pledge must be decided by the law of the State where made.216 Generally speaking, and under the laws of most of the States, there must be a delivery of the possession of the property pledged to the pledgee, to give rise to the lien in his favor,217 but such delivery may be made 216. Security Warehousing Co. v. Hand, 206 U. S. 415, 19 Am. B. R. 291, 51 L. Ed. 1117, 27 Sup. Ct. 720, affg. 16 Am. B. R. 49, 143 Fed. 32; Hartford Ins. Co. v. Railway, 175 U. S. 91, 44 L. Ed. 84, 20 Sup. Ct. 33; In re Industrial Iron Works (D. C., Pa.), 25 Am. B. R. 221, 179 Fed. 151. Matter of Harvey (D. C., Ala.), 32 Am. B. R. 337, 212 Fed. 340; citing Collier on Bankruptcy (9th Ed.), 948; Taney v. Penn. National Bank, 232 U. S. 174, 33 Am. B. R. 168; Matter of Sullivan Co., Inc. (D. C., N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. R. 530, 254 Fed. 660; Atherton v. Beaman (C. C. A., 1st Cir.), 45 Am. B. R. 212, 264 Fed. 878. In New York there can be no valid pledge without delivery of the property pledged to the pledgee. Matter of Sullivan Co., Inc. (D. C., N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. R. 530, 254 Fed. 660. Right of pledgee under void contract. - Barker Piano Co. v. Com. Security Co. (Conn. Sup. Ct. of Err.), 42 Am. B. R. 704, 105 Atl. 328; Garden City, etc. Co. v. Commerce Trust Co. (C. C. A., 7th Cir.), 44 Am. B. R. 340. 217. In re Shulman (D. C., Pa.), 30 Am. B. R. 238, 206 Fed. 129; Matter of Harvey (D. C., Ala.), 32 Am. B. R. 337, 212 Fed. 340; Matter of Sullivan Co., Inc. (D. C., N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. R. 530, 254 Fed. 660; Matter of Imperial Textile Co. (D. C., N. Y.), 43 Am. B. R. 209, 255 Fed. 199. Delivery of pledged accounts.Where the bankrupt made an agreement with a creditor to assign certain accounts due and to become due as collateral security for loans, and there after sent to the creditor a list of accounts, together with a statement that it was a list of the accounts covered by the agreement, such acts were equiv alent to the taking possession in the case of a chattel, or to the recording of a mortgage, and the trustee in bankruptcy thereafter appointed, has no right or title to such accounts as against the creditor. Matter of Hub Carpet Co. (C. C. A., 2d Cir.), 49 Am. B. R. 125, 282 Fed. 12. Return of pledged securities to trustee of pledgor.- Where a pledgee of securities, after he had returned them to the trustee in bankruptcy of the pledgor, discovered that he was exposed to liability in connection with the sale of certain other pledged securities, and that he would be entitled to reimbursement from the securities returned in case this liability should be adjudged against him, and the owners of the returned securities set up a decree of the District Court, affirmed by the Circuit Court of Appeals adjudging them to be owners, and asserted these decrees to be conclusive, the referee properly directed the trustee to retain custody of the securities, until the court should determine whether the pledgee by returning them had lost the right to claim a lien thereon. Matter of Jamison Bros. & Co. (C. C. A., 3d Cir.), 35 Am. B. R. 725, 227 Fed. 30. Possession of pledgor.- When a vendee, or a pledgee, takes title to personal property, without taking possession of it, he takes the risk of the integrity and solvency of his vendor, or pledgor, when the rights of subsequent bona fide purchasers, or of levying creditors, arise. Bank of North symbolically, and the question of possession may largely depend upon the intention of the parties dealing in good faith, and upon the nature and location of the property itself.218 Under circumstances showing that the transaction is in good faith, and that the requirement of delivery would be such a hardship as to defeat the purpose of the contract, the lien may be sustained as an equitable lien rather than a pledge.219 A bankrupt pledgor is not justified in asking that the exercise of a present right of the pledgee to realize upon his security be deferred indefinitely to await a purely problematical increase in the price which might be realized at the sale. Nor are the general America v. Penn Motor Car Co. (Pa. Sup. Ct.), 31 Am. B. R. 395, 83 Atl. 622. 