Edward Clarke v. Wilbur Larremore

• Decision Date: 20 October 1902
• Docket Number: No. 51,51
• Citation: 23 S.Ct. 363,188 U.S. 486,47 L.Ed. 555
• Parties: EDWARD H. CLARKE, Petitioner , v. WILBUR LARREMORE, Trustee in Bankruptcy of Raymond W. Kenney, Bankrupt
• Court: U.S. Supreme Court

188 U.S. 486

23 S.Ct. 363

47 L.Ed. 555

EDWARD H. CLARKE, Petitioner,

v WILBUR LARREMORE, Trustee in Bankruptcy of Raymond W. Kenney, Bankrupt.

No. 51.

Argued October 20, 1902.

Restored to docket for submission to full bench November 17, 1902.

Submitted December 15, 1902.

Decided February 23, 1903.

On January 23, 1899, the petitioner, the owner of certain notes of Raymond W. Kenney, commenced an action thereon in the supreme court of the state of New York. On March 6, 1899, he recovered judgment for the sum of $20,906.66. An execution, issued thereon, was by the sheriff of the county of New York levied upon a stock of goods and fixtures belonging to Kenney. A sheriff's sale thereof, had on March 15, 1899, realized $12,451.09. Shortly after the levy of the execution Leon Abbett sued out in the same court a writ of attachment against the property of Kenney, and caused it to be levied upon the same stock and fixtures. Immediately thereafter, claiming that the debt in judgment was a fraudulent one, he commenced in aid of his attachment an injunction suit to prevent the further enforcement of the judgment, and obtained a temporary order restraining the sheriff from paying petitioner the money received upon the execution sale. Upon a hearing the supreme court decided that the debt was just and honest, and on April 13, 1899, set aside the restraining order. On the same day, and before the sheriff had returned the execution or paid the money collected on it, a petition in involuntary bankruptcy against Kenney was filed in the United States district court for the southern district of New York, and an order made by the district judge restraining the sheriff from paying the money to Clarke, the execution creditor. 95 Fed. 427. Kenney was thereafter adjudged a bankrupt, and on November 25, 1899, the plaintiff having been appointed trustee in bankruptcy, the district judge entered a further order directing the sheriff to pay the money to the trustee. 97 Fed. 555. On review, the United States circuit court of appeals for the second circuit affirmed these ordes of the district judge (45 C. C. A. 113, 105 Fed. 897), and thereupon a certiorari was granted by this court. 180 U. S. 640, 45 L. ed. 711, 21 Sup. Ct. Rep. 927.

Section 67, subdivision f, of the bankrupt act of 1898 (30 Stat. at L. 544, 565, chap. 541, U. S. Comp. Stat. 1901, p. 3450), reads:

'That all levies, judgments, attachments, or other liens, obtained through legal preceedings 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, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien shall be preservel for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid. And the court may order such conveyance as shall be necessary to carry the purposes of this section into effect: Provided, That nothing herein contained shall have the effect to destroy or impair the title obtained by such levy, judgment, attachment, or other lien of a bona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry.'

Mr. S. Livingston Samuels for petitioner.

Mr. Nelson S. Spencer for respondent.

Mr. Justice Brewer delivered the opinion of the court:

The contention of the petitioner is that—— 'The sheriff having sold the goods levied on before the filing of the petition in bankruptcy, the proceeds of the sale were the property of the plaintiff in execution, and not of the bankrupt, at the time of the adjudication, and the trustee, therefore, has no title to the same.'

This contention cannot be sustained. The judgment in favor of petitioner against Kenney was not like that in Metcalf Bros. v. Barker, 187 U. S. 165, ante, 67, 23 Sup. Ct. Rep. 67, one giving effect to a lien theretofore existing, but one which, with the levy of an execution issued thereon, created the lien; and as judgment, execution, and levy were all within four months prior to the filing of the petition in bankruptcy, the lien created thereby became null and void on the adjudication of bankruptcy. This nullity and invalidity relate back to the time of the entry of the judgment, and affect that and all subsequent proceedings. The language of the statute is not 'when' but 'in case he is adjudged a bankrupt,' and the lien obtained through these legal proceedings was by the adjudication rendered null and void from its inception. Further, the statute provides that 'the property affected...