Lessee of Henry Waller, Assignee of the Bankrupt Estate of Francis Savage, Plaintiff v. James and Joseph Best

• Decision Date: 01 January 1845
• Citation: 44 U.S. 111,11 L.Ed. 518,3 How. 111
• Parties: LESSEE OF HENRY WALLER, ASSIGNEE OF THE BANKRUPT ESTATE OF FRANCIS A. SAVAGE, PLAINTIFF, v. JAMES AND JOSEPH BEST
• Court: U.S. Supreme Court

44 U.S. 111

3 How. 111

11 L.Ed. 518

LESSEE OF HENRY WALLER, ASSIGNEE OF THE BANKRUPT ESTATE

OF FRANCIS A. SAVAGE, PLAINTIFF,

v. JAMES AND JOSEPH BEST.

January Term, 1845

THIS case came up from the Circuit Court of the United States for the district of Kentucky, on a certificate of division in opinion between the judges thereof.

The following is the entire record in the case:——

'The following statement of questions and points of law which arose in this case, and the adjournment thereof into the Supreme Court of the United States for decision, was ordered to be entered, to wit:

'Savage had the title to the land; the plaintiff claimed under the decree of his bankruptcy; the defendant, under a sheriff's sale under an execution.

'The act of bankruptcy of Savage was committed on the 27th April, 1842; the petition of his creditors was filed against him in the District Court on the 25th day of June, 1842, and he was declared a bankrupt on the 26th of October, 1842; the plaintiff was appointed the assignee, and this is his title.

'An execution of fieri facias on a judgment against the estate of Savage was delivered to the sheriff on the 9th of April, 1842, before the act of bankruptcy, and was levied on the land on the day of before the petition; but after the act of bankruptcy the defendant purchased at the sheriff's sale, had his deed, and this was his title.

'The question was, has the plaintiff, by the decree of bankruptcy and its relation back to the act of bankruptcy, the elder and better title; or has the defendant, by the prior delivery of the execution into the hands of the sheriff, and his levy of it before the petition was filed, the prior and superior title?

'On this question the judges were divided and opposed in opinion; whereupon, on motion of the counsel of the plaintiff, the question is stated and ordered to be certified to the Supreme Court for decision.'

Morehead and B. Monroe, for the plaintiff.

Richard French, for the defendants.

The argument on behalf of the plaintiff was this:

Two questions arise: 1st. Did Best, the tenant in possession and the plaintiff in the execution under which the sale of the land was made, acquire any lien, such as is recognized by the latter proviso of the 2d section of the bankrupt law, before the execution was in fact levied?

2d. If any such was acquired, is it effectual against the rights of the assignee of the bankrupt, when the act of bankruptcy was committed before the levy of the execution; or could the execution, in virtue of the lien given by the state law, which was in the hands of a sheriff, but not levied before an act of bankruptcy, be afterwards levied, and the property sold?

These questions render it necessary to look to the character of the lien given by the statutes of Kentucky, in favor of execution creditors, and when that lien commences. The statute of Kentucky (1 Stat. Law, 636) provides 'that no writ of fieri facias, or other writ of execution, shall bind the estate of the defendant or defendants but from the time such writ shall be delivered to the sheriff or other proper officer to be executed.' What is the import of the term bind, as used in the statute? That it has some binding effect is evident, but to what extent? Is it a lien within the meaning of the proviso of the bankrupt law? It is insisted that it is not, but is only so far binding as to prevent such disposition of the property by the defendant as will defeat the execution so in the hands of the officer; and does not so far bind the property as to prevent other execution creditors from levying their executions upon the debtor's property. See Tabb v. Harris, 4 Bibb (Ky.), 229; and Kelby v. Haggin, 2 J. J. Marsh. (Ky.), 212. In the latter case the court use this language: 'The only object of attaching a lien to an execution is to prevent the debtor from defeating the creditor by alienating or embarrassing his estate. The reason of the lien in such a case, does not apply to competition between creditors, and cessante ratione cessat lex; moreover, it is but sheer justice to give the preference to the creditor who by his superior industry and vigilance shall have procured the first levy on the debtor's estate.' This interpretation of the statute shows what is the character of that binding spoken of in the statute, and that it does not amount to the lien referred to in the bankrupt law until the execution be in fact levied, when it may be admitted that it amounts to such lien.

