224 F. 434 | 8th Cir. | 1915
The trustee in bankruptcy sued to recover $10,000 par value of capital stock of the Wagoner Rand & Investment Company, claimed as belonging to the bankrupt’s estate, and also certain sums of money received from sales of the company’s property. He prevailed in the trial court, and the defendants appealed.
About a year before the bankruptcy proceedings were begun, the bankrupt, then the owner of the stock, borrowed $7,000 of a national bank on his note and pledged the stock as collateral. The validity of this debt and lien is unquestioned. Within four months of the commencement of the proceedings, and when the bankrupt was insolvent, defendants Dodge, Gibbons, and Palmer, who had taken over the management of his affairs, caused the debt to the national bank to be paid. The wife of the bankrupt raised $2,000 of the amount necessary, and the balance, of' $5,000, was borrowed from defendant the First State Bank upon the note of the Wagoner Rand & Investment Company, with the stock in controversy as collateral. Dodge, Gibbons, and Palmer were the managing officers of the Rand & Investment Company, and Dodge was the president of the First State Bank. All of them knew of the bankrupt’s insolvency and the conditions affecting the validity of the transactions attacked by the trustee. At a time uncertain in the evidence the pledged shares of
The evidence was clear that, aside from lien claims, the stock belonged to the bankrupt and passed to the trustee. The pledge to the defendant bank, and the transfers to Gibbons and Palmer and the bankrupt’s brother, assuming them to have been valid, were for security, and with no intent to affect the ownership otherwise. To that extent we agree with the trial court. We think, however, that the claim of the bank to retain the amount paid to it upon the note and for the balance due, with interest, and with lien upon the stock, should be sustained. Its money was loaned to discharge the prior valid lien, and was so used. It was agreed it should in turn have the stock as security for repayment, and the stock was accordingly pledged to it. Had this not been done, the stock might have been lost to the bankrupt’s estate, or the prior lien would have remained as against the trustee. In no way was the estate of the bankrupt prejudiced, or the creditors hindered, delayed, or defrauded. The bank parted with its money to discharge a valid lien, on assurance it would be likewise secured itself. The use of the name of the Land & Investment Company as the maker of the note was irregular, but we do not regard the circumstance as sufficient to overthrow the equitable position of the bank. We express no opinion upon the validity of the claims of the other parties to liens upon the stock. In view of the result in cause No. 4253, just decided (Harris v. Dodge, 224 Fed. 432, - C. C. A. -), the trial court will be left free to reconsider the claims of Gibbons and Palmer, and of any other person who may appear in the cause and assert a right prior to the trustee.
The decree is reversed, and the cause is remanded for further proceedings in harmony with this opinion.