J. B. Withers Cigar Co. v. Kirkpatrick

• Decision Date: 15 April 1943
• Docket Number: 14479.
• Citation: 26 S.E.2d 255,196 Ga. 41
• Parties: J. B. WITHERS CIGAR CO., Inc., et al. v. KIRKPATRICK et al.
• Court: Georgia Supreme Court

26 S.E.2d 255

196 Ga. 41

J. B. WITHERS CIGAR CO., Inc., et al. v. KIRKPATRICK et al.

No. 14479.

Supreme Court of Georgia

April 15, 1943

Judgment Adhered to After a Rehearing June 12, 1943.

The statute authorizing creditor's petition against an insolvent trader in equity, but not expressly granting lien to petitioning creditor, being in derogation of the common law, must be strictly construed, and cannot be construed as granting lien by implication. Code, § 28-401 et seq.

Syllabus by the Court.

1. Although it is declared in the Code that the general lien of a landlord shall date from the time of levy of distress warrant, the lien is not created by the distress warrant but exists by virtue of statute as applied to relationship, and is not destroyed or vacated by the institution of a creditors' suit under the insolvent traders law as embodied in the Code, Title 28, Chapter 4.

2. Accordingly, where such a lien was in existence at the time a creditors' petition was filed, although it then may have been inchoate, requiring levy of a distress warrant to perfect it, yet where it was afterwards so perfected before the rendition of judgment in favor of general creditors, it would be entitled to priority over such judgment. Under the facts of the record, the court properly sustained the claim of priority and rendered judgment accordingly.

J. B Withers Cigar Company, Inc., filed a suit in equity against Mrs. Lillian Kirkpatrick, Jr., individually and doing business as Kirkpatrick Pharmacy, the action being brought as a creditors' petition against an insolvent trader, under the Code, Title 28, Chapter 4. P. L. Bardin and King S. Cone as trustees of the estate of Thomas H. Pitts, deceased intervened for the purpose of asserting a landlord's general lien for rent. The court sustained their claim of priority, and to this judgment the Cigar Company excepted.

Various other creditors intervened in the court below and were named as parties to the bill of exceptions, but for present purposes the foregoing is a sufficient statement as to parties.

It is contended by the plaintiff in error that since there was no levy of distress warrant until after sanction and filing of the creditors' petition, the alleged lien was never perfected, or was not perfected in time, and that it was therefore not entitled to priority. The facts pertinent to this contention were as follows:

The creditor's petition after sanction was filed at 3:02 p. m. November 4, 1941. It prayed that all creditors be required to intervene, for appointment of a receiver, and for general relief. In connection with sanction, the judge issued a rule nisi, calling upon Mrs. Kirkpatrick to show cause on a future date named why the prayers of the petition should not be granted. It was further ordered that 'in the meantime, the defendant is enjoined from changing the status of any of her property, and all other creditors of defendant are enjoined from proceeding in any other action to enforce their claims against the said defendant, and are entitled to intervene in this proceeding.' A copy of the petition and order was personally served on Mrs. Kirkpatrick, the sole defendant, at 9:45 p. m. the same day. At this time, she and the plaintiff Cigar Company were the only parties, and it does not appear that Bardin and Cone had any notice of the proceeding until after this date. They did not intervene until December 11.

On December 4, 1941, the court confirmed a sale of the assets by the receiver, and ordered that all liens be divested from the assets and transferred to the proceeds of such sale.

On December 11, 1941, Bardin and Cone, as trustees, presented their intervention asserting a landlord's general lien for rent, and praying that it be established as such, and that the sum claimed be ordered paid out of the funds in the hands of the receiver. Attached to the intervention was a copy of a distress warrant, with entries showing filing of the warrant in the office of the clerk of the civil court of Fulton County at 12:33 p. m. and levy by a deputy marshal at 3:25 p. m., both on November 4, 1941; the property described in such levy being the assets that were later sold by the receiver. Objections to the allowance of such claim based on alleged landlord's lien were filed by the plaintiff Cigar Company in its own behalf and in behalf of other creditors similarly situated. On December 18, 1942, these objections were overruled and judgment was rendered in favor of the intervenors for the amount claimed as a 'lien creditor,' with the right of priority claimed. It is to this judgment that the Cigar Company excepted.

