Border Nat. Bank v. Coupland

• Decision Date: 09 March 1917
• Docket Number: 2978.
• Citation: 240 F. 355
• Parties: BORDER NAT. BANK v. COUPLAND. In re DE BONA'S ESTATE.
• Court: U.S. Court of Appeals — Fifth Circuit

240 F. 355

BORDER NAT. BANK v. COUPLAND.

In re DE BONA'S ESTATE.

No. 2978.

United States Court of Appeals, Fifth Circuit.

March 9, 1917

R. D Wright, of Eagle Pass, Tex. (Sanford & Wright, of Eagle Pass Tex., on the brief), for appellant.

John J Foster, of Del Rio, Tex. (King & White, of Eagle Pass, Tex on the brief), for appellee.

The petition to have Joseph De Bona adjudged a bankrupt was filed April 1, 1916. The Border National Bank (which will be called the Bank) presented, and prayed to have allowed as a secured claim, a mortgage, dated and executed February 17, 1916, and recorded the next day, by De Bona to it of seven described automobiles, which was given to secure a note of the same date for $5,500 and interest, payable May 17, 1916. The averments of the petition presenting the claim and the evidence in support thereof showed that the $5,500 for which the note and mortgage were given was the balance then owing on an indebtedness of De Bona to the Bank, created in the following manner: On October 12, 1915, De Bona borrowed from the Bank $3,000, giving as security a mortgage on four automobiles. This mortgage was duly recorded. In November, 1915, one of the mortgaged automobiles was sold for $695, and that amount was applied as a credit on the secured note, reducing that indebtedness to $2,305. On December 1, 1915, four automobiles were shipped to De Bona, and a draft with a bill of lading attached for their price, $3,095.16, was sent to the Bank for collection. To secure the money to pay the draft, so that he could get the bill of lading and the cars, De Bona borrowed the amount of the draft from the Bank, giving his note due in 60 days, and agreeing that the four cars called for by the bill of lading and also the three unsold cars covered by the mortgage of October 12, 1915, stand as security, and that a lien exist thereon for the indebtedness created October 12th and that created December 1st. One of the automobiles so acquired on December 1st was sold on December 6, 1915, and the amount received for it was applied on the last-mentioned note. There was a similar transaction between De Bona and the Bank on January 4, 1916, when another automobile was shipped to De Bona, and a draft for its price with bill of lading attached was drawn on him.

The trustee excepted to so much of the Bank's petition as set out the verbal agreements and understandings accompanying the transactions of December 1, 1915, and January 4, 1916, and objected to the evidence offered to prove such agreements and understandings, upon the following grounds:

'First. Because to allow verbal testimony of such detailed account of past transactions or declarations would, in effect, tend to vary and change and add to the terms of the chattel mortgage of February 17, 1916, under which petitioner seeks to have his claim allowed as a valid secured claim.

'Second. Because under the provisions of the Bankruptcy Act the trustee occupies, as to all the property coming into his possession, the position of a lien creditor, and any prior verbal understandings or agreements had with the bankrupt or any declarations made by him would not be binding upon this trustee, nor would any such testimony be admissible against him for the purpose of affecting his title to such property.

'Third. Such testimony is wholly irrelevant and immaterial to any issue in the case.'

These exceptions and objections were sustained by the referee. The trustee objected to the allowance of the Bank's claim as a secured claim on the grounds that the mortgage constitutes a preference prohibited by the Bankruptcy Act and that it was void under article 3970 of the Revised Civil Statutes of Texas. Evidence adduced before the referee was to the following effect:

As De Bona acquired the automobiles covered by his written and verbal mortgages to the Bank, he placed them in the front part of his store in Eagle Pass, in which he conducted a general brokerage business, handling automobiles, automobile accessories and parts, automobile tires, buggies, etc. None of the automobiles mortgaged to the Bank were sold by De Bona or any of his assistants without De Bona first consulting the Bank and getting special authority from it to sell that car. He was permitted to demonstrate the cars whenever he had a prospective purchaser, but he had no authority from the Bank to make sales which would confer on the purchasers title unincumbered by the Bank's lien. The sales which were made were specially authorized by the Bank, and the amounts realized on such sales were paid to the Bank and applied on the secured debt. The referee held that the mortgage of February 17, 1916, was void under article 3970 of the Revised Civil Statutes of Texas, disallowed the Bank's claim as a secured claim, and allowed it as an unsecured claim.

The Bank appeals from a decree of the District Court which...