There were few cases of interest in the period under survey. Rone Jewelry Company v. Conley\u27 presented the question of what constitutes  willful and malicious injuries to the property of another  within the meaning of section 17 of the Bankruptcy Act. A debt of this character is not released by a discharge in bankruptcy.
In the instant case the defendant had purchased silverware and a ring from plaintiff under a title retention contract. Defendant then sent the property to his mother in New Jersey. Following a discharge in bankruptcy granted to the purchaser, the seller brought action against the purchaser

Lacey, Forrest W.

English

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Vanderbilt Law Review Volume 12 Issue 4 Issue 4 - October 1959 Article 11 10-1959 Creditors' Rights and Security Transactions--1959 Tennessee Survey Forrest W. Lacey Follow this and additional works at: https://scholarship.law.vanderbilt.edu/vlr  Part of the Bankruptcy Law Commons, and the Securities Law Commons Recommended Citation Forrest W. Lacey, Creditors' Rights and Security Transactions--1959 Tennessee Survey, 12 Vanderbilt Law Review 1126 (1959) Available at: https://scholarship.law.vanderbilt.edu/vlr/vol12/iss4/11 This Article is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Law Review by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact mark.j.williams@vanderbilt.edu. DATE DOWNLOADED: Mon Sep 18 15:34:17 2023SOURCE: Content Downloaded from HeinOnlineCitations:Please note: citations are provided as a general guideline. Users should consult their preferredcitation format's style manual for proper citation formatting.Bluebook 21st ed.			                                                                Forrest W. Lacey, Creditors' Rights and Security Transactions--1959 Tennessee Survey,12 VAND. L. REV. 1126 (1959).                                                        ALWD 7th ed.                                                                         Forrest W. Lacey, Creditors' Rights and Security Transactions--1959 Tennessee Survey,12 Vand. L. Rev. 1126 (1959).                                                        APA 7th ed.                                                                          Lacey, F. W. (1959). Creditors' rights and security transactions--1959 tennesseesurvey. Vanderbilt Law Review, 12(4), 1126-1130.                                     Chicago 17th ed.                                                                     Forrest W. Lacey, "Creditors' Rights and Security Transactions--1959 TennesseeSurvey," Vanderbilt Law Review 12, no. 4 (October 1959): 1126-1130                   McGill Guide 9th ed.                                                                 Forrest W. Lacey, "Creditors' Rights and Security Transactions--1959 TennesseeSurvey" (1959) 12:4 Vand L Rev 1126.                                                 AGLC 4th ed.                                                                         Forrest W. Lacey, 'Creditors' Rights and Security Transactions--1959 TennesseeSurvey' (1959) 12(4) Vanderbilt Law Review 1126                                      MLA 9th ed.                                                                          Lacey, Forrest W. "Creditors' Rights and Security Transactions--1959 TennesseeSurvey." Vanderbilt Law Review, vol. 12, no. 4, October 1959, pp. 1126-1130.HeinOnline.                                                                          OSCOLA 4th ed.                                                                       Forrest W. Lacey, 'Creditors' Rights and Security Transactions--1959 TennesseeSurvey' (1959) 12 Vand L Rev 1126                   Please note: citations areprovided as a general guideline. Users should consult their preferred citationformat's style manual for proper citation formatting.Provided by: Vanderbilt University Law School-- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and    Conditions of the license agreement available at https://heinonline.org/HOL/License-- The search text of this PDF is generated from  uncorrected OCR text.-- To obtain permission to use this article beyond the scope of your  license, please use:Copyright InformationCREDITORS' RIGHTS AND SECURITY TRANSACTIONS-1959 TENNESSEE SURVEYFORREST W. LACEY*I. CASE LAW1. Bankruptcy2. Uniform Trusts Receipts Act3. Fraudulent ConveyancesII. LEGIsLATioNI. CASE LAW1. Bankruptcy.-There were few cases of interest in the periodunder survey. Rone Jewelry Company v. Conley' presented thequestion of what constitutes "willful and malicious injuries to the• . . property of another" within the meaning of section 17 of theBankruptcy Act.2 A debt of this character is not released by a dis-charge in bankruptcy.In the instant case the defendant had purchased silverware and aring from plaintiff under a title retention contract. Defendant thensent the property to his mother in New Jersey. Following a dischargein bankruptcy granted to the purchaser, the seller brought actionagainst the purchaser. In order to overcome the effect of the dis-charge, it was alleged that sending the property out of the state wasa "willful and malicious" injury to the property of the seller. Undera Tennessee statute it is a misdemeanor for a purchaser under a con-ditional sales contract to give away or dispose of property so purchasedwith the intention of depriving the seller of such property.3 It is afelony for any person without the consent of the seller to remove fromthe state any property subject to a conditional sales contract;4 andit has been held that the good faith of the person removing the proper-ty is no defense to the felony charge.5Referring only to the misdemeanor statute, the Tennessee SupremeCourt upheld a judgment for the defendant. Conceding that sendingthe property out of the state was a conversion of plaintiff's property,it was held that such conduct, though willful, was not malicious.