DocketNumber: No. 1105
Citation Numbers: 29 F. Supp. 746
Judges: Ford
Filed Date: 10/24/1939
Status: Precedential
Modified Date: 11/26/2022
The case is submitted on the petition of W. C. Bartlett Lumber Company seeking review of an order entered by the referee on October 25, 1938.
The bankrupt, a Kentucky corporation, was engaged in operating a saw mill near Hyden in Leslie County, Kentucky. It purchased logs in the vicinity and sawed them into lumber of various kinds for the market. For several months before bankruptcy, its business was carried on by a receiver under orders of the Circuit Court of Leslie County.
The petitioner is a West Virginia corporation engaged in the business of buying and selling lumber with its principal office in Cincinnati, Ohio. On December 17, 1935, a contract was entered into between the petitioner and the bankrupt which provided for certain advancements to be made to the bankrupt by the petitioner upon the purchase price of “such grades of lumber, sawn timbers or furniture dimen
W. C. Bartlett Lumber Company filed an intervening petition asserting title to certain piles of lumber on the mill yard of the bankrupt at the time the trustee in bankruptcy took possession on December 14, 1937. The lumber so claimed by the petitioner was appraised at $3,516.09, and upon executing bond for the forthcoming of this amount if the claim should be denied, the claimant was permitted to take possession of it.
The trustee denied that title to any lumber upon the mill yard passed to the petitioner and relied upon section 1908 of the Kentucky Statutes as a bar to the claim. By counterclaim, the trustee set up a claim against the petitioner for $9,-334.30 for lumber which, had been shipped to it by the receiver in compliance with the contract under the orders of the State Court and for the further sum of $6,-671.68 representing the value of lumber shipped by the bankrupt, under the contract, within four months prior to the filing of the petition in bankruptcy.
Proof was heard by the referee and on October 25, 1938, he denied the claim of W. C. Bartlett Lumber Company to the property on the mill yard. The referee also held that the relationship between W. C. Bartlett Lumber Company and the bankrupt throughout the period of four months prior to bankruptcy was that of debtor and creditor and not that of vendor and vendee; that the delivery of lumber to W. C. Bartlett Lumber Company by the bankrupt and by the receiver for which credit was entered upon the account for advancements constituted merely a payment of indebtedness by a creditor for money loaned; that when these transactions took place, W. C. Bartlett Lumber Company well knew that the bankrupt was in failing circumstances and in receiving satisfaction of its debt in lumber it obtained an unlawful preference over creditors of the same class. An order was entered requiring W. C. Bartlett Lumber Company to account for the appraised value of the lumber delivered to it from the mill yard and to pay to the trustee the sale price of all lumber which had been delivered to it within four months prior to bankruptcy. The petition for review challenges the correctness of these orders.
The evidence shows that at the time the trustee took possession of the mill yard the lumber in question was in piles marked as the property of W. C. Bartlett Lumber Company, as required by the contract; that these piles of lumber had been sawed pursuant to orders placed and accepted, and after being so stacked and marked, the petitioner W. C. Bartlett Lumber Company had made advancements upon the purchase price thereof in accordance with the contract. In fact, due to financial difficulties of the bankrupt, the petitioner had upon numerous occasions advanced more than called for by the contract and at the time of bankruptcy it appears that the balance due for advancements was substantially more than the appraised value of the lumber marked and identified on the mill yard. The findings of the referee do not indicate the facts to be otherwise, but his ruling was based upon the finding from the evidence.
The provision of the Uniform Sales Act, cited by the referee in support of his conclusion to the effect that if the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, is qualified by the provision “unless a different intention appear§”. Kentucky Statutes, § 265 lb-19. Nor is the conclusion of the referee sustained by the ruling in Gage Lumber Company v. McEldowney, 6 Cir., 207 F. 255, for the reason that the facts in that case were entirely different. There was nothing in the contract there involved providing when the title to the property should pass. See opinion of lower court in Re Clairfield Lumber Co., D.C., 194 F. 181.
