Coates v. Maguire Oil & Refining Corp.

HANSON, J., pro tem. This appeal presents the question whether a tax lien created by statute against the property of a distributor of gasoline takes precedence over the lien of a chattel mortgage thereon, where the tax accrued and became a lien subsequent to the recording of the chattel mortgage. A further question is whether the lien of the chattel mortgage had ceased to exist when the tax lien attached. If it had it is obvious that no question as to superiority of lien is involved, and hence we shall first address our attention to a determination of that pivotal point.

We cull from the record the following facts which we regard as material to a decision: On April 2, 1938, the Sunshine Oil Company, Ltd. (hereinafter referred to as Sunshine or mortgagee), now bankrupt (of which respondent here is trustee in bankruptcy), entered into an agreement with Buena Vista Supply Company (hereinafter referred to as Buena Vista), the predecessor in interest of the defendant Maguire Oil and Refining Corporation (hereinafter referred to as “Maguire” or “mortgagor”), by the terms of which Buena Vista was to purchase daily from Sunshine a minimum of 2000 barrels of crude oil, with exceptions not here material, for a period of one year from and after the completion by Buena Vista of a certain topping plant. The agreement, which by its terms required the buyer to execute a chattel mortgage on the topping plant when it was completed to secure the performance of the agreement, further recited that if Buena Vista should fail to comply with its agreement to purchase daily a minimum of 2000 barrels of crude oil owing to causes beyond its control, that then the time for complete performance should be extended accordingly by the number of days it was in default, provided [277]prompt notice was given of the nature and reason for the default. The topping plant was completed on or about July 20, 1938, and immediately delivery of crude oil began in accordance with the contract.

Pursuant to the terms of the contract Maguire, as the successor of Buena Vista, then executed a chattel mortgage in favor of Sunshine, which was duly recorded. Counsel for the state contends that the agreement was not annexed to the mortgage when it was recorded, but this is denied by respondent. From the record we are unable to determine what the fact is, and accordingly will assume that the agreement was annexed to the mortgage. The mortgage recites that it is “security for the performance of all obligations set forth and contained in a certain agreement made and executed on the 2nd day of April, 1938, by and between . . . Sunshine . . . therein designated as ‘seller’, and the Bnena Vista . . . therein designated as ‘buyer’. ...” As it is clear from the record that the topping plant was completed on or about July 20, 1938, and that delivery of crude oil from the mortgagee (seller) to the mortgagor (buyer) began on or about the same date, it is likewise clear that the lien of the chattel mortgage terminated by its terms on July 20, 1939, unless it can be said, as respondent contends, that it was validly extended beyond that date.