Rode & Horn v. Phipps

• Citation: 195 F. 414
• Decision Date: 11 April 1912
• Docket Number: 2,164.
• Parties: RODE & HORN v. PHIPPS et al.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

195 F. 414

RODE & HORN v. PHIPPS et al.

No. 2,164.

United States Court of Appeals, Sixth Circuit.

April 11, 1912

[Copyrighted Material Omitted]

Isaac Harr (Harr & Burrow, on the brief), for plaintiffs in error.

C. J St. John, for defendants in error.

Before WARRINGTON and KNAPPEN, Circuit Judges, and KILLITS, District judge.

KNAPPEN Circuit Judge.

Phipps was adjudicated bankrupt on his voluntary petition June 24 1910. May 26, 1909, Rode & Horn had contracted with Phipps for the purchase from the latter of 1,000,000 feet of lumber, to be cut by the latter and piled by him at Hampton or Plato, Tenn., on land leased by Phipps to Rode & Horn for the purpose. Rode & Horn agreed to advance $7.50 per thousand feet on all lumber when so piled at the places named, and to ship all lumber as soon as delivered by Phipps to the railroad, completing payment therefor within 20 days from invoice, less a deduction of 2 per cent. Phipps further agreed 'to secure the $7.50 paid by mortgage on the lumber. ' This contract was not recorded under the statutes of Tennessee relating to chattel mortgages and liens. July 31, 1909, Phipps mortgaged to King certain timber and lumber to be cut therefrom (including the lumber to be cut for Rode & Horn) for $6,000, one half that amount being for money advanced, the other half for indorsements to be made by King for Phipps. This mortgage was duly filed and recorded. The mortgage expressly authorized Phipps to manufacture the timber into lumber, and to remove the same to Plato, and there pile it, the mortgage lien to attach to the lumber so manufactured, removed, and piled, but with express authority to Phipps to incumber the lumber so piled to Rode & Horn for not exceeding $7.50 per thousand feet, to the extent of advancements made to Phipps on the particular lumber incumbered, such mortgage to be a first lien upon the lumber, Phipps, however, not to ship the same until he had deposited in a bank named, for King's benefit, $2 for each thousand feet shipped. After the bankruptcy, Rode & Horn filed their petition with the referee, alleging, in substance, the delivery by Phipps to them of 283,000 feet of lumber at Hampton, Tenn., ready for shipment; that petitioners had not only advanced $7.50 per thousand upon this lumber, but had paid in full its purchase price, and that the lumber belonged to petitioners and was in their possession ready for shipment, although the bankrupt had included it in his schedules as a part of his estate, and that it should be released to petitioners from the bankruptcy receivership; that Phipps had also cut and piled on the millyard at Plato about 300,000 feet of lumber on which petitioners had advanced $7.50 per thousand feet (except as to about 17,000 feet), and the lumber delivered to and taken possession of by petitioners before the bankruptcy proceedings; and that Rode & Horn will owe a balance on the contract price when the expense of hauling to Hampton has been paid, and that this lumber does not belong to the bankrupt estate. The petition further alleged that shortly before the bankruptcy petitioners had paid bankrupt $917.52, a portion of which completed the payment for the 283,000 feet at Hampton, the remainder to be applied upon the lumber at Plato, and that this payment was obtained by fraudulent misrepresentations made by the bankrupt, and, in contemplation of bankruptcy, the check for this payment having been directly turned over by the bankrupt to the receiver in bankruptcy. The petitioners asked that, unless the lumber shall be treated as belonging to them (an order to which effect was asked), the payment in question be set aside as to the portion thereof applicable to the lumber at Plato, and the last-named sum, $634.38, returned to petitioners. The petition further alleged the advancement of considerable sums in excess of the $7.50 per thousand provided by the contract, and partly on lumber discarded on inspection, which latter sum was alleged to be due petitioners. The petition refers to deeds of trust held by King and one Vaughan (apparently referred to in the bankrupt's schedules), and denies that such deeds of trust are superior and prior to the rights of Rode & Horn in the lumber, and reserves the right to file exceptions to claims thereunder when the same shall be presented 'by petition in this cause'; and the petition declares that:

'Notice is hereby given that proof of said deeds of trust and of the claims and rights of the beneficiaries thereunder is demanded, and each of said instruments and each of said claims hereby challenged.'

