Conner v. Long

• Decision Date: 01 October 1881
• Citation: 104 U.S. 228,26 L.Ed. 723
• Parties: CONNER v. LONG
• Court: U.S. Supreme Court

104 U.S. 228

104 U.S. 228

26 L.Ed. 723

CONNER v. LONG.

October Term, 1881

ERROR to the Circuit Court of the United States for the Southern District of New York.

The facts are stated in the opinion of the court.

Mr. Robert S. Green for the plaintiff in error.

Mr. William B. Hornblower and Mr. Daniel H. Chamberlain, contra.

MR. JUSTICE MATTHEWS delivered the opinion of the court.

The facts out of which this case has grown are undisputed. They are as follows:——

On July 20, 1875, a warrant of attachment was duly issued in an action commenced on that day in the Supreme Court of the State of New York, by Dickerson against Spaulding, a nonresident. William C. Conner, sheriff of the city and county of New York, to whom the warrant was directed, levied it, the same day, on the straw goods in controversy in this action which were at the time the property of Spaulding. On the ground that they were perishable, an order was on the 27th of that month made in the cause, directing the sheriff to sell them. Pursuant to that order, they were sold August 1 for the sum of $1,156.50. Judgment was entered in the action September 15, in favor of the plaintiff, for $2,175.85. An execution issued thereon was received by the sheriff on that day. He returned it five days thereafter, showing that the amount made, being the proceeds of the sale less expenses, had been paid by him to the attorney of the plaintiff.

Spaulding was a resident of Massachusetts. On July 23, 1875, a petition in bankruptcy was filed against him by creditors in the District Court of the United States for the District of Massachusetts, and he was adjudged a bankrupt on the fourth day of the following September. The deed of assignment was executed by the register in bankruptcy to William H. Long, the appointed assignee, on the 21st of that month.

On Jan. 21, 1876, Long, as assignee, commenced in the Superior Court of the city of New York the present action, against Conner, the sheriff, to recover the value of the goods, on the ground that the sale so made was a wrongful conversion of property, the title to and right of possession in which had at the time, by the operation of the Bankrupt Act, become vested in him as assignee of Spaulding.

This action was removed by the plaintiff therein to the Circuit Court of the United States. The answer of Conner denied 'that he knew or in any way had any notice or intimation of said alleged proceedings in bankruptcy until subsequently to such sale, and until after the payment over by this defendant of the money so received by him upon such sale, as hereinafter set forth.' Upon the trial the judge instructed the jury that upon these admitted facts the sheriff was guilty of a conversion of the property in question Aug. 1, 1875, in selling it under the order of the Supreme Court of New York; that he was consequently liable to pay to the plaintiff the market value thereof on that date, with interest; and that the only question submitted for their determination was the amount of damages.

The trial resulted in a judgment for $1,186.43 in favor of the plaintiff, to reverse which this writ of error is prosecuted.

The form of the charge assumed the truth of the foregoing allegation in the defendant's answer, as to his want of actual notice of the proceedings in bankruptcy.

The question now to be considered and determined is, whether there is error in this charge.

The solution of this question depends upon the force to be given to the fourteenth section of the act of March 2, 1867, c. 176, now sect. 5044 of the Revised Statutes, which reads as follows:——

'As soon as an assignee is appointed and qualified, the judge, or when there is no opposing interest, the register shall, by an instrument under his hand, assign and convey to the assignee all the estate, real and personal, of the bankrupt, with all his deeds, books, and papers relating thereto, and such assignment shall relate back to the commencement of the proceedings in bankruptcy, and by operation of law shall vest the title to all such property and estate, both real and personal, in the assignee, although the same is then attached on mesne process as the property of the debtor, and shall dissolve any such attachment made within four months next preceding the commencement of the bankruptcy proceedings.'

