In re Randolph

• Decision Date: 27 April 1911
• Citation: 187 F. 186
• Parties: In re RANDOLPH.
• Court: U.S. Court of Appeals — Fourth Circuit

187 F. 186

In re RANDOLPH.

United States District Court, N.D. West Virginia.

April 27, 1911

Davis &amp Davis, for trust creditors.

Charles G. Coffman, for execution creditors.

E. G Smith, for Wesley Steele.

DAYTON District Judge.

Petition in bankruptcy was filed in this case on May 20, 1909. The usual reference to a referee was made, and the case is now before me to review his action in ascertaining and fixing the order of priorities and preferences given by him to certain claims and refused as to others. The claims allowed preference are:

(1) In favor of Jesse F. Randolph for a balance of $59.24, which the referee held to be a first lien upon the proceeds derived from the sale of a 'bay horse named Prince.' The facts touching this claim are that the bankrupt on September 23, 1907, executed to claimant, Jesse F. Randolph, his note for $125, and, to secure the same, on the same day executed a deed of trust on 'one bay horse about fourteen years old known as the Innis horse, one bay horse this day bought of J F. Randolph and one pony this day bought of Clete Randolph. ' This deed of trust was regularly executed, acknowledged, and admitted to record on September 25, 1907. Payment has been made upon the $125 until the balance due is $59.24, with interest. There is no question but what the 'bay horse Prince' was one of the horses included in the deed of trust, that he was taken possession of by the trustee in bankruptcy and sold. This claim was properly allowed as a special lien upon the proceeds arising from the sale of this horse.

(2) A claim aggregating $311.07 as of February 28, 1909, in favor of D. S. & T. B. Smith, based upon a justice's judgment rendered November 27, 1908, upon which execution issued December 4, 1908, was received by a constable the same day at 4:20 p.m., levied January 14, 1909, returned not satisfied February 3, 1909, because of the service upon the constable of an injunctive writ issuing from the circuit court of Harrison county, W. Va., inhibiting sale of the property levied upon. The referee allowed this claim as a first lien upon the whole of the bankrupt's assets after payment of the special lien out of the proceeds of sale of the horse Prince, an exemption allowance to the bankrupt, and a labor lien to one Fox.

(3) A claim to Harrison Bates aggregating $73.12 as of said February 28, 1909, based upon a justice's judgment rendered December 12, 1908, upon which execution issued December 12, 1908, was received by a constable the same day at 5:20 p.m. levied January 14, 1909, and returned not satisfied February 3, 1909, by reason of the same injunction order.

(4) A claim of Homer Swiger aggregating $63.47 as of same date, based upon a justice's judgment rendered on the same day, December 12, 1908, received and levied on the same day and hour as the Bates one, and returned unsatisfied for the same reason. These two claims were held by the referee to be of equal priority, second in order after payment of the three claims above set forth.

(5) A claim of W. H. Nesbitt aggregating $46.05, based upon a justice's judgment, rendered December 18, 1908, upon which execution issued December 28, 1908, was levied January 14, 1909, and returned unsatisfied by reason of the same injunction order. This claim was allowed third priority by the referee after the three claims to the bankrupt, to Fox, and to J. F. Randolph, as above set forth.

The referee refused to allow as preferred claims:

(1) A claim of S. C. Bond and D. G. Davis for $500 upon which preference was claimed, based upon the following facts: On February 1, 1908, the bankrupt executed a deed of trust to Ernest Randolph, trustee, whereby he conveyed a number of horses and other personal property to secure and indemnify said S. C. Bond and D. G. Davis as sureties upon a $1,000 note, executed by the bankrupt to Clete Randolph payable in six months. No provision was made in the deed to secure future renewals of this note. This deed of trust was acknowledged on 'the . . . day of February, 1908,' and admitted to record on the 13th day of February, 1908. The evidence shows that some of the horses conveyed by this trust deed died or were sold or disposed of and did not pass into the hands of the bankrupt's trustee, that part of the debt was paid, and that on August 1, 1908, a note for $500 was executed to the Merchant's & Producer's Bank of Salem, W. Va., by the bankrupt and claimants Davis and Bond as sureties for the residue of this trust debt, which is still due and payable to this bank, and has not been paid by these sureties.

