In re Pittsburg-Big Muddy Coal Co.

• Court: U.S. Court of Appeals — Seventh Circuit
• Citation: In re Pittsburg-Big Muddy Coal Co., 215 F. 703 (7th Cir. 1914)
• Decision Date: 11 May 1914
• Docket Number: 2083.
• Parties: In re PITTSBURG-BIG MUDDY COAL CO. v. SKAGGS et al. GOODMAN MFG. CO.

215 F. 703

In re PITTSBURG-BIG MUDDY COAL CO.

GOODMAN MFG. CO. v. SKAGGS et al.

No. 2083.

United States Court of Appeals, Seventh Circuit.

May 11, 1914

George W. Brown, of Chicago, Ill., for appellant.

William H. Warder, of Marion, Ill., for appellee.

Before BAKER, SEAMAN, and MACK, Circuit Judges.

BAKER Circuit Judge.

Appellant sold machinery in 1911 to the St. Louis Coal Company, and took a chattel mortgage thereon to secure part of the purchase price. This machinery was afterwards sold by the St Louis Company to the Big Muddy Company (bankrupt herein) subject to the mortgage. Before the petition in bankruptcy was filed, appellant's mortgage, by reason of extensions and changes in the notes without filing the affidavits required by the Illinois statute respecting the recordation of chattel mortgages, though remaining valid between mortgagor and mortgagee, became subject to avoidance by lien creditors. But there were no creditors with liens when bankruptcy intervened. Appellant thereupon filed its petition against appellee for reclamation of the machinery. This appeal is from the decree of dismissal for want of equity.

According to the doctrine of York Mfg. Co. v. Cassel, 201 U.S 344, 26 Sup.Ct. 481, 50 L.Ed. 782, and other cases holding that a chattel mortgage that is good against the bankrupt is good against the trustee, appellant would be entitled to prevail. But by the act of June 25, 1910 (36 Stat. 840), the following addition was made to the powers of trustees in section 47a(2):

'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; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.'

Whether this addition to the Bankruptcy Act might more appropriately have appeared in section 64, relating to priorities, or in section 67, relating to liens, or in section 70, relating to the trustee's or in an independent section, we deem immaterial, for the act must always be considered as a whole, and when so read the elder sections must be construed so as not to detract from this latest expression of the legislative will.

Appellant's contention that the trustee, under the amendment of 1910, cannot defend against a voidable chattel mortgage unless there be in fact 'a creditor holding a lien' on the chattels, is supported by the cases of In re Lausman (D.C., W.D. Ky) 183 F. 647, and In re Flatland (C.C.A. 9th Cir.) 196 F. 310, 116 C.C.A. 130.

But we hold that under the amendment the filing of a petition in bankruptcy constitutes an equitable levy and a caveat to the world, for the following reasons: (1) The plain and natural reading of the words gives the trustee the same right to attack or resist secret liens that judgment creditors would have had if bankruptcy had not intervened, no matter whether there are or are not any such creditors when the petition in bankruptcy is filed. (2) If the amendment were to be construed so as to limit the power of the trustee to cases in which there are lien creditors, virtually nothing would be added to the original act, for under section 67c and 67f liens created within four months prior to the filing of the petition may be used by the trustee for the benefit of the estate. (3) Although extraneous matter cannot properly be looked to in aid of the interpretation of a clear and unambiguous statute (for such a statute carries its own means of interpretation), yet it may not be amiss, as against a contention that this amendment is not unambiguous, to note that it was the intention of the committee in charge of the measure that the rule announced in York Mfg. Co. v. Cassel should be changed. 3 Remington, 331; Cong. Rec., 61st Cong., 2d Sess., pp. 2552-2554. (4) Numerous decisions in the District and Appellate Courts directly or impliedly support this construction. ^[1] This record also contains an order of the court that the property be sold as a unit and free from liens. Appellant challenges this order as inimical to the interests of the general creditors.

In the referee's report is a statement that appellant is a general creditor of the bankrupt estate. But appellant never filed or presented a claim as a general creditor of the bankrupt. The only issue made by the pleadings and involved in the evidence was the validity of the chattel mortgage. Without novation or assumption the debt of the St. Louis Company to appellant could not become the debt of the Big Muddy Company. As there was neither pleading nor proof respecting such an issue, the purported finding of the referee must be disregarded. And so appellant is left without any standing to question the order of sale.

The decree and the order are severally affirmed.

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Notes:

^[1] Arctic Ice Machine Co. v. Armstrong County Trust Co. (C.C.A., 3d Cir.) 192 F. 114, 112 C.C.A. 458; Holt v. Henley (C.C.A., 4th Cir.) 193 F. 1020, 113 C.C.A. 87; In re Morris (C.C.A., 2d Cir.) 204 F. 770, 123 C.C.A. 220; Clark v. Snelling (C.C.A., 1st Cir.) 205 F. 240, 123 C.C.A. 430; Pacific State Bank v. Coats (C.C.A, 9th Cir.) 205 F. 618, 123 C.C.A. 634, Ann. Cas. 1913E, 846; Big Four Implement Co. v Wright (C.C.A., 8th Cir) 207 F. 535, 125 C.C.A. 577, 47 L.R.A. (N.S.) 1223; In re Gold (C.C.A., 7th Cir.) 210 F. 410; In re Gartman (D.C., E.D. Pa.) 186 F. 349; In re Franklin Lumber Company (D.C., E.D. Pa.) 187 F. 281; In re Hammond (D.C., N.D. Ohio) 188 F. 1020; In re Bazemore (D.C., N.D ala.) 189 F. 236; In re Calhoun Supply Co. (D.C., N.D. Ala.) 189 F. 537; In re Hartdagen (D.C., M.D. Pa.) 189 F. 546; In re Williamsburg...