assignee in good faith, and without intention to obstruct or prejudice the rights of the bank, had required it to establish its claims to the proceeds by judicial proceedings. In the former case it was held that, as the bank had come into a court of equity, it should be required to do equity, and that compensation should be allowed to the assignee for his own services and that of his counsel; also, that the assignee should be reimbursed for expenditures which he had made in and about the property in question. But in the Dennistown Case, the court declined to follow the decision in the first case, holding that the rights of the assignee, if any, to reimbursement, were against the assignor; in other words, that these expenses should be borne by the assigned estate, rather than by the bank which, it had been decided, had had from the beginning, the lawful and superior title to the proceeds.

It has been held that, where goods are imported under bills of lading taken in the name of bankers who finance the importations and indorse the same to the importer, taking in exchange trust receipts in the ordinary form, and payments for the goods are made to the bankers by a customer who has a contract with the importer to pay the actual cost of the goods, plus expenses of the importer and a fixed sum per ton, the customer can recover from the bankers an amount paid in excess of the actual freight on the goods, which the importer secretly arranged with the seller in a foreign country to add to the invoice. Moors v. Bird (1906) 190 Mass. 400, 77 N. E. 643. The court held that the importer could recover this excess as a payment under mistake of fact, although the bankers had paid over to the importer, or allowed the latter on account, the amount thereof, since the actual state of accounts between the person so receiving money under mistake of fact and the person to whom he has paid it is of no consequence, but the test of recovery is the right to keep the money if the state of accounts between the parties requires it. The court inti

mates that the customer could not hold the bankers liable on the ground that the fraud of the importer was in legal effect the fraud of the bankers, since the customer, in receiving the goods under its contract with the importer, did so knowing the relations of the several parties. In other words, all of the parties were familiar with the course of dealings in question, except that the bankers had no knowledge of the agreement between the customer and the importer as to the price to be paid by the former for the merchandise.

The word "proceeds" in a trust receipt under which the purchaser agrees to hold the goods in trust for bankers who advance money for the purchaser, as the property of the bankers, with liberty to sell the same for the latters' account, or to manufacture the same without cost or expense to the bankers, and to hand the proceeds to them to apply against their acceptances, has been held to mean gross proceeds, without reduction on account of expenses of manufacture or sale, or of other expenses. Brown v. Green & H. Leather Co. (1923) 244 Mass. 168, 138 N. E. 714. So that it was held in this case that the manufacturer was not entitled to be allowed for expenses incurred by it for legal services in the prosecution of a claim against the government, and to deduct such expenses from the amount due the bankers, where the goods in question were being used for the manufacture of war materials under a contract with the government, and a claim was made by the manufacturer against the government for nonfulfilment of this contract, and an allowance made by the government on this claim; but it was held that, so far as necessary to settle the bankers' claims, they were entitled to have applied thereto the entire sum received from the government. The court observed that it was unable to see any sound reason for holding that expenses incurred for legal services stood on any different footing from expenses of manufacture, and called attention to the fact that the trust receipts expressly provided that the au

thority of the manufacturer in connection with the goods was to be exercised "without cost or expense" to the bankers.

V. Effect of recording acts.

a. In general.

Recording acts have in some instances expressly dealt with the subject of trust receipts. See, for example, the Ohio General Code, § 8568 (as amended by Laws 1925, p. 116), in which it is provided that the statute shall not apply to trust receipts or similar instruments, under certain circumstances.

It was held in General Motors Acceptance Corp. v. Hupfer (1925) 113 Neb. 228, 202 N. W. 627, that the party giving the trust receipt (in a transaction involving the financing of sales of automobiles) was a bailee, and that, therefore, the case did not come within the recording statutes. See this case supra, II. b, under heading, "Bailor and bailee."

b. Trust receipt as chattel mortgage. The annotation at this point is supplemental to that in 25 A.L.R. 332, on the subject of trust receipts, or instruments purporting to be such, as chattel mortgages within filing statutes.

