232 F. 124 | 2d Cir. | 1916
In April, 1913, Crossman & Sielcken borrowed $1,000,000 of Hollins & Co. and gave them as collateral $1,-200,000 of the corporate 4J4 per cent, stock of the city of New York, agreeing that Hollins & Co. might rehypothecate the same for any larger sum they could obtain. November 13, 1913, a petition in bankruptcy was filed against Hollins & Co. and a receiver appointed. November 22, 1913, the court permitted Crossman & Sielcken to take up Hollins & Co.’s note to the Chase National Bank for $950,000 and the collateral securing it, which included among other securities $1,073,000 of their City stock and certain securities belonging to Hollins & Co. June 29, 1914, the court confirmed a composition offered by Hollins & Co. to pay their creditors in notes of the Equities Realization Corporation for the full amounts of their claims, but payable only out of the assets of the firm taken over by it.
April 21, 1915, Hollins & Co. filed a petition in the District Court sitting in bankruptcy asking that Crossman & Sielcken be required to pay over to them a part of the proceeds realized from the sale of the securities received from the Chase National Bank. The District Judge denied this petition, and upon a petition to revise his order we reversed the same without prejudice, on the ground that after confirmation of the composition the bankruptcy court had no jurisdiction as to assets not in its session. There were, however, before the confirmation of the composition, and now are, in the possession of the receiver, cash and securities turned over to him by the Eirst National Bank and by the Equitable Trust Company after loans made by them to Hollins & Co. had been paid. Various claims for priority as to these funds were referred to a special master, and upon exceptions to his report decided by the District Court.
. In the case of the Equitable Trust Company’s loan of $50,000 secured by $30,000 of Crossman & Sielcken’s City stock and certain securities belonging to Hollins & Co., there was a surplus of cash and the securities of Hollins & Co., all of which the special master awarded to Crossman & Sielcken. His two conclusions do not seem to us to be consistent. The surplus in each case should have gone to the same party, either to the receiver or to Crossman & Sielcken. Judge Hough awarded them in each case to Crossman & Sielcken, reversing the first and confirming the second order of the special master.
We are referred to but two authorities on the question of the relative standing of pledged securities belonging to the bankrupt and securities of his customers rightfully pledged, Skiff v. Stoddard, 63 Conn. 198, 26 Atl. 874, 28 Atl. 104, 21 L. R. A. 102, holds that the bankrupt’s securities should share ratably with the customers’, while United National Bank v. Tappan, 33 R. I. 1, 79 Atl. 946, holds that the bankrupt’s securities must be first exhausted. We prefer the latter view.
In this case, as it appears that there is a surplus in the loan of the First National Bank and of the Equitable Trust Company in which no other secured creditor is interested, and that Crossman & Sielckcn have lost City stock in some of the other loans in which the bankrupt pledged it of more value than the aggregate surplus, the District Judge was right in awarding the whole surplus to them. A true apportionment of the indebtedness of Crossman & Sielcken to Hollins & Co. shows that this surplus is the proceeds of - their City stock.
The orders are affirmed.