218. Ward v. First Nat'l Bank of Ironton, Ohio (C. C. A., 6th Cir.), 29 Am. B. R. 312, 202 Fed. 609 (as to delivery of lumber in possession of pledgor, which was tagged and marked with initials of pledgee). See also Matter of Sullivan Co., Inc. (D. C., N. Y.), 41 Am. B. R. 189, 247 Fed. 139, affd. 42 Am. B. R. 30, 254 Fed. 660. Warehouse receipts. As to validity of pledge of warehouse receipts to secure loans made to owner, see Union Trust Co. v. Wilson, 198 U. S. 530, 14 Am. B. R. 109, 49 L. Ed. 1154, 25 Sup. Ct. 766; Love v. Export Storage Co. (C. C. A., 6th Cir.), 16 Am. B. R. 171, 143 Fed. 1; Britton v. Union Investment Co. (C. C. A., 8th Cir.), 44 Am. B. R. 531, 262 Fed. 111. Under the laws of Wisconsin there can be no pledge of goods in a warehouse by the mere transfer of warehouse receipts. Security Warehousing Co. v. Hand, 206 U. S. 415, 19 Am. B. R. 291, 51 L. Ed. 1117, 27 Sup. Ct. 720, affg. 16 Am. B. R. 49, 143 Fed. 32. 219. Matter of Harvey (D. C., Ala.), 32 Am. B. R. 337, 212 Fed. 340; citing Collier on Bankruptcy (9th Ed.), 948, 950; Barker . v. Com. Security Co. (Conn. Sup. Ct. of Err.), 42 Am. B. R. 704, 105 Atl. 328. See also under this section post, subtitle "Equitable liens." Retention of possession by pledgor for purposes of manufacture; equitable lien. In the case of In re Industrial Iron Works (D. C., Pa.), 25 Am. B. R. 221, 179 Fed. 151, it appeared that the bankrupt, having contracted to supply a customer with a derrick car and equipment, bought the car itself from another company, upon a contract of conditional sale, title to remain in vendor until paid for. While engaged in the manufacture and erection of the equipment of the car, and more than four months before the filing of the petition in bankruptcy, the bankrupt assigned the car and its equipment and the money to be paid therefor by the bankrupt's customer, to a bank, in return for the discount of bankrupt's note for the amount of the purchase price. The purchaser was requested to pay the contract price to the bank, which it agreed to do; but when the car was delivered it was refused because not satisfactory under the contract. While in the custody of the carrier, after refusal, and after bankruptcy, the bank seized the car, with its equipment, in an action of replevin, as pledgee. It was held, that the conditional vendor of the car was entitled to the car or its value and that upon the payment of its value the bank might retain the car and its equipment; that under the law of Pennsylvania, the pledge to the bank creditors of the bankrupt pledgor entitled to this indulgence.220 Other cases dealing with the validity of pledges are cited in the foot-note.221 The question as to the title to pledged property is also considered under § 70, post.222 (12) SPECIAL STATUTORY LIENS.- Statutory liens, such as a lien given to the manufacturer of machinery supplied to a factory,223 are valid, if perfected as required by such statute.224 A livery stable keeper's statutory lien does not depend for its existence upon the institution of judicial or other proceedings, but is a perfect lien under the statute, and as such is cognizable and enforceable in bankruptcy.225 An artisan has a lien for repairs and improvements made to a bankrupt's automobile after petition filed and before adjudication.226 (13) TRUST AND OTHER TRANSFERS.- Deeds of trusts and other transfers made in good faith to secure present loans, protected under a State statute, are within the protection of clause d of this section and valid liens.227 But a deed of trust made by a corporation to was not invalid as against the trustee on the ground of retention of possession by the pledgor because possession was necessarily so retained for the purpose of manufacture, the pledgor acting as a bailee for that purpose, and neither the bankrupt nor his trustee having had possession after refusal by the purchaser; and that the bank's claim could be sustained as an equitable lien upon the property, which, having been acquired more than four months before the filing of the petition, was not affected by the bankruptcy proceeding. 