Summary
In National Cash Register Co. v. Thompson, 210 Miss. 37, 48 So.2d 608 (1950) the Court did find that a non-merchandise item — a cash register — was not subject to execution pursuant to the Business Sign Statute.
Summary of this case from In Matter of Bruneau's, Inc.Opinion
No. 37646.
November 20, 1950.
1. Business Sign Statute — purpose of.
The purpose of the Business Sign Statute is to defeat, as against creditors of a trader, secret liens asserted by third parties to property in the trader's possession and used or acquired in such business.
2. Business Sign Statute — construction of.
The Business Sign Statute is not to be deflected from its purpose by making it a panacea for creditors, but being highly penal in its nature it is to be strictly construed against any claim thereunder.
3. Business Sign Statute — limitations upon.
The Business Sign Statute applies only to traders, and not to property merely stored with the trader nor to property procured by fraud and strategem, trespass or larceny, and if the party seasonably and in good faith asserts his title he may recover it.
4. Business Sign Statute — no part in contest between creditors of common debtor.
The Business Sign Statute fixes the ownership of the property but takes no part in a contest between creditors of the common debtor who used or acquired the property which is the subject of the contest.
5. Business Sign Statute — recorded instrument retaining lien or security.
An instrument evidencing a conditional sales contract with title retained as security is properly recordable and when so recorded it is notice to all subsequently attaching creditors and they may not avail of the Business Sign Statute to displace the vendor's retained title or lien.
6. Sales — conditional sales contract — description of property.
In order that a recorded conditional sales contract may constitute constructive notice to creditors and others, the instrument itself must mention some fact or circumstance connected with the property which will serve to distinguish it from similar property, but when such a sale has been of a cash register and the instrument describes it as 1090 Brown Mahogany and gives the serial or factory number the requirements are met.
Headnotes as approved by Ethridge, C.
APPEAL from the circuit court of Yalobusha County; JOHN M. KUYKENDALL, Judge.
John S. Throop, Jr., for appellant.
The Business Sign Statute of Mississippi can not afford relief to the appellee in this case.
Appellee seeks to invoke the protection of the Business Sign Statute, Sec. 273 Code 1942, in order to destroy the recorded lien of the appellant. It has been said that the section is highly penal and is to be strictly construed against any claim thereunder. Yellow Mfg. Acceptance Corp. v. American Oil Co., 191 Miss. 757, 2 So.2d 834. The purpose of the statute is to defeat secret liens, and should not be tortured into a strained construction to defeat honest transactions entered into in accordance with upright business practices. Floyd v. C. Nelson Mfg. Co., 93 F.2d 857, 35 Am. Bankr. Rep. 202. It is said in Yellow Mfg. Acceptance Corp. v. American Oil Co., supra, "The statute is highly penal. Where it applies, in effect, it takes, without compensation, one person's property and gives it to another. The statute has no application against the original seller, who, to secure the purchase money reserves title by writing, signed and acknowledged by the purchaser and recorded." Pet Milk Co. v. Fancher, 193 Miss. 1, 6 So.2d 293; Wood Preserving Corp. v. Coney Grocery Co., 176 Miss. 406, 168 So. 864.
Business Sign Statute has no application in a contest between creditors of the common debtor.
This law suit boils itself down to a contest between three creditors of a common debtor, two of whom, the appellee and Kelco Products Co., have had their satisfaction partly through execution on the third creditor's chattel. (That of appellant).
