Leonard v. Field

• Decision Date: 28 May 1934
• Docket Number: No. 7285.,7285.
• Citation: 71 F.2d 483
• Parties: LEONARD v. FIELD.
• Court: U.S. Court of Appeals — Ninth Circuit

71 F.2d 483 (1934)

LEONARD v. FIELD.

No. 7285.

Circuit Court of Appeals, Ninth Circuit.

May 28, 1934.

Douglas T. Ballinger, of Seattle, Wash., for appellant.

Raymond G. Wright and Gail M. Williams, both of Seattle, Wash., for appellee.

Before WILBUR, SAWTELLE, and GARRECHT, Circuit Judges.

WILBUR, Circuit Judge.

This is an appeal from an order of the District Court made and entered September 12, 1933, affirming an order of the referee in bankruptcy made on May 10, 1932, disallowing a petition for reclamation filed by A. W. Leonard. According to the allegations of the various claims and petitions for reclamation filed by the petitioner he intrusted certain stocks of the aggregate value of $28,464.50 to the bankrupt as security for margins upon stock to be purchased by the bankrupt for and on behalf of the appellant.

On June 22, 1931, appellant filed claim for $31,500 for the conversion of the securities deposited by him as collateral which it was alleged were sold without authority. The next day the claim was withdrawn, claimant averring "that since said claim was turned over to be filed claimant has learned additional facts which make it unwise for him to prove his claim as a general creditor." On October 27, 1931 a claim was filed for $28,464.50, together with interest from June 25, 1930, at 6 per cent. per annum for the conversion of the aforementioned stock including 20 shares of the Pacific National Bank of Seattle, valued at $5,400, and 200 shares of Stone and Webster stock valued at $11,512.50. This claim was filed by James Crehan of Seattle, assignee petitioner. In the meantime, on March 10, 1932, the referee in bankruptcy made an order that all claims "to any of the stocks, bonds, securities, cash or assets of any kind or the proceeds thereof now in the possession of the trustee in bankruptcy be filed on or before April 15, 1932, or be forever barred." Personal notice thereof was to be given to all known claimants and also published for two weeks in the Daily Journal of Commerce. Thereafter, on April 14, 1932, petitioner filed a claim for the proceeds of the sale of 20 shares of stock of the Pacific National Bank of Seattle, being the 20 shares of Pacific National Bank stock mentioned in the claim theretofore filed for $28,464.50. This petition was granted in part for the sum of $2,842.65 on May 17, 1932. On April 30th, after the date fixed for filing claims in reclamation, petitioner filed a petition for reclamation for the proceeds of the sale of 100 shares of Stone and Webster common stock. Flora Muffley joined in this petition making a similar claim for the proceeds of 50 shares of the Puget Sound Power & Light Company stock. It was alleged in this claim by the claimants that these shares of stock were given to the bankrupt as collateral security for the purchase of stocks listed on the New York Exchange, but as a matter of fact no such stocks were purchased and that the stocks pledged by the claimants were hypothecated by him without right or authority for a loan of $8,500, that the pledge holder had sold the property for $12,048.68, and that the balance of $3,645 had been paid to the trustee in bankruptcy as a part of the fund turned over by the equity receiver for the bankrupt who had been appointed in an equitable action before bankruptcy. In this joint claim there was no segregation of the amount claimed by the two claimants. Supplementary to this claim a verified petition for a hearing was filed on May 10, 1932. This petition alleged the making of the claim of October 27, 1931, for $28,464.50, and alleged:

"That said claim set up, with particularity, the delivery of certain collateral stocks to Paul E. Williams Co. as security for the purchase of shares through bankrupt as broker; that as a matter of fact, no shares were so purchased by bankrupt for petitioner and that no indebtedness then, or at any time during the court sic of his account with bankrupt, existed between them; that said claim further stated that no securities were returned to said A. W. Leonard, but that the same were sold or pledged and the time and manner in which such disposition was made was unknown to petitioner; petitioner states that the books of Paul E. Williams Co. were kept in San Francisco, and creditors of said concern were unable to ascertain the facts or circumstances in connection with the purchase or sale of securities for their accounts or the circumstances surrounding the disposal of their collateral; that said books were not brought to Seattle until the fall of 1931, and that the proceeds of the sale of 100 shares of Stone & Webster stock, being certificate No. N-10076, registered in petitioner's name, although paid to the Trustee in Bankruptcy, was not at that time traceable as such proceeds.

"Petitioner further states that, on or about March 10, 1932, the above-entitled court sent to all customers of the bankrupt a notice, copy of which is attached hereto and marked `Exhibit B', and, although petitioner received copy of the same, he was without knowledge or information concerning the company's affairs and had no information concerning the survival of securities belonging to himself or any proceeds thereof; that, on or about April 30, 1932, he discovered that proceeds of the sale of said certificate of Stone & Webster stock had been paid by the Peoples Investment Company, who had unlawfully pledged the same, to C. K. Poe, who held said funds as trustee for the bankrupt and who later turned same over intact to the trustee herein.

"Petitioner believes that neither the trustee nor his attorneys were informed that proceeds of sale of petitioner's securities were in their possession and that the petitioner himself was not informed that they were available for reclamation until the time for appearance under the notice referred to herein as `Exhibit B' had expired. April 15, 1932

"Petitioner further states that, on or about April 14, 1932, he made and filed an amended petition for the reclamation of the proceeds of sale of collateral security; Pacific National Bank stock that said amended petition is on file in this court and is referred to and made a part hereof by reference; that said amended petition prayed for general relief as follows: `and for such other and further relief as to the court may seem just.'

"The basis of petitioner's claim for the proceeds of this stock is as follows:

"First: That he delivered said certificate as security against purchases of stock to be made for his account by the bankrupt. He alleges that no purchases were made, although purported transactions were charged to his account which were without foundation in fact.

"Second: That his collateral, consisting of the aforementioned 100 shares of Stone & Webster stock, was immediately hypothecated by the bankrupt.

"Third: That, on or about March 31, 1931, said certificate, still registered in petitioner's name and identifiable as his own, was delivered to the Peoples Investment Company, a holding corporation for Paul E. Williams Co. of Washington, and others.

"Fourth: That said Peoples Investment Company pledged said certificate, with others, as collateral on a loan made to them by the American Exchange Bank of Seattle; that, on or about April 13, 1931, said collateral, including petitioner's, was sold by the bank and the proceeds applied to the payment of the loan against them; that the full sale price of said securities was $12,048.68; after deduction of the loan of $8,500, there remained $3,548.68, which said sum is identifiable as proceeds of said 100 shares of Stone & Webster stock sold for $4,925, subject to the right of other holders of collateral in said pledge to demand contribution; that said excess, plus unearned interest totaling $3,675 was by the Peoples Investment Company delivered to C. K. Poe, acting as Trustee for Paul E. Williams Co., and by him delivered to the Receiver and the Trustee in Bankruptcy of the above estate; that petitioner can trace the proceeds of his stock, as outlined above, with particularity.

"Amendment: Petitioner further states that, if his Amended Petition for Reclamation heretofore filed on April 14, 1932, for 20 shares Pacific National Bank stock, is not sufficiently broad to accomplish reclamation of the proceeds resulting from the sale of his said certificate of 100 shares of Stone & Webster stock, he be permitted to amend the same by asking for the surrender of the proceeds of such sale under allegations similar...