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8 F.(20) 48 Aydlett & Simpson, of Elizabeth City, N. use having proved unsatisfactory. He was, C., for Fairbanks, Morse & Co., Inc.
apparently, without funds, and at his reWinfield A. Worth, of Elizabeth City, N. quest the agent of Fairbanks joined him in C., for People's Commercial & Savings a visit to Washington for a conference with Bank.
the president of the bank in an effort to inJohn Henry Skeen, of Baltimore, Md., duce the latter to advance the necessary for Walter C. Finch.
money to make the purchase, or to release
the bank's then existing mortgage and creGRONER, District Judge (sitting for ate a new mortgage in which the bank's debt CONNOR, District Judge). On the 5th of and the price of the engine would be comApril, 1923, libelant filed its libel against the bined, with a division of the notes. This efmotor vessel Defiance. Sundry intervening fort resulted in failure, and subsequently libels were thereafter filed, and on the 15th and within a few days Capt. Willis, having day of May, 1923, an order of sale was en- raised the sum of $1,500, $500 of which was tered, the vessel sold, and the proceeds de- furnished by the intervener, Finch, arranged posited in court to await the final determina- with Fairbanks for the purchase of the ention of the cause. A reference was made to gine on a basis of $1,500 in cash and the a special master, who reported the liens and balance in twelve notes, eleven of them for the order of their priority, and a decree was $429.16 each, payable monthly, and one for entered, by agreement of parties, confirming $500, payable in ninety days; and on Authe report as to sundry of the interveners, gust 24th, when the purchase and sale was and payment of their claims has been hereto- consummated, a written contract was entered fore made; leaving for determination only into between Capt. Willis and his wife on the claims of the libelant, Fairbanks, Morse the one hand and Fairbanks on the other, & Co., Walter G. Finch, the People's Com- which was as follows: mercial & Savings Bank, and F. J. Carpen
"Fairbanks, Morse & Co. (Incorporated) ter, the fund remaining in the registry of the court being insufficient to pay all of
"General Proposal. these claims in full.
“Place: Baltimore, Ma. Mrs. Fannie P. Willis was the owner of
August 24, 1922. the Defiance, an auxiliary sailing vessel of “To E. M. Willis and Fannie P. Willis, under 200 tons burden. Her husband, E. M. Beaufort, N. C.: We hereby propose to Willis, was the vessel's master. The Peo- furnish and deliver f. o. b. cars at Baltimore, ple's Commercial & Savings Bank, hereinaft- Md., the following as per specifications beer referred to as the “bank,” is the holder low." of a mortgage on the vessel of date Sep
Then followed a description of the engine tember 15, 1921. Fairbanks, Morse & Co., and parts, after which were lines to be filled hereinafter referred to as “Fairbanks,"
in, in order to show the delivery point, which elaims a lien for a marine engine furnished
were left blank, and a guaranty of the to the vessel. Carpenter is the holder of one
workmanship; after which the contract proof the notes originally given on account of vided as follows: the deferred purchase price of the Fairbanks
"We propose to furnish the property as engine; and Finch is the holder of a note specified herein for the sum of seven thoumade by Capt. Willis and his wife, original- sand, one hundred, fifty dollars ($7,150.00), ly for the sum of $500, but reduced to $400. to be paid at the company's office shown The main contest is between the bank and
herein as follows: Fairbanks. If the latter is entitled to a
$1,500.00 cash with order. maritime lien, it is conceded it will have pri
"Balance in 12 monthly notes, first one ority over the bank's claim and will absorb due October 15, 1922, after shipment. the entire fund.
“All deferred payments are to be eviThe bank insists that Fairbanks is not en- denced by negotiable notes payable to the titled to a lien, on the ground that the sale order of this company, dated and delivered of the engine was upon the credit of the
as of date of shipment and to bear interest owner, exclusively, and not upon the credit from said date at the rate of
per of the boat.
cent. per annum.
