187 U.S. 165 (1902), 67, Metcalf v. Barker

Docket Nº:No. 67
Citation:187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122
Party Name:Metcalf v. Barker
Case Date:December 01, 1902
Court:United States Supreme Court

Page 165

187 U.S. 165 (1902)

23 S.Ct. 67, 47 L.Ed. 122




No. 67

United States Supreme Court

December 1, 1902

Argued October 30, 1902




The question in this case was whether, under § 67f of the Bankruptcy Act of 1898, where a final decree recovered within four months of the petition, but which was based on a judgment creditors' bill in equity filed long prior thereto, the creditor had a lien on the assets involved in the action which was superior to the title of the trustee in bankruptcy, or whether (as was held by the district court) § 67f prevented the complainant from acquiring any benefit from the lien, or the fund attached except through the trustee in bankruptcy pro rata with other creditors. Held that while the lien created by a judgment creditors' bill is contingent in the sense that it may possibly be defeated by the event of the suit, it is in itself, and so long as it exists, a charge, a specific lien, on the assets not subject to being divested save by payment of the judgment sought to be collected, and a judgment or decree in enforcement of an otherwise valid preexisting lien is not the judgment denounced by the bankruptcy statute which is plainly confined to judgments creating liens.

When, therefore, a judgment creditor files his bill in equity long prior to the bankruptcy of the defendant, thereby obtaining a lien on specific assets, and diligently prosecutes it to a final judgment, he acquires a lien on the property of the bankrupts which is superior to the title of the trustee, and a district court of the United States does not have jurisdiction to make an order in bankruptcy proceedings against the defendants enjoining him from enforcing such lien.

See also Pickens v. Roy, decided this term, p. 177, post.

The certificate in this case is as follows:

This matter came before this court upon a petition of Metcalf Brothers & Co. to superintend and revise in matter of law certain proceedings of the District Court of the United States for the Southern District of New York wherein an order was made by said district court enjoining the petitioners, [23 S.Ct. 68] Metcalf Brothers & Co., from taking any further proceedings under any judgment obtained by them in the Supreme Court of the State of New York in a judgment creditors' action wherein certain transfers made by the bankrupts had been set aside as to them

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as fraudulent and void, and wherein receivers of the property of the bankrupts appointed by the said supreme court had been directed to pay to them the amount of their judgments at law upon which their said judgment creditors' action was founded.

For its proper decision of the matter, this court desires the instruction of the Supreme Court upon the questions of law hereinafter stated, and hereby certifies the same to the Supreme Court of the United States for that purpose.

Statement of Facts

On the 2d of October, 1896, Lesser Brothers, subsequently adjudged bankrupts, who were copartners, being then insolvent, transferred all their property, copartnership and individual, to certain favored creditors. All their outstanding accounts, being copartnership property, they transferred by instruments of assignment to Marcus A. Adler and others. They confessed various judgments in the supreme court of the State of New York in favor of Bernhard Moses and others, upon which executions were at once issued to the Sheriff of the County of New York, who levied thereunder on all their tangible personal property, consisting of clothing material and stock in trade. This also was copartnership property, and, with the book accounts, comprised all their property except a piece of real estate owned by Israel Lesser individually and a ground lease of another piece of real estate owned by Tobias Lesser individually. These two pieces of real estate the individuals owning them conveyed to Joseph Lilianthal.

After making these transfers, and after the levy by the sheriff under the executions issued upon the confessed judgments, and on the same day, by a fraud upon the court, in a collusive action in the Supreme Court of New York to dissolve the partnership, they procured the appointment of a receiver of the partnership property, Morris Moses, who was nominated by and in collusion with them. Subsequently a receiver nominated by certain creditors, James T. Franklin, was associated with Mr. Moses by the same court.

Various creditors of the bankrupts immediately commenced

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actions of replevin to recover portions of the goods in the hands of the sheriff. Their claims were conflicting with each other and with those of the confessed judgment creditors, and in an action brought in the supreme court of New York by the receivers an order was made restraining the sale by the sheriff under the executions, directing a sale by receivers (Mr. Moses and Mr. Franklin being also appointed such receivers in that action), and that the latter should hold the proceeds of the sale subject to the claims of all parties, such claims to be determined in that action. Pursuant to this order, the goods were sold, and the receivers so appointed now hold the proceeds thereof. This order was made November 23, 1896. The action is still pending, undetermined.

On the 22d day of October, 1896, and the 29th day of October, 1896, Metcalf Brothers & Co. procured judgments in the Supreme Court of the State of New York against the Lessers for $930.21 and $2,547.80 respectively, upon which executions were issued and returned unsatisfied.

On the 17th day of December, 1896, Metcalf Brothers & Co. commenced a judgment creditors' action in the Supreme Court of the State of New York, which came to trial on the 17th day of December, 1897, and as a result of which the transfers to which reference has been made and the proceedings for the appointment of the receivers were adjudged fraudulent and void as to them. The court, however, set aside the transfers of the copartnership property, not only in favor of Metcalf Brothers & Co., but also in favor of the receivers. It set aside the transfer of the real estate in favor of Metcalf Brothers & Co. alone. Judgment was entered on this decision April 6, 1898.

This judgment determined that the proceeds of the sale of the tangible property then in the hands of the receivers and the outstanding accounts or their proceeds in the hands of the transferees (to be accounted for under the judgment to the receivers) were to be administered by the receivers for the benefit of all the creditors of the copartnership equally, including Metcalf Brothers & Co., while the real estate transferred

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became subject...

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