Opinion · Supreme Court of the United States
York Manufacturing Co. v. Cassell
York Mfg. Co. v. Cassell, 201 U.S. 344 (1906)
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1906-04-02
- Topic
- general
Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court. The question is simply whether the York Manufacturing Company has a right under its conditional sale of the machinery to the bankrupt corporation to take the machinery out of the premises where it' was placed as against all except judgment, or other, creditors, by some specific lien. There are no judgment creditors in the case and no attachment has been levied, and the question is simply whether the adjudication in bankruptcy is equivalent to a judgment or an attach *351 ment on the property, so as to prevent the York Manufacturing Company from asserting its right to remove the machinery by virtue of the reservation of title contained in its contract. In Wilson v.
Citator
UpLaw has not yet analyzed York Manufacturing Co. v. Cassell. The absence of a flag is not a finding that it is good law.
- Cited by
- 320 opinions
Headnotes
- Bankruptcy Law — Trustee Powers The trustee in bankruptcy is vested with no better right or title to the bankrupt's property than belonged to the bankrupt at the time the trustee's title accrued, and takes the property in the same plight and condition, subject to all equities impressed upon it in the bankrupt's hands. 201 U.S. 344 (citing Hewit v. Berlin Machine Works, 194 U.S. 296, and Thompson v. Fairbanks, 196 U.S. 516)
- Bankruptcy Law — Effect of Adjudication as Lien An adjudication in bankruptcy does not operate as a judgment, attachment, or other specific lien upon property in the bankrupt's possession as against a conditional vendor; the filing of the bankruptcy petition is not, as to such a vendor, equivalent to a lien for the benefit of creditors. 201 U.S. 344
- Commercial Law (UCC) — Sales A conditional sale contract good between the parties, though unfiled as required by state statute, remains valid against general creditors who have not fastened upon the property by some specific lien; the statute avoids the unfiled contract only as to creditors who, before its filing, acquired a lien by attachment, execution, or otherwise. 201 U.S. 344 (construing Ohio Rev. Stat. § 4155)
- Real Property Law — After-Acquired Property A mortgage containing no clause covering after-acquired property is not a lien upon machinery placed on the land after the mortgage's execution, particularly where title to the machinery is reserved in the vendor until payment. 201 U.S. 344
- Bankruptcy Law — Rights of Conditional Vendor Where a conditional sale contract is valid between the parties under state law, a vendor of machinery who has reserved title until payment may remove the machinery from the bankrupt's premises as against the trustee and general creditors, including creditors holding a prior real estate mortgage not covering after-acquired property, absent any creditor who has acquired a specific lien upon it. 201 U.S. 344
YORK MANUFACTURING CO.v. CASSELL,201 U.S. 344(1906)
26 S.Ct. 481
YORK MANUFACTURING COMPANYv. CASSELL.
APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE SIXTH CIRCUIT.
No. 208.
Argued March 14, 1906.
Decided April 2, 1906.
THE York Manufacturing Company has appealed from a judgment of
the Circuit Court of Appeals, which held that the company had no
lien upon or right to remove certain machinery, as against
creditors of the Mount Vernon Ice, Coal and Milling Company, a
bankrupt corporation. The facts upon which the question arises
are as follows:
The corporation above named was organized under the laws of
the State of Ohio, and was doing business at Mount Vernon, in
that State. The company desired to enlarge its plant for the
purpose of making ice, and to that end it was necessary to secure
the proper machinery. It therefore entered into a contract, which
was concluded October 27, 1902, with the appellant, the York
Manufacturing Company, to supply that machinery for the sum of
$7,375, to be paid in installments as stated in the contract. The
contract also contained a stipulation "that the title to and
ownership of the machinery, apparatus or plant herein contracted
for shall remain in the York Manufacturing Company until the
entire purchase price herein agreed to be paid . . . shall be
actually paid in cash." The vendor
Page 345
was given the right to enter the premises of vendee and remove
the property in case of default. Twenty-five per cent only of the
price of the machinery was ever paid. This contract was never
filed, as required by the statute of Ohio relating to conditional
sales. See Sec. 4155, which is set forth in the margin.1
The corporation being short of funds for the purpose of
building, desired to obtain them by the execution of a mortgage
on the lot on which the building was to be erected. One William
Mild was the president of the corporation and was the owner of
and had the legal title to the real estate upon which its plant
was being constructed. Mild applied to Messrs. Waight Ames to
assist in raising money, by lending their credit as sureties on
notes to be given for loans to the corporation up to the sum of
$10,000, by such persons or banks as loans could be
Page 346
obtained from. Waight Ames agreed to become such sureties, and
the parties then entered into an agreement for that purpose, the
particulars of which it is not necessary here to deal with.
