247 F. 913 | 9th Cir. | 1918
(after stating the facts as above). Appellant’s position as presented by the assignment of errors is that there is no showing of the amount of proved claims; that the evidence fails to show that when the mortgages and deed of trust were made or put on
“Mortgages may be made upon all growing crops, including grapes and fruit, and upon any and all kinds of personal property, except tbe following: * * * 3. Tbe stock in trade of a merchant.” ,
We are inclined to believe that where possession is relied upon to sustain a transfer which will be held binding as against creditors, it should be of a character more open and visible than is claimed by the bank in this instance. Center v. Kelton, 20 Cal. App. 611, 129 Pac. 960. Section 3440 of the Civil Code of California provides that:
“Every transfer of personal property * * * and every lien thereon, other than, a' mortgage, when allowed by law * * * is conclusively presumed, if made by a person having at the time the possession or control of the property, and not accompanied by an immediate delivery, and followed*917 by an actual and continued change of possession of the things transferred, to be fraudulent, and therefore void, against those who are his creditors while he remains in possession, and the successors in interest of such creditors, and against any persons on whom his estate, devolves in trust for tiie benefit of others than himself, and against purchasers or incumbrancers in good Caitli subsequent to the transfer.”
There really was no immediate delivery and no actual and continued change of the possession of the chattels mortgaged. In Center v. Kelton, supra, the court referred to many California decisions applying the principle of section 3440 quoted above, and, after writing of the object of the statute as requiring notice to the world of the transfer of personal property in order that creditors may be justly protected, said:
“It may be said, also, that the statute does not impose any great hardship upon the parties in case of a transfer made in good faith. Ordinarily, there should be little difficulty in effecting an ‘immediate delivery’ and an ‘actual and continuous chango of possession.’ But, however honest the sale may be, and whatever hardship may be inflicted; upon the vendee, this furnishes no sufficient reason for disregarding the plain provisions of the statute or setting at> naught a wholesome and salutary rule for the promotion o-f personal honesty and commercial security.”
Let us turn now to another viewpoint.
“A mortgage without immediate delivery would create a secret lien, admittedly void against creditors. Is a mortgage without immediate recordation any less a secret lien, or any less an evil to be avoided? Prior to the amendment to section 2055 of the Civil Code, * * * if a person had desired to borrow money upon his farming implements he would have been compelled to transfer possession immediately under section 3440 of the Civil Code. By tiie amendment these implements are placed in the list of those upon which statutory chattel mortgages may be given. * * !f We conclude upon this question that our law requires immediate recordation, in lieu of immediate delivery, and that when such recordation is not effected the mortgage ‘is void as against creditors of the mortgagor.’ .,The penalty for a failure to record promptly in the case of a mortgage is identical with the penalty under section 3440 for a failure to delivery promptly in the case of a sale. In either case*918 the failure results in a legal fraud against those whom the statute enumerates and protects. Section 3440 excepts a ‘mortgage when allowed by law’ from the requirement of immediate delivery, Because, and only Because, the recordation takes the place of delivery. It certainly cannot be said that it was the design of the Legislature to exclude the articles of personal property affected by such mortgages from the operation of the laws forbidding secret liens.”
The court, through Judge Henshaw, continuing its learned discussion of the policy of the recording laws of the state, said that it had been decided:
.“(1) -That neither in the case of a sale nor of a mortgage would a delayed delivery validate the contract against creditors; and (2) that it was not necessary that these creditors should have acquired rights by Judgment or attachment before delivery of the chattel sold or mortgaged to warrant their setting aside the transfer. Our recordation laws, admittedly being but a substitute for such immediate delivery, certainly have not changed the principles here announced, and should not be said to have changed the rule which elsewhere finds abundant support.”
