Kennedy v. Pierce's Loan Co.

• Decision Date: 17 March 1903
• Citation: 73 S.W. 357,100 Mo. App. 269
• Parties: KENNEDY v. PIERCE'S LOAN CO.
• Court: Missouri Court of Appeals

73 S.W. 357

100 Mo. App. 269.

KENNEDY v. PIERCE'S LOAN CO.

Court of Appeals at St. Louis, Missouri.

March 17, 1903.

BANKRUPTCY — INVOLUNTARY PETITION — PLEDGES—TRANSFER OF TITLE—NECESSITY OF ADJUDICATION—RIGHTS OF TRUSTEES.

1. Bankr. Law 1898, § 70, subd. 5 (30 Stat. c. 541 [U. S. Comp. St. 1901, p. 3451]), provides that a trustee shall be vested with the title of the bankrupt as of the date of the adjudication to "property which prior to the filing of the petition he might by any means have transferred, and which might have been levied on or sold on judicial process against him," and section 67d [page 3449] declares that liens given or accepted in good faith for a present consideration, and not in contemplation or in fraud of the bankrupt law, shall not be affected thereby. Held, that where a bankrupt, after the filing of an involuntary petition and before adjudication, pledged certain personal property to defendant for loans which defendant made in good faith, without notice of the bankruptcy proceedings, the pledge was valid, and the property could not be recovered by the trustee.

Appeal from St. Louis Circuit Court; D. D. Fisher, Judge.

Action by Pierre B. Kennedy, as trustee in bankruptcy of Morris Ellman, against Pierce's Loan Company, to recover certain personal property. From a judgment in favor of defendant, plaintiff appeals. Affirmed.

Abbott & Edwards, for appellant. Kinealy & Kinealy, for respondent.

REYBURN, J.

This is an action of replevin submitted to the court below upon the pleadings and agreed statement of facts, which reveal the following situation:

On October 4, 1901, an involuntary petition in bankruptcy was filed against Morris Ellman by his creditors, and November 21st following he was duly adjudicated bankrupt in the District Court of the United States in and for the Eastern Division of the Eastern Judicial District of Missouri, and plaintiff was duly elected and qualified as trustee of his estate. On October 16, 1901, the bankrupt pledged with defendant, a corporation created under the laws of Missouri, and in business in the city of St. Louis as a duly licensed pawnbroker, certain chattels, consisting of the jewelry mentioned, to secure a loan of $300 due in 30 days, and on the 18th day of October, 1901, again pledged with the defendant, as such pawnbroker, certain other jewelry described, to secure the further advance of $300 due in 30 days, said Ellman receiving from defendant the sum of $300 at each time of such pledges. The period of redemption of the articles thus pawned by the bankrupt on October 16, 1901, expired February 15, 1902, and the period of redemption for those articles pawned October 18, 1901, expired February 17, 1902, and, at the expiration of the redemption periods, defendant immediately transferred all the articles from a safe in its office, in which it kept only property pawned with it, to a safe in which it kept only its own absolute property. Ellman at the times of pawning the jewelry with defendant was a stranger, not known to the officers or agents of the defendant, and neither defendant nor any of its officers or agents had any knowledge or information that a petition in bankruptcy had been filed against Ellman at any time or by any person, nor did they or any of them have any knowledge or information respecting the financial condition of Ellman. All the property pledged belonged to and was in the possession of Ellman prior to October 4, 1901, and thereafter continued in his possession until pawned by him with defendant, and its total value was $650.

Upon submission of the case upon the agreed facts, plaintiff asked the court to give a series of declarations of law, embodying the proposition that the filing of the petition of bankruptcy against Ellman conveyed constructive notice of such proceeding to defendant, and that thereafter defendant in its dealings with Ellman was bound to take notice of the filing of such petition, which was, in effect, an attachment and injunction, and that, under the facts, defendant acquired no title to the property involved, which the court refused, and at the instance of defendant gave an instruction that, under the law on the agreed statement of facts, the finding and judgment must be in favor of defendant, and the court, sitting as a jury, found and rendered judgment in favor of defendant.

It is argued on behalf of plaintiff that, after the filing of the involuntary petition in bankruptcy, Morris Ellman had no title to the personal property which he had pledged for personal loans with defendant, but that a bankrupt's estate, assets, and liabilities alike stand as of the date of the filing of the petition, and from that time the prospective bankrupt becomes, at most, a mere trustee for his creditors, and powerless to dispose of his property in any manner.

The filing of the bankruptcy proceeding, it is contended, was constructive notice to all the world of its pendency, and thereafter all persons engaging in any transactions with Ellman dealt with him at their own peril, and charged with notice of the possible adjudication of his insolvency and its consequences. In support appellant quotes the language of the Chief Justice of the United States Supreme Court from the opinion in Mueller v. Nugent, 184 U. S. 14, 22 Sup. Ct. 275, 46 L. Ed. 405: "It is as true of the present law as it was of that...