In re Durham

• Decision Date: 14 March 1902
• Citation: 114 F. 750
• Parties: In re DURHAM.
• Court: U.S. Court of Appeals — Fourth Circuit

114 F. 750

In re DURHAM.

United States District Court, D. Maryland.

March 14, 1902

John L G. Lee, W. Irvine Cross, and Harry S. Carver, for E. Savage Shure, John S. Wallis, and other creditors.

Stevenson A. Williams and David G. McIntosh, for the Harford National Bank of Bel Air, Md.

MORRIS District Judge.

The bankrupt, John J. Durham, filed his voluntary petition December 13, 1899, and was duly adjudicated. On April 19 1900, E. Savage Shure and John S. Wallis, and subsequently other creditors of the bankrupt, filed their petitions asking that certain bills of sale of the bankrupt's property made by him to the Harford National Bank of Bel Air four months preceding the bankrupt's application be set aside as illegal preferences, and made to hinder, delay, and defraud creditors. An order on the petition required the Harford National Bank of Bel Air to answer and show cause on or before May 5, 1900. On May 4, 1900, the Harford National Bank of Bel Air filed its petition, asking to have the time for filing its answer extended until May 15th. On May 15th the Bank filed its answer, under oath, to all the allegations of the petition, and, proffering itself ready to furnish such other detailed accounts of its transactions with the bankrupt as might be right and proper, claimed that it was entitled to have the lien of its several mortgage bills of sale preserved, maintained, and enforced, 'and its claim therefor allowed out of the proceeds of sale of the property covered thereby now in the hands of the permanent trustee of said Durham. ' On July 5, 1900, the petition and answer were, by order of the court, referred to the referee to take testimony and report to the court. On July 11, 1900, Thomas H. Robinson, who had been appointed trustee of the bankrupt's estate, and on whom a copy of the creditors' petition had been served, filed his petition, stating that from the information obtained by him he was unable to determine whether the allegations in the petition could be sustained or not, and that for the purpose of bringing the matter properly before this court, and having the allegations investigated, he charged that the bills of sale held by the bank did create illegal preferences, and should be set aside. On July 24, 1900, and after the taking of testimony had been commenced, the bank filed its petition, asking leave to withdraw its answer, and to file a demurrer setting up want of jurisdiction in the court to hear and determine the validity of the bills of sale. This leave was not granted, and the parties proceeded with the taking of testimony.

I am of opinion that the objection to the court assuming jurisdiction came too late. The bank, by its application for further time to answer, and then by answering and submitting to the jurisdiction of the bankrupt court, and asking that its lien be sustained, and its claim allowed out of the proceeds of property in the hands of the trustee in bankruptcy, fully consented that the issues raised by the petition and answer should be heard and determined by the bankrupt court as part of the proceedings in bankruptcy, and as a controversy in relation to the estate of the bankrupt. The Harford National Bank was not a stranger to these proceedings, for on the day that Durham filed his petition, and was adjudicated a bankrupt, it filed its petition stating that it was a creditor for $15,173.28, and asked that receivers be appointed to take possession of all the bankrupt's goods, and that a restraining order issue enjoining all persons from interfering with the bankrupt's property. Upon its petition the court granted the relief asked for. It seems clear, therefore, that the bank made itself a party to these proceedings, asked substantial relief, and consented to the determination of the controversy as to its claim of lien upon certain assets of the bankrupt by this court of bankruptcy.

There were five mortgage bills of sale duly recorded made by Durham to the bank in August, September, and October, 1899, the total of the sums intended to be secured amounting to $29,250. Of these amounts it is admitted by the bank that the sum of $5,000, mentioned in the first bill of sale, was an antecedent debt, carried over from the previous season, for which they held the bankrupt's note, with two indorsers.

All the other amounts are claimed by the bank to have been made up either of an advance of money made at the time the bill of sale was delivered to it, or for an advance then agreed to be made and subsequently advanced.

In considering whether this contention has been satisfactorily established by proof, the surrounding facts should be borne in mind. Durham carried on the business of a country storekeeper, and had for several years been engaged during the canning season in canning tomatoes in Harford county, Md. In the season of 1899 he increased his canning business, and had made contracts for cans and other material which had to be paid for in cash, and had made contracts for tomatoes to be grown for him, and contracts for filling empty cans to be provided by him. All these contracts involved the paying out of large sums of cash, the cans not being deliverable until the drafts attached to the bills of lading for them were paid, and other parties having a possessory lien on the cans when filled. No money could be realized from sale of the canned goods until near the end of the season, when they were ready for shipment to purchasers at a distance. It is plainly a case where a large advance upon the cans and other material as delivered to Durham, and upon the goods when packed, was a usual and legitimate transaction, and, for a country storekeeper of small capital, unavoidable. The business of the bank was to loan money, and to...