Lloyd's Maritime and Commercial Law Quarterly
THE UNPAID SELLER’S RESERVATION OF TITLE UNDER THE ROMALPA CLAUSE IS NOT EFFECTIVE IN AMERICA
D. E. Murray
Professor of Law, University of Miami, Miami, Florida.
In the well-publicized case of Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium Ltd.1 a Dutch seller of aluminum foil to an English buyer provided in its contracts that the:
“ownership of the material to be delivered by … [the seller] will only be transferred to purchaser when he has met all that is owing to … [seller] no matter what ground.
… purchaser shall keep the object(s) in question for … [seller] in his capacity as fiduciary owner and, if required, shall store this (these) object(s) in such a way that it (they) can be recognized as such …”.2
The buyer was placed in receivership for the benefit of debenture owners, and the Dutch seller sought to recover the aluminum foil in the hands of the receiver and to recover the sales proceeds of aluminum foil which had been sold by the purchaser but which were in the hands of the receiver. Justice Mocatta in the Queen’s Bench Commercial Court3 held that it was agreed by the parties that the seller was entitled to the unsold aluminum foil in the hands of the receiver, and that inasmuch as the contract constituted the buyer a “fiduciary,” the seller could also recover the sales proceeds in the hands of the receiver. The decision was affirmed in the Court of Appeal,4 and Lord Justice Roskill noted that in the ordinary case not involving a fiduciary-buyer, the original seller would be simply an unsecured creditor. Lord Justice Goff observed that the seller’s claim to the sales proceeds is to “take that sum in priority to the general body of the appellant’s [the buyer’s] creditors and in priority to the secured creditor”.5 In brief, both courts implicitly agreed that a “secret lien” could be enforced against third parties who had no knowledge of the lien until after the collapse of the buyer.
Approximately two years after the decision in the Romalpa case, a Federal District Court in New York was faced with another version of the Romalpa clause. A Dutch seller sold yarn to a corporate buyer in South Carolina; the sale involved five shipments of yarn under a contract which stated:6
1 [1976] 1 W.L.R. 676; [1976] 2 Lloyd’s Rep. 443. See the interesting discussion in C. Lewis, “Reservation of Title By the Unpaid Seller”, [1980] 3 LMCLQ 309.
2 [1976] 1 W.L.R. 676, 678–679; [1976] Lloyd’s Rep. 443, 444–445.
3 [1976] 1 W.L.R. 676; [1976] 2 Lloyd’s Rep. 443.
4 [1976] 1 W.L.R. 676, 683; [1976] 2 Lloyd’s Rep. 443, 451.
5 [1976] 1 W.L.R. 676, 691; [1976] 2 Lloyd’s Rep. 451, 457.
6 In re Duplan, 455 F. Supp. 926, 927; 24 UCC Repts. 965, 967 (S.D.N.Y. 1978).
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