124 F. 968 | 3rd Cir. | 1903
It appears from the record that on August 30, 1901, the appellant herein discounted a promissory note of the Hussey Steel Company for $4,000, payable on demand, and took as security therefor 200 tons of steel billets. Incorporated in the note was the provision that the said collateral was to stand as security for the “payment of this or any other liability or liabilities, contingent or absolute, of ours (the Hussey Steel Company) to the holder hereof, now due or that may be hereafter contracted.” On the same day the Hussey Steel Company executed and delivered to the bank a bill
It cannot be disputed that on the 30th day of August, 1901, when the bank discounted the note of the steel company, and took the bill of sale of the billets, it acquired a good and valid title thereto as between itself and the steel company. To complete its title or lien as against creditors and strangers, the bank was not obliged to take the billets into actual possession; it was sufficient to give notice of their lien or change of ownership. This they did by posting on the billets, which were in distinct and separate piles, the sign to which reference has been made, so that on August 30, 1901, the title of the bank or its right to a lien on the billets was good as against all of the world. If this situation had continued until after the adjudication of bankruptcy, no question could have arisen as to the title of the bank or the validity of its lien. The transaction was one made in the ordinary course of business, without fraud either in fact or in law; it was for a present valuable consideration, and completed more than four months before the adjudication of bankruptcy. The subsequent advance of $2,000 in January, 1902, was made by the bank to the steel company in good faith, in accordance with the agreement made between the parties in August, 1901, that the billets should stand as security for any advance subsequently made. Though this loan was effected within four months of the adjudication of the bankruptcy, it does not constitute a preference, within the meaning of the act. “Prior to adjudication of bankruptcy, a party may deal with his property as he chooses, provided there be no purpose to defraud or delay his creditors, or give a preference to any one, and the value of his estate is not thereby impaired.” Stewart v. Platt, 101 U. S. 731, 25 L. Ed. 816. The change of ownership, then, having been legally effected, how could the steel company, the vendor or pledgor, again become entitled to the property
We are of the opinion that the bank acquired a valid lien on the billets for the amounts advanced by it to the steel company on both of its promissory notes, and that the lien was not lost by the accidental removal of the marks placed on the same. “Until the loan shall be paid, the pledgee is entitled to the possession of the property which he holds under a valid pledge, as security for his debts against the pledgors, notwithstanding a subsequent adjudication of bankruptcy against them.” Yeatman v. Savings Institution, 95 U. S. 764, 24 L. Ed. 589.
The order of the district court should be reversed, and the rule to show cause made absolute.