In Hampton v. Rouse (22 Wall. 263, 275), it was declared by Mr. Justice Clifford, delivering the opinion of the court, that the plain meaning of this section was, that, 'until an assignee is appointed and qualified, and the conveyance or assignment is made to him, the title to the property, whatever it may be, remains in the bankrupt.' It is equally plain that, when the assignment is made, it operates retrospectively. The title of the bankrupt in the interval is defeasible, and, when the assignment is made, is divested as of the date when the petition was filed. All titles derived under or through him, originating subsequently to that date, are, by force of law and without regard to the knowledge or the motives of the claimant, overreached and defeated. Bank v. Sherman, 101 U. S. 403. The statute declares that the title of the assignee shall thus vest by relation to the commencement of the proceedings in bankruptcy, although the property is then attached on mesne process as the property of the debtor.

It is urged in argument on behalf of the plaintiff in error that the act divests the title of property held by virtue of an attachment only when it is so held at the date of the execution and delivery of the assignment, and not at the time of filing the petition in bankruptcy; and that, consequently, when, as in the present case, the attachment proceedings had resulted in a disposition of the goods, prior to the actual conveyance to the assignee, the title to them would not pass to him. To hold otherwise, it is said, would, in opposition to the plain provisions of the law, defeat the legitimate operation of an attachment, which had been commenced more than four months prior to the inception of the bankruptcy proceedings; for it might well be that under such a writ property might be held undisposed of at the date of filing the petition in bankruptcy. But it is equally true that property so held might remain subject to the attachment at the date of the conveyance to the assignee, and the supposed difficulty is not removed by the suggested construction of the act. It is removed, however, by considering the whole section, from which it appears that it is the title to property, subject to an attachment, only when levied within four months next preceding the commencement of the bankruptcy proceedings, which becomes vested in the assignee by relation, the same attachment being thereby dissolved as of that date.

One consequence is, that if property of the debtor levied on under such an attachment has been sold prior to the filing of the petition in bankruptcy, but thereafter the proceeds of the sale remain in the hands of the sheriff, or before the assignment have been applied to the payment of the judgment in the attachment suit, the rights of the assignee attach to the money and cannot follow the property sold; for the latter not being subject to the attachment at the commencement of the bankruptcy proceedings, the title thereto is thereby transferred to the assignee; but the attachment being dissolved upon that event, the right to the proceeds of the sale passes under the assignment, released from the claims of all parties to the attachment suit, as of the date of the commencement of the proceedings in bankruptcy. And in such a case the plaintiff in the attachment suit, having received the proceeds of the sale on his judgment, would be liable to an action by the assignee for that sum of money had and received to his use; or, if it remained in the hands of the sheriff, the assignee might become a party to the action, and obtain an order of the court requiring the amount to be paid directly to himself.

Another result is, that if the property has been sold under the attachment after the commencement of the bankruptcy proceedings, no title passes by the sale, for the property ceased, at that time, to be the property of the bankrupt, and became the property of the assignee, a stranger to the action and not affected by it; and both the plaintiff in the attachment and the purchaser at the sheriff's sale would be liable to the assignee for a conversion of his property,—the one for having caused its sale, the other for having taken possession of it as owner.

Upon this point there can scarcely be any diversity of opinion, for it would be difficult to give to this feature of the bankrupt law any less effect without depriving it of all substantial operation, and defeating its obvious policy. It was, undoubtedly, deemed an essential element in any efficient system, the main purpose of which was to secure to all the creditors of the bankrupt an equal participation in his effects, not only as against his fraudulent and collusive dispositions, but also as against the zealous competition among creditors, in their heedless race of diligence, to obtain priority. For this reason every title to property sought to be acquired by a seizure and sale under an attachment, belonging to one subsequently declared to be a bankrupt, is defeated, if the attachment be levied within four months next previous to the institution of the bankruptcy proceeding; and the creditor, at whose instance and for whose benefit the sale was made, and the purchaser who, having acquired possession of the property, asserts a claim of ownership, are each liable for a tortious conversion of the property of the assignee, unless, as before stated, the property has been sold under the attachment before the filing of the petition in bankruptcy, in which case the title of the assignee vests in the proceeds of sale.

In Duffield v. Horton (73 N. Y. 218), it was decided that a debtor of the bankrupt, whose obligation had been...