First Nat. Bank of Sioux City v. Flynn

• Decision Date: 09 October 1902
• Citation: First Nat. Bank of Sioux City v. Flynn, 117 Iowa 493, 91 N.W. 784 (Iowa 1902)
• Parties: FIRST NAT. BANK OF SIOUX CITY v. FLYNN.
• Court: Iowa Supreme Court

117 Iowa 493

91 N.W. 784

FIRST NAT. BANK OF SIOUX CITY

v.FLYNN.

Supreme Court of Iowa.

Oct. 9, 1902.

Appeal from district court, Woodbury county; F. R. Gaynor, Judge.

Action to recover rent alleged to be due under a lease, and to enforce a landlord's lien therefor against the L. Humbert Company. One Flynn, as trustee in bankruptcy of defendant company, sought to controvert plaintiff's right to a lien, and judgment was rendered for plaintiff establishing its lien as to a portion of the land claimed, from which judgment plaintiff and Flynn, trustee, prosecute separate appeals. Affirmed on plaintiff's appeal, and reversed on the appeal of the trustee.Lewis & Lewis, for plaintiff.

A. C. Strong, E. P. Farr, and L. M. Kean, for Geo. H. Flynn, trustee.

McCLAIN, J.

The lease on which suit was brought was executed in June, 1899. The action was instituted in February, 1900. The L. Humbert Company, defendant, on the 28th of March, 1900, filed an answer, stating that on that day a petition in bankruptcy had been filed against the said defendant in the United States district court, and praying that the courts make such order in the premises as should be necessary. The court proceeded, however, without regard to the pendency of the bankruptcy proceedings, to adjudge defendant to be in default, and rendered judgment against the defendant for the full amount of rent provided for in the lease, and established a lien in plaintiff's favor on property of the defendant, which had been seized under a landlord's writ of attachment at the beginning of the action, and ordered such property to be sold. Thereafter, on the 9th of May, Flynn, who had been on the 5th of May duly qualified as trustee in bankruptcy of the defendant firm, filed a motion to set aside the default, and presented therewith his answer, taking issue with plaintiff as to his right to a lien.

1. Plaintiff contends that as Flynn, trustee, did not file his motion and answer until the next term after the default was granted, he was not entitled to relief. Code, § 3790. But, in the first place, the statutory provisions as to setting aside a default are not applicable where no default whatever should have been granted (Hoitt v. Skinner, 99 Iowa, 360, 68 N. W. 788); and it is plain that, after defendant had set up the pendency of the bankruptcy proceedings, the lower court should not have proceeded to render a personal judgment, but should have determined the issue of fact whether such bankruptcy proceedings were pending in the federal court, and, on finding that such proceedings had been commenced, should have stayed further action, so far as the personal claim against the bankrupt was concerned, until the determination of the bankruptcy proceeding (Bankr. Act, § 11a). In the second place, the trustee's application was not an ordinary motion to set aside a default, which could be made only by the defendant against whom the default was rendered, but was in reality an intervention in behalf of the creditors of the bankrupt's estate to contest plaintiff's claim and its right to a lien. That the state court had the inherent power to entertain such an application, so long as the case was pending before it, cannot be doubted. Heath v. Shaffer (D. C.) 93 Fed. 647. That the state court still had jurisdiction of the attached property, and the power to determine what disposition should be made of it, clearly appears; for, although the judgment on default was formally a final adjudication, it is shown that at the time such judgment was rendered, and also at the time when the trustee sought to assert his right to the property, the sheriff had not only not sold the attached property...