Court Opinion

ID: 8789507
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:46:20.737246+00
Date Added: 2024-06-11T17:03:16.224390
License: Public Domain

CHATFIFRD, District Judge.
In the above matter adjudication occurred on the 8th day of June, 1912, and the first and only dividend was declared on the 12th day of July, 1913. The Mechanics & Metals National Bank attempted to prove a claim at the first meeting, which it appears was rejected by the referee, but no notice of this rejection was given to the creditor and no inquiry was made by the creditor before the declaration of the dividend. Although the year has elapsed, the creditor has asked to be allowed to prove its claim (thus necessarily being included in the discharge), and this relief was ordered by the *208court, without determining whether the creditor would he able to obtain any payment of his debt, even if the claim were allowed. The referee has rejected the claim and an appeal has been taken from his action to this court.
[1] The referee bases his rejection upon the fact that the bankrupt was an indorser upon a note held by the Mechanics & Metals National Bank and upon which they seek to base their claim. The maker of this note deposited certain shares of stock as collateral or security for his payment, and the creditor herein has not liquidated nor turned over this stock, under the provisions of section 57h of the statute. Act July 1, 1898, c. 541, 30 Stat. 560 (U. S. Comp. St. 1901, p. 3443). On the other hand, he has presented a claim as an unsecured creditor, and it is this claim which the referee has rejected.
The case of In re Headley (D. C.) 97 Fed. 765, is authority for the creditor’s interpretation of the statute, chapter 1, § 1, subd. 23, and the case of Gorman v. Wright, 136 Fed. 164, 69 C. C. A. 76, decided by the Circuit Court of Appeals in the Fourth Circuit, approves of the same conclusion; it appearing that the words “secured creditor," for the purposes of the administration of the bankrupt’s estate, are limited to security out of or against the estate. In this respect the referee’s .decision was incorrect and he should have allowed the claim in question.
[2] The payment of any dividend upon the claim would, under the ordinary laws relating to negotiable paper, subrogate the indorser to the payee’s rights against the maker, and these matters would have to be adjusted by the trustee before final dividend. Section 57, subd. 1, would by analogy support this proposition also.
But the creditor has the right under the statute to prove the face value of his claim against the indorser, without the surrender or liquidation of his security against other parties. The-appeal will be sustained, and an order will be entered directing the referee to prove the claim.