Snyder v. Smith

• Decision Date: 24 February 1904
• Citation: 69 N.E. 1089,185 Mass. 58
• Parties: SNYDER v. SMITH et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

185 Mass. 58

69 N.E. 1089

SNYDER v. SMITH et al.

Supreme Judicial Court of Massachusetts, Suffolk.

February 24, 1904

COUNSEL

G. M. Palmer and H. T. Richardson, for appellant Kimball.

Charles T. Gallagher, Hollis R. Bailey, and Frederick Manley Ives for appellee.

OPINION

KNOWLTON C.J.

The motion to dismiss the appeal of the defendant James M. Smith for want of prosecution, and the petition of Kimball, the trustee in bankruptcy, to be allowed to intervene in the suit, were heard together. The motion was allowed, and the petition was denied, except so far as it related to any surplus that might remain after the debts of the various parties had been paid. At the hearing the plaintiff filed requests for rulings, all of which were given by the judge. One of these was that under the bankruptcy act of 1898 the creditors who were parties to this suit 'obtained good equitable liens, valid as against the trustee in bankruptcy' of the defendant Smith. We infer that the decision of the judge both upon the motion and the petition was founded largely, if not entirely, upon his ruling made in accordance with this request, and was not made merely as a matter of discretion. The trustee in bankruptcy legally represented the bankrupt as the assignee of his property, and was entitled to be heard, upon proper proceedings in court, on his claim to the property referred to in the decree. We shall therefore assume in his favor against the plaintiff's contention, that he is rightly before us on his exception to the order denying his petition, and upon his appeal from that order.

The important question in the case is whether the proceedings gave the plaintiff an equitable lien upon the assets mentioned in the bill, which was good against the trustee in bankruptcy. The suit was brought under Pub. St. 1882, c. 151, § 2, cl. 11 (Rev. Laws, c. 159, § 3, cl. 7), to reach and apply certain equitable assets of the defendant Smith in the possession of the defendants Batt and Dickinson, trustees. A temporary injunction was issued on May 15, 1901, soon after the commencement of the suit, restraining the defendant Smith and the defendants who held the property from disposing of it. On March 27, 1903, a decree was entered settling the rights of the parties in favor of the plaintiff. The defendant Smith appealed, but failed seasonably to prosecute his appeal, and on May 7, 1903, he was adjudicated a bankrupt on his voluntary petition, and on May 21st Kimball was duly appointed his trustee.

Bankr. Act July 1, 1898, c. 541, §§ 67e, 67f, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3449], in differing language recognizes liens 'created by or obtained in or pursuant to any suit or proceeding at law or in equity,' and liens 'obtained through legal proceedings.' The provisions of these sections are somewhat broader than those of the bankruptcy act of 1867. They are unlike the insolvency law of Massachusetts. This law, as it is found in Gen. St. 1860, c. 118, § 44, discharged all liens obtained in legal proceedings unless the suit had gone to judgment and the lien by attachment had been perfected by a levy. It is expressly said that the assignment shall be effectual to discharge any attachment on mesne process, subject to a special exception permitting the attachment to be preserved in certain cases for the benefit of the general creditors. By St. 1880, p. 204, c. 246, § 7, this statute was amended by adding a provision as follows: 'The assignment named in section forty-four of said chapter one hundred and eighteen shall not dissolve an attachment on mesne process, made more than four months prior to the time of the first publication of the notice of issuing the warrant, in case of voluntary petitions; and in case of involuntary petitions such assignment shall not dissolve such an attachment made more than four months prior to the time of the first publication of the notice of the filing of the petition.' This provision has been embodied without material change in Pub. St. 1882, c. 157, § 46, and in Rev. Laws, c. 163, § 54. Until this amendment was made, the statute not only in express terms provided that the lien created by an attachment on mesne process should be ineffectual against the rights of the assignee, but declared by implication that equitable liens of a similar character, obtained through legal proceedings in the nature of an attachment, would not be enforceable in proceedings in insolvency. By the amendment an exception was made in favor of attachments on mesne process made more than four months before the commencement of insolvency proceedings, but there is no exception of equitable liens obtained in proceedings to collect a debt, and in respect to this the statute stands as originally enacted.

The first question under section 67 of the bankruptcy act is, what is meant by the word 'lien'? It is plain that a lien created by a suit in equity stands as well as any other kind of lien. Such a lien that has been in existence more than four months is good against the assignment to the trustee. An attachment on mesne process under our statute creates a lien. Davenport v. Tilton, 10 Metc. 320; Taylor v. Mixter, 11 Pick. 341, 348; Denny v. Willard, 11 Pick, 519, 524, et seq., 22 Am. Dec. 389. In the first of these cases it is held that such a lien is preserved by the bankruptcy act of 1841. This lien does not depend upon possession; it is created by operation of law, sometimes by a record of the doings of the officer, as in the case of attachments of real estate (see Rev. Laws, c. 167, § 59), and of personal property that cannot easily be removed (see Rev. Laws, c. 167, § 45). Undoubtedly, an attachment by trustee process gives a lien upon property which will be good against bankruptcy if more than four months old. Kimball v. Morris, 2 Metc. 573, 578, 579.

Proceedings in cases like the present are often called in the books an 'equitable attachment.' If the facts warrant it, it is the practice to issue a temporary injunction, whereby the property, by judicial order, is charged with an equity for the security of the plaintiff, and is taken directly into the control of the court. In this respect the control of it and its appropriation for security are in all particulars as effectual as in an attachment at law by trustee process. A bill brought under our statute is like a creditors' bill under general equity practice, though it may be brought by a single creditor for his own...