ASSOCIATES DISCOUNT CORPORATION vs. C. E. FAY COMPANY.

LUMMUS, J. This is an action begun November 5, 1937, for the conversion of an automobile. The plaintiff finances the purchase of automobiles by retail dealers. Grannone Motors, Inc., hereinafter called Grannone, was such a dealer. The defendant was the distributor in Boston of automobiles made by the manufacturer of the automobile in question. When the automobile ordered by Grannone arrived in Boston, the plaintiff paid for it by arrangement with Grannone, and received a bill of sale of it dated July 16, 1937, from the defendant, which knew the relationship between the plaintiff and Grannone, and knew that while the plaintiff owned the automobile Grannone was to have possession of it for sale "under some agency agreement." Accordingly the defendant delivered the automobile to Grannone. The understanding between the plaintiff and Grannone was that expressed in a certain form of document called a "trust receipt," which however happened not to be executed with respect to this particular automobile. The form of that document, except for a draft in favor of the plaintiff attached to it, to be accepted by Grannone, appears in a footnote. [Note 1] There was evidence that the blank before the word "days" usually was filled by the insertion of the figures 45 or 60.

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About July 20, 1937, after the foregoing transactions had been completed, the defendant desired an automobile like the one in question, and induced Grannone to return the automobile in question and to accept in its stead another of the same value but of a slightly different model. At that time the defendant had notice that the title to the automobile in question was in the plaintiff under a transaction in the nature of a trust receipt. The judge found as follows: "While I find it was usual for automobile dealers to exchange cars with other dealers, I find that the plaintiff gave no authority to Grannone . . . to do this and that the defendant had no reason to believe that any such authority

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had been given . . . ." It appeared that Grannone stopped doing business late in July, 1937, and that the plaintiff had not been repaid its investment in the automobile in question, which amounted to $614.

The judge, sitting without a jury, found for the plaintiff, and assessed damages at the agreed amount of $614. The defendant alleged exceptions.

The essence of the transaction expressed in the form of "trust receipt" already set forth in full, is that the plaintiff owns the automobile; that Grannone holds possession of it "in trust" for the plaintiff, with power as agent for the plaintiff to sell it, on certain conditions, paying the proceeds to the plaintiff; and that the automobile is to be delivered to the plaintiff whenever it "shall feel insecure." It is implied rather than expressed that the title to the automobile shall pass to Grannone whenever the draft is paid.

The transaction was not a pledge, for the plaintiff had full legal title and not a mere special property dependent on possession (Moors v. Drury, 186 Mass. 424, 425), to say nothing of the question whether the possession of Grannone could be considered that of the plaintiff. Moors v. Wyman, 146 Mass. 60, 63. Peoples National Bank v. Mulholland, 224 Mass. 448, 451. T. D. Downing Co. v. Shawmut Corp. of Boston, 245 Mass. 106, 113. Handy v. C. I. T. Corp. 291 Mass. 157, 160. The transaction was not a chattel mortgage, for the automobile never belonged to Grannone, and never was conveyed by it to the plaintiff. Moors v. Drury, 186 Mass. 424, 425. Peoples National Bank v. Mulholland, 224 Mass. 448, 452. Simons v. Northeastern Finance Corp. 271 Mass. 285, 291. Hartford Accident & Indemnity Co. v. Callahan, 271 Mass. 556. Handy v. C. I. T. Corp. 291 Mass. 157, 160, 161. The transaction was not a conditional sale by the plaintiff to Grannone, for Grannone was not to gain title upon paying a price to the plaintiff as a vendor. The event upon which the plaintiff was to lose title was not the payment of a price as such, but either the payment of an advance represented by a draft or a sale by Grannone under its power to some third person. Simons v. Northeastern Finance Corp. 271 Mass. 285, 290. Handy v. C. I. T.Corp.

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291 Mass. 157, 160. See Russell v. Martin, 232 Mass. 379. The name "trust receipt," given to the transaction, is a misnomer, for Grannone held no title for the benefit of the plaintiff. Handy v. C. I. T. Corp. 291 Mass. 157, 160. G. L. c. 255A (St. 1936, c. 264) Section 1, definition of "Trustee." But it is well settled that such a transaction is valid at common law so far that the title of the party financing the transaction is protected, except as against a vendee in some instances under the so called factor's act, G. L. (Ter. Ed.) c. 104, and general principles of agency. Peoples National Bank v. Mulholland, 228 Mass. 152, 155. Brown v. Green & Hickey Leather Co. 244 Mass. 168, 178. T. D. Downing Co. v. Shawmut Corp. of Boston, 245 Mass. 106, 112, 113. Handy v. C. I. T. Corp. 291 Mass. 157, 161-163. Charavay & Bodvin v. York Silk Manuf. Co. 170 Fed. 819, discussing the earlier cases.

