Pearson v. Wm. R. Moore Dry Goods Co

• Decision Date: 17 January 1927
• Docket Number: 26074
• Citation: 110 So. 709,146 Miss. 225
• Court: Mississippi Supreme Court
• Parties: PEARSON v. WM. R. MOORE DRY GOODS CO. [*]

110 So. 709

146 Miss. 225

PEARSON v. WM. R. MOORE DRY GOODS CO. ^[*]

No. 26074

Supreme Court of Mississippi

January 17, 1927

Division B

Suggestion of Error Overruled Feb. 14, 1927.

APPEAL from circuit court of Kemper county, HON. J. I. STURDIVANT Judge.

Action by the Wm. R. Moore Dry Goods Company against W. E. Pearson trustee of the estate of Guy Jack, Jr., a bankrupt, to enforce a vendor's lien on merchandise. From a judgment for plaintiff, defendant appeals. Reversed, and judgment rendered for defendant.

Judgment reversed.

Currie & Amis, for appellant.

A decision of the case of necessity involves a construction of the purchase money lien statute of Mississippi and a decision of the question as to whether or not the seller of goods by reason of that statute, where no proceedings had been begun to perfect the lien prior to the filing of the petition in bankruptcy, has a lien prior to the title of the trustee in bankruptcy.

The filing of an involuntary petition in bankruptcy was a caveat to all the world and from the service of which, property was in the custody of the bankrupt court. The well-settled rule is that the rights of the trustee in bankruptcy exist as of the date of the filing of the petition. Collier on Bankruptcy (12 Ed.), page 731; Bailey v. Ice Machine Co., 239 U.S. 268, 60 L.Ed. 275.

The rights of the trustee, such as he had, related back to the date of the filing of the involuntary petition and the property of the bankrupt was in custodia legis from the date of the filing of the petition and service of the process under it.

The question presented for decision is whether or not a creditor under the purchase money lien statute of Mississippi can enforce that lien as against the trustee in bankruptcy when no levy has been made and the goods have not been segregated from the general stock of merchandise of the bankrupt prior to the bankruptcy proceedings and the taking into its custody of the property of the bankrupt by the bankrupt court. There have been several cases construing the purchase money lien statute of Mississippi, but no case has been found by us which dealt with the facts such as we have here. See Norris v. Trenholm, 209 F. 827; Brown Shoe Co. v. Wynn, 281 F. 807; In re Purvis, 293 F. 103; Campbell Paint & Varnish Co. v. Hall, 131 Miss. 671. In the last case cited Judge ANDERSON announced what in our opinion is the correct rule of law.

We do not think the lien could be enforced for the further reason that the lien of the seller where the goods had not been segregated prior to the bankruptcy act was lost as far as the enforcement of it against the trustee is concerned either in the state or bankrupt court. Federal Statute of 1898, as amended, section 47; section 70 of the Bankruptcy act; Everett v. Judson, 57 L.Ed. 927.

The only case we have been able to find which conflicts with the idea of the law as announced by Judge ANDERSON in the Campbell case is In Re Purvis, which case is no authority here for the reason that in that case there was being construed the mechanic's lien statute which is entirely different in its provisions from the purchase money lien statute.

Chambers & Trenholm, for appellee.

This case involves a consideration of the Mississippi statutory purchase money lien on personal property, section 2436, Hemingway's Code, but we cannot agree that it involves a consideration of the question as to such lien being superior to that of a trustee in bankruptcy "where no proceeding had been begun to perfect the lien prior to the filing of the petition in bankruptcy," as the record does not make out such a case.

It is true that on the latter point the agreed statement of facts is not clear on the proposition of whether the suit in the state court was filed before or after the petition in bankruptcy. The petition in bankruptcy was filed first. This question was set at rest by the action of the district judge, from which no appeal was taken. The district judge was acting in the light of a decision of the United States circuit court of appeals, Fifth district, in Brown Shoe Co. v. Wynne, trustee, 281 F. 807, 49 Am. Bk. R. 48.

On the question of whether the suit in the state court was commenced before the filing of the petition in bankruptcy, appellant may endeavor to invoke the rule that the law takes no account of fractions of a day, but the United States circuit court of appeals for the Second circuit recently held that that rule does not apply where title to property as between claimant and trustee in bankruptcy depends upon the exact time of the filing of the petition. Matter of Gubelman, 10 F.2d 926, 7 Am. B. R. (N. S.) 563.

