case, the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to prevent a delivery to the buyer.” 1

2

412. Invalid Notice. A notice to the buyer not to take possession of the goods, or to hold the proceeds for the seller, is ineffectual as an attempted exercise of the right of stoppage

in transitu.

413. Expenses which Seller must defray. — In case the right is exercised by giving notice to the carrier, or to a third person who has received delivery from the carrier, it becomes the duty of the vendor to defray the transportation charges which have accrued against the goods; but he is under no obligation to pay charges due from the buyer to the carrier on account of other goods. If the vendor, instead of taking the goods where they are at the time of stoppage, requires their redelivery, he must bear the expenses thereof."

414. Effect of exercising the Right. — By stopping the goods, the vendor does not rescind the sale, but regains possession. As soon as the right is duly exercised, the middleman holds the goods for the vendor, and is bound to surrender them to him upon demand and tender of legal charges. His liability to deliver to the vendee ceases, although the latter may hold a bill of lading calling for the delivery of the goods to him.8 Indeed, compliance with such a bill, after due notice of stoppage has been given, would subject the carrier to an action by the vendor for conversion. If the carrier improperly refuses to recognize the seller's right to the possession of the

9

1 Kemp v. Falk, 7 App. Cas. 573; 52 L. J. Ch. 167 (1882); Burdick's Cases on Sales, 599.

Mottram v. Heyer, 5 Den. (N. Y.) 629, 635 (1846).

Phelps v. Comber, 29 Ch. D. 813; 54 L. J. Ch. 1017 (1885).

Penn. Co. v. Am. Oil Works, 126 Pa. St. 585; 17 At. 671 (1889).

Potts v. N. Y. & N. E. Ry., 131 Mass. 455, 457 (1881).

Sale of Goods Act, § 46 (2); Uniform Sales Act, § 59 (2).

7 Babcock v. Bonnell, 80 N. Y. 244 (1880); Diem v. Koblitz, 49 Ohio

St. 41; 29 N. E. 1124 (1892); Burdick's Cases on Sales, 617.

8 The Vidette, 34 Fed. 396 (1888).

9 Litt v. Cowley, 7 Taunt. 169 (1816); Jones v. Earl, 37 Cal. 630 (1869); Burdick's Cases on Sales, 616.

goods, the latter may be compelled to ask for an injunction,1 or for some other extraordinary remedy.2 On the other hand, the carrier may find it necessary to interplead the seller and some other claimant of the property.2

-

415. Doctrine of Newhall v. Central Railway. It has been held by one court that the due exercise of the right of stoppage in transitu by the seller will not affect the title of a subsequent bona fide assignee of the bill of lading.3 This decision is based on the doctrine that the vendor's lien, after the right of stoppage has been duly exercised, "is only a secret trust as to a person who takes an assignment of a bill of lading 'without notice of such circumstances as render the bill of lading not fairly and honestly assignable.

But the vendor's lien is something more than a secret trust. It is a legal interest in the property. The contest between an unpaid vendor, who has stopped the goods, and a subsequent assignee of the bill of lading depends upon the question "which party can establish the better legal title." The right of stoppage in transitu, as Lord Blackburn has established beyond controversy, is not, as Mr. Justice Buller supposed, and as many judges still appear to think, "an equitable right adopted into the law." If it were, "it would follow" (as the California court declared) that the right "could prevail only against those who had an inferior equity." But the right has its origin in "the custom of merchants," and by "the lex mercatoria, as practised in England, . . . it may be defeated before the goods have come to the end of the transitus, by the assignment of the bill of lading to one who bona fide gives value for a property in the goods, and in no other way." 5

416. Bill of Lading must be transferred before Stoppage. — If this doctrine had been applied in Newhall v. Central Railway, a different conclusion would have been reached. As soon as

1 Schotsmans v. Lancashire Ry., L. R. 2 Ch. App. 332, 340; 36 L. J. Ch. 361 (1867).

2 The Tigress, 32 L. J. Adm. 97, 102; B. & L. 38 (1863).

Newhall v. Central Railway, 51 Cal. 345 (1876). This doctrine is now incorporated in The Uniform Sales Act, § 59 (2), last sentence. Stanton v. Eager, 16 Pick. (33 Mass.) 467, 473 (1835). Blackburn on Sales (2d ed.), 319, 320.

the right of stoppage was exercised, the vendor's lien was restored. A subsequent transfer of the bill of lading to a bona fide purchaser would have the same effect, so far as the vendor's rights were concerned, that an actual delivery of the goods themselves would have had. It would confer no greater rights upon the purchaser. "The transfer of the document of title, by means of which actual possession of the goods could be obtained, had no greater effect at common law than the transfer of the actual possession." And the California court does not rest its decision on any Factors Act, or similar legislation, altering the common law. The second purchaser, therefore, should have been treated as taking only such title as his vendor had; and that was a title subject to the original vendor's lien.

§ 6. Seller's Right of Resale.

417. Having re-established his lien, by the exercise of his right of stoppage in transitu, the next question which confronts the vendor is, What can he lawfully do with the goods? 418. Nature of Vendor's Lien. If his claim against them were a mere lien, he would be entitled to hold them as security for the price, but, in the absence of authority from the vendee, he could not sell without resort to foreclosure proceedings. Such, however, is not the nature of his claim. "His right is very nearly that of a pledgee, with power to sell at private sale in case of default." 2

When the sale is upon credit, and the buyer becomes insolvent before the term of credit expires, the seller, if remaining in possession, or upon regaining possession, has the right to demand cash for the goods. There is an implied engagement on the part of a buyer who asks and receives credit to keep that credit good. This is broken by his insolvency, and the breach puts "him in the same situation as if there had been no bargain for credit." 3

1 Cole v. N. W. Bank, L. R. 10 C. P. 354, 363; 44 L. J. C. P. 233 (1875). 2 Tuthill v. Skidmore, 124 N. Y. 148, 154; 26 N. E. 348 (1891). Bloxam v. Sanders, 4 B. & C. 941 (1825); Burdick's Cases on Sales, 579; Grice v. Richardson, 3 App. Cas. 319 (1877); 47 L. J. N. s. P. C. C.

