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remain in the vendor until the payment of the purchase price, the title thereto vests in the trustee. In speaking for the Circuit Court of Appeals in that case Judge Wallace said:
“It is the settled law of this state that personal property may be sold and delivered under an agreement for the payment of the price at a future day, and the title by express agreement remain in the vendor until the payment of the purchase price. In such a case the payment is strictly a condition precedent, and, until the performance, the title does not vest in the buyer. It is one of the exceptional cases in which the law tolerates the separation of the apparent from the real ownership of chattels when the honesty of the transaction is made to appear. But, when the purpose for which the possession of the property is delivered is inconsistent with the continued ownership of the vendor, the transaction will be presumed fraudulent as against purchasers and creditors. The transaction will be deemed merely colorable, and the title to have been vested absolutely in the buyer. Ludden y. Hazen, 31 Barb. (N. Y.) 650; Frank v. Batten, 49 Hun, 91, 1 N. Y. Supp. 705; Bonesteel v. Flack, 41 Barb. (N. Y.) 435. When the property is delivered to the vendee for consumption or sale, or to be dealt with in any way inconsistent with the ownership of the seller, or so as to destroy his lien or right of property, the transaction cannot be upheld as a conditional sale, and is a fraud upon the creditors of the vendee. Even in the case of a chattel mortgage, when it is understood between the mortgagor and the mortgagee that the mortgagor may sell the chattels in his business, and use the proceeds, the transaction is fraudulent in law as against the creditors of the mortgagor. Such an arrangement, if expressed in the instrument, defeats its essential nature and qualities as a mortgage, so that, in a legal sense, it is not a security, but merely the expression of a confidence by the mortgagee in the mortgagor; and, if made, but not expressed in the instrument, is equally vicious, if not more suggestive of a fraudulent purpose."
In the above case Judge Wallace places the conclusion of the court upon the proposition that, when property is delivered to a vendee to be dealt with in any way inconsistent with the ownership of the seller, the transaction must be a fraud upon the creditors of the vendee.
In Flint Wagon Works v. John S. Buttles, Trustee, 153 Fed. 932, in a very comprehensive and well-considered opinion, as yet unpublished, Judge Martin passes upon a case, the facts in which are very similar to the case at bar. He says:
“The whole trend of the authorities is that a lien or mortgage placed upon goods obtained for sale by the vendee, and unrecorded, is a secret arrangement, is in law a fraud upon creditors, and cannot be enforced against a trustee of such a vendee who subsequently becomes a bankrupt.
* In the case at bar there was an attempted lien, absolutely secret, not even known to the vendee, and never intended to be brought to light unless the vendee should become insolvent. The vendee was put in possession of a large number of wagons, of which he was apparently the absolute owner. There was a secret attempt on the part of the vendot, should the vendee succeed in getting credit by having about him a large amount of unincumbered property and should thereafter be unable to pay debts so incurred, to make time notes, given for said property, immediately due and payable, and the vendee deliver to the vendor all goods remaining unsold, and all the time they should remain in the hands of the vendor."
Judge Martin places his decision upon the authority of In re Garcewich, supra.
In the case În re Shaw (D. C.) 146 Fed. 273:
“A bankrupt, who operated a tannery in Maine, some two years prior to the bankruptcy, executed a chattel mortgage to a creditor on all the stock and materials at his tannery and such as should thereafter be acquired. By agreement the mortgage was not recorded, nor was any possession ever taken thereunder. Subsequently the mortgagee made a mortgage to secure an indebtedness to a bank on certain bark at the bankrupt's tannery, to which it had no title unless by virtue of its own mortgage. Also, by agreement, this mortgage was not recorded, but an attempted delivery of possession was made by going to the tannery, scaling the bark, and placing on each pile a small board, having thereon a letter of the alphabet, and then formally delivering each pile to the agent of the bank, who appointed the bankrupt its custodian. There was no visible change of possession, and the bankrupt's trustee took possession of and sold the bark as assets of his estate."
This court held:
"That under Rev. St. Me. c. 93, § 1, which provides that 'no mortgage of personal property is valid against any other person than the parties thereto unless possession of such property is delivered to and retained by the mortgagee or the mortgage is recorded,' there was no such delivery and retention of possession as to validate either mortgage, but that both were fraudulent as attempted secret liens, and void as against the bankrupt's trustee.”
In that case the court took into consideration the fact that there was an express agreement not to record the mortgage, and held that such agreement was a circumstance tending to show actual fraud. The court said:
"The testimony tends to show that, at the time of the giving of the mortgage to the bank, Shaw was insolvent, that there was an obvious attempt to make the delivery to the mortgagee secret rather than open, and that there was a distinct and affirmative understanding that the mortgage was not to be recorded. The case discloses a want of good faith, resulting in an actual fraud upon the general creditors."
