In re Davies

• Court: U.S. District Court — Western District of Tennessee
• Citation: In re Davies, 256 F. 52 (W.D. Tenn. 1919)
• Decision Date: 04 March 1919
• Docket Number: 4602.
• Parties: In re DAVIES.

256 F. 52

In re DAVIES.

No. 4602.

United States District Court, W.D. Tennessee, Western Division.

March 4, 1919

Henry Craft, of Memphis, Tenn., for plaintiff.

W. B Rosenfield, of Memphis, Tenn., for defendant.

McCALL District Judge.

On the 8th day of October, 1917, R. M. Davies executed his several promissory notes to Baer Bros. and secured the payment thereof by executing on even date a mortgage on 28 head of mules. The mortgage was properly acknowledged and filed for registration in St. Clair county, state of Illinois, in which county both the mortgagor and mortgagees lived, and where the property was at that time located. No question was raised as to the bona fides of the indebtedness, nor as to the validity of the mortgage in the state of Illinois.

Davies was a levee contractor, and had employment at Millington Shelby county, Tenn. Soon after the execution of the mortgage, by and with the consent of the mortgagees, Davies removed the property to Millington, Tenn., to perform his contract there. The mortgage was not recorded in Tennessee. Thereafter, and without the knowledge or consent of the mortgagees, Davies removed the property into the state of Mississippi, and from there into the state of Arkansas, in the summer of 1918, to perform a levee contract he had made with Roach & Stansell. It became necessary for Davies to borrow money as the work progressed to take care of his pay roll, and this he, from time to time, borrowed from Roach &amp Stansell, to the amount of about $4,500. Davies did not disclose to them the fact of the Illinois mortgage, nor did Roach & Stansell know of its existence. It was represented to them by Davies that the property was all his, and following this representation they loaned the money to Davies without security. The Illinois mortgage was registered in Arkansas on December 14, 1918, after Roach & Stansell's debt was contracted.

On December 19, 1918, R. M. Davies was adjudged a voluntary bankrupt by this court, and scheduled as a part of his assets 23 mules, then in Crittenden county, Ark., which were covered by the Illinois mortgage. The trustee, if not with the consent, did with the acquiescence of the mortgagees, take possession of and sell the mules as the property of the bankrupt estate, and now has in hand the money arising from said sale.

Roach & Stansell filed their claim with the trustee as an unsecured claim against the bankrupt estate. Baer Bros. filed their notes for $1,814.62 against the bankrupt estate as a secured claim under the mortgage executed in Illinois and re-registered in Arkansas. On the same day Roach & Stansell filed exceptions to said claim as a preferred or lien claim, insisting that the mortgage under which the preference was claimed was not valid as against them as creditors of R. M. Davies, the bankrupt, because the property in question had been removed from the state of Illinois with the consent of the mortgagees, and subsequently into the state of Arkansas, and had not been legally registered in the latter state, and that they were without notice of its existence at the time of the extension of the credit by them to Davies.

The referee held that Baer Bros. at the date of adjudication had a valid mortgage on the property, and therefore had a preferred claim against the funds arising from the sale thereof by the trustee in bankruptcy, and overruled the exceptions of Roach & Stansell. Upon exceptions by them to the action of the referee, he has certified the case for review.

The referee was of opinion that the rights of the parties should be determined by the laws of the state of Arkansas. I concur in that view. In re Nuchols (D.C.) 201 F. 437; Potter Mfg. Co. v. Arthur, 220 F. 843, 136 C.C.A. 589, Ann. Cas. 1916A, 1268; Title Guaranty Co. v. Witmire, 195 F. 41, 115 C.C.A. 43.

In Creelman Lumber Co. v. Lesh & Co., 73 Ark. 16, 83 S.W. 320, 3 Ann.Cas. 108, it was decided that where personal property removed to Arkansas was covered by a mortgage executed and recorded in another state, it will be good by comity,...