
That case involved a Mississippi statute which provided that slaves should not be brought into the state without a previous certificate signed by two freeholders, with a certificate of the clerk of the courts from which they came certifying that the signers were reputable freeholders. Slaves were brought in without such certificate and sold, and it was held that the contract was not void, but that the purchaser could be compelled to pay his note given for the purchase money.
The state of Texas has a statute similar to the Ohio statute, and it was held in Shipp Buick Co. v. Tolbert (Tex.Civ.App.), 296 S.W. 329, that a note and mortgage given in exchange of automobiles were not void because in violation of criminal statutes regulating sale of secondhand cars by dealers. The same rule was declared in Moore v. Galey (Tex.Civ.App.), 286 S.W. 679, and in Granger v. Ponder (Tex.Civ.App.), 286 S.W. 668.
In Hennessy v. Automobile Owners' Ins. Assn., (Tex.Civ.App.), 282 S.W. 791, 46 A. L. R., 521, it was held that a purchaser of an automobile who held no bill of sale, as required by the statute, and who had also sold it to another without compliance with the statute, would be held to have an insurable interest therein to the extent of the amount due on buyers' notes, and it was so declared upon the ground that the statute did not provide that such sales are void or that no title would pass, but was enacted to prevent theft of motor vehicles.
In Security Finance Co. v. Hendry, 189 N.C. 549, 127 S.E. 629, the Supreme Court of North Carolina held that failure to comply with the provisions of a statute requiring one carrying on business under an assumed name to file a certificate in the office of the clerk of the superior court does not render contracts by such person void.
The same court in Carolina Discount Corp. v. Landis Motor Co., 190 N.C. 157, 129 S.E. 414, in construing an automobile act similar to the Ohio act of 1921, held the act to be a police regulation to protect the general public from fraud and theft, and that it did not interfere with the chattel mortgage laws of the state. It was further held in that case, that, notwithstanding the stringent provisions of the motor vehicle act, the rule that sale of personal property need not be evidenced by a written instrument in order to be valid was of such long standing before the enactment of a motor vehicle registration act that the court would not assume that the legislature intended to change it in the absence of an express provision to that effect.
Notwithstanding the former decisions of this court already referred to, in the retrospect of the last five years and in the light of the results of the decisions of the lower courts which have followed the decisions of this court, the majority of this court at this time are constrained to the view that the court's former decisions have not expressed the true legislative intent. The automobile has revolutionized twentieth century civilization in many ways. Those influences have progressed so rapidly and have permeated so many fields of endeavor that they have increased the difficulties of legislation and at the same time the difficulties of the interpretation of legislation. When the act of 1921 was adopted, the evil of the theft of automobiles was so acute that the legislature doubtless felt justified in resorting to extreme measures to remedy the evil. When the Todino case was decided it seemed best to this court to place a strict interpretation on that statute and to give the application of the statute the widest range. The situation in matters of insurance did not seem hard to remedy, and it did not seem that any great hardship would be imposed upon owners of automobiles in requiring them to have a bill of sale properly executed in order to obtain valid insurance. Each case which has come before the court since that time has presented much greater difficulties. The courts are now frequently confronted with the problem of determining the conflicting rights of ownership, and the rights of creditors, and it has presented situations of a very different character.
The decisions of the lower courts in the instant case have held that omissions to faithfully comply with the statute at the time it should have been complied with cannot be cured. If the statute should be so construed at this time as to deny validity to any transfer of title, where the statute has not been faithfully complied with, and if being so construed the statute should be literally and strictly enforced, many curious situations and entanglements would occur. If the bill of sale should not be executed until after the sale, or, being executed, should not be filed within three days immediately thereafter, and if it should be held that time is of the essence of this provision of the statute, then the title would rest nowhere. The seller has received the equivalent and no longer has any just claim. The purchaser has paid full consideration. He has received nothing in return. By the provisions of Section 6310-13 he cannot license or use the car on the highways. If the Todino case is to be followed, he cannot insure it against fire or theft. Under such circumstances he would not be required to pay taxes. The car would become a bit of flotsam cast adrift upon the sea of senseless legislation. The purchaser could not convey it back to the dealer, because immediately upon the first sale it becomes a used motor vehicle under the definition of that phrase in Section 6310-3, and Sections 6310-8 and 6310-10 require that he must make delivery of the duplicate bill of sale obtained from the clerk of the court, which of course he would not have.
Having the benefit of the experiences of the past eight years, and having observed this law in operation for that period, and having observed the difficulties which have grown out of the interpretation of that statute by the former decisions of this court, the majority of this court are of the opinion that the Todino and Helwig cases should be overruled. In so doing we lay down a few propositions all of which apply to these cases.
