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.

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So, in Texas Bank & Trust Co. v. Teich (1926) - Tex. Civ. App. —, 283 S. W. 552, it was held that a trust 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

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

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sum or the value of the property, the title to it to remain in the . liverer thereof until such sum has been paid."

So, in Re Ford-Rennie Leather Co. (1924; D. C.) 2 F. (2d) 750, where the bankrupt, a manufacturer, purchased a quantity of skins pursuant to a memorandum of sale, and executed to the seller, upon the delivery of the skins, trust receipts reciting that it held the skins and the proceeds thereof in trust for the seller until the full payment of the purchase price, it was held that the trust receipts, read in connection with the memorandum of sale, were not absolute, but were upon condition, and the transaction was therefore a conditional sale within the meaning of the Conditional Sales Act of Delaware; and the failure to file the contract for record, the memorandum being a material part of the contract, as required by the laws of Delaware, rendered the transaction invalid as against the trustee in bankruptcy, who under the bankruptcy act was vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings as to all property in the custody of, or coming into the custody of, the bankruptcy court.

And the court, in General Motors Acceptance Corp. v. Boddeker (1925) Tex. Civ. App. 274 S. W. 1016, held that if the trust receipt should be classified as a "reservation of title," it was void because not recorded before the petition was filed under which the receiptor was adjudged a bankrupt (see statement of case under V. b, supra.) A statute declared that all reservations of the title to or property in chattels, as security for the purchase money thereof, should be held to be chattel mortgages, and should, when possession was delivered to the vendee, be void as to creditors and bona fide purchasers, unless such reservations were in writing and registered as required in the case of chattel mortgages.

A case somewhat similar on its facts to Re Cullen (Fed.) under V. b, supra, involving the holding of automobiles by a dealer under so-called

trust receipts, acknowledging property to be in a finance corporation, is Industrial Finance Corp. v. Capplemann (1922; C. C. A. 4th) 284 Fed. 8, in which it was held that the receipts were in the nature of conditional sales or bailments, and were ineffectual as against the trustee in bankruptcy of the dealer, unless recorded as required of such instruments by the laws of South Carolina. The court pointed out that the holding of the South Carolina court as to the instruments which require record under the statutes of that state was controlling, and that that court had held that such an instrument as the trust receipt in question was in the nature of a conditional sale or bailment falling under the recording act of that state. And in Ohio Sav. Bank & T. Co. v. Schneider (1926) Iowa, - 211 N. W. 248, the court said that the trust receipt was in the nature of a conditional sale, and doubtless came within the operation of the statute requiring such an agreement to be recorded in order to impart constructive notice. The receipt, which was in the usual form, was given by a dealer in automobiles to a bank from which the former received an automobile, agreeing to hold the same in trust for the bank as its property, with liberty to sell the same for the account of the bank and to remit the proceeds to it.

It was contended in Mershon v. Moors (1890) 76 Wis. 502, 45 N. W. 94, that the trust receipt agreement, being in the nature of a conditional sale, was not valid because not filed as required by statute in that state, which invalidated a conditional sale of personal property as to third parties, unless the contract was filed in the office of the clerk of the town or city in which the vendee resided, or, if a nonresident, in the office of the clerk of the town or city where the property was situated at the time of making the contract. But the court held that the statute did not apply to this contract, as the transactions involved took place in other states, under the laws of which states the contract was valid, neither the vendor nor the vendee residing in Wisconsin, and the goods, at

the time the trust receipt was given, being in transit from a foreign country.

VI. Miscellaneous matters.

a. Effect of retaking of property by holder of trust receipt.

See Moors v. Wyman (Mass.) under IV. b, supra, as to the right to a commission for making a sale, where the goods are retaken by the party making the advances.

