1. The provisions of the Bankruptcy Act concerning liens are
superior to state laws. P.
284
U. S. 5.
2. In the administration of an estate in bankruptcy, a chattel
mortgage which, under the state law, is bad a against creditors who
were such at the date of the mortgage, or who became such between
the date of the mortgage and the date on which it was recorded,
should not be given priority over those who gave the bankrupt
credit at a later date, after the mortgage was on record.
Bankruptcy Act, §§ 70, 67, and 65.
Id.
45 F.2d 449 reversed.
Certiorari, 283 U.S. 814, to review an affirmance of an order of
the district court holding a chattel mortgage to be valid as to
creditors whose claims came into existence subsequently to its
recordation.
MR. JUSTICE HOLMES delivered the opinion of the court.
The bankrupt executed a mortgage of automobiles, furniture,
showroom, and shop equipment that is admitted to be bad as against
creditors who were such at the date
Page 284 U. S. 5
of the mortgage, and those who became such between the date of
the mortgage and that on which it was recorded, there having been a
failure to observe the requirements of the Civil Code of
California, § 3440. The question raised is whether the
mortgage is void also as against those who gave the bankrupt credit
at a later date, after the mortgage was on record. The Circuit
Court of Appeals affirmed an order of the District Judge giving the
mortgage priority over the last creditors. 45 F.2d 449. Whether the
court was right must be decided by the Bankruptcy Act, since it is
superior to all state laws upon the subject.
Globe Bank v.
Martin, 236 U. S. 288,
236 U. S.
298.
The trustee in bankruptcy gets the title to all property which
has been transferred by the bankrupt in fraud of creditors or
which, prior to the petition, he could by any means have
transferred, or which might have been levied upon and sold under
judicial process against him. Act of July 1, 1898, c. 541, §
70; U.S.Code, Title 11, § 110. By § 67, Code, Title 11,
§ 107(a), claims which, for want of record or for other
reasons, would not have been valid liens as against the claims of
the creditors of the bankrupt shall not be liens against his
estate. The rights of the trustee by subrogation are to be enforced
for the benefit of the estate. The Circuit Courts of Appeal seem
generally to agree, as the language of the Bankruptcy Act appears
to us to imply very plainly, that what thus is recovered for the
benefit of the estate is to be distributed in "dividends of an
equal percentum . . . on all allowed claims, except such as have
priority or are secured." Bankruptcy Act, § 65, Code, title
11, § 105.
In re Kohler, 159 F. 871;
Mullen v.
Warner, 11 F.2d 62;
Campbell v. Dalbey, 23 F.2d 229;
Cohen v. Schultz, 43 F.2d 340;
Globe Bank & Trust
Co. v. Martin, 236 U. S. 288,
236 U. S. 305.
Decree reversed.
