Citations
- 133 F.2d 657
Full opinion text
EVANS, Circuit Judge.
Appellant sold bankrupt a bill of merchandise consisting of oil processing equipment, in 1939. The terms of the sale were evidenced by a written conditional sales contract. After the purchaser’s adjudication as a bankrupt, appellant sought, but was denied, the right to reclaim the property. Refusal to grant this relief was due to its having filed an involuntary petition in bankruptcy against the debtor, without mentioning or asserting its lien. Such action was held to constitute a waiver of its rights under the conditional sales contract.
The merchandise, which consisted of smoke stacks, valves, pipes, tanks, etc., were sold the bankrupt, to be used by it at its plant at Central City, Illinois, for processing oil. The sales price was $9,126.83. Payments reduced this sum to $5,760. With attorneys’ fees, interest and expenses, the claim was filed for $9,077.65.
As a single creditor, appellant filed its involuntary petition against bankrupt. Its petition stated:
“* * * your petitioner is a creditor of * * * (bankrupt) having provable claim against it, fixed as to liability and liquidated in amount, amounting to $5,760.-00; the nature and amount of your petitioner’s claim is as follows: Goods, wares and merchandise sold and delivered to the said * * * (bankrupt) at the express instance and reque’st of the said alleged bankrupt on August 25th, 1939, in the total amount of $9,126.83, upon which there is presently due the sum of $5,760.00.”
No other allegations describe appellant’s claim. The petition was verified. Adjudication followed.
After adjudication, the reclamation petition was filed, but before action was taken a rule to show cause was entered (of which appellant had notice and made no objection) why the entire property of bankrupt should not be sold free of liens, the liens to attach to the proceeds. Such a sale was had, and confirmed. It brought $7,000 upon a sale in bulk. Other lien claims, as fixed by the court, totalled $2,283.09. Appellant’s claim was allowed as a general claim.
After the sale, an answer was filed to appellant’s reclamation petition, and a hearing was had before the referee, whose report denied the relief sought. The District Court approved the referee’s action, and this appeal followed.
The chief bases for the referee’s action were: (1) appellant’s alleged waiver of its lien, occasioned by the filing of the petition in bankruptcy without any mention of the existence of a lien; (2) the property was not reclaimable since it had lost its identity in the premises where it was installed, and it was not clear that the property of appellant was still on the premises, or if it were still there, where it was located, and any valuation thereof would be pure guess work.
A chronological history is set forth in the margin.
Since we conclude that the District Court correctly held the filing of the involuntary petition in bankruptcy amounted to a waiver, we will state but briefly the other facts of the case.
When appellant sold the merchandise to bankrupt, it added twenty per cent, to the standard purchase price of the articles, and received in addition to its padded price, one thousand shares of bankrupt’s stock, and the president of the appellant became a director of bankrupt. As such director, Mr. Flori participated in the negotiation of two successive sales of vendee’s properties to companies, which it was hoped might make the plant a prosperous venture. Each failed to do so. Appellee cites Mr. Flori’s action in paying unsecured creditors in full, and secured creditors only partially, with the receipts of such sales, as instances of bad faith. Appellant, however, cites these efforts as indicative of its good faith. Appellee also points to amounts which appellant asserted as its total indebtedness at various times as $5,760, in the original petition, $9,077.65, in the reclamation petition, and $7,128, at the referee’s hearing.
Other defenses were, — appellant was unable to identify more than a portion of the items sold at the trustee’s sale, as being the property claimed under the reclamation petition, and such property, conceding it was reclaimable, was worth less than $750. The trustee is -willing that appellant go on the premises and attempt to recover such of its property as might still be there. Trustee asserts that such property would be of little, or no, value, because the pipes have greatly deteriorated; they would be difficult to locate; the cost of removal would exceed their value.
Did the filing