Careful Laundry, In re
| Decision Date | 27 April 1954 |
| Docket Number | No. 120,120 |
| Citation | 204 Md. 360,104 A.2d 813 |
| Parties | In re CAREFUL LAUNDRY, Inc. TATELBAUM et al. v. PANTEX MFG. CORP. |
| Court | Maryland Court of Appeals |
Nathan Patz, Baltimore (Louis J. Sagner, Baltimore, on the brief), for appellants.
Morris Rosenberg, Baltimore, for appellee.
Before BRUNE, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.
Hyman P. Tatelbaum and Sanford A. Harris, trustees for Careful Laundry, Inc., are here contesting an order passed by the Circuit Court of Baltimore City to release to Pantex Manufacturing Corporation, of Pawtucket, Rhode Island, certain equipment it had sold conditionally and delivered to the laundry on North Franklintown Road in Baltimore.
Two conditional contracts of sale were made in the fall of 1952. The first was executed on October 16 and was properly recorded on October 30 in the office of the Clerk of the Superior Court of Baltimore City. The second was executed on November 3 and was recorded by mistake in the office of the Clerk of the Circuit Court for Baltimore County. By this contract Pantex sold twelve laundry presses and other equipment on condition that the title to the property would not pass until the total price of $11,209.92, which included finance charges, had been paid in 36 monthly instalments.
On July 28, 1953, the laundry executed a deed of trust for the benefit of its creditors. By that deed it conveyed all of its property, real and personal, to the two trustees with power to sell it and to apply the proceeds of sale to the payment of its debts. The Circuit Court of Baltimore City assumed jurisdiction of the trust on the following day.
On August 12, 1953, nine months after the execution of the second contract, Pantex recorded it in the office of the Clerk of the Superior Court of Baltimore City, and on August 14 petitioned the Circuit Court to order the trustees to return the equipment. The contract provided that if the purchaser should default on any obligation under the contract, the full balance would become due, together with attorney's fees of 15 per cent of the unpaid balance; and the purchaser would either pay the balance or deliver the equipment to the seller, who could thereupon take possession of it and sell it at either public or private sale and credit the proceeds on the amount due. The trustees disputing Pantex's claim to the equipment, stated that creditors claiming more than $5,500 had extended credit to the laundry between the execution of Pantex's second contract and its recordation in the Superior Court; that the laundry owed over $4,000 for wages earned by its employees before the Circuit Court assumed jurisdiction of the trust; and that three notices of tax liens aggregating approximately $19,000 had been recorded by the United States Government in the Superior Court before the second contract was recorded in that Court. The trustees further stated that, while the stock and fixtures and other personal property of the laundry had been appraised at $26,392.50, and the real estate at $75,250, making a total of $101,642.50, the laundry's debts amounted to approximately $128,000; consequently the assets, even including the Pantex equipment, which was then worth between $7,000 and $8,000, were not sufficient to satisfy the claims of creditors.
On September 22 the Circuit Court, relying on the Conditional Sales Act, Code 1951, art. 21, § 74, directed the trustees to release the equipment to Pantex in accordance with the terms of the contracts. It was from that order that the trustees appealed here.
Pantex filed a motion to dismiss the appeal. In this State a trustee appointed by or acting under the jurisdiction of a court of equity has the right of an appeal to the Court of Appeals from any final decree determining any preference or priority between creditors or other persons interested in the estate, provided that such appeal is taken with the consent and approval of the court having jurisdiction over the estate. Code 1951, art. 5, § 43. As the Court below gave the trustees authority to enter an appeal, we will deny the motion to dismiss.
In practically all jurisdictions statutes have been passed invalidating conditional contracts of sale as to certain classes of persons unless the contract is recorded in the manner required by statute. Divergent results have been reached by the courts in considering the question whether an assignee for the benefit of creditors of a conditional vendee is in a position, under the statute, to assert the invalidity of such a contract as against the conditional vendor who has failed to record his instrument in accordance with the statute. The divergent views have been mainly due to the varying provisions of the recording statutes and to the different conceptions which the courts have held as to the status of an assignee for the benefit of creditors.
