Carr v. Southern Pac. Co.

• Decision Date: 23 July 1942
• Docket Number: No. 9983.,9983.
• Citation: 128 F.2d 764
• Parties: CARR v. SOUTHERN PAC. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

128 F.2d 764 (1942)

CARR v. SOUTHERN PAC. CO.

No. 9983.

Circuit Court of Appeals, Ninth Circuit.

May 22, 1942.

Rehearing Denied July 23, 1942.

Louis J. Glicksberg and Francis P. Walsh, both of San Francisco, Cal., for appellant.

Ben C. Dey, A. G. Goodrich, and C. O. Amonette, all of San Francisco, Cal., for appellee.

Before WILBUR, HANEY, and STEPHENS, Circuit Judges.

WILBUR, Circuit Judge.

The Southern Pacific Company, appellee, is the holder of 592 bonds of the par value of $1,000 each, issued by the bankrupt. On May 15, 1940 the appellant filed a petition for an order directing the Southern Pacific Company to turn over to the trustee 296 of such bonds, with interest coupons attached, upon the ground that these bonds had become the property of the estate of the bankrupt by reason of certain transactions occurring before the referee on the 29th of April, 1940, at a hearing of the first meeting of the creditors to select a trustee in bankruptcy. The petition alleges that the appellee, to gain the privilege of voting half its claim in the election of a trustee, waived "one-half of its said securities and accruals thereunder, towit, one-half of $609,094," and that the referee consequently allowed the appellee to vote its claim of $609,094 in the amount of $304,106.14. The appellee filed an answer denying that the appellant owned the bonds in question and alleging that it did waive "its right to realize more than $304,547 in value from its security for said claim", and that it did vote the amount of $304,106.14 (half its claim, less a set-off of $439.86 existing in favor of the bankrupt).

The referee, upon the trial of the issues, found as facts:

"(2) That in consideration for its being permitted to vote, and as to which it did vote for a trustee of its own choosing, the claimant-respondent, in open court, waived its security shown by said secured proof of debt to the extent of $304,106.14, which said last mentioned amount was voted as an unsecured claim, as aforesaid;

"(3) That upon said claimant-respondent declaring said waiver, the official trustee of the herein bankrupt's estate, in behalf of said estate, became, ever since has been, and now is, the owner of 296 of said first mortgage bonds, each of the par value of $1,000.00 each, or an aggregate par value of $296,000.00, together with the accruals and unpaid interest coupons thereon in the additional par value sum of $8,106.14."

The referee consequently ordered that the 296 bonds, with coupons, be delivered to the trustee in bankruptcy as property of the bankrupt. The appellee petitioned the district court for review of the proceedings and order and the court sustained the contention of appellee and reversed the order of the referee. The trustee in bankruptcy appeals to this court from that order.

The appellee had a right under § 57, sub. e, of the bankruptcy act, 11 U.S. C.A. § 93, sub. e, to have allowed and to vote that portion of its secured claim of $609,094, which seemed to the referee to exceed the value of the property of the bankrupt hypothecated by the deed of trust to secure the bonds in question. The appellant admits this but claims that in order to secure this right to vote under § 57, sub. e, the procedure thereunder indicated must be followed and that inasmuch as there was no appraisal by the referee of the value of the security and no allowance of the claim as a partially secured debt, the appellant had no right to vote its claim except by surrendering the security and, consequently, that the appellee, by voting one-half of its claim, did in fact surrender one-half its security.

There are several difficulties which are involved in this position which we may state before making further reference to what actually occurred at the creditors' meeting.

It is true that a surrender of all the security for a claim would entitle the claim to be voted as an unsecured claim. In re Eagles, D.C., 99 F. 695, 697; Morrison v. Rieman, 7 Cir., 249 F. 97, 101; Petition of International Harvester Co., 6 Cir., 9 F.2d 299, 300. However, a surrender of half the security would still leave the entire claim secured, although less adequately, by the balance of the property hypothecated by the bankrupt. Thus, the appellee would not be entitled to vote any of its claim as unsecured even if it did in fact surrender half its security. Another difficulty is that if the agreement of the appellee was to surrender half its bonds to the trustee as the property of the trustee, there would be no claim, secured or unsecured, left for the appellee to vote, as to the bonds surrendered (Albert's Ex'rs v. Ziegler's Ex'rs, 29 Pa. 50; Licey v. Licey, 7 Pa. 251, 47 Am.Dec. 513; Paxton v. Wood, 77 N.C. 11), and the remainder of the bonds would still be secured.

The appellee filed a written waiver at the creditors' meeting. This written waiver is correctly construed by the district judge and is in accordance with the claim of the appellee that it merely surrendered the right to collect more than $309,547.14 from the property hypothecated to secure the bonds and described in the trust deed.

The appellant cannot, and does not, dispute the terms of the written waiver, or its interpretation, but contends that the colloquy between the referee and the attorney for the appellee at the creditors' meeting held to elect the trustee in bankruptcy resulted in the waiver which transferred the ownership in half the bonds to the trustee. The colloquy referred to is as follows:

"Mr. Goodrich: If your Honor please, I present here the claim of the Southern Pacific Company as the holder of bonds of this bankrupt in the amount of $609,094. There is a credit on that of $439.86, so that is $608,654.14. That is one claim. In regard to that claim, the Southern Pacific Company is to a certain extent a secured creditor, as those represent bonds of the bankrupt. However, I believe there is on file in this proceeding the affidavit of Mr. Piercey to the effect that the total value of the properties securing this bond issue is not over one-third of the issue, and we claim the right to vote this claim of ours for fifty per cent of the amount of the claim.

"The Referee: Are you waiving as to the rest?

"Mr. Goodrich: If necessary we will, your Honor.

"The Referee: It is necessary if you are going to vote.

"Mr. Goodrich: Very well, I hereby file with your Honor the formal waiver as to the right to obtain greater payment on these bonds than $304,547. Take $439.86 off that to arrive at the correct figure.

"The Referee: Let's get the exact amount.

"Mr. Goodrich: Therefore, we offer to vote the claim for $304,106.14."

The argument is that the inquiry by the referee "Are you waiving as to the rest?", and the following statements by the...