The petition contained this clause:

'As to what portion of the other funds or payments shall be held to be due petitioners must be determined by the court when the question of petitioners' ownership of the lumber referred to and petitioners' right to have returned to them the $900 payment shall be passed upon. A settlement of these matters will be necessary in order to establish the exact amount of petitioners' claim.'

King also presented his claim as a prior lien against the lumber by virtue of his mortgage. The referee found King had a first lien on all the lumber in question, subject, however, to the lien in favor of Rode & Horn to the extent of $7.50 per thousand feet on the particular lumber on which they had so advanced; the latter having, as between themselves and King, a first lien to that extent, but that Rode & Horn stand on an equal footing with general creditors as respects said lien for advancements, held that Rode & Horn should account to King for $2 per thousand feet on 70,000 feet of lumber shipped from Hampton. He also held that the transaction in regard to the check for $917.52 was not fraudulent, that the check belongs to the bankrupt's estate, and Rode & Horn not entitled thereto. The District Court affirmed the order of the referee. Neither King nor the trustee in bankruptcy have asked review.

1. As to the question of remedy: The case is docketed here as on a writ of error. King contends that this court has no jurisdiction to review the decree below upon such writ. Plaintiff in error asked on the hearing that we treat the review as on appeal, urging that such remedy was seasonably applied for, and should have been allowed. It is clear that appeal under section 25a of the bankrupt act was not seasonably applied for, because, while the application was made within 10 days after the denial of motion for rehearing, such motion was not made until more than 10 days after the entry of the order complained of, and the right to appeal, once lost, was not revived by the petition for rehearing. Conboy v. First Nat. Bank, 203 U.S. 141, 27 Sup.Ct. 50, 51 L.Ed. 128. We have no power to allow an appeal not taken within the statutory period. The application was, however, presented in time for appeal under section 24a.

As to the right of review under section 24a: It is clear that if Rode & Horn had intervened merely for the assertion of their right to the lumber in question, and so to secure its possession, or merely for the purpose of establishing a claimed lien thereon, a 'controversy' within section 24a would have arisen. Hewit v. Berlin Machine Works, 194 U.S. 296, 300, 24 Sup.Ct. 690, 48 L.Ed. 986; York Mfg. Co. v. Cassell, 201 U.S. 344, 26 Sup.Ct. 481, 50 L.Ed. 782; Security Warehousing Co. v. Hand, 206 U.S. 415, 27 Sup.Ct. 720, 51 L.Ed. 1117, 11 Ann.Cas. 789; Coder v. Arts, 213 U.S. 223, 234, 29 Sup.Ct. 436, 53 L.Ed. 772, 16 Ann.Cas. 1008; Knapp v. Milwaukee Trust Co., 216 U.S. 545, 553, 30 Sup.Ct. 412, 54 L.Ed. 610; In re Doran (C.C.A. 6) 154 F. 467, 468, 83 C.C.A. 265. Aside from the claim for advances made on the lumber discarded on inspection, and the claim for return of money as obtained by fraud, the only difference is that they presented their claim of ownership to the lumber in connection with their claim as creditors (as dependent upon the determination of the question of ownership), and including questions of priority between themselves and King and Vaughan. Do these facts distinguish the present case from those last cited; there being upon this review no controversy over the claim of plaintiffs in error as general creditors? We are disposed to the view that a controversy is presented under section 24a.

If, however, this is a bankruptcy proceeding, revision may be had in matter of law under section 24b, and the review may include the rank or priority of the claims (see Barnes v. Pampel, 192 F. 525, decided by this court January 3, 1912, and cases there cited). Plaintiff in error filed in the court below a petition entitled therein, but addressed to the judges of this court, praying for an appeal and writ of error and a 'revision in matters of law and of fact. ' The assignment of errors asked that the 'same may be reviewed upon appeal and writ of error or review. ' The bond is conditioned for prosecuting 'appeal or petition for revision.' While in the later proceedings the theory of petition for revision seems to have been lost sight of, yet, as no order allowing such right of revision is contemplated by the statute, we would be justified as treating the case as here on petition for revision under section 24b, as well as on writ of error under section 24a. It is therefore not very material whether the case presents a controversy under section 24a, or a proceeding in bankruptcy under section 24b.

Are the questions presented reviewable upon writ of error? Review of final orders under section 24a may be had upon writ of error or appeal (In re Mueller (C.C.A. 6) 135 F. 711, 68 C.C.A. 349), depending upon whether the proceeding in the District Court was at law or in equity, and with the difference in practice that under writ of error questions of law only can be considered, while on appeal...