In re Higgins

• Decision Date: 20 November 1899
• Parties: In re HIGGINS.
• Court: U.S. District Court — District of Kentucky

97 F. 775

In re HIGGINS.

United States District Court, D. Kentucky.

November 20, 1899

Charles Grubbs, for W. A. Pinkerton.

Wheeler & Worten, for bankrupt.

EVANS District Judge.

The petition in this case was filed January 18, 1899, and the adjudication was made on the 20th,-- two days later. After the selection of a trustee, W. A. Pinkerton, a creditor proved, as a preferred claim a demand in his favor against the bankrupt for $353.98. The claim of preference made by this creditor was based upon the fact that he had commenced an action at law against the bankrupt in the Marshall circuit court, to recover his debt, on May 31, 1897; that it was pending and undetermined on January 12, 1899, and that on that day, but not before, said Pinkerton had made an affidavit setting up grounds of attachment under the Kentucky Code of Practice, and had filed it in said action, and therein prayed that an order of attachment might then issue that such an order was issued accordingly on that day, and levied on the assets of the bankrupt which afterwards came to the hands of the trustee. Upon the hearing before him, the referee sustained the claim of this creditor to a preference and the trustee has brought the matter here for review. The action of the court must depend upon the proper construction of certain clauses of section 67 of the bankrupt act, which read as follows:

'(c) A lien created by or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy by or against such persons shall be dissolved by the adjudication of such person to be a bankrupt if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference,' etc. '(f) That all 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 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 preserved 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.'

If the language of clause 'c,' regardless of all other considerations, is to be construed as referring to the date of the institution of the action in which the attachment was long afterwards obtained, no difference what might be the date of the attachment itself, or the application therefor there must be a decision of the question in favor of the creditor. A case has been referred to which supports this view, but I have found it impossible to agree with it. There does not seem to me to be any sound reason for supposing that congress could have intended to refer to anything except the beginning of that part of the proceeding which secured the writ under which there was a seizure of, and consequent lien upon, some of the debtor's property, whereby it was put in a position where other creditors could see that a lien was being claimed upon it to the exclusion of their otherwise equal right to share in it. Here a suit had been quietly but slowly progressing in the state court for nearly two years, but no attachment had been sued out, nor had anything equivalent to a lis pendens respecting this property been brought about, nor had anything been done by Pinkerton to entitle him to claim any exclusive right to have these assets appropriated to the payment of his demand. No lien existed, nor was any claimed, up to that time, nor did the right to any exist. Under section 196, and other sections, of the Kentucky Civil Code of Practice, an order of attachment may be obtained at any time before final judgment, upon the filing of an affidavit stating the statutory grounds therefor, and upon the execution of a bond, etc.; and under section 201 other orders of attachment may subsequently issue without additional affidavit or bond. ...