U.S. Supreme Court
Bailey v. Baker Ice Machine Co., 239 U.S. 268 (1915)
Bailey v. Baker Ice Machine Company
Argued November 2, 1915
Decided November 29, 1915
239 U.S. 268
After reviewing cases on conditional sale of personal property, and sale absolute with chattel mortgage back, held that the transaction involved in this case was one of conditional sale.
Requiring a vendee to give notes for deferred installments of purchase price is not inconsistent with retention of title in the vendor pending payment of the notes. Wm. W. Bierce, Ltd. v. Hutchins, 205 U. S. 340.
While the exercise of a privilege to the vendor to file a mechanic's lien for property delivered on conditional sale might be inconsistent with retention of title in the vendor, the mere reservation of such a privilege will not nullify express words to the effect that title remains in the vendor until full payment be made.
Under the recording law of Kansas, a contract of conditional sale is valid between the parties, whether filed for record or not, but is void as against a creditor of the vendee who fastens any valid lien upon the property before the contract is filed for record.
To be within the terms of the provisions of § 60 of the Bankruptcy Act making preferential transfers voidable, the transfer must be one made by the bankrupt of his own property and which operates to prefer one creditor over another.
A contract of conditional sale, to the vendor on failure to pay the stipulated price, held, in this case, not be to a preferential transfer by the conditional vendee under § 60 of the Bankruptcy Act.
When not otherwise provided, the rights, remedies, and powers of the trustee in bankruptcy are determined with reference to the conditions existing when the petition is filed.
A trustee in bankruptcy cannot, under § 47a, cl. 2, of the Bankruptcy Act, assail a contract of conditional sale filed prior to, but within four months, of the petition on the ground that he has the status of a creditor fastening a lien under the provisions of state law on the property prior to the recording of the contract, and this because the trustee acquires that status only from the filing of the petition.
The determination of a proceeding in bankruptcy between the trustee and the vendor of property sold under conditional sale held to be without prejudice to the rights of a third party to whom the vendee had mortgaged the property and who had not been joined in the proceeding.
209 F.6d 3 affirmed. chanroblesvirtualawlibrary
By a contract in writing, made at Omaha, Nebraska, October 14, 1911, between the Baker Ice Machine Company and Grant Brothers, the former agreed to deliver and install upon the premises of the latter at Horton, Kansas, an ice-making and refrigerating machine for the sum of $5,940, to be paid partly in cash and partly in deferred installments evidenced by interest-bearing notes. It was specially stipulated that the title to the machine should be and remain in the Baker Company until full payment of the purchase price; that the machine should not be deemed a fixture to the realty prior to full payment; that, in the meantime, Grant Brothers should keep the machine in good order and keep it insured for the benefit of the Baker Company; that, if default was made in the payment of the purchase price, the Baker Company should have the right to resume possession and take the machine away, and that, in the event this right was exercised, the company should be reimbursed for all expenses incurred under the contract, should be compensated for any damage done to the machine in the meantime, and should be allowed a rental for its use equal to six percent per annum upon the purchase price from the date of the installation to that of the resumption of possession. And it was further stipulated that the Baker Company should have the right to file a mechanics' lien for the materials and labor furnished under the contract, and that no notice of a purpose to file such a lien, other than that afforded by this stipulation, would be required.
The machine was installed in February, 1912, the cash payment was made, and notes were given for the balance of the purchase price, all as contemplated by the contract. A partial payment upon two of the notes brought the total payments up to $3,200.14, and nothing more was paid. May 15, 1912, but not before, the contract was filed for record in the county register's office. At that time, Grant Brothers were insolvent, and if the contract chanroblesvirtualawlibrary
operated as a transfer of the machine from them to the Baker Company, all the elements of a preferential transfer, in the sense of the Bankruptcy Act, were present.
July 11, 1912, within four months after such filing, Grant Brothers presented to the District Court for the District of Kansas their voluntary petition in bankruptcy, and on the next day were adjudged bankrupts. Possession of the machine, which had remained with them up to that time, was then passed to the trustee in bankruptcy. Shortly thereafter, the balance of the purchase price being due and unpaid, the Baker Company intervened in the bankruptcy proceeding, asserted that it owned the machine and was entitled to the possession in virtue of the contract, and applied for an order directing that the possession be surrendered to it. Upon a hearing before the referee, the application was denied, and upon a petition for review, his action was sustained by the district court. An appeal to the circuit court of appeals resulted in a reversal of the decree, with a direction that the machine be delivered to the Baker Company unless, within a time to be named, the trustee pay the balance of the purchase price. 209 F.6d 3, 844.
During the pendency of the controversy, as now appears, the machine was sold for $2,800, pursuant to an order of the referee, requested by the parties, whereby the proceeds were to take the place of the machine and be disposed of according to the final decision. chanroblesvirtualawlibrary