Bird v. City of Richmond

• Decision Date: 14 March 1917
• Docket Number: 1461.
• Citation: 240 F. 545
• Parties: BIRD et al. v. CITY OF RICHMOND. In re AINSLIE CARRIAGE CO.
• Court: U.S. Court of Appeals — Fourth Circuit

240 F. 545

BIRD et al. v. CITY OF RICHMOND.

In re AINSLIE CARRIAGE CO.

No. 1461.

United States Court of Appeals, Fourth Circuit.

March 14, 1917

James E. Cannon, of Richmond, Va., for petitioners.

George Wayne Anderson, Asst. City. Atty., of Richmond, Va., for respondent.

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.

PRITCHARD Circuit Judge.

This is a controversy between the landlords of the bankrupt, Ainslie Carriage Company, claiming a lien upon the bankrupt's assets by virtue of a distress warrant for rent, levied on November 1, 1909, and the city of Richmond, claiming priority over the landlords by virtue of certain bills for delinquent personal taxes assessed against the bankrupt for the years 1907, 1908, and 1909, and for current taxes for the year 1910, being the year in which the adjudication in bankruptcy was made.

It is conceded that the landlords levied a distress warrant on the 1st day of November, 1909, and that the city of Richmond made no effort to levy for its delinquent taxes for the years 1907, 1908, and 1909, although given the express power to do so by section 73 of its charter in the following language:

'All goods and chattels, wheresoever found, may be distrained and sold for taxes assessed and due thereon. * * * '

It appears from the answer of the city of Richmond that the ordinances of the city provide that the taxes for each year are payable on or before June 30th, and, under chapter 14 section 7, of Richmond City Code, it is provided that, if all taxes be not paid before September 1st, the tax collector shall distrain, except where one-half has been paid prior to June 30th. The situation of the parties on November 1, 1909 may be summarized as follows:

The landlords, in pursuance of chapter 127 of the Code of Virginia, had distrained for rent to the extent of $2,929.57 at the rate of $2,000 per annum. Section 2787 of the Code of Virginia provides that rent of every kind may be recovered by distress on action, section 2790 that rent may be distrained for within 5 years from the time it becomes due, and section 2791 that distress may be levied on any goods of the lessee, or his assignee, or undertenant, found on the premises, or which have been removed therefrom not more than 30 days. Under the provisions of its charter the city of Richmond had a right to distrain for taxes due in 1907 on the 1st day of September, 1907, and at any time thereafter; likewise for its 1908 taxes on the 1st day of September, 1908, or any moment thereafter, and for its 1909 taxes it had the same right, all of which continued until the time the landlords made their levy.

It is contended by the landlords that inasmuch as they exercised their right of distress, and that the city did not exercise its right to levy and collect, that they acquired a lien upon the bankrupt's assets superior to that of the city. On the other hand, the city claims that its inchoate and unexercised right of distraint gives it a priority over the landlords, and, furthermore, under the Bankruptcy Act (section 64a), the taxes are given priority over all other claims.

It appears that the adjudication in bankruptcy was made on the 3d day of February, 1910, or less than 4 months after the levy of the landlords, and one of the contentions of the city is that therefore, under section 67f of the Bankruptcy Act, the landlords were not entitled to any lien at all. The referee made a report under date of July 14, 1910, in which he found that the landlords were entitled to participate in the distribution of the fund arising from the sale of the bankrupt's assets ahead of the claim of the city of Richmond and of the commonwealth of Virginia for franchise tax and registration fee, but recited an agreement by which final determination of the question should await the decision of the Supreme Court of Appeals of Virginia as to whether, under like circumstances in a case before it, the city and state did in fact have a lien for their taxes without making a levy.

