405 F.2d 475

ELECTRIC CONSTRUCTORS, INC., Appellant, v. George B. AZAR, Trustee in Bankruptcy of Robert L. Fallat, Bankrupt, Appellee.

No. 25680.

United States Court of Appeals Fifth Circuit.

Dec. 6, 1968.

George I. Case, Jr., Birmingham, Ala., for appellant; McGowen & McGowen, Birmingham, Ala., of counsel.

Oakley W. Melton, Jr., Montgomery, Ala., for appellee; Steiner, Crum & Baker, Montgomery, Ala., of counsel.

Before JOHN R. BROWN, Chief Judge, and RIVES and McENTEE* Circuit Judges.

*476PER CURIAM:

The Bankrupt, Robert W. Fallat, remained in the retail furniture business in Montgomery, Alabama, for about four months. In that short time he incurred debts in excess of $100,000.00. His bankrupt estate liquidated at only $3,375.00. The district court entered judgment in favor of the Trustee-in-Bankruptcy against Electric Constructors, Inc., for $12,065.60 plus interest from December 1. 1964.1 For the reasons noted in its able opinion,2 the district court held that Electric Constructors had obtained a voidable preference as defined by Section 60 of the Bankruptcy Act, 11 U.S.C.A. § 96, and a voidable transfer as defined by Section 70e of the Act, 11 U.S.C.A. § 110e.3

Appellant urges this Court to reverse the district court by holding that its factual determination that the Appellant had actual or constructive knowledge of the Bankrupt’s insolvency was “clearly erroneous”4 and that, under Alabama law, the Bankrupt’s landlord was not an intervening lien creditor. We find both contentions to be unpersuasive.

While our scope of review under the “clearly erroneous” rule has been held to be broader when we consider a case of constructive rather than actual knowledge of insolvency,5 we must conclude that the signs of knowledge of insolvency were abundant in this record.6 See Cooper Petroleum Co. v. Hart, 5 Cir. 1967, 379 F.2d 777, 779.

Appellant’s contentions with respect to the Section 70e issue are equally unconvincing. It is indisputable that, by late recordation of the security interests, Appellant lost any rights to relation back to the date of execution, acquired only prospective protection, and remained vulnerable to any intervening lien creditor. Tit. 39, § 191 (11), Code of Ala. (1959 rev. ed.). Consequently, the Bankrupt’s landlord became an intervening lien creditor into *477whose shoes the Trustee might step to declare the payments and repossession to be voidable transfers within the meaning of Section 70e(1). Contrary to the Appellant’s assertions a landlord’s lien in Alabama attaches immediately to any property brought onto the premises on which a security interest has not been perfected and “extends to the amount of the rent for the entire term of the lease contract.” Dixon v. Bashford, 1930, 220 Ala. 625, 127 So. 194. See East Gadsden Bank v. Bagwell, 1965, 278 Ala. 430, 178 So.2d 823; Arbuthnot v. Thatcher, 1939, 237 Ala. 593, 188 So. 245. Tit. 31, § 29, Code of Ala. (1959 rev. ed.).

For the reasons stated, we conclude that the district court correctly decided both issues. The judgment is

Affirmed.

Electric Constructors, Inc. v. Azar
405 F.2d 475

Case Details

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Electric Constructors, Inc. v. Azar
Decision Date
Dec 6, 1968
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405 F.2d 475

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United States

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