Firestone Tire & Rubber Co. v. Cross

• Decision Date: 11 January 1927
• Docket Number: No. 2564.,2564.
• Citation: 17 F.2d 417
• Parties: FIRESTONE TIRE & RUBBER CO. et al. v. CROSS.
• Court: U.S. Court of Appeals — Fourth Circuit

17 F.2d 417 (1927)

FIRESTONE TIRE & RUBBER CO. et al. v. CROSS.

No. 2564.

Circuit Court of Appeals, Fourth Circuit.

January 11, 1927.

D. W. Robinson, of Columbia, S. C. (B. M. Robinson, of Akron, Ohio, on the brief), for plaintiffs in error.

J. Nelson Frierson, of Columbia, S. C. (Frierson & McCants, of Columbia, S. C., on the brief), for defendant in error.

Before WADDILL, ROSE, and PARKER, Circuit Judges.

PARKER, Circuit Judge.

This was an action at law, instituted by the trustee in bankruptcy of the Capital City Garage & Tire Company of Columbia, S. C., against the Firestone Tire & Rubber Company and its subsidiary company, the Oldfield Tire Company, hereinafter called defendants, to recover the possession of certain automobile tires and accessories or their value. The case was referred to a referee in accordance with the practice prevailing in the state courts of South Carolina. He made a report, which was approved in part by the judge, who found additional facts and gave judgment in favor of the trustee for the sum of $18,834.06, the value of the property in controversy.

The facts as established by the evidence and embodied in the findings of the judge are as follows: Bankrupt was engaged in operating a general automobile business, selling automobiles, tires, tubes, and accessories, in the city of Columbia. On October 20, 1922, he entered into contracts with defendants by the terms of which he agreed to store and handle for them their storage and transfer stock at Columbia. In accordance with these contracts, defendants placed in his possession a large stock of tires and accessories, from which he made shipments from time to time upon their orders. For services rendered in thus storing and shipping the transfer stock, bankrupt received a commission of 5 per cent. on sales made therefrom. The sales, however, were made in the name of defendants and by their salesmen, and the goods sold were billed out and collected for by them. Bankrupt did not agree to buy the stock thus placed on storage, it was not charged to bankrupt, and the only right of sale which bankrupt possessed with respect thereto was that when it had a chance to make a retail sale to one of its own customers in the ordinary course of business, it was allowed to do so, but was required to make immediate report thereof to defendants, and was immediately charged with the property thus sold. The bankrupt expressly agreed that upon termination of the contracts it would immediately deliver the property then in its possession or control to defendants, and that, upon its failure to do so, defendants might enter upon its premises and remove same.

The contracts were not recorded, but on October 31, 1923, six weeks before the bankruptcy, defendants, having discovered that bankrupt was not complying with their provisions, proceeded to terminate them and to take the storage and transfer stock from the possession of bankrupt and remove it to another building, where it was placed in possession of other persons. The value of the goods thus seized was $18,834.06. The claims of creditors who extended credit to the bankrupt after the contracts were executed and the goods placed in its possession amounted to more than twice this sum, but the total of the claims of such subsequent creditors who were without notice of the contracts was only $3,659.33.

We think that there can be no question that the contracts fall within the class whose registration is required by the South Carolina statutes. Section 5519 of volume 3 of Code of 1922 provides: "Every agreement between the vendor and vendee, bailor or bailee of personal property, whereby the vendor or bailor shall reserve to himself any interest in the same, shall be null and void as to subsequent creditors (whether lien creditors or simple contract creditors) or purchasers for valuable consideration without notice, unless the same be reduced to writing and recorded in the manner now provided by law for the recording of mortgages; but nothing herein contained shall apply to livery stable keepers, inn keepers, or any other persons letting or hiring property for temporary use or for agricultural purposes, or depositing such property for the purpose of repairs or work or labor done thereon, or as a pledge or collateral to a loan."

