Court Opinion

ID: 9641048
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:21:43.082082+00
Date Added: 2024-06-11T18:10:34.723655
License: Public Domain

AUGUSTUS N. HAND, Circuit Judge
(dissenting).
I am in entire accord with the principles of law laid down in the opinion of the majority of the court, but I hold that the practice of the pledgor with respect to goods returned by customers did not in fact show that the pledgee acquiesced in a reservation ■of dominion on the part of the pledgor over such returned goods, or their proceeds.
The opinion fixes March 13, 1927, as the date when the bank learned that goods had been returned and not reported. Up to that time there had been returns of $1,574.75 upon assigned accounts aggregating $85,590.-82, or less than 1% per cent, of the total. Such returns always occur to a certain extent, sometimes merely because purchasers welch on their bargains, but frequently because of defects that render the goods of trifling value. We have no reason to suppose the returns were not made in good faith. If so, the shoes were probably of slight value on account of defective workmanship. There is no proof that they were saleable or that any of them were in fact sold, except some testimony by Rudawsky, who was found by the trial court to be an unreliable witness, that some of them had been sold. Under such circumstances, it seems unreasonable to regard the pledgor as justified in understanding that the bank, when it made subsequent loans under a written agreement with the bankrupt to hold returned goods in trust for it and to surrender them, or the proceeds, upon demand, did not mean what it said.
The burden of showing that the bank acquiesced in the exercise by the pledgor of dominion over the returned goods is upon the trustee. It is argued that the pledgor was justified in assuming that the bank acquiesced in allowing it to appropriate the returns when its auditor, Reineken, went over the books on March 13, and did not ask for an accounting of the returned merchandise. But there is no sufficient reason for assuming that the bankrupt had sold the returned goods and withheld or pocketed the proceeds or that it had done any acts in respect to them which it had to account for. Such an assumption presumes wrongdoing without any adequate basis.
When the proof indicates that the returns may have remained on hand either because they were worthless or were of such inferior grade that they were hard to sell, and that, even if any sales were made, they may well have been trifling, I think the trustee has not sustained the burden of showing acquiescence in an illegal arrangement.
There is a great difference between acquiescence negativing the trust obligation of the pledgor and a mere neglect to follow up promptly the disposition of returns of less than 1% per cent, of the assigned accounts. Neglect to inquire into such a relatively small and unpromising asset seems far from an indication that the bank intended to abandon its lien and leave the pledgor free to appropriate any and all returns. It was neglect of the bank to follow up a relatively unimportant matter and not acquiescence, in an objective or other, sense, in a violation of its rights. I feel convinced that a lien upon valuable collateral ought not to be upset for such a trifling reason and upon so doubtful an inference.
The decree should be reversed, and the bill dismissed. Wherefore I dissent.