In re Massachusetts Motors Co.

LOWED!,, District Judge. The proceedings before the referee related to several defendants, but the Federal Finance Corporation was [102] the only one which filed a petition for review. The testimony is voluminous; the material facts, however, may be stated briefly. The Massachusetts Motors was a dealer in automobiles. It borrowed money from the petitioner to pay drafts attached to bills of lading accompanying shipments of motor cars. The bankrupt gave as security for the advances documents. known as leases, by the terms of which the title to the cars should not pass to the bankrupt till the cars were paid for. There was a demand note for the amount of money advanced on each car. The cars were unloaded from the railroad and taken by the bankrupt to its salesroom; no notice was given to the customers of the bankrupt that the cars did not belong to it. The arrangement between the parties was that the cars should be sold and then the loans paid. Several cars remained in the salesroom of the bankrupt at the time of its bankruptcy, and came into the possession of the trustees. The proceedings before the referee related to the title to these cars. The learned referee ruled that the trustee in bankruptcy got title to the cars, and cited the following cases: Casey v. Cavaroc, 96 U. S. 467, 24 L. Ed. 779; Rock Island Plow Co. v. Reardon, 222 U. S. 354, 32 Sup. Ct. 164, 56 L. Ed. 231; In re Garcewich, 115 Fed. 87, 53 C. C. A. 510; Pontiac Buggy Co. v. Skinner (D. C.) 158 Fed. 858; In re Harrington (D. C.) 212 Fed. 542; Flanders Motor Co. v. Reed, 220 Fed. 642, 136 C. C. A. 250; In re Irwin (D. C.) 268 Fed. 162; In re Hallbauer (D. C.) 275 Fed. 126, affirmed in General Securities Co. v. Driscoll (C. C. A.) 271 Fed. 295. In my opinion the ruling was correct. The documents provided for what are commonly called conditional sales of personal property — i. e., sales where the title is to remain in the vendor until payment — and where such sales relate to property which is the stock in trade of' a dealer, and no notice is given to the public that the dealer does not own the articles offered for sale, the terms of the documents reserving title in the vendor are invalid as against a trustee in bankruptcy. In addition to the cases cited by the learned referee, see Reed v. Guaranty Security Corporation (D. C.) 291 Fed. 580, and Reed v. Federal Finance Corp. (D. C.) 291 Fed. 679, and cases cited.