holding that a mortgage by one not in the chain of title though recorded “is not constructive notice to subsequent purchasers”Summary of this case from Pennington v. Flaherty
Submitted April 24, 1941.
Decided May 6, 1941.
Automobiles — Registration — Mortgages — Wrongful Seizure — Right of Innocent Purchaser to Rely on Record Ownership — Measure of Damages — Pleading and Evidence — Equity — Jurisdiction. Automobiles — Mortgages — Innocent Purchaser may Rely on Record Ownership, Particularly Where Record Owner in Possession of Car. 1. Under section 1758.3, Revised Codes (a part of the statute relating to Registration of Motor Vehicles), an innocent purchaser of an automobile relying on the record ownership will be protected, particularly where he dealt with the record owner who was in the possession of the car. Same — Mortgage Given by One not in Chain of Title — Recordation not Constructive Notice to Subsequent Purchaser. 2. Under the above section of the Codes, a mortgage, covering an automobile, given by one not in the chain of title, though recorded, is not constructive notice to subsequent purchasers. Same — Case at Bar. 3. An automobile was purchased on a conditional sales contract which was filed with the Registrar of Motor Vehicles, and a certificate of title was issued to the purchaser. The person who furnished the money with which to pay for the car, and who had to borrow some of it, executed a mortgage covering it, with knowledge in the mortgagee that the certificate of title had been issued to the purchaser and not to the mortgagor. Thereafter the purchaser transferred the car to another who sold it to an automobile dealer, the latter having neither actual nor constructive notice of the mortgage. Held, under the above rules, in an action to foreclose the mortgage, that the dealer was entitled to rely upon the record which showed that the mortgagor was a stranger to the title, and that therefore the mortgagee had no interest in the car by virtue of his mortgage. Damages — One Entitled to Damages must Prove Extent and Amount. 4. Under section 8659, Revised Codes, one injured through the unlawful act of another may recover compensation by way of damages which directly flow from the act of the person causing them; but to justify such recovery there must be proof of the extent and amount of the damages claimed. Equity — Jurisdiction — Once Acquired, Jurisdiction Retained for All Purposes. 5. Where a court of equity has once acquired jurisdiction of a cause (in the instant case of a suit to foreclose a chattel mortgage on an automobile) it retains it for all purposes and may, when proper award damages. Automobiles — Quieting Title — Pleading Damages by Way of Depreciation — Recovery Limited to Amount Pleaded. 6. Where defendant in an action to foreclose a mortgage on an automobile in his cross-complaint sought to quiet title to the car under section 9478.1, Revised Codes, and pleaded damages by way of depreciation of the car in the sum of $100, and the evidence admitted over objection showed a greater amount in that regard, his recovery was limited to the amount pleaded. Same — Wrongful Detention — Measure of Damages, Where Claimant Deprived of Use of Car — When Depreciation Proper Measure. 7. While the measure of damages sustained by the owner of an automobile unlawfully deprived of its use and who desired to use it and it was used by the one who detained it, is the value of its use less depreciation, where the owner did not intend to use it but intended to place it on the market for sale, had his possession not been interfered with, depreciation by reason of age is the proper measure of damages. Same — Mortgages — Wrongful Seizure — What Proper Items of Damages — Effect of Failure of Claimant to Introduce Evidence as to Amount. 8. Where the rightful owner of an automobile wrongfully seized by the mortgagee thereof and noticed for sale under the mortgage, filed a third-party claim, made trips to various cities in pursuit of the property, the expenses incident thereto, as well as for taking depositions, were proper items of damages in an action to foreclose the mortgage in which the owner filed a cross-complaint and had judgment, but were not recoverable where the latter failed to introduce evidence as to the amounts expended for such items.
Appeal from District Court, Glacier County; R.M. Hattersley, Judge.
Mr. E.J. McCabe and Mr. S.J. Rigney ( pro se), for Appellant, submitted a brief; Mr. Rigney argued the cause orally.
Messrs. Walchli Korn, for Respondent, submitted a brief; Mr. Daniel J. Korn argued the cause orally.
Plaintiff brought this action to foreclose a chattel mortgage covering a Chevrolet automobile. The mortgage was executed by defendant Douglas Swingley and the Schott-Schnee Motor Company was made a defendant because it claims to be the owner of the car. The cause was tried to the court sitting without a jury, and judgment went in favor of the motor company.
The record discloses that Ruby Swingley purchased the car on a conditional sales contract on April 28, 1936. The contract was filed with the Registrar of Motor Vehicles at Deer Lodge, and was satisfied of record on September 3, 1937. The original certificate of title covering the car was issued by the Registrar to Ruby Swingley on May 2, 1936, showing her to be the legal and registered owner of the car. It is shown without dispute that defendant Douglas Swingley furnished the money with which to pay for the car, except that he borrowed some from one Hiebert.
