In re Standard Laundry Co.

• Citation: 116 F. 476
• Decision Date: 12 May 1902
• Docket Number: 779.
• Parties: In re STANDARD LAUNDRY CO.
• Court: U.S. Court of Appeals — Ninth Circuit

116 F. 476

In re STANDARD LAUNDRY CO.

No. 779.

United States Court of Appeals, Ninth Circuit.

May 12, 1902

The facts found by the referee are substantially as follows: On April 17, 1899, the Sun Laundry Company made its certain promissory note to Eugene S. Perkins for $1,000, payable one year after date, with interest, etc., and to secure the payment of said note executed its certain mortgage to said Perkins upon certain personal property herein designated as laundry machinery and materials; that the mortgage was properly acknowledged and duly recorded; that Perkins transferred the same to one Muller, who was the actual lender of the money, and was at all times the true party in interest in said mortgage; that on August 24, 1899, the property was sold at constable sale to one Bercovich for the sum of $200 and in the certificate of sale given to the purchaser it was expressly set forth that the property was sold subject to the chattel mortgage of $1,000; that on August 24, 1899, said Bercovich sold the same to Ottmar Muller; that thereafter said Muller sold the property to the Standard Laundry Company, and in the bill of sale, given by the said Muller to the Standard Laundry Company, there was a clause wherein it was stated that the property was sold subject to a chattel mortgage for $1,000, 'now subsisting upon the said personal property and which is assumed to be paid by the second party hereto. ' It was stipulated that the property be sold, and that the money realized from the sale be paid to the party entitled thereto. The referee decided in favor of Muller, and ordered the trustee to pay him the money realized from such sale. This order was affirmed by the district court. 112 F. 126.

Crowley & Leach, for bankrupt and trustee.

Samuel Bell McKee, for Muller.

Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge.

HAWLEY District Judge, after stating the facts as above, .

The petition for review shows that the trustee refused to pay the note held by Muller on the grounds '(1) that the chattel mortgage was void to the creditors of said bankrupt because it was not executed in accordance with the statute relating to chattel mortgages; (2) that the said chattel mortgage was void as to the creditors of said bankrupt, inasmuch as it covers property which cannot be made the subject of a chattel mortgage under the laws of this state; (3) that, if ever valid, the mortgage lien had been merged in the legal title and was conveyed by Muller to the bankrupt.'

If the contest was between the creditors of the Sun Laundry Company and the mortgagee, it might be necessary to consider and dispose of these questions seriatim. But the controversy herein is not between those parties, and will therefore be disposed of on other grounds.

Did the court err in affirming the order made by the referee directing the trustee to pay Muller the proceeds arising from the sale of the laundry machinery and materials, which was as found by the referee, subject to the lien of the chattel mortgage held by Muller? In the consideration of this question it must be borne in mind that this is not a case where the trustee is authorized, as the representative of the creditors, to bring suit for the recovery of property which had been disposed of by the bankrupt in fraud of its creditors. There was no fraud in fact or in law against the creditors of the bankrupt herein. The facts of this case are undisputed. The bankrupt acquired title to the property in controversy under a bill of sale executed to it by Muller which recited that the property was purchased 'subject to a chattel mortgage for $1,000 now subsisting upon the said personal property, and which is assumed to be paid by the second party hereto. ' The mortgage was valid between the parties thereto. Tregear v. Water Co., 76 Cal. 537, 18 P. 658, 9 Am.St.Rep. 245; Works v. Merritt, 105 Cal. 467, 470, 38 P. 1109; Bank v. Moore, 106 Cal. 673, 680, 39 P. 1071; Same v. Gibson, 109 Cal. 197, 41 P. 1008. The transaction between Muller and the Standard Laundry Company was bona fide. The Standard Laundry Company bought the property in good faith subject to the mortgage. By the terms of its purchase of the property it is estopped from denying the validity of the mortgage or of its own obligation to Muller. In a case of this character the trustee, representing the creditors, stands in the shoes of the laundry company, and is in privity with it, so far as the title of the...