13. Rights of an unpaid seller against the subject of the sale.—As we have seen, the contract of sale is com plete by the consent of the parties to the contract, and unless it is otherwise provided the title in the goods passes from the seller to the buyer. The seller is en titled to payment.
So long as the seller retains the goods in his posses sion he has a lien on them for the price. His lien is not effective if the sale was made on credit, unless the time allowed for payment has expired.' Thus A sells a carload of pulp to B on sixty days' credit; a bill of sale is made out and delivered to B, but it is agreed that A shall keep the pulp in his warehouse for the time being. B, a month later, assigns the bill of sale to C, and then becomes insolvent. Upon the demand of C for delivery of the pulp, A may refuse delivery. It is true that by making a sale on credit he waived his lien, but as B became insolvent and A had posses sion of the goods, A's right of lien at once became ef fective, and C could have no greater right to the goods than B.
If at the time that A sold the pulp to B, unlmown to A, B was insolvent, and the goods were shipped and a bill of lading was sent to him, an assignment of the bill of lading by B to C, who was named as assignee, would not defeat A's right of stoppage in transit. C is not a purchaser for value, and has only the right of B. If, however, B had sold the pulp and delivered the bill of lading to C before A exercised his right of stop page, C would be entitled to receive the goods. The seller's lien exists therefore, and he can refuse delivery, where the sale is for cash, or where the sale is on credit and the buyer has become insolvent before the goods are delivered to him.
It must be understood that unless it is otherwise agreed the seller's lien exists only so long as he re tains possession. If he delivers the goods to the buyer, or to the buyer's agent, as, for example, to a carrier, the right of lien disappears because the seller has parted with possession.
There is an exception to this rule, in that if the sale is on credit and the buyer becomes insolvent after the goods have been delivered to the carrier and while they are in transit, the seller may retake possession.
Of stoppage in transitu, Benjamin says: This is a right which arises solely upon the insolvency of the buyer, and is based on the plain reason of justice and quality that one man's goods shall not be applied to the pay ment of another man's debts. If, therefore, after the seller has delivered the goods out of his own possession and put them in the hands of a carrier for delivery to the buyer (which is such a constructive delivery as divests the seller's lien) he discovers that the buyer is insolvent, he may retake the goods, if he can, before they reach the buyer's possession, and thus having his property applied to paying the debts due by the buyer to other people. The statement that
this right is based on the reason that one man's goods shall not be applied to the payment of another man's debt is, how ever, not literally accurate, for, strictly speaking, the goods so stopped are no longer the property of the unpaid seller, and stoppage in transitu takes place only where the goods have become the property of the buyer. Where they remain the property of the seller, the latter may withhold them by virtue of his ownership, but this is not the peculiar right of stoppage given by the law merchant . . . the right of stop page in transitu is a right to interfere and prevent the buyer from taking actual possession which he would otherwise have a right to take, and to undo the effect of an unconditional delivery to an agent to forward. This power does not exist except in the case of insolvency.' The principle has been very clearly laid down also in an American case, as follows : Stoppage in transitu is a right which the vendor of goods upon credit has to recall them or retake them, upon the dis covery of the insolvency of the vendee, before the goods have come into his possession, or any third person has acquired bona fide rights in them. It continues so long as the carrier remains in the possession and control of the goods, or until there has been an actual or constructive delivery to the vendee, or some third person has acquired a bona fide right to them. Upon demand by the vendor, while the right of stoppage in transitu continues, the carrier will become liable for a conversion of the goods if he declines to redeliver them to the vendor, or delivers them to the vendee. . . . And no tice by the vendor, without an express demand to redeliver the goods, is sufficient to charge the carrier. If the carrier is clearly informed that it is the intention and desire of the vendor to exercise his rights of stoppage in transitu, the notice is sufficient. And notice to the agent of the carrier, who in the regular course of his agency is in the actual cus tody of the goods at the time the notice is given, is notice to the carrier.' It has been held that the mere fact that the seller has received part payment of the price will not defeat his right of stoppage in transitu. If the contract is severable and the goods may be delivered by stated instalments, which are to be paid for separately, and payment has been made of an instalment, the seller may exercise his right of stoppage only for the goods which remain unpaid.