116 F. 476 | 9th Cir. | 1902
after stating the facts as above, delivered the opinion of the court.
The petition for review shows that the trustee refused to pay the note held by Muller on the grounds “(i) that the chattel mortgage was void as to the creditors of said bankrupt because it was not executed in accordance with the statute relating to chattel mortgages; (2) that the said chattel mortgage was void as to the creditors of said bankrupt, inasmuch as it covers property which cannot be made the subject of a chattel mortgage under the laws of this state; (3) that, if ever valid, the mortgage lien had been merged in the legal title, and was conveyed by Muller to the bankrupt.”
If the contest was between the creditors of the Sun Laundry Company and the mortgagee, it might be necessary to consider and dispose of these questions seriatim. But the controversy herein is not between those parties, and will therefore be disposed of on other grounds.
Did the court err in affirming the order made by the referee directing the trustee to pay Muller the proceeds arising from the sale of the laundry machinery and materials, which was, as found by the referee, subject to the lien of the chattel mortgage held by Muller? In the consideration of this question it must be borne in mind that this is not a case where the trustee is authorized, as the representative of the creditors, to bring suit for the recovery of property which had been disposed of by the bankrupt in fraud of its creditors. There was no fraud in fact or in law against the creditors of the bankrupt herein. The facts of this case are undisputed. The bankrupt acquired title to the property in controversy under a bill of sale executed to it by Muller, which recited that the property was purchased “subject to a chattel mortgage for $1,000 now subsisting upon the said personal property, and which is assumed to be paid by the second party hereto.” The mortgage was valid between the parties thereto. Tregear v. Water Co., 76 Cal. 537, 18 Pac. 658, 9 Am. St. Rep. 245; Works v. Merritt, 105 Cal. 467, 470/38 Pac. 1109; Bank v. Moore, 106 Cal. 673, 680, 39 Pac. 1071; Same v. Gibson, 109. Cal. 197, 41 Pac. 1008. The transaction between Muller and the Standard Laundry Company was bona fide. The Standard Laundry Company bought the property in good faith subject to the mortgage. By the terms of its purchase of the property it is estopped from denying the validity of the mortgage or of its own obligation t'o Muller. In a case’ of this character the trustee, representing the creditors, stands in the shoes of the laundry company, and is in privity with it, so far
These views are conclusive of the questions of law presented herein. The order of the district court is affirmed, with costs.