In re National Cash Register Co.

• Decision Date: 18 December 1909
• Docket Number: 1,961.
• Citation: 174 F. 579
• Parties: In re NATIONAL CASH REGISTER CO.
• Court: U.S. Court of Appeals — Sixth Circuit

174 F. 579

In re NATIONAL CASH REGISTER CO.

No. 1,961.

United States Court of Appeals, Sixth Circuit.

December 18, 1909

Harrison Wilson, for petitioner.

Before LURTON, SEVERENS, and WARRINGTON, Circuit Judges

SEVERENS Circuit Judge.

The petitioner intervened in the proceedings in this matter of bankruptcy by filing a petition setting forth that it had before the bankruptcy sold a cash register to the bankrupt by a contract which among other stipulations contained a condition that the title should not pass until the price of the register should be fully paid; the price being payable in installments, and the register delivered at the time it was sold.

It was further stated that a down payment was made at the time, and one installment later on, but that the remainder of the price was not paid when due, and had never been paid, and that the register came into the possession of the trustee from the bankrupt. On these facts the petitioner prayed that, if the trustee would not complete the purchase by paying the part of the price still due, the court would order it sold, and in making the order should direct the proceeds to be paid over to the petitioner to the extent necessary to complete the payment of the price of the register. The trustee did not elect to pay the balance due, but made no objection to the proposed sale, claiming, however, that the court, in ordering it, should direct the trustee to retain one-half of the amount which the bankrupt had paid on the purchase price of the register. The sum involved is small, but the question involved is important, in view of the fact that such transactions have become common.

The claim made by the trustee was founded upon a statute of Ohio in which state the transaction occurred. This statute contains a provision requiring contracts for conditional sales to be put to record in the office of the recorder for the county in order to render it valid against purchasers and creditors, and then proceeds (Rev. St. Ohio, Sec. 4155-- 3) to declare that:

'Whenever such property except machinery equipment and supplies for railroads and contractors, and for manufacturing brick cement and tiling, and for quarrying and mining purposes, is so sold or leased, rented, hired or delivered it shall be unlawful for the persons who so sold, leased, rented, hired or delivered or his assigns or the agent or servant of either their agent or servant to take possession of said property, without tendering or refunding to the purchaser, lessee, renter, or hirer thereof or any party receiving the same for the vendor, the sum or sums of money so paid after deducting therefrom a reasonable compensation for the use of such property, which shall in no case exceed 50 per cent. of the amount so paid, anything in the contract to the contrary notwithstanding, and whether such condition be expressed, in such contract or not, unless such property has been broken, or actually damaged, and then a reasonable compensation for such breakage or damages shall be allowed. Provided, that the vendor shall not be required to tender or refund any part of the amount so paid unless said amount so paid to the vendor exceeds 25 per cent. of the contract price of the property.'

The referee made the order of sale requested, but refused the direction to apply the proceeds to the payment of the balance due the petitioner as prayed, and instead directed the trustee to retain the proceeds to the extent of one-half the amount of the purchase price which the bankrupt had paid. The petitioner brought this order for review before the District Judge, who confirmed it.

The referee based his order upon the construction given to the above statute by the superior court of Cincinnati in the case of Krug, Receiver, v. National Cash Register Co., 1 Ohio N.P. (N.S.) 429. The District Judge cites that case in his opinion, as well as other decisions and dicta which he thought supported the same conclusion. The decisions of the subordinate courts of Ohio, several of which are reported, are in conflict upon the question whether the provisions of the statute have application to a case, where the vendor has not sought and is not seeking to recover the possession of the thing sold, but is seeking his remedy through the action of a court of equity.

It is admitted that there is no decision of the Supreme Court of the state as to whether in such a case as this the statute applies and gives the exclusive remedy to which the vendor may resort, although there are dicta of the judges on which the parties respectively rely. We have, therefore, to rely on our own judgment as to what the statute should be construed to mean.

In equity the reserved title of the vendor is regarded as in the nature of a security for the payment of the price, and in some states it is held that such a conditional sale is the equivalent of an out and out sale and a mortgage back to secure the payment of the purchase money. At law the transfer of the property gives to the vendee the right to the possession so long as he is performing his agreement to pay. But, when he fails to do this, his right to the possession ceases, and he then holds it for the vendor. But in equity these considerations are regarded as technical merely, and the court will look to see whether the vendor has such a hold or claim upon the property as entitles him to subject it to the payment of the purchase money. The maxim that equity follows the law is inapt where the legal remedy is inadequate to the enforcement of equitable rights. 16 Cyc. 137. There are many instances in the law of sales where even at the common law a lien is implied for the protection of the vendor in cases of ordinary sales. Although the agreement is perfected so as to pass the title for most purposes, still the vendor is allowed a lien for the price, while it remains in his own possession; or where he has delivered it to a common carrier according to agreement and the carrier is held to be the agent of the vendee for the purpose of accepting delivery, the vendor is allowed the privilege...