The Federal Reporter with Key-Number Annotations, Volume 256: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, May-July, 1919. Page: 53
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IN BE DAVIES
erty was at that time located. No question was raised as to the bona
fides of the indebtedness, nor as to the validity of the mortgage in the
state of Illinois.
Davies was a levee contractor, and had employment at Millington,
Shelby county, Tenn. Soon after the execution of the mortgage, by
and with the consent of the mortgagees, Davies removed the prop-
erty to Millington, Tenn., to perform his contract there. The mort-
gage was not recorded in Tennessee. Thereafter, and without the
knowledge or consent of the mortgagees, Davies removed the prop-
erty into the state of Mississippi, and from there into the state of Ar-
kansas, in the summer of 1918, to perform a levee contract he had
made with Roach & Stansell. It became necessary for Davies to bor-
row money as the work progressed to take care of his pay roll, and this
he, from time to time, borrowed from Roach & Stansell, to the amount
of about $4,500. Davies did not disclose to them the fact of the Illi-
nois mortgage, nor did Roach & Stansell know of its existence. It
was represented to them by Davies that the property was all his, and
following this representation they loaned the money to Davies with-
out security. The Illinois mortgage was registered in Arkansas on
December 14, 1918, after Roach & Stansell's debt was contracted.
On December 19, 1918, R. M. Davies was adjudged a voluntary
bankrupt by this court, and scheduled as a part of his assets 23 mules,
then in Crittenden county, Ark., which were covered by the Illinois
mortgage. The trustee, if not with the consent, did with the acqui-
escence of the mortgagees, take possession of and sell the mules as the
property of the bankrupt estate, and now has in hand the money aris-
ing from said sale.
Roach & Stansell filed their claim with the trustee as an unsecured
claim against the bankrupt estate. Baer Bros. filed their notes for
$1,814.62 against the bankrupt estate as a secured claim under the
mortgage executed in Illinois and re-registered in Arkansas. On the
same day Roach & Stansell filed exceptions to said claim as a pre-
ferred or lien claim, insisting that the mortgage under which the pref-
erence was claimed was not valid as against them as creditors of R.
M. Davies, the bankrupt, because the property in question had been
removed from the state of Illinois with the consent of the mortgagees,
and subsequently into the state of Arkansas, and had not been legally
registered in the latter state, and that they were without notice of its
existence at the time of the extension of the credit by them to Davies.
The referee held that Baer Bros at the date of adjudication had
a vahd mortgage on the property, and therefore had a preferred claim
against the funds arising from the sale thereof by the trustee in bank-
ruptcy, and overruled the exceptions of Roach & Stansell. Upon ex-
ceptions by them to the action of the referee, he has certified the
case for review.
[1-3] The referee was of opinion that the rights of the parties
should be determined by the laws of the state of Arkansas. I concur
in that view. In re Nuchols (D. C.) 201 Fed. 437; Potter Mfg. Co,
v. Arthur, 220 Fed. 843, 136 C. C. A. 589, Ann. Cas. 1916A, 1268;
Title Guaranty Co. v. Witmire, 195 Fed. 41, 115 C. C. A. 43.
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The Federal Reporter with Key-Number Annotations, Volume 256: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, May-July, 1919., legislative document, 1919; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38827/m1/67/: accessed October 20, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.