Monaghan Mills v. Gilreath Mfg. Co.

The opinion of the Court ivas delivered by Mr. Justice Watts. This was an action for the appointment of a receiver of the Gilreath Manufacturing Company, a corporation alleged to be insolvent, for sale of assets and distribution of the same among its creditors. F. W. Symmes was appointed receiver on January 29, 1912, qualified and took charge of the business. Under an order of Court all persons having claims against the corporation were required to present and prove their claims before the master on or before a day certain. In response to this notice numerous claims were filed with the master. On May 8, 1912, the receiver presented his petition to the Court, wherein he alleged that he found in the hands of Union Bleaching and Finishing Company a large quantity of goods, which had been sold and were held upon account of Gilreath Manufacturing Company, but were claimed by various manufacturers upon the ground that said goods had never been delivered to Gilreath Manufacturing Company, but were held by the Union Bleaching and Finishing Company subject to the order of said parties, or were subject to liens in their favor for the purchase price, which had not been paid. These parties were F. W. Poe Manufacturing Company, Brandon Mills, Alice Mills, Osceola Commission Co.; that the goods so held were needed for the purpose of filling outstanding orders, which had been taken by Gilreath Manufacturing Co., and asking that he be allowed to withdraw said goods from the Union Bleaching and Finishing .Co., the *218 claims of said parties to be transferred to the manufactured product and proceeds of sale, which should be kept separate. On March 11, 1912, by consent of all parties, an order was signed by Judge Memminger in conformity to the prayer of the petition. Under said order the receiver withdrew from the Union Bleaching and Finishing Company the goods of the invoice value stated in master’s report. On July 5, 1912, by consent, Judge Prince signed an order modifying the previous orders, and permitting F. W. Poe Mfg. Co. to sell the goods referred to in the petition, which had not been delivered to the receiver under said orders, he having suspended manufacturing, the proceeds of sale to be kept separate by the said F. W. Poe Mfg. Co., subject to the orders of the Court, the proceeds standing in the place of the goods themselves, and to be held subject to the rights of the receiver and Union Bleaching and Finishing Company, except those previously delivered to the receiver. The master held references, and testimony was taken in reference to. these claims. The master filed his report on October 23, 1912, wherein he found in favor of F. W. Poe Mfg. Company’s claim for a part and against it for the greater.part; against the Brandon Mills’ claim; against the Bois Cotton Mills’ claim; against the Alice Mills’ claim; against the Osceola Commission Company’s claim. To this report the F. W. Poe Mfg. Co. and Brandon Mills, Alice Mills and Osceola Commission Company filed exceptions. The case was heard by Judge DeVore at November term, 1912, upon the exceptions to the master’s report, and on December 9, 1912, he filed his decree, in which he sustained the master as to the claim of F. W. Poe Mfg. Co., and reversing the master as to the Alice Mills’ claim, and the Osceola Commission Company’s claim, and sustaining the master as to the Brandon Mills’ claim and the Union Bleaching and Finishing Company’s claim. *219 For the proper understanding of the case both the report of the master and decree of Judge DeVore should be set out in the report of the case. Upon entry of judgment, F. W. Poe Mfg. Co. and Brandon Mills appeals, and the receiver also appeals and questions the correctness of the decree. The exceptions raised by the F. W. Poe Mfg. Co. question the Circuit Judge’s decree in confirming the master’s report in allowing a small part of their claim and disallowing the major part thereof in so far as a preferred lien is concerned, and disallowing a similar claim of the Brandon Mills.