Holt v. Crucible Steel Company of America

• Decision Date: 01 April 1912
• Docket Number: No. 183,183
• Citation: 56 L.Ed. 756,32 S.Ct. 414,224 U.S. 262
• Parties: O. G. HOLT, Trustee in Bankruptcy of Davis, Kelly, & Company, Bankrupts, Appt., v. CRUCIBLE STEEL COMPANY OF AMERICA
• Court: U.S. Supreme Court

224 U.S. 262

32 S.Ct. 414

56 L.Ed. 756

O. G. HOLT, Trustee in Bankruptcy of Davis, Kelly, & Company, Bankrupts, Appt.,

v CRUCIBLE STEEL COMPANY OF AMERICA.

No. 183.

Argued March 4, 1912.

Decided April 1, 1912.

Messrs. H. H. Nettelroth and John C. Doolan for appellant.

Messrs. Keith L. Bullitt and William Marshall Bullitt for appellee.

[Argument of Counsel from page 263 intentionally omitted] Mr. Justice Van Devanter delivered the opinion of the court:

This appeal brings up for review a decree reversing an order of the district court for the western district of Kentucky in a proceeding in bankruptcy. The matter in dispute is the validity, under the recording law of that state, of an unrecorded chattel mortgage as against creditors who became such after the mortgage was given, and without knowledge of it, where none of them had secured a lien upon the mortgaged property by execution attachment, or otherwise. The mortgagee, in making proof of its claim, asserted a lien under the mortgage, and sought priority of payment out of the proceeds of the property covered by it. The claim was allowed, but the district court, being of opinion that the mortgage was invalid as against the subsequent creditors without notice, held that it gave no right to priority of payment as against them. The mortgagee appealed to the circuit court of appeals, and that court, taking the view that the mortgage was valid as against those creditors, since none had secured any specific lien upon the mortgaged property, sustained the right to priority asserted by the mortgagee. 98 C. C. A. 101, 174 Fed. 127. The trustee prosecutes the present appeal.

Section 67a of the bankruptcy act declares:

'Claims which, for want of record, or for other reasons, would not have been valid liens as against the claims of the creditors of the bankrupt, shall not, be liens against his estate.' [30 Stat. at. L. 564, chap. 541, U. S. Comp. Stat. 1901, p. 3449.]

And the applicable provision of the recording law of Kentucky (Stat. 1903, § 496) is as follows:

'No deed or deed of trust or mortgage conveying a legal or equitable title to real or personal estate shall be valid against a purchaser for a valuable consideration, without notice thereof, or against creditors, until such deeds shall be acknowledged or proved according to law, and lodged for record.'

It is apparent from the language of § 67a and from the decisions of this court in York Mfg. Co. v. Cassell, 201 U. S. 344, 50 L. ed. 782, 26 Sup. Ct. Rep. 481; Thomas v. Taggart, 209 U. S. 385, 52 L. ed. 845, 28 Sup. Ct. Rep. 519, and other like cases, that the effect to be given to the unrecorded chattel mortgage must be determined by the recording law of the state; and it is also apparent that the question arising under that law turns upon who are included in the term 'creditors' in § 496.

Upon that question the decisions of the court of appeals of the state have not been uniform, but it is conceded, and is evident upon an examination of the more recent decisions, that the term does not include antecedent creditors, or subsequent creditors whose claims are acquired with notice of the unrecorded mortgage, but does include subsequent creditors without notice, who, by their diligence, secure a specific lien upon the property, as by execution or attachment, before the mortgage is recorded. Baldwin v. Crow, 86 Ky. 679, 7 S. W. 146; Wicks Bros. v. McConnell, 102 Ky. 434, 43 S. W. 205; Clift v. Williams, 105 Ky. 559, 49 S. W. 328, 51 S. W. 821; Bowles v. Jones, 123 Ky. 395, 96 S. W. 1121; Swafford v. Asher, 31 Ky. L. Rep. 1338, 105 S. W. 164. And so, the question for decision is...