At the date of the Waight Ames agreement, November 1, 1902,
no part of the machinery had come to the possession of the
company, but it began to arrive in January, 1903, and was finally
installed in the plant three or four months later.
On the same date that the agreement was executed a mortgage,
without date, was also executed by William Mild, in whom the
title was, to Waight Ames, conditioned for their
indemnification for becoming sureties, as contemplated by their
agreement. This mortgage was not recorded until July 16, 1903,
and on the next day the corporation made a general assignment for
the benefit of its creditors. On July 22, 1903, a petition by
creditors of the corporation was filed for an adjudication of
bankruptcy against it, and on December 11, 1903, the adjudication
was made.
Soon after the adjudication the York Manufacturing Company
filed an intervening petition, which set forth the contract under
which they sold the machinery to the bankrupt, and alleged
default in payment and prayed that the company might be allowed
to enter the premises and remove the machinery therefrom. This
petition was resisted by the creditors.
A short time thereafter Waight Ames filed their intervening
petition, setting up their mortgage, and alleging that they had
no knowledge of the contract with the York Manufacturing Company
at the time of taking their mortgage, and prayed that they might
be given precedence over that company. It appears they did raise
for Mild the sum of $10,000, by indorsing for him to that extent,
and a portion of it they have since been compelled to pay, and
they are liable for the balance.
The referee in bankruptcy, before whom the question came, held
that the mortgage of Waight Ames was a valid lien on all the
bankrupt's property, including the machinery furnished by the
York Manufacturing Company, subject, however, to a
Page 347
purchase money mortgage on the lot for $1,000. He also held that
the York Manufacturing Company had no lien on the machinery, but
was a general creditor only.
The District Court, on a petition for review, reversed this
ruling, and held that the mortgage of Waight Ames did not cover
the machinery supplied by the York Manufacturing Company, but
that the latter had no lien thereon as against general creditors;
that the mortgage of Waight Ames was a valid lien on the rest
of the property, subject to the purchase money mortgage on the
lot; that they were not creditors of the bankrupt corporation,
except as to the sum of $1,500 they had charged for becoming
sureties under the contract above mentioned, but the court held
that they might prove the debts of the creditors who held the
notes on which they were sureties, if the creditors failed to do
so, and that they might be subrogated to the rights of the
creditors to the extent they had paid or might pay any balance
due on said notes remaining after applying thereon the surplus of
the proceeds of the sale of the real estate, after the purchase
money mortgage had been paid, and that the entire $10,000 of the
notes, which were mentioned in the contract between Waight Ames
and the company, and for which they were to be sureties, might be
included in this right of subrogation. This of course did not
include a note for $1,000, which had been paid five months before
the proceedings in bankruptcy. The District Court held that the
mortgage of Waight Ames was subordinate to the lien of the York
Manufacturing Company, because no part of it had been placed on
the ground of the bankrupt until two months after the making of
the mortgage to Waight Ames. The court, however, held that the
general creditors were entitled to have the plant of the York
Manufacturing Company sold for the payment of their claims
because of the failure of that company to file the conditional
sale contract, as required by the Ohio statute, and such failure
rendered the contract void as to the creditors. Waight Ames did
not appeal from the District Court's decree.
