262 F. 111 | 8th Cir. | 1919
Appeal from decree of District Court, on petition for review, reversing order of referee in bankruptcy which declared certain'payments to appellee to be preferences.
The parties to this transaction,'with-no thought of forbidden preference, intended that the grain covered by the receipts should be a security for the debt. They sought to impound it for that purpose through the instrument delivered. Upon the faith of this security
“So far as the interpretation of the transaction is concerned it seems to us that there is only one fair way to deal with it. The parties were business men acting without lawyers and in good faith attempting to create a present security out of specified bonds and stocks. Their conduct should be construed as adopting whatever method consistent with the facts and with the rights reserved is most fitted to accomplish the result. * * * So the question is whether anything in the situation of fact or the rights reserved prevents the intended creation of a right in rem, or at least one that is to be preferred to the claim of the trustee. The bankruptcy law by itself does not avoid the transaction.”
The so-called receipt is no receipt, because it fails to comply with the requirements of the state statutes governing grain warehouse receipts, and it would form no barrier to a proper receipt covering the same grain issued to an innocent person. But it is a part of the evidence of the actual understanding and arrangement between the parties. The grain was, with the consent of appellee and the bankrupt, sold by the committee, and the resulting funds turned over to it by the committee, to be applied to its debt under the above contract. In essence such transactions amount to a reduction to possession of the grain, and a realization thereon by it. This entire transaction was fully consummated before the bankruptcy proceedings were initiated. Although, they took place within four months of bankruptcy, yet, for preference purposes, they relate back to the date of the contract which they were designed to and did fulfill. Security Warehousing Co. v. Hand, 206 U. S. 415, 423, 27 Sup. Ct. 720, 51 L. Ed. 1117, 11 Ann. Cas. 789. Even if the contract were unenforceable, which we do not decide, as contended for by appellant, because the receipt failed to conform to the state laws governing grain warehouse receipts, yet it was not inherently vicious, was made and carried out in good faith, and had been fully performed before the bankruptcy proceedings began. Equity will not disturb such a situation. The saving element here, which prevents application of the state statutes invoked by appellant, is that possession of the pledge became effective through possession of the money for which the same was sold by consent of pledgor and pledgee, with the knowledge that such disposition was to be made of the money.
The judgment of the District Court is affirmed.
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