Weber Showcase & Fixture Co. v. Waugh, 42 F.2d 515 (W.D. Wash. 1930)

*516 *517 *518 *519 Jones & Hughes, of Seattle, Wash., for plaintiff.

John C. Hogan, of Aberdeen, Wash., Roberts, Skeel & Holman, of Seattle, Wash., and Elwood Hutcheson, of Yakima, Wash., for defendant.

NETERER, District Judge (after stating the facts as above).

The plaintiff claims:

A. That the order of the District Court for the Northern District of California adjudging that the plaintiff retain title to the fixtures and have the right of possession, and defendant having refused to comply with the order of the court, the terms of the conditional sales contract are enforceable, such order not being reversed or annulled, is binding on the defendant (34 C. J. 511), and which he may not collaterally attack (34 C. J. 514). The court had neither jurisdiction of the parties in interest or the subject-matter, the fixtures in Washington. Its jurisdiction is limited and is coextensive with the boundaries of the respective districts. No extraterritorial jurisdiction exists and cannot affect title to property in other jurisdictions. Booth v. Clark, 17 How. 322-328, 15 L. Ed. 164; Great Western v. Harris, 198 U.S. 561, 25 S. Ct. 770, 49 L. Ed. 1163; Sterrett v. Second Nat. Bank, 248 U.S. 73, 39 S. Ct. 27, 63 L. Ed. 135; Standard Bonded Warehouse Co. v. Cooper & Griffin (D. C.) 30 F.(2d) 842. Such act may operate only in personam to parties related to the court in the proceeding as parties. It is brutum fulmen. The California court had no jurisdiction over, or its receiver any interest in or title to, or possession of the Washington fixtures, and could not by stipulation bind the defendant or the fixtures before the special master or the court. The receiver in that proceeding could only represent the unsold California fixtures.

B. That the contract was executed in California and "must be construed according to the California law." It is fundamental that a contract is to be interpreted according to the lex loci contractus, but the status of the res is governed by the lex loci situs. If the lex loci situs requires a certain formality of acknowledgment and registry, the omission is not cured by attestation and registration of the lex loci contractus. Story on Conflict of Laws, § 262. See, also, Beggs v. Bartels, 73 Conn. 132, 26 A. 874, 84 Am. St. Rep. 152; National Cash Register Co. v. Paulson, 16 Okl. 204, 83 P. 793; Phœnix Packing Co. v. Humphrey-Ball Co., 58 Wash. 396, 108 P. 952.

Section 3790, Rem. Comp. Stat. Wash, provides that "all conditional sales of personal property * * * where the property is placed in the possession of the vendee, shall be absolute as to all bona fide purchasers * * * and subsequent creditors * * * unless within ten days after the taking of possession by the vendee, a memorandum of such sale * * * shall be filed in the auditor's office of the county, wherein, at the date of the vendee's taking possession of the property, the vendee resides."

In Chilberg v. Smith, 174 F. 805, 806, Judge Gilbert for the Court of Appeals, this circuit, said: "But the statute of Washington, in regard to the registration of conditional sales, declares the policy of the state in regard to agreements, whereby a vendee of personal property so sold is placed in the possession thereof with all the apparent indicia of ownership, and it clearly provides that, unless the instrument be recorded within 10 days from the delivery of the property to the vendee, the sale shall be absolute as to subsequent creditors in good faith."

The fixtures being shipped by the plaintiff to the Pilcher Company, vendee, at Aberdeen, Tacoma, Everett, and Monroe, and installed in the several stores of the vendee, under the plaintiff's supervision, the conditional sales contracts were void as to subsequent creditors of the vendee. First Nat. Bank v. Wilcox, 72 Wash. 473, 130 P. 756, *520 131 P. 203. See, also, Casey-Hedges Co. v. Wilcox, 72 Wash. 605, 131 P. 205; Burroughs Adding Machine Co. v. Wilcox, 72 Wash. 700, 131 P. 206; National Bread Wrapping Machine Co. v. Crowl, 137 Wash. 621, 243 P. 840.

The receiver, appointed at the suit of general creditors, succeeded to the rights of the subsequent creditors as well as the stockholders of the corporation, and free of unrecorded conditional sales contracts. Bayne et al. v. Brewer Pottery Co. et al. (C. C.) 90 F. 754. See, also, Corbett v. Riddle (C. C. A.) 209 F. 811; Cincinnati Equipment Co. v. Degnan (C. C. A.) 184 F. 834, certiorari denied, 220 U.S. 623, 31 S. Ct. 724, 55 L. Ed. 614.