The above payments repThe facts are these: In August, 1922, resented by notes are to be secured byWillis, master of the Defiance, went to the
“This proposal is made upon the followoffice of Fairbanks, in Baltimore, for the ing conditions.” purpose of purchasing a new engine to be The conditions were that the title and installed in the Defiance; the one then in ownership of the machinery should remain in the company until final payment. The tion of counsel for the bank, the testimony company retained the right to discount or of its sales agents and of Capt. Willis, to transfer the notes; the title or right of pos- show that it was understood between the session in or to the machinery to pass there parties at the time the contract was made by to the holder of the notes. In the event that the engine was intended to be installed of default in the payment of any of the in the Defiance and was necessary in her opnotes when due, the whole amount should eration. A witness, James P. Hill, who immediately become due, as a result of which was the salesman for Fairbanks, testified the company should have a right to take that “Capt. Willis came into the office. He possession of the machinery and sell the said his present engine, the engine that was same and after satisfying its debt to pay in the boat, he could not operate, and he over any balance remaining to the purchaser. said he wanted to get a Fairbanks Morse There were also provisions providing that 100 horse power engine. We had one right the machinery should retain its character of in stock and that is the engine he wanted." personal property, however affixed or at- Carpenter, another witness for Fairbanks, tached to any building or structure, and a who was present when the transaction was provision requiring the purchaser to indem- consummated, testified that he knew of his nify against fire, etc. In conclusion, the own knowledge that the engine was installed contract provides in express terms as fol- in the Defiance, because he had seen it there lows:
some two or three months after delivery. "It is expressly understood this proposal And he also testified that at the time the made in duplicate contains all agreements contract was executed he mentioned to Capt. pertaining to property herein specified, there Willis that, as there was a mortgage on the being no verbal understanding whatsoever, boat, "we would naturally figure on our mar-. and when signed by purchaser and approved itime lien for our protection." Capt. Wilby an executive officer or local manager of lis testified that the installation of the enFairbanks, Morse & Co. becomes a contract gine purchased from Fairbanks was combinding parties hereto."
pleted September 25th at Elizabeth City, The contract was approved by an execu- having been brought from Baltimore to tive officer of Fairbanks, and accepted by Elizabeth City by his order and at his exFannie P. Willis and E. M. Willis.
pense. It will be observed from the above that Subsection P of section 30 of the Merthe contract was one of that character gen- chant Marine Act of 1920 (41 Stat. L. 1005 erally known as a conditional sale contract [Comp. St. Ann. Supp. 1923, § 814644000]) or reserved title contract, and that it non provides that: .. where contained any suggestion or mention "Any person furnishing repairs, supplies, of the use to which the engine was to be put. towage, use of dry dock or marine railway, Read by itself, the contract was a sale to or other necessaries, to any vessel, whether the Willịses without reference to the vessel. foreign or domestic, upon the order of the Delivery, actual as well as that agreed in owner of such vessel, or of a person authe contract, was to be f. o. b. cars, Balti- thorized by the owner, shall have a marimore, although the vessel was at that time time lien on the vessel, which may be enin the waters of Elizabeth City, N. C.; and forced by suit in rem, and it shall not be if that were all there would, of course, be necessary to allege or prove that credit was nothing on which a lien against the vessel given to the vessel.” could reasonably be asserted. The notes, The act, so far as it affects the matter however, which were given at the time the under consideration, is in all respects simicontract was executed, were on a printed lar to the Act of June 23, 1910 (Comp. St. form, and just above the signatures of the $87783–7787). The purpose of Congress makers contained the following provision: in the enactment of these statutes was to
"It is expressly understood and agreed simplify the law and definitely to define that the acceptance of this note by the when and under what circumstances a maripayees shall not and does not in any man- time lien may be acquired. As was said by ner or form waive or affect the maritime Judge Woolley, in The Yankee, 233 F. 919, lien whieh the payees now have or may here- 147 C. C. A. 593: after have against any boat or any other “The distinction between foreign and dowater craft of the makers within the admi- mestic ports is abolished. The allegation ralty jurisdiction of the federal courts." and proof that credit was given to the ves
And, in further support of its claim for sel is no longer required, and a maritime a lien, Fairbanks introduced, over the objec- lien, enforceable by a proceeding in rem, is
3 F.(20) 48 afforded 'any person furnishing repairs, sup- gine. To this end it entered into a written plies or other necessaries . . . to a contract with E. M. Willis and Fannie P. vessel • • • upon the order of the own- Willis, not in their capacities as master and er or owners of such vessel, or of a person owner of the vessel, but wholly in their inby him or them authorized.' To stay con- dividual capacities, and in this contract set troversy as to whether another person has out in the utmost detail the conditions which been authorized by the owner to procure should govern and control the sale and desupplies and bind the vessel, the statute af- livery of the property, and in distinct terms fords a presumption of such authority in provided that the agreement thus entered certain designated persons or officers, there into contained the entire contract, and that by relieving the libelant of the difficulty and "no verbal understanding whatsoever" should sometimes the impossibility of presenting affect the rights of either party. Under proof of that authority.”
