Bailey v. Baker Ice Machine Company

By a contract in writing, made at Omaha, Nebraska, October 14, 1911, between the Baker Ice Machine Company and Grant Brothers, the former agreed to deliver and install upon the premises of the latter at Horton, Kansas, an ice making and refrigerating machine for the sum of $5,940, to be paid partly in cash and partly in deferred instalments evidenced by interestbearing notes. It was specially stipulated that the title to the machine should be and remain in the Baker Company until full payment of the purchase price; that the machine should not be deemed a fixture to the realty prior to full payment; that in the meantime Grant Brothers should keep the machine in good order and keep it insured for the benefit of the Baker Company; that if default was made in the payment of the purchase price, the Baker Company should have the right to resume possession and take the machine away; and that, in the event this right was exercised, the company should be reimbursed for all expenses incurred under the contract, should be compensated for any damage done to the machine in the meantime, and should be allowed a rental for its use equal to 6 per cent per annum upon the purchase price from the date of the installation to that of the resumption of possession. And it was further stipulated that the Baker Company should have the right to file a mechanics' lien for the materials and labor furnished under the contract, and that no notice of a purpose to file such a lien, other than that afforded by this stipulation, would be required.

The machine was installed in February, 1912, the cash payment was made and notes were given for the balance of the purchase price, all as contemplated by the contract. A partial payment upon two of the notes brought the total payments up to $3,200.14, and nothing more was paid. May 15, 1912, but not before, the contract was filed for record in the county register's office. At that time Grant Brothers were insolvent, and if the contract operated as a transfer of the machine from them to the Baker Company, all the elements of a preferential transfer, in the sense of the bankruptcy act, were present.

July 11, 1912, within four months after such filing, Grant Brothers presented to the district court for the district of Kansas their voluntary petition in bankruptcy, and on the next day were adjudged bankrupts. Possession of the machine, which had remained with them up to that time, was then passed to the trustee in bankruptcy. Shortly thereafter, the balance of the purchase price being due and unpaid, the Baker Company intervened in the bankruptcy proceeding, asserted that it owned the machine and was entitled to the possession in virtue of the contract, and applied for an order directing that the possession be surrendered to it. Upon a hearing before the referee the application was denied, and upon a petition for review his action was sustained by the district court. An appeal to the circuit court of appeals resulted in a reversal of the decree, with a direction that the machine be delivered to the Baker Company unless, within a time to be named, the trustee pay the balance of the purchase price. 126 C. C. A. 425, 568, 209 Fed. 603, 844.

During the pendency of the controversy, as now appears, the machine was sold for $2,800, pursuant to an order of the referee, requested by the parties, whereby the proceeds were to take the place of the machine and be disposed of according to the final decision.

Messrs. Edwin A. Krauthoff, Charles Curtis, W. S. McClintock, and Arthur L. Quant for appellant.

Messrs. H. C. Brome and Clinton Brome for appellee.

Statement by Mr. Justice Van Devanter:  Mr. Justice Van Devanter, after making the foregoing statement, delivered the opinion of the court: