Gadd v. Dawson

• Decision Date: 25 June 1923
• Docket Number: 237,6280.
• Citation: 291 F. 327
• Parties: GADD v. DAWSON et al. SAME v. WINDERS & DAWSON.
• Court: U.S. Court of Appeals — Eighth Circuit

291 F. 327

GADD v. DAWSON et al.

SAME v. WINDERS & DAWSON.

Nos. 237, 6280.

United States Court of Appeals, Eighth Circuit.

June 25, 1923

[Copyrighted Material Omitted]

Clarence M. Hanson, of Ft. Dodge, Iowa (M. F. Healy, Seth Thomas, and Thomas M. Healy, all of Ft. Dodge, Iowa, on the brief), for petitioner and appellant.

Earl Smith, of Mason City, Iowa (A. J. Feeney, Jr., of Mason City Iowa, on the brief), for respondents and appellees.

Before LEWIS and KENYON, Circuit Judges, and TRIEBER, District Judge.

KENYON Circuit Judge.

This matter is before us on appeal and also on petition to revise under section 24b of the Bankruptcy Act. (Comp. St. Sec 9608). The petition to revise is clearly the proper method of presenting the legal questions involved, the controversy being 'a proceeding in bankruptcy.' In re Lee, 182 F. 579, 105 C.C.A. 117; In re Carley, 117 F. 130, 55 C.C.A. 146; Kinkead v. J. Bacon & Sons, 230 F. 362, 144 C.C.A. 504; Collier on Bankruptcy (11th Ed.) 575. That legal questions only can be considered by the appellate court upon a petition to revise is well settled by the authorities. Duryea Power Co., Bankrupt. v. Sternbergh, 218 U.S. 299, 31 Sup.Ct. 25, 54 L.Ed. 1047; Lesaius v. Goodman, 165 F. 889, 91 C.C.A. 567; In re Holden, 203 F. 229, 121 C.C.A. 435; Hall v. Reynolds, 224 F. 103, 139 C.C.A. 659; Olmstead-Stevenson Co. v. Miller, 231 F. 69, 145 C.C.A. 257.

The facts were stipulated by the parties, and there is no dispute with reference thereto. Briefly stated they are as follows: Winders & Dawson, a copartnership, hereinafter referred to as respondents, leased on August 14, 1920, to Hanson & Tyler Auto Company, a copartnership, hereinafter referred to as the Auto Company, a certain building located at Mason City, Iowa, of which they were the owners; the same to be used as a garage. The lease was for a period of three years at a rental of $400 per month, and possession of the building was taken by the Auto Company on September 1, 1920. In October the Auto Company placed 16 Napoleon trucks in the leased building, and during the same month, under the statutes of Iowa, lessees, as warehousemen, executed and delivered to a concern known as Schanke & Co. warehouse receipts upon said trucks to secure an indebtedness of some $19,000. December 4, 1920, the Auto Company made an assignment for the benefit of its creditors, to C. W. Gadd, the same party who afterwards was named and acted as trustee in the bankruptcy proceeding of the Auto Company. The said assignee in January, 1921, took up with lessors through their attorneys the question of canceling the lease, and on February 1, 1921, the lease between the Auto Company and respondents was canceled. The building was then leased to Craven & Dewing of Mason City, the trucks remaining therein. March 17, 1921, the Auto Company, William A. Hanson, and Roy C. Tyler were adjudged bankrupts, and on April 2, 1921, at the first meeting of creditors, C. W. Gadd was named as trustee in bankruptcy, and he duly qualified for such position. Respondents on April 2, 1921, filed their proof of debt in the bankruptcy court, claiming a lien by virtue of the Iowa statutes on the property kept on the premises as security for their rent. May 5, 1921, Schanke & Co., holders of the warehouse receipts, took the trucks from said building and sold them for the sum of $21,000; the same being done without the knowledge or consent of respondents. In August, 1921, the creditors of the bankrupt estate instructed the trustee to proceed against Schanke & Co., or effect a settlement. The trustee did effect a settlement with Schanke & Co., as evidenced by a written stipulation, which was approved by the referee in bankruptcy, John M. Schaupp, Jr. Under the terms of the settlement, said Schanke & Co., in consideration of the turning over by C. W. Gadd, trustee, of all the securities in controversy to them and releasing any claim or right thereto, allowed on its claim against the bankrupts, as a credit or payment, the sum of $45,000. The referee refused to allow respondents' claim for rent in the sum of $1,762.50 as a secured or preferred claim, and certified for review the question involved, to Hon. George C. Scott, Judge of the United States District Court for the Northern District of Iowa; the question, so certified, being whether or not, under the facts stated in the order to be reviewed, claimants (respondents here) were entitled to enforce their statutory landlord's lien against Gadd as trustee in bankruptcy. The District Court held that the referee erred in not allowing the claim for rent of $1,762.50 as a secured claim.

