Colorado § 38-10-114 - No delivery or change of possession - effect.

§ 38-10-114. No delivery or change of possession - effect.

Except as otherwise provided in section 4-2-402 or 4-2.5-308, C.R.S., or except where evidence of the transaction is included in the central registry maintained with respect to transactions relating to title to such goods and chattels, or is duly noted on the certificate of title to such goods and chattels by the authority issuing such certificate, or is included in the records of the proper filing office for a security interest in such goods and chattels under section 4-9-501, C.R.S., or is a transaction described in section 4-9-309 or 4-9-310, C.R.S., every sale made by a vendor of goods and chattels in his or her possession or under his or her control and every assignment of goods and chattels, unless each shall be accompanied by an immediate delivery and followed by an actual and continued change of possession of things sold or assigned, shall be presumed to be fraudulent and void as against the creditors of the vendor, or the creditors of the person making such assignment, or subsequent purchasers in good faith, unless the party opposed to the effect of the presumption shall establish that it is more probable than not that such sale or assignment was made by the seller or assignor in good faith and without any actual intent to hinder, delay, or defraud creditors or subsequent purchasers.

Source: R.S. p. 339, § 14. G.L. § 1264. G.S. § 1523. R.S. 08: § 2668. C.L. § 5113. CSA: C. 71, § 14. CRS 53: § 59-1-14. C.R.S. 1963: § 59-1-14. L. 65: p. 1481, § 3. L. 83: Entire section amended, p. 1446, § 1, effective July 1. L. 91: Entire section amended, p. 1689, § 2, effective July 1; entire section amended, p. 321, § 6, effective July 1, 1992. L. 2001: Entire section amended, p. 1446, § 42, effective July 1.

Editor's note: Amendments to this section by House Bill 91-1080 and Senate Bill 91-129 were harmonized.

Cross references: For rights of seller's creditors against sold goods, see § 4-2-402.

ANNOTATION

I. General Consideration.

II. Sufficient Delivery and Change of Possession.

III. Rights of Creditors.

I. GENERAL CONSIDERATION.

Law reviews. For comment on Daniel v. Surratt (cited below), see 9 Rocky Mt. L. Rev. 98 (1936). For article, "A Decade of Colorado Law: Conflict of Laws, Security, Contracts and Equity", see 23 Rocky Mt. L. Rev. 247 (1951).

Applicability of section limited. This section applies only to sales of chattels in possession of the vendor or under his control. Weiland v. Potter, 8 Colo. App. 79, 44 P. 769 (1896).

Section inapplicable where bailee possesses goods. This section is inapplicable where, prior to the sale, the vendor has placed the goods in possession of a bailee, and such bailee, being informed of the sale, agrees to hold them for the purchaser. Weiland v. Potter, 8 Colo. App. 79, 44 P. 769 (1896); Hendrie & Bolthoff Mfg. Co. v. Collins, 13 Colo. App. 8, 56 P. 815 (1899); Hendrie & Bolthoff Mfg. Co. v. Collins, 29 Colo. 102, 67 P. 164 (1901); Jones v. Mackenzie Bros. Wall Paper & Paint Co., 19 Colo. App. 121, 73 P. 847 (1903); Morrison v. McCluer, 27 Colo. App. 264, 148 P. 380 (1915).

Effect of proof of bona fide sale. A case is not taken out of the statute by proving that the sale was, in fact, bona fide. Bartell v. Griffin, 47 Colo. 569, 108 P. 171 (1910); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Party entitled to attack validity of property transfer. In an action of replevin for property claimed by the plaintiff under a sale to him by a third person, the defendant, who was neither a creditor of, nor a subsequent purchaser from, such third person, could not attack the validity of the transfer of the property between such third person and the plaintiff on the ground of no actual change of possession. Klug v. Munce, 40 Colo. 276, 90 P. 603 (1907).

One who is neither the purchaser of an animal, nor the creditor of the one who sold it, cannot object that a purchase asserted by another was not accompanied by a change of possession. Graves v. Davenport, 45 Colo. 270, 100 P. 429 (1909).

