Summary
In Yancey Brothers Co. v. Dehco, Inc., 108 Ga. App. 875, 134 S.E.2d 828 the Court of Appeals said that the description in the security instrument must raise a warning flag, as it were, providing a key to the identity of the property.
Summary of this case from United States v. Big Z WarehouseOpinion
40380.
DECIDED JANUARY 8, 1964. REHEARING DENIED JANUARY 23, 1964.
Trover. Fulton Civil Court. Before Judge Webb.
Joseph R. White, Jr., King Spalding, Richard M. Hester, Hester Hester, for plaintiff in error.
Gibert, Walling Hubert, Hugh W. Gibert, contra.
1. The general demurrer was properly overruled.
2. (a) Equitable estoppel does not arise where both parties have equal opportunities to know the facts.
(b) In order to afford constructive notice, the description of property in a recorded instrument must be sufficient in itself to identify the property or it must provide the key to its identity.
DECIDED JANUARY 8, 1964 — REHEARING DENIED JANUARY 23, 1964.
This is a trover action. Involved is a No. 60 Caterpillar scraper, alleged to be in defendant's possession and to have been purchased by plaintiff, who, when buying, obtained an invoice showing it to have Serial Number 2W5552 (2W hereinafter). Judgment was entered for plaintiff for a scraper with Serial Number 1D1241 (1D hereinafter). There are obvious physical differences between 1D series scrapers and 2W series scrapers.
In 1956, one Washington owned both the 1D and 2W scrapers and defendant Yancey had liens on both of them. Plaintiff (defendant in error here) wanted to buy the 1D scraper. In order to clear title, the parties arranged for Yancey to reacquire the scraper and sell it directly to plaintiff. The bill of sale identified the 2W scraper although the 1D scraper was actually delivered to plaintiff. In 1959, plaintiff wanted to sell the scraper and requested Yancey to appraise it. This Yancey did, identifying the 2W scraper in its appraisal report. Plaintiff then sold the scraper in its possession (the 1D scraper) to Gross, again identifying it as the 2W scraper. Gross gave the Cobb Exchange Bank a bill of sale to secure debt on "One (1) Caterpillar No. 60 Scraper, Serial No. 2W5552," and three other items of machinery. (Emphasis added). Gross defaulted, and in 1961 the bill of sale was assigned to Dehco, Inc., which had guaranteed the loan. The bill of sale and the assignment thereof were recorded. Gross retained possession of the scraper, sold it and it was eventually acquired for value by Yancey from Burnham under a bill of sale in which the scraper was identified by its correct serial number. Plaintiff's president, identifying the scraper solely by its physical appearance especially a weld that he had procured in mending a break on the gooseneck and which obliterated one of the two places where the true serial number appeared on the scraper, found the 1D scraper in defendant's yard and demanded it. Later written demand was made, in which it was described as the scraper, title to which Dehco claimed "by virtue of a recorded bill of sale to secure debt" which Gross had executed to Cobb Exchange Bank, transferred to Dehco and which had "been foreclosed in Cobb County by Dehco, Inc., but has not been forthcoming from the defendant in fi. fa., E. L. Gross." As stated above, the scraper was described in the bill of sale from Gross as having Serial No. 2W5552.
After a verdict and judgment by the trial judge (without a jury) was rendered in plaintiff's favor for the 1D scraper, the defendant moved for a new trial on general and special grounds. Error is also assigned on the overruling of a general demurrer.
1. The petition brought for the 2W scraper was not subject to general demurrer.
2. In response to defendant's motion for new trial on the general grounds, the plaintiff advances two theories as to why its recovery should be allowed to stand. They are: (a) that, under the circumstances, the defendant is estopped to rely on the misdescription in serial numbers, and (b) that the description in the recorded bill of sale to secure debt was sufficient, under the circumstances, to create a jury question as to the constructive notice imparted to defendant by its recordation.
