201 F. 437 | E.D. Tenn. | 1912
2. Section 8 of the Act as approved June 25, 1910 (36 Stat. 840, c., 412 [U. S. Comp. St. Supp. 1911, p. 1500]), before the execution of this chattel mortgage, amends section 47a (2) of the bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 557 [U. S. Comp. St. 1901, p. 3438]) so as to provide that—
“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 the 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.”
Section 2003 of the Tennessee Code (Shan. 3664) provides that all mortgages of personalty shall be in writing and approved and registered, “to be valid against the creditors of the bargainor.” As the trustee by the express terms of said amendment of the Bankruptcy Act is to be deemed a judgment creditor holding an execution returned unsatisfied, it is clear that under the two sections of the Tennessee Code above cited, j,f the validity and effect of this chattel mortgage is to be controlled by the Tennessee , statutes, it must be held invalid as against the trustee, independently of the question whether before said amendment to the Bankruptcy Act, it would, although unregistered, have been good against the trustee as a representative of general creditors.
It is earnestly insisted, however, in behalf of the trustee, that the rule giving effect in such cases to the lex rei sitae rather than to the lex loci contractus is based upon the fact that the litigation is in general had in such cases in the courts of the State where the property is situated, and is due to the effect given to the lex rei sitae as the lex fori. And it is urged that upon the express authority of Runyon v. Groshon, 12 N. J. Eq. 86, where there is a conflict of laws, the laws prevailing in the State where the litigation is had, rather than those where the property is situated, should have preference. A careful examination of the cases, however, does not show, in my opinion, that the lex rei sitae is given effect under the great weight of authority merely because it is the lex fori, but that, on the contrary, it is given effect as the lex rei sitae itself, upon the theory that priority of liens acquired on personal property having an actual situs should be determined according to the law óf the place where the property is situated. While it is true that in two of these cases, namely, Keller v. Paine and Denny v. Faulkner, the opinions of the court seem to be based, at least in part, upon the fact that the lex rei sitae was also the lex fori, and in two of these cases, namely, Aultman Co. v. Kennedy and Smead v. Chandler, the doctrine of the lex fori appears to have been the controlling consideration in the opinion of the court, in most of the cases above cited, on the other hand, no reference whatever was
I am constrained to conclude, after the consideration of all these cases, that the great weight of authprity supports the proposition that in a case of this character the lex rei sitie should prevail, and that it is against sound public policy to add to the complication existing in, cases of conflict between the lex loci contractus and the lex rei sitae, as an added element of uncertainty of right, the question of the lex fori. It is to the public interest that in cases of this character the rights of the parties should be determined by fixed rule according to the law of the place where the property is situated rather than vary according to the law of the place where the litigation happens to be conducted. Furthermore the application of the lex rei sitae rather than the lex fori is peculiarly appropriate in the case of a bankruptcy court, which, in a sense, through the authority of its trustee, is not merely enforcing the local law in the court in which the bankruptcy proceeding is instituted, but may obtain possession and custody of the bankrupt’s property wherever situated, and which, in such cases should, I think, in reference to personal property having an actual situs in different parts of the United States, in so far as the matter of priorities of lien are concerned, administer the law of the separate jurisdictions in which the property is thus situated, rather than apply in all instances the law of the State in which the bankruptcy court is being held. In such case I think the bankruptcy court Should, as a national court, be controlled by other considerations from those which might properly prevail in the court of a single State enforcing the law of that State.
This is particularly true, I think, in a case like the present where it was agreed by stipulation of the parties that the trustee might take possession of the mortgaged px-operty “subject to such claims thereon, as the Mechanics’ Bank & Trust Co. might have,” thus evidencing an intention that the Bank & Trust Co. should not surrender any prior lien which it had, and certainly showing no intention to waive any of the priority which it would have had if the trustee had instituted proceedings in Kentucky to acquire possession of the property, in which case the registration laws of Kentucky would clearly have prevailed.
The order of the referee sustaining the validity of this chattel mortgage against general creditors and dismissing the trustee’s petition to have the claims of the Bank & Trust Co. disallowed as a secured claim, will accordixxgly be in all things confirmed, and the trustee’s petition to