Court Opinion

ID: 9715011
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:51:43.487384+00
Date Added: 2024-06-11T18:23:30.479404
License: Public Domain

Duncan, J.,
dissenting: It is not disputed that the agreement between the borrowers and the defendant bank established a valid factor’s lien. The dispute relates to whether particular merchandise attached by the plaintiff was subject to the lien. The agreed statement contains no stipulation that this property was located at the borrowers’ place of business when the lien was created, and since the attachment was made more than a year later, it is a fair inference that it was not. The statute (R. L., c. 262A, s. 1) provides that “if so provided by any written agreement, all factors shall have a general continuing lien upon all merchandise from time to time consigned to or pledged with them, whether in their . . . possession or not ...” The agreement which created a lien in favor of the defendant provided that the “Borrowers shall make and deliver to the Bank an actual inventory of the contents of their factory once each month,” showing “actual cost ... of each item ...” This may well be thought to be “substantial compliance” with the provisions of section 1 with respect to the requisites of a written agreement sufficient to create a lien (s. 7).
Other proof which in my view is essential to the establishment of a lien is lacking. Nowhere does it appear that the attached goods were either subject to the lien originally created, or if after-acquired, that they became subject to it as “merchandise from time to time consigned to or pledged with” the bank {supra, s. 1). So far as appears, no monthly inventory was ever made or delivered. I recognize that a transfer of possession of the goods is not required. Cf. In re Comet *115Textile Co., 15 F. Supp. 963. The statute so provides (s. 1). It further provides for a “continuing general lien.” The lien may continue as to the proceeds of sale of the goods by the borrower, or as to goods substituted therefor. But before such a lien can continue, it must first attach; and the statute contemplates that before it shall attach, the particular goods shall be “consigned ... or pledged.” This can be done either by the original contract, or by subsequent appropriation of the goods to it. Until it is done, the lien fails of creation by reason of non-compliance with the statute. See Gilmore, “Chattel Security: II,” 57 Yale L. J. 761, 771, 772; Silverman, “Factoring: Its Legal Aspects and Economic Justification, 13 Law & Contem. Prob. 593, 601, 604.
While the statutes of some other jurisdictions contain more explicit provisions with respect to the appropriation of after acquired goods to a lien contract (See Minn. Laws 1947, c. 590, s. 2; Purdon, Penna., Ann. Stats. Tit. 6, s. 222), the provision of our statute that the lien shall be upon merchandise “from time to time consigned ... or pledged” should not be disregarded and is reasonably plain. The Legislature cannot well be said not to have intended what it expressly required. Since the merchandise in question was not shown to have been made subject to the lien at any time, the defendant has failed to establish the existence of a valid lien upon it.