Spilman v. Johnson

• Decision Date: 19 December 1876
• Parties: SPILMAN v. JOHNSON.
• Court: Virginia Supreme Court

68 Va. 33

SPILMAN v. JOHNSON.

Supreme Court of Appeals of Virginia.

December 19, 1876

1. A creditor by judgment of a bankrupt, who proves his debt in the bankruptcy proceedings, and takes an active part in these proceedings, cannot afterwards go into a state court to subject property sold by the assignee of the bankrupt, and the proceeds distributed in that proceeding, to satisfy his judgment, on any ground of error which might have been corrected in the bankrupt court, or by appeal from the order or decree of that court.

2. A creditor of a bankrupt having a lien on his real estate, has two courses open to him, either of which he may adopt. He may decline to appear in the bankrupt court; and he will be unaffected by any proceeding in that court; unless, indeed the proper steps are taken to sell the estate clear of all incumbrances; or he may elect to proceed in the bankrupt court, prove his debt there, and rely upon his security.

3. If the creditor elects to proceed in the bankrupt court, this is a waiver of his right to institute any suit or proceeding at law or in equity, which is in any way inconsistent with his election to obtain satisfaction of his debt under the bankruptcy proceedings.

This was a suit in equity in the circuit court of Henrico county brought in June 1871, by Luther R. Spilman against Bradley T Johnson, John Johns and others, to subject certain land called the " Granite Quarry," in the county of Henrico, purchased by Johnson at a public sale made by John Johns, assignee of Henry Exall, a bankrupt, to the lien of two judgments which had been recovered against said Exall some years before his bankruptcy, one of them by B. W. Green and the other by Taylor & Son, and which had been assigned to Spilman. This cause came on to be heard on the 18th of June 1872, when the court made a decree dismissing the bill, with costs. And thereupon Spilman applied to this court for an appeal; which was allowed. The cause is stated by Judge Staples in his opinion.

Guy & Gilliam, for the appellant.

Royall, for the appellees.

STAPLES J.

It is claimed by the appellant that the property known as the " Granite Quarry," in the possession of the appellee, Johnson, was sold under a decree of the circuit court of the United States; that the suit in which that decree was rendered, was brought not for the purpose of procuring a sale, but merely to vacate as fraudulent the lease made to Turner Exall; that he, the appellant, was not a party to that suit; that he had no connection with it; and he received no part of the purchase money.

The exhibits filed fully sustain the appellant in these positions. And if this was the whole case, the lien of his judgments would still be in force, and he might properly invoke the jurisdiction of the state courts to enforce the same against the property in the possession of the appellee. But unfortunately for him this is not the whole case. There are other facts to be considered which conclusively show that the appellant has waived his right to assert this lien by any proceeding or suit in a state court. In order to understand this more clearly, it is proper to inquire into the proceedings in the bankrupt court. In October 1868 the assignee filed his petition in that court, setting forth the real estate belonging to Exall, the bankrupt, the number and amount of the liens thereon, the parties entitled to the same, and asking for a sale of the property, discharged of all the incumbrances. Several of the judgment creditors united in this petition. Among those so uniting were the creditors, under whom the appellant now claims. A decree of sale was accordingly made. Subsequently the assignee filed his bill in the circuit court of the United States to vacate the lease to Turner Exall as fraudulent. A decree was entered vacating the lease, and directing a sale of the " Granite Quarry." The property was advertised accordingly; but the sale was enjoined by Armistead & Cary, creditors, claiming to have a lien upon it for money expended or advanced in developing the quarry. This injunction was awarded by the Hon. John C. Underwood, as judge of the district court, to whom the application was addressed. The decree of sale was set aside by him, and a rehearing of the cause directed at an adjourned term of the circuit court of the United States. Afterwards the same judge, sitting in the circuit court however, rendered a decree for the sale of the property, and under that decree the sale was made, at which the appellee became the purchaser. It would thus seem the various orders and decrees were uniformly entered by the same judge, presiding indifferently in the circuit court and in the district court. And although the assignee proposed to sell under a decree of the circuit court, he had at the same time the authority of the district court sitting in bankruptcy, conferred by the decree of the 12th October 1868, already adverted to. His reports of the sales were both returned to and filed in the latter court. These reports distinctly set forth the names of the several purchasers, the amount of the purchase money, the charges, costs, fees attending the sales, and the balance remaining in the hands of the assignee for distribution among the creditors.

It further appears that on motion of John P. Tabb, a preferred creditor, after the reports were so filed, an order was entered in the bankrupt court for an account of the liens upon the estate of the bankrupt and their respective priorities. The special commissioner, O. G. Kean, appointed for that purpose, notified the creditors that he would take the account on the 9th November 1870, and that to enable them to share in the distribution their liens must be asserted in the bankrupt suit. This notice was served on the appellant, and on the day indicated he, as assignee of B. W. Green, proved his debt as a secured creditor, claiming a lien on the real estate and upon the proceeds of sale in the hands of the assignee. The other judgment held by the appellant, as assignee of William Taylor & Sons, had been previously proved by the latter before the assignment was made.

Three months after this, in January 1871, the following order was entered: " It appearing from the report of the assignee in this cause that there is in his hands, after the payment of all expenses incurred by him in this suit, the sum of $1,577.79, one-half of which was derived from the sale of the realty, and the other half from the sale of the personalty it is ordered that John Johns, said assignee, do distribute said fund to the parties entitled to the same as ascertained by the report of O. G. Kean, special...