In re Lake, 14 F. Cas. 944

In re Lake

14 F. Cas. 944 | N.D. Ill. | 1872

BLODGETT, District Judge.

By the fourteenth section of the bankrupt act [of 1867 (14 Stat. 522)], all the property and rights and interest in property which the bankrupt had at the time of the filing of the petition pass to the assignee, and the title of the as-signee relates back to the time of the filing of the petition.

The filing of the petition praying the adjudication in bankruptcy is notice to all the world, and all persons dealing with the person thus charged do so at their peril. No person can, by dealing with a debtor thus situated, acquire any title to his property as against his assignee in bankruptcy, if the proceeding ripens into a judgment of bankruptcy. In re Gregg [Case No. 5,796]; In re Vogel [Id. 16,983]; In re Wynne [Id. 18,-117].

But it is contended that negotiable paper forms an exception to this rule, and that the bona fide purchaser of such paper will be protected, although a petition in bankruptcy may be pending against the seller of such paper; and the counsel for respondents have presented an exceedingly ingenious and plausible argument in support of this proposition, relying mainly upon a class of cases where it has been held that bank notes, bills of exchange, and promissory notes, even when stolen or obtained from the owners by actual fraud, could not be re*945covered, if they had passed to bona fide purchasers for value without notice. To my mind, however, the difficulty in applying this principle of law-to the case before the court arises from the fact that the respondents cannot be said to be bona fide holders without notice. All the parties to the transaction were domiciled in this district, and the transaction took place within the district. The proceedings in bankruptcy were then pending, and the bankrupt, Lake, was then under an injunction from this court prohibiting him from selling or disposing of any of his property. The respondents are concluded by the notice thus given them by the records of this court, and it does not lie in their mouths to say they are innocent purchasers.

The rule relied upon by the attorneys for respondents arises from the policy of the law in favor of protecting commercial transactions in negotiable or commercial paper made in due course of business, without fraud and for value paid. But an equally inexorable rule requires that all persons shall be held to take notice of judicial proceedings pending in courts having general jurisdiction over them.

The decree will be that respondents be required to deliver the notes in question to Lake’s assignee within ten days.

It was also urged that inasmuch as these notes bear Clarke’s guaranty of payment to respondents, some order should be made enabling them to avail themselves of it; but as Clarke is not before the court, I think the most the court can do at present is to require the assignee to preserve the notes and guaranties thereon intact for a reasonable time at least, so that they may be used as evidence hereafter, if required in any proceedings by respondents against Clarke.