Review by supreme court. This section cannot be invoked for the first time in the supreme court on review. Hunt v. Hayt, 10 Colo. 278, 15 P. 410 (1887); Benjamin v. Matler, 3 Colo. App. 227, 32 P. 837 (1893); Hamill v. Hall, 4 Colo. App. 290, 35 P. 927 (1894); Tynon v. Despain, 22 Colo. 240, 43 P. 1039 (1896); Painesville Nat'l Bank v. Hannan, 64 Colo. 301, 171 P. 364 (1918).

Applied in Goodrich v. Michael, 3 Colo. 77 (1876); Finding v. Hartman, 14 Colo. 596, 23 P. 1004 (1890); McCraw v. Welch, 2 Colo. 284 (1892); Goard v. Gunn, 2 Colo. App. 66, 29 P. 918 (1892); Anders v. Barton, 3 Colo. App. 324, 33 P. 142 (1893); Goff v. Landon, 5 Colo. App. 452, 39 P. 69 (1895); Singer Mfg. Co. v. Converse, 23 Colo. 247, 47 P. 264 (1896); Stanley v. Citizens' Coal & Coke Col., 24 Colo. 103, 49 P. 35 (1897); Singer Mfg. Co. v. Bohen, 31 Colo. 444, 72 P. 1097 (1903); Austin v. Terry, 38 Colo. 407, 88 P. 189 (1906); Israel v. Day, 41 Colo. 52, 92 P. 698 (1907); Morsch v. Lessig, 45 Colo. 168, 100 P. 431 (1909); Visbet v. Federal Title & Trust Co., 229 F. 644 (8th Cir. 1915); Goad v. Corrington, 61 Colo. 437, 158 P. 284 (1916); Best & Co. v. Wolf Co., 67 Colo. 42, 185 P. 371 (1919); Case Threshing Mach. Co. v. Reminger, 77 Colo. 595, 238 P. 63 (1925); Daniel v. Surratt, 97 Colo. 43, 46 P.2d 903 (1935); Foster v. Howell, 122 Colo. 64, 220 P.2d 717 (1950).

II. SUFFICIENT DELIVERY AND CHANGE OF POSSESSION.

Acts necessary to constitute sufficient delivery and change of possession depend in a great measure upon the nature and situation of the property. Crymble v. Mulvaney, 21 Colo. 203, 40 P. 499 (1895).

Determination of sufficient delivery. If there is a full surrender upon the part of the vendor and a full assumption on the part of the vendee of the control and dominion of the subject of the sale, the delivery is sufficient. Cook v. Mann, 6 Colo. 21 (1881); Wilcox v. Jackson, 7 Colo. 521, 4 P. 966 (1884); Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Sweeney v. Coe, 12 Colo. 485, 21 P. 705 (1889); Herr v. Denver Milling & Mercantile Co., 13 Colo. 406, 22 P. 770 (1889); Atchison v. Graham, 14 Colo. 217, 23 P. 876 (1890); Felt v. Cleghorn, 2 Colo. App. 4, 29 P. 813 (1892); Springer v. Kreeger, 3 Colo. App. 487, 34 P. 269 (1893); Crymble v. Mulvaney, 21 Colo. 203, 40 P. 499 (1895); Hugus & Co. v. Hardenburg, 19 Colo. App. 464, 76 P. 543 (1904).

Where, at the time of the sale, chattels were not in the physical possession of the vendor but were under his control, and where the sale was not accompanied by an immediate delivery to the bank, or any delivery, nor was it followed by an actual and continued change of possession of the things sold, the sale is void. Reed v. Ardway State Bank, 102 Colo. 266, 78 P.2d 624 (1938).

This section requires the removal of the property sold from the custody and control of the vendor whenever removal is possible, notwithstanding any expense or hardship the removal may entail. Burchinell v. Weinberger, 4 Colo. App. 6, 34 P. 911 (1893); Crymble v. Mulvaney, 21 Colo. 203, 40 P. 499 (1895).

