Singer Sewing Mach. Co. v. Cooper

• Decision Date: 11 March 1920
• Docket Number: 96.
• Citation: 263 F. 994
• Parties: SINGER SEWING MACH. CO. v. COOPER, County Treasurer.
• Court: U.S. District Court — Southern District of Ohio

263 F. 994

SINGER SEWING MACH. CO. v. COOPER, County Treasurer.

No. 96.

United States District Court, S.D. Ohio, Western Division.

March 11, 1920

Frank V. Benton, of Newport, Ky., for plaintiff.

Louis H. Capelle, Pros. Atty., and S. C. Roettinger, Asst. Pros. Atty., both of Cincinnati, Ohio, for defendant.

PECK District Judge.

This case has been heretofore heard upon a motion to strike from the answer the averment which, in effect, charges the complainant with failing to return its credits for taxation. The materiality of the averments thus sought to be stricken out was necessarily tested by assuming their truth, and the conclusion of the court then reached is that stated in its former opinion. 261 F. 635. But upon final hearing the defendant failed to offer evidence to establish those averments, and the case is now considered upon its merits.

This is an action to enjoin the treasurer of Hamilton county, Ohio from collecting taxes and penalties assessed against the plaintiff as the owner of sewing machines in the hands of its customers under contracts in the form of an unconditional lease. The taxes were assessed by the county auditor upon the sole evidence of an order from the tax commission of Ohio directing the plaintiff's tax return to be so corrected for the years 1911 to 1915, both inclusive. The answer denies the illegality of the assessment, and asserts that the plaintiff has an adequate remedy at law by appeal to the county board of revision, and also that plaintiff has not paid or tendered the penalty due upon certain other taxes of chattels concerning which the plaintiff's original return was false.

The sewing machines apparently leased were in fact sold; the intention of both vendor and vendee being that the vendee's title should become absolute on payment of the so-called rent in full. At the time of the making of the sale a written instrument (set forth in the former opinion) in the form of a lease was executed, whereby the plaintiff appeared to let the machine to the customer for a payment down and stipulated weekly or monthly payments for a stated period with the usual provisions for retaking it upon default, and one waiving the return of payments should it be so retaken. No privilege of purchase whatever, nor provision for transfer of title upon completion of the payments, was stated; but, on the contrary, it was provided that at the expiration of the term the lessee would return the machine in good order. There is no suggestion of a sale, present or future, in the instrument; it simply discloses in concise terms a bailment for hire for a limited period.

From the evidence offered at the trial it further appeared that this form was invariably signed in duplicate by the customer and transmitted to plaintiff, which returned one copy, signed by it, in an envelope upon which were stated certain discount terms, viz.: For payment in one month, 20 per cent.; in two months, 15 per cent.; and for regular payments at $5 per month, 10 per cent. As a matter of fact, if the payments were all made, the vendees kept the machines; if not paid, the machines would be retaken. In such cases they were usually voluntarily surrendered by the purchaser after one or two small payments. If several payments had been made before default, and voluntary surrender was refused, some small sum was usually allowed the purchaser, in compromise, upon the return of the machine. Occasionally the plaintiff took out a writ of replevin, on oath that it was the owner. The machines returned in all amounted to about 35 per cent. of those sold or 700 or 800 per annum. The salesman received a selling commission of 25 per cent.

The plaintiff had listed for taxation personal property amounting to about $12,000 for the years 1911, 1912, and 1913, and about $27,000 for the years 1914 and 1915. It is now admitted by plaintiff that the true value of its merchandise and other property undisputedly subject to tax for those years was about $38,300 in 1911, $28,800 in 1912, $39,700 in 1913, $50,900 in 1914, and $41,000 in 1915, apart from the unpaid accounts due for machines sold. Thus the said undisputed assets so returned during this period were grossly undervalued.

On December 30, 1915, the tax commission of Ohio, without notice to plaintiff, ordered the county auditor to correct these returns by increasing the same to $629,500 for each of these years, and he did so. Thereupon the plaintiff took an appeal from the action of the auditor to the tax commission, bringing the matter again before that body. A hearing was had, and evidence introduced showing to the tax commission the method of sale above described. It also showed in addition to the value of the undisputed assets above set forth, the value of plaintiff's accounts or credits due from customers. These were estimated at 50 per cent. of their face, in consideration of the expense of selling and collecting, and losses. Thus valued, they were slightly exceeded by the debits reported, and consequently no net credits subject to tax were shown.

The question argued to the commission was whether the machines outstanding and unpaid for on tax listing day, or the credits arising from such sales, constituted the taxable personal property of the plaintiff. It held that the plaintiff was the owner of the machines, and accordingly made an order directing the county auditor to correct plaintiff's returns, after due notice to it, by adding thereto, for each of the years stated, a sum which was (a) the increased value of the admitted assets previously undervalued, as hereinabove set forth and of which no complaint is now made, plus (b) the value of machines sold and delivered and not fully paid for on the respective tax listing days of the said years. The average of these latter items was about $155,000. The machines were sold at $60, and valued by the commission at $25, each. The auditor was also directed to add the statutory penalty of 50 per cent. He complied with the orders of the commission, and delivered his tax list so corrected to the defendant treasurer of the county for collection. The plaintiff offered to pay, and tendered, the additional tax due upon the increased value of the admitted assets, but not the penalty thereon, and brings this action to enjoin collection of the tax on the valuation of machines and the penalty on both items.

Equity jurisdiction attaches under the facts stated. Gen. Code of Ohio, Sec. 12075; Cummings v. Bank, 101 U.S. 153, 25 L.Ed. 903; Grether v. Wright, 75 F. 742, 23 C.C.A. 498; Rockfeller v. O'Brien (D.C.) 224 F. 541. The plaintiff had no right of appeal to the board of revision, as the orders of the tax commission are not reviewable by that body. Section 5598, General Code (Supp.); 106 Ohio Laws 246, Sec. 45 (in force January 1, 1916).

It is clear that the written instrument did not fully express the transaction, and that it was intended to be a conditional sale, the title to be reserved in the plaintiff until, and to pass to the purchaser upon, final payment. Hervey v Rhode Island Locomotive Works, 93 U.S. 664, 23 L.Ed. 1003; Unitype Co. v. Long, 143 F. 315, 74 C.C.A. 453; Cowan v. Singer Sewing Machine Co., 92 Tenn. 376, 21 S.W. 663; Singer Mfg. Co. v. Gray, 121 N.C. 168, 28 S.E. 257. It follows that the title retained by the plaintiff was a mere 'security title' (In re Bettman-Johnson Co., 250 F. 657, 664, 163 C.C.A. 3; In re National Cash Register Co., 174 F. 579, 98 C.C.A. 425), and that such title or lien, unrecorded, would be void as against bona fide purchasers and creditors (section 8568, Gen. Code Ohio; Jones v. Molster, 11 Ohio Cir. Ct. R. 432; Oaks v. Singer Sewing Machine Co., 17 Ga.App. 517, 87 S.E. 719). It also follows that the purchaser acquired an interest in the chattel, and that this interest was, as against all the...