Studebaker Bros. Manufacturing Co. v. Elsey-Hemphill Carriage Company

• Decision Date: 10 November 1910
• Citation: 133 S.W. 412,152 Mo.App. 401
• Parties: STUDEBAKER BROS. MANUFACTURING CO., Appellant, v. ELSEY-HEMPHILL CARRIAGE COMPANY, J. A. POTTER, Intervenor, Respondent
• Court: Missouri Court of Appeals

133 S.W. 412

152 Mo.App. 401

STUDEBAKER BROS. MANUFACTURING CO., Appellant, v. ELSEY-HEMPHILL CARRIAGE COMPANY, J. A. POTTER, Intervenor, Respondent

Court of Appeals of Missouri, Springfield

November 10, 1910

Motion for Rehearing Overruled January 9, 1911.

Appeal from Lawrence Circuit Court.--Hon. H. F. Johnston, Judge.

AFFIRMED.

Judgment affirmed.

J. B McGuffin and McPherson & Hilpirt for appellant.

(1) The court erred in refusing plaintiff's instruction A. Upon the undisputed and admitted facts plaintiff was entitled to a peremptory direction to find for it. Thompson v Massey, 76 Mo.App. 197; Tufts v. Thompson, 22 Mo.App. 64; Drew v. Drum, 44 Mo.App. 25; Bank v Iron Co., 102 F. 755; Peet v. Spencer, 90 Mo. 384; Green v. Conrad, 114 Mo. 651; Collins v. Wilhoit, 108 Mo. 456; In re New York Printing Co., 110 F. 514; Thomas Mfg. Co. v. Huff, 62 Mo.App. 124.

Edw. J. White and James A. Potter for respondents.

(1) The attempted transfer of the buggies by defendant to plaintiff on August 20, 1908, is void for the reason that it violates section 70, clause 4, of the Bankruptcy Act, and appellant admits that respondent may avoid and transfer in violation of the Bankruptcy Act. Bank Act 1898, sec. 70, clause 4; In re Legg et al., 96 F. 326; In re Rodgers, 125 F. 169; In re Kohler, 159 F. 871; In re Taylor, 95 F. 956; In re Butterwick, 131 F. 371; Skilton v. Coddlington, 185 N.Y. 80; Blake v. Meadows, 123 S.W. 868. (2) Plaintiff's action of replevin is in direct conflict with the provisions of paragraph "F" of section 67, of Bankruptcy Act of 1898. Matter of S. Ah Mi., D. C. Hawaii, 18 Am. B. R. 138; McElvain v. Hardesty, 169 F. 31; Bank v. Connett, 142 F. 33; In re Hymes, 130 F. 977; In re Haynes, 123 F. 1001; Matter of Weineger & Co., 126 F. 875; Matter of Rudnick & Co., 158 F. 223; Bankruptcy Act, sec. 67. (3) Under the evidence and the provision of the Bankruptcy Act the trustee clearly acquired title to this property. The law has been so declared in a number of cases. McFarlan Co. v. Wells, 99 Mo.App. 641; In re Pekin Co., 112 F. 308; In re Legg, 96 F. 326; In re Burks, 104 F. 326; Clark v. Williams, 190 Mass. 219; Logan v. Plow Co., 93 N.W. 1128; Haskell v. Merrill, 179 Mass. 120. (4) Plaintiff's action cannot be sustained for the reason that it would be violative of paragraph "E" of section 70 of the Bankruptcy Act. Sheldon v. Parker, 11 B.R. 152; In re Mullen, 101 F. 413; Bush v. Storage Co., 136 F. 918; Thomas v. Roddy, 122 A.D. 851; In re Rogers, 125 F. 169.

OPINION

GRAY, J.

This suit originated in the circuit court of Lawrence county, by the appellant filing with the clerk of said court on August 30, 1909, a petition and affidavit in replevin in due form, wherein it was claimed that appellant was the owner and entitled to the possession of ten top buggies and six surreys, of the value of twelve hundred dollars. The suit was brought to the January term, 1910, of said court. On the 15th day of September, 1909, the Elsey-Hemphill Carriage Company, a corporation, was adjudged a bankrupt, and the respondent, J. A. Potter, was appointed trustee of the bankrupt's estate. The corporation filed no answer but the trustee was allowed by the circuit court to intervene and defend the suit.

