D. C. Wise Coal Co. v. Columbia Zinc & Lead Co.

• Decision Date: 12 June 1911
• Citation: 138 S.W. 67,157 Mo. App. 315
• Court: Missouri Court of Appeals
• Parties: D. C. WISE COAL CO. v. COLUMBIA ZINC & LEAD CO. et al.

138 S.W. 67

157 Mo. A. 315

D. C. WISE COAL CO. v. COLUMBIA ZINC & LEAD CO. et al.

Springfield Court of Appeals. Missouri.

June 12, 1911.

1. BANKRUPTCY (§ 195) — LEVY OF ATTACHMENT WITHIN FOUR MONTHS OF BANKRUPTCY — LIEN ACQUIRED.

Under Bankr. Act July 1, 1898, c. 541, § 67f, 30 Stat. 565 (U. S. Comp. St. 1901, p. 3450), providing that liens against an insolvent obtained within four months prior to bankruptcy shall be void, a lien so acquired by attachment is not void, unless the bankrupt was insolvent at the time of the levy.

2. BANKRUPTCY (§ 198) — LIENS — ANNULMENT OF ATTACHMENT — SURRENDER OF PROPERTY TO TRUSTEE IN BANKRUPTCY.

Where a plaintiff acquiring an attachment lien within four months prior to the bankruptcy of the debtor made no objection to the trustee in bankruptcy selling the property, though he had notice of an order of the referee restraining the sale, he must be deemed to have acquiesced in the sale, and the attachment must be deemed annulled, and his only remedy is by application to the bankruptcy court for application of the proceeds.

3. ATTACHMENT (§ 337) — BONDS — LIABILITY OF SURETY.

An attachment defendant gave a forthcoming bond, and a petition in bankruptcy against him was filed within four months, and the trustee in bankruptcy, without objection from plaintiff, took possession of the property, and sold it for the benefit of the bankrupt estate. Held,

that the surety on the forthcoming bond was released, as the attachment was annulled.

Appeal from Circuit Court, Newton County; F. C. Johnston, Judge.

Action by the D. C. Wise Coal Company against the Columbia Zinc & Lead Company, in which defendant executed a forthcoming bond for the possession of property levied on under an attachment. There was an order granting a motion for an order on defendant and its surety in the forthcoming bond for the production of the property attached and for an assignment to plaintiff of the forthcoming bond, and defendant appeals. Reversed.

George Hubbert, for appellant. H. S. Miller, Haywood Scott, and John T. Sturgis, for respondent.

COX, J.

This is the third appeal in this case. The others are reported in 123 Mo. App. 249, 100 S. W. 680, and 143 Mo. App. 587, 128 S. W. 232.

The facts necessary for a determination of the questions arising upon this appeal are as follows:

The plaintiff began suit by attachment against defendant Columbia Zinc & Lead Company, and levied upon certain property. The defendant gave a forthcoming bond with the United States Fidelity & Guaranty Company as surety, and the possession of the property was released to defendant. Within four months after the levy, defendant was adjudged a bankrupt, and an order made by the referee in bankruptcy, directed to plaintiff and other creditors of the bankrupt, enjoining them from taking any steps looking to the sale of the attached property, or interfering with it in any way for a period of 12 months, or, if the bankrupt should apply for a discharge in a shorter time, then until such application should be determined. Notice of this order was served upon plaintiff's attorney. The attached property was then taken possession of by the trustee of the bankrupt estate and sold by order of the referee in bankruptcy. The plaintiff, however, proceeded with his attachment case to judgment. The defendant having appeared in that case and filed an answer, and also a plea in abatement, the judgment finally rendered was a general judgment. Upon this judgment execution was issued, which was returned nulla bona. The plaintiff then moved the court for an order upon defendant and its surety for the production of the property attached, and for an assignment to plaintiff of the forthcoming bond. The defendant and the surety upon the bond, and the trustee of the bankrupt estate, all appeared in opposition to those motions. Evidence was heard disclosing the facts as above set out. The court sustained plaintiff's motions and made the orders as requested, and the objectors have appealed.

Plaintiff's purpose in asking for the order to produce the property and for an assignment of the forthcoming bond was to prepare the way for a suit upon the bond. The property attached had been taken in charge by the trustee of the bankrupt estate and sold, and it was known that the property could not be produced, but the order for its production and failure to produce were essential to enable plaintiff to sue upon the bond. This fact was recognized by all of the objectors; hence their opposition to the orders.

The bankruptcy proceedings were begun within four months after the levy of the attachment writ, and the important questions in this case are: Did the bankruptcy proceedings annul the attachment and destroy its lien; and, if so, did this annulment release the surety on the forthcoming bond?

There are many cases which, if the language used therein is to be taken literally, hold that bankruptcy proceedings annul all liens acquired within four months, but we do not understand that the statute so reads. Section 67f of the bankruptcy act of 1898, upon this question, is as follows: "That all liens, 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 lien, judgment, attachment, or other liens, shall be deemed wholly discharged and released from the same." (Italics are ours.) As we construe this language, it means that, to render a lien acquired by the levy of an attachment writ within four months void, the bankrupt must be insolvent at the time the lien is acquired, and we have found no case holding otherwise when the attention of the court was called to this question. To our mind, it would be unjust to hold that, in the absence of fraud, a party acquiring a lien upon specific property by attachment proceedings should, under all circumstances, be held to take the risk of his debtor becoming insolvent within four months thereafter, even though he might be entirely solvent at the time the lien was acquired. The purpose of the statute is to prevent preferences between creditors of an...