INTERNATIONAL HARVESTER CO. v. GULLY

Shands, Elmore, Hallam Causey, of Cleveland, for appellant.

Under Section 3428, Code of 1930, and the cases of Third National Bank of St. Louis v. Reeves Grocery Company, 113 Miss. 35 and Thornhill v. Gilmer, 4 S. M. 153, the burden of proof was on appellee to show that the International truck was the property of Lafkowitz at the time when the attachment was levied and when the decree rendered against him and that such property as belonging to Lafkowitz was liable to execution or to be subjected to the payment of that decree. Appellee in order to prevail must show a right superior to that of appellant, and if he fails to do so, then the property cannot be subjected to the decree, regardless of whether appellant does or does not have any title or claim thereto.

Appellant contends that the proof in this case, consisting solely of the agreed statement of facts, does not sustain the appellee, and that he has not met the burden of proof required of him to show that the property belonged to Lafkowitz and was liable to his execution, or that appellant's claim was inferior to that of the appellee.

Lafkowitz had no interest in or possession of property attached when the writ was levied. Appellee's lien, if any, arose when writ was levied.

Slattery v. Renoudet Lbr. Co., Ltd., 125 Miss. 229; Sec. 130, Code of 1930.

Conditional sales contracts need not be recorded in Mississippi and are enforceable in favor of conditional vendor against all parties dealing with truck. Conditional vendee has no title until indebtedness is paid in full.

U.S.F. G. Co. v. Northwestern Engineering Co., 146 Miss. 476; Am. Hoist Derrick Co. v. Lynn, 167 Miss. 93; Mitchell v. Williams, 155 Miss. 343.

The Mississippi Sign Statute is not applicable here as state is not credited within statute.

McCulley v. Blanchard, (W. Va.), 169 S.E. 746; General Electric Co. v. Martin, 130 S.E. 299; Hamblett v. Steen, 65 Miss. 474; Bank v. Studebaker, 71 Miss. 544; State v. Marshall, 100 Miss. 626.

Truck was not in possession of Lafkowitz when lien arose by levy of writ of attachment on March 6th, and therefore sign statute is not applicable.

Capitol Motor Corp. v. Lasker, Inc. 123 S.E. 376; McCulley v. Blanchard (W. Va.), 169 S.E. 746; U.S.F. G. Co. v. Northwestern Engineering Co., 146 Miss. 476 ; Mitchell v. Williams, 155 Miss. 343; Am. Hoist Derrick Co. v. Lynn, 167 Miss. 93.

Bill of sale from M. Lafkowitz to Dora Lafkowitz filed for record on March 4th, prior to levy of writ of attachment on March 6th, constituted notice to appellee of the true ownership of the International truck and was a compliance with the sign statute.

Sec. 3352, Code of 1930; Binder v. Wineberg, 94 Miss. 817; Dead River Fishing and Hunting Club v. Stovall, 147 Miss. 385; Parker v. Foy, 43 Miss. 260.

Lafkowitz's right to use and possess the truck in his business ceased on March 1st, and thereafter his use thereof was not with the permission of International Harvester Company and the use of the truck by him, if within the sign statute, is in violation of the conditional sales contract and not with the permission or consent of International Harvester Company.

Bankston v. Hill, 134 Miss. 288; Archibald v. G.M.A.C., 172 Miss. 278.

The truck was not used in business which sold liquor and the operation of which business gave rise to the claim of appellee.

Orr v. Jackson Jitney Co. et al., 115 Miss. 140.

Lafkowitz perpetrated a fraud upon Planters' Equipment Company and International Harvester Company through which he obtained possession of the International truck, and International Harvester Company rescinded the entire transaction promptly upon learning the true facts — Lafkowitz acquired no interest and neither did Gully as against International Harvester Company in property the possession of which Lafkowitz acquired by that fraud.

This court has held that a defrauded vendor who retains the title and grants only the possession of personal property to a fraudulent vendee may rescind that transaction upon learning the truth. Appellant did this "promptly" as appears from the agreed statement of facts.

Mays v. Thompson, 128 Miss. 561, 572; Frank, Herman Co. v. Robinson et al., 65 Miss. 162; Williston on Contracts (Rev. Ed.), Secs. 1520, 1589.

W.W. Venable, of Clarksdale, and Denman Everett, of Greenwood, for appellee.

The conveyance by defendant to his wife was void as an effort to hinder, delay, and defraud.

A conveyance made to hinder a creditor in collecting what is due him is just as void as one made to defraud.