Rev. St. Me. c. 113, § 5, provides that:
“No agreement that personal property bargained and delivered to another, shall remain the property of the seller till paid for, is valid unless the same is in writing and signed by the person to be bound thereby. And when so made and signed, whether said agreement is, or is called a note, lease. conditional sale, purchase on instalments, or by any other name, and in whatever form it may be, it shall not be valid, except as between the original parties thereto, unless it is recorded in the office of the clerk of the town in which the purchaser resides at the time of the purchase.”
The facts in the case at bar disclose that the nonrecording of a "conditional sales contract" was not a mere matter of omission. It was in pursuance of a distinct plan that there should be no record of this contract; but that the wagons should appear to be the property of the vendee. The lien was never attempted to be brought to light until after the failure of the bankrupt and his voluntary assignment. The vendee was put into possession of the wagons, of which he was apparently the absolute owner.
In the Shaw Case, supra, the court cites from Rogers v. Page, 140 Fed. 596, 72 C. C. A. 164, in which, in speaking for the Circuit Court of Appeals for the Sixth Circuit, Judge Lurton said:
“The fact that this was a secret lien gave this property the appearance of being unincumbered, and was the moving inducement of some of his existing creditors to grant delay by extension and renewal. * * * But there is a distinction between a mere negligent failure to record a mortgage or deed and a deliberate agreement to do so, although the mere fact of an agreement to withhold from record is not of itself such evidence of a fraudulent purpose as to constitute fraud in law. It is, however, a circumstance constituting more or less cogent evidence of a want of good faith, according to the particular situation of the parties, and the intent as indicated by all of the facts and circumstances of the particular case."
The facts do not bring this case within the law of Hewitt v. Berlin Machine Works, 194 U. S. 297, 24 Sup. Ct. 690, 48 L. Ed. 986, and York Manufacturing Co. v. Cassell, 201 U. S. 344, 26 Sup. Ct. 481, 50 L. Ed. 782; nor within the recent decisions in this circuit. James v. Gray, 131 Fed. 401, 65 C. C. A. 385, 1 L. R. A. (N. S.) 321; Tucker v. Curtin, 148 Fed. 929, 78 C. C. A. 557.
Nor is the case within the law of the very recent case of Loveland, Petitioner, in the Matter of Warren H. Littlefield, Bankrupt, and Alfred W. Putnam, Trustee, Appellant, v. Alice H. Loveland, Petitioner, 155 Fed. 838, in which case, in speaking for the Court of Appeals in this circuit, Judge Lowell remaks:
"Where the trustee in bankruptcy and the transferee of the bankrupt both elaim certain property which once, belonged to the bankrupt, it may be difficult to decide how far the title to the property in question depends upon the state law which determines the effect of the bankrupt's conveyance, and how far upon the bankrupt law which declares what property the trustee shall take.”
He also cites York Manufacturing Co. v. Cassell, supra, in which the decision is based somewhat upon Thompson v. Fairbanks, 196 U. S. 516, 25 Sup. Ct. 660, 49 L. Ed. 577. In that case, in speaking for the Supreme Court, Mr. Justice Peckham said:
"Under the present bankrupt act the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt, except in cases where there has been a conveyance or incumbrance of the property which is void as against the trustee by some positive provision of the act.”
But the case at bar is not “unaffected by fraud." The facts bring it distinctly within the rule given by Judge Wallace in Re Garcewich, supra. In coming to a conclusion, the court gets little assistance from the line of cases which hold that, in equity, for certain purposes, the trustee merely stands in the shoes of the bankrupt, and takes all property subject to valid liens; for the case at bar does not disclose a “valid lien,” but rather an attempted lien which is invalid and fraudulent.
In reference to the last wagon ordered by the bankrupt in July, 1905, the referee finds a different state of facts from that in relation to the other eight wagons. From the facts which he has found, however, I agree with his conclusion touching this last wagon, as I do also with his decision as to the others.
The finding of the referee in his report is confirmed.
It is ordered that all the wagons named in the petition be sold by the trustee free from all liens and incumbrances.
(District Court, E. D. Pennsylvania, July 22, 1907.)
No. 11 of 1904.
1. SHIPPING-CONSTRUCTION OF CHARTER PARTY-DISCHARGE BY CHARTERER.
Under a charter party which required the vessel to discharge by night, as well as by day, if required by the charterer or consignee, but also gave the charterer the option to provide the stevedore for discharging, for which the vessel agreed to pay at not exceeding a specified rate, where he exercised such option, he is not entitled to charge for discharging a sum exceeding the stipulated rate because of night work, especially where by
means of it he earned dispatch money under the charter. 2. SAME-SUIT TO RECOVER FREIGHT-ISSUES NOT MADE BY PLEADINGS.
