In re John A. Baker Notion Co.

• Decision Date: 25 July 1910
• Citation: In re John A. Baker Notion Co., 180 F. 922 (S.D. N.Y. 1910)
• Parties: In re JOHN A. BAKER NOTION CO. Ex parte TALCOTT.
• Court: U.S. District Court — Southern District of New York

180 F. 922

In re JOHN A. BAKER NOTION CO. Ex parte TALCOTT.

United States District Court, S.D. New York.

July 25, 1910

George W. Schurman, for claimant.

Frederick M. Czaki, for trustee.

HAND District Judge (after stating the facts as above).

Under Keppel v. Tiffin Savings Bank, 197 U.S. 356, 25 Sup.Ct 443, 49 L.Ed. 790, the Supreme Court finally decided that the surrender requisite to enable a preferred creditor to prove his claim might be after the termination of a judgment in a suit between himself and the trustee. It is true that in that case the determination was in a suit in the state court; but in Re Oppenheimer (D.C.) 140 F. 51, Judge Reed decided that the creditor might file a claim in bankruptcy and be allowed the full amount, after the bankruptcy court itself had declared void certain preferential payments which he had previously received. This was the English law as quoted by Mr. Justice White in Keppel v. Tiffin Savings Bank supra, and unless it be the law under the present act, the result, after Keppel v. Tiffin Savings Bank, supra, will be to make it necessary for a creditor, claiming a disputed preference, to fight out its validity in some other tribunal than the bankruptcy court, which would be a most undesirable conclusion. In my judgment, therefore, a claimant need not avoid the bankruptcy court to get advantage of the rule in Keppel v. Tiffin Savings Bank, supra.

Therefore the trustee here argues, with much force, that there is no reason why such a creditor should not prove his claim at once within the year, and wait for the allowance of his dividends till the determination of the litigation upon which depends the validity of his preference, whether that litigation be in the bankruptcy court or out of it. The trustee further says that such a creditor is in precisely the same position as a secured creditor, who, if he delays filing his claim until after the year, because the security is being liquidated, loses all right to file it at all. In re Sampter, 170 F. 938, 96 C.C.A. 98. I confess that this would be my ruling, were I free to decide the question, because it seems to me that, after Keppel v. Tiffin Savings Bank, supra, a creditor having a questionable preference or security is precisely like any other secured creditor, except that the validity of the security must be determined before his dividends can be finally allowed. In short, it makes no difference whether his security is voidable under the bankruptcy act or by the local law. In either case he may prove for the whole claim, and get dividends upon so much as shall in the end prove to be in fact unsecured. The limitation of section 57n would therefore apply to such a claim. I should therefore regard myself as bound by In re Sampter, supra, rather than by Powell v. Leavitt, 150 F. 89, 80 C.C.A. 43, in the First circuit, and should deny this application.

Moreover the question was in no sense up in Keppel v. Tiffin...