Harman v. Hoskins, 56 Miss. 142; Henderson v. Downing, 24 Miss. 102; Shapiro v. Wilgus, 287 U.S. 348; 77 L.Ed. 355; Means v. Dowd, 128 U.S. 273, 32 L.Ed. 429.

If the intention to delay or defraud exists, it may not be the debtors primary, active, and controlling purpose. It is sufficient if it be one of the purposes.

24 Am. Jur., Fraudulent Conveyances, Sec. 11 and cases cited, notes 4 and 5.

Direct evidence of fraudulent intent is not essential. It may be proved circumstantially.

Parkhurst v. McGraw, 24 Miss. 134; Bank of Brunson v. Graham, 335 Mo. 1196, 96 A.L.R. 399.

Such a finding may be arrived at by way of inference from the facts and circumstances attending the transaction.

Evans v. Cheatam, 183 Ark. 82; Van Raalte v. Harrington, 101 Mo. 602, 11 L.R.A. 424; Note: 90 A.S.R. 505.

In considering the issue of fraud the relationship between the parties may properly be considered.

Russel v. Davis, 133 Ala. 647, 31 So. 514; Annotations 32 L.R.A. 67; Seitz v. Mitchell, 94 U.S. 580, 24 L.Ed. 179; Shaner v. Alterton, 151 U.S. 607, 38 L.Ed. 286.

The court below found as a fact that the intent existed to hinder, delay, and defraud appellee and in his finding ignored the transfer of Lafkowitz to his wife.

A finding of fact by a chancellor will not be disturbed if supported by some competent evidence unless it is against the overwhelming weight of the evidence.

Louis Werner Sawmill Co. v. Northcutt, 161 Miss. 441; Northern Assur. Co. v. Lbr. Co., 105 Miss. 688; Sykes v. Sykes, 162 Miss. 487; Partee v. Bedford, 51 Miss. 84.

It is to be borne in mind that Mrs. Lafkowitz, if she were an innocent purchaser for value, got title to the truck free from any right of appellant to rescind. Where a seller is induced to sell by a buyer's fraud, he can only rescind and recover possession of the property while it remains in the buyer's possession.

Mays v. Thompson, 128 Miss. 561; Lee v. Portwood, 41 Miss. 109.

As commonly expressed, a bona fide purchaser for value of the voidable title of the fraudulent person acquires an indefeasible title.

Lee v. Portwood, 41 Miss. 109; Restatement of Contracts, Sec. 476, Comment E; Restatement, Restitution, 172, Sec. 13; Restatement of Trusts, Sec. 284; 5 Williston and Thompson on Contracts, Sec. 1531.

It is submitted that in view of the facts the decision by the chancellor that the conveyance to her was made to hinder, delay, and defraud creditors and also that the rescission had like effect is amply supported by the evidence.

If the sale of Lafkowitz to his wife was a fraudulent conveyance as found by the chancellor, it may be ignored and the creditor may pursue his process for satisfaction as though the title were unincumbered by the invalid conveyance.

Thomason v. Neeley, 50 Miss. 310; Shaw v. Millsaps, 50 Miss. 380; Peters Branch International Shoe Co. v. Gunn, 121 Miss. 679.

It follows that at the time appellee levied upon the truck, as far as he was concerned, it was the truck of defendant and liable to be taken for his debts.

An attaching creditor has the same rights as an innocent purchaser for value, it is held by some courts.

Bridgham v. Hinds, 120 Me. 444, 21 A.L.R. 1031; Lanfear v. Sumner, 17 Mass. 110, 9 A.D. 119.

Appellee's rights had accrued prior to the attempted rescission and could not be affected thereby.

The sale of Lafkowitz to his wife being void and to be ignored, appellant cannot predicate any right upon its title retention contract.

Paine v. Hall's Safe and Lock Co., 64 Miss. 175; Fitzgerald v. Mfg. Co., 114 Miss. 580; Lyons v. Steel, 86 Miss. 261; Young v. Terry, 192 Miss. 286.

It is settled in Mississippi by a long line of decisions that a title retention contract in its legal effect is a chattel mortage. It is true that the seller retains the legal title, but this is to be used only to gain possession for purposes of sale.

U.S.F. G. Co. v. North West Engineering Co., 146 Miss. 476; Mitchell v. Williams, 155 Miss. 343.

In Gumbel v. Koon, 59 Miss. 264, this court decided expressly that reliance upon apparent ownership was not necessary and further decided that actual knowledge or notice on the part of the creditor that the one conducting the business did not own it did not prevent the application of the statute. The court held that it would not engraft exceptions to the terms of the statute as written.

Meridian, etc., Co. v. Ormond, 82 Miss. 758.