220. Griffin v. Smith (Cal. Sup. Ct.), 41 Am. B. R. 354, 171 Pac. 92. 221. Chattanooga Nat. Bank v. Rome Iron Co. (D. C., Ga.), 4 Am. B. R. 441, 102 Fed. 755; In re Cobb (D. C., N. Car.), 3 Am. B. R. 129, 96 Fed. 821; Casey v. Cavaroc, 96 U. S. 467, 24 L. Ed. 779; Clark v. Iselin, 21 Wall. 360; Adams v. Nat. Bank, 2 Fed. 174; Davis v. R. R. Co., Fed. Cas. 3648; In re Grinnell, Fed. Cas. 5,829. 222. See also under section 70, post, subtitle "Pledged property." 223. In re Matthews (D. C., Ark.), 6 Am. B. R. 96, 109 Fed. 603; In re Georgia Handle Co. (C. C. A., 5th Cir.), 6 Am. B. R. 472, 109 Fed. 632; In re Oconee Milling Co. (C. C. A., 5th Cir.), 6 Am. B. R. 475, 109 Fed. 866; Mott v. Wissler Mining Co. (C. C. A., 4th Cir.), 14 Am. B. R. 321, 135 Fed. 697, 68 C. C. A., 335. 224. In re Lillington Lumber Co. (D. C., N. Car.), 13 Am. B. R. 153, 132 Fed. 886. 225. In re Mero (D. C., Conn.), 12 Am. B. R. 171, 128 Fed. 630; In re Pratesi (D. C., Del.), 11 Am. B. R. 319, 126 Fed. 588. 226. In re Rich (Ref., Ohio), 17 Am. B. R. 893. 227. Crim v. Woodford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 136 Fed. 34; Matter of Alden (Ref., Ohio), 16 Am. B. R. 362; In re Noel (D. C., Md.), 14 Am. B. R. 715, 137 Fed. 694; Wilder v. Watts (D. C., S. Car.), 15 Am. B. R. 57, 138 Fed. 426; In re Clifford (D. C., Iowa), 14 Am. B. R. 281, 136 Fed. 475; In re Randolph (D. C., W. Va.), 26 Am. B. R. 623, 187 Fed. 186. Costs and fees.- Matter of Russell Falls Co. (D. C., Mass.), 41 Am. B. R. 448, 249 Fed. 260. A secure ultra vires notes has been held fraudulent and invalid.228 mortgage executed by the officers of a corporation, the proceeds being applied for the benefit of the corporation, but technically defective because not authorized by the directors, is valid as against the trustee of the bankrupt corporation.229 When money is advanced to a debtor in pursuance of an express agreement that it is to be used to retire existing liens or incumbrances on his property, and that the creditor who loans the money is to have a first lien upon the property to secure its repayment, such creditor may be subrogated to the rights of the incumbrancer or lienor whose debt has been paid, and may assert his lien against the borrower's trustee in bankruptcy.2 7230 An assignment of future wages constitutes a valid lien which is not affected by the discharge in bankruptcy of the mortgagor.231 228. American Wood Working Machinery Co. v. Norment (C. C. A., 4th Cir.), 19 Am. B. R. 679, 157 Fed. 801, holding that where a corporation gives its notes, without consideration, to its principal stockholder and manager, who, as intended by the parties, pledges them as collateral security for his personal indebtedness to the knowledge of the pledgees, a deed of trust securing the notes given by the corporation while insolvent, and within four months of its bankruptcy, is fraudulent and void as to the creditors of the corporation. 229. A mortgage of a Minnesota corporation, executed by the president and secretary, with the seal of the corporation, to secure an indebtedness justly due from the corporation the proceeds of which it received and used in the conduct of its business, but which had not been authorized by the directors, is a valid lien against the trustee in bankruptcy of the corporation. Galbraith v. First Nat. Bank of Alexandria (C. C. A., 8th Cir.), 34 Am. B. R. 213, 221 Fed. 387. 230. Union Central Life Ins. Co. & Burgoyne v. Drake (C. C. A., 8th Cir.), 32 Am. B. R. 252, 214 Fed. 536; In re Lee (C. C. A., 8th Cir.), 25 Am. B. R. 436, 182 Fed. 579, citing Association v. Thompson, 32 N. J. Eq. 133; Tyrell v. Ward, 102 Ill. 29; Bank v. Bierstadt, 168 Ill. 618, 48 N. E. 161, 61 Am. St. Rep. 146; Draper v. Ashley, 104 Mich. 527, 62 N. W. 707; Wilson v. Mayberry, 75 Wis. 191, 43 N. W. 901, 6 L. R. A. 61, 17 Am. St. Rep. 193; Levy v. Martin, 48 Wis. 198, 4 N. W. 35; Trust Co. v. Peters, 72 Miss. 1058, 18 South. 