Francis J. Curtis, Trustee in Bankruptcy for the Tam Corporation v. Vernon J. Knox and Helen Diekman, Trustee , 254 F.2d 433 ( 1958 )

On Petition for Rehearing.

HASTINGS, Circuit Judge.

On petition for rehearing appellants acquiesce in our holding in this cause on March 5, 1958 “that in Illinois an equitable lien which arises on after-acquired property not specifically described in a chattel mortgage is not perfected in the mortgagee until the mortgagee takes possession of the property on breach of condition in the mortgage.”

However, appellants now assert that we erred in holding that the district court properly overruled appellants’ motion for a new trial based on excessive damages. Appellants point out with much persuasiveness that there was confusion at the trial as to what after-acquired property was owned by the bankrupt at the time the mortgagee took possession and that the verdict of the jury in the amount of $32,500 is far in excess of the value of such property. They assert that the jury included machinery which the bankrupt corporation did not own and which was repossessed by the true owners and was not therefore “converted” by the mortgagee. Likewise, that there was confusion as to what property was specifically described in the mortgage (to which the mortgagee was rightfully entitled) and as to what property was after-acquired and owned by the bankrupt.

We have not been favored with a response by appellee, though it was his privilege to assist us in this present consideration. Sound practice would seem to suggest the filing of an answer to a petition for rehearing.

In the light of appellants’ petition for rehearing on this one proposition we have examined the record again and we conclude there is merit in their contention. In the interest of doing substantial justice to all parties we, therefore, now modify our prior opinion of March 5, 1958 by setting aside that part of the last two paragraphs in which we approved the verdict assessing damages of $32,500 against appellants. There can be no harm done to the trustee in bankruptcy (appellee) in any event because he is still entitled to recover the value of the after-acquired property under the definition set out in our prior opinion, but he should not be permitted to recover more than that at the expense of appellants.

We now hold that the trial court erred in not sustaining appellants’ motion, in the alternative, for a new trial on the ground that the verdict of $32,500 damages was excessive, and that appellants should be granted a new trial strictly limited to a determination of the value of the after-acquired property owned by the bankrupt and acquired by the mortgagee under the definition of the Illinois law relating thereto as set out in our prior opinion. In all other respects our prior opinion shall stand as originally handed down.

The petition for rehearing is granted and judgment below is reversed as to the question of damages alone, and this cause remanded for further hearing in accord with this opinion.