Mosby v. Steele

ORMOND, J. — By a decree in bankruptcy all the property of every description of the bankrupt is transferred to the as-signee in bankruptcy, except such articles as by the proviso to the third section, the assignee may permit him to retain. It would seem therefore entirely reasonable that in the interval which must elapse between the decree and the final hearing for the bankrupt’s discharge, he should be permitted to hold property subsequently acquired, as otherwise he would not be able to support himself and family. In the matter of B. Grant, in the Circuit Court of Massachusetts, Judge Story, upon this point, says, “I know of no reason why a bankrupt [301] may not enter into business and hold property, subject of course to the contingency of obtaining a discharge; for if he fails to obtain a discharge, all his property will at fast be subject to the claims of his creditors.” [Law Rep. May, 1842.] It is also very clear, that until the final discharge of the bankrupt, he cannot prevent his creditors from seeking to coerce' their debts by law, as was held by this court in Givens v. Robbins & Paynter, 5 Ala. Rep. 576, and also by Judge Story, in the matter of Jonathan Cheney, Law Rep May, 1842, because until that is obtained, it cannot be known that the bankrupt ever will be exonerated from the payment of his debts. As, therefore, it is only the final decree and certificate which discharges the bankrupt from the payment of his debts, the creditor had the right to sue out his execution at the time he did, and the sheriff was consequently bound to levy it, as there is nothing in the bankrupt law protecting property which he may acquire in the interval which must elapse between the interlocutory, and the final decree. Doubtless the bankrupt has an inchoate right to the enjoyment of such property free from the claims of his schedule creditors. How is he to be protected in the enjoyment of this right? It is suggested that he may bring trover or trespass for the property, after he obtains his certificate. It might, perhaps, be well doubted whether a sheriff could be converted into a trespasser by matter subsequent, having the right to levy when he did. But conceding such to be the law, is the bankrupt in the meantime to be deprived of the power of acquiring any thing for the support of himself and family, and to depend on common charity, having already deprived himself of every particle of property which he previously owned for the benefit of his creditors ? It must, we think, be evident that the right to sue, after he obtained his certificate would be a very inadequate protection. In Lockhart v. McElroy, 4 Ala. Rep. 572, we held, that an execution might be superseded if any unjust or improper use was attempted to be made of it; but that decision does not reach this case ; because the plaintiff, as has been shown, has the right to do what he is attempting to do,.and cannot therefore be restrained by a court of law from acting. The only adequate remedy seems to be the one sought in this case. A Court of Chancery can not only prevent the seizure and sale of the [302] property, until the bankrupt can ascertain whether he can obtain his certificate of discharge, but it can also protect the creditor from loss or injury, by requiring indemnity from the bankrupt for the temporary suspension, if he should fail to obtain his certificate. The jurisdiction of the Court in cases like this, is referrible to its head of preventive justice, in which it interferes to prevent great if not irreparable injury. . We think it cannot admit of doubt that the application was properly made to the Court of Chancery of this State. In a case in principle, upon this point, analagous to this, Judge Story held that the jurisdiction of the State Courts over their own Courts was exclusive, unless some authority had by law been conferred on the Courts of the United States, either expressly or by necessary implication, to intermeddle with it. [Law Rep. for May, 1842, 22.] From the view we have taken it appears that the Chancellor erred in dismissing the bill, and as it appears from the supplemental bill and answer that the plaintiff in error has been allowed his cerlificate of final discharge as a bankrupt, under the act of Congress; the decree of the Chancellor must be reversed, and a decree be here rendered, perpetually enjoining the defendants in error from further proceedings under their execution. Let each party pay his own costs in this Court and in the Court below.