HALL v. AMERICAN BANKERS SAFETY COMPANY

W.W. Magruder, for appellant

The appellee cannot recover this safe under its reservation of title by contract for the manifest reason that it sold the safe vault door, and equipment to Hardin Adams for the purpose of resale

As the authority to sustain this contention, we cite; Columbus Buggy Co. v. Turley, 73 Miss. 529; Parry Mfg. Co. v. Lowenburg, 88 Miss. 532; Watts v. Ainsworth, 84 Miss. 40; Fairbanks Co. v. Graves, 90 Miss. 453; Merchants Farmers Bank v. Schaaf, 66 Mo. 402

The fundamental propositions involved in all of these cases is that no seller will be permitted to evade the law by ingenious and specious contracts, cunningly devised to retain a title which the vendee is authorized to pass, or in other words, that complainant in this case could not retain title to a safe vault door, and equipment, for which they were contracting with Hardin Adams and authorizing him to resell to the Longview Bank, at the same time, giving the said Hardin Adams their actual aid, comfort, and co-operation in the perpetration of a nefarious and infamous scheme by which the Longview Bank was to be defrauded of its scanty funds

Counsel for complainant appear to attach much importance to the fact that the written contract itself in this case does not contain any specific authority to Hardin Adams for the resale of the property in controversy. This position is completely answered in the case Bank of Hazelhurst v. Goodbar, 73 Miss. 566

The principle involved in all of these cases is the same, whether falling specifically under section 4784, Mississippi Code of 1906, or controlled by the law as announced in the Goodbar case which is based upon the sound, legal proposition that whenever a seller clothes a buyer with the indicia of ownership and authority to resell, either as an integral part of the original contract or by contemporaneous parol agreement, the conveyance becomes fraudulent in law — either actually or constructively — depending upon the particular facts of each case

Whether the buyer handles the goods upon a commission basis or for his own account, under the decisions, is absolutely immaterial. This proposition is emphatically settled, in: Shannon v. Blum, 60 Miss. 828; Bank v. Studebaker, 71 Miss. 544; Paine v. Hall, 64 Miss. 175; Hall v. Berg, 65 Miss. 187

Counsel for complainant cited in the lower court Gayden v. Tufts, 66 Miss. 691, as authority for the proposition that an assignee has no better title than his assignor. That case has no bearing or value in the consideration of the instant case because the facts here differentiate this case from the Tufts case as clearly as night is differentiated from day. No equities intervened in that case and the contract there in the statement of facts on page 691, specifically shows that it was duly acknowledged and recorded in the public records of the county. This was not a secret reservation of title to the injury of creditors but constructive notice was honestly and publicly given by the official records of the state

They also cite Tufts v. Stone, 70 Miss. 54, but again they are hoisted by the same petard for the supreme court in its opinion states that the written contract was acknowledged and recorded

In Andrews v. Partee, 79 Miss. 80, a man by the name of Dye executed a trust deed to Moore on certain property including some saw logs, the cestui que trust testifying that a contemporaneous parol agreement was made between him and the mortgagor by which the latter was to be permitted the use of the logs to finance his business "until he could get himself in shape." The court in its opinion announced, "Notwithstanding the good faith and honest purposes of both of these men, in fact, still the law denounces a trust deed hampered by such an agreement or understanding as fraudulent and void as to creditors. The rule is a hard one but it is too well settled by authority for us to disturb it

In the instant case, complainant undertakes to rely upon an equitable mortgage created by the written contract, dated July 8, 1913, in which Hardin Adams is the grantor by operation of law as well as by the contract itself. The same parol agreement which exists in this case, as admitted by complainant, would constitute "The fly in the ointment," in the Andrews case

The same principle is announced in Harmon v. Hoskins, 56 Miss. 142. Also see Joseph v. Levi, 58 Miss. 843, in which the court approves Harmon v. Hoskins, supra, and again emphasizes the controlling principle in this line of cases

In Johnson v. Tuttle, 65 Miss. 492, the court declares in the consideration of a similar case that: "The law imputes conclusively a fraudulent purpose without regard to the actual motives of the parties." The court furthor says: "But it is immaterial, whether the agreement or understanding. . . . was expressed on the face of the instrument or appears to exist by evidence aliunde. In legal contemplation the effect is the same in both cases."

"He who comes into equity must come with clean hands."