Requirements of change of possession. The vendee of chattels must take actual possession of the articles sold, and the possession must be open, notorious, unequivocal, and such as to apprise the community that the goods have changed hands or that the sale is void as to creditors of the vendor. Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Sweeney v. Coe, 12 Colo. 485, 21 P. 705 (1889); Lloyd v. Williams, 6 Colo. App. 157, 40 P. 243 (1895); Willis v. Roberts, 18 Colo. App. 149, 70 P. 445 (1902).

The necessity of clear, unequivocal, and unmistakable change of possession, and retention of such possession by the vendee, has been properly, fully, and clearly asserted by the supreme court. Cook v. Mann, 6 Colo. 21 (1881); Wilcox v. Jackson, 7 Colo. 521, 4 P. 966 (1884); Herr v. Denver Milling & Mercantile Co., 13 Colo. 406, 22 P. 770 (1889); Baur v. Beall, 14 Colo. 383, 23 P. 345 (1890).

The possession taken by a purchaser of personalty must be actual, continued, visible, open, notorious, unequivocal, and exclusive. Cook v. Mann, 6 Colo. 21 (1881); Davis v. Patterson, 69 Colo. 226, 193 P. 662 (1920); Acott v. Sterling Hdwe. & Implement Co., 74 Colo. 195, 219 P. 1073 (1923); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Sale void absent visible indicia of change of ownership. The sale of a stock of goods in a store is void as no indicia of a change of ownership were visible, where the sign of the former proprietor, who made the sale, was permitted to remain on the building, the vendor frequented the store after the sale and occasionally made sales of goods himself; therefore, the retention of the old sign amounted to a declaration to the public that the former proprietor was still proprietor of the store and it gave to the transaction an equivocal character. Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886).

Gift of automobile by parent to minor child void as to creditors. Gift of an automobile by a parent to a minor child residing with him, unaccompanied by delivery and continued change of possession, is void as to creditors. Wilcoxen v. Morgan, 2 Colo. 473 (1875); Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Bartell v. Griffin, 47 Colo. 569, 108 P. 171 (1910); Goad v. Corrington, 61 Colo. 427, 158 P. 284 (1916); Davis v. Patterson, 69 Colo. 226, 193 P. 662 (1920); Chavez v. Haynie, 75 Colo. 414, 225 P. 852 (1924).

Purchaser's placing goods in locked room constituted possession. Where a purchaser of goods obtained possession thereof, put them in a room over which the vendor had no control, locked them up, took the key away, leaving a notice on the door that the goods were his, his possession satisfied the requirements of this section. Conly v. Friedman, 6 Colo. App. 160, 40 P. 348 (1895).

Conditional sale not avoided by vendor's continued possession. Where a bill of sale is made under an oral agreement that it shall be delivered only upon the happening of a certain event, the sale, being conditional, is not avoided by the fact that the vendor continued in possession until performance of the condition. Roberts v. Hawn, 20 Colo. 77, 36 P. 886 (1894).

If conditional sale is rescinded, seller is bound to immediately take and keep actual and continued possession of the personalty in order to make the transaction available against the buyer's creditors. Coors v. Reagan, 44 Colo. 126, 96 P. 966 (1908).

Rights of subsequent purchaser taking with knowledge of prior transaction. Where a sale of chattels is completed as between the parties thereto, but the possession temporarily remains with the vendor, a subsequent purchaser who has knowledge of the prior transaction takes subject to the rights of the prior vendee. McKee v. Bassick Mining Co., 8 Colo. 392, 8 P. 561 (1885).

Evidence admissible to determine actual change of possession of goods. Where the issue is as to whether an actual change of possession of the goods took place, the books of the warehouse in which they were stored, at and after the time of the sale, are admissible to show whether or not there has been such a change. Springer v. Kreeger, 3 Colo. App. 487, 34 P. 269 (1893).

