In re Smith
| Decision Date | 14 January 1943 |
| Docket Number | Bankrupt No. 4371. |
| Citation | 48 F. Supp. 866 |
| Court | U.S. District Court — District of South Carolina |
| Parties | In re SMITH. Ex parte CLINTON SALES CO. Ex parte CALVERT. |
F. Ehrlich Thomson and Richard T. Maher, both of Columbia, S. C., for Clinton Sales Co.
Clarke W. McCants, of Columbia, S. C., for Y. C. Calvert, Trustee.
F. Wm. Cappelmann, of Columbia, S. C., for Flag Pet Food Corporation.
Robert Moorman, of Columbia, S. C., Referee in Bankruptcy.
An opinion was entered in the above stated case on September 26, 1942, and as appears from the record the opinion was filed September 28, 1942.
On October 12, 1942, the above named Flag Pet Food Corporation filed a petition for a rehearing. The rehearing was granted and the questions raised were decided today. The Court is satisfied with the conclusions reached in the first opinion, but for the purposes of clarity and the correction of certain minor errors therein the following is substituted as the opinion of the Court:
There are two contests involved in this proceeding now before me, both of which arose in the administration of the above stated bankrupt estate. One is between Y. C. Calvert, as Trustee of the bankrupt estate, and Clinton Sales Company (hereinafter referred to as Clinton Company), and the other is between said Trustee and Flag Pet Food Corporation (hereinafter referred to as Flag Corporation). In the first, Clinton Company is asking for a review and reversal of the Referee's order denying its claim to possession of certain merchandise. In the second the Trustee is asking a review and reversal of the order of the Referee directing the surrender of possession of certain merchandise to Flag Corporation. The petitions for review and reversal were heard together and at the same time, and they will be disposed of in one opinion. The first, wherein Clinton Company is the petitioner, will be designated "I", and the second, wherein Y. C. Calvert, Trustee, is the petitioner, will be designated "II".
I. J. D. Smith, trading as Food Sales & Distributing Company (hereinafter referred to as bankrupt), was adjudged an involuntary bankrupt on December 13, 1941, and on said date this proceeding was referred to Robert Moorman, Esq., Referee in Bankruptcy, Columbia, South Carolina.
Pursuant to notice the first meeting of the creditors was held in Columbia, S. C., on the 23rd day of January, 1942. At this meeting Y. C. Calvert was elected and confirmed as Trustee of said bankrupt estate. He later qualified as such and he is now and has been since his qualification the Trustee of said bankrupt estate.
At the first meeting of the creditors, and on at least one occasion thereafter, the bankrupt was examined in regard to the claim of Clinton Company that it is the owner of and entitled to the possession of certain merchandise, 21 bbls. of corn syrup and 40 bags of corn sugar, which was in the possession of the bankrupt at the time of the adjudication. The Referee reported that, in addition to hearing the testimony and considering all exhibits touching the matter in controversy, he made a personal inspection of the merchandise in question at its location in the store room of the bankrupt. The Referee denied the claim of Clinton Company for the return of said merchandise and held it as an asset in the hands of the Trustee for the benefit of the creditors of the bankrupt estate.
The Clinton Company, in its petition for review, specifies nine (9) alleged errors in the order of the Referee. The first three (3) impute errors in findings of fact, and the last six (6) claim errors of law. It is contended in the first two exceptions that the Referee erred in finding that the merchandise in question was displayed with other merchandise of the bankrupt, in the bankrupt's place of business, and that such merchandise apparently belonged to the bankrupt.
