Campbell Paint & Varnish Co. v. Hall

Anderson, J., delivered the opinion of the court. This is a contest between appellant, the Campbell Paint & Varnish Company, a creditor of S. P. Cagle, merchant and trader, a bankrupt under the federal Bankruptcy Act, and appellee, J. P. Hall, trustee in bankruptcy; appellant claiming a purchase-money lien under section 3079, Code of 1906 (Hemingway’s Code, section 2436), on goods wares, and merchandise sold by it to said Cagle before his bankruptcy, and appellee claiming the title to said goods for the benefit of the general creditors of said bankrupt freed from said alleged purchase-money lien. The case was tried by agreement of the parties before the court without a jury upon stipulated facts. There was a judgment for appellee, from which appellant prosecutes this appeal. On the 29th day of July, 1921, said Cagle filed a voluntary petition in bankruptcy and was afterwards duly adjudged a bankrupt. More than four months before the filing of said petition appellant sold and delivered to said bankrupt certain goods, wares., and merchandise, which were the consideration for appellant’s indebtedness against said bankrupt. Before the filing of said petition appellant had brought suit in the circuit court of the first district of Hinds county against said bankrupt to recover of him said indebtedness, and had instituted the proceeding provided by sections 3079 to 3081, inclusive, Code of 1906 (Hemingway’s Code, sections 2436 to 2438, inclusive), to establish a purchase-money lien for the payment of said — 682 — indebtedness on that portion of said goods remaining unsold in the stock of merchandise of said bankrupt, and the writ provided by said statute, had been issued and levied by the sheriff on said goods so remaining, which goods had been by him segregated from the balance of the stock. Therefore, when appellee was appointed trustee of said bankrupt, and when said Cagle was adjudged a bankrupt, as well as when his voluntary petition was filed, the goods in controversy had been taken by appellant’s writ and separated from the balance of the stock of said Cagle and were in the custody of the sheriff thereunder. The following are the agreed facts upon which the cause was tried: “It is hereby agreed between the attorneys for the plaintiff and defendant in the above-styled cause that the same may be tried before the court without a jury, and that for such purpose the following statement shall be considered the facts in this case: That S. P. Cagle was. a merchant in the city of Jackson, Miss., doing business under the name and business sign of S. P. Cagle, where he kept and offered for sale, and sold to the public, paints, varnishes, stains, wall paper, glass, etc., at retail that he purchased from the plaintiff in the state of Mississippi, the goods described in the exhibit to the declaration herein, for which he owed plaintiff the purchase price at the time of the filing of this suit, which goods, within the knowledge of the plaintiff at the time it sold the same, were intended for resale by the said Cagle, and which were incorporated into and became a part of his said stock of merchandise, and that all of said goods so purchased by said Cagle had been sold by him at the time of the service of said writ of seizure except those described in the sheriff’s return upon said writ, which goods so seized were a part of the goods sold by plaintiff to said Cagle, as aforesaid; that at the time of said seizure said Cagle owed other creditors sundry sums of money for goods .purchased by him upon credit, and that on the 29th day of July, 1921, he filed a bank — 683 — ruptcy petition in bankruptcy in the district court of the United States for the Jackson Division of the Southern District of Mississippi, and was thereafter duly adjudicated bankrupt, and J. P. Hall was elected and qualified as trustee of the estate in bankruptcy, taking possession of all of the property of the said Cagle, except the goods so seized in this proceeding, which, from the time of their seizure by the sheriff on June 17, 1921, have been in the hands of said'sheriff, where they now are: and that the assets coming into the hands of said trustee will not be sufficient to satisfy the claims of the creditors in said bankruptcy proceeding.” The following questions are presented for consideration: (1) Whether or not section 3079, Code of 1906 (Hemingway’s Code, section 2436), the first section of the purchase-money lien statute, gives the seller a purchase-money lien on goods sold by him to a merchant for the purpose of resale. (2) If the seller is given a purchase-money lien under the conditions named, whether or not, under the business sign statute (section 4784, Code of 1906; Hemingway’s Code, section 3128), appellant can enforce such lien as against the trustee in bankruptcy of the purchaser, and, if the statute does not apply, whether the seller waives his lien by mere knowledge that the goods are intended for resale. We will consider these questions in the order above set out. 1. Section 3079, Code of 1906 (Hemingway’s Code, section 2436), is in this language: “The vendor of personal property shall have a lien thereon for the purchase money while it remains in the hands of the first purchaser, or of one deriving title or possession