293 U.S. 357 (1934), 148, Marine National Exchange Bank of Milwaukee v. Kalt-Zimmers Manufacturing Co.

Docket Nº:No. 148
Citation:293 U.S. 357, 55 S.Ct. 226, 79 L.Ed. 427
Party Name:Marine National Exchange Bank of Milwaukee v. Kalt-Zimmers Manufacturing Co.
Case Date:December 10, 1934
Court:United States Supreme Court
 
FREE EXCERPT

Page 357

293 U.S. 357 (1934)

55 S.Ct. 226, 79 L.Ed. 427

Marine National Exchange Bank of Milwaukee

v.

Kalt-Zimmers Manufacturing Co.

No. 148

United States Supreme Court

Dec. 10, 1934

Argued November 14-15, 1934

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

1. Bonds issued in Wisconsin payable to bearer recited that they were secured by a deed of trust to a named trustee,

to which deed of trust reference is hereby made with the same effect as though recited at length herein, for the description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds, and the terms and conditions upon which said bonds are issued, held, and secured, and may, before their fixed maturities, be declared at once due and payable, and the manner of prepayment before maturity.

The Supreme Court of Wisconsin, construing the Wisconsin negotiable instruments statute, decided that the reference did not make the bonds nonnegotiable.

Page 358

Held, that the construction is binding in the federal courts, though the statute may have been intended to be declaratory of the rule at common law. Burns Mortgage Co. v. Fried, 292 U.S. 487. P. 363.

2. Under the Wisconsin negotiable instruments Act, as construed by the Supreme Court of the State, notice of facts tending to put a cautious buyer upon inquiry will not defeat the title of the holder of negotiable paper, if in truth there was neither actual knowledge of an infirmity nor a conscious joinder in a fraud. P. 364.

3. Under the Wisconsin negotiable instruments Act, as construed by the Supreme Court of Wisconsin, the pledgee of a negotiable bond, payable to bearer, who knows from a recital on the face of the bond that the pledgor -- pledging it for his own indebtedness -- is the trustee under a deed of trust securing it with like bonds and certifier of the bond issue, is not chargeable, from that knowledge alone, with actual notice of the fact that the pledgor is fiduciary of the bonds themselves, or with a fraudulent participation in the abuse of the trust relation. P. 365.

4. This construction binds the federal courts. Burns Mortgage Co. v. Fried, supra. P. 366.

5. The principle that a construction placed upon a state statute by the highest court of the State is to be read into the statute from the day of its enactment, applies to interests dependent on the statute which were created between the enactment and the decision. Kuhn v. Fairmont Coal Co., 215 U.S. 349, distinguished. P. 367.

70 F.2d 815 reversed.

Certiorari to review the affirmance of a decision of the District Court in a bankruptcy case, denying the present petitioners leave to sell negotiable bonds which had been pledged to them by the bankrupt.

Page 361

CARDOZO, J., lead opinion

MR. JUSTICE CARDOZO delivered the opinion of the Court.

In bankruptcy proceedings pending in Wisconsin, the petitioners, two Milwaukee banks, prayed an order of the court for permission to sell collateral securities pledged by the bankrupt. The subject of the pledge was bonds payable to bearer, secured by a deed of trust. The District Court refused the relief (6 F.Supp. 638), and the Court of Appeals for the Seventh Circuit affirmed. 70 F.2d 815. Two questions are in the case: first, whether the bonds are negotiable in form, and, second, whether the petitioners are holders in good faith. We granted certiorari.

On October 9, 1929, Kalt-Zimmers Manufacturing Company of Milwaukee, Wisconsin, made its deed of trust to Hackett, Hoff & Thiermann, Incorporated, trustee, to secure bonds of the total amount of $115,000. The bonds are payable to bearer. They are stated to be secured by a deed of trust to the above-named trustee,

to which deed of trust reference is hereby made with the same effect as though recited at length herein, for the description of the property mortgaged, the nature and extent of the security, the rights of the holders of the bonds, and the terms and conditions upon which the said bonds are issued, held, and secured, and may, before their fixed maturities, be declared at once due and payable, and the manner of prepayment before...

To continue reading

FREE SIGN UP