D. C. Wise Coal Company v. Columbia Zinc & Lead Company
| Decision Date | 12 June 1911 |
| Parties | D. C. WISE COAL COMPANY, Respondent, v. COLUMBIA ZINC & LEAD COMPANY et al., Appellants |
| Court | Missouri Court of Appeals |
Appeal from Newton Circuit Court.--Hon. F. C. Johnston, Judge.
REVERSED.
Orders and assignment reversed.
George Hubbert for appellants.
(1) The attachment, which was the only possible basis of the motions for the order to produce the attached property, and for assignment of the alleged bond, had been utterly dissolved and extinguished as if it had never existed, by reason of the adjudication of defendant's bankruptcy; and, under the United States Court's decisions, the invalidity of such attachment is open to attack, either direct or collateral and, in consequence, all rights and remedies dependent thereon, including the property order on the supposed forthcoming bond, must likewise fall. Bankrupt Act, 1898 sec. 66, (c), (f); In re Higgins, 97 F. 775; In re Kemp, 101 F. 689; St. Cyr v. Diagnault, 103 F. 854; In re Kenney, 105 F. 897; In re Beals, 116 F. 530; In re Goldberg, 121 F. 581. (2) But at any rate the liability of the defendant, as obligor or receiptor to the sheriff for the attached property was extinguished by the dissolution of the attachment. Hayward v. George, 13 Allen, 66; Berry v Flanders, 69 N.H. 626, 45 A. 591. And there be numerous cases to this effect where the dissolution of attachment came of bankruptcy or insolvency, whether the property went or not into the hands of the trustee, at least unless there is an order continuing the attachment for the benefit of the trustee, which is out of this case. Wright v Dawson, 147 Mass. 385, 9 Am. St. Rep. 724; Wright v. Morley, 150 Mass. 573, 23 N.E. 252; Lewis v. Webber, 116 Mass. 450; Shumway v. Carpenter (Mass.), 13 Allen, 68; Whittridge v. Maxam, 68 N.H. 323, 44 A. 491; Polley v. Hazard, 70 Vt. 220, 40 A. 36. (3) To say that respondent could have any rights under the law of this case, on account of failure of defendant to submit the attached property to the execution for the attachment debt, seems to us beyond all reason. It cannot be that plaintiff may claim for the breach of a condition that cannot be performed, without direct violation of positive law, which law abrogated the attachment as if it had never existed. Springer v. Toothaker, 43 Me. 381; Maquota v. Willey, 35 Iowa 323; Ashley v. Smith, 9 Leigh (Va.) 164; Bank v. Matson, 24 Mo. 333; Jones v. Hawkins, 60 Ga. 52. (4) We submit that, natural justice supports the proposition that it is a good ground of defense for an obligor on a forthcoming bond, to show a clear loss of the subject of attachment through unavoidable occurrence beyond the defendant's control, and by no culpability of the obligor; and that it is wholly immaterial whether it be by providential destruction of the property, or claim of a stranger under predominant title, or paramount judicial writ or proceedings, natural death of attached beast, or legal dissolution and death of attachment itself by involuntary bankruptcy. Gass v. Williams, 46 Ind. 253; Hayman v. Hallam, 79 Ky. 389; Watson v. Simons, 91 Ala. 567; Duncan v. Thomas, 1 Ore. 314; Koener v. Creed, 58 Ind. 554; Clark v. Lamoreux, 70 Wis. 508, 36 N.W. 393.
H. S. Miller, Haywood Scott and John T. Sturgis for respondent.
(1) There are many precedents in the courts for rendering a judgment which is not to be enforced against the defendant or his property, but for the sole purpose of enabling a plaintiff to enforce the liability of a surety on a bond or other secondary liability. Kenrick v. Warren, 72 A. 461; King v. Block Co., 111 N.Y.S. 102; In re Import. Co., 166 F. 427; Hill v. Harding, 130 U.S. 699, 32 L.Ed. 1083; Marx v. Hart, 166 Mo. 518; McDonald v. Loewen, 145 Mo.App. 52; Pinkard v. Willis, 57 S.W. 891; Brown Coal Co., v. Antizak, 128 N. W. (Mich.) 774; In re Paper Co., 102 F. 872; In re Maagett, 173 F. 232; In re Automobile Co., 119 F. 441; Fisse v. Einstine, 5 Mo.App. 90. (2) This court should not hold that the attachment was dissolved by the adjudication in bankruptcy in the absence of any hearing or legal evidence as to the insolvency of the defendant at the time the attachment was levied. Loveland on Bankruptcy (2 Ed.), 566; Collier on Bankruptcy (3 Ed.), 434; Simpson v. Van Etten, 108 F. 199; Reed v. Equitable Trust Co. (Ga.), 8 Am. B. R. 242; In re Chappell, 113 F. 545. (3) The collateral liability of a surety on a forthcoming bond given in an attachment proceeding is not discharged by an adjudication of bankruptcy whether within or prior to four months of the levy of attachment. Coal Co. v. Antizak, 128 N. W. (Mich.) 774; Pub. Co. v. Grain Co., 108 Mo.App. 485; Hill v. Harding, 130 U.S. 699, 32 Law Ed. 1083; Haber v. Klauberg, 3 Mo.App. 342; Mueller v. Nugent, 46 Law Ed. 405; King v. Amusement Co., 111 N.Y.S. 102, 86 N.E. 1126.
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 and 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 twelve 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 these motions. Evidence was heard disclosing the facts as above set out. The court sustained plaintiff's motions and made the orders as required 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 67 of the Bankrupt 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 insolvent. In re Kenney 105 F. 897, and is not intended to hamper legitimate business between solvent persons. The creditor acquiring such a lien must take the risk of his debtor being insolvent at the time the lien attaches, if it is acquired within four months before bankruptcy proceedings are begun, but if the debtor is solvent when the lien attaches though it be within four months of the beginning of proceedings in bankruptcy, there can be no preferences at the time the lien attaches, and the creditor cannot be forced to lose his security by the debtor becoming insolvent thereafter. [Collier on Bankruptcy (6 Ed.), p. 476; Simpson v. Van Etten, 108 F. 199; Paper Co. v. Gomenbel, 143 F. 295.]
Although the levy was made within the four...
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