The Elsey-Hemphill Carriage Company was organized under the laws of this state in 1905, with a capital stock of ten thousand dollars, consisting of real estate, merchandise and cash. In October, 1905, the corporation purchased from the appellant buggies and wagons. The buggies were purchased outright, but the wagons under a special option contract. Between October, 1905, and August 20, 1908, the corporation had purchased of the appellant the property involved in this suit. On the latter date the corporation was indebted to the appellant in the sum of twenty-four hundred dollars, about nineteen hundred dollars of which was represented by notes, a part of which were due. At that time the buggies were in the possession of the corporation, and were a part of the stock of merchandise carried by the corporation in its store at Aurora, Mo. On that day an agreement was entered into between the appellant and the corporation, by the terms of which the corporation sold to the appellant all of the property involved in this suit. The agreement was evidenced by a written bill of sale executed by the corporation and delivered to the appellant, but not recorded. After the execution of this bill of sale, the corporation continued in the possession of the property, handling it in the ordinary course of business, and nothing was done to notify any one that the corporation had sold the same to the appellant. In May, 1909, another contract was entered into between the appellant and the corporation, by the terms of which the corporation was to sell and dispose of the property on commission.

The testimony fully discloses that the creditors of the corporation or the public, had no notice or knowledge that the appellant had purchased the property in 1908, or that the same was being handled by the corporation on any contract recognizing ownership in the appellant. The testimony further shows that the corporation in August, 1908, was unable to meet its demands then due, and that the appellant had notice thereof, and an officer of the corporation notified the appellant that if it pressed payment of the amount due, the corporation would be forced into bankruptcy. During the trial an admission was made that the corporation was insolvent, and that its liabilities were nine thousand dollars and its assets three thousand dollars, including the property in controversy. On trial before a jury, the respondent was successful and the value of the property was assessed at twelve hundred dollars and the appellant appealed.

It is the contention of the appellant that under the Bankruptcy Law the trustee takes only the title of the bankrupt, and stands absolutely in his shoes and can avoid no sale or transfer that the bankrupt could not avoid if defending or prosecuting in his own name and without having been adjudged a bankrupt. It seems to us that the plain reading of the bankruptcy statute proves the unsoundness of this contention. Section 70 of that law reads: "The trustee of the estate of a bankrupt shall be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all documents relating to his property; interests in patents, patent rights, copyrights, and trade-marks; property transferred by him in fraud of his creditors; property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him. The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication."

Section 67 of the act reads: "Claims which for want of record or for other reasons would not have been valid liens as against the claims of the creditors of the bankrupt shall not be liens against his estate. And whenever a creditor is prevented from enforcing his rights as against a lien created, or attempted to be created, by his debtor, who afterwards becomes a bankrupt, the trustee of the estate of such bankrupt shall be subrogated to and may enforce such rights of such creditor for the benefit of the estate. And all conveyances, transfers, or incumbrances of his property made by a debtor at any time within four months prior to the filing of the petition against him, and while insolvent, which are held null and void as against the creditors of such debtor by the laws of the state, shall be deemed null and void under this act against the creditors of such debtor if he be adjudged a bankrupt, and such property shall pass to the trustee and be by him reclaimed and recovered for the benefit of the creditors of the bankrupt."

It will be seen that the statute expressly provides that the title to property transferred by the bankrupt in fraud of his creditors, is vested by operation of law in the trustee. The general rule is that the trustee stands in the shoes of the bankrupt, but in all cases affected by the fraud of the bankrupt toward creditors, or where there has been some transfer or encumbrance of the property void as to creditors by state law, for want of record, or for failure to take possession, or otherwise, the trustee succeeds to the rights of any creditor who may be qualified under the state law to avoid the transfer. [Remington on Bankruptcy, sec. 1207; Chesapeake Shoe Co. v. Seldner, 122 F. 593; Bush v. Export Storage Co., 136 F. 918; Mitchell v. Mitchell, 17 A. B. R. 389; Smith v. Mishawaka Woolen Mfg. Co., 172 F. 98; Security Warehousing Co. v. Hand, 206 U.S. 415, 51 L.Ed. 1117, 27 S.Ct. 720; In re New York Economical Printing Co., 110 F. 514; Fourth National Bank v. Millbourne Mills Co., 172 F. 177; McElvain v. Hardesty, 169 F. 31; In re Burlage Bros., 169 F. 1006; In re Rudnick, 102 F. 750; In re Rodgers, 125 F. 169.]

Counsel have carefully discussed in their brief the different statutes of this state relating to transfers of property by a debtor, but it will only be necessary to notice sections 2887 and 2889 of the Revised Statutes of 1909. Section 2887 provides that every sale made by a vendor of goods in his possession or under his control, unless accompanied by delivery in a reasonable time, regard being had to the situation of the property, and be followed by an actual and continued change of the possession, shall be held to be fraudulent and void,...