In 1910 the Maryland Legislature adopted the Uniform Sales Act, which provides as follows: Laws 1910, ch. 346, Code 1951, art. 83, § 38.
At the time of the passage of the Uniform Sales Act, it was the law in this State that any contract of sale wherein the vendor reserved title to the property until the contract price was paid was valid as between the vendor and the vendee and as to all persons claiming under the vendee with notice of the contract, but invalid as to bona fide purchasers who acquired the property without notice of the vendor's claim.
We reaffirm the rule announced by this Court in 1914 in Praeger v. Emerson-Brantingham Implement Co., 122 Md. 303, 309, 310, 89 A. 501, that, in the absence of statute, the title of a vendor in a conditional contract of sale can be enforced against either assignees for the benefit of creditors or receivers, since neither assignees nor receivers are bona fide purchasers.
The first Act of the Maryland Legislature for the recordation of conditional contracts of sale was passed at its 1916 session. Laws 1916, ch. 355. That Act provided that every note, sale or contract for the sale of goods and chattels, wherein the title thereto, or a lien thereon, is reserved until the same is paid in whole or in part, or the transfer of title is made to depend upon any condition therein expressed, and possession is to be delivered to the vendee, shall, in respect to such reservation and condition, be void 'as to third persons without notice' until such note, sale or contract is recorded.
In 1926 the Court in Charles M. Stieff, Inc., v. Wilson, 151 Md. 597, 600, 135 A. 407, stated that the Act providing that the reservation of title in a conditional sale contract shall, until the contract is recorded, be void as to third persons without notice, did not intend to make any departure from the familiar American purpose of recording statutes, namely, to protect persons who might subsequently deal with the property and part with value for it without notice of the earlier conveyance.
In 1928 the Court, taking a step further in Gunby v. Mack International Motor Truck Corporation, 156 Md. 19, 25, 142 A. 596, held that, since the Conditional Sales Act does not apply in favor of creditors of the conditional vendee whose claims arose out of transactions prior to the date of the conditional contract, it is immaterial that any such claim may have been reduced to judgment after the date of the contract and that execution may have been levied on the property conditionally sold.
In 1931 the Legislature re-enacted the Act to add slightly to the regulations relating to the recording of instruments reserving title. The only addition was the provision that in the case of any corporate or partnership vendee, the instrument should be recorded 'where such vendee has its principal place of business in the State of Maryland.' Laws 1931, ch. 402.
In 1939 the Act was construed by the United States Circuit Court of Appeals in Friedman v. Sterling Refrigerator Co., 4 Cir., 104 F.2d 837. That Court, in an opinion by Judge Parker, held that under the Bankruptcy Act a claim which for want of record is void as against some of the creditors of the bankrupt may be avoided in toto by the trustee in bankruptcy, even though creditors generally benefit by the avoidance.
The Act came before the Maryland Court of Appeals for construction in 1951 in Tatelbaum v. National Store Fixture Sales Co., 196 Md. 599, 604, 78 A.2d 228, 230. There the trustees under a deed of trust from a conditional vendee were appealing from an order directing them to pay the balance due on two conditional contracts. The Court held that the contracts were valid against the only creditor who might have relied upon the equipment delivered thereunder, where the creditor had not extended credit to the conditional vendee between the date of the delivery of the equipment and the date when the first contract was recorded, and therefore the contracts were valid against all creditors who were represented by the trustees. In that case Judge Markell, speaking for the Court, took occasion to say: 'In bankruptcy, as in other proceedings, the validity of conditional sale contracts, as against creditors, depends upon state law, but the consequences of invalidity as to particular creditors are different.'
In 1949 the Legislature amended the statute by providing that every note, sale or contract for the sale of goods and chattels, wherein the title thereto, or a lien thereon, is reserved until the same is paid in whole or in part, or the transfer of title is made to depend upon any...
To continue reading
Request your trial
- Wheeler v. State
- Trader, In re
- Aero Motors, Inc. v. Administrator, Motor Vehicle Administration
- Allied Am. Mut. Fire Ins. Co. v. Commissioner of Motor Vehicles