Clem v. Johnson, 14203.

• Decision Date: 19 December 1950
• Docket Number: No. 14203.,14203.
• Citation: 185 F.2d 1011
• Parties: CLEM et al. v. JOHNSON.
• Court: U.S. Court of Appeals — Eighth Circuit

185 F.2d 1011 (1950)

CLEM et al. v. JOHNSON.

No. 14203.

United States Court of Appeals Eighth Circuit.

December 19, 1950.

Charles H. Halpern, Minneapolis, Minn., for appellant.

Franklin D. Gray, Minneapolis, Minn. (John W. Mooty and Morley, Cant, Taylor & Haverstock, all of Minneapolis, Minn., on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

This appeal is taken by George I. Clem, Trustee in bankruptcy, to reverse an order of the District court holding that the appellee Wallace Johnson had not lost his status as a secured creditor because he did not file a secured claim within the six month period provided in Section 57, sub. n of the Bankruptcy Act, 11 U.S.C.A. § 93, sub. n.

It appears that the adjudication in bankruptcy was entered on February 14, 1949. On May 25, 1949, Johnson in writing demanded of the Trustee possession of an airplane listed among the bankrupts' assets and upon which Johnson claimed to hold a mortgage. The request was refused. On February 13, 1950, Johnson filed a reclamation petition setting forth that the Trustee was in possession of the certain described airplane which was mortgaged to Johnson for the payment of a $5,000 loan. The petition set forth that the promissory note evidencing such indebtedness and the chattel mortgage were executed by the bankrupts, the chattel mortgage being recorded on November 5, 1948. The petition further stated that no payments had been made on the promissory note; that the indebtedness due the petitioner exceeded the value of the security; and that the Trustee had no equity in the airplane. Johnson prayed for an order requiring the Trustee to surrender the property to him and authorizing him to foreclose said chattel mortgage and for such other relief as to the court might seem just and equitable. The Referee entered an order denying the petition on the sole ground that Johnson had failed to file a secured claim within the six-month statutory period of limitation.

The airplane upon which the chattel mortgage was executed by the bankrupts was at the time of the execution of the mortgage and up to the time of the adjudication in bankruptcy, in the possession of the bankrupts. Thereafter it has remained in the possession of the Trustee in bankruptcy. The Referee held that where a creditor's security is in the possession of the Trustee and not in the possession of the creditors a secured claim must be filed within the six month statutory period or the security is lost, notwithstanding that the creditor makes no claim to dividends from the general assets.

On review of the Referee's order in the District court that court overruled the order and filed a written opinion in which it discussed the contentions presented in support of the ruling of the Referee and declared that "the views of the Referee are not supported by the provisions of the Bankruptcy Act, nor are they consonant with the clear weight of the decisions and the unequivocal expressions of the text writers on bankruptcy law who have commented upon this very question." It held that the failure of Johnson to file a claim in bankruptcy within six months under Section 57, sub. n of the Bankruptcy Act did not result in the loss of his security and that his petition for reclamation was sufficient.

The only contention argued for reversal by the Trustee on this appeal is that Johnson lost his security for his $5,000 debt by his failure to file a claim in bankruptcy within six months.

This court has heretofore declared the law contrary to the contention. In 1945 it stated in Rafert v. Federal Farm Mortgage Corp., 8 Cir., 152 F.2d 193, 195, "That the filing of a claim in bankruptcy is not essential to the preservation of a lien is too well settled for debate." It cited, among other cases, prior decision in this court In re Cherokee Public Service Co., 8 Cir., 94 F.2d 536, and decision in the 10th Circuit in Fish v. East, 114 F.2d 177, 201; also 2 Remington on Bankruptcy, 3rd Ed. p. 115 § 735.

On consideration of our own decisions and the many others cited and discussed in the opinion of the trial court in this case and in the briefs, we are convinced, as was the trial court, that appellant's contention should be overruled and no further discussion of it here would be justified "were it not for some language used by the Supreme Court in United States National Bank of Johnstown v. Chase National Bank of New York City, 331 U.S. 28, 67 S.Ct. 1041, 1044,...