Page 348
The Circuit Court of Appeals, upon appeal by the York
Manufacturing Company, affirmed the District Court,
135 F. 52, and that company has appealed here.
Unrecorded conditional sale of chattels is superior to lien of prior realty mortgage.Fosdickv.Schall,99 U.S. 235;Manhattan Trust Co. v.Sioux City Ry. Co., 76 F. 658;Meyerv.Car Co.,102 U.S. 1;Cumberlandv.Maryport(1892), 1 Chan. 415;Mott Iron Worksv.Middle States L.B.C. Co.,17 App.D.C. 584;Duntzv.Granger Brewing Co.,83 N.Y.S. 957. Other cases of conditional sales are:Ins. Co. v.George,77 Minn. 319;Adams Mach. Co. v.Association,119 Ala. 97;Warrenv.Liddel,110 Ala. 232;Lansing c. Worksv.Wilbur,111 Mich. 413;Harrisv.Hackley,127 Mich. 46;Germanv.Weber,16 Wn. 95;Pagev.Edwards,64 Vt. 124. See alsoCampbellv.Roddy,44 N.J. Eq. 244;Hinev.Morris, 3 Bull. 515 (Ohio Dist. Ct.);Tifftv.Horton,53 N.Y. 377;Blinkleyv.Forkner,117 Ind. 176;Wheelerv.Bedell,40 Mich. 693.
Whether personalty attached to realty becomes realty is a question of intention between the parties.Tifftv.Horton,supra; Aldine Mfg. Co. v.Barnard,84 Mich. 632.
The word "creditors" in the Ohio conditional sales law includes only judgment creditors. A judgment is requisite in order to enable a creditor to attack a previous conveyance by his debtor. This is because the existence of his debt must be in some way ascertained and must be fastened upon the land.Martinv.Bowen,51 N.J. Eq. 452.
It is as well settled in statutes as to conditional sales, as in statutes in regard to chattel mortgages, that the word "creditor" refers solely to creditors who hold some additional lien. The reason for this is that the fact that the conditional vendor, or the mortgagee, under instruments not properly filed, has no less rights than formerly, and such failure to record does notPage 349give to the mere creditor any specific right in the property conditionally sold. It merely leaves the property in such a condition that the general creditor by diligence may acquire a prior lien thereon. Jones on Chattel Mortgages, 4th ed., § 245;In re Cassie L. Chadwick, 50 Wkly. Law Bull. (Ohio) 413;Jonesv.Graham,77 N.Y. 628;Sheldonv.Wickham,161 N.Y. 500;Stephensv.Meriden Brittania Co.,160 N.Y. 178;Meyer Bros. Drug Co. v.Pipkin Drug Co., 136 F. 396;Stewartv.Beale, 7 Hun, 405;Hallv.Keating ImplementCo.,33 Tex. Civ. App. 526;Bowenv.Wagon Works,91 Tex. 385[91 Tex. 385].
The statute protects only subsequent creditors and mortgagees and not prior creditors.In re Sewell, 111 F. 791;Inre Ducker, 133 F. 771;S.C., aff'd, 134 F. 43;Baldwin c. Co. v.Crow,86 Ky. 679;Wicksv.McConnell, 20 Ky. L.R. 84;Brownv.Brabb,67 Mich. 17;First National Bank of Corningv.Reid,122 Iowa 280;In reCannon, 10 Am. B. Rep. 64;Harrisonv.South Carthage MiningCo.,106 Mo. App. 32. The date from which to reckon who are prior creditors is the date of delivery of the machinery.In reGosch, 126 F. 627.
The trustee in bankruptcy takes no greater title than the bankrupt and the bankruptcy proceedings do not operate as a judicial seizure, conferring new and greater rights on the creditors of the bankrupt.Thompsonv.Fairbanks,196 U.S. 516;Hewitv.Berlin Machine Works,194 U.S. 296;Sheldonv.Wickham,161 N.Y. 500; Collier on Bankruptcy, 5th ed., 553;Gibsonv.Warden, 14 Wall. 244;Douglasv.Vogeler, 6 F. 53;Donaldsonv.Farwell,93 U.S. 631;Winsorv.McLellan, 2 Story, 492;Mannixv.Purcell,46 Ohio St. 102;Shawv.Glen,37 N.J. Eq. 32;Van Heusenv.Radcliff,17 N.Y. 580;Nebraska Plow Co. v.Blackburn, 104 N.W. 178;Cincinnati Warehouse Co. v.Combs,109 Ky. 21;In reWise,121 Iowa 359;Ryderv.Ryder,19 R.I. 188.
