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IN RE MILLER

October 20, 1952

IN RE MILLER ET AL.


The opinion of the court was delivered by: Follmer, District Judge.

This matter is before the Court on a certificate for the review of an order of the Referee in Bankruptcy refusing claimant's petition for reclamation of a certain motor vehicle and directing claimant to surrender possession to the Trustee in Bankruptcy of the certificate of title to the same.

The facts are clearly set forth in the opinion of the Referee as follows:

    "* * * On October 23, 1950 Sam Shoemaker, of
  Ashland, Schuylkill County, Pennsylvania, sold a
  model 1950 Chevrolet one and one-half ton truck with
  refrigerator body to J.W. Miller, Jack W. Miller and
  James A. Miller, trading as J.W. Miller and Sons, the
  present bankrupt, under a Conditional Sales Agreement
  for the price of $3,144.70. The purchaser made a down
  payment of $1,050.70 at the time of the sale leaving
  $2,094.00, which sum together with other charges
  raised the full balance due under the agreement of
  $2,539.92. This latter sum was made payable in 24
  monthly installments of $105.83 each commencing
  December 4, 1950. The Conditional Sales Agreement was
  thereafter assigned by the seller to General Motors
  Acceptance Corporation, hereinafter referred to as
  G.M.A.C. The vehicle was titled in the partnership
  name and a notation of an encumbrance in favor of
  G.M.A.C. in the amount of $2,539.92 was endorsed on
  the Certificate of Title. Thereafter, on September 4,
  1951, the partnership and its individual partners
  were adjudged bankrupt. At the time of bankruptcy the
  subject vehicle was then in possession of the
  bankrupt. G.M.A.C. did not file its contract or a
  copy thereof in the Office of the Prothonotary in
  Schuylkill County until September 25, 1951.
    "On October 3, 1951, G.M.A.C. filed its petition to
  reclaim possession of the vehicle upon the ground
  that it holds a lien thereon, and setting forth the
  Conditional Sales Contract and default in the payment
  due September 8, 1951. The balance alleged to be due
  under the contract at the time of bankruptcy was
  $1,587.45 The Trustee is resisting on the ground that
  the failure of G.M.A.C. to file its Conditional Sales
  Contract prior to bankruptcy has rendered invalid its
  claim to an encumbrance. * * *"

In rejecting claimant's petition, the Referee found that the contract in question was in fact a conditional sale and not a bailment lease, and then held:

    "Our conclusion is that the mere notation of a lien
  or encumbrance on the face of the certificate of
  title to a motor vehicle is not of itself sufficient
  to establish the existence or legal validity of such
  alleged lien as against a third party, such as a
  trustee in bankruptcy. Accordingly, we hold that the
  failure of

  G.M.A.C.*fn1 to file its Conditional Sales Contract
  prior to bankruptcy is fatal to its position."

The parties have stipulated that the subject matter of this action was puchased under the terms of a conditional sale; the Referee has found that the transaction was in fact a conditional sale, and I so find.

The question before us may, therefore be tersely stated as follows:

Does the notation of a lien or encumbrance upon a certificate of title to a motor vehicle constitute such notice as to eliminate the necessity for recording a conditional sales contract under which a motor vehicle is purchased?

The Pennsylvania Conditional Sales Act of May 12, 1925, P.L. 603, 69 P.S. § 401, provides as follows:

    "Every provision in a conditional sale, reserving
  property in the seller after possession of the goods
  is delivered to the buyer, shall be valid as to all
  persons, except as hereinafter otherwise provided."

This proviso refers to the succeeding paragraph of the Act, 69 P.S. § 402, which provides as follows:

    "Every provision in a conditional sale reserving
  property in the seller shall be void as to any
  purchaser from or creditor of the buyer who, without
  notice of such provision, purchases the goods or
  acquires by attachment or levy a lien upon them
  before the contract or a copy thereof shall be filed,
  as hereinafter provided, unless such ...

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