Davenport v. Tilton

Shaw, C. J. The importance of the principal question presented by the present case is now much diminished by the length of time which has elapsed since the repeal of the bankrupt act, and the strong probability that few, if any, similar questions now remain unsettled. The question is, whether an attachment of property on mesne process, as regulated by the laws of Massachusetts, constitutes such a lien or security on property as to be saved to the attaching creditor, and prevented from passing to the assignee, by the proviso "at the end of § 2 of the bankrupt law It is a condition, reservation, or — 325 — saving clause, annexed to that part of the act which provides for an assignment of the bankrupt's property, and declares, in general terms, that all his property and rights of property shall vest in the assignee for the benefit of his creditors. It is in these words: “ And provided also, that nothing in this act contained shall be construed to annul, destroy, or impair any lawful rights of married women or minors, or any liens, mortgages, or other securities on property real or personal, which may be valid by the laws of the States respectively.” It has been argued that, as a principle of equity, when a proceeding is instituted for the satisfaction of the claims of all creditors, an attachment on mesne process, designed to obtain satisfaction in behalf of a particular creditor, must yield; and the authority of Atlas Bank v. Nahant Bank, 23 Pick. 480, is relied upon. That case did not go on the general principle, but on the construction of the Rev. Sts. c. 44; and it was held that where a bill had been filed by the bank commissioners, for the general benefit of creditors, and especially after an injunction issued, but before receivers were appointed, if an attachment was made by a particular creditor for his own benefit, it could not hold against the general creditors. But in Hubbard v. Hamilton Bank, 7 Met. 340, it was held that an attachment made by a creditor of a bank, before the application of the commissioners for an injunction, would hold against receivers subsequently appointed to take charge of the property for the general creditors. But these questions depended, as we think this question must depend, upon the construction of the statute under which it arises, and not much aid can be derived from considerations of mere expediency. As a general questiqn of policy and expediency, we are inclined to the opinion that when it becomes necessary to settle and close up the affairs of a debtor, whether at his decease or during his life, true equity would require that all his property, which has not become appropriated and vested by his own act or the operation of law, should be applied to the payment of all his debts, and that an attachment on mesne process, being a sequestration of his — 326 — property, and placing it provisionally in the custody of the law, should give way to the more general sequestration of all his property for the satisfaction of all his debts. In that case, the creditor will receive the whole amount of his debts, if there be assets, and his satisfaction pro rata, if there be a deficit; and as between him and other creditors, there seems no equitable ground on which he should have more. Such is the law of Massachusetts in regard to the settlement of the estate of a deceased insolvent debtor, where the settlement and distribution of the estate must necessarily be final. Upon the appointment of an administrator, who takes the property as trustee for all the creditors, all attachments on mesne process are dissolved. But, as we have already said, such considerations of general equity, however strongly they may influence the legislature in framing statutes, cannot change their construction where the terms are not doubtful. And upon the fullest consideration which we have been able to give the subject, this court are of opinion, that an attachment on mesne process, under the laws of Massachusetts, made before the commencement of bankrupt proceedings, is a lien or security upon property, within the meaning of the proviso above cited, and is therefore, by the terms of the bankrupt act, excepted out of the operation of the act which transfers the property of the bankrupt to the assignee. After the very full and elaborate discussion of this subject, by the late Mr. Justice Story, of the supreme court of the United States, in the cases of Ex parte Foster, 2 Story R. 131, and Matter of Bellows Peck, 3 Story R. 428, on the one side, and by Mr. Chief Justice Parker, of the supreme court of New Hampshire, in the cases of Kittredge v. Warren, and Kittredge v. Emerson, 7 Law Reporter, 77, 312, on the other side, it would be but an affectation ot learning, to enter at large into the argument, which is so entirely exhausted in the cases cited. Perhaps something may be considered as added to the authority in support of the opinion we adopt, by the case, since decided by the supreme court of the United States, of — 327 — Savage v. Best, 3 Howard, 111. The decision there is, that in Kentucky a creditor obtains a lien upon the property of his debtor, by a delivery of a fieri facias to the sheriff, and therefore that this lien