It would be unconstitutional for Congress to attempt to give the mere filing of the petition, or the adjudication, thePage 350effect of rendering judgment in favor of all the creditors. The proceedings have none of the characteristics of a recovery of a judgment. The debts are not adjudicated. The mere filing of the petition could not have that effect. The adjudication could not have that effect, because at most the claims of only the petitioning creditors are passed upon.
If the equities of the York Manufacturing Company and the creditors are equal, the former must prevail, as being prior in time.Cincinnati Warehouse Co. v.Combs, supra.
As to the creditors having actual knowledge of the reservation of title to appellant, their claims are entitled to no priority.
The sole object and purpose of the recording act is to give notice. If there is actual notice the object of the act is accomplished. Hence, it has been uniformly held, that notice is equivalent to record. There is an exception in Ohio as to mortgages of land. This is because of the peculiar wording of the statute. That notice is equal to record has been the law ever since the leading case ofLe Nevev.Le Neve, 2 White Tudor Leading Cases in Equity, 109.Batchelderv.Sanborn,66 N.H. 192;Frickv.Fritz,115 Iowa 438;Aultmanv.Kennedy,114 Iowa 444;Dyerv.Thorstad,35 Minn. 534;SmithNixonv.Simper White, 15 Ohio Cir. Ct. 375.
There was no appearance for appellee.
InWilsonv.Leslie,20 Ohio 161, the court was construing the language of the statute relating to chattel mortgages, which declared a mortgage absolutely void as against creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage or a true copy thereof should be deposited forthwith, as directed in the act. The court held that the mortgage was not void for lack of filing, as between the parties thereto, but that the statute only avoided the instrument as to those creditors who, between the time of the execution of the mortgage and the filing thereof, had taken steps to "fasten upon the property for the payment of their debts." As against such as had in the interim secured liens by attachment, execution or otherwise, the mortgage would be void. When filed with the recorder the instrument became valid as against all persons, except those whose rights had attached upon the property before the recording of the instrument. See to the same effectIn re Shirley, 112 F. 301.
We have not been referred to any decision of the Supreme Court of Ohio as to the meaning of the statute requiring the filing of contracts of conditional sales, but we concur with the Circuit Court of Appeals in this case, that the statute would render the unfiled contract void as to the same class of creditors mentioned in the chattel mortgage statute. Therefore the contract would be void as to creditors who before its filing had "fastened upon the property" by some specific liens. As to creditors who had no such lien, being general creditors only, the statute does not avoid the sale, which is good between the parties to the contract.
The mortgage of Waight Ames cannot be a lien on the machinery sold by the York Manufacturing Company, because the mortgage was prior to the time when any portion of such machinery was placed upon the land. There was no clause inPage 352the mortgage covering after-acquired property, and in any event the mortgage would not cover property so acquired, the title to which, as in this case, was reserved to the vendor. This was the ruling of the District Court, and no appeal was taken therefrom by the mortgagees. There are no creditors with any specific liens, nor is there any other mortgage, and there is no attachment.
We come then to the question whether the adjudication in bankruptcy was equivalent to a judgment, attachment or other specific lien upon the machinery. The Circuit Court of Appeals has held herein that the seizure by the court of bankruptcy operated as an attachment and an injunction for the benefit of all persons having interests in the bankrupt's estate.