Complainant cannot recover in this case because of the equitable maxim, "He who comes into equity must come with clean hands." This maxim has been enforced in the courts of England and in the various states throughout this country from time immemorial. The only difficulty that the courts have found has been in its applicability to the facts of adjudicated cases. That difficulty in the instant case will be infinitesimal because the facts clearly bring complainant's case within the condemnation of this maxim

Care must always be taken to avoid confusion of this maxim with the similar maxim: "He who seeks equity must do equity." The analogy between the two is necessarily close but the maxim upon which we rely is far more comprehensive than the other maxim in its scope and operation

We refer the court to Pomeroy's Equity Jurisprudence, sections 387-404

Counsel for complainant in their brief deny the applicability of this maxim, insisting that the contemporaneous agreement of Hardin Adams with complainant was merely incidental to the contract itself and that complainant's right to recovery is based solely upon the written contract. We insist that the entire transaction between complainant and Hardin Adams is subject to the scrutiny of the court in the consideration of the rights of this defrauded bank

We invite the careful consideration of the court to the case, Woodson v. Hopkins, 85 Miss. 171

This case will illustrate the devious methods of fraud and chicanery by which cunning grafters undertake to secure "something for nothing." A careful perusal of the testimony in response to interrogatories, propounded under the statute, will in our opinion demonstrate beyond peradventure that appellee is not entitled to recovery of the property involved in this litigation

In the records of this tribunal, this case might well in the furture be styled as "The adventures of J. Rufus Wallingford." About the only difference between complainant and that genial gentleman that we are able to discover is that Wallingford did not have the temerity to invoke the jurisdiction of the courts in the consummation of his nefarious schemes while complainant goes him one better

Wherefore, appellant asks that the decree of the lower court shall be reversed and that judgment final shall be rendered in this cause, dismissing appellee's bill, and denying all relief as sought therein

Leftwich Tubbs, for appellee

To begin with the findings of the chancellor and the facts must all be resolved in appellee's favor. Counsel claims as one defense that when complainant by contract sold the safe to Hardin Adams and reserved title for the purchase money, and then shipped the safe to Longview Bank, that it contracted with Adams for a resale of the safe to the bank, and thereby waived its lien, and to sustain this contention cites: The Columbus Buggy Co. v. Turley Parker, 73 Miss. 529; Watts v. Ainsworth, 89 Miss. 40; Fairbanks Co. v. Graves, 90 Miss. 453; Parry Mfg. Co. v. Lowenberg, 88 Miss. 532

On the other question of conditional sales, and the right of the subpurchaser of property sold on condition, we quote under this head. 6 Am. Eng. Ency. of Law (2 Ed.), which is as follows:

"3. Of Third Persons — a Bona Fide Purchaser. Subpurchaser of property sold on condition precedent acquires no title against vendor. — except where the case is controlled by statutes providing otherwise, the general rule is that where personal property is sold and delivered to the vendee on condition that the title is to remain in the vendor until the purchase price is paid or secured, the vendee who has not yet acquired title by the performance of the condition can convey no title even to a bona-fide purchaser that can be enforced against the original vendor; and that the latter, if guilty of no laches, may recover the property from such purchaser from his vendee without any previous demand."

It will be seen that under this text are cited decisions from many states including the Mississippi ones, and we refer especially to the note quoted from Coggill v. Hartford Ry. Co., 3 Gray (Mass.) 545, on page 488

" Clean Hands" We come now to the "clean hands" proposition presented in the answer and argument of the learned counsel, the charge being that the outside arrangement, lying wholly outside of the contract sued on, whereby the American Bankers Safety Co. was to bill to the Longview Bank at one thousand, four hundred and twenty-five dollars, and when the same was collected to pay all of it above eight hundred, ten dollars, to Hardin Adams and Guill Barber, was a corrupt agreement whereby complainant was colluding with Adams and assisting him in reselling these goods at a profit to the Longview Bank in violation of his trust obligation to that bank. Counsel traveled a long way from the case in attempting to show that complainant was engaged in this kind of business, but neither by independent evidence nor by cross-examination has he adduced any evidence to sustain this charge, and certainly if he had. it would be incompetent in this case. The "clean hands" doctrine, as all the text-writers and courts agree, does not apply to any kind of obliquity or illegality except that which arises out of the case in hand; the wrong must grow out of the very transaction decided; the most corrupt criminal cannot be driven out of a court of equity if he has been honest in the transaction which he is enforcing

