In re Darlington Co.

• Decision Date: 12 May 1908
• Citation: 163 F. 385
• Parties: In re DARLINGTON CO.
• Court: U.S. District Court — Eastern District of New York

163 F. 385

In re DARLINGTON CO.

United States District Court, E.D. New York.

May 12, 1908

Cornelius P. Kitchel, for petitioner.

James Schell & Elkus and Robert P. Levis, for bankrupt.

CHATFIELD District Judge.

The Homer Laughlin China Company has filed a petition in this court for the modification of a general restraining order made herein September 30, 1907. The china company seeks to obtain from the Pennsylvania Railroad certain china now in storage in Brooklyn in a warehouse under the control of the railroad company. The petition is based upon an alleged stoppage in transitu, based upon the following facts:

The china company shipped from Ohio certain hogsheads of crockery; the shipments being completed upon the 31st of August, 1907. These goods all reached the freight station of the Pennsylvania Railroad in Brooklyn by September 10, 1907 and were placed in a storage warehouse by the 18th of September, 1907. On September 21st the Darlington Company notified the china company that it did not wish the goods and asked the china company to send for them under a proposed cancellation of the order by which they had been purchased. On the 30th of September, 1907, a petition in bankruptcy was filed against the Darlington Company, and a receiver appointed, who immediately qualified and entered upon his duties. On the 7th of October the china company made a demand upon the railroad company by filing a notice for the return of the goods to the china company in Ohio. The china company served this notice upon learning of the bankruptcy of the Darlington Company, and the railroad company retained the goods, inasmuch as it had actual knowledge of the bankruptcy proceedings and the appointment of a receiver. The receiver made no demand upon the railroad company until some days later, inasmuch as he knew nothing at that time of the whereabouts of these goods.

The freight charges upon the goods have never been paid, and storage charges have accumulated for which the railroad company has a lien on the goods. The china company is attempting to enforce its claim of a complete stoppage in transitu, while the receiver in bankruptcy takes the position that, inasmuch as the filing of the petition and the order appointing him receiver were notice to the world (Muller v. Nugent, 184 U.S., at page 14, 22 Sup.Ct., at page 269, 46 L.Ed. 405), his title to property of the bankrupt which subsequently will become vested in the trustee, as of the date of adjudication, is somewhat stronger than the title obtained by an assignee of an insolvent person.

It may be assumed from the facts shown that the consignee, the Darlington Company, was to pay the freight charges, and that the goods were to be delivered to the consignee, at Brooklyn N.Y. Nevertheless the right of stoppage in transitu could be exercised, according to the almost uniform application of that doctrine, until some act by the consignee made the transportation company its agent and terminated the operation of carrying. It is contended that the appointment of a receiver, with the making of a general restraining order as to all property of the bankrupt, is a sufficient exercise of the right to possession to give the creditors in bankruptcy and their trustee greater rights to the goods in the possession of the common carrier than the bankrupt himself, or his creditors, if no bankruptcy had intervened, would have had.

The fact that the railroad company seems to have possessed actual knowledge of the appointment of the receiver makes this argument more plausible, and inasmuch as refusal to deliver the goods to the consignor was because of this knowledge it would seem that the railroad company feared lest the receiver have the right to hold them responsible for a delivery of the goods to the consignor.

The doctrine of stoppage in transitu is of itself more or less anomalous. If a purchaser ships goods at a price f.o.b. at the point of shipment, and the consignee is liable at the point of delivery for both carriage and storage charges, the exact time at which title passes to the consignee, so that the rights of his creditors may intervene, is susceptible of different opinions. But the courts have almost uniformly held that, until delivery was made in some manner at the destination, the consignor...