In re Bazemore

• Decision Date: 12 May 1911
• Docket Number: 10,946.
• Citation: 189 F. 236
• Parties: In re BAZEMORE.
• Court: U.S. District Court — Northern District of Alabama

189 F. 236

In re BAZEMORE.

No. 10,946.

United States District Court, N.D. Alabama, Southern Division.

May 12, 1911

Bondurant & Smith, for petitioner.

D. D Trimble, for trustee in bankruptcy.

GRUBB District Judge.

This matter comes on for hearing upon a petition to review the decision of the referee disallowing the petition of the Cable Company to reclaim a piano sold the bankrupt, the vendor retaining title until the purchase money was fully paid. The law of Alabama (section 3394, Code 1907) requires all contracts of this character for the conditional sale of personal property to be recorded, and avoids the contract so far as the condition is concerned, as to purchasers for a valuable consideration, mortgagees and judgment creditors without notice, when not recorded. The referee declared the conditional retention of title void as to the trustee because of noncompliance with the recording statute. Three questions are presented by petition for review: $1$ First. Does the amendment to the bankrupt act (Act June 25, 1910, c. 412, 36 Stat. 838) vest in the trustee the right of a judgment creditor without notice to hold the property sold as against the conditional vendor? Second. Was there a compliance with the record laws of Alabama in the instant case? Third. Is the burden on the trustee to show that he represented a class of creditors having no actual notice of the conditional sale?

(1) Before the amendment to the bankruptcy act, the trustee's title as against a claim under an unrecorded conditional sale, though the state law required record, did not prevail. Crucible Steel Co. v. Holt, 174 F. 127, 98 C.C.A 101. It was to obviate this, among other things, that section 47, cl. 2, subd. 'a,' of Act July 1, 1898, c. 541, 30 Stat. 557 (U.S. Comp. St. 1901, p. 3438), was amended by inserting the words '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' (statement of Representative Shirley to the House of Representatives Congressional Record, Sixty-First Congress, 2d Session, pp. 2552-2554 (36 Stat. 840)), and to vest in the trustee the same right to attack secret unrecorded liens, where record was required by the state law, as was given to the judgment creditors and others under that law. It seems to me that the language of the amendment should be construed to effectuate this result if it fairly admits of such construction. If the operation of the amendment is restricted to cases in which a creditor has in fact acquired a lien by legal or equitable proceedings, then it adds nothing to the law as it was under the original act.

By virtue of section 67 of the original act the trustee was By subrogated to such a lien, if created within four months, and could enforce it for the benefit of the estate. If created beyond four months from the filing of the petition, it was of course, valid as against the trustee, under both the original and amended acts. The class of cases, unprovided for, by the original act, and intended to be reached by the amendment, were those in which no creditors had acquired liens by legal or equitable proceedings and to vest in the trustee for the interest of all creditors the potential rights of creditors of that class. The language is readily susceptible of this construction. It recites that such trustees 'shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon. '...