(2) A claim of $347.89 of S. C. Bond upon which preference was claimed, based upon the following facts: On August 5, 1908, the bankrupt executed a note to the First National Bank of Salem, W. Va., for $1,020. The claimant Bond became surety upon this note, and on the same day took from 'R. H. Randolph and Company' a deed of trust upon 'eighteen head of horses, eight sets of double wagon harness, eight road wagons and one boiler truck, all with chains and fixtures complete and including all the property of that description belonging to the party of the first part' to indemnify and secure himself as such surety. This deed of trust was signed, 'R. H. Randolph, President,' and acknowledgment was taken as of 'this . . . day of August, 1908,' from the bankrupt in the form provided to be used where a corporation acknowledges a writing by and through its president. This deed of trust was not admitted to record until January 12, 1909.

The objection urged against the allowance as preferred of the claims of D. S. & T. B. Smith, Harrison Bates, Homer Swiger, and W. H. Nesbitt are substantially the same, and may be considered together. It is insisted it is not shown (a) what property levied upon by claimants' executions was actually owned by the bankrupt on the day the petition in bankruptcy was filed; (b) that no executions were at that time in the hands of the officer, and therefore no liens existed upon the bankrupt's personal property at that date in favor of these judgment creditors of his; (c) that collection of executions theretofore issued and levied had been enjoined and by reason of such injunction had been returned by the officer unsatisfied.

These four executions were issued in December, 1908, and from the date of issue became liens upon all the personal property of the debtor under section 2090 of the Code 1906 (Code 1899, c. 50, Sec. 139) of this state, which provides:

'From the time the execution came into the hands of such officer to be executed, it shall operate as a lien on all the personal property of the judgment debtor, liable to be seized under it.'

The executions were returnable in 60 days, but before this time their collection out of the property levied upon was enjoined. This injunction was granted February 2, 1909, and was not dissolved until the 31st day of May following. In the meantime, on the 20th day of May, the debtor had been adjudged a bankrupt. The question practically resolves itself into determining what legal effect this injunction had upon these execution liens. Did it destroy them, or only suspend them, and did they revive after the dissolution of the injunction? This question is a very perplexing one, and there is no direct authority in point in West Virginia to which I have been cited by counsel or have been able to find. In 17 Cyc. 1197, it is said: 'By the general rule an injunction releases the levy and the lien created by it'--citing the three cases from Kentucky of Mallory v. Dauber, 83 Ky. 239; Keith v. Wilson, 3 Metc. 201; Lockridge v. Biggerstaff, 2 Duv. 281, 87 Am.Dec. 498, contra; Lamorere v. Cox, 32 La.Ann. 246. Also:

'The reason is that it would ruin both debtor and creditor if the sheriff should be required to hold the goods to the termination of an injunction bill in chancery. The same reason it is obvious would equally apply if the injunction be sued out at the instance of a third person. ' Telford v. Cox, 15 Lea (Tenn.) 298, 299.

'When an officer returns an execution levied and stopped or stayed by injunction or supersedeas, the return imports a cessation of the levy and a release of the property. ' Ela v. Welch, 9 Wis. 395, 400.

If the defendant has given a forthcoming bond the issue of an injunction against the enforcement of the execution excuses him for not delivering the property levied on, and this without forfeiting his bond. Hull v. Bloss, 27 W.Va 654. See, also, Newlin v. Murray, 63 N.C. 566, where it is held that the fact that before the return of the process the injunction by consent is dissolved can make no change in the rule. And this is based upon the assumption that the injunction bond after dissolution stands as security for the debt enjoined, and subsequent execution creditors are entitled to sell the property and receive the proceeds. In accord with this would seem to be the statutory provisions of this state which require an execution debtor seeking to enjoin to execute bond with security sufficient to pay the debt, interest, costs, and damages...