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June 15, 1960


Appeal, No. 14, Feb. T., 1960, from order of Court of Common Pleas of Luzerne County, July T., 1958, No. 845, in case of First National Bank of Millville v. George Horwatt. Order affirmed.


E. Eugene Eves, with him S. Keene Mitchell, Jr., and Smith and Eves, and Bedford, Waller, Griffith, Darling & Mitchell, for appellant.

William J. Davis, for appellee.

Before Rhodes, P.j., Wright, Woodside, Ervin, Watkins, and Montgomery, JJ. (gunther, J., absent).

Author: Woodside

[ 192 Pa. Super. Page 583]


This is an appeal from the order of the Court of Common Pleas of Luzerne County opening a judgment entered by the First National Bank of Millville against George Horwatt. The case grows out of the double financing of a vehicle by an automobile dealer.

The immediate, but not the ultimate, problem involved in this case will emerge from the facts condensed as follows: A buyer purchased a motor vehicle from a dealer by executing an installment sales contract and an attached note which were assigned to the First National Bank of Millville by the dealer. The buyer defaulted, and the bank entered judgment on the note. The buyer moved to open the judgment alleging that because of the fraud of the dealer, he had neither the vehicle nor the certificate of title thereto. His depositions indicate that several months after obtaining possession of the vehicle, he took it back to the dealer's garage for repairs and, while it was there, the Wyoming National Bank of Wilkes-Barre seized it, claiming the right to it under a floor-plan with the

[ 192 Pa. Super. Page 584]

    dealer. The buyer claims that an application for a certificate of title to be issued to him and showing an encumbrance in favor of the Millville bank was executed and put among the dealer's mail for forwarding to the Bureau of Motor Vehicles, but the unmailed application was found by the Wilkes-Barre bank in the glove compartment of another automobile taken from the dealer. The buyer tendered payment of the note upon condition that the Millville bank would give him a certificate of title to the vehicle, which the bank could not do.

The court opened the judgment. Such order is within the sound discretion of the court below and will not be reversed except for a clear abuse of discretion. Phila. Gas Heating Co. v. Sanders, 181 Pa. Superior Ct. 510, 513, 124 A.2d 435 (1956). Three reasons for opening the judgment were set forth in an opinion of Judge BROMINSKI, from which we adopt the following as applicable to the above facts:

(1) "Sec. 15(G) of the Motor Vehicle Sales Finance Act [of June 28, 1947, P.L. 1110], 69 P.S. § 615(G), provides as follows:

'G. No installment sale contract shall require or entail the execution of any note or series of notes by the buyer, which when separately negotiated, will cut off as to third parties any right of action or defense which the buyer may have against the original seller.'

"The plaintiff argues that it is a holder in due course of a negotiable instrument and this precludes the defendant from introducing his defense against it which he may have had against the seller (assignor). To lend credence to such an argument would defeat the very purpose of Sec. 15(G) and would afford a purchaser of a motor vehicle no remedy whatsoever as to any defense which he may have against the seller and, particularly, as in the case here, where judgment

[ 192 Pa. Super. Page 585]

    note is attached to the motor vehicle installment sale contract. The note being attached to the sales contract, of itself, gives notice to any assignee that the transaction is subject to Sec. 15(G) of the Motor Vehicle Sales Finance Act. So that it is not necessary to decide whether this note is negotiable in that the assignee has notice that the entire transaction is subject to the Motor Vehicle Sales Finance Act and, of course, Sec. 15(G) thereof.

(2) "In addition, the sales contract to which the note is physically attached recites that '... the assignee shall have all rights and be subject to all obligations of the seller hereunder.' [Emphasis by the court below]. Are we now to treat the note separately from the sales contract and consider it negotiable and the assignee [a] holder in due course? The words 'obligation of the seller' connotes any defense the purchaser may have against the seller. To come to any other conclusion would be contrary to sound reasoning, and particularly when the note was entered of record, the sales contract was part and parcel thereof. For this reason as well as the first, the defendant should be permitted to introduce his defense of failure of consideration and fraud.

(3) "There is also a third reason why this judgment should be opened. The facts are that on July 14, 1958, defendant tendered to plaintiff assignee a money order for the full amount due on said sales contract and requested the certificate of title to the motor vehicle which plaintiff did not and could not produce. See § 30 of the Motor Vehicle Sales Finance Act, 69 P.S. § 630, which provides that:

'B. When the final payment on an installment sale contract is made in cash, money order or equivalent tender by the buyer, or his authorized representative, at the designated licensed office of the holder, the certificate

[ 192 Pa. Super. Page 586]

    of title, showing satisfaction of this encumbrance, shall be delivered at the time of such tender of payment, if demanded by the buyer, otherwise delivery may be made at a later date in person or by mail as may be arranged between buyer and holder, all other instruments shall be delivered ...

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