In re Garcewich

• Citation: 115 F. 87
• Decision Date: 22 April 1902
• Docket Number: 125.
• Parties: In re GARCEWICH.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

115 F. 87

In re GARCEWICH.

No. 125.

United States Court of Appeals, Second Circuit.

April 22, 1902

Leo Levy, for petitioner.

H Linley Johnson, opposed.

Before WALLACE and LACOMBE, Circuit Judges.

WALLACE Circuit Judge.

This is a petition for the review of an order of the district court as a court of bankruptcy directing the trustee to return to the United Shirt & Collar Company certain goods, wares, and merchandise claimed by that company to belong to it, and claimed by the trustee to be a part of the bankrupt's estate. The goods were sold to the bankrupt by the United Shirt & Collar Company upon credit, and upon the understanding that the title to such of them as should not be sold by the bankrupt should remain in the vendor until the payment of the purchase price. The court below adopted the conclusion of the referee in bankruptcy, and an excerpt from the opinion of the referee will sufficiently disclose the facts and the legal theory upon which the order was based and is as follows:

'I understand that a trustee in bankruptcy can maintain an action to set aside a fraudulent transfer of property whether a judgment has been previously recovered by a creditor or not. But the case of an ordinary conditional sale, or an ordinary chattel mortgage, which is without fraud, but is claimed to be void for noncompliance with the act requiring such instruments to be filed, stands obviously upon a different footing. In the case at bar there is nothing to indicate any fraud in the transaction between the United Shirt & Collar Company and the bankrupt, and the question simply is whether the trustee has a better title to the consigned goods than the bankrupt had. There is no evidence that there are any judgments against the bankrupt, and the schedules and proofs of claims tend to show that there are none. Under these circumstances I think that the case In re New York Economical Printing Co., 49 C.C.A. 133, 110 F. 514, is decisive.'

In Re New York Economical Printing Company this court held that a chattel mortgage executed in good faith, and valid as between mortgagor and mortgagee, did not become void as against a trustee in bankruptcy by the failure of the mortgagee to refile the mortgage in compliance with the provisions of the state statute; and that in such case the trustee took no better title to the property than the bankrupt had at the time of the filing of the petition, unless there were creditors or a creditor at the time who were entitled to attack the mortgage as fraudulent, and in that event it was void as against the trustee only to the extent of the claims of such creditors. That decision proceeded upon the theory that, upon the construction of the statute placed upon it by the highest court of the state, such a mortgage was valid as to all the world except as to purchasers without notice and creditors who were in a position by attachment or execution to seize the property. In Southard v. Benner, 72 N.Y. 424, the court, speaking of this statute, said:

'The noncompliance with the statute merely imposing a new condition to the validity of chattel mortgages for the protection of the particular classes mentioned, and not involving the question of fraud or fraudulent intent, may well be restricted in its operation to the individuals for whose immediate protection it was passed.'

These considerations can have no just application to a mortgage or other transfer of personal property, which, at its inception, was intended by the parties, or presumed by law to be intended, as a fraud upon creditors or purchasers.

It is the settled...