Burke v. Frederickson
| Decision Date | 14 July 1936 |
| Docket Number | 29673 |
| Parties | FRED L. BURKE, TRUSTEE IN BANKRUPTCY, APPELLANT, v. FRED FREDERICKSON ET AL., APPELLEES |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Lincoln county: J. LEONARD TEWELL, JUDGE. Affirmed.
AFFIRMED.
Syllabus by the Court.
1. There being a valid consideration, the execution and delivery of an assignment of a beneficial interest in a mortgage termed a " participation certificate," though such instrument is not executed in such form as to permit of recording, is valid as between the parties.
2. There being a valid consideration, the execution and delivery of an assignment of a beneficial interest in a mortgage termed a " participation certificate," though such instrument is not executed in such form as to permit of recording, is valid as against creditors not equipped with deed, mortgage or other instrument duly recorded or execution or attachment duly levied.
3. In a bankruptcy proceeding or one growing out of bankruptcy where the effect of recording or failure to record is in question the laws of the state where the recording is required or permitted are controlling.
4. Under the laws of Nebraska, the recording of the assignment of a beneficial interest termed a " participation certificate" is not a prerequisite to the validity of the transfer of the property described in such assignment and is not thereby a voidable preference.
5. The amendment of 1926 to section 60a of the Bankruptcy Act (11 U.S. C.A. § 96(a) by adding the words " or permitted" did not affect section 60b (11 U.S. C.A. § 96 (b); so, therefore, a transfer by mortgage or otherwise more than four months before bankruptcy, for a valuable consideration, without knowledge of insolvency or facts justifying a belief that such transfer would constitute a preference, but recorded within four months and not fraudulently withheld from record, is valid as against the trustee and cannot be avoided.
6. Under the terms of the assignments of " participation certificates" and the undisputed evidence, the bankrupt held the naked legal title to the note and mortgage in question. In such case the trustee of the bankrupt would not be entitled to recover for the benefit of general creditors of the bankrupt.
7. The trustee in bankruptcy not representing nor being entitled to take the place of a creditor or creditors whose claim or claims stood in a superior position to that of the defendants before the assignment and delivery of the mortgage and note and the recording of the said mortgage is not entitled to have the transaction set aside as a voidable or illegal preference.
8. A corporation, or its trustee, in case of bankruptcy, will be estopped to deny the authority of its managing agent to dispose of the property of the corporation in cases where such agent, with the consent of the board of directors, is in sole charge of its property and business and is permitted in regular course to carry on the business for which the corporation was organized.
Appeal from District Court, Lincoln County; Tewell, Judge.
Action by Fred L. Burke, as trustee in bankruptcy of the Goodman-Buckley Company, against Fred Frederickson and others. Judgment for defendants, and plaintiff appeals.
Affirmed.
E. H. Evans and Urban Simon, for appellant.
Halligan, Beatty & Halligan, contra.
Heard before GOSS, C. J., ROSE, GOOD, DAY, PAINE and CARTER, JJ., and YEAGER, District Judge.
This is an action instituted by the plaintiff and appellant as trustee in bankruptcy of the Goodman-Buckley Company, a corporation, against the defendants and appellees Fred Frederickson, Ed Todenhoft and Hugo F. Todenhoft, the object and purpose of which is to set aside the transfer by assignment of a note and mortgage held by the bankrupt, the Goodman-Buckley Company, a corporation, to the defendants. The basis of the claimed right to set aside the transfer is the claim that it was made within less than four months before adjudication of bankruptcy and was therefore and thereby an unlawful preference within the meaning of the bankruptcy laws.
The facts as disclosed by the record, to the extent necessary to a determination of this case, are substantially as follows: In North Platte, Nebraska, in about the year 1920, the Goodman-Buckley Trust Company, a corporation, was organized under the banking laws of Nebraska. In 1930 Goodman-Buckley Company, a corporation, was organized, which corporation is the bankrupt for which the plaintiff herein is trustee. It was adjudicated a bankrupt November 18, 1933.
