In re Monticello Veneer Co.
| Decision Date | 02 January 1933 |
| Docket Number | No. 3090.,3090. |
| Parties | In re MONTICELLO VENEER CO. MAY & PEELER v. GIVENS. |
| Court | U.S. District Court — Southern District of Mississippi |
G. Wood Magee, of Monticello, Miss., for petitioner.
Brady, Dean & Hobbs, of Brookhaven, Miss., John H. Arrington and C. E. Gibson, both of Monticello, Miss., and Powell, Harper & Jiggitts, of Jackson, Miss., for trustee.
The petitioner sold logs to the bankrupt to be manufactured into lumber for veneering. At the time the petition in bankruptcy was filed, the lumber remained in the hands of the first purchaser, and the trustee in bankruptcy took possession of it. The petitioner claims a lien for the unpaid purchase money under section 2239 of the Mississippi Code of 1930.
The lien given the vendor of personal property for purchase money, by the terms of the Mississippi statute, continues in force "while it remains in the hands of the first purchaser, or of one deriving title or possession through him with notice that the purchase money was unpaid." The lien is a statutory one, and we must look first to the statute, in the light of state decisions, for its duration, efficacy, peculiarity, or quality.
The trustee in bankruptcy is not an ordinary receiver in chancery, as in Weiss, Dreyfous & Seiferth v. Natchez Inv. Co. (Miss.) 140 So. 736, who takes neither title nor right of possession but only custody of the property for the benefit of the party ultimately entitled to it. Union Nat. Bank of Chicago v. Bank of Kansas City, 136 U. S. 223, 10 S. Ct. 1013, 34 L. Ed. 341; Quincy, M. & P. R. Co. v. Humphreys, 145 U. S. 82, 12 S. Ct. 787; 36 L. Ed. 632; 53 C. J. 93, 96, 102; 23 R. C. L. par. 53, 54, §§ 57, 58.
Under the Bankruptcy Act, the trustee not only takes title to the property belonging to the bankrupt, which is not exempt, but to all property which prior to bankruptcy he could by any means have transferred, or which might have been levied upon and sold under judicial process against him. 11 US CA § 110. In addition, he is vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings, and of a judgment creditor holding an execution duly returned unsatisfied. 11 US CA § 75.
Because the Bankruptcy Act measures the extraordinary rights of the trustee by the sum of the rights of the bankrupt, of creditors, and of other parties dealing with him, it follows that the trustee does not always occupy merely the status of the bankrupt, but frequently may get a better title than the bankrupt had, or, in some cases, get title when the bankrupt had none.
In the circumstances surrounding the trustee in this contest, his title, rights, or remedies may be seen most clearly, and to best advantage, by permitting him to assume the role of a judgment creditor who has seized the property under execution, upon an enrolled judgment, and by considering the rights and remedies of such a creditor as against petitioner's claim of a lien for purchase money. On this decisive issue we are controlled by state statutes and decisions. If they are conflicting, we follow the latest. Elmendorf v. Taylor, 10 Wheat. 152, 6 L. Ed. 289; Union Nat. Bank of Chicago v. Bank of Kansas City, supra; Sim v. Edenborn, 242 U. S. 131, 37 S. Ct. 36, 61 L. Ed. 199; McGregor v. Hogan, 263 U. S. 234, 44 S. Ct. 50, 68 L. Ed. 282; Terrace v. Thompson, 263 U. S. 197, 44 S. Ct. 15, 68 L. Ed. 255; Stebbins v. Riley, 268 U. S. 137, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454; Edward Hines Yellow Pine Trustees v. Martin (C. C. A.) 296 F. 442; Id., 265 U. S. 576, 44 S. Ct. 461, 68 L. Ed. 1187; Id., 268 U. S. 458, 45 S. Ct. 543, 69 L. Ed. 1050.
In Pearson v. Wm. R. Moore Dry Goods Co. (1927) 146 Miss. 225, 110 So. 709, the Supreme Court of Mississippi held that the lien for purchase money ceased to exist as of the date when the title passed to the trustee in bankruptcy, even though suit had been filed to enforce the lien, but in which case process had not been served or the property seized prior to bankruptcy. The reasoning is said to be unsound, but we are primarily concerned with the court's decision. It was actually and necessarily decided that the vendor's lien, limited in duration by the terms of the statute, expired when the property was levied upon and seized by an execution creditor who had obtained a judgment which had been enrolled under section 607, Hemingway's Code (section 819, Miss. Code of 1906, section 611, Miss. Code of 1930). The concrete holding was that the statutory purchase-money lien expired when it came into conflict with the statutory lien of an enrolled judgment. The Mississippi court was not construing the bankruptcy law. The rights of the trustee to those of judgment lien creditors were undisputed. The question for decision was boiled down to what those rights were in a conflict with a lienor for purchase money. It was held that the weaker statutory lien succumbed to the stronger one.
The ruling does not conflict with Norris v. Trenholm (5th C. C. A. 1913) 209 F. 827, which held that the purchase-money lien was not affected by the Bankruptcy Act when, prior to bankruptcy, suit in the state court to enforce the lien had been brought against the purchaser and the property seized by the sheriff under a writ of seizure while it remained in the hands of such purchaser. The possession of the property by the state court was constructive notice to all the world of its existence, and no one, not even the trustee in bankruptcy, could acquire it without notice that the purchase money was unpaid. The same distinguishing feature is found in other cases where the trustee has been defeated.
In the Pearson Case, supra, there was no notice to the...
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