Commercial Security Co. v. Holcombe

• Decision Date: 07 January 1920
• Docket Number: 3429.
• Citation: 262 F. 657
• Parties: COMMERCIAL SECURITY CO. v. HOLCOMBE. In re E. E. FORBES PIANO CO.
• Court: U.S. Court of Appeals — Fifth Circuit

262 F. 657

COMMERCIAL SECURITY CO. v. HOLCOMBE.

In re E. E. FORBES PIANO CO.

No. 3429.

United States Court of Appeals, Fifth Circuit.

January 7, 1920

Forney Johnston and W. R. C. Cocke, both of Birmingham, Ala., for appellant.

Borden Burr, Claude D. Ritter, and D. K. McKamy, all of Birmingham Ala., for appellee.

Before WALKER, Circuit Judge, and FOSTER and EVANS, District Judges.

WALKER Circuit Judge.

This is an appeal from a decree confirming an order made by the referee in bankruptcy which adjudged that the appellant Commercial Security Company, an Illinois corporation, restore and pay back to the appellee, the trustee in bankruptcy of E E. Forbes Piano Company, the sum of $12,893.41, which amount had been paid to the appellant pursuant to an order which provided that the court reserved the right, for the purpose of a correct, proper, and legal administration of the estate in bankruptcy, to order the restoration in part or in whole of sums so paid; that the appellant surrender and deliver to the trustee in bankruptcy designated assets and papers found to belong to the bankrupt estate; and that the appellant pay the costs of the proceeding, instituted by the trustee in bankruptcy, in which the order in question was made. The order followed findings to the effect that transactions by which the appellant had acquired from the bankrupt, which had been engaged in the business of leasing and selling pianos and organs, notes and other obligations made to the latter by its customers, were in the nature of pledges or hypothecations to secure the amounts of loans made by the appellant to the bankrupt at usurious rates of interest, and that payments made to the appellant prior to the bankruptcy amounted to $4,062.71 in excess of the amounts lent by it to the bankrupt with legal interest thereon.

In behalf of the appellant it is contended that the court had not acquired jurisdiction of the appellant for the purpose of making such an order as the one appealed from The appellant was present by its attorneys of record at the first meeting of the bankrupt's creditors. At that meeting, with the consent of al parties present, the referee made an order which contained the following provisions:

'(3) The said trustee is authorized, empowered, and directed to proceed to collect all accounts, notes, claims, and demands receivable, and to incur the reasonable expenses thereof, and wherever any person, firm, or corporation has, or claims to have, any lien or claim upon any such accounts, notes, claims, or demands receivable, the lien or claim of such person, firm, or corporation shall be transferred as of this day, and in precisely the same plight and condition as such lien or claim now stands, to the money or other thing of value which may so be collected by the trustee, and if anything but money be so collected and resold or converted, then to such and subsequently received proceeds; but as to each such collection or substitute or the proceeds thereof, all such expenses, including an equitable apportionment of the general costs and expenses of the administration and of this proceeding, the part represented by such lien or claim shall bear its own burden or part and the excess or balance remaining of each such part upon which lien or claim is or may be asserted shall be subjected to the satisfaction of such claim or demand after the legality thereof shall be finally determined by this court; but that any person, firm, or corporation, including the trustee, who or which may consider himself or itself aggrieved, shall have the right of review, appeal, or benefit of any or all appellate proceedings which otherwise are now authorized by law.

'The intent and purpose of the foregoing and of the next succeeding paragraph is to authorize and empower the trustee to collect and liquidate all of the assets and estate of the bankrupt, or in which the bankrupt or this estate has any claim, title, or right, legal or equitable, and to impose upon that portion of each collection upon which any other person, firm, or corporation has, or claims to have, any lien, claim, or demand a proportionate share of the expenses of making such collection, including the necessary general costs and expenses of administration under this proceeding in bankruptcy, but without prejudicing and without adjudicating at the present time the legality or validity or the extent of any such claim or demand of any such person, firm, or corporation, but as to each item of balance or excess over the claim or demand of each and every such person, firm, or corporation, respectively, shall stand in precisely the same plight and condition as such claim or demand now stands in reference to the property or thing from which the excess or balance may be derived. The trustee shall from time to time make application for instructions and orders for distribution, including these balances upon which there may be liens or claims, or of or concerning which he has any information, whether obtained before bankruptcy or afterwards, that any person, firm, or corporation has, or claims to have, any lien, claim or demand, of the hearing of which applications the person, firm, or corporation shall be given ample notice by the court; and any such person, firm, or corporation may at any time itself make such application, and no matter what the form of application, whether by petition, motion, or otherwise, the making of such application shall, for the purpose of the hearing and of the disposition thereof, be construed and considered as if having been made by the trustee as the actor in procuring the action of the court with reference thereto.

'(4) Commercial Security Company, Hamilton Investment Company, and Empire Security Company, each of Chicago, Ill., and J. H. Shale trustee of New York City, each claim to be the holder of certain papers or security originally delivered to them, respectively, by the bankrupt in the conduct of its business, each of which securities held by them, respectively, purports to cover, or carry title, to, certain musical instruments described in each such paper and each of which consents, with the same provisions, limitations, and burdens expressed in numbered paragraph next supra, that the said trustee proceed to collect from the obligors under said papers, using his best judgment in making such collections in money or any other thing of value from such obligors.

'Nothing herein in this paragraph, or in this order anywhere contained, shall be construed as a general appearance by said Commercial Security Company, Hamilton Investment Company, Empire Security Company, J. H. Shale, trustee, Bank of Cody, Smith & Barnes, Bush & Gerts, and French & Sons, the appearance of whom is limited expressly to the making of this order and the terms and provisions hereof.

'(5) The trustee will keep a separate account of all collections, whether of money or other thing of value, and of all substitutes for such other things of value, in each instance where any lien or claim is made, or which has come to his attention before or after bankruptcy and the proceeds of such collections shall be distributed as herein provided, and as may be hereafter ordered by this court in this proceeding.'

Following the making of the agreement evidenced by the order just quoted from, the appellant delivered to the trustee sundry notes for pianos and organs and piano and organ leases and mortgages given to the bankrupt and acquired from it by the appellant, and thereafter for more than a year continued to deliver to the trustee for collection all such paper called for by the trustee, and the trustee proceeded to make collections on those papers and on other claims in favor of the bankrupt. After the trustee had in this way realized a considerable sum of money, and before any decision by the court on the question of the...