The opinion of the court was delivered by: John E. Miller, District Judge.
On June 20, 1951, the Referee in Bankruptcy, Honorable Edgar E.
Bethell, filed findings of fact, conclusions of law and order in
the above named case, in which he disallowed the claims of J.W.
and Margaret O'Connell and W.S. Watson, as secured claims but
allowed them as common claims. Thereafter, on June 28, 1951, the
bankrupt, Brodie S. Watson, and claimant, W.S. Watson, filed a
petition for review of the order in so far as the same is adverse
to their contentions.
Pursuant thereto the Referee transmitted to the court Certified
Record of Proceedings, together with original briefs filed by the
parties with Referee. After receipt thereof the court granted the
attorneys time within which to file additional briefs if they so
desired. In accordance therewith the attorneys for Brodie S.
Watson and W.S. Watson submitted an additional brief, but the
attorneys for the claimants, J.W. and Margaret O'Connell, advised
that they did not desire to submit an additional brief. The court
has considered the Certified Record of Proceedings, the briefs of
the respective parties, filed with the Referee and with the
court, and a copy of a complaint filed by J.W. O'Connell and
Margaret O'Connell v. United States Fidelity and Guaranty
Company, Civil No. 2291, in the United States District Court,
Eastern District of Arkansas, Western Division, which is attached
to the brief of the Watsons. As to the complaint in the case just
referred to, a certified copy thereof may be obtained and filed
herein if the attorneys for the Watsons so desire, but for
present purposes, the court is treating the attached copy as a
true and correct copy thereof.
The findings of fact and conclusions of law filed by the
Referee reflect a thorough and accurate consideration and
determination of the issues involved in this case, and normally
the court would not deem it necessary to file an extended
opinion, as it is doing here, which to a large extent is merely
repetitious. However, in deference to the petitioners' able
attorneys, and the earnestness with which they urge their
contentions, the court has concluded that it should do so.
The only limitation on the scope of review by the district
judge of a petition of review is that imposed by General Order 47
that "the judge shall accept his findings of fact unless clearly
erroneous". 11 U.S.C.A. following Section 53; and see: 2 Collier
on Bankruptcy, 14th Ed., Sec. 39.28, page 1496; In re Taylor Oak
Flooring Co., D.C.W.D.Ark., 87 F. Supp. 6, 9. Here the facts found
by the Referee are adequately supported by substantial evidence,
and, in fact, are for the most part undisputed. The dispute
arises in the inferences and conclusions drawn from the facts.
It appears that the bankrupt was born in Calhoun County,
Arkansas, and resided there until he was 17, at which time he
went to Little Rock in Pulaski County, Arkansas, in September,
1948, to attend business college. He has retained the same
residence in Little Rock, a room in a boarding house, from 1948
until the present. After one year of training in business
college, he obtained a job with J.A. Riggs Tractor Company and
has remained in the employ of that company to the present time.
During this time he removed nothing from his family home near
Thornton, Calhoun County, Arkansas, except personal clothing, and
continued to return to the family home at Thornton every week or
two weeks, on which occasions he brought his laundry home for his
mother to wash. In November, 1949, he desired to purchase a car,
but was unable to do so because he was only 19 years old. His
father, W.S. Watson, advanced $1100
on the down payment, and took title in his name to a 1949 Special
Deluxe Club Coupe Plymouth. Thereafter Brodie S. Watson secured
an order of the Chancery Court in and for Calhoun County removing
his disabilities as a minor, his father, W.S. Watson, executed a
bill of sale of the car to him, and he obtained a title
certificate in his name, and a license for the car. The title
certificate did not show any outstanding encumbrance on the car.
Title was transferred to Brodie solely for the purpose of
obtaining state license, with the verbal understanding that W.S.
Watson should retain title to secure the balance due on the
purchase price of the car which was being paid by Brodie at the
rate of approximately $40 per month. The car was assessed for
personal taxes in Calhoun County.
On January 26, 1950, while driving the car, Brodie S. Watson
struck and injured J.W. and Margaret O'Connell. A short time
thereafter, March 2, 1950, Brodie executed and delivered to W.S.
