127 Wash. 615 | Wash. | 1923
On February 17, 1922, and for some time prior thereto, one Mrs. McRae conducted a business in tbe city of Tacoma under tbe name of tbe McRae Petticoat Manufacturing Company. Sbe tben bad in ber possession some ten manufacturing sewing machines, certain shelving desks, certain cutting tables, and a quantity of manufactured petticoats, with other personal property. Sbe was tben indebted to tbe appellant, Bank of California, on a judgment in the sum of $619.36, recovered on a promissory note given by ber to the bank to evidence a loan theretofore made to ber by tbe bank. After tbe entry of tbe judgment, Mrs. McRae called upon tbe bank’s representatives and requested time to satisfy tbe same, representing that sbe could pay tbe judgment within thirty days. Tbe representative of tbe bank required security, whereupon sbe executed a new note bearing date of February 17, 1922, payable in thirty days, and secured tbe same by executing a chattel mortgage on tbe property above described. This note sbe failed to pay at maturity or at all.
On May 12, 1922, Mrs. McRae filed a voluntary petition in bankruptcy in tbe district court of tbe United States for tbe western district of Washington, praying that sbe be adjudged a bankrupt, attaching thereto a schedule of ber debts and liabilities and a schedule of ber property. On tbe same day sbe was adjudged a bankrupt, and, in due course, Edward B. Lung, tbe respondent in this action, was elected her trustee in bankruptcy. After bis election, the trustee petitioned for an order directing a sale of tbe bankrupt’s property. This order was granted, and pursu
On June 22,1922, the appellant hank placed its mortgage in the hands of the sheriff for foreclosure by notice and sale. After the sheriff had seized the property in pursuance of the foreclosure, the trustee in bankruptcy brought the present action to enjoin him from further proceeding; to have the property returned to the trustee, and to have the mortgage adjudged void as to the creditors of the mortgagor. A temporary restraining order was issued, and to save the costs of the care of the property pending the trial of the cause, and that the purchaser might have unin-cumbered possession of it, the parties entered into the following stipulation:
“It is stipulated and agreed between the parties hereto that C. Hofstetter shall deposit with the clerk of the above entitled court, the sum of Nine Hundred ($900) Dollars in lieu of the property covered by the chattel mortgage of the defendant herein, and that the parties hereto shall have the same claims to, interests in and liens against said fund as they now have against the property covered by said mortgage, or as to any part or portions thereof pro rata to the value thereof.”
Issue was subsequently joined on the complaint of the trustee, and a trial had which resulted in a decree declaring the mortgage void as to the creditors of the bankrupt. This appeal is from the decree entered.
The appellant first contends that the title and beneficial interest to the property in question passed to the purchaser at the bankruptcy sale, and that, in consequence, the trustee in bankruptcy has no such in
The trial court held themortgage void as to the creditors of the mortgagee on two grounds; first, that it was upon a shifting stock of merchandise; and second, because it operated as a preference.
The first ground upon which the court adjudged the mortgage invalid we cannot think well founded. The mortgage covered in part certain specific, articles of
The second question is of more difficulty. By the terms of the bankruptcy act it is not enough to avoid a mortgage merely to show that the mortgage was executed within four months before the filing of the petition in bankruptcy, but it must be further shown that the bankrupt was then insolvent, that the mortgage will operate as a preference to the mortgagee, and that the mortgagee, or his agent acting therein, then had reasonable cause to believe that the enforce
The judgment is affirmed.