Gray v. Arnot

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

154 N.W. 268

31 N.D. 461

J. E. GRAY, as Trustee of James P. Johnson, Bankrupt, v. E. G. ARNOT, as Sheriff of Walsh County, North Dakota

Supreme Court of North Dakota

September 16, 1915

Appeal from the District Court of Walsh County, Kneeshaw, J.

Action in claim and delivery to obtain the possession of personal property. Judgment for plaintiff. Defendant appeals.

Affirmed.

A. C Lacy, for appellant.

Where property is attached, and within four months thereafter the debtor is declared a bankrupt, and his trustee asserts no right to the property in said attachment proceeding, it is immaterial, as between the attaching creditor and the bankrupt, whether the trustee in bankruptcy has or had a valid title to the property, as the debtor has no other right or title to the property than he had when he filed his petition in bankruptcy, at which time it was subject to attachment. Rochester Lumber Co. v. Locke, 72 N.H 22, 54 A. 705; in Re Durham, 104 F. 231.

The trustee in bankruptcy is a purchaser of the property of the bankrupt, and he acquires only the title of the bankrupt, and can sell only such title as the bankrupt had. F. A. Ames Co. v. Slocomb Mercantile Co. 166 Ala. 99, 51 So. 994; Re Peacock, 178 F. 851.

The assignee of a bankrupt takes the property subject to all liens to which it was subject while in the hands of the bankrupt. Clason v. Morris, 10 Johns. 524; Phillips v. Helmbold, 26 N.J.Eq. 202; Blank v Blank, 124 La. 832, 50 So. 745; Union Brewing Co. v Inter-State Bank & Trust Co. 240 Ill. 454, 88 N.E. 997; Under bankruptcy act 1898, 30 Stat. at L. 566, chap. 541, § 70b; Bennett v. AEtna Ins. Co. 201 Mass. 554, 131 Am. St. Rep. 414, 88 N.E. 335; Walter A. Wood Co. v. Eubanks, 95 C. C. A. 273, 169 F. 929.

The trustee is invested with no better title than the bankrupt had. Loveland, Bankr. 3d ed. § 175; Norcross v. Nathan, 99 F. 414; Rev. Codes 1905, § 6938; subd. 8, Comp. Laws, 1913, § 7537.

The Federal courts will neither interfere with property in the lawful possession of state courts, nor tolerate interference by the state courts with property in their custody. Rock Island Plow Co. v. Western Implement Co. 21 N.D. 608, 132 N.W. 351; Re Russell, 41 C. C. A. 323, 101 F. 248.

A state court is not devested of jurisdiction of an action to enforce a specific lien on property of a debtor, by the debtor's being adjudged a bankrupt pending the action, or by failure of the trustee in bankruptcy to intervene. Vance v. Lane, 26 Ky. L. Rep. 618, 82 S.W. 297; Black, Bankr. 66; Loveland, Bankr. 278; Brandenburg, Bankr. 183; Metcalf Bros. v. Barker, 187 U.S. 165, 173, 47 L. ed. 122, 126, 23 S.Ct. 67; Frazier v. Southern Loan & T. Co. 40 C. C. A. 76, 99 F. 707; Pickens v. Dent, 45 C. C. A. 522, 106 F. 653; Rock Island Plow Co. v. Western Implement Co. 21 N.D. 608, 132 N.W. 351.

The bankrupt law does not devest state courts of jurisdiction. There is nothing in the act which sanctions anything to the contrary. Eyster v. Gaff, 91 U.S. 521, 23 L. ed. 403; Burbank v. Bigelow, 92 U.S. 179, 183, 23 L. ed. 542, 543.

The filing of a petition in bankruptcy is not a caveat, injunction, or attachment against holders of prior liens or titles. Rathman v. Booth, 106 C. C. A. 253, 183 F. 914; Mueller v. Nugent, 184 U.S. 1, 14, 46 L. ed. 405, 411, 22 S.Ct. 269, 275; Eyster v. Gaff, 91 U.S. 521, 23 L. ed. 403; Jerome v. McCarter, 94 U.S. 734, 740, 24 L. ed. 136, 139; Reynolds v. Pennsylvania Oil Co. 150 Cal. 629, 89 P. 610.

