Thе bankrupt, J. E. Terrell, was engaged in the general mercantile business in Texola, Beckham county, Okl., from some time prior to July 9, 1912, up to and including February 3, 1914, when an involuntary petition in bankruptcy was filed against him upon which he was duly adjudicated a bankrupt on February 24th following, and the petitioner, Anderson, was in’due time appointed trustee in bankruptcy of his estate. ¡
On July 9 and again on Augusi 3, 1912, the bankrupt entered into separate written contracts with the Oklahoma Moline Plow Company, a corporation, for the conditional Isale by the plow company and purchase by the bankrupt of certain f'arm propеrty described in said contracts which provide that the title; and right to the possession of the property shall remain in the plow cpmpany until the agreed price therefor shall be paid in full. The property so conditionally sold was delivered to the bankrupt about the date of the respective contracts, but they were not recorded until December 30, 1913, when they were duly filed for record in the proper county in which the property was situated. The petitioner as trustee, upon his appointment and qualification, took possession of the property of the bankrupt estate, also a part of the property so conditionally sold and delivered by the plow company to thé bankrupt. Between the date of the contracts, and the filing thereof for record, other persons became creditors of the bankrupt for goods sold to him on credit, but who have! no- lien upon the property described in the contracts, or any part of the bankrupt estate other than such lien, if any, as the petitioner may have- as trustee for their benefit under section 47a (2) of the Bankruptcy Act as amended June 25, 1910. The plow company not having been paid for the property, in duе time filed its petition with the referee for an order requiring the trustee to return to it the property in his custody described in the conditional sale contracts. Upon a hearing of such petition the referee sustained the same and ordered the trustee to return such property to the plow company. Upon petition for review by the trustee, the order of the referee was approved by the judge, and the petitioner brings this proceeding to revise in matter of law the order so approving the order of the referee upon the ground; that under the Oklahoma statute the conditionаl sale contracts not having been filed foil record were void as against creditors of the bankrupt who became such prior to the recording of the contracts on December 30, 1913, though they have not by attachment or otherwise secured or fastened a lien upon the property, prior to' the bankruptcy. ¡
The questions for determination are:
(1) Are. the contracts of conditional sale void under the Oklahoma statute as to general creditors of the bankrupt' who became such between the date of such contracts and the filing of the same for record,
(2) Does the trustee in bankruptcy under section 47a (2) of the Bankruptcy Act as amended in 1910, acquire any greater rights in or to the property acquired by the bankrupt under conditional sale contracts made and to he performed in Oklahoma than the bankrupt has ?
“Sec. 2iji>4. In the absence oí fraud, every contract of a debtor is valid against all his creditors, existing or subsequent, who have not acquired a lien on tlio property affеcted by such contract.”
“Sec. -4031. A mortgage of personal property, is void as against creditors of the mortgagor, subsequent purchasers, and incumbrancers of the property, for value, unless the original, or an authenticated copy thereof, be filed by depositing the same in the office of the register of deeds of the county where the property mortgaged, or any part thereof, is at such time situated. * * * ”
“Sec. 0745. Any instrument in writing, or promissory note, evidencing the conditional sale of personal property, which retains the title to the same in the vendor until the purchase price is рaid in full, shall bo void as against innocent purchasers, or the creditors of the vendee, unless the original instrument, or a true copy thereof, shall have been deposited in the office of the register of deeds in and for the county wherein the properly shall be kept; and when so deposited, it shall be subject to the law applicable to the filing of chattel mortgages; and any conditional, verbal sale of personal property, reserving to the vendor any title in the property sold, shall be void as to creditors and innocent purchasers for value.”
Counsel for each of the pаrties have filed extensive briefs citing many authorities in support of their respective contentions, to review all of which would unduly extend this opinion, and we deem it necessary to. refer in the main only to those which declare the law of Oklahoma atid construe the statutes of that state bearing upon the question involved.
