In re Floyd & Hayes

• Decision Date: 12 July 1915
• Citation: 225 F. 262
• Parties: In re FLOYD & HAYES. Ex parte AMERICAN AGR. CHEMICAL CO.
• Court: U.S. Court of Appeals — Fourth Circuit

225 F. 262

In re FLOYD & HAYES. Ex parte AMERICAN AGR. CHEMICAL CO.

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

July 12, 1915

Willcox & Willcox, of Florence, S.C., for trustee in bankruptcy.

Sellers & Moore, of Dillon, S.C., for claimant.

SMITH District Judge.

This matter comes up for a hearing upon two petitions to review an order made by the referee in bankruptcy herein on the 3d day of March 1915, holding that the assignment of certain notes and mortgages made by the bankrupt to the American Agricultural Chemical Company were good, although the assignments were not recorded, and holding, also, that the assignment of certain accounts made by the bankrupt to the American Agricultural Chemical Company were not good, because neither the agreement to assign the same nor the assignments had been recorded.

From the facts it appears that the American Agricultural Chemical Company, a company carrying on a fertilizer manufacturing and selling business in the state of South Carolina, entered into a written agreement with the bankrupts, Floyd & Hayes, dated January 14, 1914, whereby the American Agricultural Chemical Company agreed to furnish or ship to Floyd & Hayes certain fertilizers at an agreed price; Floyd & Hayes agreeing on May 1, 1914, to pay or deliver to the American Agricultural Chemical Company all cash received on sales of the fertilizers so shipped to them, and also to deliver all the notes and mortgages that they had taken from purchasers of the fertilizers, and to assign all accounts that were due from the purchasers of the fertilizers for the gross amount of the time sales of the same as made by Floyd & Hayes. It was further agreed that all fertilizers shipped to Floyd &amp Hayes, as well as all notes, accounts, cash, or cash proceeds from the sale of such fertilizers, which might at any time be in their possession or in the possession of their representative, should remain the property of the American Agricultural Chemical Company, to be held by Floyd & Hayes as their agents in trust for the payment of their obligations to the Chemical Company for the fertilizers shipped at the agreed price, the title thereto not to pass from the Chemical Company to Floyd & Hayes until their obligations to the Chemical Company were paid.

Pursuant to this contract the American Agricultural Chemical Company shipped and delivered to the bankrupts fertilizers of the value of $9,358.16, which fertilizers Floyd & Hayes sold and disposed of to their customers. This agreement was not recorded. On June 20, 1914, and more than four months prior to the filing of the petition in bankruptcy herein, Floyd &amp Hayes executed and delivered to the American Agricultural Chemical Company an assignment of all the notes, mortgages, and open accounts taken by them from the purchasers of the fertilizers so shipped to them and representing the proceeds thereof. The notes and mortgages were actually turned over to the American Agricultural Chemical Company, but in the case of the open accounts there was turned over to the Chemical Company a list, with a written assignment of all these accounts; that being the only delivery which, from the nature of the case, was possible, there being no other written evidence of the indebtedness which Floyd & Hayes could turn over to the American Agricultural Chemical Company. About September 1, 1914, the notes and mortgages and assigned accounts were returned by the American Agricultural Chemical Company to Floyd & Hayes for collection, and a trust receipt given by Floyd & Hayes to the American Agricultural Chemical Company, stating that they had received all such from it for the purpose only of collection and remitting the proceeds to the American Agricultural Chemical Company. The bonds and mortgages and accounts so assigned were under the agreement of January 14, 1914, in effect collateral security for the obligations of Floyd & Hayes to the Chemical Company for the fertilizers at the agreed price. Floyd & Hayes were on the 1st day of January, 1915, adjudicated bankrupts in this court on their own petition.

At the first meeting of the creditors, which was held on the 18th day of January, 1915, the American Agricultural Chemical Company offered for proof its claim against the bankrupt estate for $7,381.98, claiming to hold as security for the debt the open accounts, notes, and chattel mortgages assigned to it as before recited, and alleging that the value of the security did not exceed $1,800, and asking that the value of the security be fixed and its claim be allowed as unsecured at the difference between the value of the security held by it and the amount due it by the bankrupts. The allowance of this claim was objected to by certain other creditors, and also by the trustee, on the ground that the alleged assignments were invalid under the laws of the state of South Carolina as against the trustee in bankruptcy and the creditors of Floyd & Hayes, because neither the assignments nor the agreement to assign had been recorded in the office of the clerk of the court for Dillon county, the county of the residence of the bankrupts; and said objecting creditors also moved that the American Agricultural Chemical Company be required to surrender to the trustee all proceeds collected by Floyd & Hayes on the assigned accounts, notes, and mortgages and paid to the Chemical Company, as well as the notes and mortgages and accounts so held by the Chemical Company, to be collected by the trustee for the benefit of the general estate of the bankrupts.

Upon this application and objection...