In re Jersey Island Packing Co.

• Decision Date: 05 June 1905
• Docket Number: 1,204.
• Citation: 138 F. 625
• Parties: In re JERSEY ISLAND PACKING CO.
• Court: U.S. Court of Appeals — Ninth Circuit

138 F. 625

In re JERSEY ISLAND PACKING CO.

No. 1,204.

United States Court of Appeals, Ninth Circuit.

June 5, 1905

J. C Campbell and Walter H. Linforth, for petitioners.

Frank &amp Mansfield, for respondents.

Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge.

GILBERT Circuit Judge.

Myra E Wright, William H. Wright, and W. L. Cobb have presented their petition under the provisions of the bankruptcy act which gives to this court jurisdiction in equity to superintend or revise in a matter of law the proceedings of the several inferior courts of bankruptcy, and they seek to revise an order of the District Court whereby they were enjoined from selling property of the Jersey Island Packing Company, a corporation, which property they were about to sell under the power of sale given to them in certain trust deeds. The District Court made such a restraining order upon a petition of certain unsecured creditors of said corporation, which was filed in the District Court but three days before the date of the proposed sale, at the same time with a petition that the said corporation be adjudged a bankrupt. The former petition presented to the District Court, in substance, the following allegations: That the assets of said alleged bankrupt consist of about 4,000 acres of land described in the petition, together with the improvements, machinery, implements, and tools thereon situated, all of the value of $400,000. that on February 14, 1902, a mortgage on said property was executed to the Mercantile Trust Company, a corporation, to secure $100,000, represented by bonds of said corporation; that, as the petitioners are advised and believe, the issue of said bonds was and is illegal and void, for the reason that they were not used for purposes and objects of the company, and were issued neither for money paid, labor done, nor property actually received; that on December 11, 1902, said corporation executed to the Germanic Trust Company, afterwards known as the Central Trust Company, a conveyance and assignment of all the property of said corporation, and on April 27, 1905, said Central Trust Company transferred all of said property to William H. Wright, who in said transfer was alleged to be the owner and holder of a note for $30,000 issued by said Jersey Island Packing Company, and secured by said deeds of trust; that on September 19, 1903, there was filed for record in Contra Costa county, Cal., another deed of trust, executed by said corporation to William H. Wright and Myra E. Wright, to secure the payment of $100,000; that in said deeds of trust it is provided that notice of a sale thereunder shall be published in a newspaper in the city and county of San Francisco, as well as a newspaper published in the county of which the property is situated, and petitioners aver that notice has been published under said provisions, and that the time of sale under said notices is May 22, 1905; that William H. Wright is the treasurer of said Jersey Island Packing Company, and that, as petitioners are informed and believe, he has attempted to conceal from said company and others interested the intended sale of said property; that, unless restrained by this court, said sale will be made on May 22, 1905, to the irreparable loss and injury of all unsecured creditors, and said trustees under said deeds of trust will be the only bidders at said sale, and will bid in the property for the amount of the indebtedness mentioned therein; that, if all the property of said alleged bankrupt is disposed of as a whole in this court, it will realize sufficient to pay all its indebtedness, secured and unsecured; and that the unsecured claims aggregate about $140,000.

It is earnestly insisted on behalf of the petitioners that the District Court had no jurisdiction to make the order enjoining the sale; that the deeds of trust are absolute conveyances of the property of the alleged bankrupt, and the right of the trustees thereunder to sell upon default is not and cannot be affected by the proceedings in bankruptcy. Upon the proposition that the trust deeds are absolute conveyances, the petitioners rely upon Powell v Patison, 100 Cal. 234, 34 P. 676, and Moore v. Calkins, 95 Cal. 435, 30 P. 583, 29 Am.St.Rep. 128. The first of these cases goes no further than to recognize the established distinction between a defeasible and an absolute trust, and to say that the latter is a conveyance of property to a trustee for the purpose of selling it to pay debts, the effect of which is to pass the title unconditionally to the trustee, and to vest it in him unconditionally and indefeasibly for the purposes of the trust. The second case held only that the instrument then under consideration was a trust deed; that it conveyed to the grantee, who was a creditor of the grantor, the legal title, and conferred on him the power to sell the property thus conveyed, and transmit the legal title to his grantee. The trust deeds of the alleged bankrupt's property in this case are clearly not in the nature of an absolute conveyance. They are conveyances to secure debts of the grantor not then due. 'Like the mortgage at common law, the trust deed passes the legal title to the grantee in those jurisdictions where a mortgage passes such interest, and leaves in the grantor the equity of redemption only. Likewise in those states where it is held that the legal title remains in the mortgagor the same rule is generally applied in favor of the grantor in a trust deed.' 28 Am.& Eng.Enc.of Law (2d Ed.) 753. The grantor of these trust deeds undoubtedly retained an interest in the property conveyed, which in bankruptcy would pass to its trustee for the benefit of its unsecured creditors. In re Union Trust Company, 122 F. 937, 59 C.C.A. 461. The filing of a petition in bankruptcy is in substance and effect an attachment and an injunction, and it places the property of the bankrupt constructively in the custody of the court of bankruptcy. Loveland on Bankruptcy, Sec. 150; In re Weinger, Bergman & Co. (D.C.) 126 F. 875. Property on which there is a mortgage or other lien passes to the trustee in bankruptcy, and is therefore in the custody of the court of bankruptcy. In re Rochford, 124...