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DINKELSPIEL v. GARRETT

April 19, 1951

DINKELSPIEL ET AL.
v.
GARRETT ET AL.



The opinion of the court was delivered by: John E. Miller, District Judge.

Statement

This is a suit by the plaintiff, as Trustee in Bankruptcy for James Roland Shepherd, Bankrupt, to have a transfer of a certain automobile to the defendant declared a preference within the provisions of Title 11 U.S.C.A. § 96, and to recover from the defendant the said automobile or the value thereof.

The case came on for trial to the court on April 10, 1951, at the conclusion of which the court took the case under advisement, and, having duly considered the testimony adduced at the trial, the exhibits thereto, and the authorities presented by counsel for the respective parties, makes and files the following findings of fact and conclusions of law, separately stated.

Findings of Fact

1

James Roland Shepherd filed his voluntary petition in bankruptcy in this court on September 13, 1950, and was adjudicated bankrupt as of September 14, 1950. Plaintiff, Leon Dinkelspiel, is the duly appointed Trustee in Bankruptcy for said James Roland Shepherd, Bankrupt, and brings this suit in his capacity as such.

2

Prior to his adjudication as a bankrupt, James Roland Shepherd was a dealer in new and used automobiles doing business as the Shepherd Motor Company at Arkadelphia, Arkansas. His operations were extensive and resulted in a rapid turn-over of new and used vehicles. Much, if not the major portion, of his business was as a wholesaler, that is, he purchased large quantities of vehicles from various dealers in Chicago, Illinois, Little Rock, Arkansas, and elsewhere, and immediately sold them to dealers in other States. Normally these vehicles would be picked up at the place of business of the seller by his drivers and would remain on his lot in Arkadelphia a very short time, if at all, before being transported on to those purchasing from him. The records kept by Shepherd were entirely inadequate and do not accurately reflect the extent of his operations. During the period of his operations his bank account constantly fluctuated, at times showing a substantial balance and at other times being completely depleted.

3

Defendant, Gene Garrett, was engaged in business as a wholesaler of motor vehicles in Little Rock, Arkansas. He had sold the bankrupt, Shepherd, various vehicles from time to time in the past. It was his practice to transact business on a cash basis. If cash was paid for a vehicle, he normally transferred title papers to the vehicle at the time of the sale, but in the event a check was given, title papers were withheld until the check had cleared the bank. According to his testimony, it was necessary that he operate in this manner since he had to remit the purchase price of the vehicles to those from whom he had purchased at the time of or immediately after a sale by him to a third party.

On July 31, 1950, Garrett delivered three vehicles to drivers of Shepherd and took in payment therefor three checks drawn on the Citizens National Bank of Arkadelphia, Arkansas. And, on August 2, 1950, Garrett delivered additional vehicles to drivers of Shepherd and took in payment therefor checks drawn on the same bank. No title papers of any kind were transferred by Garrett to Shepherd at the time the vehicles were delivered, or at any time subsequent thereto. This was pursuant to Garrett's practice of withholding the transfer of title until the checks had cleared. On August 2 or 3, 1950, Garrett's bank notified him that payment on the checks had been refused due to insufficient funds in Shepherd's account. Garrett immediately went to Arkadelphia to investigate the matter and to either secure payment or to recover the vehicles.

When Garrett arrived he found representatives of other dealers, who had delivered vehicles to Shepherd without receiving payment, at Arkadelphia for the same purpose. Two such concerns were the Broadway Car Company of Chicago, Illinois, and West Peach Street Motors of Atlanta, Georgia. The representatives of the latter two companies recovered various vehicles on Shepherd's lot and also obtained, apparently by going through Shepherd's files in his office, various title papers to the automobiles recovered and to others that had been delivered to Shepherd but which were not on the lot.

Garrett checked the status of Shepherd's account at the bank and talked with certain officials thereof, who verified that the account was entirely depleted. After being advised of this fact, and having ascertained that the other dealers, referred to above, were "cleaning the lot" of vechicles, Garrett undertook to trace the vehicles delivered by him to Shepherd on July 31 and August 2 and recover them. He succeeded in locating and obtaining possession of all such vehicles, except a Chevrolet ½ ton truck, one of the vehicles sold on July 31, 1951, the purchase price of which was $1450. As to this vehicle, he was advised by Shepherd that it had been sold to a third party, and Shepherd requested him not to take steps to repossess it, in as much as Shepherd had sold it for a profit and the latter did not want to cause the purchaser the difficulties which would result from Garrett's efforts to repossess the same. Garrett acceded to this request.

At this point there is somewhat of a conflict in the testimony. However, certain facts are undisputed, and certain inferences from the facts logically follow. Shepherd used a 1948 Oldsmobile automobile as his family car. There was some testimony that this automobile belonged to Shepherd's wife but all of the facts disclose that Shepherd was the actual owner thereof. Title certificate on the Oldsmobile was kept in his office files. The title had been assigned in blank by the former owner and was retained in that form in the files. Garrett obtained the title certificate from Grady Pate, an employee of Shepherd's, and took the Oldsmobile from the street in front of Shepherd's office. Garrett testified that he and Shepherd made a deal whereby Garrett would take the Oldsmobile for the Chevrolet truck and Shepherd would pay Garrett $150 extra. Shepherd admits that he requested Garrett not to repossess the Chevrolet truck but his testimony was very vague about the remainder of the transaction, stating, in effect, that there was nothing he could do about Garrett taking the Oldsmobile. In this regard the testimony of Garrett is consistent with all the facts and the court accepts it. Shepherd was advised that Garrett was demanding all of the vehicles delivered to Shepherd and made a special request of Garrett not to repossess the Chevrolet truck. The court believes that Garrett, obviously a man who is zealous in protecting his own interests, would not have acceded to this request had he not been able, in his ...


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