Century Credit Corporation v. Richard [1962] O.R. 815-821 ONTARIO [COURT OF APPEAL] LAIDLAW, MacKAY and KELLY, JJ.A.

28th MAY 1962. Sale of Goods -- Conflict of Laws -- Car purchased in Quebec under Quebec conditional sale agreement -- Conditional sale purchaser bringing car to Ontario and selling to Ontario purchaser -- Latter buying in good faith and without notice -- Rights of unpaid Quebec vendor against Ontario purchaser A conditional sale purchaser taking possession of a car in Quebec under a Quebec contract reserving title in the unpaid vendor brought the vehicle into Ontario, without the knowledge of the vendor or the latter's assignee, where he sold it to defendant's predecessor in title who purchased it in good faith and without notice. Held, that by virtue of s. 25(2) of the Sale of Goods Act and s. 2(1) of the Factors Act, the Ontario purchaser acquired title to the car, which title superseded the title acquired under Quebec law by the original vendor, notwithstanding that the title of the original vendor would have been enforceable in Ontario against the original conditional sale purchaser. In the result defendant, claiming under the aforesaid Ontario purchaser, was entitled to possession of the vehicle as against the plaintiff, the assignee of the original vendor. APPEAL from decision of Sweet, Co.Ct.J., declaring plaintiff entitled to possession of a certain motor vehicle. Reversed. FACTS: April 8, 1959, one Moses sold to Foldes a 1957 Chevrolet motor car, with respect to the unpaid purchase-price of which Foldes signed a conditional sales contract containing the usual reservation of the title and ownership. At the time of the sale which took place in Montreal, the vehicle was situated and both Moses and Foldes resided in Montreal. Possession of the vehicle was delivered to Foldes, and the conditional sales contract acknowledged the delivery to and acceptance by him of the vehicle. On the same day, as contemplated by the conditional sales contract, Moses assigned it for value to the respondent. Subsequently Foldes, without the knowledge of the respondent, brought the vehicle into Ontario where it was sold, in a damaged condition, to Hamilton Car Refinishers, which latter purchaser, in the belief that Foldes was the absolute owener, paid him the sum of $450 for it. After work had been done on the vehicle it was resold to third parties or one of them, and in turn sold to the appellant who purchased it without any notice of the respondent's title or claim, at a time when according to findings of the trial Judge the respondent was, under the terms of the conditional sales contract as against Foldes entitled to possession. The Sheriff of the County of Wentworth as directed by a replevin order, after taking security as required by Rule 362, delivered the vehicle to the respondent which has since resold it. The respondent commenced this action claiming from the appellant possession of the vehicle and damages for its wrongful detention. The appellant in his statement of defence claimed the return of the vehicle, and damages for wrongful seizure. The appellant brought into this action as third parties the vendors to him of the vehicle, claiming against the third parties the repayment of the sum of $950 paid by him to the third parties, $314.49 paid by the appellant for repairs, and indemnification against any damages awarded against him in favour of the respondent. Trial court decision The learned trial Judge held that the conditional sales contract was sufficient under the laws of the Province of Quebec to reserve the title in the unpaid vendor until payment in full of the purchase-price without the necessity of any registration in that Province and that under the laws of Ontario the vendor would, in the event of default, be entitled to possession of the vehicle as against an innocent purchaser in good faith without notice of the conditional sales contract. Judgment was therefore given against the appellant for possession and costs and in favour of the appellant against the third parties for $1,263.49 and costs, together with the costs payable by the appellant to the respondent. ISSUE: Does a sale in Ontario to a purchaser in Ontario by a person who has agreed in Quebec to buy a vehicle from a resident of Quebec under a contract by which the title and ownership are reserved to the seller and who has obtained possession of the vehicle with the consent of the seller to him, transfer title to the purchaser in Ontario notwithstanding that the original seller's right to the title and ownership would have been enforceable in Ontario against the original buyer who signed the conditional sales contract? HELD: Appelant has the right to the vehicle sold. Appellant has valid title. RATIO In considering the respective rights of the parties the respondent as assignee of Moses, the original seller, stands in no higher position than its assignor, and for the purpose of this judgment I will refer to the rights of the respondent as those of an unpaid seller. At the outset consideration must be given to the conflicts of law problem presented by the facts. The applicable principles are stated in Dicey's Conflict of Laws, 7th ed., in Rules 86 and 88 set out at pp. 537 et seq. Rule 87 is inapplicable due to the particular facts of this case. Rule 86. -- (1) A transfer of a tangible movable which is valid and effective by the proper law of the transfer and by the law of the place where the movable is at the time of the transfer (lex situs) is valid and effective in England. (2) A transfer of a tangible movable which is invalid or ineffective by the proper law of the transfer and by the lex situs of the movable at the time of the transfer is invalid or ineffective in England. Rule 88. -- A title to goods acquired or reserved in accordance with Rules 86 or 87 will be recognised as valid in England if the goods are removed out of the country where they were situated at the time when such title was acquired, until such title is displaced by a new title acquired in accordance with the law of the country to which they are removed. Applying these rules to the present facts the absence of registration in Ontario is not a circumstance invalidating the contract in Ontario and the title reserved by the respondent will remain valid in Ontario unless and until it is superseded by a valid title acquired in accordance with the laws of Ontario. If the laws of Ontario were to seek to invalidate the respondent's title by refusing to recognise that the transaction which took place in Quebec had the effect of continuing the title in the respondent, this attempt of Ontario law to invalidate a transaction taking place in Quebec would be bad because the validity of a Quebec transaction must be decided according to the laws of Quebec, the lex situs: to the extent that s. 12 of the Conditional Sales Act, R.S.O. 1960, c. 61, seeks to make subject to that Act a contract made out of