In his first examination the bankrupt testified that the claimant Clinton Company shipped merchandise to him, in care of itself, to Columbia, S. C.; that Clinton Company authorized him to sell and deliver said merchandise to customers and report the same so that it could in turn bill the purchasers for the purchase price; and that for such services he received a commission. The bankrupt further testified that the merchandise claimed by Clinton Company was consigned, and that all sales thereof were made only upon Clinton Company's authorization; that said Company gave the bankrupt a list of persons to whom sales could be made, and that all sales were made at prices fixed by Clinton Company. The bankrupt also testified that he handled no money for the goods consigned by Clinton Sales Company, except money for C. O. D. orders and money derived from the collection of checks made payable to Clinton Sales Company, from none of which he was allowed to deduct his commissions; and that all such collections were remitted promptly to Clinton Company, and before commissions were paid to him.
Upon his second examination, the bankrupt testified that he had been both a trucker and a broker; that when consigned goods were delivered by him to purchasers thereof duplicate sales tickets were made, one being left with the buyer and the other forwarded to the consignor, who in turn sent an invoice to the buyer; and that all sales were made to customers designated by the consignor and in amounts approved by it. During the second examination of the bankrupt the following occurred:
I am not prepared to say that the Referee erred in finding the facts as he did. The Referee had the advantage of seeing the place where the goods in question were kept and besides it seems uncontradicted in the record that the goods claimed by Clinton Company were kept in the same building and upon the same floor with goods that had been consigned by other customers to the bankrupt and with at least some property of the bankrupt.
The Clinton Company further complains that the Referee erred in not holding as a fact that "the creditors of the bankrupt had actual notice that petitioner's merchandise belonged to petitioner and not to the bankrupt."
I have not found any testimony in the record supporting the contention that the creditors of the bankrupt had actual notice or knowledge of the bailment contract, or of any other character of contract, between the Clinton Company and the bankrupt prior to the adjudication. Undoubtedly the burden was on the Clinton Company to show such notice or knowledge, and it did not do so.
The remaining exceptions relate to questions of law, and they are so inter-related that they may be well considered together.
In Armour & Co. v. Ross, 78 S. C. 294, 58 S.E. 941, 942, 1135, the Supreme Court of South Carolina adopted the following definition of bailment, taken from 3 Encyclopedia of Law, 733: "Bailment is the delivery of goods for some purpose, upon a contract expressed or implied, that after the purpose has been fulfilled they shall be redelivered to the bailor, or otherwise dealt with according to his directions, or kept until he reclaims them." The same definition of bailment was adopted by Judge Parker in the opinion in Firestone Tire & Rubber Co. v. Cross, 4 Cir., 17 F.2d 417, 418. This definition of bailment fits the facts in this case, even as they are contended for by the Clinton Company. The Clinton Company retained title to the property and delivered possession thereof to the bankrupt, reserving to itself the right to direct the disposition of the property, or to later reclaim it, something it did not do before the institution of the bankruptcy proceeding, or before adjudication.
If the relation of bailor and bailee existed between the parties, as I hold it did, then it follows that Section 7047, Code of Laws of South Carolina 1932 is applicable. It reads as follows: "Every agreement between the vendor and vendee, bailor or bailee of personal property, whereby the vendor or bailor shall reserve to himself any interest in the same, shall be null and void as to subsequent creditors (whether lien creditors or simple contract creditors) or purchasers for valuable consideration without notice, unless the same be reduced to writing and recorded in the manner now provided by law for the recording of mortgages; but nothing herein contained shall apply to livery stable keepers, inn keepers, or any other persons letting or hiring property for temporary use or for agricultural purposes, or depositing such property for the purpose of repairs or work or labor done thereon, or as a pledge or collateral to a loan."
In the instant case the contract between the parties was not in writing. Although the bankrupt testified that the oral contract was confirmed by letter, no letter was offered in evidence. Whether the contract was in writing or not, it was not recorded. It therefore follows that the Clinton Company can claim no benefit by reason of the recording of its contract as required by the South Carolina statutes; nor is the Clinton Company in the same situation as was the defendant in the case of Firestone Tire & Rubber Co. v. Cross, supra. In that case, the Firestone Tire & Rubber Co. was a bailor. It placed...
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