497; Dillon v. Kauffman, 58 Tex. 696. Contract to secure advances; objecttion made after securing possession of collateral. Where after bankrupt's trustee, under sanction of the court, and with the assent of a debtor who had agreed to hold its stock as security for its debt which was evidenced by notes, had virtually exercised the power to take legal possession of such stock, it was too late for certain banks, which held some of those notes as collateral for loans made to bankrupt, to raise the question, as the result of an agreement thereafter made with such debtor, whether the original agreement as to the stock between bankrupt and the debtor was ineffective to operate as a lien as to creditors because of the want of delivery. Merchants' Nat. Bank v. Sexton, 228 U. S. 634, 30 Am. B. R. 278, 57 L. Ed. 998, 33 Sup. Ct. 725. 231. Citizens' Loan Ass'n v. Boston & Maine R. R. (Sup. Ct., Mass.), 19 Am. B. R. 650; Mallen v. Wenham, 209 Ill. 252, 13 Am. B. R. 210, 70 N. E. 664; Monarch Discount Co. v. Chesa (14) VENDOR'S LIEN.-A contract of conditional sale may give rise to a valid lien,232 which will not be affected by a discharge.233 Likewise, a vendor's purchase money lien will be valid against a trustee in bankruptcy and courts of bankruptcy will recognize and give effect to such a lien provided for by the statutes of a State, in the absence of some act of the vendor or claimant inconsistent with the purpose of claiming a lien or with its continued existence.234 An implied vendor's lien cannot prevail as against intervening bona fide creditors without notice and therefore it cannot prevail against the trustee of the vendee.2 If the vendor has no lien as against cred 235 peake & Ohio Ry. Ct. (Il. Sup. Ct.), 42 Am. B. R. 497, 120 N. E. 743. 232. National Bank of Commerce v. Williams (C. C. A., 5th Cir.), 20 Am. B. R. 79, 159 Fed. 615; Matter of Johnson (D. C., Conn.), 33 Am. B. R. 104, 215 Fed. 666. See under this section, ante, subtitle "Want of record Conditional sales." 233. Smith v. Turner (Sup. Ct., Ga.), 32 Am. B. R. 864, 80 S. E. 993. 234. Sheridan State Bank v. Rowell (D. C., Oregon), 32 Am. B. R. 747, 212 Fed. 529; Farrell v. Wysong (C. C. A., 8th Cir.), 40 Am. B. R. 740, 246 Fed. 281; American Bottle Co. v. Finney (Ala. Sup. Ct.), 43 Am. B. R. 685, 82 So. 106; Matter of Oswegatchie Chemical Products Corp. (C. C. A., 2d Cir.), 48 Am. B. R. 346, 279 Fed. 547. Under the Idaho Revised Codes, sections 3441 and 3443, and the bankruptcy act, a vendor of land to a bankrupt has a lien thereon, as against the trustee in bankruptcy, and he is not guilty of laches in waiting until after the filing of a petition in bankruptcy against the vendee before asserting his vendor's lien. Matter of Lane Lumber Co. (C. C. A., 9th Cir.), 33 Am. B. R. 491, 217 Fed. 550. Under the Mississippi statute, giving vendors of personal property a lien for the purchase money, the assignee of a note given for the balance of the purchase price of personal property has a lien which is not affected by the bankruptcy act, within the meaning of section 67-d, although acquired within four months of the filing of a petition against the assignor. Norris v. Trenholm (C. C. A., 5th Cir.), 31 Am. B. R. 353, 209 Fed. 827. Insurance policy for benefit of vendor.- Sullivan v. Myer (Tenn. Sup. Ct.), 39 Am. B. R. 314, 193 S. W. 124. Decree in State court foreclosing lien before bankruptcy is res judicata. Rader v. Star Mill & Elevator Co. (C. C. A., 8th Cir.), 43 Am. B. R. 754, 258 Fed. 121. Priority over mechanics' lien.- See Matter of Atkinson-Kerce Grocery Co. (D. C., Ga.), 40 Am. B. R. 411, 245 Fed. 481. A stockholder of a bankrupt corporation is not estopped from asserting a vendor's lien held by him, by the fact that the corporation, subsequent to the accrual of his lien makes, without his knowledge, an equitable or legal lien upon the property. Rader v. Star Mill & Elevator Co. (C. C. A., 8th Cir.), 43 Am. B. R. 754, 258 Fed. 121. 235. Matter of Oswegatchie Chemical Products Corp. (C. C. A., 2d Cir.), 48 Am. B. R. 346, 279 Fed. 547. Compare Whalen v. Wolford (Kan. Sup. Ct.), 35 Am. B. R. 117, 150 Pac. 608. Where a lien on real estate is attempted to be created by a mortgage which fails because the mortgage is insufficient as such, the recording of such insufficient mortgage is not sufficient notice of the existence of a vendor's lien. Davis |