IN RE HACKETT, HOFF & THIERMANN

• Citation: 6 F. Supp. 638
• Court: U.S. District Court — Eastern District of Wisconsin
• Decision Date: 15 June 1933
• Parties: In re HACKETT, HOFF & THIERMANN, Inc. KALT-ZIMMERS MFG. CO. v. MARINE NAT. EXCHANGE BANK et al.

6 F. Supp. 638

In re HACKETT, HOFF & THIERMANN, Inc. KALT-ZIMMERS MFG. CO. v. MARINE NAT. EXCHANGE BANK et al.

District Court, E. D. Wisconsin.

June 15, 1933.

Fish, Marshutz & Hoffman, of Milwaukee, Wis., for Kalt-Zimmers Mfg. Co.

Kaumheimer & Kaumheimer, of Milwaukee, Wis., for Marine Nat. Bank.

Geo. A. Affeldt, of Milwaukee, Wis., for West Side Bank.

GEIGER, District Judge.

The two banks, Marine National Exchange Bank and West Side Bank, are in possession of bonds pledged to them respectively by the bankrupt to secure personal loans. The question at issue is the right of the banks to hold them by virtue of the pledge.

Apparently, the petitioning banks assume that if the bonds are negotiable the question tendered by Kalt-Zimmers Manufacturing Company must be answered in the negative.

My consideration of the matter leads me to reject the conclusion, even if the assumption be granted. By that is meant that even if the bonds be negotiable in form and in fact, it does not follow that the bankrupt, because of that fact alone, could validly negotiate them in any and in every way. Plainly, inquiry respecting the bankrupt's real relationship to such bonds — known to or knowable by a transferee — cannot be foreclosed by the mere fact of their general negotiable character, even if there be added general good faith, value given on transfer, and claimed ordinary course attending the transfer. Therefore, it has seemed to me that proof of some kind bearing upon the bankrupt's real relationship thereto, as affecting claimed rightful negotiation, was receivable to consider and determine the latter as a basic inquiry. Whether we term the relationship as a real estate mortgage trust, or something else, and include the somewhat general and at times vague idea of "underwriting," we recur to the necessity of inquiry respecting the bankrupt's relation to these bonds; and, if found to be fiduciary, whether knowledge thereof is chargeable to the petitioning bankers. This basic inquiry must start with an examination of the bonds and their securing mortgage. It may be conceded that upon such examination there is disclosed a power of the bankrupt trustee to "negotiate" and "sell" the bonds for some purpose. It may be particularly further conceded that if the bankrupt either owned the bonds in its individual right, or, if not, it could sell them in its capacity as trustee pursuant to power granted. In either event, purchase could be made without peril. The fact of ownership, whether it be known or unknown to the purchaser, would control in the one, as would the undoubted trust power to sell in the other. The purchaser would be protected....