*Professor of Law, University of Tennessee College of Law.1. 319 S.W.2d 245 (Tenn. 1958).2. 52 Stat. 851 (1938), 11 U.S.c. § 35 (1958).3. TENN. CODE ANN. § 47-130 8 (1956).4. TENN. CODE ANN. § 47-1310 (1956).5. Pappas v. State, 135 Tenn. 499, 188 S.W. 52 (1916).1126CREDITORS' RIGHTSAlthough conversion of property by one lawfully in possession of itmay be willful and malicious so as to deny the protection of a dischargein bankruptcy,6 not every conversion is of such a character: "Theremay be a conversion which is innocent or technical, an unauthorizedassumption of dominion without willfullness or malice . . . . Thedischarge will prevail as against a showing of conversion withoutaggravated features."'7The Conley case also seems consistent with an earlier Tennesseedecision8 to the effect that noncompliance with provisions of a chattelmortgage as to advertisement and public sale does not render thedebt exempt from the effect of a discharge in bankruptcy. It doesseem anomalous, however, that removal of property subject to aconditional sales contract is not serious enough to bar the effect of adischarge in bankruptcy while at the same time such conduct sooffends the policy of Tennessee that even good faith removal is punish-able as a felony.2. Uniform Trust Receipts Act.-Another decision added to the caselaw interpreting the Uniform Trust Receipts Act.9 In Commerce UnionNational Bank v. Alexander'0 it was held that the priority given theentruster by section 10 of the act" upon a demand for an accountingfor the proceeds of the entrusted goods was a lien on the assets of thetrustee's insolvent estate. In this case the bank, having loanedmoney secured by trust receipts upon automobiles, made demandupon the automobile dealer-trustee for an accounting for proceeds ofthe sales of entrusted automobiles. The dealer-trustee died later inthe same day following the demand for an accounting. The bankfiled a claim for a lien in the amount of the proceeds of sales of theentrusted automobiles. The lower court allowed the claim eventhough the proceeds were not identifiable, and this decision wasupheld by the court of appeals.Section 10 of the act provides that the entruster shall be entitled to:Any proceeds or the value of any proceeds (whether such proceeds areidentifiable or not) of the goods, documents or instruments, if saidproceeds were received by the trustee within ten days prior to eitherapplication for appointment of a receiver of the trustee, or the filing of apetition in bankruptcy or judicial insolvency proceedings by or against6. E.g., Fruchter v. Martin, 350 Mich. 12, 85 N.W.2d 125 (1957), and casescited 1 CoLLIER, BANKRUPTCY § 17.17 (14th ed. Moore & Mulder 1940).7. Davis v. Aetna Acceptance Company, 293 U.S. 328, 332-33 (1934).8. Woelfle v. Giles, 182 Tenn. 88, 184 S.W.2d 177 (1945).9. TENN. CODE ANN. §§ 47-1001 through 47-1019 (1956). For a general dis-cussion of the act, see Comment, Principle Security Devices in Tennessee, 22TENN. L. REV. 392, 394 (1952).10. 312 S.W.2d 611 (Tenn. App. M.S. 1957).11. TENN. CODE ANN. § 47-1010 (1956).1959 ]VANDERBILT LAW REVIEWthe trustee, or demand made by the entruster for prompt accounting, andto a priority to the amount of such proceeds or value ....The decision in the Alexander case relies upon the decision in Inre Harpeth Motors,13 in which section 10 was construed to create alien, good against a trustee in bankruptcy, on unidentifiable proceedsfrom the sale of entrusted goods. The administrator of Alexander'sestate contended that the principle of the Harpeth case was not appli-cable in a proceeding for winding up a decedent's insolvent estate. Inanswer to this contention the court stated that the lien under section10 was fixed in the trustee's lifetime and was not affected by his deathor the insolvency of his estate. The decision, apparently the first topass upon this problem under the Uniform Act, seems a logical corol-lary of the interpretation of the act made in the Harpeth case.3. Fraudulent Conveyances.