The trust receipt agreements commonly provide that the holder of the receipt may at any time cancel the arrangement and repossess himself of the goods or the proceeds. See, for example, Re Marks (1915) 137 C. C. A. 590, 222 Fed. 52, in which the court said that the plain intention of the parties was that title to the goods should remain in the bankers until they were reimbursed for payment of the purchase price to the seller; and that they had at all times the right to retake the goods from the merchant, or their proceeds, if they could be traced. In view of this right of the holder of the receipt to repossess itself of the goods, the question has arisen as to whether it has a right, after retaking the property, to reimbursement for any deficiency which may arise between the amount of its advances and the proceeds arising from a sale of the goods. It was held in Charavay v. York Silk Mfg. Co. (1909; C. C.) 170 Fed. 819, that where the banker retook the goods, as he had the right to do under the trust receipt agreement, he was not precluded by the retaking of the property from recovering the loss which he had sustained by reason of the sale of the property below the invoice valuation. The court said that it was clear that in the ordinary case where a banker has not parted with possession of the goods under a trust receipt or otherwise, and is forced to realize upon them at a loss, he is entitled to claim for a deficiency, and that there was no reason why, because he had given them up and retaken them, his right should be any less. The contention was that the trust receipt created a conditional sale, and that the retaking

constituted an election of remedies precluding recovery for a deficiency. See this case, also, supra, II. b, under heading, "Conditional sales."

It has been held that where the holder of the trust receipt has the right to retake the property, and exercises this right, the receiptor cannot recover damages for deprivation of the use of the property. Thus, where a trust receipt given by the purchaser of an automobile on credit to an acceptance corporation stipulated that the purchaser should hold the property in trust as the property of the corporation, for the purpose of storage, and that the purchaser had no right to operate or use it for demonstration purposes, nor to pledge, mortgage, or sell the same except as therein authorized, and that prior to sale the purchaser would return the property unused and in good condition to the order of the corporation, it was held in Scott v. Industrial Finance Corp. (1924) Tex. Civ. App. -, 265 S. W. 181, that the purchaser could not recover damages on account of being deprived of the use and possession of the automobile, since, before sale, the finance corporation had the right at any time to retake the property, even if there was a contemporaneous or subsequent parol agreement giving to the purchaser the right to use the automobile, there being no evidence of fraud or mistake in the execution of the trust receipt.

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b. Provision in receipt for payment of "other indebtedness.”

Where the trust receipt, which gave the importer the liberty to sell or manufacture the goods, and provided that he should keep the same or their proceeds separate and capable of identification as the property of the bank which financed the importation, provided that the proceeds should be applied against the acceptances of the bank and the "payment of any other indebtedness" to the bank, it was held in Vaughan v. Massachusetts Hide Corp. (1913; D. C.) 209 Fed. 667, that the words quoted should not be construed as requiring payment of other indebtedness to the bank not then due

and not arising out of the particular letter of credit under which the importation in question was made, before title passed. In other words, where there was a series of importations, such an agreement did not entitle the bank to a claim on the proceeds superior to that of other creditors of the importer, to meet indebtedness from the latter to it which was not then due, where the importer had met all the obligations which were then due, and all obligations with respect to the particular letters of credit under which the goods were imported, the proceeds of which were sought to be recovered. The court approved the holding in New Haven Wire Co. Cases (1888) 57 Conn. 352, 5 L.R.A. 300, 18 Atl. 266, involving a similar state of facts, in which it was held that the contract should be construed as permitting the importer to obtain title by paying for the particular goods, and, in addition, such other indebtedness from it to the bank as was then due, and not as requiring the payment of acceptances before maturity as a condition precedent to obtaining title to goods which it had paid for.

c. Right of receiptor to maintain action for purchase price.

The right of the importer to recover from a purchaser the price of the goods was denied in Perkins v. Lippincott Co. (1918) 260 Pa. 473, 103 Atl. 877, where, although the trust receipt contemplated possession by the importer and sale for the account of the bank which financed the importation, the importer had neither title to nor possession of the goods, but on arrival they were delivered, under the direction of the bank, directly to the purchaser from the importer. In this instance, the importer, who had received an order from the defendant for certain goods, made arrangements with a bank to finance the transaction, the agreement being that payment should be made directly to the bank. The goods were shipped to the order of the bank, with bills of lading and drafts attached. On the arrival of the goods the bank authorized the custom

house broker to deliver them to the importer, taking from him a trust receipt in which he agreed to hold the consignment in trust for the bank, and, in the event of sale, to collect the proceeds and deliver the same to the bank. But, as above indicated, delivery was actually made directly to the defendant, the purchaser from the importer. And it was held not only that the latter had no right of action for the price of the goods, since the proceeds belonged to the bank and the only way in which the importer could acquire the right thereto was by paying his indebtedness to the bank, but that the importer could not maintain the action for the use of a second bank to which it had assigned the account represented by the sale of the goods, as security for advances, this bank having no notice of any defect in the title of the importer, the assignor, since the second bank succeeded only to such rights as the importer possessed.