Take another view of this question. The only relief that the bank could have or the receiver representing the bank, would be to subject to its use the right of Adams to the share of the commissions. Wynn v. Dillon, 27 Miss. 494; Trice v. Comstock, 61 L.R.A. 176

Counsel cites Pomeroy on Equity, 397; but we especially call the court's attention to the limitations of the doctrine set up in section 399, of that learned writer. The case of Truce v. Comstock, 61 L.R.A. 176, was a case of agency; and when the court reads it, it will be seen that distinguished counsel for appellees who won below, denounced just as vigorously the conduct of complainant, as learned counsel does here, but still the lower court was reversed, and as will be seen on page 181, the court discriminated and said:

"The acts to which defendants object neither conditioned nor affected the equity which the complainants now seek to enforce."

So here, we argue that when this complainant seeks to retake his own goods, title to which was reserved because they have never been paid for, his doing so is in no manner conditioned upon nor affected by the scheme of Hardin Adams which he was never able to carry out to obtain a profit from his principal by having the seller of the goods pay the bill and conceal the profit. In the case of Wooten v. Miller, 7 S. M. referred to by Judge WHITFIELD in the Woodson Case, the distinction here claimed is plainly set out and approved by the supreme court. On page 386, of that report, the court says with approval:

"There are cases which decide that where the demand is collateral to the original transaction, as where money has been loaned to pay an illegal debt, although the lender knew the illegal purpose, he may recover of this class, are Faikney v. Regnons, 4 Burr; Petrie v. Hannay, 3 T.R., but the principle upon which they act would not be applicable here unless there had been some collateral undertaking of Robert Wooten to pay."

In the last subdivision of the brief we assumed that the transaction here was tainted with such illegality as to affect complainant; we now argue, and the authorities are perfectly clear on the point that there was no illegality at all in so far as this complainant was concerned. The most that can be said about the American Bankers Safety Company's participation in Adams' scheme, is that it may have suspected that Adams expected to deceive his principal or the bank of which he was the agent and president, and get a profit, which the bank could of course recover from him, is not illegal at all, and is not that form of illegality that the "clean hands" doctrine effects. Tracy v. Talmage, 87 A.D. 132; Wooten v. Miller, 7 Miss. 308; Buck v. Albee, 62 A.D. 564; Tracy v. Talmage, 67 A.D. 146-7

On page 5 of counsel's brief he uses this language: "Upon delivery of the safe and outfit to the Longview Bank by the American Bankers Safety Co. under instructions from Hardin Adams, the title was vested in the Longview Bank by virtue of the implied contract of sale created by law from Hardin Adams to the Longview Bank."

We have studied counsel's analysis of the situation on this page of his brief with much interest. In every logical analysis there must be a sound premise; we grant that title to property must vest somewhere; there is no question in the world where the title is in this case; it was retained by complainant as security for its purchase money. There can be no question about that whatever the writing establishes it; it never did pass to Hardin Adams; it never did pass to the Bank, and there is not a word in the whole testimony showing that the purchase of the safe by the bank's officers at any price was ever discussed or even hinted at. With the legal title outstanding in the vendor and possession of the safe merely loaned to Hardin Adams; with the doctrine of caveat emptor standing out in all its virility, by what course of reasoning can any court conclude that the Longview Bank became the owner of the safe by an implied contract of sale. Tufts v. Stone, 70 Miss. 54; Gayden v. Tufts, 68 Miss. 691

As decided in all Mississippi cases, from Ketchum Cumnins v. Brennan, 53 Miss. 596, down, the reservation of title is good against all the world, but for the sign statute section 4784, of the present code. That statute can only be invoked by creditors who have obtained a lien by attachment who have bought the property in market overt and as our court has distinctly held, the vendee himself, who is Hall in this instance, pro hac vici, cannot set up a claim like this receiver is trying to set up; he is a volunteer. Ketchum v. Brannan, 53 Miss. 596; Duke v. Shackleford, 56 Miss 552; Fairbanks v. Graves, 90 Miss. 556; 24 Am. Eng. Enc., p. 77

We all recognize we suppose that witness Coleman's answer was a legal conclusion of his. The chancellor simply found that the refusal of the appellee to ship or deliver the safe to Adams and all the facts, when taken together, looking through the form to the subdivision, the sale was really to the Bank of Longview; the chancellors decree was eminetly just and we ask affirmance