Moran & Wilkinson v. Martin

Wade, 0. J. A proceeding to partition certain realty was instituted in the superior court of Chatham county by several co-.-tenants,- jointly interested as legatees, and the property, being incapable of equitable division otherwise, was (under proper order) sold by the commissioners-for distribution. Subsequently it was made to appear that there were of file and record in the office of the clerk of that court several judgments and liens against John G. Thomas, one of the eotenants, and it was thereupon ordered by the court that the portion, of the fund arising from said sale, which [673] constituted his distributive share, should be paid into the registry of the superior court, “and that all-parties having claims against his said interest [should] have the right to intervene therefor before this court.” This order was entered on November 18, 1915. Thereafter Moran & Wilkinson filed an intervention in the superior court, claiming the impounded fund under certain general judgments against Thomas, alleged to be a lien upon all of his, property. After the passage of the order of November 18, impounding the distributive share of Thomas, which amounted to $144.11, and authorizing intervention by his creditors, he was adjudicated a bankrupt. Thereafter, before ¿ny distribution of the fund in the hands of the superior court had been made, or before any order setting up liens against it was' entered, and within less than four months from the time Thomas had been adjudicated a bankrupt, the trustees in bankruptcy made an application to the superior court for the impounded fund, in order that it might be distributed through the court of bankruptcy. This application was granted and the judge passed an order requiring the clerk of the superior court to pay over to T. B. Martin, as trustee, the said sum of $144.11, less such costs as might be due the clerk. Moran & Wilkinson excepted to the order awarding the fund to the trustee in bankruptcy as against them, and the question is here for determination. The judgment liens against Thomas were general liens only, and the fund in the hands of the superior court came into its possession through partition proceedings and totally without reference to and without the aid of the liens claiming the fund. The superior court therefore did not acquire possession of the fund under and by virtue of the liens in question, or through any effort to enforce them. Apparently the trustee in bankruptcy pursued the exact course held proper in McGahee v. Cruickshank, 133 Ga. 649 (66 S. E. 776), in that he applied to the State court for an order directing that the fund in the registry of the court be delivered over to him. The possession of the fund by the superior court was wholly incidental, and while the order passed by that court, based upon information derived from its records as to the existence of outstanding judgments and general liens against the partitioner Thomas, allowed his creditors to intervene and have their priorities established and their rights to the fund determined [674] by the court, when Thomas was adjudicated a bankrupt, another . court, possessed of broader powers and more comprehensive means of administering the fund equitably and with proper consideration for the rights of all creditors of the bankrupt (whether judgment creditors or not), acquired jurisdiction over his assets; in which court all parties interested could appear and be heard as to the validity of any outstanding judgment or judgments, lien or liens, against the bankrupt, with full opportunity afforded non-judgment creditors to attack any such claims in judgment, and to defeat them if for any reason they or any of them should be nonenforcible or not entitled to their apparent priority as judgment claims. . Quite a different case is presented by the record under consideration from one in which the fund in the hands of the State court is brought into that court by the enforcement of a valid subsisting lien more than four months,old. The State court, as to the fund in its hands arising from the partition proceedings, was a mere custodian or depository, and occupied no different position from that of a bank or individual in possession of property belonging to the bankrupt and held for his benefit or convenience, and the transfer of the fund to the bankruptcy court upon the petition of the trustee and the order of the superior court did not deprive the State court of its jurisdiction to enforce a pending valid subsisting lien more than four months old at the time of the bankruptcy, since the proceeding to distribute the fund was merely ancillary to the main proceeding. “In general, an adjudication of bankruptcy vests the bankruptcy court with exclusive jurisdiction to administer the property of the bankrupt, as against any State court which may have obtained possession of such property through proceedings instituted within four months prior to the adjudication, and it is immaterial that the proceedings in the State court were for the enforcement of valid liens not affected by the bankruptcy act.” In re Knight,-125 Fed. 35 (4). In the case under consideration the proceeding in which the court obtained possession of the property was, it is true, instituted more than four months prior to the adjudication in bankruptcy, but this proceeding was not one to enforce a lien, and in fact the ancillary proceeding to enforce the lien in favor of Moran & Wilkinson was not begun in any view until their intervention was filed, and it was not filed four months prior to the [675] adjudication, bnt only a few days anterior thereto. Had the case been one in which the State court had obtained possession of the bankrupt’s property through proceedings instituted for the purpose of acquiring possession of it in order to enforce a lien against it, and the effort to enforce the lien had been instituted more than four months prior to the adjudication, an entirely different state of facts would have been presented. In the Kaplan ease, 144 Fed. 159, the headnote is as follows: “A trustee in bankruptcy is entitled to possession of all of the bankrupt’s property, and to administer the same, although it may be subject to liens or in possession of a State court in proceedings to enforce a lien, instituted within four months prior to the bankruptcy.” A careful consideration of that case will serve to differentiate it from the case now under consideration, if the fact be recalled that' the proceeding to enforce the liens in favor of Moran &■ Wilkinson and against the property impounded in the superior court was not instituted within four months prior to the bankruptcy, but was only begun (under the most liberal view that can be taken) when the judge of the superior court, upon information, directed in-his order of November 18, 1915, that the creditors of Thomas be allowed to intervene in that court and set up their claims to the fund paid into the registry of the court in his behalf; and this proceeding, as stated above, was instituted less than four months before Thomas was adjudicated a bankrupt. As held in the Kaplan ease, supra, a trustee in bankruptcy is entitled to the possession of all the bankrupt’s property and to administer it, even where it is subject to liens or in the possession of a State court in proceedings to enforce a lien, where such proceedings are instituted within four months prior to the bankruptcy. In our opinion, therefore, the trial judge did not err in directing the clerk of the superior court to pay over the fund in question to the trustee in bankruptcy, for administration by the bankruptcy court. Judgment affirmed. Jenkins and Luke, JJ., concur.