I respectfully dissent. There is no evidence to sustain the findings that Lamb borrowed the purchase price of the automobile "after" he had purchased the same from Cowden. On the contrary, the evidence is to the effect, and the trial judge found, that the finance corporation advanced the full purchase price of the automobile to Lamb and the automobile was purchased by the funds so advanced. The contract between Cowden and Lamb was not a contract of sale but was an executory contract to sell for cash and hence incomplete until the payment of the price. The transfer of the property in the car by Cowden was conditional upon the actual payment of the price by Lamb to Cowden. It is true that the evidence is open to the inference that Lamb was furnished with the muniments of *Page 300 title necessary for him to execute a bill of sale to the finance corporation and to enable it in turn to have itself registered as the legal owner, in accordance with the law pertaining to the registration of motor vehicles. But whatever was furnished Lamb it was ineffective to transfer title to Lamb and was not intended to be effective to pass title to and through him until Cowden was paid the price. Title never passed out of Cowden until he was paid.
The car was not delivered by Cowden to Lamb until Cowden had been paid. After Cowden was paid it was immaterial whether Cowden delivered the car to Lamb through the finance corporation or did so directly. Under the conditional sale contract Lamb was entitled to possession.
Lamb never had legal title to the car in controversy. Never having had legal title, Lamb could not create a mortgage lien upon the legal title. This is not the case of the legal owner of an automobile borrowing money on a car of which he has both title and possession and the security for repayment takes the form of a conditional sale. The distinction between such a case and the case at bar rests upon the postulate that if the putative vendee has both legal title and possession prior to the execution of the conditional sale contract the transaction while enforceable as between the parties is, as to third parties, constructively fraudulent, irrespective of the terms of sale.
Nor can I subscribe to the unqualified acceptance of the proposition that an existing creditor without more may vary the terms of a written instrument and by extrinsic evidence show that a conditional sale contract is in fact a mortgage. The majority declares "The law permits a creditor to establish the mortgage character of his debtor's transaction * * *." To this declaration arises the legitimate rejoinder "When and under what circumstances?" The only support for this declaration is "All contracts are *Page 301 made * * * subject to valid provisions of law pertaining to their execution, construction and effect." To me such generalities are not sufficient to support a finding that a conditional sale contract is, as a matter of law, a chattel mortgage.
Conditional sale contracts are not constructively fraudulent in this jurisdiction. On the contrary, by Revised Laws of Hawaii 1945, section 9144, included in chapter 176 of the revision, it is provided that "Every provision in a conditional sale reserving property in the seller after possession of the goods is delivered to the buyer shall be valid as to all persons, except as hereinafter in this chapter otherwise provided." And it is not otherwise provided in the chapter. So far as I know, the only ground of attack available to an existing creditor is that the conditional sale was resorted to with the intent to hinder, delay or defraud creditors. The title to the car was in the finance corporation and it possessed the legal capacity to sell the same conditionally to Lamb. The bill of sale from Lamb to the finance corporation and the conditional sale from the latter to the former was recorded in strict compliance with the provisions of Revised Laws of Hawaii 1945, section 12758, and of its contents the attaching creditor had constructive notice. There is no evidence showing or tending to show, in fact there is not the slightest intimation, that the method resorted to to finance the loan was intended to hinder, delay or defraud creditors. Under the circumstances, the attaching creditor had no rights superior to the finance corporation.
To say that the transaction was one of security is beside the point. The primary function of a conditional sale contract is security. But every conditional sale contract is not a mortgage as to existing creditors.
Lamb had no attachable interest in the car at the time of the attachment nor since. The mutual rescission of *Page 302 the conditional sale contract and sale to plaintiff was effected prior to attachment and operated to divest Lamb of all interest in the car. Nothing further was required to make Lamb's surrender or waiver of his rights as a conditional buyer legally effective. The provisions of subdivision 5 of Revised Laws of Hawaii 1945, section 7342, do not apply to the surrender by a conditional buyer in default to the conditional seller and legal owner of a motor vehicle of the rights of the former under a conditional sale to him by the latter of said motor vehicle. The provisions of section 7342, subdivision 5, supra, apply only where there is a "conveyance" as that term is used in section 12758, the symbolic substitute of which is "delivery" or a "transfer" of "title" as those words are used in the subdivision. The provisions of subdivision 1 of section 7342 are restricted to the "title" or "interest" of a "legal owner." The respective definitions and connotations of the words "conveyance," "transfer" and "title" limit their application to transfers of "legal title." The legal title was and always had been in the finance corporation, the conditional seller, and the interest of Lamb, the conditional buyer, whether considered contractual rights or property rights or both, does not constitute "legal title." Under both the common law and the statute law of Hawaii pertaining to conditional sales "legal title" is retained by the conditional seller. It is to the "legal title" that the provisions of section 7342 relate and it is with the legal title that the limitations and restrictions of subdivision 5 of the section are concerned as a means of protection against theft, the admitted purpose of the requirements of the registration of legal ownership of motor vehicles. The case of Hilo Fin. T. Co. v.De Costa, 34 Haw. 407, is clearly distinguishable and does not apply. The issue of an attachable interest in the judgment creditor Lamb relates to Lamb, the former conditional buyer alone and not to that of the finance corporation, *Page 303 the former conditional seller and owner of the legal title.
The majority further concludes that "Had a conditional sale from the finance corporation as vendor to Lamb as vendee existed under the same circumstances, the vendee's obligation of contract, as in effect reduced by the parties to the equivalent of the agreed value of the conditionally sold automobile, would have been satisfied in termination of the contract and the actualities would have been the same as those on the extinguishment of the mortgage lien as far as the plaintiff and the defendant are concerned. The title reserved by the vendor in such a case would have automatically passed to the vendee under the contract and by operation of law without any further consent or act on the part of the vendor, its conduct being entirely repugnant to any further retention of title." This conclusion is based upon a factual hypothesis that has no evidence for its support. Sale to the plaintiff was made by the finance corporation directly to him. It was the owner of the legal title to the car which enabled it to make delivery directly to him consistently with the agreement of all the parties concerned. Nor was the conditional sale contract completed by the payment of the purchase price paid by the plaintiff.
There remained $700 to be paid under the conditional sale contract before title could vest in Lamb. The authorities cited to support the quoted excerpt are merely to the effect that upon completion by the conditional vendee of the conditional sale contract title vests in him. But Lamb was a conditional vendee in default, had no title, on the contrary, merely a right of possession and his surrender to the conditional vendor of whatever interest he had in the property subject to the conditional sale divested him of the only right he had, that of the bare possession. To say that "Thus from either view, until Lamb's agreement of absolute sale became effective to pass title to the plaintiff, *Page 304 Lamb held the absolute title to the automobile and nothing effecting the automobile remained in the finance corporation other than the bare registration of its name as legal owner" is contrary to the facts and a misapplication of the law of conditional sales.