Evening star. [volume] (Washington, D.C.) 1854-1972, 1904-11-12

Creditors holding Claims winch are Sc
cured shall not, in respect to sucn
claims be entitled to vote at creditors
meetings. Eor shall such claims be counted
I'm computing either the number OF cred
iiors or the amount of their claims, unless
the amounts Of such claims exceed the val
mes of such securities and then
only for such excess.
Claims of secured creditors
may he allowed to enable such creditors To
pa ticipate in the proceedings at creditors
meetings held prior to the determination or
the value of their securities but
shall he allowed for such sums only as tn
the courts seem to be owing over and above
The value of their securities.
The right of creditors to vote may bs
summarized follows: creditor who
does not hold security is allowed to vote
for the full amount of his claim. while one
who does hoid SECURITY is allowed to vote
If at all only for the amount by which MS
claim. may seem. to the court. TO exceed the
value of his security.
ut is therefore manifestiy necessary, De-
fore proceeding to an election for the al'-
pointment of q trustee or trustees, to deter
mine which creditors are secured credit-
Ors.
Section l. subparagraph % OF <e act
rroyid.s as follows: Secured creditor
shall include creditor who has security
for his debt upon the property or the bank.
rupt of a ma ture to be assignabie unuer tho
act or who owns such a debt Tor Wnch
some indorser surety or other persons sec
oudariy liable for the bankrupt has suca
Sc Irty upon the bankruptS assets.
ile security referred to by the bankrupt
in his schedules as held by large majority
Of the creditors whom he class mes as Sc
cured Is designated by him as List NO. l.
The creditors who are named oy MN as Sc
cured upon it are the holders or promlssory
notes executed by third persons and guar
anteed by the bankrupt by Endorsement.
Every creditor of this class who has
proved his debt has proved it as secured.
Property Of the Holders.
I'm view of the fact that these notes are
The property not of the bankrupt, but Of
their respective holders. these creditors. II
entitled to be classed secured are so
entitled, not because they are secured upon
but by means of these notes.
The mere fact that the notes of this
kind held by this class of creditors contain
statements that certain other notes are
deposited with the bankrupt as collateral
security does not ipso facto. confer upon
these creditors any legal title to the notes
referred to. Personal property can be sub
jected to the payment of debt as collat-
eral security either by way OF pledge or
mortgage. The essential incident of
pledge Is possession by the Pledge of the
property pledged, and although this pos
session may have been merely temporary
and the subject of the pledge Immediately
returned to the oledgor as bailee or agent
for the pledged. there is nevertheless the
necessity for the delivery. either actual or
constructive. OF the property pledged to the
pledgee The essential incident of mort
gage is title conferred by the mortgagor
uron the mortgage to the property mort
gagged.
In each proof of debt filed by creditors
of this class there is an averment of the
fact that the creditor holds security for
his debt. but in no one of them is there any
statement of the fact that these So-called
collateral notes were ever pledged or mort
gagged to any one of these creditors or were
ever at any time in their possession. If
such had been the fact IT was not only
the privilege but the duty of these creditors
so to state in their proofs of debt in order
that they might assert their rights as
pledges mortgages In the absence of
any such averments. therefore, it must be
presumed that these collateral notes have
never been either pledged or mortgaged to
these creditors.
Not Secured Creditors.
1T has been suggested that an equitable
lien exists i'm favor of creditors holding
notes which purport to be secured by the
so-called collateral notes referred to as
list of notes No. l. 1t is manifest that
these re-itors do not fall within the sec
ond class of secured creditors cas- defined
by section l. Subparagraph %, because the
only indorser of the notes held by them Is
the bankrupt himself. If, therefore, they
are entitled TO be classed secured credi-
tors they must fulfill the requirements of
the definition of the first class mentioned in
section l. subparagraph D. namely, a
creditor who has security upon the prop
erty of the bankrupt, etc
There are, therefore. three prerequisites
necessary to the creation and establishment
of equitable lien, namely %. an inten-
ton to create 1t: 90. such a designation OF
the property to be charged as will render 1t
capable of identification, and CD, ownership
of the property to be subjected to the lien
by the person by whom it is attempted or
intended to create 1t. The intention to ere
ate such a lien in this may be inferred
from the language contained in the various
notes filed by the creditors who claim to be
secured upon the so-called List No. l.
The property referred to which is to be SUBJ
jected to the lien. although not described
with minute particularly, is sufficiently
designated to be capable of Identification
The only question which causes me any
difficulty is that of ownership.
Makers Are the Owners.
The notes held by the creditors whose
status is the subject of this opinion indicate
upon their face that the makers are the
owners of these so-called collateral notes.
One of the notes referred to in this opinion
embodies an authorization to sell this List
No. l so clearly Indicative of ownership as
to estop the bankrupt to deny it, In fact
the recitals in all of these notes which pur-
port to be secured upon List No. l. are so
strongly indicative of ownership on the part
of the makers as materially to strengthen
relation which the parties sustain upon the
faces of these instruments.
An inspection of the schedules filed by
the bankrupt discloSes the fact that he in
cludes list No. l among the assets. Are
there innumerable lists bearing that mark
or identification, or mystifca ton In the
office of the bankrupt? Is he Joint owner
with all of the makers of the innumerabIe
notes purporting to be secured upon a
Last NO i? So far the determination of
the status of creditors holding notes which
purport to he secured upon List No Is
concerned il is equally immatarial whether
the makers of these notes are or are not
the owners of that list. In neither case can
the holders Of these notes be held to be
secured creditors. In the one case they
are at best entitled to attempt to enforce
an equitable lien upon the property of a
person other than the bankrupt. In the
other case, in the absence of all proof in
this case at the present time they have
no security whatever upon the property
of anyone.
This case has been pending for more
than two months.
Applying the law to these facts I am of
opinion that those persons are not secured
creditors of Thomas e. Waggaman who
hold notes which recite that as collateral
security for their payment there are depos-
lted with the bankrupt certain notes Sc
cured upon real estate, which notes are
enumerated and described In a list known
N m yxrhtN 81 IT,.