In support of the law which would prohibit such an unjust situation, we cite the case of Kinney v. Paine, 68 Miss. 258, 8 So. 747, in which it was held that the Business Sign Statute has no application in a contest between creditors of the common debtor. And we cite the following cases which hold that the Sign Statute does not derange priority of lien between creditors of common debtor. Crump v. Hill, 105 F.2d 124, 124 A.L.R. 165; Dodds v. Pratt, 64 Miss. 123, 8 So. 167; Campbell Paint Co. v. Hall, 131 Miss. 671, 95 So. 641. And for the landlord situation which we have here in the person of the appellee, we cite the case of Dorsey v. Latham, 194 Miss. 253, 11 So.2d 897, in which it was held that purchase money liens on automobile trailers, which were seized and removed from leased premises of the purchaser by landlord under attachment writ seeking to collect unpaid rent, were not displaced by landlord's lien and were not affected by the fact that there was no sign on the trailers indicating that the seller had any lien thereon. Nor can a landlord subject for his rent property which his tenant acquired under recorded contract of sale reserving title, even though tenant is a trader. Fitzgerald v. American Mfg Co., 114 Miss. 580, 75 So. 440. In the case just cited the plaintiff had sold an electric fan and a soda fountain to one Goodman who operated a pool room and had taken conditional sales contracts to secure the purchase price. Goodman absconded owing his landlord, the defendant. Plaintiff brought replevin for these items and the Court allowed him to succeed on the soda fountain because the contract was recorded, but denied recovery of the fan because the contract was not recorded which covered the fan. It is respectfully submitted that the Court must overrule the Fitzgerald case in order to affirm the judgment of the lower court in the case at bar. The Fitzgerald case is on all fours with the case at hand and leads inescapably to the conclusion that the appellant must succeed here. John Horan and Kermit R. Cofer, for appellee.
We submit that this case should be affirmed, because the dealer was a trader and operated the business in his own name, without disclosing that any other than he himself was the owner. In Quin v. Myles, 59 Miss. 375, it was held: "The Statute making property embarked in a trade liable for the debts of the person who conducts the business without disclosing the owner by a conspicuous sign, applies regardless of whether the creditors were misled or their claims antedated the business."
And in Durant Motor Co. v. Simpson, 160 Miss. 313, 133 So. 672, the Court held that "an automobile conditionally delivered to dealer and used in dealer's business must be treated as dealer's property, as against creditors."
Then the effect of the statute is to make all of the property used or acquired in the business the property of him who transacts the business, and liable for his debts, without regard to the sign under which the business is conducted, unless by a proper sign, the name of the owner be disclosed. See Lock v. Morton, 63 Miss. 280; Paine v. Hall Safe Lock Co., 64 Miss. 175, 1 So. 56.
In addition to the above, appellant took this conditional sales contract, whatever it is and whatever it amounts to, on November 26, 1947, and it was not recorded until June 5, 1948. It is here shown that the contract by its contents does not reflect that Simmons had bought from appellant and appellant had sold to him a cash register, and when the document was recorded it gave no notice to any creditor or prospective creditor that there was a lien against the cash register. It clearly appears from the first page of the contract that one piece of personal property was sold to Simmons and that this piece of property under the head "size and finish of cash register or accounting machines" was 1090 Br. Mah. and that the only other information is given under "Key Arrangement, standard, special" and "Serial or factory numbers" and is: "Shipped 4373428 From D Warehouse 4/30/1948".
It is respectfully submitted that it is impossible to determine with certainty on what this lien was and certainly no one dealing with Simmons after the recording of this instrument had any notice whatever that there was a retention of title agreement applying to this cash register.
The Supreme Court had before it in the case of Foods Co., Inc. v. Friedrich, 173 Miss. 717, 163 So. 126, the matter of replevin by appellee to recover from appellant a fish and poultry display case on which there was alleged to have been a mortgage to appellee to secure an unpaid portion of purchase money. In the mortgage the property was described as follows: "The following described personal property situate in Forrest County, State of Mississippi, namely 1 — 5' Fish and Poultry case complete # 5018."