There is no claim of any actual fraud between the plow company and the bankrupt in the making of these contracts, or in withholding them from record, and they are valid as between the parties though not filed for record; also as against creditors of the bankrupt existing at the timе they were made, or who became such subsequent thereto, who have not acquired specific liens upon the property covered by the contracts prior to the bankruptcy (Revised Raws of Oklahoma [1910] § 2894, above; McCormick v. Koch,
That the contracts in question are valid as between the parties, though not recorded, cannot he successfully controverted, is also settled by repeated decisions of the Supreme Court of the United States
McIver v. Williamson Co.,
“We take it that * * * attachment and execution creditors here are in no better position, and have no grеater rights, than had the vendee (the execution debtor), because our own Supreme Court, in the ease of Central Loan & Trust Co. v. Campbell Commission Co., reported in5 Okl. 411 ,49 Pac. 52 (decided in 1897), lay down this rule:! Where personal property is sold and delivered, upon condition that the titlé shall not vest in the vendee, unless the price agreed upon he paid within a sjpecified time, the vendee has no attachable interest in the property until the performance of the condition’ — [citing many authorities]. * * * Under the law as laid down in this decision, and all of the decisions upon the subject that we are able to find, we think that the conclusion of the jury and the finding of the court below that the plaintiff was entitled to recover the goods was correct. * * * ”
In Chandler v. Colcord,
“The law is well settled that a creditor, who has no lien on the property covered by a chattel mortgage, cannot be permitted to assail the validity of the mortgage, on the ground that it was made with intent to hinder, delay and defraud the creditors of the mortgagors. In order to do so, he must not only obtain a judgment, but must have a valid execution against the property of the mortgagor [citing People’s Saving Bank v. Bates,120 U. S. 556 , 7 Sup. Ct. 679,30 L. Ed. 754 ].”
In Lockwood v. Frisco Lumber Co.,
“Where a chattel is sold with a reservation of title in the vendor until the price is paid, the title remains in him until the condition is performed, and a purchaser of the vendee acquires no title, though he buys in good faith for a valuable consideration and without notice of the condition.”
In the course of the opinion it is stated:
“The universal and fundamental principle of our law of personal property is that no man can be divested of his property without his own consent, and, consequently, that even the honest purchaser under a defective title cannot hold against the true proprietor."
And it is now settled by the great weight of authority that, unless otherwise declared by statute, siich bona fide purchaser acquires no better title than his vendor had. Lawton Pressed Brick Co. v. Ross-Kellar Co.,
In Garrison v. Street & Harper Furniture Co.,
“Upon what theory the” Street & Harper Company “was given judgment in the court below we are not advised, except as is stated in counsel’s brief that the decision of the lower court was right, under the construction given to our statute in the case of Greenville National Bank v. Evans-Snyder-Buel Co., found in9 Okl. 358 ,60 Pac. 249 ,” which doubtless was the controlling authority in the mind of the court below; but in Frick Co. v. Oats,20 Okl. 473 ,94 Pac. 682 , “the portion of that opinion bearing upon the question involved in this case was specifically overruled.”
Cornelius v. Boling,
“It is only necessary to add that there is nothing either in the statute or adjudged law of Idaho (where the contract was made) to prevent, in this case, the operation of the general rule, which we consider to he established by overwhelming authority, namely, that, in the absence of fraud, an agreement for a conditional sale (of personal property) is good and valid, as well against third persons, as against the parties to the transaction, and the further rule that a bailee of personal property cannot convey the title, or subject it to execution for his own debts, until the condition on which the agreement to sell was made has been performed.”
Is this rule changed by section 6;745, Revised Statutes of Oklahoma 1910, or by the Bankruptcy Act aá amended June 25, 1910? Section 6745 of the Revised Raws of Oklahoma provides:
“Any instrument in writing, or promissory note, evidencing the conditional sale of personal property, which retains the title to the same in the vendor until the purchase price is paid in full, shall be void as against innocent purchasers, or the creditors of the vendee, unless the original instrument, or a true copy thereof, shall have been deposited in the office of the register of deeds in and for the county wherein the property shall be Kept; and, when so deposited, it shall be subject to the laws applicable to the filing of chattel mortgages.” ¡
This section was enactеd in 1897, but we discover nothing therein inconsistent with section 2894 of the Revised Raws, enacted in 1890. The contracts in question were deposited for record in the proper office December 30, 1913, and not until that time, under a literal reading of the section, were they subject to the law of Oklahoma as to the filing of chattel mortgages. But if the true interpretation of the statute be that conditional sale contracts in that state are to be treated as chattel mortgages, and void as to creditors of and innocent purchasers from the vendee unless filed ;for record, etc., still the legal title 'and right of possession to the property in controversy remained in the vendor from their date as security for a then present consideration
“And 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.”
