Mitchell Wagon Co. v. Poole

• Decision Date: 06 October 1916
• Docket Number: 2793.
• Parties: MITCHELL WAGON CO. v. POOLE et al. In re WEST.
• Court: U.S. Court of Appeals — Sixth Circuit

235 F. 817

MITCHELL WAGON CO. v. POOLE et al.

In re WEST.

No. 2793.

United States Court of Appeals, Sixth Circuit.

October 6, 1916

A. W Ketchum, of Memphis, Tenn., for appellant.

Frank S. Elgin, of Memphis, Tenn., for appellee.

Before KNAPPEN and DENISON, Circuit Judges, and COCHRAN, District judge.

COCHRAN District Judge.

This is an appeal from a decree of the lower court denying the intervening petition filed by the appellant the Mitchell Wagon Company, a Wisconsin corporation, in the bankruptcy proceeding of J. B. West, doing business under the name of J B. West & Co. at Memphis, Tenn., begun December 1, 1914, in which it set up a claim to certain wagons shipped by the appellant to the bankrupt under a contract dated May 25 1914, a copy of which is set forth in the margin ^[1] and in his hands at the time the bankruptcy proceeding was brought. By an indorsement on the margin of the contract it was provided that settlements for wagons sold should be made quarterly, instead of monthly, except that the first settlement should be made at the end of six months. At the time the bankruptcy proceeding was brought but one shipment had been made under the contract and six months had not elapsed from the time thereof.

The right of appellant to the relief sought by it depends upon whether the contract under which the wagons were shipped was a sale, conditional or absolute with lien for the purchase price, or an agency to sell. If it was a conditional sale, appellant is not entitled thereto, because such a sale in Tennessee is void as contrary to the public policy of the state. Coweta Fertilizer Co. v. Brown, 163 F. 162, 189 C.C.A. 612. If it was an absolute sale with such lien, the lien is of no avail, for want of record. It is only in case the contract was an agency to sell that appellant is entitled to such relief. The fact that it contemplated and provided for a purchase of the wagons by the bankrupt in the course of the transaction did not prevent its being an agency to sell until such purchase. In Mechem on Sales, Sec. 45, it is said:

'It is, moreover, possible that the relations of the parties may change or be susceptible of change during the progress of the transaction. Thus there may be the creation of a genuine agency to sell, but coupled with it the right of the agent to himself become the purchaser if he so desires or a stipulation that in a certain contingency-- as if he sell at a different time or price than fixed-- he shall or may be treated as a purchaser. In such a case, if the contingency contemplated occurs, the transaction will cease to be an agency to sell and will become a sale.'

And in his work on Agency (2d Ed.) Sec. 2499, the same author said;

'It is not necessarily inconsistent with the idea of a present agency that the contract shall provide that, at the close of the season or the happening of some other event, the title to the goods remaining unsold shall, at the option of the consignee, then vest in the latter who shall thereupon become responsible for the price.'

The contract here provided for the bankrupt becoming purchaser in several contingencies. One was when he sold the wagons. This follows from the fact that he had a right to sell on such terms as to price and time of payment as he liked, but was bound, if he sold, to pay appellant for them at a fixed price and a fixed time, and the proceeds of the sale were to be his. A sale by him was, in effect, a purchase and a resale.

In Ex parte White, L.R. 6 Ch.App. 397, Mellish, J., said:

'It appears to me that the real question is: When Nevill sold the goods, did he sell them as the agent of Towle & Co., so as to make Towle & Co. the vendors, and the persons to whom he sold, purchasers from Towle & Co.? Or did he sell on his own account, so as to create the relation of purchaser and vendor between himself and Towle & Co., and again the relation of vendor and purchaser between himself and the persons to whom he sold? Now, it is said that he was a del credere agent, and no doubt it requires a very minute examination of what the course of business is, to distinguish between a del credere agent, and a person who is an agent up to a certain point, that is to say, until he has sold the goods, but who, when he has sold the goods, has purchased them on his own credit and sold them again on his own account. And no doubt persons may suppose that their relationship is that of principal and agent, when in point of law it is not. It is quite clear that Nevill, if he sold these goods, was to pay Towle & Co. for them, at a fixed price-- that is to say, a price fixed beforehand between him and them-- and at a fixed time. Now, if it had been his duty to sell to his customers at that price, and to receive payment from them at that time, then the course of dealing would be consistent with his being merely a del credere agent, because I apprehend that a del credere agent, like any other agent, is to sell according to the instructions of his principal, and to make such contracts as he is authorized to make for his principal; and he is distinguished from other agents simply in this, that he guarantees that those persons to whom he sells shall perform the contracts which he makes with them; and therefore, if he sells at the price at which he is authorized by his principal to sell, and upon the credit which he is authorized by his principal to give, and the customer pays him according to his contract, then, no doubt, he is bound, like any other agent, as soon as he receives the money to hand it over to the principal. But if the consignee is at liberty, according to the contract between him and his consignor, to sell at any price he likes, but is to be bound, if he sells the goods, to pay the consignor for them at a fixed price and at a fixed time, in my opinion, whatever the parties may think, their relation is not that of principal and agent. The contract of sale which the alleged agent makes with his purchasers is not a contract made on account of his principal, for he is to pay a price which may be different from those fixed by the contract. He is not guaranteeing the performance, by the persons to whom he sells, of their contract with him, which is the proper business of a del credere agent; but he is to undertake to pay a certain fixed price for those goods, at a certain fixed time, to his principal, wholly independent of what the contract may be which he makes with the persons to whom he sells; and my opinion is that, in point of law, the alleged agent in such a case is making, on his own account, a contract of purchase with his alleged principal, and is again reselling.'

Another was at any time within 12 months from the date of shipment at his option by paying the fixed price, in cash, when he would be entitled to 5 per cent. discount. There were two other contingencies in which the bankrupt agreed to purchase at the appellant's option. One was at the expiration of the selling period of 12 months and the other in case he sold or closed out his business. The bankrupt agreed, in either contingency, at appellant's option, to purchase all the wagons then unsold. Until then a purchase by the bankrupt in one or the other of these four contingencies, what was the relation between appellant and the bankrupt? Was is that of seller and buyer, or principal and agent? The contract is entitled 'Agent's Commission Agreement,' and its initial provision is that the bankrupt is thereby appointed appellant's 'agent for the sale of their farm wagons' for the time and in the territory thereby prescribed. But this is not conclusive. Indeed, it may be of little weight, as it may turn out to be a pretense. This apart, however, it would seem that there can be no question that the relation between them was that of principal and agent, and not of seller and buyer. This follows from the facts that there was no agreement on the part of the bankrupt to pay the prices fixed for the wagons-- it was not contemplated that he should pay for them except upon his becoming a purchaser in one of the contingencies named-- and that the appellant had the right to demand a return of the wagons at any time. That it had such right does not follow from the provision that, until a bankrupt so becoming a purchaser, the ownership of the wagons should remain in it. This is a provision characteristic of a conditional sale contract. Nor should the provision that the appointment of the bankrupt as agent was revocable at the pleasure of the appellant be stressed. The contract contemplated other shipments under it, and the purpose of the provision may have been to confer the right of withholding further shipments rather than that of demanding the return of wagons shipped. The existence of such a right is to be gathered from the provision that the bankrupt should be entitled to reimbursement for freight and drayage paid out by him if appellant should order the wagons reshipped or turned over to other parties when he had complied with the terms of the contract, but not if appellant concluded it wanted possession because of any violation thereof, to which the provision that the bankrupt was to pay all expenses until the wagons were sold or 'ordered away' looked. This provision rather presupposes that the bankrupt had such right than confers it. But that which is presupposed by a contract is as much a part of it as that which is expressly provided for therein. This provision may be thought to be a harsh one. But there is no gainsaying that it is there.

The relevant decisions in other jurisdictions are very numerous-- so numerous as to forbid an attempt to consider them. Note however, may be taken of those upon which the parties herein rely to sustain their respective contentions. Of those cited...