In re Faulkner

• Decision Date: 04 May 1908
• Docket Number: 87.
• Citation: 161 F. 900
• Parties: In re FAULKNER.
• Court: U.S. Court of Appeals — Eighth Circuit

161 F. 900

In re FAULKNER.

No. 87.

United States Court of Appeals, Eighth Circuit.

May 4, 1908

The question involved in this petition to revise is whether two certain claims of the petitioner, Faulkner, against the estate of Charles J. Devlin, bankrupt, should have been allowed and permitted to participate in the assets of the estate of the bankrupt. The referee and the judge of the District Court for the District of Kansas ruled adversely to the petitioner, and that is the ruling we are asked to revise. Devlin was adjudicated a bankrupt on July 7, 1905 and some efforts followed to secure a settlement with his creditors. These efforts proved ineffectual, and shortly before the year expired after the date of the adjudication within which claims could be proven against the estate (Bankr. Act July 1, 1898, c. 541, Sec. 57n, 30 Stat. 561 (U.S. Comp. St. 1901, p. 3444)), on June 20, 1906, the petitioner filed with the referee a paper, signed and sworn to by him, as follows:

'Application for sale of Collateral. Now comes E. O. Faulkner, and shows to this court that he is the holder of two certain obligations, one of seventy-five hundred dollars ($7,500) indorsed by C. J. Devlin, of which a copy is hereto attached, with all indorsements thereon and made a part of this application, and which obligation was duly protested and C. J. Devin held as an indorser thereon. Under the terms of the said obligation, marked 'Exhibit A,' the applicant was to receive $7,500, payable February 17 1906, with 7 per cent. interest payable semiannually. The said obligation was personally delivered by the said C. J. devlin to this applicant, and at the time of the delivery the said Devlin, as collateral security for the said obligation, turned over to this applicant and placed in his possession 10 first mortgage gold bonds of the Marquette Third Vein Coal Company, being bonds 177 to 186, inclusive, upon which there were attached and still remain the coupons of July 1, 1905, and all subsequent coupons. Said bonds draw interest at 5 per cent. annually. This applicant has received no money from the said Marquette Third Vein Coal Company, J. S. Wylie, or from the said C. J. devlin in payment of the said obligation marked 'Exhibit A,' and the same is wholly due and unpaid; nor has any interest been paid upon the said bonds. Applicant further says that the said obligation for which the said collateral was pledged was for an actual loan of money in the ordinary course of business, and was in all respects bona fide, and the deposit of the said collateral was made at a time when your petitioner had no reason to believe and did not believe that the said coal company or the said C. J. Devlin were insolvent, if, indeed, they were at that time. Your petitioner further says that at Topeka, Kan., on June 14, 1904, the bankrupt C. J. Devlin, made, executed, and delivered to him his own certain promissory note in the sum of twenty-five hundred dollars ($2,500), a copy of which is hereto attached, marked 'Exhibit B,' and made a part hereof. At the time of the delivery of the said note to the applicant as collateral security for the payment of said note certificate No. 449 of the Bank of Topeka, Kan., representing 25 shares in said bank, of the par value of $2,500, and also as further collateral certificate No. 278 of the First National Bank, Topeka, Kan., representing 5 shares in said bank, of the par value of $100 each. Nothing has been paid upon the said promissory note marked 'Exhibit B,' and the same is wholly due and unpaid, and the applicant says that the said obligation marked 'Exhibit B' was for a sum of money actually loaned in the ordinary course of business, which was in all respects bona fide, and the deposit of the said collateral was made at a time when the applicant had no reason to believe and did not believe that the said Devlin was insolvent, if, indeed, he was at that time. The applicant further says that the value of the said Marquette Third Vein Coal Company bonds are 90 per cent. flat. The market value of the bank stock of the Bank of Topeka is worth 100 cents on the dollar or upwards. The bank stock of the First National Bank of Topeka is of unknown market value to this applicant. The applicant asks that he be given permission to sell the foregoing collateral at public sale under reasonable terms and conditions to the party who will pay the highest cash price therefor, and that if the proceeds of the sale exceed in amount the sum due on the said obligations that such surplus be applied to the payment of other obligations held by this applicant against C. J. Devlin, but which do not appear in the foregoing application, and your petitioner asks for such other relief as he may be entitled to in law.'

On July 5, 1906, the referee made a finding and order, the concluding parts of which are as follows:

'(3) There is due to the said Faulkner from the said Devlin the following sums: $7,500, with interest at 7 per cent. from February 17, 1905, and $2,500, with interest at 7 per cent. from June 14, 1904. As a conclusion of law the referee finds that the said Faulkner is entitled to sell said collateral in payment of the obligations of the said Devlin. It is therefore ordered that E. O. Faulkner has permission to sell said collateral at a price not less than three-fourths of the value as above fixed, and apply the same upon the said indebtedness. It is further ordered that the said sales take place at the front door of the Central National Bank of Topeka, Kan., upon Saturday, July 14, 1906, at 11 o'clock a.m., and that report be made of said sale for the purpose of confirmation and distribution of the funds, and that when said sale is confirmed the title to the said collateral so sold shall pass to the purchaser.'

Pursuant to the terms of the order the collateral was sold for the aggregate sum of $7,700, and a report of sale was made to the referee. On July 18, 1906, the sale was confirmed by the referee, and $7,600 out of the proceeds were ordered to be credited upon the note of $7,500 and interest, and $100 were ordered to be credited upon the note of $2,500. Afterwards and on the same day, the petitioner filed with the referee his three affidavits, and on the which is as follows: 'At Topeka, in the county of Shawnee and state of Kansas, came E. O. Faulkner, of said county and state, and made oath and said: That the said Chas. J. Devlin, the above-named bankrupt, at and before the filing of the petition in said matter, was and still is justly indebted to the said deponent in the sum of seventy-five hundred dollars. That the consideration of said debt is as follows: Borrowed money drawing 7...