Wyatt v. Duncan

• Decision Date: 28 January 1939
• Docket Number: 34142.
• Parties: WYATT et al. v. DUNCAN. [*]
• Court: Kansas Supreme Court

87 P.2d 233

149 Kan. 244

WYATT et al. v. DUNCAN. ^[*]

No. 34142.

Supreme Court of Kansas

January 28, 1939

Syllabus by the Court.

The term "creditors," as used in statute declaring conditional sale void as to innocent purchasers or "creditors" of the buyer unless the original instrument or copy thereof shall have been entered on the records, means creditors who have acquired a lien on the property, and not merely general creditors. Gen.St.1935 58-314.

A conditional sales contract, although unrecorded, was valid as between the parties thereto. Gen.St.1935, 58-314.

The rights of a trustee in bankruptcy do not become effective until the date when the petition in bankruptcy is filed.

A trustee in bankruptcy is not an "innocent purchaser," but takes bankrupt's property subject to all valid claims, liens, and equities.

The taking of possession of goods by seller under unrecorded conditional sales contract, within period of four months prior to filing of buyer's petition in bankruptcy, did not constitute a "preference or transfer" under the Bankruptcy Act. Bankr.Act § 60, 11 U.S.C.A. § 96.

The taking of possession of goods by seller under unrecorded conditional sales contract within four months prior to buyer's filing of petition in bankruptcy did not constitute a "preference or transfer" under the Bankruptcy Act by reason of provision in contract vesting title in seller to after-acquired property. Bankr.Act § 60 11 U.S. C.A. § 96.

Where seller under express terms of conditional sales contract had right to repossess goods from buyer, seller's dismissal of replevin action rendered surety liable only in nominal damages and accrued costs for failure of seller to prosecute replevin action.

The record in an action by a trustee in bankruptcy to recover damages against a surety on a replevin bond which bond had been given in a replevin action by a vendor (prior to the filing of a petition in bankruptcy by the vendees), to recover possession of a stock of merchandise and fixtures from vendees who had purchased the same under a conditional sales contract which was never recorded, examined and held:

1. The conditional sales contract, although unrecorded, was valid as between the parties thereto.

2. The term "creditors" in our conditional sales contract statute, G.S.1935, 58-314, means creditors who have acquired a lien on the property and not general creditors.

3. The vendor retained title to the property, under the express terms of the contract, and obtained possession thereof by virtue of judicial process and not by reason of any act of the vendees. The vendor obtained possession of the property before any creditor obtained a specific right in or a lien upon the property and prior to the filing of the petition in bankruptcy by the vendees; the taking of possession, under the circumstances, operated as a filing of the contract for record; the act of taking possession within the period of four months prior to the filing of the petition in bankruptcy did not constitute a preference or a transfer under the provisions of the national bankruptcy act, 11 U.S.C.A. § 96 nor did it constitute a preference or transfer under that Act by reason of the provision in the contract which vested title in the vendor to after-acquired property.

4. The act of acquiring possession by the vendor, under the circumstances in the instant case, did not constitute a "sale or disposal" within the meaning of those terms as employed in the bulk sales law of this state. G.S.1935, 58-101.

5. The rights of the trustee accrued on the date of the filing of the petition in bankruptcy by the vendees and the liability of the surety, on the replevin bond, to the trustee was no greater than his liability would have been to the vendees, defendants in the replevin action.

6. The vendor, under the express terms of the contract, had the right to repossess the property from the vendees and his dismissal of the replevin action, under the conditions of the bond, rendered the surety liable only in nominal damages and accrued costs for failure to prosecute the replevin action.

7. The motion of the surety for judgment against him on the pleadings for nominal damages only and for accrued costs was properly sustained.

Appeal from District Court, Saline County; Ralph Knittle, Judge pro tem.

Action by J. Earl Wyatt, trustee in bankruptcy, and others, against George H. Duncan, to recover damages on a replevin bond on which defendant was the surety. From an adverse judgment, the plaintiffs appeal.

Judgment affirmed.

William S. Norris, Wint Smith, and Homer B. Jenkins, all of Salina, for appellants.

David Ritchie and C. L. Clark, both of Salina, for appellee.

WEDELL Justice.

