In re Waters-Colver Co.

• Decision Date: 14 July 1913
• Citation: 206 F. 845
• Parties: In re WATERS-COLVER CO.
• Court: U.S. District Court — Eastern District of New York

206 F. 845

In re WATERS-COLVER CO.

United States District Court, E.D. New York.

July 14, 1913

Hunt Hill & Betts, of New York City (William H. Peck, of New York City, of counsel), for petitioners.

Alexander & Ash, of New York City (Mark Ash, of counsel), for trustee.

CHATFIELD District Judge.

The facts are stated in the commissioner's report and need not be repeated. The record shows that the Badenhausen Company wished to have the Waters-Colver Company use the Badenhausen boilers in a government contract for the tug Vigilant. They asked the Waters-Colver people to obtain authority therefor. The contract was signed with that end in view, and other arrangements were made with the government showing that all parties contemplated that title in the boilers would pass to the government.

Such a situation would defeat reservation of title to the boilers themselves, and the special commissioner has found that the parties did not in fact intend the transfer to be a conditional sale. The clause reserving title was in the body of the contract, which differs from the facts in the case of In re George O. Hassam & Son (D.C.) 153 F. 932; but the commissioner's finding makes the situation like the one passed upon in that case. This finding should be upheld unless plainly contrary to the evidence (In re Stout (D.C.) 109 F. 794; In re Schwartz (D.C.) 179 F 767); but, aside from the question of intent, the same result must be reached.

Further any attempt to work out an equitable lien or assignment of an interest in a government contract is impossible. Section 3477, R.S. (U.S. Comp. St. 1901, p. 2320); National Bank of Commerce v. Downie, 218 U.S. 345, 31 Sup.Ct. 89, 54 L.Ed. 1065, 20 Ann.Cas. 1116; Smedley v. Speckman, 157 F. 815, 85 C.C.A. 179. Nor can there be an equitable lien against the trustee or against creditors, where the legal title has passed, and where to defeat the legal title would be to carry out a fraud in law, even if the parties had no intent to defraud. As a matter of fact, the government officers gave no thought to any idea of this sort, and their acquiescence would not have bound the United States, in the face of positive law.

The Badenhausen Company assigned their claim against the Waters-Colver Company to a trust company, and also, a short time after the petition in bankruptcy against the Waters-Colver Company, filed the so-called conditional bill of sale under the laws of the state of New York. The assignee would succeed to the rights of the Badenhausen Company against the bankrupt; but an assignment of this sort would not add any rights against the bankrupt's claim of its contract with the United States, nor has the filing of the bill of sale changed the situation, for there are no subsequent mortgages or purchasers for value since the date of filing. Personal Property Law N.Y. (Laws 1909, c. 45 (Consol. Laws 1909, c. 41)) art. 4, Sec. 62.

If filed before use of the boilers on the government contract, the title would still have passed, and the government would not have been bound to recognize the vendor as a party to its contract with the vendee. This would be in effect an assignment of a part of the vendee's claim against the United States. It is plainly shown that all the parties expected title to the boilers to pass to the United States, but Badenhausen seems to have had the idea that his title to the boilers would be immediately transferred to the $3,500 item of the contract, and that such a claim would be good against creditors of the Waters-Colver Company. Hence his attempt to assign the proceeds to the trust company.

Conditional sales are valid against the vendee, and against creditors generally, where no fraud is shown. York Mfg. Co. v. Cassell, 201 U.S. 344, 26 Sup.Ct. 481, 50 L.Ed. 782; Wm. W. Bierce, Ltd., v. Hutchins, 205 U.S. 340, 27 Sup.Ct. 524, 51 L.Ed. 828; Bryant, Trustee of Newton & Co., Bankrupts, v. Swofford Bros. Dry Goods Co., 214 U.S. 279, 29 Sup.Ct. 614, 53 L.Ed. 997; Dunlop v. Mercer, 156 F. 545, 86 C.C.A. 435; In re Garcewich, 115 F. 87, 53 C.C.A. 510. These cases hold that a conditional sale will be tested by the law of the state thereon.

But, as in the case of a chattel mortgage, a reservation of title cannot be coupled with a plain intent to transfer that title. If intent to substitute the proceeds for the chattels be expressed, or be evident from the instrument involved, then the validity of such an intent must be tested by the law of the place where the contract is made.

A trustee in bankruptcy now has the rights of any creditor, as well as those of the bankrupt himself, and the doctrine of York Mfg. Co. v. Cassell, supra (1905), has thus been amplified. The amendment of the law has entirely validated the statements of the court in the Garcewich Case ...