In re Calhoun Supply Co.

• Decision Date: 28 July 1911
• Citation: 189 F. 537
• Parties: In re CALHOUN SUPPLY CO.
• Court: U.S. District Court — Northern District of Alabama

189 F. 537

In re CALHOUN SUPPLY CO.

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

July 28, 1911

Knox Acker, Dixon & Sterne, for petitioner.

Blackwell & Agee, for trustee.

GRUBB District Judge.

(1) The record presents but one question, viz.: Does the amendment to the bankruptcy act of June 25, 1910, extend the rights and remedies of the trustee to those of a judgment creditor under the registration act of Alabama, so as to avoid in favor of the trustee an unrecorded conditional sale.

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 the act, 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, 61st 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 (c) of the original act the trustee was 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 with such liens. The language admits of this construction. It recites that such trustee 'shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon. ' This language aptly refers to such rights, remedies, and powers as a creditor holding such a lien is entitled to under the law, rather than to the rights, remedies, and powers of a creditor who had actually fastened a lien on the property of the bankrupt estate. It is true that the case of In re Lausman (D.C.) 183 F. 647, conflicts with this view. The construction, necessary to effectuate the intention of Congress, does not seem to me to make the amended section conflict with section 64b, cl. 5, as there stated.

Under the state law, the conditional vendor has no priority over judgment creditors without notice and the amendment to the bankruptcy act places the trustee in that category. As against his right as conferred by the amended section of the act, the conditional vendor has no priority, and the order of...