This was an action by a trustee in bankruptcy to recover damages from a surety on a replevin bond. The principal, Joseph Duncan, in the replevin action had sold a stock of furniture and fixtures to L. E. Smith and W. H. Hollis, Jr., partners, under an unrecorded conditional sales contract. Prior to the filing of the petition in bankruptcy of the vendees, the vendor obtained possession of the stock and fixtures in a replevin suit, sold the property under the terms of the contract and dismissed the replevin suit. In the instant case the trustee sought to recover from the surety, George H. Duncan, on the replevin bond, the value of the property on the basis of the value thereof as fixed in the replevin affidavit. The surety answered and prayed that judgment be rendered against him for the sum of $1 only and for the then accrued costs of the action. After the trustee filed a reply the surety moved for judgment on the pleadings except as to nominal damages. The motion was sustained and the trustee appeals. The pertinent averments of the petition were in substance as follows:

On February 7, 1931, Smith & Hollis, partners, and Smith and Hollis, as individuals, filed their voluntary petition in bankruptcy and were adjudicated bankrupt February 9, 1931. J. Earl Wyatt is the duly constituted and qualified trustee in bankruptcy. On February 3, 1931, Joseph Duncan instituted a replevin action against Smith & Hollis, partners, and on February 5th, obtained possession of the property in question under the writ of replevin. The defendant, George H. Duncan signed the replevin bond as a surety. March 3, 1931, the replevin action was dismissed without prejudice on the motion of the plaintiff in that action. The rights of the plaintiff to the possession of the property had not been adjudicated. Had Joseph Duncan not obtained possession of such property prior to the filing of the petition in bankruptcy, the trustee would have been entitled to the possession thereof. By reason of the dismissal of the replevin action the terms of the bond were violated and the surety, George H. Duncan, became liable to Smith and Hollis in the replevin action in the sum of $4,000, the value of the property, with interest from March 3, 1931. The trustee became vested with all the property and the rights of Smith and Hollis, as of the date they were adjudicated bankrupts.

The pertinent provision of the replevin bond reads: "Now, we the undersigned, residents of said County and State, bind ourselves to said defendant, in the sum of Four Thousand ($4,000.00) Dollars, that said plaintiff shall duly prosecute the above action, and pay all costs and damages that may be awarded against him, and, if a return of the property therein delivered to him be adjudged, that he will deliver the same to said defendant."

The material averments of the answer filed by the surety were in substance as follows:

His principal, Joseph Duncan, was, under the terms of his contract, entitled to the possession of the property at the time such possession was obtained by virtue of the writ. On January 1, 1930, and prior thereto, Joseph Duncan, was the owner of the property and on January 1, 1930, entered into a written contract with Smith and Hollis. On January 1, 1931, the vendees had failed to make the payments on the purchase price according to the terms of the contract. Demand was made for the possession of the property and the demand was refused, Joseph Duncan obtained possession by virtue of the writ of replevin. The sheriff held the property twenty-four hours as provided by law and delivered it to Joseph Duncan. (No redelivery bond was filed.) On March 3, 1931, Joseph Duncan dismissed the replevin action without prejudice. He was entitled to the possession under the express terms of the written agreement. The trustee was entitled to nominal damages only for the failure of Joseph Duncan to prosecute the replevin action and he (the surety) confessed judgment in the sum of $1 and all accrued costs, including the costs of filing his answer.

Pertinent provisions of the contract attached to the answer were in substance as follows:

Joseph Duncan was the owner of the building located at 156 North Santa Fe Avenue, in the city of Salina, where the personalty covered by the contract was located. Joseph Duncan was also the owner of the stock and fixtures. The latter were sold in consideration of the sum of $3,087.01. The title to the property remained in Joseph Duncan until the purchase price was fully paid. Smith and Hollis agreed to pay a monthly rental on the building in the sum of $120, and $100 per month on the purchase price out of the proceeds of sale. The vendees were permitted to take from the proceeds of the business the sum of $75 per month for their services. They were required to keep accurate book accounts. The title and right to the possession of the stock and fixtures and to any and all other goods which the vendees might at any time purchase was to be and remain in Joseph Duncan. The vendees were required to pay all taxes and lawful...