Gray v. Arnot

• Decision Date: 16 September 1915
• Citation: 154 N.W. 268,31 N.D. 461
• Parties: GRAY v. ARNOT, Sheriff.
• Court: North Dakota Supreme Court

31 N.D. 461

154 N.W. 268

GRAY

v.ARNOT, Sheriff.

Supreme Court of North Dakota.

Sept. 16, 1915.

Syllabus by the Court.

The language of section 67 of the Bankruptcy Act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1913, § 9651]), which provides that “levies, 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 levy, judgment, attachment, or other lien shall be deemed discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt,” relates merely to levies, judgments, attachments, and liens which are acquired through legal proceedings, and does not affect contractual or quasi contractual liens. Scrupulous care, indeed, is evidenced throughout the act to save all such rights and liens which are obtained in good faith from the bankrupt.

Where within four months of the filing of a petition in bankruptcy an action is brought by the vendor of goods to recover the purchase price of the same, and as subsidiary to such action an attachment is issued and levied against such goods, under the provisions of section 6938, Rev. Codes 1905, being section 7537 of the Compiled Laws of 1913, the lien of such attachment and of the judgment rendered in such attachment proceedings is nullified by the petition.

A vendor in North Dakota has after a delivery to the vendee no lien upon the goods sold for the purchase price, except by virtue of the levy of an attachment under the provisions of section 6938, Rev. Codes 1905, being section 7537, Compiled Laws of 1913.

Where an action is brought by the vendor of goods to recover the purchase price thereof, and an attachment is issued and levied on such goods in said proceeding, and within four months of the bringing of such action a petition in bankruptcy has been filed, the trustee in bankruptcy has no right or power to intervene in the action in order to gain the possession of the goods. The action being for money merely, and the lien of the attachment having been nullified by the filing of the petition in bankruptcy, such trustee cannot, by filing a petition in intervention, transform the action into one for the recovery of goods, or for the trial of the right of title thereto.

The trustee of a bankrupt estate may bring an action in the state courts in order to gain possession of property which belongs to the estate.

Where an attachment proceeding and the lien thereof has been nullified by the filing of a petition in bankruptcy, the trustee will not be precluded from recovering the possession of the property by the mere fact that after the filing of such petition the goods have been sold under such attachment proceedings.

After the lien of an attachment has been nullified by the filing of a petition in bankruptcy, the goods can no longer be said to be in custodia legis, so that an action against the sheriff for the possession thereof cannot be maintained. After the nullification of such lien of attachment, the sheriff holds merely as an involuntary bailee for the benefit of him who is entitled to the possession of the goods, and who in such case is the trustee in bankruptcy.

Appeal from District Court, Walsh County; Kneeshaw, Judge.

Action by J. E. Gray, as trustee in bankruptcy of James P. Johnson, against E. G. Arnot, as Sheriff of Walsh County. From judgment for plaintiff, defendant appeals. Affirmed.

This is an action in claim and delivery, which is brought by the trustee in bankruptcy of an insolvent debtor for the possession of certain personal property which he claims belongs to the estate. On the 14th day of February, 1911, Bristol & Sweet Company, a corporation, brought an action in the district court of Cass county against the defendant, James P. Johnson, of Grafton, N. D., to recover the purchase price of certain merchandise theretofore sold to the said Johnson. The complaint describes the property, and alleges that the defendant “had the same on hand.” Accompanying this complaint, and on the same day, there was filed in the district court an affidavit and undertaking in attachment, and afterwards, and on the same day, a warrant of attachment was issued. The affidavit for attachment, among the other statutory grounds, stated that the action was brought to recover the purchase money of the goods described, and the same statement was made in the complaint. The warrant of attachment was levied on the 16th day of February, 1911, and the goods taken into the sheriff's hands; the goods at the time of the levy being in the possession of the defendant, Johnson. On the 18th day of March, 1911, a demurrer was interposed by the defendant, Johnson, and later a motion for a change of venue was made, which motion was denied, and which demurrer was overruled, and the defendant was declared in default, and judgment rendered against him for the amount prayed for in the complaint, and so much of the property as was necessary was ordered to be sold to satisfy the judgment. There is no record of any motion having been made for leave to answer before the judgment was rendered. On the 4th day of April, 1911, this judgment was docketed, and the sheriff continued to hold possession of the property until the fall of 1911, when the said sheriff sold the property for considerably less than plaintiff's claim. Meanwhile, and on the 17th day of February, 1911, that is to say, some three days after the bringing of the action by Bristol & Sweet Company, and two days after the warrant of attachment came into the hands of the sheriff, and one day after he had made his levy thereunder, and a month or so before the docketing of the judgment in the action, the defendant in the action, James P. Johnson, filed a petition in bankruptcy in the District Court of the United States for the Northern District of North Dakota, and in which said petition the said Johnson...