This section by its terms only vests in the trustee “the rights, remedies and powers of a creditor holding a lien,” etc., upon property coming into the custody of the court of bankruptcy from the date of the filing of the petition in bankruptcy, if adjudication in bankruptcy follows ; but this is far short of declaring that such rights, remedies, and powers are paramount or superior to all prior liens upon or rights in such property; nor does it vest in the trustee a lien upon or right in or to property not in fact belonging to the bankrupt, or in which he has no interest; and it is settled by the decisions of the Supreme Court of Oklahoma that lien creditors by attachment, judgment, or otherwise in that state, reach only the interest of the debtor in such property, subject to prior liens or incumbrances thereon. The rights so vested in the trustee, therefore, under section 47a (2), are only such as any other lienholder might acquire in or to the property of the bankrupt on the date of the filing of the petition in bankruptcy, and if he has no interest in the property, the trustee acquires none. The bankrupt, Terrell, under the contracts had the right to pay the balance of the purchase price to the plow company at any time prior to its taking possession of the property, and prior to the bankruptcy proceеdings and thus acquire the full title thereto; and this right vested in the petitioner as trustee upon his appointment and qualification, who undoubtedly might enforce this right of the bankrupt; but this he does not seek to do.
In Baily v. Baker Ice Machine Co.,
Counsel for the petitioner rely; especiаlly upon In re Johnson (D. C.)
In Re Johnson, the amendment of 1910, and Cornelius v. Boling,
By the express terms of section 2894 of the Revised Laws of Oklahoma, and by the settled decisions of the Supreme Court of that state, creditors who under sections 4031 and 6745 may successfully challenge the validity of the conditional sale contracts because not recorded, are those only who have acquired or fastened a lien upon the property by judgment or otherwise. There are none of this class of creditors in this case; and if it be only a matter of procedure to obtain such a lien that is hardly a valid reason for disregarding the statute in the one case, and the decisions of the Supreme Court of Oklahoma construing the other two sections.
Further than this, section 60b of the Bankruptcy Act, as amended in 1910, authorizes the trustee to avoid a preferential transfer only when the person receiving the transfer or to be benefited thereby, or his agent acting therein, “shall then have reasonable cause to believe that the enforcement of such transfer would effect a preference, it shall be voidable by the trustee,” etc. As before stated, there is no question of fraud involved in this controversy; nor is there any showing of a preferential transfer by the bankrupt of any of his property involved herein to the plow company or any one else. The matter was submitted to the referee and the judge upon a stipulation of facts, the pertinent parts of which after setting out the making of the conditional sale contracts, the date thereof, the time of filing the same for record, the filing of the petition in bankruptcy, the adjudication thereon, and the appointment of the petitioner as trustee, read in this way:
“That between the date of the making of the contracts and the filing thereof for record on December 30, 1913, third parties who are now creditors of the bankrupt sold certain goods to him on credit (which goods are described); that on December 20, 1913 (nearly a year and a half after the credits were extended), the bankrupt was insolvent, and the claimant plow company then had reasonable grounds to know of his insolvency.”
This wholly fails to show that the plow company, though it may have known of the bankrupt’s insolvency ten days before it filed the conditional sale contracts for record, had reason to believe when the contracts were filed that a preference would be effected by the filing thereof for record. For this reason alone the trustee would not be еntitled to retain possession of the property involved in this controversy. Besides the lien of the trustee under section 47a (2) of the act as amended dates only from the filing of the petition in bankruptcy. Bailey v. Baker Ice Machine Co.,
Post v. Berry,
Code of Iowa 1897, § 2905: “No sale, contract or lease, wherеin the transfer of title or ownership of personal property is made to depend upon any condition, shall be valid against any creditor or purchaser of the vendee or lessee in actual possession obtained in pursuance thereof, without notice, unless * * * recorded.” 1
Section 2906: “No sale or mortgage pf personal property, where the vendor or mortgagor retains actual possession! thereof, is valid against existing creditors or subsequent purchasers, without notice, unless” recorded.
The last section would be inapplicable in any event, for the plow cоmpany here, which was the vendor, did not retain possession of the property, and it was delivered to the vendee. The Supreme Court of Iowa has repeatedly held that sectibn 2905 of the Code does not mean general creditors, even though their indebtedness is incurred subsequent to the execution of the unrecbrded mortgage and before it is recorded; and before such a creditor can successfully assert a right as-
A number of other cases are cited by the petitioner, but we need not consider them, for, under the facts stipulated, the cases to which we have referred, and the recording statute of the state of Oklahoma as construed by the decisions of the Supreme Court of that state we are satisfied that the district court correctly held that the plow company was entitled to the property in controversy.
The petition to revise is therefore denied at the cost of the petitioner ; and it is accordingly so ordered.
Since the foregoing opinion was filed, the decision of the United. States Supreme Court in Martin v. Commercial National Bank has been published in 245 U. S. -, 38 Sup. Ct. 176, 62 L. Ed. —.