FINANCE AND GUARANTY COMPANY
v.
OPPENHIMER, TRUSTEE
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A secured creditor who retained title to automobiles under a conditional sales contract lawfully repossessed the vehicles from a debtor within four months before the debtor's bankruptcy petition was filed, and this repossession did not constitute a voidable preference because the creditor's lien arose before the bankruptcy trustee's lien and the creditor merely reclaimed its own property. The Supreme Court reversed the Circuit Court of Appeals and held that a party holding security does not create a preference by taking possession under it within four months if lawfully permitted under state law.
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Mr. Justice Holmes delivered the opinion of the Court.
This is a suit brought by the respondent, trustee in bankruptcy for W.
A. Lee, to recover the value of four automobiles seized by the defendant, the petitioner, in circumstances alleged to have made the taking a preference if maintained. The defendant sold the automobiles to the bankrupt by a duly recorded contract of conditional sale.
On January 10, 1921, it repossessed itself of the cars by a suit in detinue. Ten days later, on January 20, the petition in bankruptcy was filed against Lee, and on February 25, he was adjudicated ,a bankrupt. About a year later the trustee brought this suit relying upon the Traders’ Act, § 5224 of the Code of Virginia, by which, it may be assumed, all the property used by Lee in his business, including these cars, “shall as to the creditors of any such person, be liable for the debts of such person.” The trustee prevailed in the Circuit Court of Appeals. Opinion, 5 F. (2d) 486. Formal conclusion, 15 F. (2d) 1011. A writ of certiorari was granted by this Court. 273 U. S. 689.
We are of opinion that the decision was wrong for the reason given by the dissenting judge below. The Supreme Court of Appeals of Virginia has construed the Traders’ Act and has established that “the creditors” in § 5224 means creditors having a lien. Capital Motor Corporation v. Lasker, 138 Va.
630. The lien of the trustee in bankruptcy did not arise until after the property in question had come back to the hands of the petitioner, which had reserved title to itself. Bailey v. Baker Ice Machine Co., 239 U. S. 268, 270. Martin v. Commercial National Bank, 245 U. S. 513, 517, Bankruptcy Act, §47 (a) (2) as amended.
U. S. C., Title 11, § 75.
Therefore the retaking of the property was valid as against the trustee. It could not work a preference unless he represented a claim that was paramount when the property was seized. At that time the petitioner did what it had a right to do as against the bankrupt and simply took what was its own. It did no wrong to ,any creditor, for no creditor not having a judgment or other lien could have complained so far as the law of Virginia went. See Firestone Tire & Rubber Co. v. Cross, 17 F. (2d) 417, 421, 422. The majority in the Circuit Court of Appeals took the distinction between a trustee under a conventional deed of trust for the benefit of creditors and a trustee in bankruptcy, that the former has no power to vacate preferences. But, as we have implied, a party holding security does not create a preference by taking possession under it within four months if he lawfully may under the law of the State. Thompson v. Fairbanks, 196 U. S.
516. Humphrey v. Tatman, 198 U. S. 91.
We understand it to be admitted that the plaintiff is entitled to judgment for seven hundred dollars for property not covered by the petitioner’s title, that amount having been allowed by the District Court, although it held as we do that the seizure was lawful. We follow the judgment in that respect. With this understanding the judgment of the Circuit Court of Appeals is reversed.
Judgment reversed.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Cited By (19 total)
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Burrowes v. Nimocks, 35 F.2d 152 (4th Cir. 1929)…registration, or in a proper case the taking of possession of the property, before bankruptcy, will render it valid as against the trustee in bankruptcy, and will not be held to be the obtaining of a preference. Finance & Guaranty Co. v. Oppenhimer, 276 U. S. 10, 48 S. Ct. 209, 72 L. Ed. 443; Bailey v. Baker Ice Machine Co., 239 U. S. 268, 36 S. Ct. 50, 60 L. Ed. 275; Humphrey v. Tatman, 198 U. S. 91, 25 S. Ct. 567, 49 L. Ed. 956; Thompson v. Fairbanks, 196 U. S. 516, 25 S. Ct. 306, 49 L. Ed. 577; Firestone…
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Union Tr. Co. of Md. v. Townshend (two cases). In re Smith, 101 F.2d 903 (4th Cir. 1939)…lien creditors until registered. See In re Cunningham, 4 Cir., 64 F. 2d 296, 299. It is analogous, also, to the rule applied where the creditor takes possession of the property under such a mortgage. See Finance & Guaranty Co. [*914] v. Oppenhimer, 276 U.S. 10, 48 S.Ct. 209, 72 L.Ed. 443. In such cases the preferential nature of the transfer is to be judged as of the date of the basic agreement und'er which the lien was created by the parties, not as of the date when it was perfected as against the claim…
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In re Sachs. Joseph v. Winakur, 30 F.2d 510 (4th Cir. 1929)…ion that they are entitled, in view of our statute, to challenge a lien or title dependent upon an unrecorded agreement of which they were unaware when their claims were contracted.” (Italics ours.) The case of Finance & Guaranty Co. v. Oppenhimer, 48 S. Ct. 209, 72 L. Ed. 443, relied upon by appellee, has no application; for that case dealt with a statute of Virginia, in which the word "creditors” had been construed by the Supreme Court of Appeals of that state as meaning creditors having a lien, and the d…
Previewing 3 of 19 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Bailey in Bankruptcy of Grant v. Baker Ice Mach. Co., 239 U.S. 268 (U.S. 1915)
- Thompson v. Fairbanks, 196 U.S. 516 (U.S. 1905)
- Virgin v. Commercial Nat'l Bank of MacOn, 245 U.S. 513 (U.S. 1918)
- Humphrey v. Tatman, 198 U.S. 91 (U.S. 1905)
- Firestone Tire & Rubber Co. v. Cross, 17 F.2d 417 (4th Cir. 1927)
- In re Oppenhimer v. Fin. & Guar. Co., 5 F.2d 486 (4th Cir. 1925)
- Fin. & Guar. Co. v. Henry W. Oppenhimer in Bankruptcy for W. A. Lee, 273 U.S. 689 (U.S. 1927)
- Tucker v. Acel C. Alexander, 273 U.S. 689 (U.S. 1927)
- Frankelite Co. v. Kornfeld, 15 F.2d 1011 (6th Cir. 1926)