these circumstances, the objection that was The facts in the case at bar show that the made to the evidence offered by Fairbanks equipment purchased of Fairbanks was nec- that it considered that it had not waived its essary in the operation of the vessel; that maritime lien, was properly taken, for by it was purchased upon the order of the own- its very terms the contract contained the er's representative, and, though delivered in whole agreement and neither party could a distant port to the owner's agent, it even- add to or diminish its provisions. But even tually found its way to the vessel, as it was if this were otherwise and the evidence admutually intended it should. The question missible, the mere opinion of one or the for determination, therefore, is twofold: other of the parties that a maritime lien exFirst, does a lien exist in the case of a sale isted would not of itself create one, for as direct to the owner, evidenced by a written was said by the Supreme Court in Piedmont, contract, entire in itself, in which the vessel ete., Coal Co. v. Seaboard Fisheries Co., 254 is unnamed and in which the seller reserves U. S. 1, 41 S. Ct. 1, 65 L. Ed. 97: the title until payment of the balance of the . "The fact found by the lower courts that purchase price; and, secondly, if under such the parties understood the law would afford circumstances a lien arises because of the a lien on the vessels for the coal is, in this mutual intention of the parties, is it defeat- controversy, without legal significance." ed by the failure to make delivery to the · Since, therefore, the parties, by their own vessel's side?
solemn contract in writing, have declared In passing, it may be observed that the the whole agreement to be a sale on the answer to neither of these questions is wholly part of the one to the other with a reservawithout doubt; but after careful considera- tion of title, and an agreement on the part tion the conclusion I have arrived at is that of the other to pay the balance of the purthe first question should be answered in the chase price in monthly installments, and negative and the second in the affirmative, have likewise declared that no verbal un
[1-4] The effect of the statute avoids the derstanding or agreement should modify necessity of proof that credit was given to these terms, it seems to me it would be a the vessel. It does not, however, bar proof far stretch of a law to hold that this was a that the supplies or equipment were fur- sale on the credit of the vessel; nor in my nished on the credit of the owner alone, and opinion is this conclusion shaken by the it cannot be doubted that in the latter case printed stipulation contained on the face of no lien exists. If this be correct, it would the notes evidencing the deferred payments, follow, necessarily, that a decision of the for in itself it is no more than a claim of question depends upon the facts. The evi- reservation of a lien on an unnamed vessel dence here shows that prior to the purchase if the law should give it. of the engine the master of the vessel and  The second question, as has been statFairbanks, the seller, were in communica- ed above, must likewise be found against the tion; that the latter, in an effort to obtain claimant; for notwithstanding the fact that security, had endeavored to have a prior the engine appears to have been actually inmortgagee release his mortgage (not pre- stalled on the vessel, it is uncontradicted that ferred) and, failing in this, or in the pro- unconditional delivery (except as to the rescurement of the entire amount in cash or in ervation of title) was made to the individusecuring a solvent indorser on the notes rep- al purchasers in Baltimore, when the vessel resenting the deferred purchase price, had was in another state some 250 miles or more chosen a medium of sale which, in his opin- away. As was said by Mr. Justice Brandeis ion, provided the necessary security for the in the Piedmont Coal Company Case, supra : payment of the purchase price of the en- "The difficulty here • • • is not in
failure to show that the coal was furnished entirely different from a delivery to the to the vessels but in failure to prove that it ship's side so as to bind the ship in rem. was furnished by the libelant."
