In re Cobb

• Decision Date: 04 October 1899
• Citation: 96 F. 821
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: In re COBB.

96 F. 821

In re COBB.

United States District Court, E.D. North Carolina.

October 4, 1899

The referee certifies the following findings of fact and conclusions of law for review:

'That on the 12th day of October, 1898, J. Haywood Sawyer having on deposit with the bank of Guirkin & Co. the sum of $1,302.70, the firm of Guirkin & Co., then doing a general banking business, and desiring to obtain a loan of $3,000 or more, made application to said Sawyer for a loan of such amount; that G. W. Cobb, a member of the firm of Guirkin &amp Co., was informed by said Sawyer that he had on hand in the applicant's bank the sum of $1,302.70, and that he would and could obtain for him an additional sum of $1,900 that this amount of $3,202.70 was accepted by said Cobb for Guirkin & Co., and which, at the time of its acceptance by said Cobb, tendered and delivered certain collateral securities to the said Sawyer to secure said loan, but without previous demand or agreement therefor; that the sum of $1,302.70, then on general account in said bank to the credit of J. Haywood Sawyer, was verbally ordered paid over to said bank, and that the additional sum of $1,900 was paid to said Cobb, for the use of said bank, in cash; that thereafter, to wit, on the 19th day of October, 1898, the said Guirkin & Co., being insolvent, made a general assignment for the benefit of creditors; that J. Haywood Sawyer was employed as counsel for Guirkin & Co., bankers whenever his services as counsel and attorney were required.'

The referee's conclusions of law were as follows:

'From the foregoing facts I find, as a conclusion of law, that the said Guirkin & Co., through G. W. Cobb, to relieve themselves from financial embarrassment, borrowed the said sum of $3,200.70 from J. Haywood Sawyer, and at the time gave as security therefor the collaterals referred to in the testimony taken in this cause; that the entire sum so loaned the firm of Guirkin & Co. was for a present consideration, and that the transaction, from all the evidence, I find to be free from fraud in fact, and the loan so made was advanced in good faith to the debtors of Guirkin & Co. to enable them to further carry on their business for which the security above mentioned was taken; that the said J. Haywood Sawyer is entitled to retain the said securities until therefrom he shall be paid the full sum of $3,200.70, with interest at six per cent. from the said 12th day of October, 1898, until paid; that, from the evidence of the commissioner filed in this cause, I find that said collaterals so deposited for said loan amount to the sum of about $7,000. All of which is respectfully submitted.

'L. J. Moore, Referee in Bankruptcy.'

E. F. Aydlett and G. W. Ward, for appellant.

J. Haywood Sawyer, for appellee.

PURNELL District Judge.

The referee fails to find as a fact, which is shown by the testimony, that on the day of the transaction under consideration there was less than $500 of currency on hand, or to consider the further fact, heretofore found by the court and evident from the record, that George W. Cobb was the only member of the firm of Guirkin & Co.; and in making the assignment the act of bankruptcy for which both George W. Cobb individually, and as surviving partner of Guirkin & Co., was liable, the adjudication was made as to both, or Cobb acting in the dual capacity. Bray v. Cobb, 91 F. 102. The assignment was by George W. Cobb, individually and as surviving partner of Guirkin & Co., and not a general assignment by Guirkin & Co. There is no evidence that Guirkin & Co. was a corporate body, but the firm seems to have been doing a private or individual banking business. The question to be considered is not whether the creditor, J. Haywood Sawyer, has a lien, or can retain the collaterals or security until he is paid; for it is familiar learning, and conceded in the argument, that, whatever priorities, liens, or rights he may have, they must be administered in the bankruptcy court. After an adjudication in bankruptcy, the bankrupt court takes jurisdiction of the estate and all matters pertaining thereto, and will administer the same to a final settlement. Parties having or claiming an interest in the bankrupt estate must submit them to the bankruptcy court. Blum v. Ellis, 73 N.C. 293; Withers v. Stinson, 79 N.C. 341; In re Gutwillig, 34 C.C.A. 377, 92 F. 337; Davis v. Bohle, 34 C.C.A. 372, 92 F. 325. The trustee is vested by law with the estate, and could by a proper action recover possession of the securities in possession of any one as collateral, subject to any valid lien such person might have on the proceeds of such securities. The vesting of title gives him constructive possession of the property the instant the title passes. Such property is then brought into the bankruptcy court in its entirety, and under its protection, as fully as if actually brought into the visible presence of the court. No other court and no person acting under process can, without permission of the bankruptcy court, interfere with it, and to so interfere is a contempt. The trustee is an officer of the court, and his possession, actual or legal, is the possession of the court. Taylor v. Carryl, 20 How. 583; Shields v. Coleman, 157 U.S. 168, 15 Sup.Ct. 570; Porter v. Sabin, 149 U.S. 473, 13 Sup.Ct. 1008; Freeman v. Howe, 24 How. 450; Loveland, Bankr. Sec. 150.

The conclusion of law by the referee, 'That the said J. Haywood Sawyer is entitled to retain the said securities until therefrom he shall be paid the full sum of $3,202.70,' etc., is reversed. The nature of the securities delivered to Sawyer as collateral, as claimed, is not disclosed by the testimony; but he could not legally collect, realize on, or cancel the same, but, whatever their nature, they must be surrendered to the trustee, who alone is authorized to reduce the same to money, and the rights of claimant to a priority to the proceeds thereof will be duly adjudged and administered in this court. This court alone has jurisdiction.

This case might rest here until the creditor has surrendered the preference claimed, as provided he must do, in section 57g, before his claim can be allowed and the cause again presented for review; but as it is to the interest of the parties to close the estate, and it is presumed claimant, being an attorney, will comply with the law, the real question may be adjudicated on the record now before the court. It would be useless circumlocution to require the case to be sent up a second time, on probably the same record.

The question is not whether Sawyer can retain the securities given him, claimed as collateral, but whether he is entitled to priority in the proceeds thereof...