In re Selman Heating & Plumbing Co.

• Citation: 204 F. 839
• Decision Date: 14 April 1913
• Docket Number: 11,975.
• Parties: In re SELMAN HEATING & PLUMBING CO.
• Court: United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama

204 F. 839

In re SELMAN HEATING & PLUMBING CO.

No. 11,975.

United States District Court, N.D. Alabama, Southern Division.

April 14, 1913

Henry Bentley, of Cincinnati, Ohio, for petitioner.

Max J Winkler, M. M. Ullman, and R. Du Pont Thompson, all of Birmingham, Ala., for trustee.

GRUBB District Judge.

This is a petition filed by the Peck-Williamson Heating & Ventilating Company to review an order of the referee disallowing in part its claim filed against the bankrupt estate. The referee upon motion of the trustee to expunge, disallowed an item of $2,400, the price of a car load of furnaces, shipped the bankrupt corporation by the petitioner on August 3, 1911. This item was disallowed by the referee upon the theory that the contract under which it was incurred by the bankrupt was void by reason of the failure of the petitioner, which was a foreign corporation, to qualify as required by the Constitution and laws of Alabama to do business in that state. It is conceded that at the time of the transaction the petitioner had not properly qualified itself to do business as a foreign corporation in Alabama, and that under the decisions in that state, which are followed in the federal courts, all contracts made by it and to be performed in Alabama are avoided by such failure, except such as relate to transactions of interstate or foreign commerce. The question the solution of which determines the review, is whether the transaction, which is the basis of the asserted claim of petitioner, is one relating to commerce between states.

The facts of the transaction are not in doubt or dispute. The bankrupt corporation had placed an order with petitioner for three car loads of furnaces, payment to be made on the usual terms of credit. Two cars were delivered to and accepted by the bankrupt under the terms of this order. Upon advice of the shipment of the third and last car of the order, the bankrupt protested against receiving that car, asserting that it was prematurely shipped, and because its immediate receipt would inconvenience the bankrupt as to storage, and also in paying for it on the terms of credit. After correspondence it was agreed that the terms of the sale should be modified, and the furnaces received by the bankrupt on consignment only, and handled for and stored at the expense of the petitioner, with the understanding that the bankrupt, by permission of petitioner in advance in each instance, might sell the furnaces from stock to its customers. The furnaces were received and stored for petitioner under this arrangement on their arrival. None were sold to customers before bankruptcy intervened. On December 18, 1911, the bankrupt by letter offered to buy these furnaces then stored with it, and after some correspondence with petitioner, on January 22, 1912, the petitioner agreed to sell the furnaces to the bankrupt. Nothing was then said as to the price, but it was assumed between both parties that the original selling price was to govern. The petitioner about that date received in payment the bankrupt's note for $2,400, a renewal of which constitutes the item in controversy.

The contention of the trustee is that the original sale was rescinded before the goods were received by the bankrupt, and that it received them at first upon consignment only, and that the only sale that was made was afterwards consummated in Alabama, and while the goods sold were in Alabama, and for that reason was not a transaction in interstate commerce. The petitioner contends that the transaction from the original sale, through the consignment, and to the final sale was a continuous one; that the consignment and final sale were modifications merely of the original sale, which concededly was an interstate transaction; and, consequently, that the entire transaction was one of interstate commerce.

The trustee lays stress upon the time and place where the sale was consummated, and where the title to the property passed, and if these circumstances are controlling, the transaction was clearly not an interstate one, since it is conceded that the only sale which had the effect to pass title to the bankrupt occurred after the property sold was in Alabama, and that delivery to the bankrupt, as purchaser, there first occurred.

In the case of Dozier v. Alabama, 218 U.S. 124, 127, 30 Sup.Ct. 649, 650 (54 L.Ed. 965, 28 L.R.A. (N.S.) 264), the Supreme Court said:

'No doubt it is true that the customer was not bound to take the frame unless he saw fit, and that the sale of it took place wholly within the state of Alabama, if a sale was made. But as was hinted in Rearick v. Pennsylvania, 203 U.S. 507, 512 (27 Sup.Ct. 159, 51 L.Ed. 295), what is commerce among the states is a question depending upon broader considerations than the existence of a technically binding contract, or the time and place where the title passed. It was agreed that the frame should be offered along with the picture. The offer was a part of the interstate bargain, and as it was agreed that the frame should be offered 'at factory prices,' and the company and factory were in Chicago, obviously it was contemplated, if not agreed, that the frame should come on with the picture. In fact, the frames were sent on with the pictures from Chicago, and were offered when the pictures were tendered, as part of a transaction commercially continuous and one, at prices generically fixed by the contract for the pictures, and by that contract represented to be less than retail or usual prices, in consideration, it is implied, of the purchase already agreed to be made. so separated from the rest of the dealing between the Chicago company and the Alabama purchaser as to sustain the license tax upon it. Under the decisions the statute as applied to this case is a regulation of commerce among the states, and void under the Constitution of the United States. Article 1, Sec. 8; Robbins v. Shelby County Taxing District, 120 U.S. 489 (7 Sup.Ct. 592, 30 L.Ed. 694); Caldwell v. North Carolina, 187 U.S. 622 (23 Sup.Ct. 229, 47 L.Ed. 336); Rearick v. Pennsylvania, 203 U.S. 507 (27 Sup.Ct. 159, 51 L.Ed. 295).'

In the case of Rearick v. Pennsylvania, 203 U.S. 507, 512, 27 Sup.Ct. 159, 160 (51 L.Ed. 295), the Supreme Court said:

"Commerce among the several states' is a practical conception not drawn from the 'witty diversities' ((Yaites v. Gough), Yelv. 33) of the law of sales. Swift & Co. v. United States, 196 U.S. 375, 398, 399 (25 Sup.Ct. 276, 49 L.Ed. 518). The brooms were specifically appropriated to specific contracts, in a practical, if not in a technical, sense. Under such circumstances it is plain that, wherever might have been the title, the transport of the brooms for the purpose of fulfilling the contracts was protected commerce. In Brennan v. Titusville, 153 U.S.

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