117 F.2d 463 | 3rd Cir. | 1941
Appellant here is contending for a liberal construction of one of the Pennsylvania Recording Acts. The argument is, we think, inappropriate. That type of statute is for protection, not for punishment. Its interpretation should be strong to help its beneficiaries and not, as in the criminal law, tempered with mercy toward those it strikes down. This is particularly so in a State whose “abhorrence of the secret lien” did not even admit of the palliative of recording.
The particular Recording Act is that applicable to the conditional sale of chattels attached to the realty.
“The law is replete, however, with cases where a party in possession using the prop
“To prevent injury to innocent persons who may rely on the buyer’s apparent ownership, it seems desirable to insert this filing requirement in the Uniform Act. The burden on the seller is slight, and the benefit to the public is great.” 2 Uniform Laws Annotated (1922), Conditional Sales Act, p. 7.
In describing the application of this general policy to our particular field, i. e. the conditional sale of fixtures, Professor Bogert, the draftsman of the Act, lays down the principle which we think should control the decisions of the courts. In his Commentaries, he says :
Does the brief description of the case at bar satisfy the principle? We think not at all. The property sold on condition is bottling equipment and the real estate to which it is attached is functionally a brewery. There are three references to the real estate, each one a little more detailed than the last. The first is the statement accompanying the filed contract and describes the property as “* * * Street, City of Brownsville, State of Pennsylvania.” In the body of the contract this is expanded to “At Street Water Street, City Brownsville, Pa.” and finally in the refiling of July 24, 1936, “Water and Bolivar Streets, South Brownsville, City of Brownsville, State of Pennsylvania”. The trouble with these latter two amplifications lies in the fact that the bottling equipment is in the ice plant and the ice plant is located neither on Water Street nor on Water and Bolivar Streets but on a parcel of land bounded on the east by Fayette Street, on the south by Edel Alley, on the west by Bolivar Street, and on the north by an unnamed alley. This property was not owned by the Brewing Company and therefore the inaccurate description could not have been augmented and corrected by a glance at the land records. Nowhere is there any reference to the standard and now ancient method for the identification of urban real estate.
In summation, it is not only possible, but-nearly always extremely easy to identify urban real estate by street and number. Here, for instance, the seller just carelessly left a blank with instructions (not. complied with) to have it filled in. We see no cause, therefore, why the “dealer in real estate” (here the appellee) should be forced to make any inquiry no matter how simple of success. We agree with the learned Court for the Sixth Circuit when it said: “The property here .involved is described in the contract as an automatic sprinkler system, called ‘Equipment,’ situated in the knitting mill of the bankrupt at 827-828-829 South Spring Street, Shelbyville, Tenn. This definitely locates it and we think that no other sprinkler system could be mistaken for it. See Stoll v. Schneider, 158 Tenn. 341, 344, 13 S.W.2d 325.” In re Robinson-McGill Mfg. Co., 70 F.2d 100, 101 (italics ours).
The Pennsylvania Courts and our own District Court decisions exhibit a similar tendency.
As the description in the statement of the refiling is the more detailed, appellant stresses it also. There would seem to be three answers to this contention. First, although fuller, the description is still wrong. One correct street is added to other incorrect ones. Second, the three years elapsed since the original sale cannot be considered a reasonable time. Pennsylvania seems to incline toward the authorities
inspected by
c. SCHWARTZ
The appellant claims- lliai, - v». — _ _ is not the kind of receivership essential to an attack on a conditional sales contract. We quite concede the distinction between the rights of a receiver for an insolvent corporation and those of a receiver for a solvent company, and further concede thát the aforesaid power of attack rests with the former only.
There aré sufficient facts of record to sustain the finding of the Court that the bankrupt was, in fact, insolvent at the time of the appointment of the state court receiver. On May 12, 1934, the bankrupt entered into an agreement with its creditors for an extension of time for the payment of its indebtedness and the operation of its business under the supervision of a cred-committee, and as part thereof ex- •• —-4’tors a mortused in the pt defaulted with the relitors began st the prop.ined the apg foreclosure lot to provide a ______ _ lissipation of the assets which ~hair already been prevented, by the creditors’ agreement,-but was to provide a means for realizing on the assets. The receiver was appointed as a representative of the creditors in lieu of attachments. - He should have as many rights as a creditor who has obtained a judgment execution. Since there was little change in the company’s situation subsequent to the receiver’s appointment and since the bankrupt was found hopelessly insolvent in the 77B, 11 U.S.C.A. § 207, proceedings, the Court below was amply justified in treating the receivership proceeding as a general receivership for an insolvent corporation. If the refilings were invalid against the state court receiver, they were invalid against the bankruptcy trustee since under Section 77B, sub. i the trustee has the rights of the prior receiver.
