Court Opinion

ID: 9640067
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:56:38.441259+00
Date Added: 2024-06-11T08:15:11.072995
License: Public Domain

On Petition for Rehearing.
LEWIS, Circuit Judge.
It seems to us that counsel for appellant make a wrong assumption on which they base their conclusion that appellee’s equitable lien comes within the requirements of the Colorado chattel mortgage statute and had to be placed of public record, if possession of the chattels had not been taken by appellee before bankruptcy, to save its validity; and that assumption is that the Colorado Supreme Court has so construed its statute. In their brief filed with the motion they say: “The holding of the Bogdon case, Bogdon v. Fort, 75 Colo. 231, 225 P. 247, however, is controlled by one essential fact not found in this matter, i. e., in the Bogdon case the holder of an equitable lien had taken possession prior to bankruptcy.” There is no such statement in the opinion in that case and no discussion of an equitable lien. The situation there was this, as stated by the court:
“This action is by the assignee of the vendor of five automobile carriages or buss-es which were sold to the Inter-City Automobile Lines of Denver, a corporation, and the object is a foreclosure, as chattel mortgages, of the five written instruments evi*772dencing the transaction. Whether under the decision in Bailey, Trustee, etc., v. Baker I. M. Co., 239 U.S. 268, 36 S.Ct. 50, 60 L.Ed. 275, under a similar contract, that there is a real distinction between a conditional sale and an absolute sale with a mortgage back, and that the transaction there was strictly a conditional sale, is not important here, even if the conclusion is inconsistent with Andrews & Co. v. Colorado Sav. Bank, 20 Colo. 313, 36 P. 902, 46 Am.St.Rep. 291, which held a somewhat similar contract in legal effect a chattel mortgage. - This is so because the parties here are in accord that under the law of this state the disposition of this case is to be, and should be, as though the instruments in question are chattel mortgages.” '
The remainder of the opinion clearly shows that disposition was made on that basis.
In Colorado a chattel mortgage is a conveyance of personal property. It pásses title to the mortgagee. If the mortgagor does not redeem on condition broken the' mortgagee can recover the property in trover. Hurt v. Hubbard, 41 Colo. 505, 92 P. 908. In Tolland Co. v. First State Bank et al., 95 Colo. 321, 35 P.2d 867, 868, the court said:
“A mortgagee of land has a lien merely. Pueblo & A.V. R. R. Co. v. Beshoar, 8 Colo. 32, 5 P. 639; Laws 1927, p. 592, § 12. A chattel mortgage, on the other hand, conveys title to the chattels, subject to redemption by the mortgagor.”
Appellant also cites First National Bank v. Felter, 65 Colo. 370, 176 P. 496, as an equitable lien case and within the requirements of the -chattel mortgage statute. The assumption is without foundation. The court said:
“Defendant in error leased a farm to one Allen, and took a promissory note for the rent, secured by a chattel mortgage on the crops grown or to be grown on the land. * * *
“Subsequent to the making of said mortgage, the plaintiff in error made a loan to Allen, and took as security therefor a chattel mortgage on some personal property, together with 20 acres of sugar beets and other crops, already planted. * * *
“The only question to be considered is the effect of a mortgage on crops not yet planted, as against a mortgage given after the crop has been planted.”
As stated by the court, each party relied on a chattel mortgage. No equitable lien was involved. Nor was such right in any manner involved in Tolland Co. v. First State Bank, supra. In J. I. Case Threshing Mach. Co. v. Glass & Bryant M. Co., 74 Colo. 535, 223 P. 35, nothing can be found in relation to the recording of an equitable lien, or in the alternative, as required by the chattel mortgage act, taking possession of the chattels by one holding such a lien. In that case the contest is between two chattel mortgagees as to which held the prior right as such on certain crops covered by each of the mortgages.
The result is, appellant’s counsel cite no Colorado case and we find none construing the chattel mortgage statute as covering or applying to a purely equitable lien. Furthermore, sectiqn 2 of that statute (Ch. 32, 1935 Colorado Statutes Annotated) applies only to chattel mortgages on crops and reads:
“No chattel mortgage on any crop shall be, or be deemed invalid by reason of the mortgagee consenting or agreeing, either expressly or by implication, that the crop may be sold by the mortgagor, but the lien of the mortgage shall, in such case, continue and attach to the proceeds of the sale in the hands of the purchaser, unless the mortgagee shall have expressly waived such lien.” Section 4 of said statute reads:
“Every chattel mortgage shall be good and valid between the parties thereto until the indebtedness secured thereby is paid or barred by the statute of limitations.”
But appellant’s counsel are insistent that section 20 of said statute brings a purely equitable lien within all of its terms as to' its requirements of public record or possession to be taken of the chattels by a mortgagee. That section reads in this way:
“Except as provided in section 6, above, the provisions of this chapter shall extend to all bills of sale, deeds of trust and other conveyances of personal property intended by the parties to have the effect of a mortgage or lien upon such property.”
How can it in reason be said that the extension made by said section covers equitable liens ? The extension is specifically confined to “bills of sale, deeds of trust and other conveyances of personal property”. An equitable lien is not a bill of sale, deed of trust or other conveyance. That is clearly shown by our opinion heretofore rendered on submission of the cause.
