In re Wilcox & Howe Co.

39 A. 163, 70 Conn. 220, 1898 Conn. LEXIS 6

• Court: Supreme Court of Connecticut
• Decided: January 5, 1898
• Status: Published

Opinion

Torrance, J.

The statute (Public Acts of 1895, Chap. 212) under which the questions presented upon this reservation arise, reads as follows: “ Section 1. All contracts for the sale of personal property, except household furniture, musical instruments, bicycles, and such property as is by law exempt from attachment and execution, conditioned that the title thereto shall remain in the vendor after delivery, shall be in writing, describing the property, and all conditions of said sale, acknowledged before some competent authority, and recorded within a reasonable time in the town clerk’s office in the town where the vendee resides.

“ Sec. 2. All conditional sales of personal property which •shall not be made in conformity with the provisions of the preceding section shall be held to be absolute sales, except as between the vendor and the vendee or their personal rep•resentatives, and all such property shall be liable to be taken •by attachment and execution for the debts of the vendee, in the same manner as any other property not exempted by ■law.”

Leaving out of consideration for the moment the Merrill Brothers’ contract, there can be no doubt that all the others are, and were intended to be, conditional contracts of sale; for in each, by force of the contract, the general property in the subject-matter of the contract is ultimately to pass, for an agreed price in money, from its owner to the Wilcox & Howe Company, on the performance by it of certain conditions ; and where this is intended to be the effect, operation and main purpose of the contract, it will, as a rule, be held to be one of conditional sale, without much regard to the name or the form the parties may give to it. Hine v. Roberts, 48 Conn. 267; Loomis v. Bragg, 50 id. 228; Beach's Appeal, 58 id. 464; Robinson's Appeal, 63 id, 290.

Counsel for Merrill Brothers claims that the contract with them should also be regarded as one of conditional sale, rather than as a chattel mortgage; and for the present we will so regard it. All of these contracts, then, are for the sale of personal property within the operation of the statute, and they are upon condition that the title thereto shall remain in the vendor after delivery, and are consequently conditional contracts of sale within the meaning of the statute. None of these agreements fully complied with the provi- ' sions of the first section of the Act in question. The Waterbury Company’s agreements were not witnessed, nor acknowledged, nor recorded as the Act requires. The Merrill Brothers’ agreement was not recorded in the town of Huntington till long after the receiver was appointed and qualified. The Pratt and Whitney Company agreement was not acknowledged as the Act requires, nor at all. The McCabe & Company’s agreement can hardly be said to have been in writing within the meaning of the statute, for it was a mere statement signed by no one; and it was not witnessed, acknowledged, nor recorded as required by the Act. The New Haven Manufacturing Company agreement was not witnessed nor acknowledged, nor recorded as the Act requires; and the Farist Steel Company’s agreement was not in writing at all.

This being so, the conditional sales evidenced by these conditional contracts of sale, by force of the statute, are to “ be held to be absolute sales, except as between the vendor and the vendee or their personal representatives.”

Under the statute, then, as between all these conditional vendors and the Wilcox and Howe Company, or the personal representatives of that company, these contracts remain conditional contracts of sale, with the property in this machinery still in the vendors; while as between the vendors and the creditors of the Wilcox and Howe Company, the machinery covered by these contracts is the absolute property of that company. And the main, important question in the case is, whether the receiver is the “ personal representative ” of the company as to these contracts, within the meaning of the statute.

Experience has shown that great evils have resulted to creditors aiid bona fide purchasers, from the existence, Without notice to the world, of conditional sales like those here in question; and as this statute was evidently passed toj remedy to some extent those evils, it should receive such a construction as will best carry out the purpose of the statute. One main purpose and object of the statute is to protect creditors of, and bona fide purchasers from, the vendee in such contracts. As to them and as to those who by a limited or by a universal succession represent them, the sale is an absolute one. They take the benefits of the contract without its burdens. As between the vendor and vendee and their personal representatives, the sale remains as it was made, a conditional one. They, as between themselves, take alike the benefits and the burdens of the contract. The statute plainly embraces all contracts of the kind here in question; contracts made by natural persons who may die and be represented by universal successors known as executors or administrators, and contracts made by natural persons whose estate, in their lifetime, may through insolvency or bankruptcy proceedings pass to trustees or assignees as their limited successors and representatives; and contracts made by corporations whose estate, during the existence of the corporation or after its dissolution, may through like proceedings, be transferred to receivers or trustees or assignees as the limited successors and representatives of the corporation.

Counsel for the receiver contends that the words “ personal representatives,” as used in this statute, mean executors and administrators only, and it may be conceded that this is their usual and ordinary meaning when the personal representatives of deceased persons alone are spoken of. Pixley v. Eddy, 56 Conn. 336, 338. But the statute is dealing with all contracts of this kind, as well those made by natural persons who after death can be represented by executors or administrators, as those made by corporations who cannot be so represented; and to give to the words in question the narrow construction contended for would, to a certain extent at least, defeat the manifest intention of the legislature in the passage of this Act.

