Pearson v. Wm. R. Moore Dry Goods Co.

Ethridge, J., delivered the opinion of the court. Suit was filed by the Wm, R. Moore Dry Goods Company in the circuit court of Kemper county, seeking to *231 enforce a vendor’s lien npon merchandise sold to Gny Jack, Jr., by the plaintiff, appellee herein. The case was tried on an agreed statement of facts, which was as follows : “Gny Jack, Jr., was a resident of Scooba, Kemper county, Miss., during’ the year 1924, and np to January 2, 1925, was doing a general mercantile business in the town of Scooba, Miss. During the year 1924, in the month of September, Guy Jack, Jr., purchased from the William R. Moore Dry Goods Company, a corporation of Memphis, Term., dry goods amounting to eight' hundred ninety-nine dollars and eight cents, which amount is still unpaid, and on or about November 26, 1925, Guy Jack, Jr., being then and there indebted to the William E. Moore Dry Goods Company in the sum of eight hundred ninety-nine dollars and eight cents, gave to it his five promissory notes, four of which were for and in the sum of one hundred eighty dollars each, and one in the sum of one hundred seventy-nine dollars and eight cents, all payable at the Bank of Commerce & Trust Company, Memphis, Term., with eight per cent, interest thereon from maturity, such notes being due December 12, December 22, and December 29, 1924, and January '5 and January 12, 1925, providing that default in the payment of any one note should cause all to mature. That on January 2, 1925, a declaration was filed by the William E. Moore Dry Goods Company in the circuit court of Kemper county, Miss., against Guy Jack, Jr., to recover from him the indebtedness due at that time’ to it by him, and also to enforce purchase money lien on the goods sold by the William E. Moore Dry Goods Company to him and at that time in his possession. That 'on the same day, namely, January 2, 1925, an involuntary petition was filed in the district court of the United States for the Eastern division of the Southern district against the said Guy Jack, Jr., praying for his adjudication as a bankrupt, service of process under which was had on Guy *232 Jack, Jr., on January 2, 1925, -which, petition and service are in all respects regular. “That at the time of the filing of said suit in the circuit court of Kemper county a writ of summons and seizure was issued to the sheriff of said county, and delivered to him commanding him to seize and take possession of and info such of the goods upon which a lien was asserted as he could find in the possession of the defendant, Guy Jack, Jr., and that thereafter, on January 5, 1925, the sheriff seized the property at that time had by Guy Jack, Jr.; in his possession and purchased by him from the William R. Moore Dry Goods Company; the store of the said Guy Jack, Jr., being at that time open, no receiver having been appointed, and the return day of the process on the’ petition in bankruptcy not having at that time arrived. That. after making such seizure, and serving the said Guy Jack, Jr., with a copy of the writ, as in other cases, the sheriff took said goods into his possession, as required by law, and thereafter, on January 8,1925, a receiver was appointed by the court of bankruptcy, pending adjudication upon said petition in bankruptcy; said receiver being W. E. Pearson oí Scooba, Miss. • That thereafter the said Guy Jáck, Jr., was adjudged a bankrupt upon said petition, the first meeting of creditors duly held, and the said W. E. Pearson was elected and qualified as trustee in bankruptcy of the said Guy Jack, Jr. “After the-appointment of the said W. E. Pearson as trustee in bankruptcy, an agreement was made and entered into by and between attorneys for the trustee and the attorneys for the William R. Moore Dry Goods Company, that the trustee in bankruptcy might, at the time and place named for the sale of the other merchandise of Guy Jack, Jr., sell the property levied on in this cause, separately, the proceeds to stand in lieu of the goods theretofore levied on by the sheriff and delivered by him under such agreement to the trustee; and said goods were sold by the trustee at and for the sum of three hun *233 dred forty dollars. That said sale was made by W. E. Pearson, trustee, after he had filed in the bankruptcy proceeding on February 2, 1925, a petition setting up the agreement aforesaid, .and that such proceeds were to be held by him pending* the decision of the bankruptcy court upon a petition to be filed therein by William R. Moore Dry Goods Company, for the possession thereof, which was a part of said agreement, and after the bankruptcy court had entered an order on the trustee’s petition permitting such action. ‘ ‘ That thereafter, on May 7,1925 the William R. Moore Dry Goods Company filed its petition in the bankruptcy court seeking to enforce its purchase money lien and said sum of three hundred forty dollars, held in lieu of said goods, which petition was by the referee denied, from which order of the referee the William R. Moore Dry Goods Company appealed to the district judge. That upon a hearing* before him, and upon the above state of facts, the district judge held that the court of bankruptcy was without jurisdiction, the suit in the circuit court (this cause) having been commenced and the goods seized by the sheriff prior to the appointment of a receiver or the adjudication of said Guy Jack, Jr., to be a bankrupt, and further directed that the trustee, W. É. Pearson, pay over to the sheriff of Kemper county said sum of three hundred forty dollars, and that said trustee appear in this court and defend this suit; an order being then and there entered accordingly. That neither the said William R. Moore Dry Goods Company nor said trustee appealed from said order, and that the time in which an appeal might be taken has expired. Said sum of three hundred forty dollars has been paid to the sheriff of Kemper county by the trustee, and is now being held by him in lieu of the goods levied on awaiting the final decision as to whether this money belongs to W. E. Pearson, trustee, or the William R. Moore Dry Goods Company, under and by the virtue of its purchase money lien. *234 “It is further agreed that the sale made by the William R. Moore Dry Goods Company to Guy Jack, Jr., actually having been made in Mississippi, is a Mississippi sale, and that the laws of the state