But in Perkins v. Halpren (1917) 257 Pa. 402, 101 Atl. 741, it was held that the importer could maintain an action, for the use of his assignee, for the purchase price of the goods, notwithstanding the fact that the bank which financed the importation had, after the assignment, sold the goods, which were held by a warehouseman, and applied the proceeds to the credit of the importer. The case turns on the question as to whether there was an executed contract of sale, and whether title had passed to the purchaser of the goods from the importer, who had given a trust receipt to the bank which financed the importation, agreeing to hold the goods in trust as the property of the bank, with liberty to sell the same and to account to it for the proceeds. It was held that this question depended upon the intention of the parties as indicated by their course of dealing; and that a finding was justified that the parties intended to, and did definitely, complete the sale at the time the goods were billed to the purchaser by the importer, and the accounts with the purchaser, the goods being sold on credit, were, with the purchaser's knowledge, assigned

to a third party, although this assignment was in violation of the trust receipt agreement.

d. Subrogation.

It has been held that where the purchaser and seller of goods imported from a foreign country have mutual accounts, and the actual credit extended therefor from the one to the other is the balance on the mutual accounts, but the purchaser is compelled to pay the amount of the purchase price to the trust company which finances the importation and surrenders the goods to the purchaser in exchange for trust receipts, the latter is entitled to subrogation to the rights of the trust company in collateral security pledged with it by the seller, the latter having become insolvent. Gerseta Corp. v. Equitable Trust Co. (1924) 122 Misc. 361, 203 N. Y. Supp. 58. In this instance, as the purchaser had a credit balance against the seller, the purchaser would have been required to pay nothing, in case the rights of the trust company had not intervened.

The invoices, however,

were made expressly payable to the trust company, and by thus injecting the rights of a third party into the transaction, which rights the purchaser was obliged to respect, the latter sustained a loss which it was held entitled to recoup from the property of the seller pledged with the trust company.

e. Commingling of goods by receiptor.

The question of the effect of the commingling of goods by the importer, where the trust receipt provides that he shall keep the goods received thereunder separate and capable of identification as the property of the bank which advanced the money for the importation, is presented in People's Nat. Bank v. Mulholland (1917) 228 Mass. 152, 117 N. E. 46, where the goods received under the trust receipt (consisting of hides) were commingled with other goods of the same kind. The court held that the contract in the trust receipt to keep the goods separate and capable of identification required the receiptor to keep

the property at all times, both in its raw and manufactured states, separate; that this duty was not performed if only one person was sufficiently familiar with the goods to be able to make a separation, but required such a segregation or susceptibility to recognition that anyone familiar with the trade would be able to select the property covered by the trust receipt, so that the bank might with reasonable effort repossess itself of its property at any time; that there was a breach of this duty by the commingling of this property with other similar property so that the possibility of picking out of the mass the property of the bank was gone, and it was not necessary to determine that there was any moral turpitude involved in such commingling; that the commingling being a breach of a fiduciary duty owed to the bank, and having been done through the fault of the importer, and being a wrong against the bank, the burden of separating and tracing further its own property did not rest upon the bank; but that the loss should fall on the one whose carelessness had caused the indiscriminate intermixture. And the court applied the common-law rule applicable to commingled goods, under which the entire lot is held to the satisfaction of the claims of one whose property has been thus wrongfully commingled with the goods of the wrongdoer. It was held, also, that the amount received from sales by the importer out of the mixed lot, being still on deposit as part of a larger fund, was impressed with a trust for the benefit of the bank.

f. Waiver.

It was held in Brown v. Green & H. Leather Co. (1923) 244 Mass. 168, 138 N. E. 714, that their rights under the trust receipts had not been waived by bankers who had financed the purchase of hides by a manufacturer under a contract by which bills of lading were taken in the name of the bankers, who authorized delivery of the goods. to the manufacturer on receiving from the latter trust receipts in the usual form (providing that the hides, and the leather manufactured therefrom,