Court Opinion

ID: 8794220
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:03:22.929903+00
Date Added: 2024-06-11T17:03:31.919832
License: Public Domain

LACOMBE, Circuit Judge.
Judge Hough apparently made this disposition of the matter, because he was satisfied that the decision of the Supreme Court in Gorman v. Littlefield, 229 U. S. 19, 33 Sup. Ct. 690, *54657 L. Ed. 1047, required him to do so. He did not do so because the 100 shar,es in the box were identified by the testimony, for he says: “for'which particular customer these 100 shares were held does not appear and cannot be ascertained.” Applying what is called the “grain in a bin” theory, he reached the conclusion that all claimants to Copper stock were entitled to share ratably in these 100 shares. Examining the record, especially the book entries in Exhibit A, we find much force in the contention of appellants that at the time of the bankruptcy 50 of Landau’s shares were hypothecated with the trust company, Duel’s 100 shares had been used for delivery under a “short” order, i. e., loaned to the “short” customer, and 50 of Landau’s shares and Wieners’ 50 shares were in the box. But it is not necessary to decide that question; Landau is making no claim that this particular certificate for 100 shares is his property.
[1] It may be noted that all four claimants are general creditors of the bankrupts, and it has been repeatedly held that they merely share with all other general creditors in the assets "available for such creditors, except so far as they may be able to trace and identify their own individual property or its substitute or proceeds. Unless reasonably specific proof of such identification is presented, equity would seem to require that the fund for general creditors should not be depleted on any theory which has not the sanction of controlling authority.
[2] The application of the theory followed in this case leads to this curious result. Bamberger was owing money to the bankrupts on his original purchase; his contract with them authorized them to pledge the stock bought for him. Shortly after purchase, a year before bankruptcy, the bankrupts borrowed money from the Bank of Commerce pledging his certificate for 30 shares as security. There it remained undisturbed till bankruptcy. The identity of this certificate as Bamberger’s is conclusively proved; every one concedes that his 30 shares are represented by the certificate for that amount held by the bank. Nevertheless, under the theory now contended for, 30/280 of his 30 shares is also identified as a fractional part of another certificate for 100 shares; to that extent, 30/280, there would be a double identification.
We are not satisfied that the decision of the Supreme Court requires the adoption of a method of identification, which may lead to such results. The statement is made that the court held in the Gorman Case that:
“No identification is necessary — the presumption of restitution plus the physical presence of some stock supplies the link in the absence of countervailing proof.”
But the facts in that case differed in a very material particular from those here presented. The bankrupt brokers in the Gorman Case had bought for him 250 shares of Greene Cananea Copper, they had disposed of his original certificate, but other certificates had from time to time found their way into the box, so that when they failed they held 350 shares of that stock and were under obligations to no other customer to account for any such shares. Upon the presumption that the brokers, in the absence of proof to the contrary, did their duty, buying other shares of like kind to replace customer’s shares which they *547had sold, identification of 250 shares, which belong to Gorman, was made out — -the bankrupts had 350 shares free from any claim, except Gorman’s to 250 of them. The Supreme Court says:
“It is said, however, that the shares in this particular case are not so identified as to come under the rule. But it does appear that at the time of bankruptcy certificates were found in the bankrupt’s possession in an amount greater than * * * should have been on hand for this customer, and the significant fact is shown that no other customer claimed any right in those shares of stock.” (Italics ours.)
In the case at bar, however there are claimants — even leaving out Bamberger, whose certificate is conclusively identified — to more than twice the number of shares found in the box. The facts are much the same as In re McIntyre, Petition of William Grace, 181 Fed. 960, 104 C. C. A. 424, where we held identification had not been shown. Grace claimed 200 shares of Southern Pacific stock, the bankrupts had 107 shares of that stock on hand or hypothecated and owed their customers 1,651 shares of the same variety of stock. The theory now relied on was submitted with petition for certiorari in the McIntyre-Grace Case, but certiorari was refused. Grace v. Burlingham, 218 U. S. 672, 31 Sup. Ct. 221, 54 L. Ed. 1204. We are not persuaded that the decision in the Gorman Case requires a modification of the rule followed in the Mclntyre-Grace Case. The rights of general creditors are likely to be seriously impaired if the theory of constructive identification based on presumptions of intent be carried to the extent here asked for.
The order is reversed.