A trustee failing to intervene in an action pending against a bankrupt is bound by the judgment in such action. Va. 1911, Under bankruptcy act, July 1, 1898, 30 Stat. at L. 544, chap. 541; Heckscher v. Blanton, 111 Va. 648, 37 L.R.A(N.S.) 923, 69 S.E. 1045; Brown v. Wygant, 163 U.S. 618, 623, 41 L. ed. 284, 286, 16 S.Ct. 1159; Kessler v. Herklotz, 132 A.D. 278, 117 N.Y.S. 45; Remington, Bankr. §§ 1640--1644; Griffin v. Mutual L. Ins. Co. 119 Ga. 664, 46 S.E. 870; Herring v. Downing, 146 Mass. 10, 15 N.E. 116; Thatcher v. Rockwell, 105 U.S. 469, 26 L. ed. 949; Bank of Commerce v. Elliott, 109 Wis. 648, 85 N.W. 417; Vance v. Lane, 26 Ky. L. Rep. 619, 82 S.W. 297; Black, Bankr. 66; Loveland, Bankr. 278; Brandenburg, Bankr. 183; Collier, Bankr. 7th ed. 222; Hubbard v. Gould, 74 N.H. 25, 64 A. 668; Hahlo v. Cole, 112 A.D. 636, 98 N.Y.S. 1049; Eyster v. Gaff, 91 U.S. 521, 23 L. ed. 403; Norton v. Switzer, 93 U.S. 355, 23 L. ed. 903; Jerome v. McCarter, 94 U.S. 734, 737, 24 L. ed. 137, 138; Frazier v. Southern Loan & T. Co. 40 C. C. A. 76, 99 F. 707; Burbank v. Bigelow, 92 U.S. 179, 183, 23 L. ed. 542, 543; Re Klein, 97 F. 31; Weaver Mercantile Co. v. Thurmond, 68 W.Va. 530, 33 L.R.A.(N.S.) 1061, 70 S.E. 126, 3 N. C. C. A. 1.

Where a court has jurisdiction, it has the right to decide every question which arises in the cause; and whether its decision be correct or not, its judgment, until reversed, is binding in every other court. Metcalf Bros. v. Barker, 187 U.S. 165, 174--176, 47 L. ed. 122, 126--128, 23 S.Ct. 67; Frazier v. Southern Loan & T. Co. 40 C. C. A. 76, 99 F. 707.

Gray & Myers, for respondent.

A lien for the purchase price of personal property sold and delivered does not exist in this state, merely by force of the exemption statutes, or by reason of any other law. It is the levy upon the property, either under attachment or execution, and while such property is still in the hands of and owned by the original vendee, that gives the lien. Northern Shoe Co. v. Cecka, 22 N.D. 635, 135 N.W. 177.

Where property has been levied upon under attachment within four months prior to the debtor's adjudication in bankruptcy, the attachment is annulled by the filing of petition in bankruptcy by the debtor and his adjudication as a bankrupt; and any lien brought into existence by the attachment is dissolved, and the title to the property vests at once in his trustee in bankruptcy. Bankruptcy act 1898, § 67f; Clarke v. Larremore, 188 U.S. 486, 47 L. ed. 555, 23 S.Ct. 363; First Nat. Bank v. Staake, 202 U.S. 141, 50 L. ed. 967, 26 S.Ct. 582; Re Wilkes, 112 F. 975; Staunton v. Wooden, 102 C. C. A. 355, 179 F. 61; Goodnough Mercantile Co. v. Galloway, 48 Ore. 239, 84 P. 1049; Watschke v. Thompson, 85 Minn. 105, 88 N.W. 263; Hall v. Chicago, B. & Q. R. Co. 88 Neb. 20, 128 N.W. 645; Cavanaugh v. Fenley, 94 Minn. 505, 110 Am. St. Rep. 382, 103 N.W. 711; Alexander v. Wilson, 144 Cal. 5, 77 P. 706; Dittemore v. Cable Mill. Co. 16 Idaho 298, 133 Am. St. Rep. 98, 101 P. 593; Bank of Garrison v. Malley, 103 Tex. 562, 131 S.W. 1064; D. C. Wise Coal Co. v. Columbia Lead & Zinc Co. 123 Mo.App. 249, 100 S.W. 680; Wallace v. Camp, 200 Pa. 220, 49 A. 942; Wood v. Carr, 115 Ky. 303, 73 S.W. 762; Armour Packing Co. v. Wynn, 119 Ga. 683, 46 S.E. 865.