(a) Estoppel. Plaintiff relies on equitable estoppel or estoppel in pais. See Code § 38-116. However, an estoppel of this nature cannot arise where both parties have equal knowledge or means of obtaining knowledge of the facts alleged to constitute an estoppel. Williams v. Waldrop, 216 Ga. 623 (2), 626 ( 118 S.E.2d 465) and citations. See Gay v. Laurens County, 213 Ga. 518 (2), 523 ( 100 S.E.2d 271) and citations. Here, the testimony amply showed that both of the parties had equal opportunities to obtain knowledge of the serial number of the scraper actually sold to the plaintiff, which might have been accomplished by an examination of the number appearing on the scraper itself. Therefore, no estoppel can arise against the defendant.
(b) Constructive Notice. The question of the sufficiency of the description in a recorded instrument to impart constructive notice is for the jury except in clear cases. Trusco Finance Co. v. Childs, 87 Ga. App. 789 ( 75 S.E.2d 336). While there appears to be some conflict in the decisions, a merely general description of the affected property will be held sufficient for jury consideration where either the location of the property is asserted in the instrument or the instrument indicates from whom the property was purchased. Location cases, see North American Loan c. Co. v. Burel, 89 Ga. App. 654 ( 80 S.E.2d 495); Sterchi Bros. Store, Inc. v. Seaboard Finance Co., 99 Ga. App. 138 ( 107 S.E.2d 913). From whom purchased cases, see Thomas Furniture Co. v. T. C. Furniture Co., 120 Ga. 879 ( 48 S.E. 333); Paradies Rich v. Warren Co., 53 Ga. App. 457 (1) ( 186 S.E. 438); Trusco Finance Co. v. Childs, 87 Ga. App. 789, supra. The gist of these cases and others is that, while it is not wholly necessary that the physical description appearing of record be sufficient in itself to identify the property, it must raise a warning flag, as it were, providing a key to the identity of the property. Merely stating an incorrect serial number will not vitiate the contract if the key is there, Trusco Finance Co. v. Childs, 87 Ga. App. 789, supra; but, when the incorrect serial number is eliminated here, all that remains is the names of the parties (Gross and Cobb Bank), the date, and the fact that a No. 60 Caterpillar scraper was one of the subjects of the instrument. Under the cases cited above, this would not be sufficient to create a jury question as to constructive notice.
The provisions of the Uniform Commercial Code (effective January 1, 1964) do not appear to work any change in this rule. See Code Ann. §§ 109A-9-110, 109A-9-203(1b), 109A-9-402.
But may the plaintiff rely on this insufficient description coupled with the actual knowledge of the defendant? That is, may record of the bill of sale, though legally insufficient itself to constitute constructive notice, be combined with actual knowledge of the character shown here in order to authorize a jury to find that a defendant knew or should have known of the existence of a lien? An affirmative answer finds apparent support in Nussbaum v. Waterman, 9 Ga. App. 56, 61 ( 70 S.E. 259) where it was said: "Whether the record gives . . . [sufficient] notice depends not solely on the language appearing in the mortgage, but is determined in accordance with what a person of ordinary business prudence would have found out from pursuing such lines of inquiry as the data given in the mortgage would naturally suggest to his mind; and, additionally, any further information actually possessed by the claimants at the time of their transaction, which would have led an ordinary man to believe that he was dealing as to the mortgaged property, or would ordinarily have led him to further inquiry, may be taken into consideration in determining whether they had notice of the lien, or were legally chargeable with notice." See also, Washburn Storage Co. v. Columbia Loan Co., 95 Ga. App. 552, 555 (4) ( 98 S.E.2d 147). However, we do not think that this principle is available in the circumstances where, as here, the scraper was reacquired for value by the original seller under a correct description and without any fact indicating that it knew at the time of reacquisition that the scraper was the same one that had been sold under the misdescription.
It seems likely that this rule may be applied in situations arising under the Commercial Code, particularly since the description of the property is not required to be specific, Code Ann. § 109A-9-110, but the debtor has means of obtaining from the secured party a statement both of the amount owing and the correct identification of the collateral, Code Ann. § 109A-9-208. Thus, a prudent purchaser or lender may require the seller or borrower to produce a statement from one in whose favor a financing statement has been filed.
Defendant being otherwise a bona fide purchaser and here neither estoppel nor constructive notice preventing such a status, the motion for new trial should have been granted on the general grounds.
Judgment reversed. Felton, C. J., and Russell, J., concur.