The act of 1921 had a definite purpose, which is expressed in its title. It is a penal statute which was not intended to affect the validity of contracts, or titles, or rights of property. It was not designed to repeal or interfere with the statutes relating to conditional sales, chattel mortgages, or the uniform law of sales in transactions relating to motor vehicles. Its provisions apply only to the statute relating to the sale of chattel property by making special procedure to govern the transfer of title to motor vehicles. By virtue of its provisions purchasers of motor vehicles may unreservedly rely upon the files in the office of the clerk of courts in ascertaining the title to motor vehicles. But a failure to execute bills of sale concurrently with the making of sales of motor vehicles, or failure to file a bill of sale within three days immediately thereafter, will not ipso facto render a transfer void. A sale of a motor vehicle not accompanied by a bill of sale executed in compliance with the act of 1921 is not void, but is effective between the parties. If a bill of sale is executed in proper form, though not executed at the time of making the sale, it is nevertheless a valid instrument when executed. A bill of sale properly executed either at the time of sale or at any time subsequent thereto becomes effective as against subsequent purchasers from the time of filing in the office of the clerk of courts, even though not filed within three days immediately thereafter.
From the foregoing principles it follows, in cause No. 21364, that possession of the automobile having been delivered to Seymour, and Seymour having paid part of the purchase price, and having executed and delivered his note and chattel mortgage for the balance, the contract became valid between the parties. The Central Ohio Peerless Company having negotiated the note and the mortgage to the Commercial Credit Company, and no rights of creditors having intervened, the Commercial Credit Company became a valid purchaser of the mortgage, and a record of that mortgage would be constructive notice to all subsequent purchasers and mortgagees. Seymour having received a bill of sale properly executed on November 1, 1925, and having filed the same in the office of the clerk of courts of Franklin county on May 18, 1926, and the rights of no other purchasers having intervened, his title became good as to all persons except the mortgagee. When Schreyer purchased the automobile on June 10, 1926, he had constructive notice of the sale made by the Central Ohio Peerless Company to Seymour, by reason of the bill of sale which was filed in the office of the clerk of the courts of Franklin county on May 18, 1926. Having that notice, he was put upon inquiry concerning chattel mortgages given by Seymour, and was therefore bound to examine the files in the office of the county recorder of Franklin county, and must therefore be held to have constructive notice of the chattel mortgage held by the Commercial Credit Company. The issues joined between the Commercial Credit Company and Schreyer must therefore be resolved in favor of the Commercial Credit Company, and the judgments of the Court of Appeals and of the common pleas must therefore be reversed.
In cause No. 21530, one additional question arises.
Section 6310-9 provides: "Any bill of sale not verified before delivery as hereinbefore provided shall be null and void and of no effect in law." This is the only provision in the Automobile Registration Act which affects the validity of the transaction. That portion of the statute being very specific, it must be held that the bill of sale, as it existed at the time of the levy of execution, was wholly invalid, and the transaction stood as though no bill of sale had been executed or delivered. Though a defectively executed bill of sale, which by the terms of the statute is absolutely void, adds nothing to the title of Mrs. Anderson, it does not follow that she had no title. In accordance with the principles herein declared, a bill of sale was not necessary as between the parties, and the court therefore erred in holding that she had neither the right of possession nor ownership.
At the trial of this cause issue was joined upon the right of Anderson to transfer his automobile to his wife, by reason of his claimed insolvency, and therefore in violation of rights of creditors. It is evident that both the trial court and Court of Appeals have followed the principles declared in the Todino case. That case having been declared to be unsound, the ruling of the common pleas court on the question of possession and ownership is likewise unsound, and the cause should therefore be remanded to be again tried upon the question of bona fides in the transfer from Anderson to his wife.
KINKADE, ROBINSON, MATTHIAS and ALLEN, JJ., concur.
JONES, J., concurs in the judgment.
I am unable to concur in the reversal of the Todino case, 111 Ohio St. 274, 145 N.E. 25, 38 A. L. R., 1118, and the construction placed upon Sections 6310-3 to 6310-14, General Code, known as the Motor Sales Act.
The paramount question is what was the legislative intent in the passage of the act under consideration.
In order to ascertain that intent, a consideration of the title is proper. The same provides: "An act to prevent traffic in stolen cars, require registration and bill of sale to be given in event of sale or change in ownership of motor vehicles." 109 Ohio Laws, 330.
