Johnson v. Bixby

• Decision Date: 23 May 1918
• Docket Number: 5017.,190
• Citation: 252 F. 103
• Parties: JOHNSON et al. v. BIXBY et al. (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

252 F. 103

JOHNSON et al. v. BIXBY et al. (two cases).

Nos. 190, 5017.

United States Court of Appeals, Eighth Circuit.

May 23, 1918

Rehearing Denied September 11, 1918.

Randolph Laughlin, of St. Louis, Mo. (Emil A. Roebke and L. E Richardson, both of St. Louis, Mo., on the brief), for petitioners and appellants.

Frank H. Sullivan, of St. Louis, Mo. (Jones, Hocker, Sullivan &amp Angert, of St. Louis, on the brief), for respondents and appellees.

Before HOOK, CARLAND, and STONE, Circuit Judges.

STONE Circuit Judge.

This is a contest between three parties, Johnson, Schoellhorn, and Bixby, for priority in the assets of the bankrupt estate of Payne & Becker, a brokerage partnership. Each of these three parties had deposited with the bankrupt, under different arrangements and agreements, certain shares of stock indorsed in blank; none of these deposits, however, authorizing the subsequent use made of the shares by the bankrupt. Shortly after securing the shares the bankrupt pledged them to its Chicago correspondent, Finley, Barrell & Co., as collateral to secure existing and future indebtedness. Some time after this had been done the bankrupt became financially involved. At that time Finley, Barrell & Co. had closed out all of its dealings with the bankrupt, except one small transaction in New England stock. Immediately upon ascertaining the financial difficulties of the bankrupt, Finley, Barrell & Co. proceeded to realize on much of the pledged collateral of all kinds which it held, including the shares of the three parties here involved. In the course of doing this it sold a large amount of collateral not here involved, and the shares belonging to Johnson for $4,183.50, and those belonging to Schoellhorn for $12,217. The next day it sold the Bixby stock for $5,435.50. The sale of the collateral up to the time the Bixby shares were sold was sufficient to pay all indebtedness due from the bankrupt to Finley, Barrell & Co., and leave an excess of $3,356.65, due the bankrupt. The subsequent closing out of the New England stock (the day following sale of the Bixby stock) resulted in a loss to Finley, Barrell & Co. of $746.56, thus leaving a final credit due the bankrupt of more than $2,500, without the proceeds of the Bixby shares, and of $8,101.65, including such proceeds. This fund, and some shares, not here involved, which had been pledged with Finley, Barrell & Co., but not sold by them, were remitted to the trustee. To this fund each of these contestants lays claim. The referee prorated the fund between the three on the basis of the amounts realized for the respective stocks.

Upon review, the District Court modified this disposition of the amount to payment in full of the Bixby claim and proration of the balance between Johnson and Schoellhorn. A petition to revise and an appeal bring this order before us. Several errors are pressed upon our attention, which will be noticed in turn.

It is said that hypothecation of Bixby's stock by the bankrupt was no greater breach of trust than the hypothecation of the securities of Johnson and of Schoellhorn. Without examining this contention, it may, for the purposes of this opinion, be taken that the bankrupt was without authority to hypothecate any of the stock. The fact, however, is that it did pledge all of it, and, since the certificates were signed in blank and taken innocently by Finley, Barrell & Co., such pledge was binding.

It is next contended that the...