In holding that the mortgage was void for insufficiency of description, the Court said this: "`While it is true that it is difficult, if not impossible, to describe in a mortgage this species of property, so as to determine with certainty whether any particular property of that class is that embraced in the mortgage, without resorting to evidence aliunde, yet the mortgage must mention some fact or circumstance connected with the property which will serve to distinguish it from all other property of the same kind. This fact or circumstance must be stated in the mortgage itself, it cannot be proved by parol evidence without thereby adding to the mortgage a term not contained in it. When thus stated, its existence in connection with the property may be established by extrinsic evidence. . . . If the description . . . be so vague and uncertain as necessarily to apply equally to all property of that kind, then it is clear that there can be no identification of it, without proving some fact or circumstance connected with the property not referred to in the mortgage." Kelly v. Reid, 57 Miss. 89; Garmon v. Fitzgerald, 168 Miss. 532, 151 So. 726.
There was no notice of any kind of claim until it was recorded and when it was recorded the description of whatever personal property was ordered (no showing from the document that the property ordered was delivered) is so indefinite and uncertain as to be rendered absolutely void under the authorities above cited. Therefore, even if otherwise the appellant would be able to avoid the Business Sign Statute it cannot do so because of the invalidity of the description in the contract relied upon, rendering same absolutely void.
As to appellant's point that the Business Sign Statute has no application in a contest between creditors of the common debtor, we find nothing in the record to sustain the common creditors theory.
Ellzey v. Frederic, 191 Miss. 633, 2 So.2d 849, is a case parallel with the case at bar. In the Ellzey case, C.N. Ellzey brought replevin suit against Wash E. Frederic to recover possession of two electric refrigerators which had been purchased by defendant, Frederic, at an execution sale. The sale was made under a judgment against J.J. Kersenac, who was a trader.
The declaration alleged and the evidence disclosed that the property was sold to Kersenac by the plaintiff in the replevin suit under contracts of conditional sale with title retained by Ellzey. The contracts were not recorded. And Ellzey sought to recover by virtue of the retained title; but Frederic resisted on the ground that the trader Kersenac was conducting business as a trader, and that the property was "used or acquired in such business" under our Business Sign Statute, Sec. 3352 Code 1930, and is, therefore, subject to his debts and is in "all respects treated in favor of his creditors as his property." The proof in the Ellzey case showed that Kersenac, the trader, used the refrigerators in his business. In the case at bar the proof showed that Simmons used the cash register in his business. And in sustaining the judgment in favor of the purchaser at the execution sale the Supreme Court among other things said: "One who carries on the business of a gasoline filling station is a trader within the meaning of Sec. 3352 (Code 1930). Louisiana Oil Co. v. Robbins, 169 Miss. 39, 152 So. 846. See also B.F. Goodrich Rubber Co. v. Breland, 170 Miss. 117, 154 So. 303. This section subordinated in favor of creditors of a trader the rights of a conditional vendor under unrecorded contract retaining title. . . . Under the evidence the integration of the services and activities into the business known as `Kersenac's Place' subjects property used or acquired therein to liability to creditors under the Business Sign Statute. . . . The peremptory instruction given for the defendant was proper."
In reply for appellant.
Appellant seems to emphasize the case of Ellzey v. Frederic, 191 Miss. 633, 3 So.2d 849, on page seven of his brief, and it is admitted that the facts are strikingly similar to those in the case at bar; however, the important difference lies in the fact that the conditional sales contract in the Ellzey case was not recorded, whereas, the contract in the case for consideration now was recorded as admitted by all.
At pages 8 et seq. of appellee's brief, the theory is advanced for the first time in this case that the description in the recorded sales contract is not sufficient. The contract shows that the National Cash Register Co. shipped a machine described under the column, "Size and finish of Cash Register or Accounting machines", as "1090 Br. Mah.". "Br. Mah." is obviously the abbreviation for brown mahogany and requires no comment. It is a common abbreviation for brown mahogany and is so used throughout the business trades. The contract further shows that the key arrangement is "standard, special", and under the column, "Serial or factory numbers" appears, "Shipped 4373428 From D Warehouse 4/30/1948".