In a number of cases cited in the above annotation, the courts have taken the position that trust receipts were not chattel mortgages within the meaning of the recording acts. There is some authority therein cited to the contrary, however. It seems difficult to understand how a true trust receipt can be regarded as a chattel mortgage, for it will be observed that in such transactions the party giving the receipt does not have title, but the title is in the party to whom the receipt is given, and to hold that it is a chattel mortgage under these conditions would seem in effect to hold that one might give a chattel mortgage on goods belonging to the mortgagee. It seems that the confusion has arisen from failure to keep clearly in mind the nature of the true trust receipt transaction, and to distinguish it from those transactions

where the receiptor is a link in the chain of title direct from the seller or shipper of the goods. In several cases in which the so-called trust receipts have been held ineffectual unless recorded as a chattel mortgage, the courts have distinguished the transaction in question from the ordinary trust receipt contract, on the ground that, in the latter, the lender's title is derived from a third person, and not from the borrower. See Re Fountain (1922; C. C. A. 2d) 25 A.L.R. 319, 282 Fed. 816.

It will be observed that the recent cases which have held the trust receipts to be in the nature of chattel mortgages within the meaning of recording acts are cases generally involving the marketing of automobiles, and that the transaction is somewhat different from that in the ordinary trust receipt transaction. It is possible that in these cases the circumstances were such that the title should be regarded as passing directly from the seller to the purchaser, the automobile dealer, and in this view of the transaction the position taken would seem justifiable.

In Re Schuttig (1924; D. C.) 1 F. (2d) 443 (a case arising in New Jersey), the court recognizes a distinction between the true trust receipt situation where the purchaser never has title to the property, and therefore third persons are not deceived by "retention of of possession," and cases of the kind in question where the purchaser is a link in the chain of title, the transaction, in the latter instance, being in effect a chattel mortgage. It was held in this instance that the transaction constituted the giving of a chattel mortgage, which, not being recorded, was invalid as against the trustee in bankruptcy of the party giving it, where the latter, who was a dealer in automobiles, purchased cars from the manufacturer, which shipped them under negotiable bills of lading to the dealer's order, with sight drafts upon him attached, and, to procure funds to meet the drafts, the dealer obtained a loan of 80 per cent thereof from a security corporation to which he gave

trust receipts, stating that cars specified therein had been received from the corporation and were held as its property, with liberty to sell the same and to account to it for the proceeds. The court pointed out that the security corporation never took title from the manufacturer, that the bills of lading did not read to it, and that all that it did was to lend to the bankrupt (the dealer) money to take up the shipping documents covering the cars in question.

So, in Re Cullen (1922; D. C.) 282 Fed. 902 (a case arising in Maryland), where the instrument designated as a trust receipt was given in a domestic transaction involving the sale of automobiles to a dealer, under arrangement by a credit company for financing such transactions, the acceptances on the part of the credit company to be secured by trust receipts covering automobiles sold on credit, acknowledging that the automobiles covered by it were the property of the credit company and were held in trust, it appeared that the trust receipt was taken, instead of a chattel mortgage or a recorded conditional sales contract, for the purpose of avoiding the publicity arising from the necessity of recording such instruments. The court, in holding that the so-called trust receipt was ineffectual as against the trustee in bankruptcy of the dealer, pointed out that this transaction differed in essential elements from one in which a trust receipt might properly be used; that in this instance the effect of the transaction was that the manufacturer sold the automobiles to the dealer, retaining a lien upon them for the balance of the purchase price, and assigned this lien to the credit company as collateral security for the advance made by the latter to it; that in most, if not all, of the best considered cases in which trust receipts had been sustained, they had been employed in the exportation or importation of merchandise under conditions under which it would have been more or less inconvenient to have given either contracts of conditional sale or chattel mortgages, and in connection with which it was not likely that there

would arise the evils against which the recording statutes were intended to guard. See also Industrial Finance Corp. v. Capplemann (Fed.) under V. c, infra.

And in Commerce-Guardian Trust & Sav. Bank v. Devlin (1925; C. C. A. 6th) 6 F. (2d) 518, the court held that the bank's lien, by way of bills of sale, trust receipts, or otherwise, not being recorded or filed as provided by the Ohio statutes, was void as against creditors of the mortgagor, both by the statutes of Ohio and under the bankruptcy act, where the bank loaned money to an automobile dealer, secured by bills of lading conveying to the bank the title to automobiles purchased by the dealer, the bankrupt, these automobiles never being in fact delivered to the bank, but being retained in the possession of the dealer at its place of business, under trust receipts given by him to the bank whereby the automobiles were to be held "as the purchase of the bank," sales or other disposition to be only on the written order of the bank "for release from trust," on payment to the bank of the required amount. And after the pledged automobiles were wrongfully sold, it was held that the bank was merely an unsecured creditor as respects the debts which it was attempted to secure by the trust receipts.

