Case Name: W. E. HINTON et als. v. D. E. WILLIAMS
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1915-11-17
Citations: 170 N.C. 115
Docket Number: 
Parties: W. E. HINTON et als. v. D. E. WILLIAMS.
Judges: 
Reporter: North Carolina Reports
Volume: 170
Pages: 115–118

Head Matter:
W. E. HINTON et als. v. D. E. WILLIAMS.
(Filed 17 November, 1915.)
Vendor and Purchaser — Conditional Sales — Registration—Bankrupt—Court-Trustee — Interpretation of Statutes.
By the amendment to the Bankrupt Act enacted by Congress in 1910 the title to the bankrupt’s property is vested in his trustee, “with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings,” and such trustee coming, therefore, within the provisions of Revisal, sec. 938, conditional sales contracts, reserving title in the vendor, are not good as against such trustee, when the writing has not been recorded until after the title has passed to him. Hence, when the vendor of the bankrupt, reserving title to the property sold, does not have his paper-writing recorded until after the property has passed to the trustee in the bankruptcy proceedings, the purchaser at the sale acquires a good title.
Appeal by plaintiffs from Justice, J., at January Term, 1915, of PASQUOTANK.
Action for tbe alleged conversion of certain personal property, i. one skidder and two trucks or log cars. C. L. & E. L. Hinton sold and delivered to tbe Camden Timber Company said skidder, four trucks and some miles of railroad iron, under a written agreement, 21 June, 1912, “to be paid for about one-tbird casb, balance note, title to remain witb vendor till all tbe note is paid in full.” Three hundred dollars was paid in casb. This agreement was not recorded till 30 August, 1913, over fourteen months after date. In accordance witb tbe agreement tbe Camden Timber Company executed two notes, one for $278.60 and one for $1,000, both dated 15 November, 1912, and due three and six months after date. On 8 July, 1913, tbe Camden Timber Company filed its petition in bankruptcy, including in its list of creditors bold-ing securities, tbe following: “C. L. & E. L. Hinton, South Mills, N. C., two notes, $278 and $1,000, secured by contract reserving title, for mill equipment and railroad track.”
The Timber Company was adjudged a bankrupt and Ebringbaus and Spence were appointed trustees. On 16 August, 1913, these trustees filed a petition asking that tbey be empowered to sell all tbe property of the bankrupt, specifying among such property “a locomotive, a lot of rail, two skidding machines and other property,” On that date the bankrupt court granted the order of sale, directing the property to be sold on Monday, 1 September, 1913. The agreement between the Timber Company and plaintiff was not recorded till after such order, to wit, on 30 August, 1913. The sales were reported to the court and confirmed 23 September, 1913, and the trustees delivered this property to the purchaser. This action was brought to recover its value of the purchaser.
Aydlett <& Simpson for plaintiffs.
Ward & Thompson for defendant.

Opinion:
Claes, C. J.
The sole question in the case is whether the vendors claiming under an unregistered conditional sale are entitled to recover the property from the purchaser at sale by the bankrupt's trustees. At the close of the testimony the defendant moved for a nonsuit, which was allowed, and the plaintiffs excepted.
The mortgage or conditional sale expressed the intention of the parties that title was to be retained by the Hintons until the purchase price was paid in full. Though the agreement .was executed 21 June, 1912, it was not recorded till 30 August, 1913. In the meantime the Camden Timber Company had been adjudged a bankrupt, 8 July, 1913, and on 16 August the trustees in bankruptcy had been directed to sell the property at public sale on Monday, 1 September, 1913. The court adjudged that the purchasers at such sale took the property clear of any lien.