Reference was made by the referee to the fact that shortly prior to the appointment of a receiver there was considerable activity on the part of Shipley Stave and Lumber Company in replacing tags upon the various piles of lumber in its .yards. But there is nothing in the evidence to show any fraud or bad faith in this respect. It was the duty of the bankrupt to keep the lumber marked and identified and to replace such tags as had been defaced or torn off.
It is clear from the evidence that before bankruptcy the bankrupt had accepted orders for and received advancements upon the lumber in question. It was plainly marked as the property of the purchaser and segregated as provided by the contract. The parties intended a bona fide purchase and sale and that title to the property should immediately pass to the purchaser. These facts are sufficient to establish the purchaser’s title to the lumber. Stelling v. Jones Lumber Co., 7 Cir., 116 F. 261; In re Ozark Cooperage & Lumber Co., 8 Cir., 180 F. 105; McDermott v. Kimball Lumber Mfg. Co., 102 Ark. 344, 144 S.W. 524, 39 L.R.A.,N.S., 461.
It is insisted by the trustee, however, that the transaction is void as to the trustee under the following provisions of section 1908 of the Kentucky Statutes: “Every voluntary alienation of or charge upon personal property, unless the actual possession, in good faith, accompanies the same, shall be voided as to a purchaser without notice, or any creditor, prior to the lodging for record of such transfer or charge in the office of the county court for the county where the alienor or person creating the charge resides.”
The question is whether the marking and segregation of the lumber on the mill yard of the seller, as shown by the evidence in this case constituted sufficient delivery of possession to escape invalidation of the transaction by this statute.
In Penick v. White & Beauchamp, 264 Ky. 172, 177, 94 S.W.2d 338, 340, the Kentucky Court of Appeals said: “ * * * in law, there is a delivery of property by a seller to a purchaser when the seller places the property at the disposal of the purchaser and relinquishes to the purchaser the control and right of control of, or dominion over, the property and the purchaser takes, or accepts, the control and right of control, or dominion, over the property.”
In the case of In re Ozark Cooperage & Lumber Company, supra, it was said, in reference to compliance with a similar Statute of Missouri, Mo.St.Ann. § 3123,. p. 1958: “After the lumber in controversy was sawed it was piled as directed in the contract, estimated by the petitioner, each stack was marked legibly in front with
My conclusion is that, under the circumstances disclosed by the evidence, the segregation of the lumber into piles bearing clearly legible indicia of transfer of title to the purchaser W. C. Bartlett Lumber Company evidenced the seller’s complete relinquishment of control and dominion over it and the actual delivery of possession to the purchaser with sufficient notoriety to satisfy the requirements of the statute.
The order of the referee should be set aside in so far as it required the petitioner W. C. Bartlett Lumber Company to account for the lumber piled and marked as its property at the time the trustee took over the mill yard.
In view of this conclusion, it is unnecessary to discuss the petitioner’s alternative claim to an equitable lien.
The referee’s holding that the lumber delivered to W. C. Bartlett Lumber •Company within four months prior to bankruptcy was an unlawful preference is based upon his conclusion that at the time of such transactions the relation of debtor and creditor existed between the parties rather than that of vendor and vendee. The evidence clearly shows that no money was loaned to the bankrupt by W. C. Bartlett Lumber Company as an independent transaction, but all that was furnished was in the nature of an advancement made pursuant to the contract and was intended as part payment for the purchase of specific lumber clearly marked and identified. No other relationship was contemplated between the parties except that of vendor and vendee. The purchaser was not engaged in the business of lending money but was a bona fide purchaser of lumber. When the lumber was shipped to the buyer it was not in payment of debt. To attribute to the transaction such an effect would be to create a relationship entirely different from that which the evidence shows was the bona fide intention of the parties. Hurley v. Atchison T. & S. F. R. Co., 213 U.S. 126, 29 S.Ct. 466, 53 L. Ed. 729; Templeton v. Kehler, D.C., 173 F. 575.
The order of the referee requiring W. C. Bartlett Lumber Company to pay to the trustee the value of the lumber delivered within four months prior to bankruptcy should also be set aside.
Let orders in conformity herewith be submitted for entry.