In the first place, the interpretation placed upon the title in the majority opinion is far too narrow, in that it attempts to establish that the sole purpose of the act was to prevent traffic in stolen cars, and thus to reach a conclusion that the statutes in question are exclusively penal in nature. An examination of the entire act discloses that the bill related to the single subject of the manner of acquiring and transferring title to motor vehicles. The language of the title is broad enough to sustain a construction that such was its purport, for no reference is made in the act itself to stolen cars, although the bills of sale and registration required by the act would tend to prevent such traffic.
Again, these sections are found in Part Second of the General Code, Title II, to wit, Police Regulations, appertaining to a wide range of matters relative to social and economic conditions upon which the state, in the exercise of its police power, finds it necessary to legislate. It is conceded that this act is a proper exercise of police power by the legislature, and, as indicated, it is placed in that portion of the General Code which affects civil rights and liabilities, even though a penalty may be provided, as shown by a wide range of subjects referred to in Part Second, Title II, Chapters I to 34, of the General Code.
When the legislature desired to make a purely penal section with reference to motor vehicles, the same is found in the Penal Code, being Part Fourth, Title I, Chapter 5. It is evident that the legislature intended to distinguish between the exclusively penal sections with reference to motor vehicles, such as 6310-1 and 6310-2, relative to lights on automobiles, and 6310-3 to 6310-14, having to do with the sale of motor vehicles, because a special provision was made in the Penal Code by the enactment of Section 12614-1, which specifically relates to Sections 6310-1 and 6310-2 and provides a penalty for the violations thereof; whereas, Sections 6310-3 to 6310-14 have no provision for their violation made in the Penal Code, but the penalty is found in the act itself, to wit, Section 6310-14. If the legislature was not satisfied with this assignment of section numbers by the attorney general, opportunity has been afforded to change or alter the same.
That the legislative intent was to make sales in disregard of this act (Sections 6310-3 to 6310-14) not only unlawful, but void, is evidenced by Section 6310-4, which provides, "It shall be unlawful to sell, convey, give away, transfer, exchange, receive, purchase or obtain any 'motor vehicle' * * * within this state, except in the manner and subject to the conditions hereinafter provided," and by Section 6310-9, providing: "Each bill of sale shall be duly verified by the seller or other person as defined in section 1 [G. C. § 6310-3] of this act. * * * Any bill of sale not verified before delivery as hereinbefore provided shall be null and void and of no effect in law."
It is hardly to be presumed that the legislature intended that a bill of sale not verified before delivery should be "void and of no effect in law," but that the sale itself should be lawful and enforceable which had ignored the requirement of giving any bill of sale at all. It is claimed that the act makes no provision declaring sales in violation thereof to be void, hence such sales are enforceable. Such provision was unnecessary, as it is a generally accepted doctrine that a statute, which penalizes an act prohibits it; that a penalty implies a prohibition. An illegal sale is a void sale.
The early eighteenth century case of Bartlett v. Vinor, Carthew's English King's Bench Reports, 251, 90 Eng. Rep., 750, concludes with a note by Lord Chief Justice Holt that "Every contract made for or about any matter or thing which is prohibited and made unlawful by any statute, is a void contract, tho' the statute itself cloth not mention that it shall be so, but only inflicts a penalty on the offender, because a penalty implies a prohibition, tho' there are no prohibitory words in the statute."
This doctrine has been quite generally followed in America, as evidenced by the following decisions:
"A contract is void if prohibited by statute, though the statute only inflicts a penalty, because such penalty implies a prohibition." Vanmeter v. Spurrier, 94 Ky. 22, 21 S.W. 337.
"If the statute imposes a penalty upon the act done, this will make the contract void, in like manner as if it were in terms prohibited, because a penalty implies a prohibition." Miller v. Post, 83 Mass. (1 Allen), 434.
"It is an established rule of law, supported by uniform authority, that when a statute goes no further even than to impose a penalty for the doing of an act, a contract founded on such act as a consideration is void, although the statute does not pronounce it void, nor expressly prohibit it." Dudley v. Collier Pinckard, 87 Ala. 431, 6 So. 304, 13 Am. St. Rep., 55.
" The rule * * * is that where a statute pronounces a penalty for an act, a contract founded on such act is void, although the statute does not pronounce it void, nor expressly prohibit it." Berka v. Woodward, Treas., 125 Cal. 119, 57 P. 777, 45 L.R.A., 420, 73 Am. St. Rep., 31.
"A forfeiture or penalty imposed * * * by * * * statute [upon specified contracts] implies a prohibition against such a contract, although there were no prohibitory words to that effect to be found in it." Cook v. Pierce, 2 Houst. (Del.), 499.
