In Re Quaker City Uniform Company, 23857.

• Citation: 134 F. Supp. 596
• Decision Date: 07 September 1955
• Docket Number: No. 23857.,23857.
• Parties: In the Matter of QUAKER CITY UNIFORM COMPANY, Inc., Bankrupt.
• Court: U.S. District Court — Eastern District of Pennsylvania

134 F. Supp. 596

In the Matter of QUAKER CITY UNIFORM COMPANY, Inc., Bankrupt.

No. 23857.

United States District Court E. D. Pennsylvania.

September 7, 1955.

Freedman, Landy & Lorry, Philadelphia, Pa., for Daniel P. Veloric.

William M. Keenan, Pepper, Bodine, Frick, Scheetz & Hamilton, Philadelphia, Pa., for Fidelity-Phila. Trust Co.

Verlin & Goldberg, Philadelphia, Pa., for College Hall Fashions and Synthetic Specialists, Inc.

Markovitz, Stern & Shusterman, Philadelphia, Pa., for Delsea Corp.

KIRKPATRICK, Chief Judge.

This is a contest in which the trustee in bankruptcy is not interested. It is between a chattel mortgagee holding a valid lien and a landlord who distrained for rent prior to the bankruptcy but did not sell. By agreement, the mortgaged property was sold and the proceeds substituted. If bankruptcy had not intervened, the controversy could hardly have arisen, because the law of Pennsylvania clearly subjects the interest of the chattel mortgagee to the lien of the landlord's levy. The chattel mortgagee concedes as much, but argues that the Bankruptcy Act nullifies the landlord's preferred status as against him. Sections 64, sub. a, 11 U.S.C.A. § 104, sub. a and 67, sub. c, 11 U.S.C.A. § 107, sub. c, of the Act provide that in the distribution of the estate a landlord's lien shall be postponed to costs of administration, wages and taxes, all of which admittedly come after valid liens such as this chattel mortgage. Of course, it can be said properly enough that the Bankruptcy Act governs and that it was within the power of Congress to accomplish the result contended for by the chattel mortgagee, inasmuch as the legal title to the mortgaged chattels remained in the bankrupt at all times, the mortgage under the law of Pennsylvania being in the nature of a pledge rather than a conveyance. Whether Congress did so or intended to do so is the question in this case.

It will be noted that Section 64, sub. a of the Bankruptcy Act, 11 U. S.C.A. § 104, sub. a, establishes priorities in "bankrupt estates". The words "estate" and "bankrupt estates" in the Act mean the "unincumbered assets generally of a bankrupt, properly administerable in bankruptcy, as distinguished from property of the bankrupt dedicated by law to the payment of a particular obligation or upon which there is a specific lien." In re Menzies, D.C., 60 F.2d 1064, 1067. Regardless of where the bare legal title resided, the mortgaged property or in this case its proceeds, to the...