Appellee cites National Foods Co., Inc. v. Friedrich, 173 Miss. 717, 163 So. 126, in which it was held that a poultry case described as #5018 was insufficiently described because it could not be known from the contract whether #5018 was a serial number or appeared in the same form on every poultry case. It is respectfully shown that here we have a column in the contract headed "Serial or factory numbers", under which appears, "Shipped 4373428 From D Warehouse 4/30/1948". This contract was recorded for all to see in the public records of Yalobusha County, Mississippi, and no one would have been misled who had searched the records to determine existing liens prior to extending credit. And it is further shown that it is too late on appeal to raise for the first time the question of the description of the cash register.
As said by appellee, the description must be such as will enable a third party to identify the property to the exclusion of all other property, without the assistance of external evidence which adds to or contradicts the original instrument. Without external evidence here a third party, on examining the recorded instrument, would easily see that a National Cash Register had been shipped by the National Cash Register Company to James Simmons and that it was a standard, special key arrangement, and that it bore serial number 4373428. The question is respectfully propounded as to how a cash register could be more definitely described.
In November, 1947, appellant, the National Cash Register Company, sold to James Simmons a cash register. The contract was a conditional sale with title retained in the vendor until the full purchase price was paid. The cash register was not for resale but was used by Simmons in operating his jewelry store in Water Valley. However, it was not shipped to Simmons until April 30, 1948. On June 5 of that year, the contract was recorded by appellant in the chattel deed of trust records of the Second Judicial District of Yalobusha County, in which Water Valley is situated.
In July, 1948, James F. Thompson, appellee, and landlord of Simmons, and another creditor of Simmons, attached all of the property in Simmons' jewelry store to pay judgments which they subsequently obtained against him, and included in this property attached and later sold at an execution sale was the cash register in question. Appellant appeared at the execution sale, by its agents, and prior to the sale advised James F. Thompson, the purchaser, of the existence of appellant's claim of title to the cash register.
In September, 1948, appellant filed suit against appellee in replevin for the cash register. At the conclusion of testimony by both parties, the case was submitted to the court without a jury on both law and facts. The trial judge held for appellee, the purchaser at the execution sale. His decision was apparently based upon the idea that the so-called "business sign statute" applied so as to subject the cash register to the claims of the conditional vendee's creditors. This act, which is Section 273 of the Mississippi Code of 1942, provides that: "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 words, and fail to disclose the name of his principal or partner by a sign in letters easy to be 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, be liable for his debts, and be in all respects treated in favor of his creditors as his property."
This statute was first passed in 1880. Miss. Code 1880, Sec. 1300. It is evidently a copy of an act of 1839 of Virginia, and is also similar to statutes from West Virginia and Maryland. Schmitt, The Sign Statute in Mississippi, 1 Miss. L.J. 203 (1928). (Hn 1) Its purpose is to defeat as against creditors of a trader secret liens asserted by third parties to property in the trader's possession and used or acquired in such business. Paine v. Hall's Safe Lock Company, 1886, 64 Miss. 175, 1 So. 56. This basic purpose has been kept in mind by the courts in numerous cases involving this legislation. This objective must not be deflected by applying the act as what Chief Justice Woods once called a "statutory panacea" for creditors. John Van Range Co. v. Allen, Miss., 1890, 7 So. 499. As was said in Yellow Mfg. Acceptance Corp. v. American Oil Co., 1941, 191 Miss. 757, 2 So.2d 834, 836, (Hn 2) "The statute is highly penal. Where it applies, in effect it takes, without compensation, one person's property and gives it to another. It is to be strictly construed against any claim thereunder."