The mortgage which plaintiff seeks to foreclose was executed by Douglas Swingley, who never appeared in the chain of title to the car. On May 27, 1938, a duplicate certificate was issued to Ruby Swingley, showing her to be both the legal and registered owner of the car, and showing no liens or incumbrances against it, the original certificate having theretofore been lost. The mortgage relied upon by plaintiff was executed on January 14, 1938. Defendant Douglas Swingley knew when he made the mortgage that the car was registered in the name of Ruby Swingley as the owner, and that he was a stranger to the certificate of title. The evidence shows that plaintiff Rigney knew at the time he took the mortgage that the certificate of title had been issued to Ruby Swingley, and that she was the registered owner thereof at the time the mortgage was given. Plaintiff at no time had possession of the car. Plaintiff's mortgage was sent to the Registrar at Deer Lodge for filing on January 15, 1938, but it was subsequently withdrawn from the active file because it was executed by one not in the chain of title, and plaintiff was notified of such withdrawal prior to the time that the duplicate certificate of title to Ruby Swingley was issued.
On June 10, 1938, Ruby Swingley transferred her ownership in the car to Harold L. Hiebert. On August 24 Hiebert sold the car to the Schott-Schnee Motor Company in Kalispell by trading it in for another car and receiving an allowance in the sum of $495 on the Chevrolet car. On that day Hiebert had possession of the car but the certificate of title was held by his attorney, Ainsworth, in Thompson Falls. Before completing the transaction, the manager of the defendant company telephoned to Ainsworth with reference to the title and was assured by him that Hiebert had the certificate of title and was the legal and registered owner and that there were no liens or incumbrances against it. The certificate of title issued by the Registrar to Hiebert showed Hiebert to be the owner of the Chevrolet, and that there were no liens or incumbrances against it. The transfer of this certificate of title was not formally issued by Hiebert to the defendant company until September 10, 1938. On September 27 the Registrar of Motor Vehicles issued a new certificate of title to the defendant company, which showed it to be the owner free and clear of any liens and incumbrances.
On September 10 the sheriff of Flathead county posted notice of sale under the mortgage in defendant's garage, and this was the first knowledge it had of plaintiff's mortgage. Defendant company filed a third-party claim, and this action was instituted for the foreclosure of the mortgage. On October 5 the sheriff took possession of the car and has ever since retained it.
Numerous specifications of error have been made by appellant. In our opinion but two questions are raised which are determinative of the case; the first being the force and effect of our statute relating to the registration of motor vehicles, and the second whether or not the court was warranted in finding, as it did, that the motor company is entitled to $250 damages against the plaintiff.
Plaintiff takes the position that the ownership of the car can be proved otherwise than by the registration thereof. This contention makes it necessary to consider the purpose of our registration statutes. We have said in Anderson v. Commercial Credit Co., 110 Mont. 333, 101 P.2d 367, 371: "The purpose of automobile registration, being a police regulation, is to provide a method to deter automobile thefts, and to apprehend thieves."
Some courts take the view that legal title to an automobile can be established only through the evidence shown by the registration required by statute. ( Merchants' Sec. Corp. v. Lane, 106 N.J.L. 169, 147 A. 385; McGlynn v. Ellis, 102 N.J.L. 729, 123 A. 373.) Others take the view that the fact that a person is or is not the registered owner is merely a circumstance to be considered upon the issue of ownership, but that it does not conclusively establish the fact. ( Tigue Sales Co. v. Reliance Motor Co., 207 Iowa, 567, 221 N.W. 514; Amick v. Exchange State Bank, 164 Minn. 136, 204 N.W. 639; Commonwealth v. Overheim, 106 Pa. Super. 424, 162 A. 475; Wilkison v. Grugett, 223 Mo. App. 889, 20 S.W.2d 936.) All the cases, however, hold that an innocent purchaser relying on the record ownership will be protected, particularly when dealing with such record owner who is also in possession of the automobile. ( Shockley v. Hill, 91 Colo. 451, 15 P.2d 623; Moore v. Wilson, 230 Ky. 49, 18 S.W.2d 873.) In this state the rule is made plain by statute.
Section 1758.3, Revised Codes, provides: "No chattel mortgage or conditional sales contract on a motor vehicle shall be valid as against creditors or subsequent purchasers or encumbrancers until the mortgage or conditional sales vendor therein named is registered as the legal owner thereof as herein provided."
From the foregoing resume of the evidence, it is clear that [1-3] the motor company at the time it purchased the car in question had neither actual nor constructive notice of plaintiff's mortgage. It was entitled to rely upon the record which showed that Hiebert was the owner of the car and that Douglas Swingley was a stranger to the title. While the facts are not exactly the same, the holding in the following cases support the conclusion that a mortgage by one not in the chain of title though recorded is not constructive notice to subsequent purchasers: Ohio Finance Co. v. McReynolds, 27 Ohio App. 42, 160 N.E. 727; Rhea Mortgage Co. v. Lemmerman, (Tex.Civ.App.) 294 S.W. 959; Id., (Tex.Com.App.) 10 S.W.2d 690; Southwest Securities Co. v. Jacques, (Tex.Civ.App.) 31 S.W.2d 1098; Id., (Tex.Com.App.) 42 S.W.2d 232; People's Finance Thrift Co. v. Shirk, 181 Okla. 418, 74 P.2d 379; Fitzgerald v. People's Finance Thrift Co., 184 Okla. 44, 84 P.2d 625; Kurtz v. Adrian, 46 S.D. 125, 191 N.W. 188. And see 5 R.C.L. 415; 10 American Jurisprudence, Chattel Mortgages, sec. 116, p. 791; 14 C.J.S., Chattel Mortgages, sec. 164, page 772.)