The provision of our bankruptcy law is similar in effect to general insolvency laws, and operates ipso facto to dissolve the attachment. Baum v. Rapheal, 57 Cal. 361; Cerf v. Oaks, 59 Cal. 132; Lynch v. Roberts, 57 Md. 150; O'Neil v. Harrington, 129 Mass. 591; Lincoln v. Leshure, 132 Mass. 40; Nelson v. Winchester, 133 Mass. 435; Gay v. Raymond, 140 Mass. 69, 2 N.E. 782; Wright v. Dawson, 147 Mass. 384, 9 Am. St. Rep. 724, 18 N.E. 1; Wright v. Morley, 150 Mass. 515, 23 N.E. 232; North Star Boot & Shoe Co. v. Lovejoy, 33 Minn. 229, 22 N.W. 388; Wheelock's Petition, 18 R. I. 463, 28 A. 966; Bank of American Loan & T. Co. v. Burdick, 18 R. I. 481, 28 A. 967; Baldwin v. Buswell, 52 Vt. 57; Palmer v. Woodward, 28 Conn. 248; Johnson v. Bray, 35 Minn. 248, 28 N.W. 504; Owen v. Roberts, 81 Me. 439, 4 L.R.A. 229, 17 A. 403.

Such was the holding of the courts under the bankruptcy act of 1867. Duffield v. Horton, 73 N.Y. 219; Miller v. Bowles, 58 N.Y. 253.

Under such statutory provisions, the attachment becomes dissolved without the assistance or necessity of any order of the court out of which it issued. King v. Loudon, 53 Ga. 64; Duffield v. Horton, supra; Tichenor v. Coggins, 8 Ore. 270; Sullivan v. Rabb, 86 Ala. 433, 5 So. 746; Conner v. Long, 104 U.S. 228, 26 L. ed. 723; Chapman v. Brewer, 114 U.S. 158, 29 L. ed. 83, 5 S.Ct. 799; International Bank v. Sherman, 101 U.S. 403, 25 L. ed. 866; Bracken v. Johnston, 4 Dill. 518, Fed. Cas. No. 1,761; Hill v. Harding, 93 Ill. 77; Barker v. McLeod, 14 Nev. 148; Johnson v. Bray, 35 Minn. 248, 28 N.W. 504; Weisenfeld & Co. v. Mispelhorn, 5 W.Va. 46.

The dissolution of the attachment lien operates to render the sheriff an involuntary bailee of the property for the owner; that is, his continued possession of the property would be the possession of the owner. 4 Cyc. 808 and 809, Rev. Codes 1905, § 6963, Comp. Laws 1913, § 7562.

As against the bankrupt's trustee, the holding of the property by the sheriff, under such circumstances, would not be an adverse holding. Re Francis-Valentine Co. 36 C. C. A. 499, 94 F. 793.

The mere refusal of the sheriff to surrender the attached property does not render him an adverse claimant. Staunton v. Wooden, 102 C. C. A. 355, 179 F. 61.

The question of the right of title to property is not here involved. The property in question belonged to the bankrupt; upon his adjudication as a bankrupt, the title thereto at once vested in his trustee, who was then entitled to the physical possession of the same; and the form of this action represents the proper remedy. The moment the attachment was annulled and dissolved, that moment the property ceased to be in the custody of the law; and upon the sheriff's failure to surrender the same, replevin would lie. Ranft v. Young, 21 Nev. 401, 32 P. 490; Anderson v. Nunan, 5 Wash. 493, 34 Am. St. Rep. 875, 32 P. 107; Re Walsh Bros. 159 F. 560.

That portion of the judgment in the attachment suit, ordering the property in question to be sold by the sheriff to satisfy the money judgment rendered...