through him, with notice that the purchase money was unpaid.” It is argued that the language of the statute is broader than its purpose; that it was not intended by this státute — 684 — to give the seller of goods to a merchant for resale a lien for the purchase money; that to give such a lien would be unreasonable and inconsistent with other principles of law well established, and especially would make ineffectual to a large extent the usefulness and efficiency of the federal Bankruptcy Act (U. S. Comp. St., sections 9585-9656. There can be no question that the language of the statute is broad enough to cover the facts of this case. It is argued that no such purpose was intended by the legislature, because such a construction would render the statute inconsistent with section 1168, Code of 1906 (Hemingway’s Code, section 895), which provides among other things, that it shall be a crime to sell personal property upon which there is a lien by contract or by law, without informing the person to whom it was sold of the existence of the lien. It is said that merchants daily make sales of goods without giving the purchaser information as to whether there are any purchase-money liens thereon, and therefore, if the statute is held to be as broad in its purpose as its language, that most, if not all, merchants will be criminals. It seems that a complete answer to that argument is that a merchant so selling goods would not be guilty of violating said statute, for no one would be injured. His seller could not complain, because of the fact that he, at least tacitly agreed to their resale by virtue of his knowledge that they were being bought for that very purpose;-and the’purchaser without notice would receive no injury, because under the statute he would get a good title. It is argued further that the legislature could have had no such purpose, in view of the fact that this court has often held that a mortgage on a stock of goods intended for resale was void as to creditors. In the first place, a lien on goods for the payment of their purchase money is not the same character of security as a mortgage on a stock of merchandise intended for resale. In the one case the seller has a lien alone on the goods sold, while in the other — 685 — the creditor has a mortgage for his debt, either on the whole or a part of the mortgagor’s stock of goods, and the mortgage may be for' the purchase money or not. It would probably be within the competency of the legislature to make valid mortgages on stocks of merchandise intended for resale, both as between the parties as well as to the creditors of the mortgagor. And certainly the legislature would have the power to make a mortgage by the purchaser to the seller on the goods bought to secure their purchase price valid as between the parties, as well as against the creditors of the purchaser. The statute by its plain language covers a case, of. the character here involved. Several cases have been before this court involving a construction of said statute. In none of those cases has the court intimated that such a narrow construction as that contended for should be put upon the statute. Although the exact question was not decided in any of those cases, it was assumed that the statute gave a lien for the purchase money, although the goods were bought for the purpose of resale in due course of business. This was the view taken by the United States circuit court of appeals for the Fifth Circuit in the case of Norris v. Trenholm, Trustee, 209 Fed. 827, 126 C. C. A. 551, 31 Am. Bankr. Rep. 353, the opinion in which case is well reasoned, and in our judgment sound. • It was held by the United States circuit court of appeals for the Fifth Circuit, in Martin v. Orgain, 174 Fed. 772, 92 C. C. A. 246, 23 Am. Bankr Rep. 454, that a landlord’s lien created by statute was not affected by the Bankruptcy Act, and the same court held, in Re Georgia Handle Co., 109 Fed. 632, 48 C. C. A. 571, 6 Am. Bankr. Rep. 472, that a contractor’s or builder’s lien for material furnished was not affected by the Act, and in Re Kerby-Dennis Co., 95 Fed. 116, 36 C. C. A. 677, that a lien for wages created by statute was not dissolved or affected by the bankruptcy of the employer. These were all statutory liens not required to be recorded so as to give constructive notice, — 686 — and, in our judgment, the argument here made could have been made with as much reason and force in each of those cases. 2. Does the trustee in bankruptcy take this property, as against the appellant, freed from the purchase-money lien under our business sign statute? Section 4784, Code of 1906 (Hemingway’s Code, section 3128), is in this language : “If a person shall transact business as a trader or otherwise, with the addition of the words ‘agent,’ ‘factor,’ ‘and company,’ or ‘& Co.,’ or like wprds, and fail to disclose the name of his principal or partner by a sign in letters easy to read, placed conspicuously at the house where such business is transacted, or if any person shall transact business in his own name without any such addition, all the property, stock, money, and choses in action used or acquired in such business shall, as to the creditors of any such person, bp liable for his debts, and be in all respects treated in favor .of his creditors as