Ontario with respect to goods not then in Ontario but subsequently brought into Ontario, it is an attempt to legislate with respect to such a transaction, the effects of which are to be decided according to the law of Quebec and for this reason offends against the above-quoted Rule 86. However, if the laws of Ontario provide that a later transaction which takes place wholly within Ontario has the effect of overriding prior titles, then since Ontario does not seek to give its laws any extra-territorial effect the laws of Ontario prevail and the title created under the laws of Ontario displaces the title reserved in the Quebec transaction. The sale by Foldes to Hamilton Car Refinishers took place in Ontario and its effect must be decided according to Ontario law. The applicable statutory provisions appear to be s. 25(2) of the Sale of Goods Act, R.S.O. 1960, c. 358, and s. 2(1) of the Factors Act, R.S.O. 1960, c. 129: 25. (2) Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under a sale, pledge or other disposition thereof to a person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. 2. (1) Where a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, a sale, pledge or other disposition of the goods made by him when acting in the ordinary course of business of a mercantile agent, is, subject to this Act, as valid as if he were expressly authorized by the owner of the goods to make the disposition, if the person taking under it acts in good faith and has not at the time thereof notice that the person making it has not authority to make it. The sale by Foldes in Ontario to a purchaser who received the vehicle in good faith and without notice of any lien or other right of the original seller, by reason of s. 25 of the Sale of Goods Act, has the same effect as if Foldes in making the delivery and transfer were a mercantile agent in possession of the goods with the consent of the owner. Applying s. 2(1) of the Factors Act, this sale by Foldes is as valid as if it were expressly authorized by the owner and the title acquired by the purchaser by virtue of this sale is absolute. As I have said before the respondent can stand in no higher position than the original seller in Quebec and therefore respondent's title is displaced by the valid sale in Ontario. Similar facts have been dealt with in Traders Finance Corp. v. Dawson Implements Ltd. (1958), in this case, in my opinion, correctly applied the law in holding that despite the fact that the conditional sales agreement made in Alberta did not require to be registered in the Province of British Columbia in order that it might retain its validity in British Columbia as between the original parties, the sale of goods situated in British Columbia, having taken place in that Province, was to be considered according to the laws of that Province: and that by virtue of s. 32(2) and s. 60 of the Sale of Goods Act the purchaser acquired a valid title which displaced the title reserved by the conditional vendor in Alberta. Section 32(2) of the British Columbia Act appears to be identical with s. 25(2) of the Ontario Sale of Goods Act, while s. 60 is similar in effect to s. 2 of the Ontario Factors Act. It was submitted by counsel of the respondent that s. 57(2) of the Sale of Goods Act nullifies the effect of s. 25 of the Sale of Goods Act. 57. (1) The rules of the common law, including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, and in particular the rules relating to the law of principal and agent and the effect of fraud, misrepresentation, duress or coercion, mistake or other invalidating cause, continue to apply to contracts for the sale of goods. (2) Nothing in this Act affects enactments relating to conditional sales, bills of sale or chattel mortgages. (3) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale that is intended to operate by way of mortgage, pledge, charge or other security. In my view s. 57 does not prevent s. 25 applying to the transaction so as to confer a good title upon the second purchaser of the vehicle in question. The only relevant enactment in Ontario which could be referred to by s. 57 would be the Conditional Sales Act. Since the right of a seller to reserve ownership when parting with the possession to a buyer was a common-law right existing before the enactment of our Conditional Sales Act, the only purpose and effect of the Conditional Sales Act was to restrict the rights of the seller by imposing requirements as to registration as a necessary condition for the preservation of the rights of the seller as against subsequent purchasers and mortgagees, without notice, in good faith and for valuable consideration. The appellant's title to the vehicle was good and absolute when the vehicle was seized under the replevin order of August 31, 1960, and the respondent had no interest in the vehicle which could be asserted as valid against the title of the appellant. According to the evidence of one Francoeur, an officer of the respondent, the vehicle was resold by the respondent after it came into the respondent's possession. The return of the vehicle to the appellant has therefore become impossible by reason of an act of the respondent, but the appellant is entitled to receive the value of the vehicle, which value was found by the learned trial Judge to be $1,263.49. The appellant should be granted leave to make whatever amendments to his pleadings become necessary to claim this relief. The vehicle was improperly taken from the appellant, and he has been deprived of possession of it since August 31, 1960; in both of these respects he has suffered compensable wrongs. While it is true that he could have minimized his inconvenience by buying another vehicle, by doing so he would have lost the use of the money invested in the new vehicle. I think that an allowance of $250 for wrongful seizure and interest at 5% on the sum of $1,263.49 from August 31, 1960 until paid, for wrongful detention would be appropriate compensation under all the circumstances. The appeal must be allowed with costs. The judgment below shall be set aside and in its place there shall be judgment dismissing the respondent's claim and awarding to the appellant on its counterclaim 1. $1,513.49. 2. A sum equal to the interest at the rate of 5% from August 31, 1960 on $1,263.49. 3. The costs of the action and counterclaim: the claim against the third parties shall be dismissed with costs and the appellant shall be allowed to add to its claim against the respondent such costs as shall be taxed against the appellant by the third parties.

Appeal allowed.