So, in Mohr v. First Nat. Bank (1924) 69 Cal. App. 756, 232 Pac. 748, the court took the position that if title to automobiles passed from the manufacturer to the purchaser, and the latter retained possession under a trust receipt arrangement by which trust receipts were given to a bank which advanced the purchase price, the transaction between the dealer and the bank would constitute a chattel mortgage which would be invalid as against the rights of creditors of the dealers, because not executed or recorded as required by statute.

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In General Motors Acceptance Corp. v. Boddeker (1925) - Tex. Civ. App. 274 S. W. 1016, where a retail dealer of automobiles purchased on credit executed a trust receipt to an acceptance corporation, which had

sent the bill of lading to a bank, for delivery upon payment of the draft attached, covering a part of the purchase price, and the execution of the trust receipt (which is not set out), it was held that, as the parties contemplated that the dealer would immediately expose the automobiles for sale at retail as part of his stock of merchandise, the trust receipt was a mere chattel mortgage on a stock of merchandise daily exposed for sale in parcels at retail, and, not being filed for record, was void under a statute declaring that every mortgage, deed of trust, or other form of lien attempted to be given by the owner of any stock of goods or merchandise daily exposed to sale in parcels, in the regular course of business of such merchandise, and contemplating a continuance of possession of the goods and control of the business by sale of such goods by the owner, should be deemed fraudulent and void. The conclusion was accordingly reached that when the acceptance corporation sold the automobiles to the retail dealer, merely taking the trust receipt, which was void under the statutes of that state, not only the right of possession but the title to the property passed to the dealer, and in turn both went to the trustee in bankruptcy when the dealer became a bankrupt; and that the trustee then had the right to transfer them to a third party. The contract was also regarded as void, if considered as a reservation of title. See the case under V. c, infra. So, in Texas Bank & Trust Co. v. Teich (1926) Tex. Civ. App. S. W. 552, it was held that a trust 283 receipt given by an automobile dealer to a bank, in which the dealer agreed to hold an automobile in trust as the property of the bank, was void as to creditors of the dealer, because not registered as required by the statutes of that state. In the trust receipt the dealer, as above indicated, declared that he held the automobile in trust for the bank, that, at the time of the issuance of the receipt, it was solely the latter's property, that he agreed to keep it in store for the bank's benefit, and to turn the proceeds of the sale

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thereof into the bank in payment of his note given for money furnished to him for the purpose of "unloading" automobiles, the expressed condition of the trust receipt being that the title to the automobile should remain in the bank until payment of the note referred to, the bank, on default of such payment, being authorized to take charge of and sell the automobile, and to apply the proceeds to the payment of the dealer's debt to it.

But in General Motors Acceptance Corp. v. Hupfer (1925) 113 Neb. 228, 202 N. W. 627, it was held that the trust receipt did not constitute a chattel mortgage, but a mere bailment, so that recording was unnecessary. See this case supra, II. b, under heading, "Bailor and bailee."

It was held in Re Ford-Rennie Leather Co. (1924) 2 F. (2d) 750, that a chattel mortgage, within the meaning of the provision of the Delaware recording statute making an affidavit essential to the validity of a chattel mortgage, did not arise from the delivery of goods under a trust receipt reciting that the buyer held the goods, or their proceeds, as the property of the seller until full payment of the purchase price, since the trust receipt reserved title to the property in the seller, and no title passed to the buyer.

c. Trust receipt as conditional sale.

In Re Bettman-Johnson Co. (1918) 163 C. C. A. 3, 250 Fed. 657, the court held that a transaction under the ordinary trust receipt agreement (by which the importer obtained possession of the goods through indorsement by the bank of the bill of lading, under an agreement to hold them in trust as the property of the bank, with liberty to sell, and to deliver the proceeds to the bank to apply against its advances for the purchase price) was in the nature of a conditional sale, so as to fall within the provisions of the Ohio statute under which the condition as to the reserved title was void unless the contract was recorded, in the case of the delivery of property to another "on condition that it will belong to the person receiving it when the amount paid is a certain