"Contracts intended to promote, or requiring the performance of acts forbidden by statute are void, and this is so though the statute does not so declare, but only inflicts a penalty for its violation upon the parties forbidden to do the acts." Dillon v. Allen, 46 Iowa 299, 26 Am. Rep., 145.
"Where a penalty is imposed by statute upon a party for entering into a contract, the imposition of the penalty, in law, amounts to an implied prohibition of the act for which the penalty is inflicted, and the contract is thereby rendered illegal and void." Brackett v. Hoyt, 29 N. H., 264.
Other cases might be cited to the same effect, but the foregoing will announce the principle. It is quite true that other jurisdictions have reached different conclusions upon the question under consideration, and the decisions are not harmonious; each state being controlled, of course, by its own statutes. However, the following well-considered cases may be cited as illustrative of the view sought to be expressed in this minority opinion:
In Michigan, where the statute is not essentially dissimilar to our own, it was held, in a late case (December, 1928), that the failure of a seller of a motor vehicle to comply with the mandatory requirements of Section 3, Act No. 46, Pub. Acts of 1921, as amended by Act No. 16, Pub. Acts of 1923, relating to delivery of certificate of title and registration invalidates the contract of sale for motor vehicles. Ittleson v. Hagan, 245 Mich. 56, 222 N.W. 145.
The case of Endres v. Mara-Rickenbacker Co. (1928), 243 Mich. 5, 219 N.W. 719, is in point, holding that in view of the purpose and language of Act 46, Section 4, Pub. Acts of 1921, making it crime to sell a car without delivering a certificate of title and registration as required by Act 16, Section 3, Pub. Acts of 1923, a sale or transfer in violation of such statute is void. In the opinion it is said:
"The decisive question is, Which of the defendants owned the car? Is the sale void for the dealer's violation of the statute (Section 3, Act 16, Public Acts of 1923), in failing to deliver to Pushkin 'an affidavit of conveyance or assignment in such form as the secretary of state shall prescribe, to which shall be attached the assigned certificate of title received by such dealer'? By section 4 of Act No. 46, Public Acts of 1921, it was a crime punishable by fine or imprisonment, or both, to sell a motor vehicle without complying with the provisions of section 3 above quoted from. The legislature provided penalty for such violation, fine or imprisonment, or both. It did not expressly provide that the sale or transfer without such compliance be void or fraudulent. If the courts are to add such penalty, further than that specifically given by the legislature, it must clearly appear from the statute that the legislature so intended. See Dunlop v. Mercer (C.C.A.), 156 F., 545, and 13 Corpus Juris, 422.
"Among other things, the title of Act No. 46, Public Acts of 1921, declares its purpose 'to regulate purchase and sale or other transfer of ownership' and 'to facilitate the recovery of motor vehicles * * * stolen.' The act is designed to discourage and to prevent stealing of automobiles, to protect the public against crime. It states definitely a rule of sale or transfer of automobiles, and it provides the stated penalty for violation thereof. In Cashin v. Pliter, 168 Mich. 386, 134 N.W. 482, Ann. Cas., 1913C, 697, it was said: 'The general rule is well settled that, where statutes enacted to protect the public against fraud or imposition, or to safe-guard the public health or morals, contain a prohhibition and impose a penalty, all contracts in violation thereof are void.'
"See, also, Edward v. Ioor, 205 Mich. 617, 172 N.W. 620, 15 A. L. R., 256, and cases cited.
"In view of the purpose and language of the statute, we think it was the intent of the legislature that a sale or transfer of an automobile in violation of the provisions of the act should be void * * *."
The Kansas statute is very similar to that of Ohio, the Supreme Court of that state, in Hammond Motor Co. v. Warren, 113 Kan. 44, 213 P. 810, having held: "The purchase of an automobile in total disregard of a statute governing the sale and transfer of such property is void and affords the purchaser no defense in a replevin action instituted by a plaintiff having a lawful claim to the property."
See, also, State, ex rel. Connecticut Fire Ins. Co. of Hartford, Conn., v. Cox et al., Judges, 306 Mo., 537, 268 S.W. 87, 37 A. L. R., 1456: "The provision of the Motor Vehicle Act * * * requiring the assignment by the holder of a certificate of ownership of an automobile, in case of sale, to be made upon the back of the certificate and returned as a part of said certificate to the commissioner, is mandatory, and therefore the execution and delivery of a separate bill of sale, by such owner, to a purchaser, is not a substantial compliance with said law."
The rule as expressed in the cases above cited, to which others might be added, seems to me highly salutary and so clearly within the intent of the legislature that I feel it my duty to express my regret that the case of Ohio Farmers' Ins. Co. v. Todino should not be adhered to by this court. It construed a statute in existence for over eight years, and, since its decision five years ago, it has been followed by the lower courts of this state and elsewhere. It announced a rule of property which was safe, sound, and in the interest of the public good.