Watson a chattel mortgage on the car to secure an indebtedness of
$1180. This mortgage was filed and recorded in Calhoun County on
March 18, 1950, but was never filed and recorded in Pulaski
County. J.W. and Margaret O'Connell filed suit against Brodie S.
Watson in the Circuit Court of Pulaski County, Arkansas, seeking
damages for personal injuries, and judgments were entered in
their behalf on February 2, 1951, in the amounts of $2,000 and
$4,000, respectively. Writ of execution was issued on said
judgments, and on March 10, 1951, the sheriff of Pulaski County
levied on and took possession of the car. At the time the lien
arising from this levy attached, Brodie S. Watson was insolvent,
in that he had no property other than the car which had a value
of approximately $1,000 and he owed approximately $7,000.
On March 27, 1951, Brodie S. Watson filed a voluntary petition
praying that he be adjudicated bankrupt, and attached thereto a
petition praying that the sheriff of Pulaski County, Arkansas,
who had seized said car, as above pointed out, be restrained from
selling same under execution. Both prayers were granted. J.W. and
Margaret O'Connell filed a motion to dismiss the petition for
adjudication for lack of jurisdiction, or venue, alleging that
Brodie S. Watson was neither domiciled in nor a resident of the
Western District of Arkansas. A hearing was held on this issue,
and the Referee overruled the motion.
The bankrupt by his schedules and pleadings asserted that the
car was subject to a lien in favor of his father, W.S. Watson, to
secure purchase money advanced, and J.W. and Margaret O'Connell
filed a petition attacking the alleged lien of W.S. Watson, and
asserting the priority of their judgment lien. Formal proof of
claim was filed by the O'Connells, and thereafter a response to
their petition was filed on behalf of Brodie S. and W.S. Watson
asserting the validity and priority of the alleged lien of W.S.
Watson. Formal proof of claim was subsequently filed on behalf of
With the exception of a nominal amount owed by the bankrupt for
personal taxes, the only creditors of the estate are J.W. and
Margaret O'Connell, claiming on their judgment, and the father of
the bankrupt, W.S. Watson, claiming the balance due on the
purchase price of the car. The 1949 Plymouth is the only asset of
the estate. As heretofore pointed out, the Referee disallowed
both claims as secured claims, but allowed them as common claims.
It is, of course, first necessary to look at the issue raised
as to the bankruptcy court's jurisdiction. Under Sec. 2, sub.
a(1), National Bankruptcy Act, 11 U.S.C.A. § 11, sub. a(1), the
court has jurisdiction to "Adjudge persons bankrupt who have had
their principal place of business, resided or had their domicile
within their respective territorial jurisdictions for the
preceding six months, or for a longer portion of the preceding
six months than in any other jurisdiction". In the instant case
the Referee concluded that the bankrupt was a resident of Little
Rock, Pulaski County, Arkansas, in the Eastern District of
Arkansas, but that his domicile was in Calhoun County, Arkansas,
in the Western District of Arkansas, and the court agrees with
this conclusion. The domicile of a minor child is that of its
father, and until its majority ordinarily so
continues. Yarborough v. Yarborough, 290 U.S. 202, 211, 54 S.Ct.
181, 78 L.Ed. 269; Leflar, Conflict of Laws, Sec. 15, p. 75.
Thus, until the removal of his disabilities as a minor, Brodie S.
Watson could not have acquired a separate domicile from that of
his father, which was Calhoun County, Arkansas, and thereafter,
it does not appear that he did so. It is well settled that
domicile and residence are not synonymous terms, and while it is
possible for one person to have more than one legal residence at
one time, it is quite clear that he can have only one domicile at
any given time. See: Leflar, Conflict of Laws, Sec. 12, p. 68;
Morris v. Gilmer, 129 U.S. 315, 328, 9 S.Ct. 289, 293, 32 L.Ed.