-Hamilton v. Gleaves14 was an actionby a creditor to set aside an alleged fraudulent conveyance. The trans-action attacked was the transfer of a lease on race track premises anda small amount of miscellaneous personal property. At the time ofthe transfer the lease was subject to termination and a generalcreditors' bill was pending against the transferor. In an effort to helpan American Legion Post, which had initiated the race track project,several creditors paid in excess of $14,000 for the transfer. All of themoney obtained by the grantor except about $750 which was notaccounted for in the record was used to satisfy debts.The case was heard by two chancellors on an original and a sup-plemental bill. Both hearings resulted in denial of the relief anddismissal of the bills. The court of appeals affirmed. As to the con-tention that the consideration for the transfer was inadequate andunfair, it was found that "the purchase price was more than the rea-sonable value of the assets to be transferred."'5 It was also held thatthere was no actual fraudulent intent, and no showing of prejudiceto the creditor by the conveyance. The decision is based primarily onfactual determinations with no controversial legal questions as tofraudulent conveyances being presented.A claim was also made that the assets of a corporation constitute atrust fund for the benefit of creditors upon which a lien exists whichcontinues against bona fide purchasers for value. This claim was re-jected with the citation of authority to the effect that "the law isotherwise."'612. Id. § 47-1011 (b).13. 135 F. Supp. 863 (M.D. Tenn. 1955), discussed in Hartman, Creditors'Rights and Security Transactions-1956 Tennessee Survey, 9 VAND. L. REV. 965,971 (1956).14. 316 S.W.2d 335 (Tenn. App. M.S. 1958).15. Id. at 339.16. Id. at 342.1128 [ VOL. 12CREDITORS' RIGHTSII. LEGISLATION 17Several acts of the 1959 General Assembly effect changes in the fieldof creditors' rights and security transactions. Chapter 12718 extendsthe definition of artisan under the Artisans' Lien Law to include per-sons who clean, repair or work on shoes or boots and provides thatthe artisans' lien under section 64-1402 through 64-1406 may, in thealternative, be enforced by compliance with sections 64-1602 through64-1607.Chapter 30419 makes changes in the procedure with respect to sale ofconfiscated drugs or vehicles used in the transportation of such drugsbut does not alter the substantive rights of persons claiming an interestin such property.Chapter 31220 amends section 64-1804, which deals with liens onmerchandise, by deleting the words "thereafter arising" from line fourof said section. The effect of this amendment is that the notice of lienshall be effectual from the time of filing as against all claims of credi-tors of the borrower instead of being effective only against such claimsarising after filing.Probably the most important legislation in the field is Chapter 114,21which deals with assignment of accounts receivable.(a) The term "account receivable" or "account" means and includes anyopen, running or book account which arises out of or is acquired inconnection with a business or occupation of the assignor. It excludeswages; sums arising from public or private construction contracts forwhich the assignor has furnished a surety bond ....Every assignment of an account receivable hereafter made in writingfor valuable consideration shall be valid and shall be deemed and heldto have been fully perfected at the time such assignment was or is made,notwithstanding that the obligor be not notified or does not assent to suchassignment .... 22If, however, the obligor, not knowing of an assignment and acting ingood faith, pays the assignor or a subsequent transferee, thL3 obligor isprotected to the extent of such payment, and the person who receivespayment is accountable to the assignee for such sums received.The protection of the act is afforded only if a notice of assignment isfiled with the Secretary of State. The form of notice authorizes filingan intent to assign as well as an assignment. A filed notice is effectivefor the duration of the assignment, but not in excess of three yearsfrom the date of filing.17. In this section all references to code sections are to TENN. CODE ANN.(1956).18. TtNN. CODE ANN. § 64-1401 (Supp. 1959).19. Id. § 52-1404.20. Id. § 64-1804.21. Id. §§ 47-1801 through 47-1804.22. Id. §§ 47-1801, 47-1802.11291959]1130 VANDERBILT LAW'REVIEW [ VoL. 12This act will change existing law in Tennessee as to assignmentsof such accounts, for Tennessee has heretofore followed the minorityrule that the first assignee to give notice to the obligor has priority.2 3Unfortunately, there is ambiguity in the act. For example, section2 provides that such an assignment in writing and for a valuable con-sideration shall be valid and fully perfected. Later in the sectionappears the clause: "[A]nd in case more than one assignment of thesame account or any interest therein is made by the assignor, the oneprior in time shall prevail over each subsequent one, notwithstandingthat such subsequent assignee shall have notified the obligor of hisclaim thereto."' ' In this clause there is no reference either to writingor to consideration. Because of such uncertainties, the act merits care-ful study by lawyers concerned with accounts receivable financing.23. Nail & Naill v. Blackvell, 164 Tenn. 615, 51 S.W.2d 835 (1932).24. TENN. CODE ANN. § 47-1802 (Supp. 1959).

Creditors\u27 Rights and Security Transactions--1959 Tennessee Survey

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Creditors\u27 Rights and Security Transactions--1959 Tennessee Survey

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