101 F. 691 | S.D. Iowa | 1900
From the certificate of the referee the facts in this case are shown to he as follows: On the 17th day of June, 3898, the firm of Luthy & Co., of Peoria, Ill., upon the order of Charles S. Klingaman, shipped to him some 4,000 pounds of hinder twine; it being provided in the order that notes for the purchase price were to be given by Klingaman, payable on September 1, 1898, and it being also stipulated,in the order that:
“All property delivered under this order, and the proceeds thereof, and the policies of insurance thereon, are hereby pledged and hypothecated to Luthy & Co. as collateral security for the payment as herein promised, and shall be held subject to their order, on demand, with authority to take possession and dispose of the same, at their discretion, for security or reimbursement.”
On the 1st day of August, 1898, Luthy & Co., having learned that Klingaman was then insolvent, sent an agent to his place of business, who secured the return of ípKÍO worth of the binder twine bought of Luthy & Co., for which credit was given Klingaman on the notes he had given for the purchase price of the twine. Within a few days thereafter Klingaman filed his petition in bankruptcy, and on the 12th of August, 3898, he was adjudged a bankrupt, and in due season a trustee of his estate was appointed. Luthy & Co. thereupon filed for allowance against the bankrupt estate a claim consisting of the
Ás I understand the facts of the case, at the time the twine was delivered back to Luthy & Co. Klingaman was then insolvent, and Luthy & Co. knew such to be the fact. By section 60 of the act it is declared that:
“A person shall be deemed to have given a preference, if, being insolvent, be bad * * * made a transfer of any of bis property, and tbe effect of * * * sueb transfer will be to enable any one of bis creditors to obtain a greater percentage of bis debt than any other of such creditors of tbe same class.”
It cannot be questioned that if Luthy & Co. are permitted to retain the property delivered to them on August 1, 1898, and to prove up the balance of the debt due them, they will be enabled to secure a greater percentage of their debt than the general creditors; and therefore it is clear that the pivotal question is whether, as between Luthy & Co. and the contesting creditors, the transfer of the property in fact took place on the 1st day of August, 1898, or on the 17th day of June, 1898, the date of the contract of purchase, — it not being shown that on that date Klingaman was insolvent. It will be kept in mind that Luthy & Co., by their own act, in seeking to prove up their claim, have invoked the aid of the court in bankruptcy for the enforcement of the provisions of the act; and they cannot insist upon their right to share in the dividends payable from the estate unless they meet the obligations imposed upon them by the provisions of the act, which are intended to enforce the equitable rule, established by the act, that among the creditors equality is equity.
On behalf of the contesting creditors it is claimed that, as against them, the transfer of the property must be deemed to have taken place on the 1st of August, 1898, whereas on behalf of Luthy & Co. it is claimed that the actual delivery then made to them of the property in question was in pursuance of the terms of the contract of purchase; that this contract gave them an equitable lien upon the goods then sold to the bankrupt, which they could enforce at any
«. Under the prior act of 1867, the preference was held to have been given when a lien, valid between the parties thereto, was created, although no notice thereof was given to the other creditors. Under the present act a preference is not created until notice thereof is given to the other creditors, either by recording or registering the instrument of transfer, or by taking actual or open possession of the property by the creditor, or by giving aci.ual notice of the transfer to the creditors. It does not seem possible that congress did not intend this change in the rule to apply to questions arising between a creditor claiming the benefit of a preference and the other creditors. This would require the holding that upon a petition filed by creditors, based upon an act of bankruptcy in giving a preference when insolvent, the act of bankruptcy must be held to have been committed when the creditor recorded the instrument of transfer or took open possession of the property; but if the trustee or creditors, after the adjudication has been had, should seek to avoid the same transfer, it would be held that the transfer constituting the preference took place when the mortgage or contract was delivered to the creditor, although the same was not recorded, nor was possession then taken of the property intended to be transferred. In my judgment, it was the purpose of
The referee in this case correctly held that under the provisions of the Code of Iowa the failure to record the contract of purchase did not affect the validity of the equitable lien secured thereby as between the parties thereto, and that, as no subsequent lien had been obtained against the same up to the date, when possession was taken on August 1,1898, the lien was made effectual as against third parties by the act of taking possession; but the pivotal question under the bankrupt act is, when did this transfer take effect as against creditors, in the sense that thereby a preference was given to Luthy & Co. ? If, as against creditors, it took effect on August 1, 1898, then it constituted a preference, as on that day Klingaman was insolvent, and Luthy & Co. knew it. If, however, the transfer, as against creditors, dates back to June 17, 1898, then it cannot be held to be a preference, as it is not shown that at that date Klingaman was insolvent. Under the. provisions of the bankrupt act, it must be held, for the reasons already stated, that the transfer of the property to Luthy & Co. took effect on August 1st, and therefore this transfer constituted a preference to Luthy & Co.; and it follows that, under the provisions of section 57 of the bankrupt act, the claim of Luthy & Co. cannot be allowed, unless they surrender the preference they have received.
The ruling of the referee is therefore set aside, and the proceedings are remanded to him, with instructions to enter an order conforming to this opinion, and fixing some proper time within which Luthy & Co. may surrender the preference recéived, in case they so elect to do. The same order will be entered with respect to other claims of the same character, and to which this ruling is applicable.