Cavanaugh v. Fenley

Decision Date19 May 1905
Docket Number14,266 - (75)
Citation103 N.W. 711,94 Minn. 505
PartiesJ. O. CAVANAUGH v. SIMPSON S. FENLEY
CourtMinnesota Supreme Court

Action in the municipal court of St. Paul to recover $167 for medical services, the Chicago Great Western Railway Company being garnished and disclosing an indebtedness to defendant of $139.35. Judgment by default upon a substituted service of summons was entered against defendant. From an order Finehout, J., denying a motion to vacate the judgment and to restrain further proceedings thereon on the ground that he had received his discharge in bankruptcy instituted on his voluntary petition filed within four months after the commencement of the action, defendant appealed. Reversed.

SYLLABUS

Liens Obtained Against Person Adjudged Bankrupt.

Section 67, subd. f, of the Bankruptcy Act of 1898, providing that "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 in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt," applies to both voluntary and involuntary proceedings against the debtor.

Garnishment.

A garnishment of funds belonging to an insolvent person within four months of the time he is adjudged a bankrupt is, within the meaning of the bankruptcy act, dissolved and rendered null and void by the bankruptcy proceedings, and this result follows notwithstanding the insolvent person made no reference in his schedule of assets to the fact that the indebtedness had been garnished.

Judgment against Bankrupt.

A judgment entered against an insolvent person after he is adjudged a bankrupt, and before his final discharge in the bankruptcy proceedings, upon a provable claim existing at the time he was adjudged a bankrupt, and from liability for the payment of which he was relieved by his discharge, is cancelled and annulled by such discharge, and the bankrupt has the absolute legal right, after obtaining his discharge, if he proceeds with reasonable diligence, to have execution upon the same perpetually stayed.

J. M. Hawthorne and Lloyd Peabody, for appellant.

D. J. Keefe, for respondent.

OPINION

BROWN, J.

The facts material to the questions controlling the decision in this case are as follows: The action was commenced in the municipal court of St. Paul on August 14, 1903. Defendant being a nonresident, summons was served upon him by publication. The garnishee summons was served upon the garnishee, and it appeared by its attorney at the time specified therein, August 25, 1903, and disclosed that it was indebted to defendant in the sum of $139.35. It also, in connection with and as a part of the disclosure, stated that defendant was a married man, and resided in the state of Iowa. On September 17, 1903, within the period of four months from the commencement of the action, defendant was on his own petition adjudged a bankrupt by the United States District Court for the Northern District of Iowa. Such proceedings were thereafter had in that court that he was on March 9, 1904, duly discharged. Defendant scheduled and disclosed the indebtedness due him from the garnishee in the bankruptcy proceedings, and claimed the same as exempt under the laws of the state of Iowa, where he resided. No nonexempt property being disclosed by the bankrupt, no trustee of his estate was appointed, but the proceedings in bankruptcy were in all things regular, and his discharge in accordance with the bankruptcy act. On October 1, 1903, default judgment was entered against defendant, but no judgment was entered against the garnishee until June 11, 1904, and after defendant's discharge had been issued to him.

Defendant moved the court below for an order discharging the garnishment and releasing to him the money held thereunder, and for an order perpetually enjoining further proceedings on the judgment in the main action, or that it be vacated and defendant permitted to answer, setting up his discharge in defense. The motion was denied, and defendant appealed.

The record presents two principal questions: (1) Whether the garnishment proceedings were dissolved by operation of law by the bankruptcy proceedings; and (2) whether the court erred in denying the motion perpetually to enjoin collection of the judgment against defendant. If these questions be answered in the affirmative, the order appealed from must be reversed.

1. Section 67, subd. f, of the Bankruptcy Act of July 1, 1898, c. 541, 30 St. 565 [U.S. Comp. St. 1901, 3450], provides:

That 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 in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment or other lien, shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt.

There is no ambiguity in this provision of the act, and it would seem to require no discussion to demonstrate that it means what its plain language imports. But it is urged by plaintiff that it has no application to the case at bar, for the reason that defendant became a voluntary bankrupt; that, as the bankruptcy proceedings were initiated and conducted to a conclusion on his voluntary petition, the case does not fall within the scope or purpose of the section, construed in connection with the whole act. In other words, his contention is that this provision of the law applies solely to involuntary bankrupts. Several cases in the United States District Court are cited to sustain this contention. In re Delue (D.C.) 91 F. 510; In re Easley (D.C.) 93 F. 419; In re O'Conner (D.C) 95 F. 943. They fully bear out respondent's contention; but, it seems to us, they are at variance with the whole purpose and object of the bankruptcy act, and should not be followed. The contrary rule was laid down by the United States Circuit Court of Appeals, Seventh Circuit, in Re Richards, 96 F. 935 37 C.C.A. 634. It was there held that the section of the bankruptcy act above quoted, properly construed, applied to voluntary as well as involuntary cases; the decision...

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