We are of opinion that it did not operate as a lien upon the machinery as against the York Manufacturing Company, the vendor thereof. Under the provisions of the bankrupt act the trustee in bankruptcy is vested with no better right or title to the bankrupt's property than belonged to the bankrupt at the time when the trustee's title accrued. At that time the right, as between the bankrupt and the York Manufacturing Company, was in the latter company to take the machinery on account of default in the payment therefor. The trustee under such circumstances stands simply in the shoes of the bankrupt and as between them he has no greater right than the bankrupt. This is held inHewitv.Berlin Machine Works,194 U.S. 296. The same view was taken inThompsonv.Fairbanks,196 U.S. 516. It was there stated that "under the present bankrupt act, the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt." SeeYeatmanv.Savings Institution,95 U.S. 764;Stewartv.Platt,101 U.S. 731;Hauseltv.Harrison,105 U.S. 401. The same doctrine was reaffirmed inHumphreyv.Tatman,198 U.S. 91. The law of Ohio says the conditional sale contract was good between the parties, although not filed. In such aPage 353case the trustee in bankruptcy takes only the rights of the bankrupt, where there are no specific liens, as already stated.
The remark made inMuellerv.Nugent,184 U.S. 1, "that the filing of the petition [in bankruptcy] is acaveatto all the world, and in effect an attachment and injunction," was made in regard to the particular facts in that case. The case itself raised questions entirely foreign to the one herein arising, and did not involve any inquiry into the title of a trustee in bankruptcy as between himself and the bankrupt, under such facts as are above stated. The dispute in theMuellercase was whether the court in bankruptcy had power to compel, in a summary way, the surrender of money or other property of the bankrupt in the possession of the bankrupt, or of some one for him, without resorting to a suit for that purpose. This court held, as stated by the Chief Justice in delivering its opinion: "The bankruptcy court would be helpless indeed if the bare refusal to turn over could conclusively operate to drive the trustee to an action to recover as for an indebtedness, or a conversion, or to proceedings in chancery, at the risk of the accompaniments of delay, complication, and expense, intended to be avoided by the simpler methods of the bankrupt law." It was held that the trustee was not thus bound, but had the right, under the facts in that case, to proceed under the bankrupt law itself and take the property out of the hands of the bankrupt or any one holding it for him.
In this case, under the authorities already cited, the York Manufacturing Company had the right, as between itself and the trustee in bankruptcy, to take the property under the unfiled contract with the bankrupt, and the adjudication in bankruptcy did not operate as a lien upon this machinery in favor of the trustee as against the York Manufacturing Company.
The decree of the Circuit Court of Appeals is reversed and the case remanded to the District Court, with directions to enter a decree in conformity with this opinion.Reversed.Page 354
- Page 345 Section 4155, Revised Statutes of Ohio, provides as follows:
"In all cases where any personal property shall be sold to any person, to be paid for in whole or in part in installments, or shall be leased, rented, hired or delivered to another on condition that the same shall belong to the person purchasing, leasing, renting, hiring or receiving the same whenever the amount paid shall be a certain sum, or the value of such property, the title to the same to remain in the vendor, lessor, renter, hirer or deliverer of the same, until such sum or the value of such property or any part thereof shall have been paid, such condition, in regard to the title so remaining until such payment, shall be void as to all subsequent purchasers and mortgagees in good faith, and creditors, unless such conditions shall be evidenced by writing, signed by the purchasers, lessor, renter, hirer or receiver of the same, and also a statement thereon, under oath, made by the person so selling, leasing or delivering any property as herein provided, his agent or attorney of the amount of the claim or a true copy thereof, with an affidavit that the same is a copy, deposited with the clerk of the township where the person signing the instrument resides at the time of the execution thereof, if a resident of the State, and if not such resident, then with the clerk of the township in which such property is sold, leased, rented, hired, or delivered is situated at the time of the execution of the instrument; but when the person executing the instrument is a resident of a township in which the office of county recorder is kept, or when he is a non-resident of the State, and the property is within such township, the instrument shall be filed with the county recorder; and the officer receiving any such instrument shall proceed with the same in all respects as he is required to do by section four thousand one hundred and fifty-two of the Revised Statutes of Ohio, and shall receive the same fees as are allowed by law for similar services in other cases." ↩