Gorman v. Wright

• Decision Date: 21 February 1905
• Docket Number: 569.
• Citation: 136 F. 164
• Parties: GORMAN v. WRIGHT.
• Court: U.S. Court of Appeals — Fourth Circuit

136 F. 164

GORMAN v. WRIGHT.

No. 569.

United States Court of Appeals, Fourth Circuit.

February 21, 1905

Wm. B Guthrie (Wm. A. Guthrie, on the brief), for appellant.

Manning & Foushee, for appellee.

Before GOFF and PRITCHARD, Circuit Judges, and BOYD, District Judge.

GOFF Circuit Judge.

In the matter of B. W. Mathews, bankrupt, one P. H. Gorman filed a claim founded on a note dated November 29, 1901, signed by J N. Gorman, payable to the order of P. H. Gorman, for $10,000 due on demand, and indorsed by said B. W. Mathews. R. H Wright, a creditor of the bankrupt, objected to the allowance of this claim, assigning as cause therefor that P. H. Gorman held security for its payment not disclosed in his proof thereof, and therefore he asked the court to direct that it be not allowed as an 'unsecured' claim against said bankrupt estate. Such proceedings were had before the referee as made it appear that the maker of said note placed in the hands of the payee thereof (P. H. Gorman), as additional security for its payment, 96 shares of the capital stock of the Gorman-Wright Company, which said payee still held in his possession; that said company was in the hands of a receiver, and such stock practically worthless; that said J. N. Gorman had also been adjudicated a bankrupt; and that all the dividends to which such claim would be entitled out of both of said bankrupt estates, together with any proceeds of the sale of such stock so placed as collateral, would be insufficient to pay in full the amount due on said note. The full amount of the claim, $11,376.66, had theretofore been proved as an unsecured debt, as of the day of the adjudication of Mathews a bankrupt.

The referee sustained the contention of the objecting creditor, and held that the claim of P. H. Gorman could not participate in the estate of the bankrupt until it had been credited with the full value of the collateral mentioned. This action of the referee was certified to the District Court for review, and on consideration thereof the judge of that court, stating the question before him as follows, viz.: 'Whether a creditor who has been allowed to prove his claim as an unsecured creditor against a surety or indorser must realize and credit the proceeds of collateral securities held by him against the principal debtor before being allowed to participate in the distribution of the estate of the surety or indorser'-- answered such question in the affirmative, thereby affirming the order of the referee. From this conclusion of the court below this appeal is prosecuted.

That the claim of P. H. Gorman was properly proven as an 'unsecured' claim of P. H. Gorman was properly proven as an 'unsecured' claim against the estate of the bankrupt Mathews is entirely clear. The security held by said Gorman was the property of the...