Court Opinion

ID: 3432765
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:01:41.355642+00
Date Added: 2024-06-11T12:39:02.660455
License: Public Domain

The only point seriously contended by appellant on rehearing relates to the rights and equities of the trustee in bankruptcy, as compared with those belonging to the real estate mortgagee under the receivership clause. It is the claim of appellant at this juncture that the "rights and equities" of the trustee in bankruptcy are not different or greater than those of the bankrupt himself. This undoubtedly for many years was the rule, but it appears that the Bankruptcy Act has been amended so as to change the former doctrine in that respect. Section 110 in Title 11 of the United States Code, Annotated, contains this provision:
"(a) The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all * * * (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him."
That code editor makes the following historical note:
"Attention is called in this connection to the amendment of 1910, embodied in Section 75 of this title, which is germane to the provisions of this section." *Page 907 
Section 75, there referred to, so far as material, is as follows:
"* * * and such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied."
Upon the general subject relating to the change in the Federal Bankruptcy Statute, the circuit court of appeals for the eighth Federal circuit, in the case of Albert Pick  Co. v. Wilson, 19 Fed. (2d Series) 18, said:
"The specific question before us is whether, under Section 47a of the Bankruptcy Act, as amended in 1910 [Section 75 of the United States Code, Annotated, supra], * * * the rights of a creditor levying upon property coming into the control of the bankruptcy court at the time the petition was filed, and, generally, just what additional rights this amendment gives the trustee. This estate was in custodia legis from the date the petition was filed, and the title of the trustee, and his rights and remedies, related back to, and are determined as of, that date. * * * The amendment provides, in effect, that the trustee shall have the same title to the property of the bankrupt in the custody of the court that a creditor holding a lien by legal or equitable proceedings levied against the property would have under a state law, and, as to property not in the custody of the court, the trustee should stand in the position of a judgment creditor, holding an execution duly returned unsatisfied. * * * The provisions of the Federal Bankruptcy Act are paramount to any state statute, and state courts follow the decisions of the Federal courts dealing with questions arising under that law. * * * The intention of the Bankruptcy Act prior to 1910 was that the trustee should take the estate precisely where he found it, with no additional rights, excepting, of course, the specific right to set aside preferences and liens acquired within the four-month period. * * * But, as pointed out in Smith-Flynn Commission Co., supra [292 Fed. 465], and the Congressional Record, *Page 908 
61st Congress, 2d Session, 2275-2277, the amendment under discussion was designed to supersede that decision."
If there was no active, valid petition pending wherein a receivership was asked, the mortgagor could have sold or pledged the rents, and his creditors could have taken the same by attachment or execution. Consequently, the trustee in bankruptcy came into that right within the purview of Federal Statutory Section 110, supra, as well as the additional title, powers, and equities under Federal Statutory Section 75, supra.
We do not adjudicate that the appellant is not entitled to the rents and profits involved as against the appellees E.E. Butler and Lenette W. Butler.
Petition for rehearing is overruled.