Benton E. Gaines, of Atlanta, for plaintiffs in error.

Craighead, Dwyer & Lavender, W. O. Slate, J. B. McCallum, and Noah J. Stone, all of Atlanta, for defendants in error.

Sam G. Dettelback and Augustine Sams, both of Atlanta, for party at interest.

BELL, Presiding Justice (after stating the foregoing facts).

The plaintiff in error as a creditor instituted suit against its debtor under the insolvent traders' law, as contained in the Code, Title 28, Chapter 4. The controversy is between the plaintiff in error acting for itself and other unsecured creditors, and parties asserting preference or priority under an alleged landlord's general lien for rent. The parties last mentioned may be referred to as defendants in error, or simply as the landlord. The questions raised require consideration of certain provisions of the insolvent traders' law, as well as the law relating to landlord and tenant. The following are the pertinent provisions of the law as to insolvent traders:

'In case any corporation, not municipal, or any trader or firm of traders shall fail to pay, at maturity, any one or more matured debts, payment of which has been properly demanded of such debtor, and by him refused, and shall be insolvent, it shall be in the power of a court of equity, under a creditor's petition, to which one or more creditors, representing one-third in amount of unsecured debts of such insolvent corporation, trader, or firm of traders, whose debts are matured and unpaid, shall be necessary parties, to proceed to collect the assets, real and personal, including choses in action and money, and appropriate the same to the creditors of such trader, firm of traders, or corporation.' Code, § 28-402.

'The judge, under such proceedings as are usual in equity, may grant injunctions and appoint receivers for the collection and preservation of the assets in the cases provided by this Chapter, and may at any time appoint an auditor and take all proper steps to bring the matter to a final hearing.' Code, § 28-403.

'Any creditor may become a party to said petition, under an order of the court, at any time before the final distribution of the assets, he becoming chargeable with his proportion of the expenses of the previous proceedings.' Code, § 28-404.

'Upon the appointment of a receiver, no creditor shall acquire any preference, by any judgment or lien, on any suit or attachment under proceedings commenced after the filing of the petition, and all assignments and mortgages to pay or secure existing debts, made after the filing of said petition, shall be vacated, and the assets be divided pro rata among the creditors, preserving all existing liens.' Code, § 28-405.

As to liens of landlords, we have the following provisions:

'The following liens are established in this State: * * * 4. Liens in favor of landlords.' Code, § 67-1701.

'Landlords shall * * * also have a general lien on the property of the debtor, liable to levy and sale, which general lien shall date from the time of the levy of a distress warrant to enforce the same.' Code, § 61-203.

'The landlord's lien for his rent shall attach from the time of levying his distress warrant, but it shall take precedence of no lien of older date except as to the crop raised on the premises.' Code, § 61-403.

The Code further provides for issuance of distress warrant on ex parte affidavit of the landlord, his agent or attorney. Code, § 61-402. Such a distress warrant is final process under which the property levied on may be sold as under other executions, unless it is arrested by a counter affidavit. Elam v. Hamilton, 69 Ga. 736(1); Corley-Powell Produce Co. v. Allen, 42 Ga.App. 641(1), 157 S.E. 251.

It is argued for the plaintiff in error that in view of the Code, § 28-403, supra, providing for injunction and receiver for preservation of assets, and the provisions declaring that the general lien of a landlord shall date from the time of the levy of a distress warrant to enforce the same, the landlord in this case was not entitled to priority, for the reason that the distress warrant was not levied until after the creditor's petition was filed. It is insisted that the insolvent traders' law was designed to prevent any creditor from acquiring a preference by judgment or lien after the filing of the creditor's petition, and that under the facts of the case, the present alleged lien would constitute a preference under section 28-405. It is further contended that although the receiver was not appointed until after the distress warrant was levied, the restraining order prevented the making of a valid levy, but even if not, the appointment of the receiver related back to the filing of the petition, and hence annulled the levy that was made in the meantime. Compare May v. Printup, 59 Ga. 128; Merchants' & Planters' Nat. Bank v. Trustees of Masonic Hall, 63 Ga. 549(2), 552; Patterson v. Veasey, D.C., 295 F. 163, 165, where retroactive force of an appointment was recognized, but in each of these cases, the statement or ruling made related to conflict of jurisdiction between State and Federal courts, as to which would retain...