In re Taylor, 9917.

• Decision Date: 06 January 1931
• Docket Number: No. 9917.,9917.
• Citation: 46 F.2d 326
• Parties: In re TAYLOR.
• Court: U.S. District Court — Western District of Michigan

46 F.2d 326 (1931)

In re TAYLOR.

No. 9917.

District Court, E. D. Michigan, S. D.

January 6, 1931.

Dilley & Dilley, of Grand Rapids, Mich., for petitioner.

Fred B. Darden, of Detroit, Mich., for Trustee.

SIMONS, District Judge.

This bankruptcy cause is before the court on a petition to review an order of one of the referees in bankruptcy for this district denying a reclamation petition herein. The reclamation petition was filed by Martin Chain Stores, Inc., a Michigan corporation, as petitioner, to recover from the trustee in bankruptcy possession of certain clothing delivered by the said petitioner to the bankrupt prior to the filing of the petition in bankruptcy in this cause. This clothing was so delivered in pursuance of a certain written contract between the petitioner and the bankrupt. The petitioner contends that this contract was one of consignment only, and that this merchandise still belongs to it, and that it is entitled to the return thereof. It is the contention of the trustee in bankruptcy that the contract was one of conditional sale, for the purpose of a resale by the bankrupt, and that therefore such contract was subject to the provisions of a Michigan recording statute (section 11912 of the Michigan Compiled Laws of 1915), which requires such contracts to be filed for public record, and that as it was not so filed it is void as against the creditors of the bankrupt. The trustee also contends that the petitioner, by permitting the bankrupt to appear to be the owner of such merchandise, became thereby estopped, as against such creditors, to assert title thereto in itself. The referee sustained both of these contentions of the trustee and denied the reclamation petition. This ruling the petitioner seeks to review here.

The contract in question was executed in Michigan in 1928, to be performed in Michigan, and consisted of the following provisions, the petitioner being therein designated as the "first parties" and the bankrupt as the "second party":

"Whereas first parties are dealers in men's clothing consisting principally of suits, extra trousers, and overcoats which they place with dealers in kindred lines on consignment and whereas second party desires to have certain of first parties' merchandise on a consignment basis, it has been agreed between parties to this contract as follows:

"(1) First parties will deliver to second party on completion of this contract, certain quantities of above mentioned merchandise to be held by second party on consignment and sold by him for cash only, the number of garments being based upon the turnover.

"(2) Prices at which merchandise is to be sold are to be according to invoices rendered by first parties, with the exception of, first parties grant second party permission to raise the retail price on first parties' regular $15.00 price, to their selling price of $16.50. The following commissions, to be figured on business done each week, will be allowed second party:

"Twenty per cent. (20%) on all merchandise sold at prices other than $16.50. Twenty-five per cent. (25%) on merchandise sold at $16.50 per garment.

"(3) Settlements are to be made in full weekly, at which time second party is to report all merchandise received, sold, and on hand, showing it on forms supplied by first party. Second party agrees to take a unit count of all articles according to separate headings shown on weekly report and if same does not agree with the figures shown on said report, first parties are to be notified immediately.

"(4) First parties will pay all freight, express and parcel post charges on shipments to second party. Second party will pay all freight, express and parcel post charges on all shipments to first parties.

"(5) Goods at all times are to be subject to the order of first parties and second party is to ship or deliver on order of first parties promptly and when so requested, to turn any and all merchandise or other property belonging to first parties, to said parties. Merchandise to remain at all times property of first parties until sold and paid for in cash. Such cash, except the commission due second party, is not to be used by second party, but must be held for weekly account of goods sold, as provided in Article No. 3.

"(6) Second party is to take care of all merchandise in his possession, keep it as free from dust as possible, at least once a week to dust with whisk broom all merchandise on hand. Second party to guarantee good condition of merchandise. It is understood that the second party will be responsible for any loss incurred through theft or burglary.

"(7) Second party to give first parties a bond of One Thousand ($1,000.00) Dollars for the faithful performance of his part of his contract, second party to pay all taxes assessed on property in his hands. First parties will pay all fire insurance.

"(8) Second party agrees not to handle any lines that will conflict with first parties' line of goods.

"(9) This contract can be terminated by either party at any time. In event of cancellation by second party, contract will remain in force until all property of first parties is properly accounted for by second party.

"In witness whereof the parties have hereunto set their hands and seals the day and year above written."

There is nothing in the record to indicate that this contract was intended, by either of the parties thereto, as a sham, subterfuge, or device for misleading creditors or other persons, nor does it appear that any one was misled as a result of the making or performance thereof. The record clearly shows, and I am fully satisfied and find, that both of these parties intended to, and in fact did, perform all of the obligations of the contract in substantial compliance with its terms and conditions, from the time when it was made, September 6, 1928, to the time of the filing of the bankruptcy petition herein, October 31, 1929. During that period the petitioner shipped to the bankrupt from time to time considerable quantities of clothing, all of it accompanied by statements referring to such clothing as consigned in accordance with this contract. This merchandise was added to other stock in the retail store of the bankrupt and there displayed and sold by...