202 F. 117 | 5th Cir. | 1913
(after stating the facts as above).
The inquiry remains whether the mortgage, as to the excess over the bankrupt’s homestead exemption, was an illegal preference and properly set aside at the instance of the trustee. The mortgage was given on March 12, 1909, within four months of bankruptcy and to secure a pre-existing debt. The appellant contends (1) that it was given in substitution of other securities, which were surrendered contemporaneously to' the bankrupt, and (2) that, when accepted, appellant had no reasonable ground for believing that a preference was intended or would be effected by it. The bankrupt’s insolvency was not seriously controverted.
The securities which appellant contended were surrendered by it were trust receipts for lumber of the face value of about $7,500. These trust receipts were mere declarations by the bankrupt that he was holding the lumber described in them for the use of the appellant. According to the course of business between the appellant and the bankrupt, possession of the lumber was retained by the bankrupt, with full control over the lumber and the right to dispose of it at his will, and without liability to account for the specific proceeds of the sale to' the appellant. Such a transaction does not effect a pledge or any other valid security known to the general law, nor does any statute of Louisiana cover it. The security of the trust certificates being void in law, their surrender afforded no new consideration for the giving of the mortgage on the homestead.
The order of the District Court, confirming the order of the referee from which the appeal is taken, is reversed, and the cause remanded to the District Court for further proceedings in conformity to the opinion of this court.