123 Ark. 403 | Ark. | 1916
Appellee, Merchants Grocer Company, is a domestic corporation engaged in the. wholesale grocery business, and Mrs. N. A. Petty was one of its stockholders, being the owner of thirty shares of the capital stock of the company of the par value of $25 per share, which stood on the books of the company in her name. E. C. Petty & Company, a partnership composed of E. C. Petty and Mrs. N. A. Petty, who were engaged in the retail grocery business, became indebted to appellee on a promissory note and an open account, all of which indebtedness aggregated the sum of $864.41 at the time the present litigation arose. Mrs. N. A. Petty subsequently became indebted to appellant, Bank of ■Searcy, in the sum of $1,584 for borrowed money and assigned to appellant her said shares of stock in appel- , lee corporation as security for said indebtedness. Said assignment of sto-ok by Mrs. Petty to the bank was not recorded on the books of the corporation.
While the conditions thus described 'existed, the firm of E. C. Petty & Company, and each of the individual members thereof, filed a voluntary petition in bankruptcy and were adjudged to be bankrupt and a trustee was subsequently elected for each estate. Appellee proved its claim in full against the estate of the copartnership, without making any claim of preference or offering to surrender its security, but did not file any claim against the bankrupt estate of. Mrs. Petty. A small dividend was declared on the estate of the bankrupt copartnership and -appellee accepted its share thereof. Appellant proved up its claim against the bankrupt estate of Mrs. Petty, as ,a secured creditor, and obtained from the trustee an order for the sale of the pledged shares of stock, and at the sale became the purchaser thereof. Demand was then made by appellant upon the officers of appellee corporation for transfer of said shares of stock on the books of the corporation, and upon the same being refused this action at law was commenced by appellant against appellee to require such transfer to be made. The circuit court heard the -ease upon the testimony of witnesses and refused to order a writ of mandamus, from which judgment denying relief -appellant took an appeal to this court.
The view that such a character of indebtedness falls within the statutory lien of the corporation on the stock of its share holders is sustained by abundant authority. In Thompson on Corporations, volume 4, section 4010, the law is stated to be that “among other forms of indebtedness the lien has been held to 'attach to * * * debts due the corporation from a partnership in which the stockholder is a partner.” See also Planters & Merchants Mutual Insurance Co. v. Selma Savings Bank, 63 Ala. 585; In re Bigelow, 3 Fed. Cases, 1395; Arnold v. Suffolk Bank, 27 Barb. (N. Y.) 424; Citizens Bank v. Kalamazoo Bank, 111 Mich. 313.
This court has not had occasion heretofore to pass directly upon the question but our decisions construing the section of the statute referred to give it the broadest effect in declaring liens in favor of a corporation for debts due by its stockholders. Oliphint v. Bank of Commerce, 60 Ark. 198; McIlroy Banking Co. v. Dickson, 66 Ark. 327; Springfield Wagon Co. v. Bank of Batesville, 68 Ark. 235; Bankers Trust Co. v. McCloy, 109 Ark. 160.
The bankruptcy act (section 57, subdivision “e”) contains the following provision-on the 'subject of secured creditors : “ Claims of secured creditors and those who have priority may be allowed to enable such creditors to participate in the proceedings at creditors’ meetings held prior to the determination of the value of their securities, or priorities, but shall be allowed for such sums only as to the courts seem to be owing over and above the value of their securities or priorities.” Another subdivision of the same section (“h”) contains the following provision: “The value of securities held by secured creditors shall be determined by converting the same into -money 'according to the terms of the agreement pursuant to which such securities were delivered to such creditors or by such creditors and the trustee, by agreement, arbitration, compromise, or litigation, as the court may direct, and the amount of such value shall be credited upon such claims, and a dividend shall be paid only on the unpaid balance.” The bankruptcy act (section 1, subdivision 23) defines the words “secured creditor” as follows: “Secured creditor’ shall include -a creditor who has security for his debt upon the property of the bankrupt of a nature to be assignable under this act, or who owns such a debt for which some indorser, surety, or other persons seeondarilv liable for the bankrupt has such security upon the bankrupt’s assets.”
It follows that if this separate entity is preserved for the purposes indicated, a specific lien on the separate property of an individual member of a copartnership does not constitute a claim against a copartnership a secured one within the meaning of the bankruptcy statute so as to require a surrender of the .security before the full amount of the claim can be proved against the copartnership. There are no oases directly on that point but we think that the necessary result of the construction of the act given bv the Federal courts leads to that conclusion.
District Judge Lowell, in deciding1 a case under the bankruptcy statute of 1867, said: “When one partner has pledged his shares for the debt of the firm, proof may be made in full against the assets of the firm, because it is only when the proof is against the same estate which furnished the security that a sale and application of the security is required by the bankrupt law.” Ex parte Whiting, 29 Fed. Cases, No. 17573. This is the construction of the statute which is given by all the text writers on the subject of the National bankruptcy Act. “An individual creditor of one partner having a security on the firm estate may prove for the full amount of his debt against the individual estate without giving up his security, and on the other, hand a creditor of a partnership, whose debt is secured by mortgage or lien on the individual estate of one of the partners, may prove for the full amount of his debt against the firm estate, without giving up his security. ’ ’ Loveland on Bankruptcy, p. 566. In Remington on Bankruptcy (volume 1, section 756), the law is stated to be that “property of individual members of a partnership held as' security for a firm debt need not be deducted in the allowance of the claim against the partnership estate.” And in Collier on Bankruptcy, p. 724, the law is stated >as folloVs: “No matter how' great may be the security which one may have, if it be property of another than the bankrupt, the creditor may prove his entire claim agiainst the bankrupt estate, and receive a dividend thereon,' and thereafter institute proceedings to enforce his claim upon the security for the balance. And this rule applies even where the 'security that is held is security for a partnership debt but is property of individual members of the firm, the partnership and the individual estates being considered distinct and separate.”
It is also contended that the treasurer of the corporation waived the lien, pro tanto, by paying to Mrs. Petty the dividends on the stock after he acquired information that appellant was asserting a claim of ownership of the stock. The proof on the part of appellant is that its cashier, Mr. Watkins, went to Mr. Ward, the treasurer of the Merchants Grocer Company, and consented to the payment of the dividend to Mrs. Petty on condition that the stock be transferred to appellant. The proof is that Mr. Ward stated that he had no authority to make any transfer, but that in accordance with the agreement between appellant and Mrs. Petty he would give the latter a check for the dividend, which was done. It can not be said that there was a waiver of the lien to the extent of the amount of dividend which appellant lost by reason of its consent to the payment over to Mrs. Petty, for according to the findings of the court upon legally sufficient evidence Mr. Ward had no authority to make the transfer, and in addition thereto the appellant at that time knew that the appellee was asserting its lien against the stock.
Upon the whole we are of the opinion that the decision of the circuit court in favor of appellee was correct,- and the judgment is therefore affirmed.