Under date of March 12, 1913, the referee made another report, in which he stated that the case in the Virginia appellate court had gone off on a question of jurisdiction, and in which he proceeded to hold that, under the proper construction of section 67f of the Bankruptcy Act, the landlords were not entitled to a lien, and that being, therefore, relegated to the class of general creditors, the city and state were preferred in the distribution of assets by virtue of section 64 of the Bankruptcy Act. To this report the landlords filed exceptions, which were treated by the court below as a petition to review such report, and the court, by an order entered on the 14th day of April, 1914, reversed the ruling of the referee and held that the landlords did have a valid lien for their rent under the Bankruptcy Act, and that such lien took priority over the claims of the state of Virginia and of the city of Richmond.

On April 21, 1916, the court below, having previously granted a rehearing on application of the city of Richmond, handed down an opinion reversing its former ruling, and holding that the city's claim for taxes should take priority over the landlords' lien, and carried this ruling into effect by the entry of an order on June 19, 1916, which order we are now asked to review.

We are not unmindful of the importance of the questions involved in this controversy. That the state and its municipalities should be clothed with ample power to assess and collect taxes promptly and with as little delay as possible is conceded. In this suit, as appears from the statement of facts, a controversy has arisen which involves on the one hand the character of a lien to which a landlord is entitled under the laws of the state of Virginia, and on the other the character of a lien for taxes to which the city of Richmond is entitled by virtue of its charter.

The petitioners rest their 'claims upon those statutes of Virginia which are merely declaratory of the common-law principle of distress for rent in arrear which obtains in one form or another throughout the entire English-speaking world. ' Section 2787 of the Code of Virginia is pertinent to this case, and reaffirms the common law, to wit:

'Rent of every kind may be recovered by distress or action.'

Section 2790 also provides:

'Rent may be distrained for within five years from the time it becomes due, and not afterwards, whether the lease be ended or not.'

Section 2791 is in the following language:

'The distress may be levied on any goods of the lessee, or his assignee, or under tenant, found on the premises, or which may have been removed therefrom not more than thirty days. If the goods of such lessee, assignee, or under tenant, when carried on the premises, are subject to a lien, which is valid against his creditors, his interest only in such goods shall be liable to such distress. If any lien be created thereon while they are on the leased premises, that shall be liable to distress, but for not more than one year's rent, whether it shall have accrued before or after the creation of the lien. No other goods shall be liable to distress than such as are declared to be so liable in this section.'

In this instance it appears that the landlords proceeded to enforce their statutory rights and to perfect the inchoate lien, which they had by virtue of their lease, by levying a distress warrant for 18 months' rent, which gave them a lien subject to the provisions of section 2792, in which it is provided that:

'Neither this or the preceding section shall affect any lien for taxes, levies, or militia fines.'

The referee who passed upon this question in his second report held that this lien was of no effect because of section 67f of the Bankruptcy Act, that part which is germane being in the following language:

'All levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition against him shall be deemed null and void in case he is adjudged a bankrupt. * * * '

The framers of the Bankruptcy Act, in employing the word 'levies,' etc., obviously had reference to writs of execution, fi. fa. garnishment, etc. In other words, this section is limited to liens obtained through legal proceedings. This, we think, easily distinguishes the liens contemplated by section 67f from the landlords' lien, which is not, in any sense of the word, a lien obtained through legal proceedings. Collier on Bankruptcy, at page 966, in referring to levies under section 67f, says:

'A lien acquired by a levy under a landlord's distress warrant is not obtained through legal proceedings within the meaning of this subsection.' A landlord's lien is contradistinguished from the other class of liens to which we have referred, in that it is inchoate from the moment the lease is executed, and may be made perfect at any moment by distress, a remedy which is summary in its character.

The Bankruptcy Act is intended to prevent one general creditor from obtaining an advantage over another. In other words, it was the intention of the Congress in the enactment of this law that, where one becomes unable, by misfortune or otherwise, to meet his obligations, to preserve the status of his estate, so that there might be an equal distribution of his assets between all his creditors, subject to the claims of lien creditors whose standing is fixed by the statute; in other words, to prevent preferences and secure a fair and impartial distribution of the bankrupt's estate among his creditors, having, as we have stated, due regard to the valid liens of any of his secured creditors.

We do not think there is anything in the statute to authorize the contention...