252 F. 103 | 8th Cir. | 1918
This is a contest between three parties, Johnson, Schoellhorn, and Bixby, for priority in the assets of the bankrupt estate of Payne & Becker, a brokerage partnership. Each of these three parties had deposited with the bankrupt, under different arrangements and agreements, certain shares of stock, indorsed in blank; none of these deposits, however, authorizing the subsequent use made of the shares by the bankrupt: Shortly after securing the shares the bankrupt pledged them to its Chicago correspondent, Finley, Barrell & Co., as collateral to secure existing and future indebtedness. Some time after this had been done the bankrupt became financially involved. At that time Finley, Barrell & Co. had closed out all of its dealings with the bankrupt, except one small transaction in New England stock. Immediately upon ascertaining the financial difficulties of the bankrupt, Finley, Barrell & Co. proceeded to realize on much of the pledged collateral of all kinds which it held, including the shares of the three parties here involved. In the course of doing this it sold a large amount of collateral not here involved, and the shares belonging to Johnson for $4,183.50, and those belonging to Schoellhorn for $12,217. The next day it sold the Bixby stock for $5,435.50. The sale of the collateral up to the time the Bixby shares were sold was sufficient to pay all indebtedness due from the bankrupt to Finley, Barrell & Co., and leave an excess of $3,356.65, due the bankrupt. The subsequent closing out of the New England stock (the day following sale of the Bixby stock) resulted in a loss to Finley, Barrell & Co. of $746.56, thus leaving a final credit due the bankrupt of'more than $2,500, without the proceeds of the Bixby shares, and of $8,101.65, including such proceeds. This fund, and some shares, not here involved, which had been pledged with Finley, Barrell & Co., but not sold by them, were remitted to the trustee. To this fund each of these contestants lays claim. The referee prorated the fund between the three on the basis of the amounts realized for the respective stocks.
Upon review, the District Court modified this disposition of the amount to payment in full of the Bixby claim and proration of the balance between Johnson and Schoellhorn. A petition to revise and ah appeal bring this order before us. Several errors are pressed upon our attention, which will be noticed in turn.
As to contribution, the pledgee had a right to sell the Johnson and the Schoellhorn stock and apply the proceeds, because such action was. necessary to pay its debt. So far as this record shows, the other collateral sold that day belonged to the bankrupt. The balance of such proceeds after payment was, so far as the pledgee was concerned, due the pledgor. But as it sprang from stock wrongfully pledged, and can be traced by the owners of that-stock, it may be made subject to their superior rights. It is the only fund that can be so followed by them. This measures the maximum residue of their converted property which can be legally identified. The then unsold collateral x(including the Bixby stock) was not in asquali jure with the proceeds of the prior sales. This collateral was burdened with no obligation of contribution. It was at that time freed from the pledge. No such obligation originated in the mere fact of a subsequent wrongful sale by the pledgee. No part of the proceeds of the Bixby stock was or, under the circumstances, could properly be applied to the debt. The entire proceeds of that sale remain intact, and can be traced. The mere fact that such were transmitted to the trustee in a common sum or payment with the above balance does not lessen Bixby’s right therein. It does not create a right in Johnson or Schoellhorn to any part thereof.
The judgment of the trial court was correct, and is affirmed. The petition to revise is dismissed.
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