Under the undisputed facts did the court err as to the legal conclusion to be drawn therefrom?

The issues are narrowed to a rather restricted sphere. The trustee claims: (1) That respondents waived their lien on February 1, 1921, when they took possession of the leased premises and relet them with the trucks upon the premises, and especially in view of the fact that Schanke & Co. paid the storage on the trucks from February 1, 1921, until they sold them in May, 1921. (2) That while there was a lien for rent it was an inchoate lien under the Iowa statute, and that no action was taken to enforce it before the expiration of six months, the limitation of the lien provided by the statute. (3) That under the statute the lien of respondents terminated on August 1, 1921, and that the action of the trustee thereafter, under the direction of the creditors, could not reinstate the lien. While other questions are argued, the solution of these is decisive of the case, and it will be unnecessary to discuss the others.

Under the Iowa statutes a landlord has a lien for his rent upon the personal property of the tenant used or kept on the premises during the term, and not exempt from execution, for the period of one year after a year's rent or the rent of a shorter period falls due. Such lien, however, does not continue more than six months after the expiration of the term. Iowa Compiled Code 1919, Secs. 6502, 6503; Doane v. Garretson, 24 Iowa, 351; Gilbert, Hedge & Co. v. Greenbaum et al., 56 Iowa, 211, 9 N.W. 182; Holden v. Cox, 60 Iowa, 449, 15 N.W. 269.

The action to enforce such lien must be brought within six months after the expiration of the term of the lease. Nickelson v. Negley et al., 71 Iowa, 546, 32 N.W. 487; Manhattan Trust Co. v. Sioux City & N. Ry. Co. (C.C.) 68 F. 72.

The lease terminated here on the 1st day of February, 1921. The lien as to property owned by the tenant and used or kept upon the place terminated therefore August 1, 1921. It was necessary that action be commenced to enforce the lien before the 1st day of August. Was this done? Respondents on April 2, 1921, filed their claim in the bankruptcy court and asserted their landlord's lien. In Lacey et al. v. Newcomb, 95 Iowa, 287, 63 N.W. 704, it was held that where a claim was deposited with an assignee for creditors under sections 2017 and 2018, corresponding to sections 6502 and 6503 of the later Code, it amounted to the commencement of an action for all purposes touching the running of the statute of limitations. Under the principle of law as thus laid down, the filing of the claim by respondents in this case claiming their lien would be sufficient commencement of the action before the expiration of such lien. What more could the respondents do? They could not seize any of the assets, and the trucks were assets unless they had been abandoned in the method provided by law as burdensome to the estate, which it was conceded was not done. We are satisfied that the filing of the claim in the bankruptcy court, and the assertion of the lien, prior to the expiration of the six months, was a sufficient commencement of proceedings to enforce the lien within the statutory period.

The trustee earnestly contends, and the referee found, that the trustee never took over the trucks; never had them in his possession, and that there is no showing that the money in the hands of the trustee was derived from property subject to the landlord's lien. The trial court held that the trustee was in constructive possession of the trucks; that at all times it was his duty to be in possession thereof; and that he at no time disclaimed such duty or abandoned the same as burdensome property.

Under section 70a of the Bankruptcy Act (Comp. St. Sec. 9654), the trustee of the estate of the bankrupt, upon his appointment and qualification, is vested by operation of law with the title of the bankrupt as of the date he was adjudged a bankrupt (except as to exempt property) to property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him. This title passes to the trustee for the purpose of equally distributing the proceeds thereof among the creditors of such bankrupt. Such title is, of course, subject to rights and equities existing in favor of third persons against the bankrupt. 5 Cyc. 341; In re Swift (D.C.) 108 F. 212; In re Hanna (D.C.) 105 F. 587; In re Mullen (D.C.) 101 F 413;...