In re Steiners Improved Dye Works

• Citation: 44 F.2d 557
• Decision Date: 12 November 1930
• Docket Number: No. 4323.,4323.
• Parties: In re STEINERS IMPROVED DYE WORKS, Inc. McKEY v. TROY LAUNDRY MACHINERY CO.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

44 F.2d 557 (1930)

In re STEINERS IMPROVED DYE WORKS, Inc.

McKEY v. TROY LAUNDRY MACHINERY CO.

No. 4323.

Circuit Court of Appeals, Seventh Circuit.

November 12, 1930.

James W. Davis, Isadore Wolfson, and Arthur Chittick, all of Chicago, Ill., for appellant.

Charles P. Molthrop, of Chicago, Ill., for appellee.

Before EVANS and PAGE, Circuit Judges, and LINDLEY, District Judge.

PAGE, Circuit Judge,

The District Court, sitting in bankruptcy, allowed appellee's reclamation petition for the return, by the receiver in bankruptcy, of certain laundry machinery, on the ground that it was possessed by the bankrupt under a conditional sale contract between bankrupt and appellee.

The contract is an order, made by bankrupt, under date of July 9, 1927, on appellee's conditional sale contract blank, addressed to and accepted by appellee. In part, it reads: "Gentlemen: Please ship, subject to the conditions printed on the back hereof, to the undersigned" (bankrupt) "* * * the chattels below mentioned, for which we agree to pay the sum of $4930." Then follow provisions for the payment of $250 with the order, and a like amount upon acceptance by appellee — "Balance as follows: 18 equal monthly notes, bearing 6% interest, covered by chattel mortgage & insurance to be carried by Troy Laundry Machinery Co. Inc., premiums to be added to notes. 1 note for $250 due Oct. 15, 1927 in add. to regular monthly notes."

The above words in italics are printed, but the remainder of quoted part is written. Material parts of the printed matter on the back of the blank are: "It is agreed that title to the chattels specified on this order shall remain in the Troy Laundry Machinery Co., Ltd., or its successors, until fully paid for in cash. * * * Notes with interest at the legal rate shall be delivered for deferred payments in amounts agreeable to the Troy Laundry Machinery Co., Ltd., with renewal privileges. * * * The delivery to, and the receipt by, the Troy Laundry Machinery Co., Ltd., of any notes, with or without any indorsements thereupon, shall not in any manner or form affect the title of the said Troy Laundry Machinery Co., Ltd., in and to said chattels or its right to reclaim said chattels in the event of default hereunder."

There is a provision that upon default all notes shall immediately become due and payable, and "collection of any of said notes after default hereunder shall not be considered as a waiver, nor shall it in any manner or form affect the title to the Troy Laundry Machinery Co., Ltd., or its right to thereafter reclaim said chattels."

The initial payment only was made. Neither the chattel mortgage nor the notes were given. Appellee sued bankrupt to the March term, 1928, of the superior court of Cook county, Ill., to recover the money due for the machinery, plus the insurance paid. Although the issues were settled in April, 1928, nothing further was done in that suit. Petition in bankruptcy was filed September 27, 1929. Reclamation petition was filed October 11th of the same year.

Appellant contends: (1) That because of the provision for the chattel mortgage, the sale was not conditional; (2) that failure to repossess the property for more than eight months after the final payment became due created an estoppel; and (3) that suit in the Cook county court was an election between inconsistent remedies, so that title vested in bankrupt.

Chapter 121a of the Illinois statute (Cahill's Rev. St. 1929) covers sales of personal property, and includes the Uniform Sales Act. Paragraph 23 thereof (section 20 of Uniform Sales Act) reads:

"Where there is a contract to sell specific goods, or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of possession or property in the goods until certain conditions have been fulfilled. The right of possession or property may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer."

Appellant's authorities do not, we think, support his first contention.

The first case cited, In re Parkstone Apartment Co., 243 Mich. 401, 220 N. W. 780, covers several reclamation proceedings against a receiver, on written contracts, held to be conditional sales. The contracts are not set out. After saying the decree should be affirmed, the court discussed chattel mortgages and also stated what options the seller had in case of default by the buyer. So far as appears, those questions were not there involved.

Concerning Heryford v. Davis, 102 U. S. 235, 26 L. Ed. 160, relied on by appellant, the Supreme Court in Harkness v. Russell, 118 U. S. 663, 680, 7 S. Ct. 51, 60, 30 L. Ed. 285, said:

"The whole question in Heryford v. Davis was as to the construction of the contract. This was in the form of a lease, but it contained provisions so irreconcilable with the idea of its being really a lease, and so demonstrable that it was an absolute sale with a reservation of a mortgage lien, that the latter interpretation was given to it by the court. This interpretation rendered it obnoxious to the statute of Missouri requiring mortgages of personal property to be recorded in order to be valid as against third persons."

In the third case cited, In re Richardson, Co. (C. C. A.) 294 F. 451, 453, notes and a chattel mortgage were executed and accepted by the seller. The court, considering the contract, said:

"It might very well be that there would be delay or disputes in respect of the time when the machinery was erected `ready for power connection,' and for that or some other reason, good or bad, that the purchaser might not execute the notes and the chattel mortgage at the time contemplated in the agreement. It was but natural that the vendor should protect itself by reserving title until such time as the chattel mortgage was executed and delivered. Without such a reservation clause, the order or agreement might have been construed as an absolute sale. * * *

"When, however, the chattel mortgage was executed and delivered, the relations of the parties changed."

If that case has any persuasive power here, it is in favor of the proposition that, as long as the mortgage is unexecuted, the sale continues to be conditional.

It seems to us idle to consider at length the cases cited in support of appellant's third proposition, because there are many...