In re Terrell

• Decision Date: 15 October 1917
• Docket Number: Original.,164
• Citation: 246 F. 743
• Parties: In re TERRELL. v. OKLAHOMA MOLINE PLOW CO. ANDERSON
• Court: U.S. Court of Appeals — Eighth Circuit

246 F. 743

In re TERRELL.

ANDERSON v. OKLAHOMA MOLINE PLOW CO.

No. 164, Original.

United States Court of Appeals, Eighth Circuit.

October 15, 1917

J. C Willingham, of Oklahoma City, Okl. (Morse, Standeven &amp Willingham, of Oklahoma City, Okl., on the brief), for petitioner.

David I. Johnston, of Oklahoma City, Okl. (James R. Keaton, Frank Wells, and George G. Barnes, all of Oklahoma City, Okl., on the brief), for respondent.

Before HOOK, Circuit Judge, and REED and BOOTH, District Judges.

REED District Judge.

The bankrupt, J. E. Terrell, was engaged in the general mercantile business in Texola, Beckham county, Okl., from some time prior to July 9, 1912, up to and including February 3, 1914, when an involuntary petition in bankruptcy was filed against him upon which he was duly adjudicated a bankrupt on February 24th following, and the petitioner, Anderson, was in due time appointed trustee in bankruptcy of his estate.

On July 9 and again on August 3, 1912, the bankrupt entered into separate written contracts with the Oklahoma Moline Plow Company, a corporation, for the conditional sale by the plow company and purchase by the bankrupt of certain farm property described in said contracts which provide that the title and right to the possession of the property shall remain in the plow company until the agreed price therefor shall be paid in full. The property so conditionally sold was delivered to the bankrupt about the date of the respective contracts, but they were not recorded until December 30, 1913, when they were duly filed for record in the proper county in which the property was situated. The petitioner as trustee, upon his appointment and qualification, took possession of the property of the bankrupt estate, also a part of the property so conditionally sold and delivered by the plow company to the bankrupt. Between the date of the contracts, and the filing thereof for record, other persons became creditors of the bankrupt for goods sold to him on credit, but who have no lien upon the property described in the contracts, or any part of the bankrupt estate other than such lien, if any, as the petitioner may have as trustee for their benefit under section 47a (2) of the Bankruptcy Act as amended June 25 1910. The plow company not having been paid for the property, in due time filed its petition with the referee for an order requiring the trustee to return to it the property in his custody described in the conditional sale contracts. Upon a hearing of such petition the referee sustained the same and ordered the trustee to return such property to the plow company. Upon petition for review by the trustee, the order of the referee was approved by the judge, and the petitioner brings this proceeding to revise in matter of law the order so approving the order of the referee upon the ground; that under the Oklahoma statute the conditional sale contracts not having been filed for record were void as against creditors of the bankrupt who became such prior to the recording of the contracts on December 30, 1913, though they have not by attachment or otherwise secured or fastened a lien upon the property, prior to the bankruptcy.

The questions for determination are:

(1) Are the contracts of conditional sale void under the Oklahoma statute as to general creditors of the bankrupt who became such between the date of such contracts and the filing of the same for record, but who have acquired no lien upon the property by attachment or otherwise, prior to the bankruptcy?

(2) Does the trustee in bankruptcy under section 47a (2) of the Bankruptcy Act as amended in 1910, acquire any greater rights in or to the property acquired by the bankrupt under conditional sale contracts made and to be performed in Oklahoma than the bankrupt has?

The applicable provisions of the Oklahoma statute as appear in the Revised Laws of Oklahoma (1910) are:

'Sec. 2894. In the absence of fraud, every contract of a debtor is valid against all his creditors, existing or subsequent, who have not acquired a lien on the property affected by such contract.'

'Sec. 4031. A mortgage of personal property, is void as against creditors of the mortgagor, subsequent purchasers, and incumbrancers of the property, for value, unless the original, or an authenticated copy thereof, be filed by depositing the same in the office of the register of deeds of the county where the property mortgaged, or any part thereof, is at such time situated. * * * '

'Sec. 6745. Any instrument in writing, or promissory note, evidencing the conditional sale of personal property, which retains the title to the same in the vendor until the purchase price is paid in full, shall be void as against innocent purchasers, or the creditors of the vendee, unless the original instrument, or a true copy thereof, shall have been deposited in the office of the register of deeds in and for the county wherein the property shall be kept; and when so deposited, it shall be subject to the law applicable to the filing of chattel mortgages; and any conditional, verbal sale of personal property, reserving to the vendor any title in the property sold, shall be void as to creditors and innocent purchasers for value.'

