Ruling Case Law: As Developed and Established by the Decisions and ...

law in the case of the sale of realty. Thus it has been held that the seller has no lien on the property which could be enforced in equity against a subsequent purchaser though the latter did not stand in the position of a bona fide purchaser for value, the court acknowledging that if in fact there had been any lien in favor of the seller the position of the purchaser was not, such as to prevent its enforcement. Courts of equity, however, have in some instances extended the rule under which a vendor of real estate is given a lien for the unpaid purchase price to sales of personalty, on the ground that there is no reason, in principle, why the doctrine should not apply to every case of a sale of personal property in which the court of equity assumes jurisdiction over the subject matter of the sale. And it has been held, in case of a sale of a reversionary interest in a trust fund, though the subject matter is personalty, that the seller is entitled to a lien for the unpaid price enforceable in equity.

398. Lien Created by Agreement.-The seller may at common law expressly reserve the title to the goods sold until the price is paid, and effect will, as a general rule, be given thereto for his protection," and of course the buyer may execute a chattel mortgage on the property as security for the price. The fact, however, that the bill of sale recites that the seller reserves a lien on the chattels for the price does not constitute it a legal chattel mortgage, but it is held that such a stipulation will create an equitable lien enforceable against the buyer and volunteers or claimants under him with notice of the stipulation.10 On the other hand such a lien will not be enforced against one purchasing from the buyer for value and without notice of the lien, and this has been held also true as to attachment or execution creditors of the buyer levying on the chattels without notice of the lien, and even though the credit was extended before the delivery of the goods to the buyer.11 It is the general rule, however, that levying creditors

3. Lupin v. Marie, 6 Wend. (N. Y.) 77, 21 Am. Dec. 256; James v. Bird, 8 Leigh (Va.) 510, 31 Am. Dec. 668. As to the vendor's lien in case of the sale of real estate, see VENDOR AND PURCHASER.

4. Lupin v. Marie, 6 Wend. (N. Y.) 77, 21 Am. Dec. 256.

5. In re Stucley, [1906] 1 Ch. 67, 75 L. J. Ch. 58, 54 W. R. 256, 93 L. T. N. S. 718, 22 Times L. Rep. 33, 3 British Rul. Cas. 807; Laidlaw v. Vaughan-Rhys, 44 Can. Sup. Ct. 458, 21 Ann. Cas. 948.

Notes: 21 Ann. Cas. 953; 3 British Rul. Cas. 826.

6. In re Stucley, [1906] 1 Ch. 67, 75 L. J. Ch. 58, 54 W. R. 256, 93 L.

T. N. S. 718, 22 Times L. Rep. 33, 3
British Rul. Cas. 807.

7. Emerson v. Fisk, 6 Greenl. (Me.) 200, 19 Am. Dec. 206. See infra, par. 743.

8. See generally, CHATTEL MORT GAGES, vol. 5, p. 380 et seq.

9. Freeman v. Bass, 34 Ga. 355, 89 Am. Dec. 255.

10. Gregory v. Morris, 96 U. S. 619, 24 U. S. (L. ed.) 740; Wood v. Holly Mfg. Co., 100 Ala. 326, 13 So. 948, 46 A. S. R. 56; Freeman v. Bass, 34 Ga. 355, 89 Am. Dec. 255.

Note: 83 A. S. R. 455.

See LIENS, vol. 17, p. 604.

11. Chickering v. Bastress, 130 Ill. 206, 22 N. E. 542, 17 A. S. R. 309.

only acquire such right as their debtor had and take subject to outstanding equities, and where such rule prevails it would seem that the lien involved would be enforceable against them.12 It has also been held that a transaction of this character, being in effect a chattel mortgage, falls within the provisions of the statutes requiring chattel mortgages to be recorded.18 If a lien is reserved on several articles of personalty sold until the whole amount of the purchase price thereof is paid the payment of the price of one of the articles does not discharge it from the lien for the aggregate price of all of such articles.14 The proper method of enforcing this contractual lien is by a bill in equity.15 And it has been held to constitute no objection to the enforcement of such a lien in favor of the seller of machinery that such machinery forms a part of waterworks intended for a public supply, and that great public inconvenience will be occasioned by the removal of the machinery.16

Stoppage in Transitu

399. Definition and Origin of Right.-One who sells goods on credit to another has the right to resume the possession of the goods while they are in the hands of a carrier or middleman in their transit to the consignee or purchaser and before they arrive into his actual possession or to the destination which has been appointed for them on the purchaser's becoming bankrupt or insolvent. This is called the right of stoppage in transitu.17 The first reported case recognizing such right seems to be the early English case of Wiseman v. Vandeputt (2 Vern. 203) decided in 1690.18 It has since been established in England and from an early date has been recognized as a common law right by the courts of this country.19 The origin of the right is of