The court properly held that defendant motor company is the lawful owner of the car in question and that plaintiff has no right or interest therein by virtue of his mortgage.
Plaintiff introduced some evidence tending to show that defendant had actual notice of the mortgage, but this was denied by defendant and the question thus became one for the fact finding tribunal.
The plaintiff complains that the court erred in awarding damages to the motor company. The motor company in its answer and by way of cross-complaint invoked section 9478.1, Revised Codes, which authorizes the bringing of an action to quiet title to personal property. It alleged that it had sustained damages to the extent of $250 because of the action of plaintiff in taking and retaining possession of the car. The court awarded the entire amount alleged as damages.
Section 8659, Revised Codes, provides that "every person who [4-7] suffers detriment from the unlawful act or omission of another may recover from the person in fault a compensation therefor in money, which is called damages." By virtue of this section the injured party may recover those damages which directly flow from the act of the person causing them. In the case at bar the damages alleged are compensable as flowing directly from the act of plaintiff.
It is well settled that a court of equity, once having jurisdiction, retains it for all purposes and may award damages. (See, generally, annotation in 95 A.L.R. 228; also Grosfield v. Johnson, 98 Mont. 412, 39 P.2d 660; Blose v. Havre Oil Gas Co., 96 Mont. 450, 31 P.2d 738; McConnell v. Combination M. M. Co., 30 Mont. 239, 76 P. 194, 104 Am. St. Rep. 703; 21 C.J. 140, sec. 121.)
It is also well settled that in order for the damages to be recovered, there must be proof of the extent and amount thereof. ( Raas v. Sharp, 46 Mont. 474, 128 P. 594; Bush v. Chilcott, 64 Mont. 346, 215 P. 1001; McFarland v. Welch, 48 Mont. 196, 136 P. 394.) In this case the evidence of damages may be grouped under two heads: First, the loss due to depreciation of the car; and, second the expense which the defendant was put to in maintaining its rights by pursuing its property.
As to the first, it is shown that the defendant on October 6, 1938, allowed Hiebert $495 on the particular car on a trade on a new car; that the defendant put work and repairs on the car in the amount of $84.74; that at the time of the taking of the car by the sheriff, the car was worth $579.74; that at the time of the trial the value was $450, thus making a net loss on the car due to its aging amounting to $129.75. The evidence relating to this item of damages was uncontradicted. It is sufficient to sustain an award in the sum of $129.75. However, defendant pleaded damages by way of depreciation in the sum of $100 only, and it will be limited in its recovery on this item to the sum of $100, since the evidence tending to show a greater amount went in over plaintiff's objection. Plaintiff further contends that loss by depreciation is not the proper measure of damages, but that the proper measure is the value of the use of the car by plaintiff less depreciation. This is the general rule when the property is detained from one who desires to use it and is used by the one who detains it. ( Puckett v. Hopkins, 63 Mont. 137, 206 P. 422; Luther v. Lee, 62 Mont. 174, 204 P. 365; Rasmussen v. Lee Co., 104 Mont. 278, 66 P.2d 119.) Here defendant did not intend to use the car but, had its possession not been interfered with, would have placed it on the market for sale. In such circumstances depreciation from age is a proper measure of damages. This court so intimated in Hammond v. Thompson, 54 Mont. 609, 173 P. 229. (See, also, 54 C.J. 618 and 626.)
The other items of damage are for the expenses required to  make a "third party claim," trips to Thompson Falls, Deer Lodge, Cut Bank, Browning, and Conrad, and the taking of depositions. Under the weight of authority these are proper items of damage. (54 C.J. 629.) However, there is no evidence as to the amount expended or incurred for any of these purposes. Since defendant motor company failed to sustain the burden resting on it to establish these items of damages, it cannot be compensated therefor. Even when attorneys' fees are claimed as special damages, there must be allegation and proof of the amount expended or incurred subject to the further requirement that the amount must be reasonable. (Note in 25 A.L.R. 599.) The evidence admissible under the pleadings sustains an award of damages in the sum of $100 and no more.
The cause is remanded with directions to modify the judgment in accordance with this opinion and as modified the judgment will stand affirmed. Respondent motor company will recover its costs on this appeal.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES ERICKSON, ANDERSON and MORRIS concur.
Rehearing denied June 3, 1941.