I am very sorry that I cannot agree with the opinion of the majority.
By the transaction in Illinois, Tallmadge became the owner of the automobile, the seller retaining a lien thereon for the balance of the purchase price; such lien being evidenced by means of a chattel mortgage, properly made out and recorded as required by the laws of that state. The parties to this instrument were all in that state at the time, as was also the property. The contract was intended to be performed in that state. Hence the law of that state governs in the matter of its exposition and construction. *Page 420
It is stipulated that under the laws of Illinois the mortgagee's lien in that state was good as against any subsequent purchaser of the car. It was removed, however, from the state by the purchaser, Tallmadge, without the knowledge or consent of the mortgagee, into the state of Texas, and in the latter state disposed of to one L. Bibb in the manner set out in the stipulation.
The lower court held, and I think properly, that the transaction between Tallmadge and Bibb was not a sale to Bibb, but a pledge to him of the car as security against his contingent liability on Tallmadge's bail bond. This contingent liability became fixed when judgment was entered against him on the bail bond. This liability was incurred in consideration of the automobile being turned over as security to Bibb, who at the time had no actual or constructive knowledge or notice of the Illinois chattel mortgage lien, it at this time not having been recorded in El Paso county, Texas, where the transaction between Tallmadge and Bibb took place. Bibb, at El Paso, sold and delivered the car to defendant, Bainbridge, who, it is stated by the trial court, was a resident of the state of Arizona.
At the time this suit was brought, the title of the car was still in the mortgagor, Tallmadge, and the attempted sale by Bibb to Bainbridge was ineffectual to pass such title, but did have the effect of an assignment of the pledge from Bibb to Bainbridge. We then have the Illinois mortgage lien good against the world in that state and good in Texas as between the mortgagee and the mortgagor and also the lien created by the pledge to Bibb and by him transferred to defendant, Bainbridge. The question is whether the chattel mortgage lien or the pledge should be given precedence in this jurisdiction. The trial court held both liens valid, but gave precedence to the *Page 421 lien created in Texas, which was for $1,000, and gave judgment against Bainbridge on his redelivery bond for the balance of the stipulated value of the automobile, or $760, together with interest and costs.
It is undoubted that in the great majority of the states the rule of comity is observed. By such rule, if the chattel mortgage was valid in Illinois, where it was made and the property located, it would be held valid against creditors and purchasers in good faith in the state to which the property was removed by the mortgagor without the consent of the mortgagee, "unless there is some statute in that state to the contrary, or unless the transaction contravenes the settled law or policy of the forum." 11 C.J. 424, § 33.
Under the decisions of the courts of Texas, construing their relevant statutes, it is held that a chattel mortgage is not good as against creditors and bona fide purchasers unless the mortgage is placed of record in the proper county of the state, or unless there is a complete change of possession from mortgagor to the mortgagee. Consolidated Garage Co. v. Chambers, 111 Tex. 293, 231 S.W. 1072. The Texas statute that the court construed as requiring the holder of a mortgage upon personal property brought into that state to comply with its registration laws in order to protect his lien is article 5655, Vernon's Sayles' Texas Civil Statutes 1914, which is, for all intents and purposes, the same as our paragraph 4126, Civil Code of 1913, which was probably copied from Texas. In the above case the court quoted from Chief Justice MARSHALL, in Harrison v. Sterry, 5 Cranch 289, 3 L. Ed. 104, to the effect that "the right of priority forms no part of the contract. . . . It is extrinsic, and is rather a personal privilege, dependent on the law of the place where the property lies, and where the court sits which is to decide the cause." Also from *Page 422 Snyder v. Yates, 112 Tenn. 309, 105 Am. St. Rep. 941, 64 L.R.A. 353, 79 S.W. 796, as follows:
"When parties to a foreign contract are impleaded in the courts of this state, this court will expound and enforce the contract according to the laws of the country where it was made, if such laws are properly pleaded and proven; but it will not, in a question of priority, set aside its own statutes and rules to the prejudice of its own citizens."
The court then stated:
"Also, the policy of this state is expressed by our statutes — articles 5654 and 5655, Vernon's Sayles' Texas Civil Statutes — that a mortgage of chattels, including conditional sales, is void as against third persons innocently purchasing the property for value, unless it is duly registered as provided therein.
