196 F. 29 | 6th Cir. | 1912
On May 19, 1902, Coates, the present bankrupt, gave appellant a mortgage upon his stock in trade, fixtures, etc., to secure a then existing debt. The mortgage was not filed until September 9, 1902. It does not appear that the failure to so file was fraudulent in fact. On January 10, 1903, there was paid to the bank, in satisfaction of the mortgage, from moneys paid on the purchase of the stock and fixtures from Coates, the sum of §2,120.50. Proceedings in involuntary bankruptcy were begun against Coates on February 16, 1903, and he was adjudicated bankrupt on March 6th following. The trustee then brought this suit against the bank for the recovery of the amounts of the claims of creditors who became such between the giving and filing of the mortgage. Complainant’s brief asks this recovery for file benefit of creditors generally. See In re Martin (C. C. A.) 193 Fed. 841. Upon final hearing on pleadings and proofs decree was entered for complainant, from which this appeal is taken.
The bill attacks the payment to the bank, first, as an unlawful preference under the bankruptcy act; and, second, as invalid under section 9523, Comp. Laws Mich. 1897, as amended by Act No. 332 of the Public Acts of 1907, which provides that every chattel mortgage “not accompanied by an immediate delivery, and followed by an actual andi continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers or mortgagees in good faith,” unless the mortgage or a copy thereof be filed as directed in the statute.
It is urged that an assignee for the benefit of creditors is held by the Supreme Court of Michigan to have a right to avoid an unrecorded chattel mortgage so far as affects the rights of creditors of the class here concerned; and it is insisted that the rights of a trustee in bankruptcy are no less than those of a statutory assignee. But, as we pointed out in the Huxoll Case, the Michigan decisions mean no more than that the assignee is by the assignment given a lien upon the property which did not before exist.
There is no merit in the suggestion that the Huxoll Case does not control the case before us from the fact that the question in that case was merely one of priority between creditors. That case turned squarely upon »the decisive propositions that the existence of a lien prior to bankruptcy was necessary for enforcement in bankruptcy of the prior rights of creditors of the class before us, and that no such lien is created by the Michigan statute. The fact that in this case the mortgaged property had been sold, and that attempt is made to reach not the property itself, but the personal responsibility of the mortgagee, gives the trustee no greater rights. The decision in the Huxoll Case must be adhered to, and is decisive of the present controversy.
The decree appealed from must be reversed, with costs, and the case remanded to the District Court, with directions to enter decree dismissing the bill of complaint.