"The ship was not in Jersey City; but In The Yankee, supra, the supplies for within a different jurisdiction, a mile or two which a lien was claimed were ordered for a away. There can be no delivery to the ship, dredge then operating in the Delaware river. in the maritime sense, whether of supplies In each instance the supplies ordered were or, of cargo, so as to bind the ship in rem, specifically designated as supplies for the until the goods are either actually put on Yankee, to be shipped to the dredging com- board the ship, or else are brought within the pany at Christian Street wharf, Philadel- immediate presence or control of the officers phia, marked, "For Dredge Yankee.” When of the ship." received at the wharf they were unloaded  The claim of Carpenter to a lien and loaded on a barge and towed to the must, likewise, be denied, for in no case Yankee and by her received and used. The could he stand in any better plight than Circuit Court of Appeals (Third Circuit) Fairbanks, from whom he acquired the note. held that this was a sufficient delivery to  The claim of Finch is, if anything, comply with the statute and to create the less meritorious than the two above. In his lien; but the facts there and here are by case he advanced his money, clearly, on the no means analogous. There, as here, it is personal credit of the master of the vessel. true, the delivery was made some distance  While the mortgage of the bank, be from the vessel's side; but there, unlike ing in its nature nonmaritime, could not here, the delivery was specifically for the have been made the basis of a libel in rem, dredge, at the nearest point at which deliv- it may, nevertheless, as declared in The J. ery could be made in the ordinary course of E. Rumbell, 148 U. S. 1-15, 13 S. Ct. 498, transportation. In the case at bar the de- 37 L. Ed. 345, have its priority determined livery was in Baltimore. There was noth- in this suit. The other claims superior to it ing in the contract which, as has been al- having been paid, and the claims disallowed ready stated several times, embraced the en- herein removed, it is entitled to the balance tire agreement, which imposed an obligation of the fund on hand. on the purchaser to use the engine on the Defiance. Without breaching in any way its terms, the engine could have been lawfully used on any other vessel or for any UNITED STATES V. LANKFORD et al. other purpose. So far as the agreement
(District Court, E. D. of Virginia. November, bound the purchaser, he might never have
15, 1924.) installed it on the Defiance; and absolute
1. Fraudulent conveyances 47 Chattel ly nothing was done by the seller to see that
mortgage not "sale, transfer, or assignment," he did, and apparently it never knew wheth- within Bulk Sales Act. er it was so installed, or not until some A chattel mortgage is not a "sale, transfer, months later when its salesman happened or assignment,” within the meaning of the Bulk to be aboard the vessel and observed a Fair- but until payment or foreclosure the relation
Sales Act of Virginia (Code Va. 1919, § 5187), banks engine in use which he took to be the of the parties is that of debtor, on one side, one his company had sold. If it had been and creditor, secured by a lien, on the other. lost in transitu from Baltimore to Elizabeth and Phrases, First and Second Series, Sale.)
(Ed. Note.-For other definitions, see Words City, a maritime lien could not by any possibility have arisen. It seems to me equal- 2. Chattel mortgages w 190(1)-Provision au3 F.(20) 82 erty by the grantor with the consent of the ignated supplies located in the stores at Norgrantee.
thorizing mortgagor to sell and take the prof. ly true that if the purchaser had, as he its renders mortgage void. might lawfully have done, converted it to Under the law of Virginia, as declared by some other use, the same result would have its Supreme Court of Appeals, a chattel mortensued.
gage or deed of trust of personal property,
which is in its nature susceptible of general The rule applicable under such circum- sale as merchandise, containing a provision austances is that announced by Judge Brown thorizing the grantor to remain in possession in The Vigilancia (D. C.) 58 F. 698. In
and take the profits, is equivalent to a provi
sion giving the right of sale, and renders the that case the delivery of the supplies was
mortgage or deed void. to a truckman in Jersey City for transporta- 3. Chattel mortgages w219-Rendered invalid tion to the vessel in New York. Such a de as against creditors by sales by mortgagor livery Judge Brown held merely to be a
with knowledge of mortgagee. common-law delivery to the company, suffi
A deed of trust covering personal property
salable as merchandise is rendered invalid as cient to bind the company in personam, but against creditors by sales made from the prope
folk and Newport News, and in addition 4. Chattel mortgages Ow74 - Mortgage void several motor trucks and motor boats used
as to part of property covered held void in in the business. entirety.
