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  • First Security Bank of Idaho v. Fred Crouse, D/B/A C & L Diesel Service, 374 F.2d 17, 1st Cir. (1967)

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    This document summarizes a court case regarding a dispute over possession of a truck between a bank holding a chattel mortgage on the truck and a garage that performed repairs on the truck. The district court found that the garage's lien for repairs was superior to the bank's chattel mortgage under Colorado law. However, the appeals court reversed, finding that Colorado law as established in statute gives a recorded chattel mortgage priority over a subsequent garage lien. The case was remanded for determination of damages from the garage unlawfully detaining the truck.

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    Filed: 1967-03-07 Precedential Status: Precedential Citations: 374 F.2d 17 Docket: 8724

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    This document summarizes a court case regarding a dispute over possession of a truck between a bank holding a chattel mortgage on the truck and a garage that performed repairs on the truck. The district court found that the garage's lien for repairs was superior to the bank's chattel mortgage under Colorado law. However, the appeals court reversed, finding that Colorado law as established in statute gives a recorded chattel mortgage priority over a subsequent garage lien. The case was remanded for determination of damages from the garage unlawfully detaining the truck.

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    112 views4 pages

    First Security Bank of Idaho v. Fred Crouse, D/B/A C & L Diesel Service, 374 F.2d 17, 1st Cir. (1967)

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    This document summarizes a court case regarding a dispute over possession of a truck between a bank holding a chattel mortgage on the truck and a garage that performed repairs on the truck. The district court found that the garage's lien for repairs was superior to the bank's chattel mortgage under Colorado law. However, the appeals court reversed, finding that Colorado law as established in statute gives a recorded chattel mortgage priority over a subsequent garage lien. The case was remanded for determination of damages from the garage unlawfully detaining the truck.

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    of 4

    374 F.

    2d 17

    FIRST SECURITY BANK OF IDAHO, Appellant,


    v.
    Fred CROUSE, d/b/a C & L Diesel Service, Appellee.
    No. 8724.

    United States Court of Appeals Tenth Circuit.


    March 7, 1967.

    Thomas J. Kerwin, Denver, Colo. (Richard W. Breithaupt and Hodges,


    Silverstein & Harrington, Denver, Colo., on the brief) for appellant.
    George R. Buck, Jr., Cortez, Colo. (Dilts & Buck, Cortez, Colo., on the
    brief) for appellee.
    Before MURRAH, Chief Judge, and HILL and SETH, Circuit Judges.
    HILL, Circuit Judge.

    Appellant, assignee-holder of the chattel mortgage, sued appellee in the United


    States District Court for the District of Colorado to replevy a Mack truck in the
    possession of appellee, a garageman. Appellee counterclaimed for his bill for
    repair work and storage, contending that Colorado law gives him a garageman's
    lien which is superior to appellant's chattel mortgage. The case was tried to the
    court which held that plaintiff-appellant was entitled to possession of the truck
    but that defendant-appellee was entitled to relief on his counterclaim for the
    repairs and storage in the total amount of $1,813.40, plus interest.

    The facts are these: The subject 1960 model Mack truck was purchased in
    Boise, Idaho. The buyer executed a conditional sales contract to the seller and
    the seller assigned the contract to appellant bank. The contract was recorded
    with the proper Idaho authorities and the lien in the amount of $11,475.00 was
    noted on the face of the title. The buyer was in the business of hauling livestock
    and his employee, on March 26, 1964, drove the truck into Colorado for that
    purpose. The truck broke down near Cortez, Colorado. The appellee towed it to
    his shop and, acting on the driver's instructions, telephoned the buyer in Idaho
    to obtain authorization to perform necessary repair work. The buyer, over the

    telephone, authorized appellee to install an overhauled transmission and to


    make other repairs. Ownership of the truck was not mentioned, nor was the
    bank in any way mentioned or notified of the repairs. Appellee expended
    $1,506.49 for parts and labor and stored the truck for a period of time making a
    total charge of $1,813.40. None of this sum has been paid appellee and he has
    retained possession of the truck. The buyer defaulted on the conditional sales
    contract and, there being diversity jurisdiction, the bank brought this replevin
    action in the United States District Court in Colorado, contending it was
    entitled to immediate possession of the truck. Appellee answered and
    counterclaimed, contending that it, under Colorado law, had a superior lien on
    the truck for the amount of the repairs and storage. The District Court agreed
    with appellee and the bank appealed.
    3

    Colorado statutory law defines a conditional sales contract as a chattel


    mortgage1 and the Idaho contract will be so referred to herein.

    The title to the truck bore a notation adequate to apprise a purchaser, creditor or
    mortgagee of the existence of the chattel mortgage and the chattel morgage is
    therefore entitled to the same effect as though it were filed in the state of
    Colorado in the manner prescribed by Colorado statute.2 The question is what
    effect does Colorado law give this chattel mortgagee as against the rights of
    appellee garageman.