The seller may refuse to deliver the goods unless the price is paid. But the insolvency of the buyer does not ipso facto annul the sale contract.1 Hence, if the purchaser, or one lawfully claiming under him, pays or tenders the price within a reasonable time, the seller must deliver the goods. In case no such payment or tender is made, or in case the purchaser is already in default, when the seller regains his lien, the latter may resell the goods, and if the resale does not result in satisfying his claim, the loss may be recovered from the buyer, as damages.3

419. How should Resale be made? In England, this question has been answered by statute. If the goods are perishable, the unpaid vendor may sell at once and without notice. In other cases, he should give notice to the buyer of his intention to resell, and the latter has a reasonable time thereafter within which to pay or tender the price.1

420. In this country, upon default by the purchaser, whether that default consist in his failure to take and pay for the goods at the stipulated time and place, or in his failure to pay cash within a reasonable time after his insolvency," the vendor may resell the property, acting as the purchaser's agent in the matter, and entitle himself to damages to the extent of any ensuing loss.

When it is said that the vendor acts as the purchaser's agent in making a resale, it is not meant that the purchaser is a true principal, clothed with absolute ownership, for whom the vendor acts as a true agent. Even though title has passed to an insolvent purchaser, the rights of the unpaid vendor in possession of the goods enable him to sell them to third parties,

48 (1877); Diem v. Koblitz, 49 Ohio St. 41; 29 N. E. 1124 (1892); Burdick's Cases on Sales, 617.

1 McElroy v. Seery, 61 Md. 389; 48 Am. R. 110 (1883). 'Newhall v. Vargas, 15 Me. 314 (1839); Patten's Appeal, 45 Pa. St. 151, 159 (1863); Ex parte Stapleton, 10 Ch. D. 586, 590 (1879).

Uniform Sales Act, § 60 (1).

• Sale of Goods Act, § 48 (3); Page v. Cowasjee, L. R. 1 P. C. 127, 145 (1866), qualifying the doctrine in Martindale v. Smith, 1 Q. B. 389 (1841); Burdick's Cases on Sales, 582.

Diem v. Koblitz, 49 Ohio St. 41, 59; 29 N. E. 1124; 34 Am. St. R. 531 (1892); Burdick's Cases on Sales, 617.

Sands v. Taylor, 5 Johns. (N. Y.) 395; 4 Am. Dec. 374 (1810).

without liability to a previously appointed receiver of the insolvent purchaser.1

The Uniform Sales Act 2 deals with this topic much more in detail than does the English statute. It permits the sale to be made at public or private sale, provided only that the seller exercise reasonable care and judgment in making the resale.3

5

421. Notice of Intention to resell. In most of the reported cases, the seller has taken the precaution of giving notice to the defaulted buyer of his intention to resell; and many courts have assumed that such a notice is necessary. Other courts have ignored, doubted, or even disputed the necessity of such notice. Clearly if the default consists in the buyer's refusal to take or pay for the goods, any notice by the vendor of his intention to resell is superfluous. It "could only operate in the way of a threat to induce compliance. If having once refused to comply with the contract, there be locus pœnitentiæ for the buyer, he must avail himself of it without further notice from the seller." 6

422. Notice of Time and Place of Resale. That this is unnecessary is now well settled. In reselling the goods for the purpose of enforcing his lien, the vendor acts as the vendee's agent in the sense above stated. "But it is no part of

1 Moore v. Potter, 155 N. Y. 481; 50 N. E. 271; 63 Am. St. R. 692 (1898); Burdick's Cases on Sales, 731.

2 Mass. L. 1908, ch. 237, § 60.

Ibid. § 60 (5); Piowaty v. Sheldon, 167 Mich. 218, 227; 132 N. W. 517 (1911); Ackerman v. Rubens, 167 N. Y. 405; 60 N. E. 750; 53 L. R. A. 867; 82 Am. St. R. 728 (1901).

Saladin v. Mitchell, 45 Ill. 79, 85 (1867); Rosenbaums v. Weeden, 18 Grattan (Va.), 785, 793 (1868); Ridgley v. Mooney, 45 N. E. 348; 16 Ind. App. 362 (1896); Burdick's Cases on Sales, 570; Davis Sulphur Ore Co. v. Atlanta Guano Co., 109 Ga. 607; 34 S. E. 1011 (1900); Am. Canning Co. v. Flat Top Grocery Co., 68 W. Va. 698; 70 S. E. 756 (1911).

5 Gaskell v. Morris, 7 W. & S. (Pa.) 32, 38 (1844); Jones v. Marsh, 22 Vt. 144 (1850); Dustan v. McAndrew, 44 N. Y. 72 (1870); Ullman v. Kent, 60 Ill. 271, 274 (1871); Rosenbaums v. Weeden, supra, 795. The Uniform Sales Act, § 60 (3) declares notice of resale to be unnecessary; but failure to give it may be evidence that buyer had not been in default an unreasonable time.

Waples v. Overaker, 77 Tex. 7, 13; 13 S. W. 527 (1890); Plumb v. Campbell, 129 Ill. 101, 110, 111; 18 N. E. 790 (1889); Armsby Co. v. Raymond Bros. C. Co., 90 Neb. 553, 560, 773; 134 N. W. 174 (1912).