In a suit in personam by a vessel owner to recover freight money from a charterer, the claim that under the cesser clause of the charter the sole remedy of the libelant was in rem against the cargo cannot be urged
as a defense where it was not raised by the pleadings. 3. SAME-LIABILITY FOR PORT CHARGES.
Where a charter party provided that the freight specified should be "in full of primage, consulage, port charges, etc., as customary," and also that the vessel should, if required, discharge by night, as well as by day, she is liable for extra port charges incurred by reason of night work, although the discharging was done by the charterer under a provision giving him that option at a specified rate to be paid by the vessel.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 44, Shipping, $ 183.] In Admiralty. Suit to recover freight.
Suit to recover freight. On final hearing.
J. B. McPHERSON, District Judge. This is an action in personam, brought by the libelant to recover from the respondent two sums of money that are averred to have been improperly deducted by his agent at his direction from the freight due for the carriage of a cargo in the steamship Bencliff. Originally it was sought to recover three items, but the dispute concerning one of them was settled after the suit was brought.
The facts, which are not in controversy, are as follows: In July, 1902, the libelant and the respondent entered into a charter party, whereby it was agreed, inter alia, that the Bencliff should proceed to the port of Bilbao and there load from the respondent's shippers a cargo of ore, which she was to deliver as directed by him at whichever of four specified ports in the United States he might select. Perth Amboy having been chosen, the cargo was in due season delivered at that port; and it is for certain stevedores' charges and for fees paid to the customs officials that the present suit is brought. These. sums were deducted by the respondent's orders when his agent settled for the freight with the master, and the libelant contends that the deductions were improperly made; the argument being that under the charter party the payments in question should fall upon the respondent and not upon the ship.
Unquestionably, if the agreement of the parties had embraced nothing more than an undertaking on the part of the ship to carry and
deliver the cargo, and an undertaking on the part of the respondent to pay a specified sum as freight, the freight would not have been earned until the cargo was delivered, and the ship would have been bound to make whatever payments were necessary in order to enable her to fulfill the obligation to carry and deliver. But the agreement contains other provisions which modify the respective obligations to deliver and to pay, and it is by the construction of these provisions that the present dispute must be determined. Instead of undertaking to do the actual work of delivery herself, the ship gave to the respondent "the option of providing stevedore for discharging the cargo at port of discharge," but agreed to pay the cost of doing the work at the "current rate of 40 cents if discharged at New York or Perth Amboy.” The respondent exercised this option, and employed a stevedore to do the work at a rate that is not disclosed by the evidence, but in all probability did not exceed 40 cents. Moreover, as the charter party further provided that the “ship is to load and discharge as rapidly as possible (if required), by night as well as by day, when required to do so by charterer, shipper or consignee,” the respondent took advantage of this additional option-being probably stimulated thereto, in part at least, by a provision for "despatch money at the rate of 15 pounds sterling per day of twenty-four hours for any time saved in
* discharging, payable by the ship to
charterer at discharging port”—and required the stevedores to work by night as well as by day. The result was that the cargo was unloaded quickly, and that the respondent earned thereby £207 10s. dispatch money, which was duly allowed by the ship and deducted from the freight without question. But, of course, work by night must be paid for, since a day's wage does not of itself compensate for such labor, and the men who work by night are not the same as those who work by day; and it is for the additional amount paid to the stevedores' servants for discharging the cargo at night that the libelant claims in the first item of the present suit. The respondent paid the money to the stevedore, but deducted it from the freight, claiming that a custom of the port authorized him so to do. There is no proof whatever of such a custom, and the final reluctant acquiescence of the master in the deduction does not bind the owner, if the respondent's claim was clearly erroneous. In my opinion nothing has been shown to justify it. As I have just said, there is no evidence whatever of such a custom-I lay aside a feeble effort to prove it by the obviously incompetent testimony of one witness—and the provisions of the charter party negative the claim decisively. The respondent was not bound to unload the cargo. He was merely permitted to do so, and, if he chose to undertake the work, the price he was to be allowed for it was distinctly specified. How he spent this money, whether in work by day or in work by night, or in both, was no affair of the ship. Her obligation to deliver was transferred to the respondent when he undertook the unloading himself in consideration of being paid a rate of 40 cents, and thereafter it was the respondent's duty, and not the ship’s, to pay the wages of the men who handled the cargo. He could compel work by night as well as by day, but, if he chose both varieties of labor, he, and not the ship, was bound 6 pay for both. Moreover, he was earning dispatch money by this haste