Kennison v. International Clay Mach. Co. , 13 F.2d 774 ( 1926 )

DONAHUE, Circuit Judge.

Section 8568 of the General Code of Ohio provides, among other things, that when personal property is sold, to be paid for in whole or part in installments, the title to remain in the vendor until the value of the property has been paid, such agreement in regard to title shall be void as to all subsequent purchasers and mortgagees in good faith and creditors, unless the contract is in writing, signed by the purchaser, and a copy thereof, with affidavit attached thereto, stating the amount of the claim, be deposited with the county recorder of the county where the purchaser signing the instrument resides at the time of its execution, if a resident of the state, and, if not such resident,- then with the county recorder of the county where the property is situated at the time of the execution of the instrument. The purchaser was not a resident of the state, and the property was not in existence at the time of the execution of these contracts; therefore, if this statute is to be strictly construed, it can have no application to the facts of this case, because it would be impossible of performance.

If, on the other hand, this statute is to be construed with reference to the intent of the General Assembly of Ohio and the evident purpose to be accomplished thereby, then these contracts were properly recorded in Huron county, where the property _first eame to rest after it was manufactured by the plaintiff and shipped to Monroeville, Huron county, Ohio, where it first eame into the actual physical possession of the Kiln Company. This was a substantial compliance with the terms and provisions of section 8568, G. C., and clearly within the intent and purpose of that section.

Section 8568, G. C., does not require conditional sale contracts to be filed with the recorder until the seller surrenders the possession of the goods to the buyer. Nor does it limit the time in which such contracts must be filed. On the contrary, it has been held in Ohio (Tischler v. Seeley, 14 Ohio Cir. Ct. R. 236, affirmed without opinion 60 Ohio St. 629, 54 N. E. 1110) that a conditional sale contract is valid from the date of its filing, although not filed until 6 months after its execution, and but a few minutes before the filing of a chattel mortgage upon the same property. It was also held, in Berlin Machine Works v. Hilton & Dodge Lbr. Co., 126 F. 627, that under a similar statute of the state of Georgia, which required conditional sales contracts to be recorded within 30 days from their date, the date from which the 30 days should be reckoned was the date of the delivery of the goods sold, and not the date of the making of the contract, or of its acceptance by the seller, thereby giving full effect to the legislative intent and purpose, although a strict construction of the language of the statute would require recording within 30 days from date of contract, even if the property were still in the possession of the seller.

Potter v. Arthur (6 C. C. A.), 220 F. 843, 136 C. C. A. 589, Ann. Cas. 1916A, 1268, is particularly applicable to the question here presented. In that ease a machine was sold and delivered f; o. b. Indianapolis, with a reservation of title in the seller until the purchase price was paid; but it was contemplated by both the seller and the buyer that, before any use by the buyer, the property should be transported into another state. It was held that recording statutes must be construed with reference to the situs, and not with reference to the actual place of sale, or where it is delivered to a common carrier, to be transported to the place in which it is to be permanently or quasi permanently located. While the question there involved was whether the filing of the contract was controlled by the law of Indiana, where the sale and delivery were made, or the law of Ohio, where the property sold was to be used by the buyer, yet the principle involved applies with equal force to the facts of this ease. If the Ohio statute were construed in line with appellant's construction, then a conditional sale contract, made in Indiana, for property then in Indiana, and delivered to the purchaser in Indiana, could not be filed for record in Ohio.

It is further claimed on the part of the receiver that the delivery by the seller to the carrier in Montgomery county was a delivery to the kiln company, and for that reason the conditional sales contract should have been filed with the recorder of that county. That contention, we think, is fully answered by this court in Potter v. Arthur, supra, even if it were conceded that the delivery of the carrier was an unconditional delivery to the kiln company. While it is true that, in case of the unconditional sale of chattel property, the delivery to a common carrier, consigned to the purchaser, is sufficient delivery to transfer title to the purchaser, in this ease the title did not pass, and it was not intended to pass. The conditional contract of sale was good as between the parties without being filed with the recorder of any county. The delay in filing the conditional sales contract did not affect the rights of the parties thereto.

It is also urged that the court erred in affirming the holding of the master that the Clay Products Company was not a purchaser in good faith. The Clay Products Company is a reorganization of the Monroeville Company, and had full knowledge of this transaction.

After the contract was entered into by the Kiln Company and the Monroeville Company a subsequent eoiftract was made between the same parties, by the terms of whieh the Monroeville Company was to purchase this property and to be credited with the cost upon the contract price for the construction of its kiln. It did make an effort to buy this property from the machinery company, but the machinery company refused to extend the eredit and thereupon the Kiln Company made this purchase. While the Kiln Company became the purchaser, nevertheless, it was acting in and on behalf of the Monroeville Company, and, in effect, buying for the Monroeville Company what it had agreed to buy,, but could not buy on its own eredit. For this reason the master did not err in holding that the Clay Products Company was not a subsequent purchaser in good faith. In this respect the District Court was also right in holding that, while the, Kiln Company was ostensibly the purchaser and became liable for the payment of the purchase price, nevertheless it was acting in and on behalf of the brick company, whieh company had agreed to supply these materials, but was financially unable to do so.

Conditional sale contracts are valid between the parties without being filed as required by section 8568, G. C., and as against everybody claiming an interest therein except the creditors of the purchaser or subsequent purchasers or mortgagees in good faith. The Clay Products Company is not a subsequent purchaser in good faith, and therefore the contract is valid against it, whether filed or not.

Judgment affirmed.