At common law the heir succeeded to the real estate of the deceased ancestor, and was for this reason sometimes called a “ real ” representative ; while the executor or administrator who succeeded to the personal estate of the deceased, was for this reason called the personal representative. Card v. Card, 39 N. Y. 317, 323. But the words “ personal representatives ” standing alone, do not necessarily include only executors and administrators; they have acquired no such fixed, definite, technical meaning. A trustee in insolvency and an assignee in bankruptcy, for many purposes stands in the shoes of the debtor and represents him, and speaking generally is, to the extent of the estate committed to his charge and for such purposes, as truly the personal representative of the debtor, as the executor or administrator is the personal representative of the deceased; and for all practical purposes, and speaking generally, no distinction can be made, in this respect, between a trustee in insolvency or an assignee in bankruptcy, and a receiver appointed under our statutes. We think the words “personal representatives,” as used in this statute, may reasonably be held to include in addition to executors and administrators, at least trustees in insolvency and receivers. For most purposes the trustee in insolvency and the receiver .stand in the shoes of the debtor and represent him; but they also, for some purposes, stand in the shoes of creditors and represent them. “ While it is true that the trustee can exercise some rights which are not in the insolvent, such as the setting aside of preferences and. the recovery of property conveyed in fraud of the rights of creditors, yet as a general rule he is entitled to have and do-only what the insolvent could have had and done; must take the estate with the burdens placed thereon by him, with all outstanding equities against it.” Merwin v. Austin, 58 Conn. 22, 34. “ The receiver for most purposes represents and stands-in the place of the corporation, and can enforce only such contracts and rights as it could enforce. But when acts have been done by the corporation in violation of law and in fraud of creditors, the receiver, who for all beneficial interests connected with the trust is regarded as the representative of the creditors, may repudiate their acts, taking care, however, that third parties who are without fault do not suffer. Such cases, however, are exceptions to a general rule, and it should clearly appear that the case is within the exception.” Greene v. Sprague Mfg. Co., 52 Conn. 330, 361; Litchfield Bank v. Peck, 29 id. 384; New Haven Wire Co. Cases, 57 id. 352.

As the receiver is thus the representative of the corporation for some purposes, and may for such purposes be called its personal representative, within the meaning of the statute, and as he also represents creditors for some purposes, the precise question here is whether the receiver, quoad these conditional contracts of sale and the property covered by them, is the personal representative of the corporation within, the meaning of the statute; and we are of opinion that he is not.

The commencement of proceedings for the appointment of a receiver of a corporation, or of a copartnership, dissolves all attachments and all levies of executions not completed, made within sixty days next preceding, on the property of the corporation or copartnership. Public Acts of 1895, Chap. 96. And by the appointment of a receiver the rights of creditors to attach or levy upon such property are suspended. New Haven Wire Co. Cases, 57 Conn. 352; Longstaff v. Hurd, 66 id. 350, 359. The law thus disables the creditors from interfering with that property, or from in any way appropriating it for their sole benefit; but in so doing it does not lessen their rights with respect to such property, nor does it destroy them; it merely provides for their protection and enforcement in another way. And whenever the law thus disables creditors from helping themselves, whether by proceedings in insolvency or bankruptcy, or by the appointment of a receiver or otherwise, it provides for the enforcement of whatever rights they may possess against the property of the debtor, through the instrumentality of its agent, the trustee, assignee or receiver. For the purpose of enforcing any such right which the creditor could have enforced for Ms sole advantage, and for the purpose of holding or taldng any property which a creditor could hold or take by law, or for recovermg back any property of which a creditor could avail Mmself in payment of his debt, the trustee, assignee, or receiver is M effect the creditor, as this court has repeatedly decided. Swift v. Thompson, 9 Conn. 63; Rood v. Welch, 28 id. 157; Shipman v. Ætna Ins. Co., 29 id. 245; Gaylor v. Harding, 37 id. 508; Taylor v. Atwood, 47 id. 498; Shaw v. Smith, 48 id. 306; Litchfield Bank v. Peck, Greene v. Sprague Mfg. Co., and New Haven Wire Co. Cases, supra.

It is of no importance, so far as the present discussion is concerned, whether such agent of the law takes the technical title to the debtor’s property, or takes only the possession of it; in either case he is the sole agent through whom, and through whom alone, as a general rule, the rights of creditors can be protected and enforced; and in protectmg and enforcmg those rights he is the representative of creditors and not of the debtor.

In the case at bar, the machinery covered by the conditional contracts of sale was, as to the creditors of the Wilcox and Howe Company, the absolute property of that company. It was available to the creditors in payment of their debts, and could have been appropriated for that purpose by attachment and levy of execution. When it came into the hands of the receiver of the insolvent corporation, the law sequestered it, on behalf of the creditors and for the benefit of all of them, as the absolute property of the corporation, just as fully and just as effectually as the creditors could have sequestered it by attachment and levy. For the purpose of making that sequestration effectual the receiver is the representative of the creditors, and holds the property, as they would have held it by proper proceedings, as the absolute property of the corporation. In a case like the present, a dispute as to the ownersMp of property between the receiver and the conditional vendors, is, in effect, and must be regarded as, one between such vendors and the creditors of the conditional vendee; and m such a case the statute imperatively requires that the property in dispute shall he held to he the absolute property .of the conditional vendee.

The claim is made on behalf of Merrill Brothers that their contract, if not valid as a conditional sale, maybe good as a chattel mortgage. But it was not recorded as such a mortgage is required to be recorded, until long after the receiver took possession, and therefore as to him, as the representative of creditors, it was not a valid mortgage under the circumstances. It was also claimed on behalf of Merrill Brothers that the Wilcox and Howe Company would be estopped by the recitals in the contract, from claiming that the contract was not properly recorded as a chattel mortgage or conditional contract of sale, in the town of Derby. Whether the company would he so estopped or not, we have no occasion to decide, for it is certain that the receiver as the representative of creditors is not so estopped.

The Superior Court is advised that all the machinery covered by all the contracts here in question, should be held by the receiver as the absolute property of the Wilcox and Howe Company, so far as the same may be necessary for the payment of its debts, and that the claims of the conditional vendors should he allowed only as general unsecured claims.

In this opinion the other judges concurred.