Cooper v. Michigan Artificial Ice Products Co., 2301.

• Decision Date: 22 November 1930
• Docket Number: No. 2301.,2301.
• Citation: Cooper v. Michigan Artificial Ice Products Co., 1 F.Supp. 741 (W.D. Mich. 1930)
• Parties: COOPER et al. v. MICHIGAN ARTIFICIAL ICE PRODUCTS CO.
• Court: U.S. District Court — Western District of Michigan

1 F. Supp. 741

COOPER et al. v. MICHIGAN ARTIFICIAL ICE PRODUCTS CO.^*

No. 2301.

District Court, D. Michigan, S. D.

November 22, 1930.

Glenn D. Mathews, of Ionia, Mich., for plaintiffs.

Hugh E. Wilson, of Ionia, Mich., for defendant.

George E. Nichols, of Ionia, Mich., for receivers.

RAYMOND, District Judge.

This matter is before the court upon exceptions to the special report of the master in chancery upon the petition of Westerlin & Campbell Company. On February 15, 1930, claimants filed in this court a petition asking determination of the amount due upon certain contracts for the installation of machinery and equipment at the various plants of defendant. It was stated therein that "upon a determination of the amount so due, your petitioner should be decreed to have a first and paramount lien in and to the said machinery and equipment so furnished and installed by your petitioner at the said four respective plants paramount to the rights, interests, liens and claims of any and all other persons whatsoever." Among the prayers of the petition was one that if a sale of the several plants be decreed by the court, "the rights and claims in and to and liens upon, if any, of your petitioner in and to the said machinery and equipment so furnished and installed in said four plants should be held and decreed to attach to the proceeds of any such sale as a first and prior lien thereon." Another prayer was that if this court determines that a sale should not be had "that your petitioner may reclaim all of said machinery and equipment so furnished and installed by it in order that your petitioner's claims in and thereto may be satisfied, or as an alternative, that your petitioner be given leave to file a bill of foreclosure in this court, or in any other appropriate court or jurisdiction, praying that your petitioner's lien in and to said machinery and equipment so furnished and installed by it be foreclosed and that the said machinery and equipment be sold to satisfy your petitioner's said claims."

Upon answer being filed to said petition an order of reference was made to the master in chancery whereby he was directed "to take testimony on the claim or claims of said Westerlin & Campbell Company, as set forth in its said petition and to hear and determine all matters, facts and issues arising under said petition and answer * * *," and also "to determine all questions arising as to (a) the amount due said petitioner from said Michigan Artificial Ice Products Company under any and all contracts between petitioner and said defendant, if any; (b) the validity and extent of any lien or security, either by reservation of title under any contract or contracts of conditional sale or otherwise claimed by said petitioner, and the sum or sums secured by such lien or security under any such contract or contracts, if any."

On July 18, 1930, the master in chancery filed a special report upon said reference, which in substance denied the petition for allowance as a secured claim and allowed petitioner's debt as an ordinary claim. On the twenty-first day after the filing of said report exceptions were filed thereto.

The questions presented to this court for determination by the briefs of counsel are: First, whether under Equity Rule 66 (28 US CA § 723) the report of the master is open to review by this court; and, second, whether the master was right in his conclusion that the contracts upon which petitioner relies are in legal effect chattel mortgages and therefore void as against the receivers for want of proper record.

For petitioners it is argued chiefly upon the authority of National Folding-Box & Paper Company v. Dayton Paper-Novelty Co. (C. C.) 91 F. 822; Burke v. Davis (C. C. A.) 81 F. 907; Fleming v. Noble et al. (C. C. A.) 250 F. 733; Celluloid Mfg. Co. v. Cellonite Mfg. Co. (C. C.) 40 F. 476, and Smith v. Seibel et al. (D. C.) 258 F. 454, that it is unnecessary to file exceptions in order to review conclusions of law of the master in chancery in cases where the facts are correctly stated by him. It is urged that, in any event, the court should permit a tardy filing of exceptions in the circumstances here existing. Consideration of the cases cited and others leaves doubt as to the precise interpretation to be placed upon the rule. It is difficult to believe that the Supreme Court in promulgating the rule would have used the broad language, "the report shall stand confirmed," if it had intended to limit the matter confirmed to fact findings. It seems reasonably clear that generally and as to all matters within the scope of the order of reference it was intended the findings of the master should stand confirmed under Equity Rule 66 at the end of twenty days. See General Fire Extinguisher Co. et al. v. Equitable Trust Co. of New York et al. (C. C. A.) 17 F.(2d) 968; American Surety Co. of New York v. James A. Dick Co. et al. (C. C. A.) 23 F.(2d) 464; Decker v. Smith (D. C.) 225 F. 776). Whether or not the court may, after the lapse of twenty days and during the same term of court, upon showing of obvious error in conclusions of law, reopen the report for further hearing, is open to question. It is the opinion of the court that no such obvious error is here present. However, the view taken by the court upon the second question renders unnecessary the decision of that question.

The second question is the familiar one of whether the contract under which the equipment and machinery in this case was sold should be construed as one of conditional sale or one whereby the seller reserved title by way of security merely to enable him to collect the purchase price. This question (so far as Michigan contracts are concerned) has been recognized by our Circuit Court of Appeals and other federal courts as one not of general law, but one to be determined in accordance with the construction placed upon such contracts by the Michigan Supreme Court. See In re Ames (C. C. A.) 289 F. 208; In re Goorman (D. C.) 283 F. 119. The principles laid down by that court have been...