12. See infra, par. 407, 599.

13. Andrews v. Colorado Sav. Bank, 20 Colo. 313, 36 Pac. 902, 46 A. S. R. 291.

14. Wood v. Holly Mfg. Co., 100 Ala. 326, 13 So. 948, 46 A. S. R. 56.

15. Note: 83 A. S. R. 455. 16. Wood v. Holly Mfg. Co., 100 Ala. 326, 13 So. 948, 46 A. S. R. 56. 17. Branan v. Atlanta, etc., R. Co., 108 Ga. 70, 33 S. E. 836, 75 A. S. R. 26; Hause v. Judson, 4 Dana (Ky.) 7, 29 Am. Dec. 377. See also Ilsley v. Stubbs, 9 Mass. 65, 6 Am. Dec. 29.

Am. Rep. 17; Jacobs v. Bentley, 86 Ark. 186, 110 S. W. 594, 126 A. S. R. 1086; Jones v. Earl, 37 Cal. 630, 99 Am. Dec. 338; Newhall v. Central Pac. R. Co., 51 Cal. 345, 21 Am. Rep. 713; Ocean Steamship Co. v. Ehrlich, 88 Ga. 502, 14 S. E. 707, 30 A. S. R. 164; Rucker v. Donovan, 13 Kan. 251, 19 Am. Rep. 84; Hause v. Judson, 4 Dana (Ky.) 7, 29 Am. Dec. 377; Blum v. Marks, 21 La. Ann. 268, 99 Am. Dec. 725 (recognizing and enforcing the right of the seller when the sale is made in New York state to stop in transitu); Hepp v. Glover,

18. O'Brien v. Norris, 16 Md. 122, 15 La. 461, 35 Am. Dec. 206; 77 Am. Dec. 284.

Newhall v. Vargas, 13 Me. 93, 29
Am. Dec. 489; Newhall v. Vargas, 15
Me. 314, 33 Am. Dec. 617; O'Brien v.
Norris, 16 Md. 122, 77 Am. Dec. 284;

uncertain parentage but according to the better view seems to be a right founded on equitable principles, originally established by the courts of equity, and afterwards adopted by the courts of law; 20 and is said to be nothing more than an extension of the right of lien, which by the common law the seller has, before delivery, on the goods for the price, originally allowed in equity and subsequently adopted as a rule of law. The right is said to be one favored in the law, being founded on the equitable principle that one man's property should not be applied in payment of another man's debts, and is perfectly equitable and just in every case of the actual insolvency of the buyer. The right of stoppage in transitu is recognized in the Sale of Goods Acts.4

400. Special Circumstances as Affecting Right.-The fact that the goods are sold on definite terms of credit does not affect the seller's right of stoppage, for the credit is understood to be predicated on the

Arnold v. Delano, 4 Cush. (Mass.) 33, 50 Am. Dec. 754; Stubbs v. Lund, 7 Mass. 453, 5 Am. Dec. 63; Ilsley v. Stubbs, 9 Mass. 65, 6 Am. Dec. 29; Kingman v. Denison, 84 Mich. 608, 48 N. W. 26, 22 A. S. R. 711, 11 L.R.A. 347; Fenkhausen v. Fellows, 20 Nev. 312, 21 Pac. 886, 4 L.R.A. 732; Chapman v. Lathrop, 6 Cow. (N. Y.) 110, 16 Am. Dec. 433; Muller v. Pondir, 55 N. Y. 325, 14 Am. Rep. 259; Farrell v. Richmond, etc., R. Co., 102 N. C. 390, 9 S. E. 302, 11 A. S. R. 760, 3 L.R.A. 647; Diem v. Koblitz, 49 Ohio St. 41, 29 N. E. 1124, 34 A. S. R. 531; Patten's Appeal, 45 Pa. St. 151, 84 Am. Dec. 479; Pennsylvania R. Co. v. American Oil Works, 126 Pa. St. 485, 17 Atl. 671, 12 A. S. R. 885; Parker v. Melver, 1 Desaus. (S. C.) 274, 1 Am. Dec. 656; Chandler v. Fulton, 10 Tex. 2, 60 Am. Dec. 188; Harris v. Tenney, 85 Tex. 254, 20 S. W. 82, 34 A. S. R. 796; Sawyer v. Joslin, 20 Vt. 172, 49 Am. Dec. 768; Howatt v. Davis, 5 Munf. (Va.) 34, 7 Am. Dec. 681; Jeffris v. Fitchburg R. Co., 93 Wis. 250, 67 N. W. 424, 57 A. S. R. 919, 33 L.R.A. 351.

