Studebaker Bros. Mfg. Co. v. Elsey-Hemphill Carriage Co.

• Decision Date: 10 November 1910
• Parties: STUDEBAKER BROS. MFG. CO. v. ELSEY-HEMPHILL CARRIAGE CO. (POTTER, Intervener).
• Court: Missouri Court of Appeals

133 S.W. 412

152 Mo. A. 401

STUDEBAKER BROS. MFG. CO. v. ELSEY-HEMPHILL CARRIAGE CO. (POTTER, Intervener).

Springfield Court of Appeals. Missouri.

November 10, 1910.

Rehearing Denied January 9, 1911.

1. BANKRUPTCY (§ 185) — ASSIGNMENTS — PROPERTY VESTING IN TRUSTEE—STATUTE.

Under the direct provisions of the bankruptcy act (Act Cong. July 1, 1898. c. 541, §§ 67-70, 30 Stat. 564, 565 [U. S. Comp. St. 1901, pp. 3449-3451]), a trustee in bankruptcy not only has all the rights which the bankrupt might have exercised, but he may avoid any preferential or fraudulent transfers, etc., which any of the bankrupt's creditors might have avoided.

2. FRAUDULENT CONVEYANCES (§ 135)—CONTINUED POSSESSION OF SELLER.

Where a corporation made a bill of sale of goods, but remained in possession for over a year, the sale was void as to the creditors of that company under the direct provisions of Rev. St. 1909, § 2887.

3. SALES (§ 474)—CONDITIONAL SALES—RECORD—NECESSITY.

A carriage company made a contract with a manufacturer whereby carriages in its possession were to be sold by it as agent on commission; title to remain in the manufacturer till sale. Records of all transactions were to be kept by the carriage company, and proceeds of sales were to be kept as a trust fund. All taxes were to be paid by the carriage company on the property, while in its possession, and the property was to be insured by the carriage company at its own expense. In case of a fire loss, the manufacturer was to be paid any difference between the insurance money and the invoice price, less freight. In case the contract was terminated by failure of the carriage company to keep its provisions, or if the property remained unsold for 12 months after invoice, the carriage company was required to pay the invoice price in cash or return the property to the manufacturer with 10 per cent. of the invoice price for depreciation. Held, that the transaction was a conditional sale, and, not having been recorded, was void as against creditors under the express provisions of Rev. St. 1909, § 2889.

4. BANKRUPTCY (§ 184) — ASSIGNMENT — PROPERTY VESTING IN TRUSTEE — PREFERENCES—VOIDABLE—STATE LAWS—TIME.

A replevin suit was filed August 30, 1909, and, defendant having been adjudged a bankrupt September 15, 1909, its trustee resisted the action. Plaintiff based its claim on a bill of sale and a contract of sale. Possession not having been given under the sale, it was void under the direct provisions of Rev. St. 1909, § 2887, and the contract, being a conditional one and not having been recorded, was also void under the direct provisions of Rev. St. 1909, § 2889. Bankruptcy Act July 1, 1898, c. 541, § 3, 30 Stat. 546 (U. S. Comp. St. 1901, p. 3422), provides, among other things, that a petition may be filed against an insolvent who has committed an act of bankruptcy, within four months after the commission of the act, and that the said period shall not expire until four months after the date of recording or registering the transfer or assignment, when the act consists in having made a transfer of any property for the purpose of giving a preference, etc., and, if recording and registering is not required by the laws of the state, then from the date when the beneficiary takes notorious and exclusive possession of the property. Held, that the sale did not take effect as against the creditors until the replevin suit was brought for want of change of possession, and that the conditional contract never took effect because it was not recorded, and therefore the preference obtained by plaintiff in the replevin suit might be set aside at the instance of the trustee in bankruptcy.

5. BANKRUPTCY (§§ 159, 175)—TRANSFERS— PREFERENTIAL AND "FRAUDULENT TRANSFERS" DISTINGUISHED—"PREFERENCE."

A "preference" and a "fraudulent transfer" of a bankrupt's assets, within the bankruptcy act, are not the same; the fraud in a preferential transfer being technical and consisting in the infraction of the rule of equal distribution among all creditors, while, in a fraudulent transfer, the fraud is actual, in that the bankrupt has secured an advantage for himself out of what in law should belong to his creditors.

6. BANKRUPTCY (§ 159)—VOIDABLE "PREFERENCE"—INSOLVENCY OF DEBTOR.

Where a creditor attempted to take possession of the property of his debtor, over which he had previously attempted to obtain a lien by a bill of sale and a conditional sale, and must, from the circumstances, have known that such debtor was insolvent, it was a "preference" within the meaning of the bankrupt act and is not permissible.

7. APPEAL AND ERROR (§ 1068) — REVIEW — HARMLESS ERROR—INSTRUCTIONS—REFUSAL OF INSTRUCTION.

Where the judgment of the trial court is for the right party, and under the evidence plaintiff is not entitled to recover, the action of that court relating to instructions, even if erroneous, is no ground for reversal.

Appeal from Circuit Court, Lawrence County; F. C. Johnston, Judge.

Replevin by the Studebaker Brothers Manufacturing Company against the Elsey-Hemphill Carriage Company and J. A. Potter, intervener. From a judgment for defendant, plaintiff appeals. Affirmed.

J. B. McGuffin, I. V. McPherson, and A. L. Hilpirt, for appellant. Edw. J. White and James A. Potter, for respondent.

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 $1,200. 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 $10,000, 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 $2,400, about $1,900 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 $9,000 and its assets $3,000, including the property in controversy. On trial before a jury, the respondent was successful, and the value of the property was assessed at $1,200, 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 (Act Cong. July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]) 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 trademarks; 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...