    Colorado Revised Statutes 1963, 13-6-19 provides that filing a chattel


    mortgage and noting that fact on the face of the title certificate "shall constitute
    notice to the world of each and every right of the person secured by such
    mortgage." Appellee concedes that the general rule is that a garageman's lien
    for work done on a vehicle will be subordinated to prior recorded mortgages.
    However, appellee contends that the District Court correctly determined that
    excepted from the general rule is a garageman's equitable lien for necessary
    repairs of ordinary wear and tear. The District Court found that Colorado law
    recognizes this exception on the theory that the mortgagee has impliedly
    consented to permit necessary repairs for ordinary wear and tear because the
    chattel is thereby preserved and his security protected.

    There are early Colorado cases that contain language that can be said to support
    the "ordinary wear and tear" exception. In Hawkes v. First National Bank of
    Telluride, 75 Colo. 47, 224 P. 224 (1924), a valid chattel mortgage recited that
    the owners might retain and use the truck "provided such use and enjoyment
    shall not impair the value thereof." The mortgage on the truck was $460.00.
    The truck was brought by the owner to defendant "in a broken and dilapidated
    condition" and he did repair work amounting to $300.00. After repairs, the

    truck was worth $800.00. The Colorado Supreme Court, looking at the
    language in the mortgage referred to above, queried: "Was actual or implied
    consent thereby given to create this lien?" And the Court answered: "We think
    not. Ordinary wear and tear only could have been contemplated."
    7

    In Walker et al. v. Mathis et al., 78 Colo. 384, 242 P. 68 (1925), the Court said
    in dictum that, "It is of the very essence of the mortgaged contract that nothing
    shall be done or permitted to be done by the mortgagor to impair the mortgage
    security, other than ordinary wear and tear. Hawkes v. Bank, supra."

    Those two cases are the only Colorado law appellee has shown us which in any
    way support the exception urged. Those cases have never been overruled. This
    led the District Court to conclude that "The significant conclusion to be drawn
    from these Colorado cases is that the Supreme Court has not ruled out the
    possibility that extreme circumstances, showing a high degree of necessity for
    the contracting of necessary repairs by the mortgagor, could produce a result
    different from that reached in Hawkes and Walker."3

    We cannot agree. The "exception," so far as our research has indicated, has not
    been mentioned since the 1925 case of Walker v. Mathis, supra. If there ever
    was any such exception we think it was eliminated by the enactment of 13-619 of the Colorado Revised Statutes, mentioned above, which provides that
    properly recording, and noting chattel mortgages on the title certificate
    provides "notice to the world."4 We note in passing, that even if we could agree
    that the exception existed, the trial court never made a specific factual finding
    that the appellee repaired only "ordinary wear and tear", nor do we think the
    record would support such a finding.

    10

    The conclusion that a prior recorded chattel mortgage is superior to a


    subsequent garageman's lien is also supported by the Colorado legislature's
    treatment of the problem in its enactment of the Uniform Commercial Code
    which became effective on July 1, 1966, after the instant facts occurred. As
    promulgated by the National Conference of Commissioners on Uniform State
    Laws, the applicable section provides that a repairman's lien takes "priority
    over a perfected security interest unless the lien is statutory and the statute
    expressly provides otherwise." The Colorado legislature changed this section so
    that the Colorado statute, Colorado Revised Statutes, 1963, 155-9-310,
    expressly provides that the repairman's lien "does not take priority over a
    perfected security interest unless a statute expressly provides otherwise." This
    maintains the prior law by giving the repairman an inferior priority status. 5

    11

    We disturb a District Court's interpretation of local state law only when we are

    11

    12

    We disturb a District Court's interpretation of local state law only when we are
    convinced that the interpretation is clearly erroneous. 6 We do feel that the
    District Court was clearly erroneous in finding, under Colorado law, that the
    appellee had a lien superior to that of appellant. We think Section 13-6-19 of
    the Colorado Revised Statutes commands the opposite.
    That part of the judgment permitting Crouse to recover upon his counterclaim is
    REVERSED and the case is remanded with directions to determine the claim of
    the First Security Bank of Idaho against Crouse for damages arising out of the
    unlawful detention of the truck and to make a redetermination of the liability
    for costs.

    Notes:
    1

    Colorado Revised Statutes 1963, 13-6-2 (14)

    Colorado Revised Statutes 1963, 13-6-32. See Federico v. Universal C.I.T.


    Credit Corporation, 140 Colo. 145, 343 P.2d 830

    First Security Bank of Idaho, N.A. v. Crouse, D.C., 252 F.Supp. 230, 233

    See Colorado Attorney General's Opinion in No. 2361-52; contra, Storke and
    Sears, Colorado Security Law, 24, p. 88

    The "Official Comment", following the Colorado statute, states that the
    purpose of the section is to provide repairman's liens a priority over earlier
    perfected security interest. This "Official Comment" explains the original
    Uniform law and was not changed to conform to Colorado's enactment. See
    Vol. 7A, Colorado Revised Statutes, 1963, page iii

    See Jamaica Time Petroleum, Inc. v. Federal Insurance Company, 10 Cir., 366
    F.2d 156; Bushman Construction Company v. Conner, 10 Cir., 351 F.2d 681,
    cert. denied, 384 U.S. 906, 86 S.Ct. 1340, 16 L.Ed.2d 358; First National Bank
    & Trust Company of Oklahoma City, Okl. v. Foster, 10 Cir., 346 F.2d 49 and
    cases there cited

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