Ireton v. Lincoln Nat. Bank ( 1924 )

HICKENLOOPER, D. J.

Epitomized Opinion

Prior to the bankruptcy of Ireton, he discounted with the claimant, the Lincoln National Bank, certain trade acceptances aggregating $31,884.64. These were drawn by the bankrupt on the Harrison Shoe Co. and the Kimball Bros. Co, retail shoe merchants in Chicago, for goods sold to said companies by the bankrupt. Such drafts were only accepted by the drawees, were endorsed by the bankrupt, and discounted in the usual course of business, by the bank. The avails of such discounts were credited to the account of the bankrupt and items charged to “foreign bills discounted.” Likewise, prior to the bankruptcy of the Manss-Owens Co., all of these trade acceptances were presented to the acceptors, were dishonored and protested for non-payment and shortly thereafter each of the acceptors went into bankruptcy, or insolvency liquidation, under state laws.

Claims were proved by the bank in these proceedings to administer the estates of such acceptors, notwithstanding the fact of such dishonoring of the trade acceptances, and that their protesting bank demanded and took demand notes in place of these trade acceptances. The trade aceeptanres were attached to the demand notes as collateral. At no time did the bank surrender possession of the. acceptances, nor was any change made in the account of the bankrupt. The bank filed a claim with the trustee. The District Court allowed this claim, whereupon the trustee appealed. In affirming’ the judgment below, the Court of Appeals held:

1. Where bankrupt discounted trade acceptances with bank, and, on dishonor, gave demand notes covering amount of each trade acceptance, declaration in notes that trade acceptances were held as collateral held not to show passing of title thereto from bank to bankrupt, and accepting, in place of such' title, of a lien thereon, as against inference that bank did not intend to part with absolute title to notes.

2. Where maker and indorser of notes or acceptor and indorser) of a bill of exchange, are both bankrupt, holder may prove in each bankruptcy proceeding full amount due thereon, and may receive dividends, subject only to limitation that he shall not receive more than full amount of claim due him.