690. One capable of doing so may acquire a new domicile by
"physical presence at a new place coinciding with the state of
mind of regarding the new place as home", Leflar, Conflict of
Laws, Sec. 13, p. 70, or as otherwise stated, "there must be, to
constitute it, actual residence in the place, with the intention
that it is to be a principal and permanent residence", Morris v.
Gilmer, supra. The facts found by the Referee, all of which were
not set forth above, convince the court that Brodie S. Watson did
not change his domicile from Calhoun County, Arkansas, to Pulaski
County, Arkansas, by his residence there during the period
involved. There is nothing to indicate a "state of mind" to
abandon his domicile in Calhoun County in favor of a new one in
Pulaski County. And, under the law, which insists that every
person have a domicile, until a new domicile is acquired, the old
one continues. Leflar, Conflicts of Laws, Sec. 13, p. 70. See,
also: Oakes v. Oakes, Ark., 242 S.W.2d 128. Therefore the court
Although J.W. and Margaret O'Connell are not here attacking the
action of the Referee in denying their claim as a secured claim,
and indeed to the contrary they urge that the action of the
Referree on the whole case was correct, it may be noted in
passing that the Referee was clearly correct in this respect.
Under Sec. 67, sub. a(l), National Bankruptcy Act, 11 U.S.C.A. §
107, sub. a(l), "Every lien against the property of a person
obtained by attachment, judgment, levy, or other legal or
equitable process or proceedings within four months before the
filing of a petition in bankruptcy * * * shall be deemed null and
void (a) if at the time when such lien was obtained such person
was insolvent". The O'Connells obtained their judgments in the
Pulaski Circuit Court on February 2, 1951, and the sheriff levied
on the car involved on March 10, 1951. Bankrupt's petition was
filed on March 27, 1951, so their lien was obtained well within
the four month period. By § 67, sub. a(4), 11 U.S.C.A. § 107,
sub. a(4), the Referee was authorized to adjudicate by summary
proceedings the validity of the lien, and the action of the
Referee in restraining the sheriff of Pulaski County, Arkansas,
from disposing of the car was proper. See: 1 Collier on
Bankruptcy, 14th Ed., Sec. 2.64, p. 302; 4 Collier on Bankruptcy,
14th Ed., Sec. 67.18, p. 142; and cases cited therein. And, the
property involved was properly discharged from the lien and
placed in the possession of the trustee. Sec. 67, sub. a(3),
National Bankruptcy Act, 11 U.S.C.A. § 107, sub. a(3).
This brings the court to a consideration of the action of the
Referee on the claim of W.S. Watson, the correctness of which is
placed in issue by the petition for review.
When W.S. Watson gave a bill of sale on the car to his son,
Brodie S. Watson, he reserved title by oral agreement to secure
the balance of the purchase price. The reservation was valid.
Pugh v. Camp, 213 Ark. 282, 284, 210 S.W.2d 120; and see:
Anderson and Hale, Conditional Sales in Arkansas, 4 Ark.L.Rev.
19, 23. However, when W.S. Watson subsequently accepted a chattel
mortgage on the car he waived the previous reservation of title,
and, therefore, must rely here and stand or fall upon the
strength of the mortgage. As stated in Buckeye Cotton Oil Company
v. Westerfield, 186 Ark. 505, 54 S.W.2d 295, 297; "None of these
cases in any way modify or change the rule announced in the case
of Thornton v. Findley, 97 Ark. 432, 134 S.W. 627, 628, 33 L.R.A.
(N.S.) 491. This court said in the last-mentioned case: `And as
a general rule, if the vendor takes a mortgage or other security
price without then reserving title, such act will be regarded as
a waiver of the condition of the original sale and an election to
consider the sale as absolute.'"
This rule is sound when the nature of the two situations is
considered. In the case of a conditional sale the seller
transfers the possession of goods to a buyer, on credit, with the
understanding that title shall not pass until the buyer has paid
the price. On the other hand, a mortgage transaction presupposes
the vesting of a complete title in the vendee-mortgagor, and the
separation and transfer back of legal title to the
vendor-mortgagee as security. Thus, by his action in accepting a