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IN RE WATSON

July 19, 1951

IN RE WATSON.


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 W.S. Watson.

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 had jurisdiction.

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 for the 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 chattel ...


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