Counsel for each of the parties have filed extensive briefs citing many authorities in support of their respective contentions, to review all of which would unduly extend this opinion, and we deem it necessary to refer in the main only to those which declare the law of Oklahoma and construe the statutes of that state bearing upon the question involved.

There is no claim of any actual fraud between the plow company and the bankrupt in the making of these contracts, or in withholding them from record, and they are valid as between the parties though not filed for record; also as against creditors of the bankrupt existing at the time they were made, or who became such subsequent thereto, who have not acquired specific liens upon the property covered by the contracts prior to the bankruptcy (Revised Laws of Oklahoma (1910) Sec. 2894, above; McCormick v. Koch, 8 Okl. 374, 58 P. 626, decided in 1899); and no title passed to the bankrupt until the purchase price of the property was paid as specified in the contracts; (McIver v. Williamson Co., 19 Okl. 454, 92 P. 170, 13 L.R.A. (N.S.) 696, decided in 1907, and cases cited); nor had the bankrupt any attachable interest in the property covered by the contracts before the purchase price was paid (Lockwood v. Frisco Lumber Co., 22 Okl. 31, 97 P. 562, decided in 1908); nor have creditors without a lien upon the property any standing in court to challenge the title of the plow company to the property (Chandler v. Colcord, 1 Okl. 269, 32 P. 330, 335, decided in 1893).

That the contracts in question are valid as between the parties, though not recorded, cannot be successfully controverted, is also settled by repeated decisions of the Supreme Court of the United States (Fosdick v. Schall, 99 U.S. 235, 250, 25 L.Ed. 339), even in states where under the local law they are to be treated in effect as chattel mortgages (Id., 99 U.S. 251, 25 L.Ed. 339; Harkness v. Russell, 118 U.S. 663, 7 Sup.Ct. 51, 30 L.Ed. 285; Bryant v. Swofford Brothers, 214 U.S. 279, 290, 291, 29 Sup.Ct. 614, 53 L.Ed. 997).

McIver v. Williamson Co., 19 Okl. 454, 92 P. 170, 13 L.R.A. (N.S.) 696, above, was replevin by the defendant Williamson Company wholesale grocers to recover certain groceries that it had sold and delivered to one Pickford, a retail dealer in groceries, under an agreement to be paid for upon delivery, but were not paid for. After several demands upon him for payment, which he failed to make, the goods were levied upon under execution by others of his creditors and were replevined by the Williamson Company. After a full consideration of the authorities the Supreme Court of Oklahoma said:

'We take it that * * * attachment and execution creditors here are in no better position, and have no greater rights, than had the vendee (the execution debtor), because our own Supreme Court, in the case of Central Loan & Trust Co. v. Campbell Commission Co., reported in 5 Okl. 411, 49 P. 52 (decided in 1897), lay down this rule: 'Where personal property is sold and delivered, upon condition that the title shall not vest in the vendee, unless the price agreed upon be paid within a specified time, the vendee has no attachable interest in the property until the performance of the condition'-- (citing many authorities). * * * Under the law as laid down in this decision, and all of the decisions upon the subject that we are able to find, we think that the conclusion of the jury and the finding of the court below that the plaintiff was entitled to recover the goods was correct. * * * '

In Chandler v. Colcord, 1 Okl. 260, 32 P. 330, decided in 1893, the court said:

'The law is well settled that a creditor, who has no lien on the property covered by a chattel mortgage, cannot be permitted to assail the validity of the mortgage, on the ground that it was made with intent to hinder, delay and defraud the creditors of the mortgagors. In order to do so, he must not only obtain a judgment, but must have a valid execution against the property of the mortgagor (citing People's Saving Bank v. Bates, 120 U.S. 556, 7 Sup.Ct. 679, 30 L.Ed. 754).'

In Lockwood v. Frisco Lumber Co., 22 Okl. 31, 97 P. 562, above, decided in 1908, the syllabus reads:

'Where a chattel is sold with a reservation of title in the vendor until the price is paid, the title remains in him until the condition is performed, and a purchaser of the vendee acquires no title, though he buys in good faith for a valuable consideration and without notice of the condition.'

In the course of the opinion it is stated:

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