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    MARTIN v. COMMERCIAL NAT. BANK OF MACON, GA. , 245 U.S. 513 (1918)

    U.S. Supreme Court

    MARTIN v. COMMERCIAL NAT. BANK OF MACON, GA. , 245 U.S. 513 (1918)

    245 U.S. 513

    No. 100.

    Argued Dec. 19, 20, 1917.
    Decided Jan. 14, 1918.

    Messrs. R. Douglas Feagin and Rudolph S. Wimberly, both of Macon, Ga., for petitioner. [245 U.S. 513, 514]   Messrs. Orville A. Park and George S. Jones, both of Macon, Ga., for respondent.

    Mr. Justice McREYNOLDS delivered the opinion of the court.

    As security for money presently loaned to him in good faith by the Commercial National Bank, one Virgin executed and delivered a mortgage upon his stock of merchandise at Macon, Ga., February 16, 1914. It was recorded August 20, 1914, when the bank knew of his insolvency. The next day involuntary bankruptcy pro- [245 U.S. 513, 515]   ceedings were instituted and in due time he was adjudged bankrupt and a trustee appointed. Recordation of the mortgage was not fraudulently delayed and prior thereto no other liens were fixed upon the property. Both trustee and other creditors objected to the bank's claim as one entitled to priority 'on the ground that the mortgage was recorded within the four months period preceding bankruptcy, at a time when the mortgagor was insolvent, and when the mortgagee knew that he was insolvent, and the recording of the mortgage would effect a preference, and that the transfer arising from the recording of the instrument was nonoperative, and that the instrument must be held as not recorded.' Their contention here is thus stated:

    The referee allowed the claim as preferred and the Circuit Court of Appeals approved his action. 228 Fed. 651, 143 C. C. A. 173. [245 U.S. 513, 516]   It is provided by section 60b, Bankruptcy Act, as amended June 25, 1910, c. 412, 36 Stat. 838, 842 (Comp. St. 1916, 9644):

    Section 47a of the Bankruptcy Act (Comp. St. 1916, 9631) provides:

    Section 3260, Georgia Code of 1910, declares that:

    Construing this section, in Hawes v. Glover, 126 Ga. 305, 317, 55 S. E. 62, 67, the Supreme Court held:

    Section 60b, Bankruptcy Act, has been specially considered by us in two recent cases-Bailey v. Baker Ice Machine Co., 239 U.S. 268 , 36 Sup. Ct. 50, and Carey v. Donohue, 240 U.S. 430 , 36 Sup. Ct. 386, L. R. A. 1917A, 295. In the first the company installed an ice machine for Grant Bros. at Horton, Kan., during February, under a conditional sale contract of earlier date and recorded May 15th following, when the purchasers were known to be insolvent; July 11th they became bankrupt. Such a contract is valid under the laws of Kansas as between the parties whether recorded or not, but void as against a creditor of the vendee who fastens a lien upon the property by execution, attachment or like process prior to recording. The vendors demanded the machine. The trustee maintained section 47a, Bankruptcy Act, gave him the status of a lienholder prior to recordation and that the contract, having been put to record within four months, operated as a preference voidable under section 60b. We held the trustee occupied the status of a creditor with a lien fixed as of the date when the bankruptcy proceedings commenced and that he could not assail the contract under the state law; further, that section 60b refers to an act whereby the bankrupt sur- [245 U.S. 513, 518]   renders or incumbers his property for the benefit of a particular creditor, thereby diminishing the estate which should be applied to all; the contract in question did not operate as a preferential transfer; the property was not the bankrupts', but the vendor's; the former were not to become owners until the condition was performed; and there was no diminution of the estate.

    In Carey v. Donohue the trustee sought to set aside a real estate transfer executed more than four months before bankruptcy, but recorded within that time. Under the Ohio Statute conveyances of land until filed for record are deemed fraudulent as to subsequent bona fide purchasers without knowledge, but recording is not essential to their validity as against any creditor, whether general creditor, lien creditor, or judgment creditor with execution returned unsatisfied, that is, as against any class of persons represented by a trustee in bankruptcy or with whose rights, remedies, and powers he is deemed to be vested. We denied the trustee's contention and, among other things, declared:

    The word 'required' in section 60b refers directly to statutes in many states relating to recording which through various forms of expression seek to protect creditors by providing that their rights shall be superior to transfers while off the record. Recognizing the beneficial results of these enactments and intending that rights based thereon might be utilized for the advantage of bankrupt estates, Congress inserted ( amendment of 1910) the clause 'or of the recording or registering of the transfer if by law recording or registering thereof is required.' In Carey v. Donohue we pointed out that purchasers are not of those in whose favor registration is 'required,' but that the reference is to persons concerned in the distribution of the estate, i. e., 'creditors including those whose position the trustee was entitled to take.' And we think it properly follows that before a trustee may avoid a transfer because of the provision in question he must in fact represent or be entitled to take the place of some creditor whose claim actually stood in a superior position to the challenged transfer while unrecorded and within the specified period.

    The Georgia statute imposes the requirement of registration only in favor of a creditor who fixes a lien on the property before recording takes place. Here there is no such person; the trustee occupies the status of one who acquired a lien after that event. No one concerned in the distribution of the estate actually held rights superior to the mortgage while off the record.

    The judgment of the court below is correct, and must be


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