SARKIS IZMIRLIAN, Appellant-Defendant v. RECEIVER IN BANKRUPTCY OF ruE ESTATE OF KRIKOR DARUDJIAN, DECEASED,
Bankruptcy-Fraudulent preference-Requirement of notice of charge against
movables to other creditors under Legal Circular I8-Importance of
length of time between the delivery of movables and the filing of petition
of bankruptcy
When a debtor pledges and delivers crops to a creditor as a pledge in
an action for a loan without notice to other creditors, and the goods are
delivered more than three months before the filing of a petition in bank-
ruptcy, the value of the crops is not made part of the general fund for
distribution because: (1) Legal Circular 18 does not apply when the
movables charged are actually delivered and in apparent possession of the
creditor; (2) section 28 of the Bankruptcy Ordinance 1916 does not apply
when actual delivery of the pledged movables is made more than three
months before the filing of the petition of bankruptcy ..
Bankruptcy Ordinance 1916, s. 28.
Appeal
The facts of this case as they appear from the record are as
follows:
The deceased, Krikor Darudjian, pledged his crops with appellant
in an action for a loan from appellant. The crops were actually de-
livered to appellant up to April 2, 1926. No notice of the pledge
was given to the other creditors of deceased. On the subsequent
death of Krikor Darudjian. his estate was found to be insolvent and a
bankruptcy petition was presented against the estate on July 11, 1926
The receiver of the estate sued appellant in the Damer District Court
for the value of the crops, i.e., £E.65, claiming that the pledge to ap-
• Court: Hamilton-Grierson,
pellant was voidable at the instance of the reciver, according to Legal
Circular 18, as a charge over movables of a debtor made without
notice to the debtor's other creditors; and also under Bankruptcy Ordi-
nance 1916, s. 28. The Damer District Court held in favour of re-
spondent.
November 10, 1927. Hamilton-Grierson J.: In my opinion the
decision of the District Judge, Damer, was wrong in holding that the
£E.6? in respect of crops delivered to appellant up to April 2nd,
1926 should be inciuded in the general fund for distribution to the
creditors generally, on the ground that no notice of mortgage of the
crop in favour of appellant was given to the creditors.
The District Judge relies on section 28 of the Bankruptcy Ordi-
nance 1916. I do not think that section applies in the present in-
stance. The date of the petition of bankruptcy was July 11th,
1926, i.e., more than three months from the last delivery of crops to
appellant. .
As regards Legal Circular 18, in my opinion the meaning is that
a charge on movables is not valid against creditors so long as the
movables are in the apparent possession of the pledgor, and that
such a charge is valid when the movables have been delivered in fact
to the pledgee.
Accordingly I hold in this case that the proceeds of the crops,
£E.65.056 m/ms, belong to appellant and not to the bankrupt estate.
Order: The £E.65.056 m/ms paid by appellant into court is
to be repaid him, along with the costs of this appeal, £E .. 140 m/ms.
Appeal allowed