Robert A. Watson v. Wesley K. Duce, Trustee in Bankruptcy for Myrtle M. Dawson, Bankrupt

Appellant seeks reversal of a decision of the district court which adopted the findings of fact and conclusions of law of a referee in bankruptcy and affirmed the referee’s order.

The order denied appellant’s secured status as the holder of a chattel mortgage on a shifting stock of goods. There is no disagreement on the facts.

Before 1957, appellant owned a small business in Everett, Washington, known as The Book and Record Shop. In Febu-ary, 1957, appellant sold the business to Kenneth and Myrtle Dawson, who at the time were husband and wife and composed a marital community under Washington law. The Dawsons paid cash for part of the purchase price and gave appellant a promissory note for the balance. To secure the note Kenneth Dawson executed in appellant’s favor a shifting stock chattel mortgage on the fixtures and inventory of the business. The terms of the mortgage allowed the stock and fixtures of the business to be sold or replaced by the mortgagor as long as the aggregate value always amounted roughly to the original amount of the security. In addition to the stipulated monthly payments to be made on the note, the mortgage provided for appropriate quarterly financial…