185 Iowa 760 | Iowa | 1919
In addition to the matters set forth in the foregoing statement, the truth of all of which is conceded, it should be said that' the petition in Paragraph i thereof alleges that the written order or contract of conditional sale “was duly filed for record in the recorder’s office of Black Hawk County, Iowa,” and this allegation is formally admitted in Paragraph i of defendants’ answer.
In a subsequent paragraph, however, it is alleged “that, on account of the faulty and illegal acknowledgment” of said instrument, it “was improperly recorded, it was not entitled to record, and it imparted no notice to anyone of plaintiff’s alleged rights;” but such allegation is accompanied by no explanation or statement of the fact or facts relied upon as rendering the acknowledgment “faulty” or “illegal.”
It is also stipulated that Noftzger, whose name is subscribed to the contract and who acknowledged the execution, “had full authority from the plaintiff to sign the conditional sales contract in the way he signed this contract, and full power and authority to acknowledge this signature in the form and manner shown by the instrument,” also “full power and authority” to sell said property, either for cash -or upon conditional contracts, and to enter into said contracts “either in the name of the plaintiff or in his own name;” but this concession is made with
The stipulation further shows that the purchaser was adjudged a bankrupt on May 18, 1917, and that the defendant was appointed trustee in such proceedings on June 1, 1917; and it is agreed that, “previous to such appointment, he had no actual notice of plaintiff’s claim;” and there is no evidence that, prior to such date, the creditors of the bankrupt had any actual notice thereof.
In discussing the plaintiff’s petition, and confirming the defendants’ claim to priority, the trial court based its ruling upon the theory that the acknowledgment of the written contract was insufficient to admit it to record, as provided by statute, and that its record did not serve to impart constructive notice of the plaintiff’s right.
In this court, the appellant argues: First, that the acknowledgment is not fatally defective; and second, that, even if the recording did not impart constructive notice, yet, under the admitted facts and circumstances, the trustee takes no other or greater right in the property than was held by the debtor when he was adjudged a bankrupt.
Whether this objection is good depends very much upon the conceded facts as to the relation of Noftzger to the contract of sale. The writing bears the stamped signature of the plaintiff and the written signature of Noftzger. It is admitted that Noftzger' was authorized to sell and dispose of the property either in the name of the plaintiff or in his own name, and to enter into contracts of conditional sale accordingly.
This contract is subscribed by both the names of the plaintiff and Noftzger. Whether the name of the plaintiff was attached by Noftzger is not stated in the stipulation; but it is enough, we think, that it is agreed that he had
Still confining our attention to the effect of our own statutes in dealing with conditional sales of personal property, it is well settled by the decision of this court in Warner v. Jameson, 52 Iowa 70, and many others of that class, that an assignee or trustee in insolvency cases is not a purchaser, in the terms of the statute last above cited, and that a claim of the vendor in a contract of conditional sale is superior to that of the assignee or trustee, even though the written instrument has never been recorded. In other words, the effect of such holdings is that the assignee or trustee in insolvency takes the debtor’s estate as he held it, subject to all the liens now lawfully existing thereon.
This proposition, so far as our local law is concerned, is not open to question; but it is the contention of the appellee that this rule does not obtain in the settlement of a bankruptcy estate under the Federal law and practice. In support of this position, special reliance is laid upon the provision found in Section 67a of the Federal Bankruptcy Act Í30 Stat. atL. 564, Oh. 541), as amended by the Act of June 25, 1910 (36 Stat. at L. 842, Ch. 412), which reads as follows:
“a. 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.”
Following the language above quoted, and connected with the same general subject-matter, is Section 67d, as follows:
“d. Liens given or accepted in good faith and not in contemplation of or in fraud upon this act and for a present consideration, which have been recorded according to law, if record thereof was necessary in order to impart notice,
Section 47a also provides that:
“Such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, .remedies and powers of a judgment creditor holding an execution duly returned unsatisfied.”
But none of these provisions go to the extent argued by the appellees’ counsel. Section 67a does no more than to provide that creditors having no valid liens as against other creditors, at the ■ date when debtor goes into bankruptcy, ’ shall have no lien upon the bankrupt’s estate. In other words, the relative positions and relative rights of the individual creditors of the bankrupt, as they exist when the jurisdiction of the Federal Court attaches, are to remain unchanged, and claimants or creditors in whose favor there is then no valid lien as against other creditors, cannot thereafter assert such alleged lien as against the trustee of the bankrupt estate. Section 67d recognizes the validity of liens which have been created in good faith, for a consideration and which have been duly, recorded, if record was necessary to impart notice.
