In re Pacific Elec. & Auto. Co.

• Decision Date: 08 June 1915
• Docket Number: 5374.
• Citation: 224 F. 220
• Court: U.S. District Court — Western District of Washington
• Parties: In re PACIFIC ELECTRIC & AUTOMOBILE CO.

224 F. 220

In re PACIFIC ELECTRIC & AUTOMOBILE CO.

No. 5374.

United States District Court, W.D. Washington, Northern Division.

June 8, 1915

Saunders & Nelson, of Seattle, Wash., for petitioner.

E. H Chavelle, of Seattle, Wash., for trustee.

NETERER District Judge.

On December 9, 1914, the Pacific Electric & Automobile Company was adjudged bankrupt. On April 30th, prior to adjudication the bankrupt had purchased from the Burrows Adding Machine Company, an adding machine, upon a conditional sale contract which contract was not signed by the vendor, and not filed for record as provided by Remington & Ballinger's Code of Washington, Sec. 3670, within 10 days after its execution. On April 30, 1915, petition and demand for reclamation of the machine was made by the Burrows Adding Machine Company, and the matter was heard before the referee. The referee denied the right to reclaim, and the decision of the referee is brought here for review.

The petitioner relies upon Malmo v. W.R. & F. Co., 79 Wash. 534, 140 P. 569, In re Flatland, 196 F. 310 116 C.C.A. 130, Lundberg v. Kitsap County Bank, 79 Wash. 75, 139 P. 769, and Secor v. Close, 145 P. 56.

This case must be concluded by the construction placed upon section 3670 of the Washington Code, which provides as follows:

'All conditional sales of personal property, or leases thereof, containing a conditional right to purchase, where the property is placed in the possession of the vendee, shall be absolute as to the purchasers, incumbrancers and subsequent creditors in good faith, unless within ten days after taking possession by the vendee, a memorandum of such sale, stating its terms and conditions and signed by the vendor and vendee, shall be filed in the auditor's office of the county, wherein, at the date of the vendee's taking possession of the property, the vendee resides.'

Construction placed upon this section by the state court will be adopted by the federal court. York Mfg. Co. v. Cassell, 201 U.S. 344, 26 Sup.Ct. 481, 50 L.Ed. 782; Holt v. Crucible Steel Co., 224 U.S. 262 ^[d]; Nauman Co. v. Bradshaw, 193 F. 350, 113 C.C.A. 274; Tullis v.

Railway Co., 175 U.S. 348, 20 Sup.Ct. 136, 44 L.Ed. 192. The Circuit Court of Appeals of this circuit, In re Osborn, 196 F. 257, at page 259, 116 C. C. A. 59, with relation to a conditional sale contract, under this same statute, said:

'There is no evidence on the face of the instrument of an intent or purpose on the part of the vendor to accept the terms proposed by the vendee, and the order itself does not show that the vendor had accepted or agreed to the terms and conditions of the proposal. The so-called agreement was by its terms and conditions absolutely unilateral, and extraneous evidence was not admissible to show that the terms and condition of the proposal were accepted by the vendor. Such acceptance was one of the terms and conditions required by the statute to appear upon the face of the instrument.

'The petition and adjudication in bankruptcy in this case were filed in December, 1910. As far as the Bankruptcy Act is concerned, the right of the trustee to the property in question is therefore governed by the amended act (Act June 25, 1910, c. 412, Sec. 8, 36 Stat. 840, amending section 47a (2) of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 557). That amendment provides: 'And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be * * * vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon.' Giving effect to the provisions of the Bankruptcy Act and the statute of the state of Washington, the court must hold that the sale made by the petitioner, Purcell Safe Company, to the bankrupt, S. C. Osborn & Co., and S. C. Osborn, of the property described in the contract, was an absolute and unconditional sale.'

This case was decided after the Washington court had held for nearly a score of years that a chattel mortgage, not executed or recorded as provided by statute, was void as to subsequent creditors (Willamette Casket Co. v. Cross Undertaking Co., 12 Wash. 190, 40 P. 729; Mendenhall v. Kratz, 14 Wash. 453, 44 P. 872; Hinchman v. Point Defiance Ry. Co., 14 Wash. 361, 44 P. 867; Blumauer v. Clock, 24 Wash. 596, 64 P. 844, 85 Am.St.Rep. 966; Springer v. Ayer, 50 Wash. 642, 97 P. 774; and American Multigraph Sales Co. v. Jones, 58 Wash. 619, 109 P. 108), and the federal courts of this district had followed such construction of the state court (Pacific State Bank v. Coats, 205 F. 619, 123 C.C.A. 634, Ann. Cas. 1913E, 846). The Willamette Casket Co. v. Cross Undertaking Co., supra, was overruled by the Washington court in Pacific Coast Biscuit Co. v. Perry, 77 Wash. 353, 137 P. 483, when it held that only subsequent lien creditors could attack the validity of a chattel mortgage not filed within 10 days, and in Malmo v. W.R. & F. Co., supra, the state court held an unrecorded conditional sale contract good as against a receiver representing subsequent general creditors, citing Pacific Coast Biscuit Co. v. Perry, supra, and Heal v. Evans Creek Coal & Coke Co., 71 Wash. 225, 128 P. 211, and this was adhered to in Watson v. First National Bank of Clarkston, 82 Wash. 65, 143 P. 451, and Secor v. Close, 145 P. 56. Malmo v. W.R. & F. Co., supra, was decided May 8, 1914, by department 2. On November 14, 1914, this same department, in Jennings, Trustee, v. Frank Schwartz, 82 Wash. 209, 144 P. 39, had the identical question in issue here before it, and held that the memorandum of sale as set out in this case could not be considered, under the law, as a conditional sale contract, and did not follow Malmo v. W.R. & F. Co., supra, or refer to it, and cited with approval from Worley v. Metropolitan Motor Car Co., 72 Wash. 243, 130 P. 107, as follows:

'Whatever the general rule may be as to priority between creditors, we think this case must be decided by reference to the statute and that alone. The provision that all

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