Was a heavy printing press returned when the failed buyer kept physical possession but stored it solely for the seller after rescission?

Plain-English summary

A seller transferred a used printing press, but the purchaser's checks bounced and the sale was rescinded for nonpayment. Because the press was heavy, the purchaser did not physically move it back and instead held it for the seller.

California said physical possession by the seller was not absolutely required. Under the historical rule, the return could qualify if the sale was rescinded within the required period, the buyer thereafter stored the press solely on the seller's behalf, and the seller had received no valid consideration.

The memorandum did not finally approve the refund because the claim's facts were incomplete; it described the conditions under which the storage arrangement would be sufficient.

Common questions

Did the seller have to move the press back immediately?

No.

What had to change after rescission?

The purchaser had to hold the press on the seller's behalf rather than as owner.

Did bounced checks count as consideration received?

The opinion assumed they did not.

Citations and references

• Historical California returned-merchandise rule — seller control through buyer storage could substitute for immediate physical repossession

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/490-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/490-0100.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

490.0100
March 27, 1951

To:

Mr. J. C. Ingle (DB)

From:

R. G. Hamlin

Subject:

D--- S. M--- Co.
XXXX South --- Street
--- --- XX

-- XXXXX

You have inquired with respect to the validity of the claim for refund filed by the above-named taxpayer for the recovery of the tax which he paid to the State upon the sale of a used printing press to the C--- T--- and L--- Co., of --- ---, which was subsequently rescinded. Although the facts contained in the taxpayer’s claim are incomplete, it appears that the purchaser’s checks bounced and that the seller rescinded the sale for nonpayment. It appears that the printing press is a heavy piece of equipment and that the purchaser is not storing the equipment for the seller. It is our opinion that it the seller receives no consideration other than the dishonored checks, he would be entitled to a refund if the rescission occurred within three months and if the purchaser has been merely storing the machine for the seller since that time. In other words, it is not absolutely necessary tha the seller obtain physical possession of the machine. It is sufficient if, as of a date within ninety days after the date of sale, the sale is rescinded and the purchaser from that date on stores the property on behalf of the seller.

RGH:HB