of Mississippi are applicable thereto in all respects. It is further agreed that the trustee herein, under the direction of the federal court in and for the Eastern Division of the Southern District of Mississippi, the court administering said bankruptcy estate and being duly authorized so to do, is appearing as defendant in this cause in lieu of Guy Jack, Jr., bankrupt, and as such trustee is claiming the proceeds realized from the sale of the goods levied upon by the plaintiff herein and now in the hands of the sheriff of Kemper county, and that this cause may be considered as revived against him, accordingly. Further, that all proceedings are regular.” The case was tried before the circuit judge without a jury, and judgment was rendered in favor of the plaintiff, the William R. Moore Dry Goods Company, from which the trustee in bankruptcy appeals to this court. Section 2486, Hemingway’s Code (section 3079), Code of 1906 reads as follows: “The vendor of personal property shall have a lien thereon for the purchase money while it remains in the hands of the first purchaser, or of one deriving title or possession through him, with notice that the purchase money was unpaid. ’ ’ It is conceded by the appellee in his brief that— “It is too well settled to permit of argument that the title of the trustee in bankruptcy vests as of the date of adjudication, but as it was at the time of the filing of the petition. 2 Collier on Bankruptcy (13th Ed.), p. 1635, and cases cited. ’ ’ The amendment to the bankruptcy law of 1910 (subdivision 2, subsec. (a), of section 47 of the Bankruptcy Act [U. S. Comp. Stat., section 9631]) gives the trustees all the rights, powers, and remedies of a creditor holding a lien. Under the case of Bank v. Coupland, 240 F. 355 *235 (C. C. A. 5th. Cir.) 39 Am. Bankr. Rep. 165, it is hela that a trustee in bankruptcy takes the status of the lien creditor as of the time the petition in bankruptcy is filed. Therefore’the suit must be regarded in the light of the fact that the trustee had secured his right as a lien creditor prior to the service, of process upon the defendant and the seizure of the goods in the circuit court. Section 2438, Hemingway’s Code (section 3079, Code of 1906), above’set out, confers the lien upon personal property for the purchase money while it remains in the hands of the first purchaser, or of one deriving title or possession through him, with notice that the purchase money was unpaid. The formal filing of the suit is not effective to confer notice prior to the service of process issued upon the filing of the suit, which, in the present case, was not served until the 5th day of January, whereas the petition in bankruptcy was filed on the 2d day of January and summons served on the bankrupt on that day. In Allen v. Poole, 54 Miss. 323, it was held by this court that in a chancery suit the lis pendens begins not from the time of. the filing of the bill, but from the service of process and continues until the disposition of the suit. In Bacon v. Gardner, 23 Miss. 60, it was held to create a lis pendens as against a subsequent purchaser, there must be service of process. In Allen v. Mandaville, 26 Miss. 397, it was held that a bill becomes a pending suit as to the defendant and his representatives from the service of the subpoena. It follows, therefore, that the mere filing of the suit is not sufficient to give notice of the lien sought to be enforced by the suit, and there is nothing in the agreed statement of facts to show that the trustee had any actual notice. We think that the burden was upon the plaintiff to establish the fact of notice, and that he failed to do so. If a creditor-or purchaser had acquired a contract lien in a case- between the filing of the suit and the service of process thereunder without actual notice of the rights of the plaintiff or of the pendency of the suit, *236 such creditor or purchaser would be protected against the claim sought to be enforced by the suit. The claim may have been a contract lien secured from the purchaser of the goods within four months preceding the bankruptcy, and such creditor would have prevailed over the Wm. R. Moore Dry Goods Company although the bankruptcy court would have set aside such contract lien under the Bankruptcy Act. Nevertheless, the plaintiff could not prevail, and it would take its place in line with the other creditors of the bankrupt. Under section 607, Hemingway’s Code (section 819, Code of 1906), a judgment enrolled in accordance with this section binds all of the property of a defendant within the county where so enrolled from the rendition-thereof, and shall have priority according to the order of such enrollment in favor of the judgment creditor, his representatives, or assigns against the judgment debtor and all persons claiming the property under him after the rendition of the judgment; and the judgment shall not be a lien upon any property of a defendant thereof unless the same be enrolled. This enrolled judgment makes the judgment creditor a lienholder who prevails over creditors who have not secured judgment, and is stronger and more far reaching than an execution judgment creditor, or one who has obtained a lien by execution. We think the trustee in bankruptcy, under the provisions above set forth, stands as though the defendant had such a lien, and that the plaintiff failed to show that the trustee acquired title to the goods with notice of his vendor’s lien. Under the above section 2436, Hemingway’s Code (section 3079, Code of 1906), a purchaser does not have to be a purchaser for value without notice, but merely a purchaser without notice. Therefore we think that the learned circuit court was in error in rendering the judgment on the agreed statement of facts for the plaintiff, and that it should have rendered judgment *237 for the trustee and remitted the plaintiff to the bankruptcy court to assert its rights as a creditor therein. The judgment of the lower court will therefore be reversed, and judgment rendered here for the trustee for possession of the proceeds of the goods sold by the trustee. Reversed and judgment rendered. Footnotes [*] Corpus Juris-Cyc. References: Bankruptcy, 7CJ, p. 124, n. 20; p. 225, n. 41 New; p. 271, n. 95; Judgments, 34CJ, p. 588, n. 23; Lis Pendens, 38CJ, p. 20, n. 62; p. 27, n. 47; p. 38, n. 33, 34; p. 66, n. 34; Sales, 35Cyc, p. 487, n. 35.