- The receiver by his exceptions questions the correctness of the Circuit Judge’s decree in not sustaining his exception to the master’s report as to the F. W. Poe Mfg. Co.’s claim, and in holding that it held a lien upon the goods designated as Claim B, and represented by two bills, $1,076.70 and $1,075.76, and questions his findings and holdings as to the Alice Mills’ claim and the Osceola Commission Company’s claim. The sole question raised by the exceptions of the appellants, the F. W. Poe Mfg. Co. and Brandon Mills, is their right to exercise the right of stoppage in transitu under the circumstances developed by thé evidence. A reading of the evidence shows that F. W. Poe Mfg. Co. is engaged in the manufacture of cotton goods, in the gray, as it is called, that is, unbleached; their factory is just outside the city of Greenville. In the fall of 1911 Gilreath Mfg. Co. was engaged in the manufacture of under garments; their factory was located within the city limits of the city of Green-ville. They ordered a lot of unbleached goods from F. W. Poe Mfg. Co., amounting to $12,134.02, to be made up into garments at their factory; not being able to use them in their unbleached state, the goods were sold f. o. b. Union Bleaching and Finishing Co., upon ten days’ credit, in various bills, dated November 9, 18, 21 and 23, and December 15, 1911. The goods were delivered by the wagons of the Poe Mills at the bleachery; there they were booked to the account of the *220 Gilreath Mfg. Co., at whose direction they were to be finished and at whose orders delivered at bleachery for transportation to factory of Gilreath Mfg. Company. The latter was charged with the finishing charges. The Poe Mfg. Co. • had the goods insured for their protection, and Mr. Poe’s evidence was that the shortest possible credit was given so that if they were not paid for within the time of credit, which was necessarily shorter than the time required for finishing, he could attach them before delivery to the Gilreath Company. In January, 1912, Gilreath Mfg. Co. became insolvent, and on January 22, 1912, the appellant, the Poe Mfg. Co., gave written notice to the Union Bleaching and Finishing Co. that they claimed the right of stoppage in transitu and not to deliver the goods to the Gilreath Mfg. Co. The receiver was appointed for the Gilreath Company, as an insolvent corporation, On January 29, 1912. At this time the goods in question were in the possession of the Union Bleaching and Finishing Co., and had not reached the actual custody of the Gilreath Mfg. Co. There is no question but that the seller has the right of stoppage in transitu after he has sold the goods on credit and delivered them to a carrier, warehouseman or other intermediary, for delivery to the buyer, upon discovery of the buyer’s insolvency, to retake the goods before they have reached the actual possession of the buyer, and enforce his lien against the goods for the purchase price. In Hutch. Carr. (3d ed.), sec. 757, it is said: “It is a right founded upon the plain reason of justice and equity, that one man’s goods shall not be applied to the payment of another man’s debts.” In Fraser v. Hilliard, 2 Strob. Law 309, the Court says: “The general rule is that when the goods have not been paid for, the vendor, in case of insolvency of the vendee, may retain them if they remain in his'possession, or, if he has dispatched the goods to the vendee, he may stay them on the way before they come into his possession.” After referring *221 to several cases, the Court says: “These cases show that the deposited goods, after they have reached their destination in a warehouse, subject to the order and control of the huyelas of executed delivery, is effectual to defeat the right of stoppage in transitu as if they had been deposited in the warehouse of the buyer, and the deposit in like manner in the warehouse of vendee divests his right to retain for the price which may be unpaid; and that complete possession may be transferred without the removal of the goods or the exercise of any act of ownership, but by the mere act of delivering the order for the transfer of them to the vendee.” By this case, it will be seen that the right to exercise stoppage in transitu is not defeated where goods are placed in a warehouse unless they are subject to the control and order of the buyer and further that there can be no delivery by a mere order to that effect unless the order is actually delivered and demand made under it. “A clear and unequivocal case of the termination of the transit should be made out by the evidence before the vendor should be deprived of the right of stoppage.” Rogers v. Schneider (Ind.), 41 N. E. R. 71. In the case of Parker v. McIver, Dec. Eq. 274, holds that there must be an actual delivery to cut off the right of stoppage in transitu. 