, 1873-10-04

Tho CxCitomont in Now York OH lnufadh9 COLI
aoquent upon tho suspension Of tho brokerage
firm Of Bird, Grinnoli i Co. was not occaHionod
by tho announcement OF tho failure, but by tho
injunction issued by Judge Dlatohfor1, reatrain-
ing tho holders Of collatora1s from selling. This
iB undoubtedly grave mattor, and ono affecting
a vast multitude of loana in all parts Of tho
country. If 1t becomes sott]od principle
Of law TINT w1lonever q petition ls ilod in
bankruptcy tho Court may tic up the collaterals
which tho bankrupt has pledged for prior loans
Of money, tho value Of collateral security will
bo materially lossened. It is tho ossonco Of col
lateral notoa that thoy give, by contract between
the maker and tho holder. the right to sell upon
default. Tho practice of oDjoining such salo at
any time when tho makor OF tho note shall fall
to pay somo other doht, and receive notice OF q
bankruptcy proceeding, might, in somo casos,
forco tho holder Of the note into bankruptcy by
his inability to borrow at all oven upon the very
highest security.
Tho injunction in tho caso Of Bird, Grinnell Il
Go. may have been granted upon representa-
tions Of fraud In the petition, and may be dis
solved upon hearing Of tho argument. It may
have boon alleged that tho collatorals were put
up, not for new advance Of money, but to
aecuro old dobts, in which oaso the firms holding
the collateral would be in tho position Of pre-
ferred creditors in violation Of tho law.
It may also DO TINT tho injunction
was granted In order thnt tho coliatorals
should not DO sacrificed. This Ia douo frequent
~ by Bankrupt Courts In tho matter Of roal cB-
tate mortgagos or trust doeds. Tho nature Of
collateral however, Ia essentially different from
roal estate mortgages. It has boon hold TINT
any property, real or personal, under D mort-
gago or contract Of Balo, may be redeemed
out Of the nsaots Of the bankrupt and discharged
from the lien for the joint benefit OF the credit
ora; but this course doos not appear to hayo
been adopted III tho drinnoll caao, though it
would DO naturally tho step to tale In justice to
all parties, II 1t woro the purpoao Of tic Court
to protect tho collatorals from being sacrificed.
Tho law provides TINT q Bankruptcy Court " may,
by its injunction, restrain the debtor, aud auy
other person, In the meantime. from mailing any
transfer disposition Of any part Of the debtors
property, not excepted by this act." Undor this
provision, tho powers OF a Bankrupt Court have
been hold to bo very broad. The power to COL
1ect assets hns boon given by tho law, aud 1t is
hold that this power includes tho right
| to restrain tho parties from liquidating
their liens without the intervention of
| the Court, anu to prcsorvo tho property
by restraining its salo until tho lien is ascor-
tainod to be- good Or void. The petition in the
| caao Of Bird Grinnol Il Co. probably sets forth
fraud, aud the Court las thoroupon exercised
its power to onjoin pending tho order to show
causo.
Tho improperly Of permanent injunction re-
straining tho sale Of collatorals, under lawful
contract to sell upon dofault Of payment, during
the winding up Of tho debtors assots in bank
ruptcy, can roadily be recognized, and 1t is not
probable that my Bankrupt Court would UNDER
take to do this. 1t is question whether
such proceeding would not be unconstitution-
a1, as 1t would bo tho impairment Of tho obliga-
tion Of o contract. As thore iB always somo
reason to suspect that Wall stroot stock con-
tracts arc taintod with fraud, Judge Dlatclford
probably had good ground for onjolning tho Hale
Of tho Grlnnel colatoralB. In such case,
thoso is nothing IN the decision calculated to
impair tho security or to destroy the credit on
which bona Jqde collateral loans are made.