In re Hansen

Decision Date30 June 1950
Docket NumberNo. 17791.,17791.
Citation94 F. Supp. 225
PartiesIn re HANSEN et al.
CourtU.S. District Court — District of Minnesota

Franklin D. Gray and John W. Mooty, of Minneapolis, Minn., for petitioner.

Charles H. Halpern, of Minneapolis, Minn., for Trustee in Bankruptcy.

NORDBYE, Chief Judge.

On February 14, 1949, an adjudication in bankruptcy was entered herein. On May 25, 1949, the petitioner in writing demanded of the Trustee herein possession of an airplane listed among the bankrupts' assets and upon which petitioner claimed to hold a mortgage. The request was refused. On February 13, 1950, petitioner filed a reclamation petition setting forth that the Trustee in the above-entitled bankruptcy was in possession of a certain described airplane which was mortgaged to the petitioner as security for the payment of a $5,000 loan. The petition set forth that the promissory note evidencing such indebtedness and the chattel mortgage were executed by the bankrupts, the chattel mortgage being recorded on November 5, 1948. The petition further stated that no payments had been made on the promissory note; that the indebtedness due the petitioner exceeded the value of the security; and that the Trustee had no equity in said airplane. The petitioner prayed for an order requiring the Trustee to surrender the property to him and authorizing him to foreclose said chattel mortgage, and for such other relief as to the court might seem just and equitable. The Referee denied the petition on the sole ground that the petitioner had failed to file a secured claim within the six-month statutory period of limitation.

The airplane upon which the chattel mortgage was executed by the bankrupts was, at the time of the execution of said mortgage and up to the time of the adjudication in bankruptcy, in the possession of the bankrupts. Thereafter, it had been, and is now, in possession of the Trustee in Bankruptcy. The Referee held that where a creditor's security is in the possession of the Trustee and not in the possession of the creditor, a secured claim must be filed within the six-month statutory period or the security is lost, notwithstanding that the creditor makes no claim to dividends from the general assets.

After due consideration, the Court is of the opinion that the views of the Referee are not supported by the provisions of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., nor are they consonant with the clear weight of the decisions and the unequivocal expressions of the text writers on bankruptcy law who have commented upon this very question. Were it not for some language used by the Supreme Court in United States Nat'l Bank of Johnstown v. Chase Nat'l Bank of New York City, 331 U.S. 28, 67 S.Ct. 1041, 91 L.Ed. 1320, the matter might be disposed of without further discussion. In that case, the judgment lien creditors filed their claim within the statutory period as a secured claim. They participated, however, with the general creditors in dividends from the general assets of the debtor. As stated by Justice Murphy, 331 U.S. at page 35, 67 S.Ct. at page 1045, the question before the court in that case was, "Has the conduct of the judgment lien creditors been such as to constitute a waiver of their judgment liens?" The question as to whether a secured creditor, who did not desire to participate in obtaining dividends from the general assets of the debtor, was required to file a claim within the six-month statutory period was not before the court. But in summarizing the steps which might be taken by a secured creditor under the Bankruptcy Act, the court in the Johnstown case did state, 331 U.S. at page 33, 67 S.Ct. at page 1044, "He referring to a secured creditor must file a secured claim, however, if the security is within the jurisdiction of the bankruptcy court and if he wishes to retain his secured status, inasmuch as that court has exclusive jurisdiction over the liquidation of the security." This, of course, states the law if the court was referring to secured creditors who wish to retain their status as such, but who desire to participate in dividends with general creditors. However, the Referee concluded that the Supreme Court had departed from the prevailing construction of Section 57, 11 U.S.C.A. § 93, and unequivocally laid down the principle that, regardless of whether the secured creditor sought to participate in general dividends if his security was in the possession of the Bankruptcy Court, he had to file his proof of claim as a secured creditor within the six-month statutory period. Now, at best, the statement of the Supreme Court, in light of the issues presented, was merely dictum. It is to be doubted that the court, by the language used, intended to place an interpretation on Section 57 which is in direct conflict, not only with the settled bankruptcy law on the question here involved as recognized by a majority of the courts and the text writers on the subject, but also contrary to one of the sections in Collier on Bankruptcy, which the Supreme Court cites in support of its statement. See, 3 Collier on Bankruptcy, 14th Ed., p. 157, where the following statement is to be found: "A fully secured creditor is not entitled to share in the distribution of the bankrupt's estate. Hence where there is no doubt that the security is ample to cover the debt, the creditor's claim will not be allowed and there is therefore no use proving it, although, as has been said, `There is no provision in the statute which precludes a creditor from proving his claim in bankruptcy merely because he has collateral security therefor covering the indebtedness either in whole or in part.' The proof of a secured claim implies that the creditor expects his security to satisfy only a part of the debt and serves to announce that he wishes to participate in the estate, together with the general creditors, for the unsecured balance. If the creditor does not wish to claim a dividend on the unsecured balance of the debt, he need not prove the claim. The court is without authority to compel a creditor to file his claim. * * * A creditor may rely entirely on his security. The filing of a claim in bankruptcy is not essential to the preservation of a lien. The failure to file a proof of claim does not affect the creditor's right to the security."

See, also, 2 Remington on Bankruptcy, Sections 735 and 907; 8 C.J.S., Bankruptcy, § 431. The following decisions tend to support the position of the petitioner herein: In re Winner-Franck Baking Company, D. C., 58 F.2d 409 affirmed, Schug v. Caldwell, 3 Cir., 61 F.2d 1039, certiorari denied 288 U.S. 609, 53 S.Ct. 401, 77 L.Ed. 983. In re Cherokee...

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