Concurrent or joint possession inadmissible. A concurrent or joint possession between buyer and seller is not admissible. Cook v. Mann, 6 Colo. 21 (1881); Wilcox v. Jackson, 7 Colo. 521, 4 P. 966 (1884); Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Atchison v. Graham, 14 Colo. 217, 23 P. 876 (1890); Donovan v. Gathe, 3 Colo. App. 151, 32 P. 436 (1893); Bartell v. Griffin, 47 Colo. 569, 108 P. 171 (1910); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Purchaser's exclusive possession is question of fact for jury. A question as to whether exclusive possession of the chattels sold was given to the purchaser is one of fact for the jury. Eversman v. Clements, 6 Colo. App. 224, 40 P. 575 (1895).

III. RIGHTS OF CREDITORS.

Recording of bill of sale not notice to creditors. The recording of a bill of sale, the law not requiring or authorizing the recording of such instruments, is no notice to creditors of the vendor. Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Sweeney v. Coe, 12 Colo. 485, 21 P. 705 (1889); Allen v. Steiger, 17 Colo. 552, 31 P. 226 (1892); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Rights of parties unaffected by transfer subsequent to sale. The rights of the parties are not at all affected by any transfer which may be made subsequent to the time of the sale, even though the transfer may occur before any actual levy on the goods by creditors who have sued out attachments or have issued executions. Cook v. Mann, 6 Colo. 21 (1881); Ray v. Raymond, 8 Colo. 467, 9 P. 15 (1885); Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Sweeney v. Coe, 12 Colo. 485, 21 P. 705 (1889); Atchison v. Graham, 14 Colo. 217, 23 P. 876 (1890); Allen v. Steiger, 17 Colo. 552, 31 P. 226 (1892); Felt v. Cleghorn, 2 Colo. App. 4, 29 P. 813 (1892); Burchinell v. Weinberger, 4 Colo. App. 6, 34 P. 911 (1893); Autrey v. Bowen, 7 Colo. App. 408, 43 P. 908 (1896); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Creditor may secure debt by mortgage on property sold. A bona fide creditor may, notwithstanding notice or knowledge of a sale fraudulent and void under this section, secure his debt by mortgage on the property thus sold. Allen v. Steiger, 17 Colo. 552, 31 P. 226 (1892).

Creditor's knowledge of fraudulent sale inmaterial. Knowledge of creditors of a sale which is fraudulent and void under this section is immaterial. Cook v. Mann, 6 Colo. 21 (1881); Bassinger v. Spangler, 9 Colo. 175, 10 P. 809 (1886); Allen v. Steiger, 17 Colo. 552, 31 P. 226 (1892); Lloyd v. Williams, 6 Colo. App. 157, 40 P. 243 (1895); Willis v. Roberts, 18 Colo. App. 149, 70 P. 445 (1902); Helgert v. Stewart, 20 Colo. App. 202, 77 P. 1091 (1904); Bartell v. Griffin, 47 Colo. 569, 108 P. 171 (1910); Davis v. Patterson, 69 Colo. 226, 193 P. 662 (1920); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

A sale, not accompanied by delivery and followed by actual and continued change of possession, is fraudulent and void as to creditors of the vendor, notwithstanding such creditors had actual notice of the sale. Helgert v. Stewart, 20 Colo. App. 202, 77 P. 1091 (1904); Fish v. East, 114 F.2d 177 (10th Cir. 1940).

Voluntary property transfer to creditor not void as to other creditors. A voluntary transfer by a debtor to one of his creditors of certain horses and mules and wagons used by the debtor at his sawmill, in trust to sell the same and to apply the proceeds in payment of certain preferred creditors, the balance being accepted by the assignee in settlement of his own claim, is not void as to other creditors under this section, where a bill of sale of the property was executed by the debtor, and delivered to the assignee, and formal possession of the property surrendered to the assignee one day, and the property removed by the assignee from the mill the next. Bailey v. Johnson, 9 Colo. 365, 12 P. 209 (1886).