The contracts were clearly contracts of bailment. "Bailment is the delivery of goods for some purpose, upon a contract expressed or implied, that after the purpose has been fulfilled they shall be redelivered to the bailor, or otherwise dealt with according to his directions, or kept until he reclaims them." Am. & Eng. Encyc. of Law (2d Ed.) 733; Armour & Co. v. Ross, 78 S. C. 294, 58 S. E. 941, 1135; Walter A. Wood Mowing & Reaping Machine Co. v. Vanstory (C. C. A. 4th) 171 F. 375. The facts in the case last cited were in all material respects similar to those of the case at bar, and the reasoning of Judge Pritchard is conclusive that the relationship between the parties here with respect to the goods in controversy was that of bailor and bailee. In the case entitled "In the matter of H. A. Tansill, Doing Business as Carolina Waste Company," in the District Court of the United States for the Western District of South Carolina, decided March 31, 1922, 17 F.(2d) 413, Judge Watkins dealt with the case of cotton linters stored in the warehouse of a bankrupt under an agreement that the bankrupt should submit to the owner offers of purchase, which must have been accepted on the part of the owner before a sale was consummated. The learned judge held the statute to be applicable to such a bailment, and, in the course of an able opinion filed in the case, said: "It would seem, therefore, that the statute was intended to prevent one from placing in the hands of another, upon consignment or otherwise, tangible personal property to which title was reserved, and thereby clothing him with apparent ownership, and thus furnishing a basis of credit, unless and until the agreement of bailment should be reduced to writing and recorded. The Legislature saw fit to exempt certain classes of bailments from the operation of the statute and made it imperative that all others desiring protection against subsequent creditors should observe the requirements laid down."

In Townsend v. Ashepoo Fertilizer Co. (C. C. A. 4th) 212 F. 97, this court held the statute to be applicable to a contract between the vendor and vendee of fertilizer, where the contract provided that the goods should be held in trust as security for the purchase price. The court said: "Even if the contract had provided for a bailment instead of a sale of the fertilizer, the same result would follow, since the South Carolina statute covers bailments as well as sales."

But we do not think that it follows that, because the contracts were required by the statute to be recorded, the trustee was entitled to recover the value of the property from the owner who had retaken possession of it prior to the bankruptcy. In passing upon the effect to be given registration statutes, and the failure to comply with them, we are, of course, bound by the decisions of the state courts interpreting these statutes. Bryant v. Swofford Bros., 214 U. S. 279, 291, 29 S. Ct. 614, 53 L. Ed. 997; Rock Island Plow Co. v. Reardon, 222 U. S. 354, 363, 32 S. Ct. 164, 56 L. Ed. 231; Holt v. Crucible Steel Co., 224 U. S. 262, 265, 32 S. Ct. 414, 56 L. Ed. 756. And it is settled by the decisions of the Supreme Court of South Carolina that section 5519 of the Code, quoted above, must be construed along with section 5312, and that reference must be had to the latter statute for the time, manner, and effect of the recording required by the former. Carroll v. Cash Mills, 125 S. C. 347, 118 S. E. 290; In re American Slicing Machine Co., 125 S. C. 214, 118 S. E. 303.

Section 5312 is as follows: "What Instruments are to Be Recorded — When, Where and Effect. — All deeds of conveyances of lands, tenements or hereditaments, either in fee simple or for life, all deeds of trusts or instruments in writing, conveying either real or personal estate, and creating a trust or trusts in regard to such property, or charging or encumbering the same; all mortgages or instruments in writing in the nature of a mortgage of any property, real or personal; all marriage settlements or instruments in the nature of a settlement of marriage; all leases or contracts in writing made between landlord and tenant for a longer period than twelve months; all statutory liens on buildings and lands for materials or labor furnished on them; all statutory liens on ships and vessels; all certificates of renunciation of dower; and, generally, all instruments in writing now required by law to be recorded in the office of register of mesne conveyances or clerk of court in those counties where the office of register of mesne conveyances has been abolished, or in the office of the Secretary of State, delivered or executed on and after the first day of May, in the year of our Lord one thousand nine hundred and nine, shall be valid, so as to affect from the time of such delivery or execution the rights of subsequent creditors (whether lien creditors or simple contract creditors) or purchasers for valuable consideration without notice, only when recorded within ten days from the time of such delivery or execution in the office of mesne conveyance or clerk of court of the county where the property affected is situated, in the case of real estate; and in the case of personal property of the county where the owner of said property resides, if he resides within the state, or if he resides without the state, of the county where such personal property is situated at the time of the delivery or execution of said deeds or instruments: Provided, nevertheless, that the recording and record of the above mentioned deeds and instruments of writing subsequent to the expiration of said ten days shall, from the date of such record, have...