The statute in its language is not confirmed to commercial creditors. A non-commercial creditor may be as much deceived by ostensible ownership as a commercial one and falls just as much within the reason for the passage of the statute. While it is true that the particular creditor who seeks the benefit of the statute may or may not himself be actually relying upon ostensible ownership, yet the purpose of the statute was to prevent fraudulent claims by third parties as against a person entitled to subject the property of the debtor to the satisfaction of the claim. A person who has a non-commercial claim, liquidated and certain, has just as much a right to be protected from false claims in his effort to subject the property of the debtor as does a commercial creditor.

State v. Crutcher, 2 Swan. (Tenn.), 504, 511.

The tax collector is a statutory officer appointed to sue for a debt due certain bodies politic, to-wit, the state, county, and town, where a penalty is sought to be recovered for the sale of intoxicating liquors in connection with the business. If, under the terms of the statute, a state, county, or town, would fall within the term "creditor", it is not perceived why an agent of officer appointed to act for the state, etc. would not likewise be such.

Lindstrom v. Spicer, 205 N.W. 231; 41 A.L.R. 968.

The statutory penalty sued for by the state tax collector is a debt. Statutory penalties are so considered and designated at common law. An action of debt was and is the proper remedy for the recovery of statutory penalties.

Mobile Ohio R. Co. v. State, 51 Miss. 137; Elder v. Harrison, 35 Miss. 231.

If the amount owed as a penalty under Section 2000 is a "debt" and the one owing it is thus a "debtor", it would seem that the one to whom it is owed would be a "creditor".

We see no reason why the legislature should say in this statute or be placed in a position of saying that the third party, having a fraudulent secret claim against the debtor, may not practice fraud against an individual creditor but may practice it against the sovereign.

The statute is clearly remedial and should be construed to reach the evil to as large an extent as possible and prevent as far as possible fraud as against the greatest number of people.

Under the statute upon the sale of liquor in January, before any default in March, the rights of appellee had accrued. He became a creditor and had a right as such under the terms of the statute to treat the truck as the property of defendant, Lafkowitz, the title retention contract not having been recorded. If the sign statute applies, the time that the attachment was levied is immaterial. Appellee, under the statute, does not derive his right from the levy of the attachment but from the mandate of the statute. The levy was simply a method of enforcing the right to seize the property given by the statute.

Under the terms of the title retention contract, the right to continue to use the property in the business did not cease. The contract merely gives the right to repossess the property and to sell it as security for the debt. This right the seller may exercise or waive as he may see fit. A reading of the contract in the record will disclose this to be true.

Bankston v. Hill, 134 Miss. 288; Archibald v. G.M.A.C., 172 Miss. 278.

In the case at bar Lafkowitz did acquire the truck in a trading business and the statute specifically says that when this is done it shall be liable for his debts in favor of his creditors.

A right to rescind for fraud is based upon the fact that while there was a real consent for the passage of title from the seller to the buyer and title did so pass, yet the consent was obtained by a fraudulent inducement, and therefore, when the fraud is discovered, the seller may withdraw his consent to the passage of title and receive the title back again.

Since there was real consent for the passage of title, legal title is vested in the buyer, the seller having only a mere right or equity to set the transaction aside. Since the buyer has the legal title, he can convey it, and assuming that he has conveyed it to a third person and the third person was innocent and without notice of the fraud, the question arises whether or not the seller would be permitted to exercise the right of rescission as against the innocent third party who has acquired rights in and to the property.

It is Hornbook Law that rescission for fraud cannot be exercised against any innocent purchaser for value.

First Nat. Bank of Greenville et al. v. Cook Carriage Co., 70 Miss. 587; Lee v. Portwood, 41 Miss. 109; Restatement, Contracts, Sec. 476, Comment E; Restatement, Restitution, Sec. 13, 172; Restatement of Trusts, Sec. 284; Williston and Thompson on Contracts, Sec. 1531.

Conceding that generally the rule is that an attaching creditor acquires by his attachment only the property interest which the debtor has as against a creditor, this is not the rule where statutes require that the liens or conditional sales of personalty must be recorded in order to be valid against creditors. The sign statute invalidates any title retention contract on property used and acquired in the business which is not placed of record, or where signs are not posted giving notice of the rights of the third party. The effect of this statute and it so declares that such contracts are void as to a creditor who attaches the property and seeks to subject it to the satisfaction of his claim.

6 C.J., Sec. 556; Paine v. Hall's Safe and Lock Co., 64 Miss. 175.

Argued orally by Dugas Shands, for appellant.