Notes: 29 Am. Dec. 384; 50 Am. Dec. 760; 3 L.R.A. 647; 4 L.R.A. 732; 23 Eng. Rul. Cas. 409.

20. Newhall v. Vargas, 13 Me. 93, 29 Am. Dec. 489; Parker v. McIver,

1 Desaus. (S. C.) 274, 1 Am. Dec. 656.

Note: 29 Am. Dec. 384.

1. Loeb v. Peters, 63 Ala. 243, 35 Am. Rep. 17; Newhall v. Vargas, 13 Me. 93, 29 Am. Dec. 489; Newhall v. Vargas, 15 Me. 314, 33 Am. Dec. 617; Johnson v. Eveleth, 93 Me. 306, 45 Atl. 35, 48 L.R.A. 50; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Am. Dec. 607; Potts v. New York, etc., R. Co., 131 Mass. 455, 41 Am. Rep. 247; Conrad v. Fisher, 37 Mo. App. 352, 8 20 Nev. 312, 21 Pac. 886, 4 L.R.A. L.R.A. 147; Fenkhausen v. Fellows, 732; Gwyn v. Richmond, etc., R. Co., 85 N. C. 429, 39 Am. Rep. 708; Farrell v. Richmond, etc., R. Co., 102 N. C. 390, 9 S. E. 302, 11 A. S. R. 760, 3 L.R.A. 647.

Note: 23 Eng. Rul. Cas. 409.

2. Tufts v. Sylvester, 79 Me. 213, Atl. 357, 1 A. S. R. 303; Kingman v. Denison, 84 Mich. 608, 48 N. W. 26, 22 A. S. R. 711, 11 L.R.A. 347; Muller v. Pondir, 55 N. Y. 325, 14 Am. Rep. 259; Farrell v. Richmond, etc., R. Co., 102 N. C. 390, 9 S. E. 302, 11 A. S. R. 760, 3 L.R.A. 647; Calahan v. Babcock, 21 Ohio St. 281, 8 Am. Rep. 63.

Note: 19 Am. Rep. 87.

3. Ilsley v. Stubbs, 9 Mass. 65, 6 Am. Dec. 29.

4. Note: 23 Eng. Rul. Cas. 407.

supposed ability of the buyer to pay at the expiration of the credit." Fraud on his part is not an essential ingredient of the right. Nor is the application of the doctrine to be restricted to those cases where the contract of sale, as between the consignor and consignee, is to be considered executory, as where the consignee or buyer has not obtained on the credit afforded him what is, by the principles of the common law, a vested property; on the contrary this is presupposed. The fact that goods are sold f. o. b., at the point of shipment for transportation to the buyer, as distinguished from a delivery to the buyer for transportation by him as owner, does not affect the right of stoppage in transitu while the goods are in actual transit to the buyer. The right exists not only as regards the sale of personal chattels but equally as regards the sale of choses in action such as negotiable bills or the like. When a seller sends goods sold to the place of destination by private conveyance, e. g., a company incorporated to drive logs, the right of stoppage exists the same as if they are sent by common carrier.10 The death of the buyer during the transit, if his estate is insolvent, does not terminate the seller's right of stoppage,11 but if the goods are delivered by the carrier to the administrator, the right is thereby terminated, because the transit is duly ended by such delivery.12 Where goods sold on credit are in the custody of a warehouseman or wharfinger, such custody is looked on as of the nature of a transit, and the seller's right to stop delivery to the buyer has been upheld.18 The restrictions on the exercise of this right, established by English decisions, have been derived from mercantile usages, sanctioned by their expediency and by principles of public policy, or by the precautions suggested by the system of the bankrupt laws.14 On the other hand the view has been taken, in the case of a sale of goods in the possession of a warehouseman, the transaction taking the form of a transfer of the warehouseman's receipt or order, negotiable

5. Arnold v. Delano, 4 Cush. (Mass.) 33, 50 Am. Dec. 754; Stubbs v. Lund, 7 Mass. 453, 5 Am. Dec. 63.

Note: 29 Am. Dec. 387.

6. Muller v. Pondir, 55 N. Y. 325, 14 Am. Rep. 259.

7. Hause v. Judson, 4 Dana (Ky.) 7, 29 Am. Dec. 377; Johnson v. Eveleth, 3 Me. 306, 45 Atl. 35, 48 L.R.A. 50; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Pick. (Mass.) 607; Ilsley v. Stubbs, 9 Mass. 65, 6 Am. Dec. 29.