The sale was concededly regular, and the title of the defendant, being deraigned through the receivership proceedings, is such as the receiver was competent to convey. North Coast Dry Kiln Co. v. Montecoma Investment Co., 82 Wash. 247, 144 P. 58. And the receiver had no right or power to waive any of the rights of the subsequent creditors (Keyes v. Sabin, 101 Wash. 618, 172 P. 835), and there is no evidence that any waiver was attempted by the receiver of this court, or any court, prior to sale of the property, November 3, 1926. See, also, Grunbaum Bros. Furniture Co. v. Humphrey Investment Co., 141 Wash. 329, 251 P. 567; Lundquist v. Olympia National Bank, 133 Wash. 600, 234 P. 453; Monotype Co. v. Guie, 134 Wash. 81, 234 P. 1046.

The fixtures came within the public policy of the state of Washington (Sound Industrial Loan Co. v. Allyn, 149 Wash. 123, 270 P. 295), and the public policy of the state of Washington may not be subordinated to the laws of California, under the established facts (Farley v. Fair, 144 Wash. 101, 256 P. 1031). See Barbour v. Campbell, 101 Kan. 616, 168 P. 879. See, also, Turnbull v. Cole, 70 Colo. 364, 201 P. 887, 25 A. L. R. 1149. The public policy declared by the state of Washington as to personal property cannot be rightfully separated from the title, except in the manner pointed out by the Washington statute. Hervey v. Rhode Island Locomotive Works, 93 U.S. 664, 672, 23 L. Ed. 1003. In that case the court said: "Accordingly, the actual owner of personal property creating an interest in another, to whom it is delivered, if desirous of preserving a lien on it, must comply with the provisions of the Chattel Mortgage Act. * * *" See, also, Du Pont de Nemours Powder Co. v. Jones Bros. (D. C.) 200 F. 638; Corbett v. Riddle (C. C. A.) 209 F. 811; Potter Mfg. Co. v. Arthur (C. C. A.) 220 F. 843; Cunningham v. Cureton, 96 Ga. 489, 23 S.E. 420.

The bills of sale being signed in Oregon and accepted in Los Angeles, Cal., and the fixtures shipped to Washington by the plaintiff and installed under its supervision, all that could be deduced from acceptance in California is that the purchaser would pay the freight to destination and assume damages to goods en route. Phœnix Packing Co. v. Humphrey-Ball Co., supra.

It may also be said that filing of the claim in the receivership and receiving dividends upon the proved claims, even though attempt was made not to waive the right to retake the property, is election of remedy. The Supreme Court of Washington in Kimble Motor Car Co. v. Androw, 125 Wash. 225, 215 P. 340, said: "The filing by a conditional sales vendor of a claim against the estate of the deceased vendee, whereby the claim is established and directed to be paid in the course of administration, constitutes an election to seek relief in court, and waives the right to reclaim the property, and it is immaterial that the claim expressly states that the right to retake the property is not waived."

The plaintiff selected its remedy, accepted the amount allowed on the claims, and received the dividends paid thereon, and repossessed itself of the fixtures in Oregon and California, presumably in the receiver's possession, and in which states there is no registry act as to such contracts. "To proceed by one remedy constitutes an election which is final and irrevocable," said the court in Eilers Music House v. Douglass, 98 Wash. 683, 156 P. 937, 938, L. R. A. 1916E, 613.

It can also be said that a conditional sales contract authorizing the seller to retake and sell the property on default and recover any deficiency, under the Washington policy, is, in fact, a chattel mortgage. Since inconsistent rights may not be reserved (West American Finance Co. v. Finstad, 146 Wash. 315, 262 P. 636), and, where doubt arises on the face of the instrument, courts usually treat it as a mortgage. Low v. Colby, 137 Wash. 476, 243 P. 18, 247 P. 475. "A mortgage of personal property is void as against all creditors * * * and against all subsequent purchasers * * * for value and in good faith, unless it is accompanied by the affidavit of the mortgagor that it is made in good faith, and without any design to hinder, *521 delay, or defraud creditors, and unless it is acknowledged and filed within ten days from the time of the execution thereof in the office of the county auditor of the county in which the mortgaged property is situated." Section 3780, Rem. Comp. Stat. (Wash.). No affidavit is attached.