"Plaintiff in error insists that it is a hard rule to deprive him of his reservation of title or lien upon the property without any negligence on his part. Also, it is a hard rule to deprive an innocent purchaser for value of the property when he has been at no fault. The difference between them is this: While it works a hardship upon the mortgagee, yet he trusts the property to the possession of the mortgagor, and thereby puts it within the power of the mortgagor to dispose of the property to one who has no notice of his claim. The mortgagee takes the risk incident to such possession, and while he has done no wrong and may not be negligent in regard to trying to protect his rights in the property, yet he makes it possible for a third person to be defrauded if it should be held that the rights of the third person are subject to his prior claim, of which said purchaser has no knowledge or notice.
"An innocent purchaser for value has no means of protection whatever against a private or secret unregistered reservation of title in chattels, whether made in this state or out of it."
In Thayer Merc. Co. v. First Nat. Bank, 98 N.J.L. 29,119 A. 94, the court said: *Page 423
"As a general rule, a transfer of property valid where made, is effectual everywhere; but a universal recognized exception to this rule is that, where it is opposed to some statutory policy of the state of the rei sitae, and where it is sought to be enforced, the statute is paramount, and the rule is nullified thereby. Varnum v. Camp, 13 N.J.L. 326, 25 Am. Dec. 476;Moore v. Bonnell, 31 N.J.L. 90; Bentley v. Whittemore,19 N.J. Eq. 462, 97 Am. Dec. 671. And so where a state, in the exercise of its sovereign power, regulates by positive law the disposition of personal property found within its borders, and prefers its own attaching creditors to a foreign assignee of a chattel, or the conditional vendor thereof, the statutory right conferred upon the resident creditor overrides the rights of such assignee or conditional vendor vested in him by the law of the forum where the contract was made."
If the contest was between the mortgagee and the mortgagor, or between the former and some purchaser from the mortgagor in the state of Arizona, and no consideration of the Texas transaction was involved, I should feel that the proper thing for this court to do would be to adopt the general rule of comity and uphold the priority of the Illinois mortgage. Under the Texas law, however, if Tallmadge had sold the car to Bibb the latter's title would have been good. Likewise Tallmadge, being in possession of the car, with the indicia of ownership, had the right under the Texas law to pledge it to Bibb, and the latter's lien, if he took it without notice and in good faith, was superior to the unrecorded Illinois mortgage. It seems to me that, if we now apply to this controversy the rule of comity, we are undertaking to do for Texas what we think she herself should have done. We are ignoring a perfectly valid and subsisting lien against this property under the Texas law in favor of Bainbridge, and saying, in effect, that the public policy of a sovereign sister state, in requiring the observance of registration laws *Page 424 in the selling or encumbering of personal property is entirely wrong, and that we will right it.
I have looked very carefully into the decisions, and I can find but one case exactly in point (cited by appellee), and that case accords with my views as above expressed. Fuller v. Webster, 5 Boyce 538, 95 A. 335. The decision is by a superior court of Delaware, but it was appealed to the Supreme Court (6 Boyce 297,99 A. 1069), and there affirmed upon an equal division of the judges. Because of its being an opinion of an inferior, and the affirmance by a divided, court, it may be said that it is not of much value as authority. However, it appears to me to be a correct and satisfactory solution of a rather difficult question. The fourth syllabus of that opinion states the facts and the law, and reads as follows:
"Where the vendee of an automobile conditionally sold in Massachusetts, where such contracts are recognized as valid against third persons, took the same into Pennsylvania, where such contracts are not so recognized, and sold to a third person with notice, who sold to defendant, a bona fide purchaser without notice, who brought the car into this state, where such contracts are recognized as in Massachusetts, the defendant's title to the car was indefeasible, since he had purchased in Pennsylvania, under the rule that the lex loci rei determines the status of personal property."
This case has been cited by two subsequent cases upon the point that the law of the place where personal property is located determines its status. Goetschius v. Brightman, 245 N.Y. 186,156 N.E. 660; Fry Bros. v. Theobold, 205 Ky. 146,265 S.W. 498.
I think the judgment should be affirmed. *Page 425