is protected by the bankrupt act, if the execution was so delivered, before the act of bankruptcy, though not levied until after. This, and we think several other cases go to decide the more general proposition that, whenever, by the law and usage of the State, the charge created by process of law becomes fixed, fastened to the property itself, so as to make it specifically liable for that debt, then it is a lien or security on property, reserved out of the bankrupt’s assignment, and secured to the attaching creditor by the proviso in the act. In various States the property becomes so charged by different stages in the process, as by the attachment on mesne process, by the rendition of judgment, by the delivery of the execution to the sheriff, or by the commencement of the levy. But, at whichever of these steps, or by whatever other means, it does become fixed, there the bankrupt act recognizes and excepts it. By the law of Massachusetts, an attachment of property on mesne process is a specific charge upon the property, for the security for the debt sued for, and the property is set apart and placed in the custody of the law, for that • purpose, subject only to the condition that the attaching creditor shall obtain judgment in the suit, take out execution and levy it upon the property so held, within a limited time. Indeed, it seems to be admitted, by those who maintain that an attachment on mesne process is not a lien absolutely protected, that it is yet a qualified lien, a security on property, not dissolved by the decree declaring the party bankrupt, nor yet by the assignment of the property to an assignee, but it is a qualified lien, which may be perfected and enforced by a judgment and execution, in case the bankrupt, after due time allowed for that purpose, does not obtain his discharge, or if, being obtained, he should not choose to plead it, or otherwise rely upon it as a bar to a judgment. If this be a correct view, then an attachment on mesne process is a qualified lien — 328 — or security on property, which, in certain events and in a certain mode, maybe perfected and made available, and shall then be protected from the operation of the assignment by the proviso in the bankrupt act. Then the question is, whether the discharge of the bankrupt, provided for in another part of the act, though general in its terms, shall so operate as to bar every form of judgment, and deprive the attaching cred itor of the power of obtaining any execution, and thus prevent him from making his attachment available, by a levy on the attached property. In general, it is a rule in the exposition of statutes, that every section, provision and clause shall be expounded by a reference to every other, and, if possible, every clause and provision shall avail and have the effect contemplated by the legislature, ut res magis valeat quam pereat. Thus, if there be a clause in a statute expressed in general and unqualified terms, and without exception, it must be construed to mean what it imports, and to embrace the objects which come within its terms. But if there is another provision in the same statute, which necessarily qualifies or limits the former, and requires an exception to it, then both are to be construed together, as if the qualification, condition or exception had been immediately annexed to the general provision. To apply that rule to the present case: As the bankrupt law provides, in general terms, that the bankrupt shall, upon certain conditions, obtain his discharge from al his debts in general terms, such discharge, prima fade, shall bar all actions against the debtor, and of course prevent the recovery of any judgments against him. But, if another part of the act provides that the discharge shall not operate as a bar to a judgment on certain fiduciary debts, or in cases where the bankrupt has given certain preferences, or committed other frauds, these are necessary exceptions to the generality of the terms granting a discharge. And an exception, by necessary implication, from other provisions of the statute, is equivalent to an exception in terms. This "consideration leads to another rule of exposition, which is, that when a — 329 — statute confers a right, it confers all the necessary means by which such right can be established and made effectual The exception of liens, mortgages and securities on property is made for the benefit of the holders of such securities, and they are entitled to the use of the necessary legal means of making them available. If so, and if an attachment on mesne process is a lien or security on property, to be made available only by a judgment and execution of some kind, then the above proviso would in legal effect stand thus: Provided that nothing in this act contained shall be construed to prevent an attaching creditor from obtaining such judgment and execution as may be necessary to give legal effect to his attachment on the property of the bankrupt, made before the proceedings in bankruptcy were commenced. But where such exception is founded on implication, it must be a necessary implication, and will be extended no further than is necessary to give effect to the right reserved. The discharge will still have its full