This case was approved in Hopper v. Keys, 152 Cal. 488, 92 Pac. 1019. The court defined creditors as those to whom, from time to time, the debtor became obligated. There too, it was contended that, even though an unrecorded mortgage is void in the instance of creditors, still only such creditors could take advantage of the law as by judgment and levy had acquired a lien upon the property before recordation. But the court held that under the statute of the state, immediate recordation being exacted, or immediate delivery being required, the result of a failure to record was to render the contract absolutely void as to creditors. In re Mission Fixture & Mantel Co. (D. C.) 180 Fed. 263. In this last case, where the statute of the state of Washington requiring the recordation of chattel mortgages was considered, Judge Donworth said that a creditor within the contemplation of the statute was one to whom the debtor was obligated, even though the inception of the obligation antedated the making of the chattel mortgage. And in Karst v. Gane, 136 N. Y. 316, 32 N. E. 1073, it was held that the statute in using the word “creditors” did not mean to distinguish between a creditor who became such before one who became a creditor after the execution of the mortgage. See, also, Union National Bank v. Oium, 3 N. D. 193, 54 N. W. 1034, 44 Am. St. Rep. 533.
“The trustee no longer stands in-the shoes merely of the bankrupt, with the limited rights of the bankrupt to attack unrecorded liens which may be valid and unimpeachable by such bankrupt; but the amendment by opera-*919 trim of law vests in him a lien equivalent to such as would be acquired by legal or equitable proceedings upon the property coming into his custody by virtue of the bankruptcy proceedings.”
In Scandinavian-American Bank v. Sabin, 227 Fed. 581 (142 C. C. A. 211), Judge Morrow, writing for the court:, .said that:
“The trustee is not limited to such objections to a transaction between the bankrupt and a creditor as the bankrupt might have had, but he may make any objection that a creditor holding a lien might make.”
The trustee in the interest of the general creditors may therefore contest any claim of lien that a judgment creditor might contest if bankruptcy had not intervened. In re Lane Lumber Co., 217 Fed. 550, 133 C. C. A. 402. In Re Pittsburg Big Muddy Coal Co., 215 Fed. 705, 132 C. C. A. 81, the Court of Appeals for the Seventh Circuit held that under the amendment the trustee could make such a contest whether there were or were not any such creditors when the petition in bankruptcy was filed, arid regarded the trustee as having the status of a creditor holding a lien by legal or equitable process as of the time when the petition in bankruptcy is filed. And we hold accordingly. Bailey v. Baker Ice Machine Co., 239 U. S. 268, 36 Sup. Ct. 50, 60 L. Ed. 275.
In Bunch v. Maloney, 233 Fed. 967, 147 C. C. A. 641, the Court of Appeals for the Eighth Circuit held that where there is a state statute providing that an unfiled or unrecorded transfer shall be void as to creditors, the trustee in bankruptcy, “as the representative of general creditors, may invoke the remedy of section 60b, regardless of the local construction of the statute making a procedural distinction between creditors with a lien and those without.” We are of the opinion that the defendant bank cannot successfully contend that it did not have reasonable cause to believe in April, 1915, before the mortgages were recorded, that by recording and enforcing them a preference would be effected in its favor. It is not to be seriously questioned that bankrupt was insolvent in April, 1915. It is true that in his schedules he included assets in the amount of $59,157, but a single item of this, $17,492, a claim against the Los Angeles Hay Storage Company, had no value, and certain pieces of property were listed at valuations much in excess of their actual value. It also appears that his liabilities, placed at $46,756 did not include $9,200 of $10,500 due by him to the National Bank of Bakersfield, and did not include certain other obligations of his aggregating approximately $6,000. Mr. Russell had had occa
A-32.
In B-94 the decree, after holding the chattel mortgages to be void, and that payments of $1,000 made by Bannister to the bank between April 23 and May 5, 1915, were preferences, recited that, no moral turpitude on the part of the bank being found, it could file its unsecured general claim against the estate of Bannister, bankrupt, within 60 days after entry of final judgment for the amount 'unpaid upon the promissory notes referred to in the purported chattel mortgages. In A-32 the trust deed was decreed to b.e null and void, and the gran
These decrees aro affirmed.