In re Packard Press, Inc.

HOUGH, Circuit Judge (after stating the facts as above). It must be remembered, in dealing with matters of lien, or rights arising from liens, that the bankruptcy trustee does not stand merely in the bankrupt’s shoes. Since the amendment of 1910 he has by statute all the rights and powers of a judgment creditor holding an execution duly returned unsatisfied. Section 47a (Comp. St. § 9631). Even before that amendment, defective filing of a chattel mortgage was usually hold to vitiate it in bankruptcy. ■ Remington, § 1373. In this circuit, and in respect of mortgages under the New York statute, that holding was flat (In re Gerstman, 157 F. 549, 85 C. C. A. 211) and failure to refile properly worked tho same result (In re Watts-Woodward Press, 181 F. 71, 104 C. C. A. 105). Nor was there any conflict between the rule in bankruptcy, and that worked out in favor of creditors in the courts of the state. Ely v. Carnley, 19 N. Y. 496, is a striking instance; it being there held that an error in the filed copy of a chattel mortgage whereby the debt secured was overstated by $100, rendered the mortgage wholly void. In Senft v. Lewis, 239 F. 116, 152 C. C. A. 158, the facts were quite like those at bar; i. e., there had been a mistaken understatement of the amount still due, inserted in the renewal certificate, "and we held that [234] creditors (including, of course, the trastee as representing them) were entitled to depend absolutely on that recorded statement. Jt follows that on December 24, 1923, this petitioner might well have been a creditor of bankrupt for $2,400.75, but as against -creditors he had a lien for no more than $24.75. Let it be assumed that under the form of this mortgage, and the New York chattel mortgage theory as stated in Peter Barrett Mfg. Co. v. Van Ronk, 212 N. Y. 90, 105 N. E. 811, petitioner had good right to sell in order to secure $24.75 and costs of sale, yet the sale was by auction, and it is fundamental that unless other terms are announced before hand, one who successfully bids at an auction receives title on the fall of the hammer, and possession when he pays the amount of his bid. It is quite true that these rales cannot apply literally to a sale by a mortgagee, who in New York has title .after default, although out of possession (Van Ronk Case, supra); and the object usually sought by a mortgagee’s sale is to cut off the equity of redemption (Bragelman v. Daue, 69 N. Y. 69). Considering that this bankrupt had explicitly waived redemption in this instance, the question arises why have a sale? Evidently to ascertain how much would be left unpaid on the mortgage, and the real question here presented is whether this sale extinguished this mortgage. As above indicated we hold that the mortgage as against creditors was paid, and the difference between $950 and $24.75, plus expense of sale, would have become a debt due by petitioner to the trustee, had petitioner become physically possessed of the mortgaged property. But this was not done. The court’s receiver peaceably took possession, and the final question put by the proceeding below is whether the petitioner should have had the machinery which it had bought at an auction sale without paying for it? The moment a bankruptcy petition was filed, a receiver or trustee became, as it were, the seller of the machinery, etc., in the sense that he would be entitled to whatever mortgagee had to account for. But mortgagee (petitioner) refused to account for anything, necessarily resting his denial on the assertion that his mortgage was valid for $2,400.75, and refusing to accept the trustee’s tender. Therefore in legal effect the trustee had the subject' of sale/ and the purchaser at auction refused to pay or account for the $950 he had'bid; therefore again by analogy to elementary rules of auction sales, the quasi seller (trustee or receiver) had a lien on the machinery for whatever petitioner mortgagee was liable for. The facts rendered the order made eminently proper, and it is affirmed, with costs.