Johnson, Sheriff, v. Sauerman Brothers, Inc.

• Decision Date: 25 March 1932
• Citation: 243 Ky. 587
• Parties: Johnson, Sheriff, et al. v. Sauerman Brothers, Incorporated.
• Court: United States State Supreme Court — District of Kentucky

243 Ky. 587

Johnson, Sheriff, et al. v. Sauerman Brothers, Incorporated.

Court of Appeals of Kentucky.

Decided March 25, 1932.

1. Sales. — Conditional sale contract must be recorded as constructive notice of seller's claim of title, in absence of actual notice to adverse claimants (Ky. Stats., sec. 2651b-1 et seq.)

2. Courts. — Extraterritorial law will not be given force when it would contravene positive policy of law, or work injustice to citizens of state wherein action is brought.

3. Sales. — Rights of parties to suit, in which attachment was levied on machinery, claimed by conditional vendor having knowledge that its permanent situs would be in Kentucky, though shipped to Tennessee, must be determined by Kentucky law respecting unrecorded title or lien claims (Ky. Stats., sec. 2651b-1 et seq.).

4. Sales. — Constructive notice of priority of vendor's lien or reserved title under contract recorded at place of sale or original situs of machine, sold with knowledge that its permanent situs would be in state, did not follow it into state (Ky. Stats., sec. 2651b-1 et seq.).

5. Sales. — Laws of state, into which chattel is removed with conditional seller's consent or according to both parties' intent, control in determining whether contract must be recorded to preserve seller's rights as against attachment creditor (Ky. Stats., sec. 2651b-1 et seq.)

6. Sales. — Seller's rights under unrecorded conditional sale contract are unenforceble as against purchasers or creditors without actual notice thereof (Ky. Stats., secs. 496, 523a-2 et seq.).

7. Sales. — Conditional seller of machine for building levees largely in state cannot defeat equities of innocent party extending credit to buyer on ground that contract was not required to be recorded in adjoining state to which machine was shipped (Ky. Stats., secs. 496, 523a-2 et seq.).

Appeal from Fulton Circuit Court.

EWING, KING & KING and LOWELL W. TAYLOR for appellants.

WHEELER & HUGHES and ROBERT LEE BARTELS for appellee.

OPINION OF THE COURT BY STANLEY, COMMISSIONER.

Reversing.

The appeal presents an issue of the superiority of the rights of an attaching creditor or a conditional vendor.

In August, 1929, the appellee, Sauerman Bros., Inc., sold the Sweet Price Dredging Corporation a lot of levee building machinery for $37,850, a part of the purchase price being represented by promissory notes. The contract of sale contained express provisions that the title and right of possession of the property should remain in the seller until full payment had been made.

The appellant Paige Engineering Company, in May, 1930, sued the dredging corporation on an account for $19,811.76, and had an attachment levied on the machinery, and the sheriff took it into custody. Sauerman Bros. Inc., seasonably set up its title and asked for an order of delivery. By apt pleadings the issue was formed as to the priority of the respective rights, and, upon a trial, judgment was rendered sustaining the superiority of the seller's claim to the extent of $15,925 and interest, that being the unpaid purchase money, and the machinery was ordered to be sold. It is to be noted that, when the attachment suit was instituted, all of the unpaid purchase-money notes were long past due.

There is a contention as to whether the contract is to be regarded as having been executed in Illinois or in Tennessee. The importance of the point relates to the matter of the laws of the respective states regarding recordation of conditional sale contracts and the effect upon the rights of a subsequent attaching creditor. The sale contract was not recorded anywhere. There is also a disagreement as to the place of the delivery of the machinery. The contract calls for delivery f.o.b. Chicago, but the machinery was actually shipped and delivered to the purchaser in Tennessee, a short distance below the Kentucky line. However, it does not become necessary to determine either of these issues.

Proof was made that a conditional sale contract was not required to be recorded in Tennessee, but that it was required in Illinois, with the respective resulting effects upon the rights of a party innocent of its terms who obtains a lien on the property covered by it. In the opinion of Munz v. National Bond & Investment Company, 243 Ky. 293, 47 S.W. (2d) —, this day delivered, it is held that under the statutes of Kentucky a conditional sale contract (section 2651b-20) must be recorded in order to preserve the rights retained in the property as against an innocent purchaser. That opinion may be read in connection with this one as bearing upon...