Section 47a defines the nature of the rights which rest in the trustee by virtue of his appointment. As to all property in the custody of the bankruptcy court (and the property in the case at bar comes within that exception), he acquires “the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings therein.”
This Section 47a, as above quoted, is part of the Bankruptcy Act of 1898, while Sections 67a and 67d were enacted
Discussing Section 47a, Mr. Collier says, in his work on Bankruptcy (9th Ed.), page 659:
“This language aptly refers to such rights, remedies, and powers as a creditor holding such a lien is entitled to under the law, rather than to the rights, remedies, and powers of a creditor who had actually fastened a lien on the property of the bankrupt estate.”
“In other words, the amendment of 1910 simply puts the trustee in his representative capacity in the position of a creditor who has reduced his claim to judgment. Such a creditor, by the settled law, is subject to all latent or secret prior liens or equities in favor of third persons. 23 Cyc. 1377; 2 Freeman on Judgments (4th Ed.), Sec. 368; Miller v. Albright, 60 Ohio St. 48 (53 N. E. 490).” In re S. D. F. & M. Co., 208 Fed. 813, 818.
It is true this section gives to the trustee a lien, or the rights of a lien-holding creditor, but it does not profess to affect any existing valid lien. The order of priority of valid liens, if any, including the. lien or title of the trustee, remains, as before, a matter for the adjudication of the court, according to the settled rules and principles of law and equity.
When a debtor is adjudged a bankrupt, the court assumes control of his estate, to insure the proper and faithful application of all his assets to the payment of the just claims of his creditors. To that end, the law makes provisions to guard against evasion and fraud by which the debtor may avoid a full and honest disclosure and surrender of his property, or by which one creditor may obtain an unfair advantage or preference over another; but it cannot be presumed that the statement was intended to permit the court or its trustee to subject to the payment of the bankrupt’s debts the property of third persons who
Recurring again to Section 67a of the statute, it will be seen that, as against the trustee, liens claimed by creditors will be disregarded'only where, “for want of record or other reasons,” such claims “would not have been valid liens against the claims of the creditors of the bankrupt.” In other words, this provision does no more than give to the trustee a right to dispute an alleged lien, to the same extent which other creditors could have asserted, had there not been an adjudication of bankruptcy. Orr v. Kenworthy, 113 Iowa 6.
So, in Section 67d, the failure to record the claim becomes material only “if record thereof was necessary in order to impart notice.” '
These references to unrecorded liens are doubtless made in recognition of the fact that, under the laws of some states, recording is essential to existence of a “valid lien,” especially upon personal property, and in such case it is manifest that the title of the trustee in bankruptcy is not affected by alleged liens of that character. But, as we have seen, under the law of this state, the claim of the vendor upon a contract of conditional sale is not invalid except as against subsequent purchasers and attaching and execution creditors without notice.
Assuming that, in this respect, the debtor does his full duty (and there is, in this case, no evidence that he failed in the performance of such duty, in any manner or degree), the court has in its hands, and upon its own record, substantially all the facts which are necessary to enable it and its trustee, when appointed, to liquidate the estate by converting the assets into money and applying it to the satisfaction of the admitted or proved charges and claims against it.
In obedience to the law, the debtor in the present case '.did, with his petition to be adjudged a bankrupt, lay before the court a schedule of his property, a list of his creditors, the amount owed to each, and the manner in which it was secured, if at all. It disclosed, in unmistakable terms, the nature of the debt to this plaintiff, — that is, that it was a remainder due upon the price of this machinery bought upon a contract of conditional sale. The debtor thereby informed the court that his right or title to the property was not ‘ absolute, but qualified and conditional upon the payment of the unpaid portion of the agreed price, to the amount of $1,459.61. Had he done no more than to schedule this property as an asset, and to list plaintiff as a creditor for the stated amount, without explanation or qualification, it may be conceded, for the purposes of this case (without so deciding), that the trustee’s title thereafter accruing would have precedence over the plaintiff’s claim under the contract; but the debtor having, at the very outset, revealed to the court the true nature and
That the question as to what shall constitute notice sufficient to protect the rights of a lienholder against accruing claims is to be determined under the law of the local jurisdiction, has been often held. York Mfg. Co. v. Cassell, 201 U. S. 344; Thompson v. Taggart, 209 U. S. 385; Bryant v. Swofford Bros., 214 U. S. 279, 290.
Further discussion seems to be unnecessary. Upon