The Uniform Trust Receipts Act, G. L. c. 255A, inserted by St. 1936, c. 264, makes for trust receipt transactions elaborate provisions which differ to some extent from common law requirements. For example, compare Section 2, el. 1 (a) (b) (ii) with Simons v. Northeastern Finance Corp. 271 Mass. 285, and Hartford Accident & Indemnity Co. v. Callahan, 271 Mass. 556, 562, 563. Section 1 contains this definition: "`Trustee' means the person having or taking possession of goods, documents or instruments under a trust receipt transaction, and any successor in interest of such person. The use of the word `trustee' herein shall not of itself be interpreted or construed to imply the existence of a trust or any right or duty of a trustee in the sense of equity jurisprudence other than as provided by this chapter." Section 2 restricts a "trust receipt transaction" to the delivery to the trustee of goods, documents or instruments "against the signing and delivery by the trustee of a writing" or "pursuant to a prior or concurrent written and signed agreement of the trustee to give such a writing." The present case, in which there was no writing, falls outside the act, Section 2, cls. 1 (b) (i) (ii), 2; Section 4, cl. 1. It is left to be governed by the pre‰xisting law. Section 17. See 5 Fordham Law Review, 240, 246.

The so called factor's act (G. L. [Ter. Ed.] c. 104) in Section 1

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provides: "A factor or other agent intrusted with the possession of merchandise or of a bill of lading consigning merchandise to him with authority to sell the same shall be deemed the true owner of such merchandise, so far as to give validity to any bona fide contract of sale made by him." One who is the so called trustee under a trust receipt, with authority to sell (H. A. Prentice Co. v. Page, 164 Mass. 276; Thacher v. Moors, 134 Mass. 156, 163; Royle v. Worcester Buick Co. 243 Mass. 143) is a "factor or other agent" within that section. International Trust Co. v. Webster National Bank, 258 Mass. 17. Handy v. C. I. T. Corp. 291 Mass. 157, 162. Of course the automobile was "merchandise." Jeffery v. M. W. Leahy & Co. 258 Mass. 548, 550. If Grannone, the so called trustee, had authority to sell upon any terms, however limited, a "bona fide contract of sale made by him" upon other terms would be valid. The very purpose of the statute is to protect a purchaser where the agent has exceeded his authority. Michigan State Bank v. Gardner, 15 Gray 362, 374. H. A. Prentice Co. v. Page, 164 Mass. 276, 281. International Trust Co. v. Webster National Bank, 258 Mass. 17, 22. Although at common law authority to sell does not include authority to exchange or barter (Am. Law Inst. Restatement: Agency, Section 65 (1), Comment a. Guerreiro v. Peile, 3 B. & Ald. 616; Howard v. Chapman, 4 C. & P. 508; Taylor & Farley Organ Co. v. Starkey, 59 N. H. 142; Hayes v. Colby, 65 N. H. 192; Kearns v. Nickse, 80 Conn. 23; Royle v. Worcester Buick Co. 243 Mass. 143, 146; Clough v. Whitcomb, 105 Mass. 482, 485), in statutes the word sale is commonly construed as including exchange or barter (Commonwealth v. Clark, 14 Gray 367, 372; Howard v. Harris, 8 Allen 297; Dowling v. McKenney, 124 Mass. 478; Gallus v. Elmer, 193 Mass. 106, 109; Cobb, Bates & Yerxa Co. v. Hills, 208 Mass. 270) and in the factor's act the words "contract of sale," which formerly read "contract . . . for the sale" (St. 1845, c. 193, Section 2), have already been so construed. Michigan State Bank v. Gardner, 15 Gray 362, 374. See also Handy v. C. I. T. Corp. 291 Mass. 157, 158, 164.

The defendant was entitled to have its transaction with Grannone considered a "bona fide contract of sale" within

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the statute, notwithstanding the fact that it knew the relationship between the plaintiff and Grannone and knew that while the plaintiff owned the automobile Grannone was to have possession of it for sale "under some agency agreement." The judge does not find that the defendant knew that Grannone had no authority to exchange the automobile. See Goodwin v. Massachusetts Loan & Trust Co. 152 Mass. 189, 194. Bad faith is not to be presumed. Notice to the defendant of circumstances that, if investigated, might have disclosed want of authority to exchange or barter the automobile, was not inconsistent with good faith or with a "bona fide contract." The statutory test is good faith, and not reason to believe in the existence of authority nor want of notice under principles of equity. Compare Essex County Acceptance Corp. v. Pierce-Arrow Sales Co. of Boston, 288 Mass. 270, 276. In many cases to which the protection of the factor's act extends, the existence of the agency is well known. The act would give but scant protection in commercial dealings if a purchaser with knowledge of the agency could not rely upon the statute, especially where the agency, though within the words of the statute, was a special one. See Cairns v. Page, 165 Mass. 552; Marquandt v. Boston Young Women's Christian Association, 282 Mass. 28; Handy v. C. I. T. Corp. 291 Mass. 157, 162, 163. We are unable to follow the decisions in New York which construe a somewhat similar statute so as to deny its protection to a purchaser who knew that the seller was an agent or factor and not the owner. Stevens v. Wilson, 6 Hill 512; S. C. 3 Denio 472. Cartwright v. Wilmerding, 24 N. Y. 521, 534, 535. Allen v. St. Louis Bank, 120 U.S. 20, 33, 34. Our construction is supported by Williston, Sales (2d ed. 1924) Section 322, and by an opinion of Ryan, C.J., in Price v. Wisconsin Marine & Fire Ins. Co. 43 Wis. 267, 289 et seq. See also Navulshaw v. Brownrigg. 2 De G. M. & G. 441.

We think that the ruling requested by the defendant, that on all the evidence it was entitled to a finding as matter of law, should have been given.

Exceptions sustained.

Judgment for the defendant.