In Morris v. Firemen's Ins. Co. of New Jersey, 121 Kan. 482, 247 P. 852, 52 A. L. R., 696, the Todino case was quoted and followed with approval, the court using the language, "The opinion is instructive and convincing," and quoting at length therefrom.
The case of Helwig v. Warren State Bank, 115 Ohio St. 182Y, 152 N.E. 298, is referred to in the majority opinion. In that case both Helwig and the bank had complied with the Motor Sales Act by recording their bills of sale in the office of the clerk of courts as persons "to whom title has in any manner been passed to a motor vehicle," and it was held that Helwig having failed to take advantage of the notice of the claim of the bank on file in the office of the clerk of courts when he bought the car in question and placed his own bill of sale on file, the printed record at page 21 disclosing that he had not examined the chattel mortgage records, or that the bank had done anything to mislead him, that the existence of the bank's claim was readily ascertainable by Helwig by examining the public records, as between the bank and him the equities of the bank were superior; equity aiding the vigilant and not those who slumber upon their rights. If Helwig, the second purchaser, had examined the public records in the clerk's office, he would have discovered the bank's bill of sale and might have protected himself. Thus, one of two innocent purchasers must lose; and it was held that the one who might have protected himself by exercising diligence should suffer the loss.
However, Helwig purchased with constructive knowledge of the filing by the bank of its bill of sale, and he could get no better title than Snyder, the seller, had a right to give; and when he purchased the car Snyder had already sold to the bank. Thus Helwig had constructive knowledge of the filing by the bank of its bill of sale, and he had no standing in court against a claimant who had complied with Section 6310-10, General Code, by filing prior to his purchase or filing, and the statutes afforded opportunity for Helwig to have protected himself as above indicated. The facts are so dissimilar in either of the cases at bar that we see no purpose in reversing the Helwig case.
The case of Warren People's Market Co. v. Corbett Sons, 114 Ohio St. 126, 151 N.E. 51, relates to the sale of stock in violation of the so-called Blue Sky Law. The gist of the decision is in the first syllabus: "In construing a statute which imposes specific penalties for its violation, the court must examine the entire act to determine whether or not it was the purpose of the legislature, in addition to imposing express penalties for the violation of the law, to render void any contract based on the prohibited act."
The plain purpose of the Motor Sales Act was to provide for transfer of title to motor vehicles by duly executed bills of sale and the filing thereof in the office of the clerk of courts, to protect the public in the possession of its motor vehicles, now that transportation of freight and passengers by motor has practically superseded all other means of local transportation, such act affecting nearly every individual in the community; while the sale of stocks, bonds, etc., of corporations and similar organizations is a vastly different matter and affects a much more limited number and class of people. The records of corporations as to stocks and bonds, etc., the method of dealing therein, are all so different from motor sales that the legislature may well have had a very different intent in passing the Motor Sales Act and the so-called Blue Sky Act. Under the latter act, certain stocks are exempt from its operation; while under the Motor Sales Act there are no exemptions whatsoever. The two acts are so dissimilar in subject-matter, operation, and purpose that I cannot find the case of Warren People's Market Co. v. Corbett Sons, supra, controlling in determining the legislative intent as disclosed in the Motor Sales Act. I quite agree with the syllabus above quoted, which gives the rule that the legislative intent is to be the determinative factor; but that by the passage of the Motor Sales Act the legislative intent was to create exclusively an addition to the Criminal Code, I cannot concede.
A void contract is one which has no legal force and which for that reason cannot be enforced. An unlawful contract is one to do an act which the law forbids or to omit an act which the law enjoins, and for that reason is non-enforceable. The object of all laws is to protect life, property, and legal rights, to enforce legal obligations, and to promote justice and honest dealing. It is the business of the law and its administration to enforce the performance of contracts that are not forbidden by law. There are classes of contracts the enforcement of which will not be promotive of the general welfare, and these contracts the courts, following the maxim that "the general welfare is the highest law," refuse to enforce. The sovereign power of the state, acting through the legislature, has provided that the transfer of motor vehicles without the formalities required in Sections 6310-3 to 6310-14 is unlawful, and, such being without the pale of the law, it does not lie in the power of the courts by construction to make that lawful which the law plainly says is unlawful. Under such circumstances, the courts should leave the parties where they have placed themselves.
In my judgment, it was not the intent of the legislature, in the passage of the Motor Sales Act, to establish the principle that an enforceable title in the sale or transfer of a motor vehicle may be obtained by the performance of an unlawful act.