Hence the Court in interpreting the statute has defined its reach. (Hn 3) It applies only to "traders", and a sawmill and a gin, for example, are not so classified. Yale v. Taylor Mfg. Co., 1885, 63 Miss. 598. If property is merely stored with the trader, it cannot be subjected to his debts. Hall's Self Feeding Cotton Gin Co. v. Berg, 1888, 65 Miss. 184, 3 So. 372. And if the property was procured by fraud and strategem, trespass, or larceny, if the party seasonably and in good faith asserts his title he may recover it. Frank v. Robinson, 1887, 65 Miss. 162, 3 So. 253; Yellow Manufacturing Acceptance Corp. v. American Oil Co., supra. And it is said that (Hn 4) the statute fixes the ownership in the property, but takes no part in a contest between creditors of the common debtor who used or acquired the property which is the subject of the contest. Dorsey v. Latham, 1943, 194 Miss. 253, 11 So.2d 897. Also, the Court has interpreted in a number of cases what is meant by "transacting business" and property "used or acquired in such business". (Hn 5) Another limitation upon the Act is the one which should have been applied in this case. As far back as 1890, the Court held that if the instrument retaining the lien or security is properly filed for record, the property cannot be attached by creditors. John Van Range Co. v. Allen, supra. In that case the conditional vendor had sold to Allen a stove for use in a hotel, and in sustaining the vendor's action of replevin the Court said: "every one (had) constructive knowledge; for the agreement, properly acknowledged by Harrison, was promptly put to record in the proper office". In Gayden v. Tufts, 1891, 68 Miss. 691, 10 So. 53, there was a recorded conditional sale of a soda fountain and creditors of the conditional vendee undertook to attach it. The Court sustained judgment for the vendor in replevin. Tufts v. Stone, 1892, 70 Miss. 54, 11 So. 792, 793, was also an action of replevin for a soda fountain sold to a conditional vendee. The contract was recorded. The Court held that "it was properly recordable, and excluded all idea of its being classed with those secret claims which it was the purpose of section 1300 of the Code of 1880 to disallow." To the same effect is Dodds v. Pratt, 1886, 64 Miss. 123, 8 So. 167.
The contrast between the result of a recorded and an unrecorded lien is well illustrated in Fitzgerald v. American Mfg. Co., 1917, 114 Miss. 580, 75 So. 440. The conditional vendor sold a soda fountain and a ceiling fan to the vendee. The contract for sale of the soda fountain was duly recorded. That of the ceiling fan was not recorded. The Court granted replevin to the vendor for the soda fountain, for which the contract had been recorded, and denied replevin for the ceiling fan, for which the contract had not been recorded. See also Yellow Mfg. Acceptance Corp. v. American Oil Co., supra, Miss. Code of 1942, Secs. 851, 863, 868.
The conditional sale contract to Simmons was properly recorded by appellant prior to the writ of attachment, and therefore the principle of the Fitzgerald case and its predecessors is applicable. The statute does not apply where the contract creating the lien is recorded prior to the attachment by creditors. The constructive notice thereby given negatives the secret lien penalized by the act and serves as a published proof to everyone of the lienor's claim. Appellant had recorded its retention of title. It was notice to attaching creditors and to appellee of the rightful claim of appellant to the cash register.
Appellee suggests that the recorded contract of sale does not show that appellant had actually sold to Simmons the cash register. However, the contract adequately reflects a conditional sale with retention of title until the vendor was paid the purchase price. (Hn 6) Appellee also urges that the property was not adequately described in the recorded contract of conditional sale. That contract designates it as one cash register "1090 Br. Mah.", which apparently means brown mahogany. Under the column called "serial or factory numbers" is the figure "4373428", which clearly designates the serial number of the machine. The requirement stated in National Foods, Inc., v. Friedrich, 1935, 173 Miss. 717, 163 So. 126, is that the description must separate the property from all other items of like kind. The contract must mention some fact or circumstance connected with the property which will serve to distinguish it from similar property, and this fact or circumstance must be stated in the instrument itself. The clear designation of the serial number of the cash register along with the other facts in the contract meet these requirements.
For the above reasons the judgment of the trial court is reversed, judgment rendered for appellant for the cash register, or, if it cannot be had, its value, and this case is remanded to the circuit court for the determination of what damages, if any, were incurred by appellant.
Reversed and remanded.
The above opinion is adopted as the opinion of the Court, and for the reasons therein indicated the case is reversed and remanded.