The right of the state court to enforce this particular kind of lien after bankruptcy, where the bankruptcy court did not acquire jurisdiction, has been finally determined so far as we are concerned in this state, at least until the United States supreme court shall hold to the contrary, which it has not yet done, by the decision of Brown Shoe Co. v. Wynne, Trustee, supra.

It follows, therefore, that we have not a case "where no proceeding had been begun to perfect the lien prior to the filing of the petition in bankruptcy," else this case would never have come back to the state court.

Jack owed appellee the debt sued for as the purchase price of certain personal property sold and delivered by appellee to Jack in the state of Mississippi, and the goods seized by the sheriff were a part thereof. It is true that Jack had given appellee notes for said indebtedness, but that fact makes no difference. Norris v. Trenholm, Trustee, 209 F. 827, 126 C. C. A. 551, 31 Am. B. R. 353. See section 2436, Hemingway's Code. Section 2437, Hemingway's Code, sets out the manner in which the lien may be enforced which is the procedure adopted in this case.

This court in Campbell Paint & Varnish Co. v. Hall, Trustees, 131 Miss. 671, 95 So. 641, finally disposed of all the old arguments as to the sign statute, goods for re-sale, etc., and settled the proposition that the statute means just what it says, and that the seller has lien.

Considering, therefore, that if bankruptcy had not occurred, the plaintiff had the right, under the facts in this case, which come squarely within the Campbell case, supra, to subject the seized property by virtue of the statutory lien, the question is: What is the effect of the filing of the petition in bankruptcy? And that is a federal question. We must, therefore, look to the bankruptcy act and the decisions of the federal courts for the answer. See section 67, Bankruptcy Act of 1898, U. S. Compiled Statutes, paragraph 9631; Norris v. Trenholm, Trustee, supra; Brown Shoe Co. v. Wynne, Trustee, supra; In Re Purcis, 293 F. 102, 1 Am. B. R. (N. S.) 595.

On the federal question as to the rights and title of the trustee under the bankruptcy act, it is too well settled to permit of argument that the title of the trustee in bankruptcy vests as of the date of adjudication, but as it was at the time of the filing of the petition. 2 Collier on Bankruptcy (13 Ed.), page 1635. And equally well settled that "the trustee takes the property of the bankrupt, not as an innocent purchaser, but subject to all valid claims, liens and equities." 2 Collier on Bankruptcy (13 Ed.), page 1643; Zartman v. Bank, 216 U.S. 134, 54 L.Ed. 418, 23 Am. B. R. 635.

It is well settled that the amendment of 1910 to section 72a of the Bankruptcy Act of 1898, vesting the trustee with all the rights, remedies and powers of a lienor or judgment creditor "may not be invoked to deprive a creditor of the bankrupt of equities existing in his favor at the time of the bankruptcy and was not intended to limit the general rule that a trustee takes the bankrupt estate subject to all valid claims, liens and equities." 2 Collier on Bankruptcy (13 Ed.), page 1647; Matter of Creech Bros. Lbr. Co. (C. C. A., 9th Cir.), 240 F. 8, 39 Am. B. R. 487; Matter of Shelly (C. C. A., 3rd Cir.), 242 F. 251, 39 Am. B. R. 165; In re Purvis, supra.

We cannot find where the United States supreme court has yet spoken upon this particular point. For that reason, therefore, the decisions of the several circuit courts of appeal are conclusive. It will be seen from the above that the federal court in this state refuses to adopt what counsel for appellant says should be the rule. From the authorities we have already cited, it appears that the decision of the federal judge in Mississippi in the Purvis case is correct.

This is simply a case of a valid state lien, such as the lien of the vendor of real property, the lien of a mortgage, etc. If the appeal is to be made to any on the above ground, it should be made to the legislature. And it is interesting to note that this statute appears in the law of this state in its present form for the first time in 1906, after the bankruptcy act had been in force for eight years, and in direct answer to a decision of this court that under the statute as it existed prior to that time a mere assignee for creditors had a lien superior to that of the vendor. Goodbar v. Knight, 89 Miss. 124. In other words, after the passage of the bankruptcy act, the legislature took steps to give the vendor of personal property a lien from the time of sale, instead of from the time of seizure, and as against every one except an innocent purchaser for value.

The federal court has refused to take the property from the state court, but sent the trustee into the state court to set up any defenses he might have. We submit that he has set up none that are worth considering, and that the action of the circuit court should be sustained.

Argued orally by J. H. Currie, for appellant, and E. L. Trenholm, for appellee.

OPINION

ETHRIDGE, J.

Suit was filed by the Wm. R. Moore...