35 Cyc. 499, says: “But the giving of the delivery orders is not alone a delivery of the goods so as to terminate the transit unless such is the understood custom of the particular trade or the carrier attorns to the holder of the order.” In the case of Mohr v. Boston, 106 Mass. 67, it was held that the fact that the goods were transferred upon the records of the warehouse to the buyer did not affect the seller’s right of stoppage. “Goods are delivered when they are placed in the buyer’s power, so that he may immediately remove them, and cannot rightably be prevented from so doing.” ’“The right of stoppage in transitu is extinguished only by actual and complete delivery of the goods consigned to the vendee or to some agent of and for him.” Smith’s Mercantile Daw, 599. “The vendee must have the means of *222 controlling the possession before the right of stoppage is cut off.” Callahan v. Babcock, 8 Am. Rep. 63. “The general rule- in this class of cases is that while the goods remain in the possession of persons concerned in their transportation to the place of destination named by the purchaser, they may, in the event of his failure, be reclaimed by the seller. It is not material whether the person -in whose possession they are when the seller interposes his claim be a carrier, a warehouse keeper, a wharfinger, packet, or other depository, or an agent for the purpose of forwarding, nor by which of the parties of the sale he was employed. He may be the agent of the purchaser, designated, paid, and employed by him, yet if the purpose of his employment is to expedite the property towards its destination, or to aid those engaged in forwarding it, the seller’s right to stay the final delivery continues.” Harris v. Pratt, 17 N. Y. 249. “Goods sold are considered in transitu as regards that right, until actually delivered to the buyer, or brought to some place appointed by him as their final destination, and not merely as a stage in their progress to such destination.” Atkins v. Colby, 20 N. H. 154. “The right of stoppage in transitu of goods sold continues whilst they remain in the hands of a warehouseman, though at the place at which they are directed to be sent; if that be an intermediate point between the place of sale and the ultimate destination of the goods.” Covell v. Hitchcock, 23 Wendel’s Rep. 611. The evidence in this case shows the appellants sold to the Gilreath Mfg. Co; unbleached goods and invoiced them to it. The goods were to be delivered to the Union Bleaching and Finishing Co., an intervening independent contractor, to be bleached and finished, and then delivered to the Gilreath Mfg. Co. The Gilreath Mfg. Co. and Union Bleaching and Finishing Company were over three miles apart. When the goods were delivered to the Union Bleaching and Finishing Co. they were not actually, delivered to the Gilreath Mfg. Co., and had not reached the ultimate destination con *223 templated by the parties to the contract. Something had to be done to the goods before they are delivered to the consignee. The Union Bleaching and Finishing Co. was in possession, not as agent of either party, but under a contract to bleach the goods for compensation to itself, and then deliver to the buyer. We think his Honor was in error in not allowing the whole of claims of appellants, F. W. Poe Mfg. Co. arid Brandon Mills, as preferred liens, and in not holding that they had the right to exercise the right of stoppage in transitu, and the exceptions of these appellants are sustained. The exceptions of the appellant, F. W. Symmes, receiver, are overruled, for the reasons given in sustaining the exceptions of the F. W. Poe Mfg. Co. and Brandon Mills. The decree of Judge DeVore should be modified in accordance with the views announced in this opinion. Judgment modified. Mr. Justice Hydrick. I think the judgment of the Circuit Court should be affirmed, for the reasons therein stated, and also for the reasons stated by the master for denying the right of stoppage in transitu of the goods described in claim A of F. W. Poe Mfg. Co. and the claim of Brandon Mills. Suppose Gilreath had bought of Poe cloth to make a suit of clothes for himself, and Poe had by his directions, sent it to Gilreath’s tailor to be cut out and made for Gilreath, and the tailor had received it for account of Gilreath, and had cut out and made the suit for him and charged him for the work. Could Poe prevent delivery of the suit to Gilreath under the right of stoppage in transitu? The undisputed facts make the analogy between the actual and the supposed case complete. I think delivery of the goods to the tailor would be held to be delivery to Gilreath and the transit ended there. So, in this case, delivery to the bleacher)' was delivery to Gilreath Mfg. Co., and the transit was ended there.