2d. The proceeding against Savage was at the instance of a creditor. The act of bankruptcy complained of was committed before any levy of the execution, though the filing of the petition and the decree were subsequent to the levy of the execution of Best. At common law a fieri facias had relation to its teste, but by our statute only from the day of its delivery to the officer. According to the adjudications of the English courts, on the bankrupt laws of that country anterior to the 36 George 3 and the 6 George 4, the uniform and well settled doctrine was that the assignee had a right to overhaul all the transactions of the bankrupt subsequent to the first act of bankruptcy, and recover all moneys or property which passed through his hands; but by the 18th section of the 6 George 4 'all bona fide transactions entered into more than two calendar months before the date and issuing the commission against the bankrupt, and all executions and attachments against his lands or chattels bona fide executed or levied more than two calendar months before the issuing of the commissions,' are made valid, 'notwithstanding any prior act of bankruptcy, provided the parties had no notice of it.'

Our bankrupt law has this proviso in the 2d section (1st proviso): 'That all dealings and transactions by and with the bankrupt, bona fide made and entered into more than two months before the petition filed against him or by him, shall not be invalidated by this act, provided that the other party to any such dealings or transactions had no notice of a prior act of bankruptcy, or of the intention of the bankrupt to take the benefit of this act.'

These provisos have no bearing upon the questions involved. No reference is here made to any executions or attachments, as in the English statute, but they are left to be governed by the last proviso of the 2d section.

The binding effect of writs of fieri facias in England, by the common law, was from the teste; by the statutes of Kentucky it is from the delivery to the sheriff: but in the character of this binding effect there is believed to be no other distinction but in respect of the time of its commencement. It may be proper then to learn what was the course of adjudication by the English courts upon this question. In Cooper v. Chitty, 2 W. Bl., 65; 1 Burr., 20, it is said if a sheriff take goods of a bankrupt in execution after the act of bankruptcy and before commission issued, and sell them after the commission, trover will lie against him.

Again, the sheriff seized the goods of a defendant under a fieri facias, and sold and delivered them to the judgment creditor, in satisfaction of the debt, after a secret act of bankruptcy committed by the defendant, but before the issuing of a commission against him: held, that the seizure and sale of the goods was a wrongful conversion, for which the sheriff was liable in an action of trover at the suit of the assignee subse quently chosen. Balme v. Hutton, 3 Moo. & S., 1; 9 Bing., 471; 1 Car. & M., 262; reversing s. c. Tyrw., 17; 2 Car. & J., 19; 2 Younge & J., 101, held by seven judges K. B. and C. P. (Gaselie, J., dissentient); Price v. Helyar, 1 Bing., 597; 1 M. & P., 541; S. P. Porter v. Starkie, 1 M. & S., 260; Blogg v. Phillips, 2 Campb., 129.

Farther, in Lazarus v. Waithman, 5 Moo., 313, where a trader committed an act of bankruptcy on the 9th of November, and the sheriff took his goods in execution on the 15th November, and sold them on the 21st December, and a commission issued on the 23d, and an assignment made on the 6th January following, it was held, 'that the assignee might maintain trover against the sheriff,' although he had sold before the assignment was made, as the bankrupt's property vested in him by such assignment from the act of bankruptcy by relation.

These authorities are deemed sufficient to show that the binding effect of an execution from its date, in England, was not such as to give the execution creditor any lien or preference over other creditors, unless the execution was in fact levied before the act of bankruptcy; and if not levied, the decree in bankruptcy, by relation, reached back, and effectually passed all the rights of the bankrupt to the assignee, as they existed at the time of the commission of the act of bankruptcy. And there is believed to be nothing in our bankrupt law which requires that it should receive a different interpretation from the English statutes in this particular. The action of some creditor was necessary to bring about the decree in bankruptcy; it is, therefore, the effort of the creditor, not of the defendant in the execution, which brings about the decree. The investiture of the rights of the debtor in the assignee is the act of the law, and the effect of the action of one or more creditors, for his own benefit and that of other creditors; and the result of this conclusion is, that there is a pro rata distribution of the bankrupt's property, rather than the appropriation of the whole to a single creditor.

Is the placing the execution in the hands of the sheriff a dealing by and with the bankrupt, to which the first proviso in the 2d section has reference? It is insisted that it is not. The bankrupt has, in that matter, been passive entirely. There has been no act upon his part, which is to acquire sanctity by the lapse of sixty days, spoken of in this proviso. But in this case sixty days had not elapsed; therefore, this proviso is altogether inoperative.

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