On the assumption that the recordings, both, original and refiled, are invalid
“In interpreting ‘freehold’ to include all fixtures in a plant which are necessary to its operation as a complete going concern, the Pennsylvania court has unequivocally allied itself with the few exponents of the ‘institutional’ theory, of which New Jersey was hitherto the leading proponent. The criticism directed against this theory has been that the mortgagee, having advanced nothing in reliance on the value of the subsequently annexed fixtures, should not be permitted to enhance his original security as against the expression of a contrary intention by the parties installing the chattels, who have agreed that title should be reserved in the vendor. This argument, however, assumes that the mortgagor-mortgagee relationship contemplates the restriction of the security to the property in its physical condition as of the time it was pledged— a dubious assumption in cases where the security is an industrial concern whose chief value is its attribute as a business institution. The equity in permitting the mortgagee to take advantage of normal improvements is even more forceful when it is realized that he, almost alone, bears the loss of depreciation and unfavorable market fluctuations. Nor is the conditional sale vendor left without protection, as is frequently supposed, since he may adequately secure himself by obtaining the readily procured assent of the mortgagee to his reservation of title.” 83 University of Pennsylvania Law Review 916, 917
This Court has already, as it must, given its own concurrence in the principle,
On the question of notice, we think appellant falls between two stools. If he intends to rely on the rule of burden of proof of notice, he has not so framed the issue. The petition is for reclamation of the property. An improper conditional sale contract is void as against a trustee in bankruptcy.
Even the partizans of the conditional vendor would not, we believe, permit him to raise the question for the first time after the testimony has been closed. That is the case here.
We think that delay arose because appellant really intended an attack on the distribution of the proceeds of the property rather than on the property Jtself. If he then can affect the mortgagee bank with notice, the rule applicable is admirably stated by the learned author of the law review earlier cited.
“Thus when the conditional vendor proves that some (the creditors) of them had notice of his claim as of date anteceding the beginning of the proceedings, his lien is validated as far as the claims of such creditors are concerned, and so his debt has priority over theirs in sharing the proceeds of the goods. As a result, only the total amount of the claims of those creditors who could have secured priority over the conditional vendor’s lien by an actual attachment at the time of the bankruptcy proceedings is allowed to stand ahead of the conditional vendor’s claim on the goods.” Bankruptcy — Right of Trustee to Property Sold to Bankrupt Under an Unrecorded Conditional Sale, 4 Texas Law Review 223, 225-226 (note) ,
The order of the District Court sustaining and approving the order of the Referee is affirmed.
Martin v. Mathiot, 14 Serg. & R., Pa., 214, 16 Am.Dec. 491; In re Collins Hosiery Mills, D.C., 19 F.Supp. 500, 502.
69 P.S. § 404. The pertinent part of the statute as amended reads as follows:
“First. As against a subsequent purchaser, subsequent mortgagee, or other subsequent encumbrancer of the realty, for value and without notice of the reservation of property in the goods, such reservation shall be void as to any goods-so attached to the realty as to form a part thereof, unless the conditional sale contract, or a copy thereof, shall be filed, as required in section six, before such purchase is made or such mortgage is given or such encumbrance is effected. * * *
“Third. In order to entitle the conditional sale contract or copy thereof, referred to in this section, to be filed and indexed, it shall have endorsed thereon or attached thereto a statement, signed by the seller, briefly describing the realty, and stating that the goods are, or are to be, affixed thereto.” 1925, May 12, P.L. 603, No. 325, § 7; 1927, May 12, P.L. 979, § 2 (italics ours).
The Act was further amended on July 12, 1935, P.L. 658, § 1, 69 P.S. § 404; 2 Uniform Laws Annotated (1922), Conditional Sales Act, 1940 Supp. p. 39.
Conditional Sales — Effect of Failure to Refile Conditional Sale Contract Within The Time Prescribed By The Uniform Conditional Sales Act, 81 University of Pennsylvania Law Review 628; 1 Williston on Sales, 2d Ed., § 328a, p. 767; Mariash on Sales, § 186, pp. 436-439.
Of. Conditional Sales; Fixtures: Conditional Seller of Fixtures Versus Purchaser of Realty, 13 Cornell Law Quarterly 435, 437 (note).
“By the numbers”.
A fortiori urban realty described by streets and street numbers.
Delco Ice Mfg. Co. v. Frick Co., 318 Pa. 337, 340, 178 A. 135; In re Famous Cleaning & Dyeing Co., D.C., 7 F.Supp. 280; In re Yough Brewing Co., D.C., 27 F.Supp. 729; In re Jacob F. Thaler & Co., D.C., 1 F.2d 461 (under an earlier Act); In re Smith, D.C., 19 F.Supp. 595; cf. Yates American Machine Co. v. Jury, 3 Cir., 56 F.2d 831, certiorari denied, 287 U.S. 615, 53 S.Ct. 17, 77 L.Ed. 534.
