Lerner Stores Corporation v. Electric Maid Bake Shops

• Decision Date: 16 March 1928
• Docket Number: No. 5029.,5029.
• Citation: 24 F.2d 780
• Parties: LERNER STORES CORPORATION v. ELECTRIC MAID BAKE SHOPS et al. In re ELECTRIC BAKING CO., Inc.
• Court: U.S. Court of Appeals — Fifth Circuit

24 F.2d 780 (1928)

LERNER STORES CORPORATION v. ELECTRIC MAID BAKE SHOPS et al.

In re ELECTRIC BAKING CO., Inc.

No. 5029.

Circuit Court of Appeals, Fifth Circuit.

March 16, 1928.

Walter J. Suthon, Jr., of New Orleans, La. (J. Blanc Monroe and Monte M. Lemann, both of New Orleans, La., on the brief), for appellant.

Claude L. Johnson, Sol Weiss, Louis H. Yarrut, and Frank J. Stich, all of New Orleans, La. (Milton P. Firestone, of St. Paul, Minn., on the brief), for appellees.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

FOSTER, Circuit Judge.

In this case the facts, so far as they are material to a discussion of the issues presented, are these:

The Electric Baking Company, Inc., was adjudicated a bankrupt on its voluntary petition, July 3, 1925, and surrendered as assets the movable property in its store on Baronne street, New Orleans, which store had been rented from appellant at a monthly rate of $750 by a written lease having at least a year to run. The record does not disclose any other assets, except a deposit in bank of $56.91.

Appellee, the Electric Maid Baking Shops, was the holder of two chattel mortgages on part of the property in the store, and asked for and obtained the separate appraisement of those articles on which the liens rested. Certain perishable property was promptly sold, and realized $75.91, and the balance of the contents of the store was sold at auction on August 4, 1925; the items covered by the chattel mortgages being sold separately, one lot to a third person for $375, and the other, called a baking outfit, to the mortgage holder for $2,600. The balance of the property was sold for $374.05. The baking outfit was not removed from the store until August 29, 1925, and appellant did not secure possession of the premises until then.

Appellant succeeded in re-renting the premises, October 1, 1925, for $567.67 per month, and made proof of debt for the rent at $750 per month for July, August, and September, 1925, and at $182.33 for the rest of the year, including June, 1926, claiming a lien on all the property in the leased premises superior to the mortgages.

In passing on the trustee's account, the District Court entered judgment recognizing the validity of the chattel mortgages, ranked the liens ahead of the landlord on the baking outfit in the sum of $2,520.87, with 8 per cent. interest from May 9, 1925, until paid, and 10 per cent. attorney's fees thereon, and on the other property in the sum of $280, with 6 per cent. interest from May 14, 1925, until paid, and 6 per cent. attorney's fees thereon, and required a contribution from the mortgage creditor of 85 per cent. of the following items, allowed as costs of administration, to wit: Appraisers' fees, $106; auctioneers' fees, $256.29; referee's costs, $116.75; stenographer's fees, $40; advertising $16 — a total of $534.04, and "a fair amount as storage or warehouse charge from August 4, 1925, to August 29, 1925, for the premises, 143 Baronne street, formerly occupied by the bankrupt," to be paid appellant, but did not fix this amount. The judgment further recognized the lessor's privilege on the proceeds of the property not covered by the chattel mortgages for the period from July 5 to August 4, 1925, in the sum of $750, to be paid after deducting the costs of administration, which amounted to $1,197.06, allowed by the referee and approved by the judgment. Other features of the judgment are immaterial.

We have heretofore held that a mortgage holder is not required to contribute any more to the expense of administration than it would have cost him to foreclose his mortgage, on the theory that he is not to be affected by the proceedings in bankruptcy, if he has a valid lien, under the provisions of section 67d of the bankruptcy act (11 USCA § 107). The trustee is not obliged to administer property burdened with a valid lien. If it appears in the exercise of sound and honest discretion that there is a substantial equity for the general creditors, it is his duty to do so, but in that event the lien creditor loses none of his rights. Gugel v. New Orleans Nat. Bank (C. C. A.) 239 F. 676.

It is material, however, to consider what the rights of a mortgage creditor are. He is entitled to collect his debt in full, with interest to the date...