Big Four Implement Co. v. Wright

• Decision Date: 04 August 1913
• Docket Number: 3,889.
• Citation: 207 F. 535
• Parties: BIG FOUR IMPLEMENT CO. et al. v. WRIGHT.
• Court: U.S. Court of Appeals — Eighth Circuit

207 F. 535

BIG FOUR IMPLEMENT CO. et al. v. WRIGHT.

No. 3,889.

United States Court of Appeals, Eighth Circuit.

August 4, 1913

Samuel Feller, of Kansas City, Mo., for appellants.

William Osmond and Elrick C. Cole, both of Great Bend, Kan., for appellee.

Before SANBORN and CARLAND, Circuit Judges, and WILLARD, District judge.

WILLARD District Judge.

In this controversy between the Big Four Implement Company and the Kansas Moline Plow Company on the one hand, and Wright, the trustee of Bell, the bankrupt, on the other, the court below held that the appellants were not entitled to a return to them of certain farm implements received by the bankrupt on conditional sale contracts. The contract between the Plow Company and Bell was made on January 23, 1911, and filed in the proper register's office on November 11, 1911. The contract between the Implement Company and Bell was made on December 8, 1910, and was filed on November 9, 1911.

Within three or four days after the filing of the contracts Bell made a trust deed for the benefit of his creditors of all his property, except that covered by these contracts. A petition in bankruptcy was filed against him on February 22, 1912, and he was adjudicated a bankrupt on March 19, 1912. Some of the property delivered under these contracts came into the possession of his trustee. Appellants appeared in the bankruptcy proceeding and asked for a return to them of such property. The two cases were consolidated in the court below. The referee refused to grant the petition of the claimants the court affirmed this ruling, and they have appealed.

The trustee claims that these contracts were fraudulent in fact because 'there was an understanding between the bankrupt and the interveners that they were not to be filed unless necessary for interveners' interests, and that the bankrupt would see that they received notice in time to protect themselves. ' That the mere failure to file the contracts is not sufficient to show fraudulent intent cannot be doubted. The evidence shows the following additional facts: While the contracts were made in December and January none of the goods of the Plow Company were shipped until March, and most of those of the Implement Company not until June. The bankrupt, being pressed by the German-American Bank, one of his creditors, for security, went to Kansas City, it seems, about November 11, 1911, and saw the agents of the appellants. He then told the agent of the Implement Company that he could not meet his obligations. At that time he had no talk whatever with the Plow Company about the filing of their contract. The agent of the Implement Company, however, suggested or spoke of the fact that they would file their contract. The property here in question was expressly excluded from the trust deed made on November 15th. Bell had dealt with these companies before under similar contracts, which had not been filed, and had settled with them according to their terms. This is all of the evidence tending to show any agreement on the part of the companies to withhold the contracts from record, and it is in our opinion entirely insufficient to establish their fraudulent character.

Some of Bell's creditors became such after the making and before the filing of these contracts. No one of them had, however, at the time of such filing, obtained any specific lien upon the property here involved. Under the law of Kansas relating to the filing of chattel mortgages, the protection given to creditors by the law requiring such filing was intended to include only those having some specific lien upon or right to the mortgaged property, and not mere general creditors. Youngberg v. Walsh, 72 Kan. 220, 83 P. 972; Geiser Mfg. Co. v. Murray, 84 Kan. 450, 114 P. 1046. The statute requiring the filing of chattel mortgages is in this respect the same as that requiring the filing of conditional sale contracts, and the same rule must apply to the latter. This case is thus distinguished therefore from Re Wade (D.C.) 185 F. 664, and First National Bank v. Connett, 142 F. 33, 73 C.C.A. 219, 5 L.R.A. (N.S.) 148, both of which cases arose in Missouri.

Prior to 1910 the trustee stood in no better condition than the bankrupt, and these contracts would have been valid as to him, even though never recorded. It is said, however, by the trustee, that this condition has been changed by the amendment of section 47a of the Bankrupt Act made in 1910. That amendment is as follows:

'And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.'

This amendment must speak as of the time of the bankruptcy. The lien which the trustee is considered as holding must be a lien attaching as of that date. There can be no ground for saying that the lien is in existence before the bankruptcy. No case has been cited which so holds. In most of the cases referred to by the trustee the contract was never filed. In Rock Island Plow Company v. Reardon, 222 U.S. 354, 32 Sup.Ct. 164, 56 L.Ed. 231, the contract was not filed, yet the vendor had taken possession of the property covered by it before the bankruptcy. It appeared, however, in that case, that prior to that possession by the vendor another creditor had secured a lien by execution, which lien was preserved by the trustee for the benefit of the creditors. There is no authority for holding that a trustee can, in his own right, avoid such contracts as these when they have been filed before the bankruptcy. The decisions are to the contrary. Keeble v. John Deere Plow Co., 190 F. 1019, 111 C.C.A. 668 (5th Cir.). Part of the opinion of the court below in this case is found in Re Jacobson & Perrill (D.C.) 29 Am.Bankr.Rep. 603, 200 F. 812; Re Farmers Co-operative Co. (D.C.) 202 F. 1005; Hart v. Emmerson-Brantingham Co. (D.C.) 203 F. 60. In Sturtivant Bank v. Schade, 195 F. 188, 115 C.C.A. 140 (8th Cir.), it appeared that a deed was made in 1902 and not recorded until August 8, 1906. A petition in bankruptcy was filed on October 8, 1906, and an adjudication had on October 31, 1906. The trustee came into possession of the real estate covered by the deed. The court considered that any judgment lien which the trustee was deemed to have was created subsequent to August 8, 1906. It is not necessary to determine whether, under the amendment of 1910, the lien of the trustee attached on the filing of the petition, or on the date of the adjudication, because the filing of the papers in this case preceded both dates.

The trustee claims also that the transaction constitutes a preference, saying that these contracts are, under the laws of Kansas, nothing more than chattel mortgages, and, not having been filed until within four months of the bankruptcy, they must be aside on that ground. Mattley v. Geisler, 187 F. 970, 110 C.C.A. 90 (8th Cir.). But they are not instruments of that character. They are in the usual form of conditional sale contracts of farm machinery. The Implement Company's contract contains this clause:

'It is also agreed that the title to and ownership of, and the right to the immediate and exclusive possession, upon demand either oral or written, of all goods which may be shipped as herein provided, or during the current season, shall remain in, and their proceeds in case of sale, shall be the absolute property of the Big Four Implement Company and subject to their order until full payment shall have been made for the same by the purchaser in money. In case the Big Four Implement Company shall take possession of any property as provided for in this contract, they or their agent shall have the right to sell the same at public or private sale, with or without notice and at such place as they or their agent may deem best, and the proceeds arising from such sale, after paying the expenses of the same, shall be applied to the payment of the indebtedness due to said Big Four Implement Company. The appraisement of said property to be sold is hereby waived, but nothing in this clause will release the purchaser from making payment as herein agreed.'

The Plow Company...