At the time the deed of trust was executUnder the law of Virginia as established by its Supreme Court of Appeals, which gov. ed, and for two or three years prior thereerns in the federal courts, a deed of trust to, Hogshire had been steadily going be which is void as to part of the property cov: hind; its losses for the three-year period ered because of sales permitted or made by
aggregating considerably over $100,000. the grantor is void in its entirety.
After the execution of the deed of trust the In Equity. Suit by the United States Newport News store was closed, and so conagainst Menalcus Lankford, trustee, and
tinued up to the bringing of this suit. The
supplies in the Norfolk store conveyed in others. Decree for complainant.
the deed of trust were attempted to be idenLester S. Parsons, Asst. U. S. Atty., of tified by placing in the racks containing Norfolk, Va.
them little tags, about two inches in size, Wolcott, Wolcott & Lankford, Harry K. on which were typewritten the words “SurWolcott, and Menalcus Lankford, all of plus Stock D. T.” The deed of trust conNorfolk, Va., for E. Hogshire, Son & Co., tained the usual provisions applicable to Inc.
such instruments in use in Virginia, and Richard H. Baker, of Norfolk, Va., for among other things provided that the granMerchants' & Mechanics' Sav. Bank.
tor should remain in peaceable possession
and take the profits thereof to its own use GRONER, District Judge. This is a suit until default, etc., in the debt. About the by the United States to set aside and annul time of the execution of the deed of trust a deed of trust executed by E. Hogshire, one of the government revenue agents came Son & Co., Inc., to Menalcus Lankford, to the place of business of Hogshire for the trustee. There is no suggestion from be purpose of making an audit of its books, ginning to end of any actual fraud, and the but at Mr. Hogshire's personal request, and evidence discloses beyond peradventure that upon his statement that that was a particuthe deed of trust was taken by the bank in larly busy season, inspection was delayed ungood faith, but to secure a pre-existing til the following fall. When finally made, indebtedness. The circumstances, briefly, it showed an indebtedness to the government were these:
on account of income taxes of approximateThe Merchants' & Mechanics' Savings ly $200,000, which, together with interest Bank had been financing Hogshire for a and penalties, amounted to approximately long number of years. Apparently, some $250,000. time about the beginning of the war, Hog- The government claims that the deed of shire, whose business was that of shipchand- trust is void and of no effect, first, because ler, with stores at Norfolk and Newport it falls within the provisions of section 5187 News, obtained a government contract for of the Code of Virginia (1919), known as the furnishing of supplies to government the "Bulk Sales Act”; and, secondly, bevessels, and required a large amount of cause under the law in Virginia a deed of money to carry on its business. The bank trust of chattel property, in which the granadvanced the money and took an assign- tor reserves the right to remain in possesment of the payments due from the govern- sion and enjoyment of the property conment; that is to say, the government checks veyed until default is made in the payment as they were received were delivered to the of the debt secured, and such reservation is bank and applied to the payment of the in- inconsistent with the purposes of the condebtedness. The government, at some peri- veyance and adequate to defeat them, is od which is not disclosed in the evidence, fraudulent per se. canceled the contract, and left Hogshire
 I have given as careful consideration with a considerable stock of marine supplies as the time at my disposal has permitted to on hand and with an indebtedness to the the questions thus raised, and I am of opinbank of between $20,000 and $25,000. The ion, first, that section 5187 of the Code is bank, desiring to secure itself for this in- not applicable. This act provides that "the debtedness, and desiring also to create a se- sale, transfer or assignment in bulk of any curity upon which it might safely advance part or the whole of a stock of merchandise, other money, took the deed of trust from
otherwise than in the ordinary Hogshire, in which was conveyed certain des- course of trade,
shall be void as