8. Note: 62 L.R.A. 805.

11. Mactier v. Frith, 6 Wend. (N. Y.) 103, 21 Am. Dec. 262.

12. Jacobs v. Bentley, 86 Ark. 186, 110 S. W. 594, 126 A. S. R. 1086. Note: 11 L.R.A. 349.

13. Dixon v. Yates, 5 B. & Ad. 313. 27 E. C. L. 86, 39 Rev. Rep. 489, 23 Eng. Rul. Cas. 385. See also South Western Freight, etc., Co. v. Stanard, 44 Mo. 71, 100 Am. Dec. 255; Conrad v. Fisher, 37 Mo. App. 352, 8 L.R.A. 147; Arnold v. Carpenter, 16 R. I. 560, 18 Atl. 174, 5 L.R.A. 357.

Notes: 19 Am. Rep. 89; 23 Eng.

9. Muller v. Pondir, 55 N. Y. 325, Rul. Cas. 409. 14 Am. Rep. 256.

14. Ilslev v. Stubbs, 9 Mass. 65, 6

10. Johnson v. Eveleth, 93 Me. 306, Am. Dec. 29. 45 Atl. 35, 48 L.R.A. 50.

in form, that there is no transit involved, as the delivery was not to the warehouseman for delivery to the buyer, and that therefore no right of stoppage in transitu can exist.15

401. Who May Exercise Right Generally.-The right of stoppage in transitu belongs only to one occupying the relation of seller or quasi seller towards the consignee of the goods, 16 and does not extend to a surety for the price of the goods.17 So if one who has been induced by the fraud of the buyer to make the sale exercises his right of rescission this puts an end to the relation of seller and buyer and therewith any right in the seller as such to stop in transitu.18 It has been held, however, that if a third person pays the price for the buyer and takes an assignment or transfer of the bill of lading he may exercise the right of stoppage.19 Also the right may exist in cases where the transaction is not strictly a sale as between the consignor and consignee; it is sufficient if the parties stand in substantially the position of buyer and seller.20 Thus where a purchasing agent purchases goods on his own credit with his own funds and ships them to his principal he occupies substantially the position of a seller as regards his principal and may exercise the right of stoppage.1 So one who consigns goods to his factor may on the latter's insolvency stop the goods in transitu, as a factor has no lien for a general balance until the goods come into his actual possession. According to the view taken in this country especially, where a merchant on receipt of an order for goods from a customer directs another merchant to ship them on his credit direct to his customer, no privity of contract arises between the customer and the merchant shipping the goods, and the latter has no right of stoppage in transitu on account of the insolvency of the merchant at whose order and on whose credit the goods were shipped, as the transaction is in effect a sale and delivery to the merchant at whose order the goods are shipped at the point of shipment and the goods cannot be regarded in any sense as in transit to the merchant directing

15. Rummell v. Blanchard, 216 N. Y. 348, 110 N. E. 765, Ann. Cas. 1917D 109.

16. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434; Hepp v. Glover, 15 La. 461, 35 Am. Dec. 206; A. J. Neimeyer Lumber Co. lington, etc., R. Co., 54 Neb. 321, 74 N. W. 670, 40 L.R.A. 534.

W. 1059, 59 A. S. R. 434. As to rescission for the fraud of the buyer generally, see infra, par. 592.

19. Notes: 29 Am. Dec. 385; 19 Am. Rep. 87.

20. Notes: 29 Am. Dec. 385; 19 Am. Rep. 87. Bur- 1. Newhall v. Vargas, 13 Me. 93, 29 Am. Dec. 489; Ilsley v. Stubbs, 9 Mass. 65, 6 Am. Dec. 29; Muller v. Pondir, 55 N. Y. 325, 14 Am. Rep. 259.

Notes: 29 Am. Dec. 385; 19 Am. Rep. 87; 105 A. S. R. 364; 3 L.R.A. 648; 23 Eng. Rul. Cas. 410.

17. Notes: 29 Am. Dec. 385; 19 Am. Rep. 87.

Notes: 29 Am. Dec. 385; 19 Am. Rep. 87.

2. Notes: 29 Am. Dec. 385; 19 Am. Rep. 87. See FACTORS, Vol. 11, p: 776, as to the possession requisite to supN. port the lien of a factor.

18. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66

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Ruling Case Law: As Developed and Established by the Decisions ..., Volume 24