The plaintiffs contended that the mortgage, though unregistered,' was good as between the parties and that the trustees in bankruptcy stood in the shoes of the bankrupt, and did not hold as a purchaser for value. In this State and some others it has been held that the failure to record a conditional sale precludes the seller from any lien on the property when it has passed into the hands of the trustee in bankruptcy, on the ground that the contract is void as to creditors until it is recorded, and that therefore the title passes to the trustee in bankruptcy discharged of any lien. In re Tatum, 110 Fed., 519; In re Smith, 132 Fed., 301; In re Poore, 139 Fed., 862.
In 1906 the Supreme Court of the United States, in Mfg. Co. v. Cassell, 201 U. S., 304, held that "The trustee in bankruptcy is vested in no better right or title to tbe property than tbe bankrupt bad wben tbe trustee's title accrued," and hence tbat where a conditional sale contract was not recorded before tbe adjudication in bankruptcy, tbe vendor's lien, being good as between tbe parties, was good against tbe trustees in bankruptcy.
In 1910 Congress, in order, no doubt, to avoid cases of fraud wbicb arose under tbat decision, amended tbe Bankrupt Law, sec. 47 (a), clause 2, by adding thereto: "And such trustee, as to all property in tbe custody, or coming into tbe custody, of tbe bankrupt court, shall be deemed vested with all tbe rights, remedies and powers of a creditor bolding a lien by legal or equitable proceedings thereon, and also as to all property not in tbe custody of tbe bankruptcy court shall be deemed vested with all tbe rights, remedies and powers of a judgment creditor bolding an execution duly returned unsatisfied." Chapter 412, sec. 8, Stat. at L., 840; TJ. S. Comp. Stat. Supp., 1912, p. 1493.
Tbe decisions since tbe adoption of this statute bold tbat where tbe seller of property by conditional sale has failed to record bis contract of sale where tbe State statute renders tbe contract invalid as to lien creditors or bona, fíele purchasers without registration, be has no remedy as against tbe trustee in bankruptcy to enforce tbe lien, but is a mere general creditor with a right to share in tbe assets of tbe estate. In re Lumber Co., 197 Fed., 281; In re Gehris-Herbine Co., 188 Fed., 502; In re Basemore, 189 Fed., 236; In re Knitting Mills, 190 Fed., 871; In re Nelson, 191 Fed., 233; Bank v. Coats (C. C. A.), 205 Fed., 618; Ann. Gas., 1913, E. 846.
Prior-to tbe above amendment of 1910, under tbe ruling in Mfg. Co. v. Cassell, supra, a trustee in bankruptcy was vested with no better right or title to tbe bankrupt's property than belonged to tbe bankrupt at tbe time wben tbe trustee's title accrued. He stood in tbe shoes of tbe bankrupt and bad no greater right; and where under tbe State law, wbicb was binding on tbe bankruptcy court, a chattel mortgage was valid as between tbe bankrupt and tbe mortgagee without registration, but not against tbe purchasers, mortgagees or creditors, it was good against tbe trustee in bankruptcy. Tbe amendment of 1910 changed this rule. This has been held in numerous cases in tbe Federal courts, among them Bank v. Schade (C. C. A.), 195 Fed., 188; In re Osborn (C. C. A.), 196 Fed., 257; Milliken v. Bank (C. C. A.), 206 Fed., 14; Lumber Co. v. McEldowney (C. C. A.), 207 Fed., 255.
Hnder tbe North Carolina statute unrecorded conditional sale contracts are not good against creditors and purchasers for value. Eevisal, 983; Blalock v. Strain, 122 N. C., 283; Clark v. Hill, 117 N. C., 11.
Tbe amendment of 1910 puts trustees in bankruptcy on tbe same basis. Mfg. Co. v. Arthur (C. C. A.), 220 Fed., 846; Collier on Bankruptcy (9 Ed.), 658, 662, 999, citing many cases in the notes.
The court below properly held that the plaintiff vendor in an unrecorded conditional contract of sale could not recover the property or its value from the purchaser at such sale, when such conditional sale was not recorded until after the title passed to the trustees in bankruptcy.
The judgment of nonsuit is
Affirmed.