178 F. 187 | 3rd Cir. | 1910
The essential facts of this case are these: .On June 18, 1904, Jonathan A. Perley and Maurice B. Perley, copartners in business trading under the name of Perley & Bro., executed and delivered to the Industrial National Bank of Pittsburgh an instrument in writing, by which they assigned to the bank all their book
Whether a conditional contract of sale, chattel mortgage, or pledge of personal property is valid as against the general creditors of the vendor, mortgagor, or pledgor, or his trustee in bankruptcy, must be
“I take ⅛ where the motive of the sale is merely security to the vendee, and the owner is permitted to retain all the visible marks of ownership for no other reason than the convenience of the parties, the contract will be void, although the reasons for the arrangement be inserted and the possession be consistent with the deed. The law will not and ought not to permit the 'owner of personal property to create an interest in another, either by mortgage or absolute sale, and still continue to be the ostensible owner.”
This rule was confirmed in Barlow v. Fox, 203 Pa. 114, 52 Atl. 57. The principle on which it was founded was recognized and enforced by this court in Fourth St. Nat. Bank v. Millbourne Mills Co.’s. Trustee, 172 Fed. 177, 96 C. C. A. 629. In the case at bar it should be remembered, too, that the bill of sale for the machinery was absolute in form, and did not by its terms in any wise indicate that it was intended as a mortgage or pledge of the machinery to secure a debt.
It must be conceded then, we think, that between September 12, 1906, when the receiver was appointed by the state court, and September 29, 1906, when the bankruptcy proceedings were commenced, the claim of the bank was subordinate to that of the receiver appointed by the state court. The question is whether the lien which that receiver had passed to the trustee in bankruptcy. That question is to be determined by the bankruptcy act.
Section 67c of the bankruptcy act is as follows:
“A lien created by or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judg'ment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy by or against such person shall be dissolved by the adjudication of such person to be a bankrupt if (1) it appears, that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy, or (3) that such lien was sought and permitted in fraud of the provisions of this act; or if the dis*191 solution of such lieu would militate against ihe host interests of the estate of such person the same shall not be dissolved, but the trustee of the estate of such person, for the benefit of the estate, shall be subrogated to the rights of the holder of such lien and empowered to perfect and enforce the same in Ids name as trustee with like force and effect as such holder might have done had not bankruptcy proceedings intervened.” Act duly 1, 1898, c. 511, 30 Mat. 564 (U. S. Comp. St. 1901. p. 3449).
Tiie lien obtained by the receiver appointed by the state court was in a proceeding in equity begun against Jonathan A. I’erley within four months before the filing of the petition in bankruptcy against him. ft is obvious, therefore, that the lien may have been dissolved by the adjudication of bankruptcy if it was such a lien as is described in clause 1, clause 2, or clause 3 of the first sentence of 07c. We think each of these clauses refers to a lien obtained in a proceeding at law or in equity for the benefit, not of the bankrupt’s creditors in general, but of one or mote creditors less than all of them. If such be the proper construction of the first sentence of the section, it follows that the lieu was not dissolved by force of any of its three clauses. But the second sentence of the section provides that, if the dissolution of “such lien” would militate against the best interests of the estate of the bankrupt, the lien shall not be dissolved, but that the trustee shall be subrogated to the rights of the. holder of the lien and empowered to perfect and enforce it as such holder might have done “had not bankruptcy proceedings intervened.” If bankruptcy proceedings had not intervened, the receiver appointed hv the state court could have perfected and enforced his lien. We think the words “such lien,” in the second sentence of 07c, refer to any “lien created by or obtained in or pursuant to any suit or proceeding at law or in equity.” mentioned at the beginning of the section, and not merely to a lien described by the language of clause 1, clause. 2, or clause 3. It is not the intent of the section to dissolve a lien where its retention will benefit the general body of the bankrupt’s creditors.
Tt has been suggested, however, that sections 67c and 67f are in such conflict that both of them cannot stand, and that 07 f must stand as the later declaration of the legislative will. Indeed, such conflict was held to exist by the Circuit Court of Appeals for the Seventh Circuit in the Richards Case, 96 Fed. 935, 37 C. C. A. 634, and by the District Court in the Tune Case (D. C.) 115 Fed. 900. The part of 07f material to the present inquiry is as follows :
“That all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is ■insolvent, at any time within four months prior to ihe filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that.the right under such levy, judgment, attachment, or other lien shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid.”
In so far as 67c is in conflict with 67f, the former is doubtless superseded by the latter section. But, if our construction of 67c is correct,
As a lien acquired by a particular creditor may be preserved for the benefit of all creditors under 67f, we see no reason why a lien acquired for the benefit of all creditors, especially where its dissolution will result in giving priority to a particular creditor and thereby militate against the best interests of the general body of creditors, should not be preserved under 67c.' The fact that the appointment of the receiver by a state court is the very act of bankruptcy charged in the bankruptcy proceedings is immaterial. The policy of the bankruptcy act is to preserve liens where preservation will benefit the general body of the bankrupt’s creditors.
We conclude, therefore, that the trustee was subrogated to the rights of the receiver; that his rights in the machinery, and in the $8,800 produced by its sale, were superior to the rights of the bank: and that as to those proceeds the judgment óf the district court should be affirmed.
The remaining question has to do with the assignment of they book accounts. In our view of the case, it is not necessary to consider whether under the law of the state of Pennsylvania an assignment of all the assignor’s future book accounts, without limit as to time, as security for present and future indebtedness to the assignee, without limit as to amount, may be enforced in* equity against the creditors of the assignor, or against the assignor’s trustee in bankruptcy. In the present case the book accounts were assigned to the bank by the firm of Perley & Bro. in the lifetime of 'Maurice B. Perley. When
As it is conceded that the accounts from which the $17,329.40 was' collected were created after the death of Maurice B. Perley, they belonged to Jonathan A. Perley individually or to the new partnership created at the time of Maurice’s death. The assignment of future book accounts, made by Jonathan and Maurice, could not have included the hook accounts from which the collections were made. Consequently the hank is not entitled to the sum collected.
BUFFINGTON, Circuit Judge, dissents.