This corporation was organized for certain specific purposes, among which were the following:
Prior to and at the time of the incorporation of the Good-man-Buckley Company, hereinafter referred to as the bankrupt, the defendants each had moneys on deposit with Goodman-Buckley Trust Company. After the incorporation of the bankrupt, each of them invested funds which had been on deposit with Goodman-Buckley Company in what the bankrupt chose to term "participation certificates." The participation certificates are, in terms, assignments of specific beneficial interests in real estate notes and mortgages with a description of the notes and mortgages contained in the assignments. By the terms of the assignments, the bankrupt held legal title to the notes and mortgages for the purpose of collection and distribution of proceeds. In the first certificates issued to defendants, the only description of notes and mortgages was by number. The participation certificates were all signed "Goodman-Buckley Company, by N.E. Buckley," whose full name is Newton E. Buckley. Newton E. Buckley was secretary and treasurer of the corporation and was in actual charge of its affairs and business.
Up to January, 1933, no certificate held by the defendant Ed Todenhoft had contained any description of mortgage except by number. The same situation was true as to certificates held by Hugo F. Todenhoft until January 25, 1933. Frederickson held one prior to October 1, 1932, which was taken up on that date and a new one issued containing a legal description of the lands covered by the mortgage.
On the 1st day of August, 1932, Harry C. McCann and Dedie McCann executed and delivered to the bankrupt their note for $ 17,000, with interest coupons attached, which note was secured by mortgage on the south 53 feet of lots 7 and 8, block 68, Original Town of North Platte, Nebraska. A certificate was issued to Ed Todenhoft by the bankrupt and dated December 1, 1932, which assigned to him a $ 10,000 interest in this note and mortgage. A certificate was issued to Hugo F. Todenhoft on January 25, 1933, which assigned to him a $ 3,000 interest in the same note and mortgage. A certificate issued to Fred Frederickson on October 1, 1932, also assigned to him a $ 4,000 interest in this particular note and mortgage. None of the certificates were executed in such manner and form as to permit them to be recorded. No substitution was ever made for the Frederickson certificate and there never was a reformation of its form so as to admit it for recording. In September, 1933, the Ed Todenhoft certificate was acknowledged and on the 7th of that month was duly recorded. At about the same time the Hugo F. Todenhoft certificate was also acknowledged and duly placed of record.
On or about October 13, 1933, the defendants demanded and received from the bankrupt the McCann note and mortgage, which was the note and mortgage described in their certificates, together with a written assignment thereof, and they have since the said date retained actual possession of such note and mortgage. The certificates of the three defendants taken together are assignments of and consume the entire beneficial interest in this note and mortgage.
It is this transfer of the note and mortgage by the bankrupt to the defendants that plaintiff seeks to have set aside on the ground that it is a voidable preference under the bankruptcy laws, the transfer having been made within four months of the date Goodman-Buckley Company was adjudicated a bankrupt.
There can be no question, and none is raised, that there was a valid consideration for the certificates issued to the defendants in October, 1932, and in January, 1933. It then necessarily follows that, as between the parties, the transaction is valid and binding. The failure to record them or to leave them executed in such form as not to permit of recording could not affect the validity of the transaction. They were also valid under Nebraska recording acts, as against creditors not equipped with deed, mortgage or other instrument duly recorded or execution or attachment duly levied. Stocker v. Church, 113 Neb. 639, 204 N.W. 398; Minor Lumber Co. v. Thompson, 91 Neb. 93 135 N.W. 429; Harral v. Gray, 10 Neb. 186, 4 N.W. 1040; Mahoney v. Salsbury, 83 Neb. 488, 120 N.W. 144; Naudain v. Fullenwider, 72 Neb. 221, 100 N.W. 296; Forrester & Co. v. Kearney Nat. Bank, 49 Neb. 655, 68 N.W. 1059; Oleson v. Pumphrey, 125 Neb. 708, 251 N.W. 828; ...
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