C. The plaintiff's contention that the receiver's title was limited to the Pilcher Company title, which passed to the defendant, subject to the conditional sales contract, and that the defendant is not a bona fide purchaser for value, is not well founded. The sales contracts are void as to subsequent creditors, and of no effect as to bona fide purchasers. "Bona fide," Bouvier says, means "honest," synonymous with "good faith." The Supreme Court in Hosmer v. Wallace, 97 U.S. 575, 24 L. Ed. 1130, held that "bona fide" is synonymous with "good faith"; and a like holding in Rutledge v. Murphy, 51 Cal. 388. The Supreme Court of Georgia, in Phillips v. Dobbins, 56 Ga. 617, says "bona fide" means "without actual notice." In United States v. Des Moines Nav. & R. Co., 142 U.S. 510, 12 S. Ct. 308, 35 L. Ed. 1099, the court says one is a bona fide purchaser who buys in good faith and pays value. There is multitude of authority holding that the term "bona fide purchaser" means a purchaser in good faith without notice and for a valuable consideration. Young v. Schofield, 132 Mo. 650, 34 S.W. 497; Pickett v. Barron, 29 Barb. (N. Y.) 507; Ten Eyck v. Witbeck, 135 N.Y. 40, 31 N.E. 994, 31 Am. St. Rep. 809; Bowman v. Griffith, 35 Neb. 361, 53 N.W. 140; Cloud v. Dupree, 28 Ga. 170. A bona fide purchaser may be said to be a purchaser without knowledge of impeaching facts which would invalidate title, or without notice or knowledge of any defect in the title. See Matthews v. Poythress, 4 Ga. 487; Lawrence v. Clark, 36 N.Y. 128; Central Bank, etc., v. Hammett, 50 N.Y. 158; Green v. Biddle, 21 U. S. (8 Wheat.) 1, 5 L. Ed. 547; Canal Bank v. Hudson, 111 U.S. 66, 4 S. Ct. 303, 28 L. Ed. 354. The essential elements to constitute a bona fide purchaser are absence of notice, and a valuable consideration. United States v. Winona & St. P. R. Co. (C. C. A.) 67 F. 948; Id., 165 U.S. 463, 17 S. Ct. 368, 41 L. Ed. 789; United States v. California & Overland Co., 148 U.S. 31, 13 S. Ct. 458, 37 L. Ed. 354. See, also, State v. Brummett, 98 Wash. 182, 167 P. 120; Allis-Chalmers Mfg. Co. v. Ellensburg, 108 Wash. 533, 185 P. 811; Malmo v. Washington Rendering, etc., Co., 79 Wash. 334, 140 P. 569, L. R. A. 1917C, 440.

The exceptive clause in the bill of sale does not change the status. The rule applicable to bona fide purchasers of negotiable instruments, I think, has application. See Butterfield v. Town of Ontario (C. C.) 32 F. 891; Splivallo v. Patton et al., 38 Cal. 138, 99 Am. Dec. 358.

The burden is upon the plaintiff to show that the creditors were not subsequent and that the defendant did have notice of the sale and was therefore not bona fide. This burden has not been sustained. Nor is it material in any event, since the title is deraigned through subsequent creditors, against whom the unrecorded sales contracts are void. Defendant did not have actual notice, or any notice. Nor does it appear that the consideration was inadequate. The sale was extensively advertised. Bids were competitive, and the defendant's bid, $81,000, was higher than any other bid, and after adjournment a new bid was tendered in the sum of $90,000. There is no testimony that this was not adequate consideration. The cases^[1] cited by the plaintiff are all distinguished by the facts and by the decisions cited herein, and it would unduly lengthen this memorandum to specially apply or distinguish the several cases.

Judgment for the defendant.

[1] 24 R. C. L. par. 668; 35 Cyc. 691; 35 Cyc. 682; 35 Cyc. 693; Wittler-Corbin Mach. Co. v. Martin, 47 Wash. 123, 91 P. 629; Sunel v. Riggs, 93 Wash. 314, 160 P. 950; 34 Cyc. 191, 193, 334; Beach on Receivers, par. 732; Western Electric Co. v. Norway Drydock Co., 124 Wash. 49, 213 P. 686; Kidder v. Beavers, 33 Wash. 635, 74 P. 819; Sumner Iron Works v. Wolten, 61 Wash. 689, 112 P. 1109; McGill v. Brown, 72 Wash. 514, 130 P. 1142; State v. Superior Court of Chehalis County, 8 Wash. 210, 35 P. 1087, 25 L. R. A. 354; Bornstein v. Allen, 127 Wash. 314, 220 P. 801; Spencer v. Alki Point Trans. Co., 53 Wash. 77, 101 P. 509, 132 Am. St. Rep. 1058; 13 C. J. 580; 35 Cyc. 666; 12 C. J. 451; 35 Cyc. 606; Shaw Supply Co. v. Nelson, 124 Wash. 305, 214 P. 19; Rodecker v. Jannah, 125 Wash. 137, 215 P. 364; Mergenthaler Linotype v. Hull (C. C. A.) 239 F. 76; In re Nager (D. C.) 166 F. 972, 978; 34 C. J. 511, 514; McConnell v. Redd, 86 Cal. App. 785, 261 P. 506; Matteson v. Equit. Min. Co., 143 Cal. 436, 77 P. 144; Bice v. H. L. Arnold Co., 75 Cal. App. 629, 243 P. 468; Judicial Code, § 65 (28 USCA § 124).