and complete effect, except so far as the existence and operation of a judgment may be necessary to enable the creditor to have a special execution awarded, and to take the attached property upon it. It would not have the usual attributes of a judgment, as record evidence of a debt, on which an action will lie, and upon which the person of the debtor may be arrested, or other property than that attached taken in satisfaction. In all these respects, the discharge would still have its effect. It Avould be, though still in form a judgment in personam, in substance and legal effect a judgment in rem, binding the specific property attached. We have thus far considered the question, as it would usually present itself, as a question of competition between a particular attaching creditor and the general creditors under the bankruptcy. The only show of reason why such a particular attachment should be set aside by the proceedings in bankruptcy, or by the discharge obtained, is, that it would promote a more equal distribution amongst the general creditors. But that this would not necessarily be the — 330 — effect is manifest from the present case, which shows that, if the plaintiffs’ right to hold the attached property were defeated, it would not go to the creditors, but to the holder of a prior unrecorded deed, who is no party to the bankrupt proceedings, and who is not entitled to claim any right, interest or benefit under them. So that if full effect were given to this discharge, to bar the plaintiffs’ action, neither the creditors of the bankrupt, nor the bankrupt himself, would be benefitted by it, but it would be merely making use of the bankrupt proceedings to reverse a priority, which the plaintiffs had by law obtained, to a right of property, in favor of another person, claiming for his own use, both claiming under the laws of the State. As between the plaintiffs and such other claimant, the plaintiffs have the better legal title, and there seems no reason why they should be divested of it, by the accidental operation of the bankrupt law, in favor of a party who is no party to the bankrupt proceedings, and claims nothing under them. If, therefore, we entertained more doubt as to the general question, we should strongly incline to the opinion that, under the circumstances of the present cáse, the plaintiffs would have a legal right to maintain their prior lien, over the claim of another separate claimant, who, if the plaintiffs should fail, would hold the property against both the bankrupt and his creditors; and that the plaintiffs are entitled to such special judgment and award of execution as will enable them to maintain that priority. [See Storm v. Waddell, 2 Sandf. 494.] Such special judgment, or special award of execution, although not frequent, is not unprecedented. The law having exempted the person of a debtor from arrest, after having taken the poor debtors’ oath, leaving his property liable, the process may be varied accordingly. And generally, where a party has a right which cannot be obtained by the ordinary forms of process, the court will vary these forms, so as to secure the party his right. Cooke v. Gibbs, 3 Mass. 193. Express authority is given to the courts by Rev. Sts. c. 97, 10. 11. to vary the forms of execution, when neces — 331 — sary to adapt them to the changes of the law, or for other sufficient reasons. And it is believed, that such special judgment and award of execution are not unknown to the common law of England, when the rights of the parties require it. In Tappan v. Poor, 15 Mass. 419, a special plea in bar of execution against the person and certain property of the defendants was pleaded, on the ground of their having obtained a qualified discharge under the law of Maryland. The plea was overruled, on the ground that under the circumstances, and between the parties before the court, the discharge in Maryland was not available in this Commonwealth. The plea in that case conforms substantially to a precedent in 3 Wentworth’s Pleadings, 121, which appears to have been furnished by Mr. Baron Wood, who, I believe, before he was appointed to the court of exchequer, was an eminent special pleader. A similar plea was pleaded in the case of Smith v. Buchanan, 1 East, 6. The plea was overruled, on the ground that a discharge under the law of Maryland could not affect a debt which accrued in England ; but no objection seems to have been taken to the form or sufficiency of the plea, if the case had been such as to warrant it. See also Ingraham v. Phillips, 1 Day, 117. As all special pleading is now abolished by statute, in this State, neither the defendant’s discharge is specially pleaded, nor is the plaintiffs’ attachment replied specially, by way of avoidance. But the forms of proceeding do not alter the rules of law. The same rules must be applied to the facts appearing in the agreed statement, as if they were put upon the record by more formal pleadings. Upon these facts, the court are of opinion that the plaintiffs are entitled to such special and limited form of judgment and award of execution, as will enable them to levy upon the property attached upon the writ, and no more. Verdict set aside, and a new trial granted.