55 C.J. § 1268, p. 1259; The Time of Conditional Sales Contracts, 13 St. Johns Law Review 205 (note); contra Collingswood Trust Co. v. Brunswick-Balke-Collender Co., 112 N.J.Eq. 597, 164 A. 689; Statutes—Conditional Sales Contracts—Protection of General Creditors of the Buyer, 18 New York University Law Quarterly Review 147 (note); Conditional Sales—Effect of Failure to Refile Conditional Sales Contract Within Time Prescribed by the Uniform-Conditional Sales Act, 81 University of Pennsylvania Law Review 628, footnote 7 (note); 10 Am.Jur. 791, § 115, Note 2. It should be noted that statutes governing the recording of chattel mortgages usually set a time limitation for recordation. The limitation is rigidly observed. See Chattel Blortgages—Recording—Filing “Forthwith” Under Texas Statute, 17 Texas Law Review 202 (note); Chattel Mortgages—Filing, Recording & Registration—Effect of Failure to Record Within Period Prescribed by Illinois Statute, 17 Chicago-Kent Law Review 177 (note).
Cowan v. Pennsylvania Plate Glass Co., 184 Pa. 1, 38 A. 1075; Duplex Printing Press Co. v. Clipper Publishing Co., 213 Pa. 207, 62 A. 841; Blum Bros, v. Girard Natl. Bank, 248 Pa. 148, 93 A. 940; 61 A.L.R. 975, note; Sullivan Machinery Co. v. Griffith, 294 Pa. 422, 144 A. 421, 61 A.L.R. 974. For the rights of a receiver generally, see Power of Receiver for Corporation to Assert Causes of Action Vested Solely in Creditors, 46 Tale Law Journal 1229 (note); Rights of Various Types of Creditors in Property Unavailable to the Debtor, 47 . Tale Law Journal 1164 (note); Conditional Sale — Unrecorded—Property of Vendee’s Receiver Over Vendor, 2 Ohio State Law Journal 287 (note); of. Rights of Creditors of Insolvent Corporation— Greater than Rights of Corporation, 34 Michigan Law Review 1196 (note).
Sullivan Machinery Co. v. Griffith, 294 Pa. 422, 144 A. 421, noted in 61 A.L.R. 974, especially pages 980, 981.
Blum Bros. v. Girard Natl. Bank, 248 Pa. 148, 93 A. 940, Ann.Cas.1916D, 609; cf. Shipler v. New Castle Products Corp., 293 Pa. 412, 418, 143 A. 182, 184.
On the rights of a trustee whez-e no receivership has intervened, see Bankruptcy — Conditional Sales — Recording Statutes, 24 Minnesota Law Review 101 (note); Bankruptcy — Liens—Status of Trustee in Bankruptcy Under Section 47a (2) As Affected By Actual Notice of Creditors of the Bankrupt, 18 Minnesota Law Review 541; Bankruptcy — Right of Conditional Vendor As Against a Trustee in Bankz'uptcy, 19 Boston University .Law Review 650.
Of. Conditional Sales — Rights of Conditional Vendor of Chattels Under a Recording Act As Against Subsequent Purchasers Of the Realty, 77 University of Pennsylvania Law Review 1022; Fixtures — Effect of Forfeiture of Lease on Rights of Conditional Vendor Who Sold Chattels To Lessee Under Title Retention Agreement, 34 Michigan Law Review 426; Fixtures — Conditional Sales — Rights of Conditional Seller of Articles Annexed to Realty as Against Vendor of Realty, 19 Minnesota Law Review 342 (note); Sales — Conditional Sales: Estoppel of Conditional Vendor to Assert Prior Lien Against Judgment Creditor of Vendee, 22 Cornell Law Quarterly 269 (note).
Medical Tower Corp. v. Otis Elevator Co., 3 Cir., 104 F.2d 133.
In re Yough Brewing Co., D.C., 27 F.Supp. 729.
Remington on Bankruptcy, 4th Ed., § 1578; Bankruptcy—Conditional Sales—Recording Statutes, 24 Minnesota Law Review 101 (note).
In re Bazemore, D.C.N.D.Ala., 189 F. 236; In re Master Knitting Corp., 2 Cir., 7 F.2d 11; In re Pointer Brewing Co., 8 Cir., 105 F.2d 478; Hogan v. Detroit United R. R., 154 Mich. 478, 481, 118 N.W. 140; Martin Bros. & Co. v. Lesan, 129 Iowa 573, 105 N.W. 996. Contra, In re Douglas Lumber Co., D.C. Wyo., 2 F.2d 985; Singer Mfg. Co. v. Nash, 70 Vt. 434, 41 A. 429; Equitable Auto Sales Co., Inc. v. Sherman, Sup., 170 N.Y.S. 948.
Bankruptcy — Right of Trustee to Property Sold to Bankrupt Under An Unrecorded Conditional Sale, 4 Texas Law Review 223 (note).
Conditional Sales — Failure to Record —Burden of Proof of Notice, 26 Columbia Law Review 227 (note).
Cf. In re Fidler & Brock, 6 Cir., 220 F. 843, Ann.Cas.1916A, 1268.