The case, In re Gallacher Coal Co., D.C., 205 F. 183, 185, is much like the case in hand on its facts. There the lien imposed was by a coal mining lease on property of the lessee that might thereafter be brought onto or in the mine for use, to secur-e the pay*773ment of unpaid royalties in event of abandonment. Judge Grubb in disposing of the point now in mind said:
“If record of the instrument was required in order that it might be effective as against subsequent creditors, then the trustee, under the amendment to the bankruptcy act of June 25, 1910, might avail himself of the failure to record. * * * The controlling inquiry is whether record was necessary to the validity of the lien. Sections 3376 and 3386 of the Alabama Code of 1907 are relied on as requiring the record of the lien. The language of each is identical in its description of the character of the instruments required to be recorded. It is ‘conveyances of personal property to secure debts, or to provide indemnity,’ in each section. In order to come within the statute, the instrument must come within the description of ‘a conveyance of personal property,’ and its purpose must be to secure a debt or to provide indemnity.”
Judge Grubb then said:
“The lien created by the lease was a pledge of personal property for the purpose of securing the royalty fixed by the lease, which was a debt. Can it be described as a conveyance? It did not purport to transfer title or possession out of the lessee, but merely to charge the property with the payment of the royalty. * * *
“In the case of Fash v. Ravesies, 32 Ala. 451, the Supreme Court of Alabama said:
“ ‘The contract, then, really amounts to nothing more than a charge of the estate with a lien which may be enforced in a court of equity. There is no conveyance, either legal or equitable, to the Ralstons. There is no transfer of legal or equitable title to them. They could not, like a mortgagee, sue for and recover the property in any tribunal.’ * * *
“In the case of Bailey v. Timberlake, 74 Ala. 221-224, the same court said:
“ ‘The statutes of registration relate only to conveyances of the legal estate in lands, not to equitable interests, often incapable of registration, and to which it is not practicable to apply the policy pervading the statutes.’ ”
See Lewin v. Telluride Iron Works Co., 8 Cir., 272 F. 590; In re Terrell, 8 Cir., 246 F. 743; Big Four Imp. Co. v. Wright, 8 Cir., 207 F. 535. Burroughs Adding Mach. Co. v. Bogdon, 8 Cir., 9 F.2d 54, is not in point, because in that case there was a conveyance of the personal property involved — here no conveyance.
In Watson v. Merrill, 136 F. 359, 363, 69 L.R.A. 719, the Circuit Court of Appeals for the Eighth Circuit said:
“An adjudication in bankruptcy does not dissolve or terminate the contractual relations of the bankrupt. * * * Its effect is to transfer to the trustee all the property of the bankrupt except his executory contracts, and to vest in the trustee the option to assume or to renounce these. * * * It is the discharge of the bankrupt alone, not his adjudication, that releases him from liability for provable debts in consideration of his surrender of his property, and its distribution among the creditors who hold them. Even the discharge fails to relieve him from claims against him that are not provable in bankruptcy, and, since his obligation to pay rents which are to accrue after the filing of the petition in bankruptcy may not be the basis of a provable claim, his liability for them is neither released nor affected by his adjudication in bankruptcy, or by his discharge from his provable debts. * * * Nor are those who contracted with him absolved from their obligations. If he or his trustee pays the stipulated rents for his place of residence or for his place of business, the lessors may not deny to the payor the use of the premises according to the terms of the lease. If he renders the personal services, he who contracted to pay for them may not deny his liability to discharge this obligation. His trustee does not become liable for his debts, but he does acquire the right to accept and assume or to renounce the executory agreements of the bankrupt, as he may deem most advantageous to the estate he is administering, and the parties to those contracts which he assumes are still liable to perform them. And so * * * the adjudication in bankruptcy absolves from no agreement, terminates no contract, and discharges no liability.”
We noted in our former opinion that bankrupt on May 1, 1937, filed its petition to be adjudged bankrupt and also filed on that day schedules of its personal property. In Schedule B. (2) sub K it put down “Machinery, fixtures, apparatus, and tools used in the business, * * * viz.: See list attached which property is subject to lien in the lease in favor of Rocky Mountain Fuel Co. $18,185.00.”Attached thereto was a list of that property and values placed on each item, amounting to $18,185.00. The trustee was appointed as such on May 26, 1937. On June 8, 1937, he made written application to the referee to abandon the lease. He stated it was of no value, but *774rather a liability; that because of the condition of the mine it could not be operated profitably nor could he find a purchaser; “that your trustee has never taken possession of the said lease and therefore desires to reject and disclaim said lease as of May 1, 1937; that it will be to the benefit of said estate if your petitioner may abandon and disclaim title to said property and refuse to take the same into his possession.” The order in part is this: “It is further ordered, that the trustee is authorized to reject and disclaim said sublease as of the date of May 1, 1937.” On said June 8th the trustee filed a disclaimer of “any right, title or interest in and to said sub-lease and the amendment thereto as of May 1, 1937, as property of said estate” and abandoned and relinquished all claim thereto and gave written notice that he refused to take same into his possession as trustee. It further appears in the record that the lessor’s employes reentered the mine on May 4, 1937, for the purpose of keeping it from being flooded, and they have since remained there for that purpose, doubtless using some of the property broughf onto the mine by the lessee.
The trustee testified on June 28, 1937, and part of his testimony is this:
“Q. Did you examine the mine yesterday? A. I did not go underground. I stopped and talked to Mr. Duncan. That was the first time I had been out since the 1st of May.
“Q. Have you been underground in that mine? A. Yes, sir.
“Q. When? A. Shortly before it went into bankruptcy.”
We adhere to our former opinion, the conclusion there reached, and the order therein directed. Mandate may issue.