his property.” We think this question is answered in the negative, not only by the plain terms of the statute itself, but in addition by the construction put upon said statute by this court in the cases of Kinney v. Paine, 68 Miss. 258, 8 So. 747, Dodds v. Pratt, 64 Miss. 123, 8 So. 167, and Frank v. Robinson, 65 Miss. 162, 3 So. 253. In the first case mentioned this court held that the statute had no application whatever in a contest between creditors of a common debtor. In the second case a. deed of trust was given by a merchant on his stock of goods to secure the purchase price thereof, and the court held that, although the goods were the property of the merchant, still the deed of trust given to secure the purchase price' was coetaneous with the acquisition of title, and therefore the merchant held the goods subject to the deed of trust, which was paramount to any other claim, and that the sign statute did not derange the order of priority among the creditors of said merchant. And' in the last case named the court held that the statute did not prevent a recission of sale and recovery — 687 — of the goods sold where the sale was induced by false and fraudulent representations by the purchaser; and this court recognized this principle in the late-case of Payne Hardware Co. v. Harvester Co., 110 Miss. 783, 70 So. 892, in which the court among other things, said: “The Harvester Company does not come into court, and did not replevy the goods, as a creditor of the insolvent Hardware Company. It claimed, and claims, the goods as the owner of same. There is no question here of prior liens. The Harvester Company does not claim to be a prior lienor, or a preferred creditor; but, to the contrary, it claims to be the owner of the goods in controversy, and upon this claim it must stand or fall.” (Italics ours.) The statute, when not complied with, simply malíes the property in question the property of the debtor, and liable to his debts, subject, however, to any valid lien thereon, even though such lien be in favor of the seller to secure the purchase money. We conclude, therefore, that the sign statute has no effect on appellant’s lien. It is contended by appellee that the lien given by the statute is waived by the seller in case of a sale of goods to be commingled with the stock of merchandise of the purchaser, a trader, and by the latter resold in the ordinary course of business. There is no claim that appellant expressly waived its lien. The contention is that it was waived- by virtue of the fact that appellant knew, when it sold the goods to the bankrupt, that same were purchased for the purpose of resale. Does the fact that the. goods were intended for resale by the purchaser, with knowledge of the seller, exclude them from the operation of the said purchase-money lien statute? Bouvier’s Law Dictionary (volume 3, p. 3417) defines “waiver” to mean the relinquishment of a known right, with knowledge of the existence of such right and a purpose to relinquish it. Mere silence on the part of the seller is not sufficient to constitute a waiver, unless such silence exists under circumstances when the seller is called on to speak. Such silence, in the absence of conduct amounting — 688 — to an estoppel, will not constitute a waiver, and, in the absence of estoppel, a waiver should be supported by a valuable consideration. We are unable to see any element of estoppel in the mere fact that appellant was silent as to its lien until called upon to take steps to enforce it. Nor, in our opinion, does the fact that the goods were sold for the purpose of resale constitute a waiver. The statute by its language has in view purchases for resale, for the lien only exists while in the hands of the first purchaser or one deriving title through him with notice. It should be borne in mind that, under the facts of this case, when the petition in bankruptcy was filed, appellant, for the purpose of enforcing his lien, which accrued more than four months theretofore, had had, in accordance with the statute, said goods seized by the sheriff and separated from the balance of the stock of said bankrupt; that therefore it is not a case where at the time of the bankruptcy proceedings the seller has taken no steps to enforce his lien, and the goods on which he claims a lien are part and parcel of the stock of merchandise found in possession of the bankrupt. In the latter case, under the amendment of 1910 — subdivision 2, subsection (a) of section 47 — of the Bankruptcy Act (U. S. Comp. St. section-), giving trustees all the rights, ppwers, and remedies of a creditor holding a lien, it seems clear that 'the trustee would take the goods freed from the purchase-money lien, 1 Collier on Bankruptcy (12th Ed.) pp. 716, 727, 728, and 729; In re Wright & Weissinger, Bankrupts (D. C.), 277 Fed. 514, 47 Am. Bankr. Rep. 283; Milling Co. v. Foote Trustee (D. C.), 277 Fed. 519, 47 Am. Bankr. Rep. 501. (But, as we understand, that is a federal question.) While in the former case (which is the present case) we hold that the lien of the seller of the goods is paramount to the rights of the trustee in bankruptcy. We are. unable to see how such a holding will result in marring the usefulness and efficiency of the Bankruptcy Act. Beversed, and judgment here for appellant. Reversed.