Hatch v. Oil Company

ERROR to the Circuit Court of the United States for the Eastern District of Michigan.

The Standard Oil Company of Cleveland brought replevin against Alonzo S. Hatch for a quantity of staves whereof it claimed to be the owner, which he, as sheriff of Lapeer County, Michigan, had seized under and by virtue of certain attachments and executions sued out against the property of John J. and Alfred E. Merritt.

There was a verdict in favor of the company, and judgment having been rendered thereon, Hatch sued out this writ of error.

The assignment of errors is set out in the opinion of the court.

The facts giving rise to the litigation are substantially as follows:--

An agreement in writing was entered into March 11, 1874, between the company, an Ohio corporation, and said Merritts, who were residents of said county, whereby the latter sold to the company one million of oil-barrel staves, to be sawed of certain dimensions, and manufactured from good, sound, white oak. They were to be delivered on board cars in Cleveland, Ohio, on or before the first day of June, 1875. The company was to receive them as fast as they were inspected, and pay therefor the sum of $30 per thousand.

Aug. 28, 1874, before the staves were furnished, the parties entered into a new contract, providing that, subject to certain modifications thereinafter mentioned, the former contract was to continue, and that said Merritts shall make the staves, and, as fast as they are sawed, deliver them properly piled in some convenient place, to be agreed upon by the parties, on land in Deerfield, Lapeer County, controlled by the company; that the company shall furnish a man to count the staves from week to week, who, when they shall be so piled and counted, shall give the Merritts a certificate of the amount piled, upon the presentation of which to the company it shall pay $17 a thousand as part of the purchase price of the staves; that upon the piling and counting of them, as provided in the contract, 'the delivery of the same shall be deemed complete, and said staves then become and thenceforth be the property of the second party absolutely and unconditionally;' that the Merritts, 'as agents of the Standard Oil Company,' at their own expense shall, on or about the fifteenth day of August, 1875, begin to draw, ship, and forward the staves to the company at the rate of not less than one hundred thousand per month; that the staves shall be allowed to remain piled for the period of three months before the company shall have the privilege of calling for the shipment of the same, but that it shall be the privilege of the company to insist that they shall remain piled for the period of eight months before the shipment; that the whole quantity shall be delivered by Jan. 1, 1876; that if the shipment of them shall be delayed beyond the period of eight months, and not at the request of the company, then the Merritts shall pay interest, and in addition thereto the cost of insuring; that the company shall have the privilege of calling for the shipment direct from the saw; that the company shall pay the balance of the contract price, deducting interest therefrom at ten per cent per annum on the advances of $17 per thousand from the time paid until the staves shall be received at Cleveland, and also the cost of insuring them against loss by fire after delivery at Lapeer, the amount of said insurance to be $18 per thousand; that if they shall be destroyed by fire before delivery at Cleveland, the loss above said $18 per thousand to fall upon the Merritts; but if the latter shall fail to draw, ship, and forward the staves as agreed, then the company shall be authorized to procure the same to be done, and deduct the necessary expenses from the balance of the contract price, also ten per cent interest on advances and insurance premium paid by them; and that if any balance of the contract price then remains due to the Merritts, the company shall pay the same; but if the advances upon that price, interest, insurance, and the cost and expenses of shipment exceed the balance due upon such price, the Merritts, on demand, shall pay the same.

The Merritts leased, Aug. 28, 1874, to the company a tract of land adjoining their mill, and shortly thereafter began to manufacture the staves and pile them on that tract. One Donely was employed by the company to count them. His certificates of the number were from time to time given, and advanced payments were, to the sum of $15,148, made thereon by the company. Its agent, accompanied by one of the Merritts, made, July 10, 1875, a count of the staves, the number being seven hundred and eighty thousand. About fifty thousand of them were piled upon land immediately adjoining that tract. After they had been counted, Hatch made the levies in question.

The contracts and lease were made in good faith, but neither was recorded or filed in any public office.

At their dates, and during the transactions under them, the statute of Michigan contained and following provisions, to wit:--

'4703: SECT. 7. Every sale made by a vendor of goods and chattels in his possession, or under his control, and every assignment of goods and chattels by way of mortgage or security, or upon any condition whatever, unless the same be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things sold, mortgaged, or assigned, shall be presumed to be fraudulent and void as against the creditors of the vendor, or the creditors of the person making such assignment, or subsequent purchasers in good faith, and shall be conclusive evidence of fraud, unless it shall be made to appear on the part of the persons claiming under such sale or assignment that the same was made in good faith, and without any intent to defraud such creditors or purchasers.'

'4706: SECT. 10. Every mortgage or conveyance intended to operate as a mortgage of goods and chattels which shall hereafter be made, which shall not be accompanied by an immediate delivery, and followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers or mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be filed in the office of the township clerk of the township, or city clerk of the city, or city recorder of cities having no officer known as city clerk, where the mortgagor resides.'

The chief controversy below was, whether, under the contract, the title to the staves in controversy, at the time when they were seized by Hatch, had vested in the company as vendee or as mortgagee.

Mr. Ashley Pond for the plaintiff.

1. The interest of the company in the staves at the time they were seized by Hatch upon process against the Merritts was that of a mortgagee, the legal title remaining in the Meritts as owners.

2. Up to that time there had been no delivery to the company, and no actual and continued change of possession, within the meaning of sect. 4703 of the statutes of Michigan.

3. There being no such change of possession, actual notice of the unfiled mortgage would not render the instrument valid against creditors. Such has been the uniform ruling where similar statutes have been enacted. Tyler v. Strang, 21 Barb. (N. Y.) 198; Farmers' Loan & Trust Co. v. Hendrickson, 25 id. 484; Stevens v. Railroad Company, 31 id. 590; Robinson v. Willoughby, 70 N. C. 358; Bevans v. Bolton, 31 Mo. 437. Were the law otherwise, there was no proof of such notice to Hatch or to creditors.

4. Assuming that the contract operated as a sale, and not as a mortgage, the title to the fifty thousand staves not piled upon the land covered by the lease had not, at the time they were seized, passed from the Merritts to the company.

Mr. F. H. Canfield, contra.

Mr. JUSTICE CLIFFORD delivered the opinion of the court.