Crowe v. Reid

BRICKELL, C. J. 1. The material questions which are-pressed in the argument -of appellant’s counsel, were con— [286] sidered and decided at the last term, in the case of Vanzant v. Lockett. We then held the lien of an attachment levied on real estate, more than four months prior to an adjudication in bankruptcy, and of executions issuing from the courts of the State, were not impaired or destroyed, but were preserved by the bankrupt law. That creditors could, after bankruptcy, enforce such liens through the medium of the process of the State courts having jurisdiction. Numerous authorities, •State and Federal, were cited in support of the proposition. We are not aware that the first branch of the proposition has been, under the present bankrupt law, controverted. The point of controversy has been as to the proper jurisdiction in which to proceed after bankruptcy, for the enforcement of such liens. Though the jurisdiction of the courts of the State had attached, and was in full exercise, there are many cases, especially in the district courts of the United States, and in the earlier days of the operation of the bankrupt law, which hold that it was at once arrested by an adjudication in bankruptcy, and exclusive jurisdiction of the assets of the bankrupt, and of liens encumbering them, transferred to the ■court of bankruptcy. These cases are not supported by the decisions of the Supreme Court of the United States, under the present bankrupt law, or under that of 1841. In Savage v. Best, 3 How. 111, it was held: the lien of a creditor obtaining judgment in the State court, acquired by the delivery of a ji. fa. to the sheriff, was not affected by the subsequent bankruptcy of the debtor before a levy was made. Notwithstanding the bankruptcy, the sheriff could proceed to levy .and sell, and the purchaser would acquire a valid title, prevailing over any claim of the assignee. In Peck v. Jenness, 7 How. 712, declaring the levy of an attachment created a lien, which was preserved by the bankrupt law, it was further held: the District Court of the United States, sitting in bankruptcy, could not interfere with, or oust the State court from which the attachment issued, of jurisdiction to proceed to a judgment of condemnation of the property levied on, to the satisfaction of the lien. In Marshall v. Knox, 16 Wall. 551, goods subject to a lien for rent, under the statutes of Louisiana, had been seized under process issuing out of a State court, at the suit of the lessor, before the bankruptcy of the lessee. It was held that they could not, on the bankruptcy of the lessee, be by the court of bankruptcy taken, by rule, from the possession of the sheriff and given to the assignee. In Doe v. Childress, 21 Wall. 642, an attachment issuing out of a State court, ana levied more than four months [287] before bankruptcy of tbe debtor, was declared a valid lien; and it was held if the assignee permitted the creditor to proceed to judgment, and to a sale of the lands levied on, the purchaser in a case free from fraud would hold against him. In Eysler v. Gaff, 1 Otto 521, (91 U. S.), pending a bill for foreclosure -of a mortgage, the mortgagor became bankrupt, and the cause proceeded to a final decree in a territorial court of Colorado, without the assignee intervening, or being made a party. It was insisted the decree was void, and the purchaser under it acquired no title. It was held by the Supreme Court the bankruptcy did not affect the jurisdiction of the court, and the assignee was bound by the decree, as any other person ac- - quiring title from the bankrupt pendente lite would have been bound. The court say: “It is a mistake to suppose that the bankrupt law avoids, of its own force, all judicial proceedings in the State or other courts the instant one of the parties is adj udged a bankrupt. There is nothing in the act which sanctions such a proposition.” Again: .“The opinion seems to have been quite prevalent in many quarters at one time, that the moment a man is declared a bankrupt, the district court which has so adjudged, draws to itself by that act, not only all control of the bankrupt’s property and credits, but that no one can litigate with the assignee contested rights in any other court, except in so far as the circuit courts have concurrent jurisdiction, and that other courts can proceed no further in suits of which they had at that time full cognizance; . and it was a prevalent practice to bring any person, who contested with the assignee any matter growing out of disputed rights of property, or of contracts, into the bankrupt court by the service of a rule to show cause, and to disprove of their rights in a summary way. This court has steadily set its face against this view. The debtor of a bankrupt, or the man who • contests the right to real or personal property with him, loses none of those rights by the bankruptcy of his adversary. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions.” In the decisions of the Supreme Court of the United States, under the present, or under the bankrupt law of 1841, there is not discoverable any suggestion countenancing the proposition, so vigorously pressed by the counsel of the appellant, that an adjudication in bankruptcy strips other tribunals of jurisdiction already existing, and transfers to the court of bankruptcy exclusive jurisdiction of the estate of the bankrupt. As that court has said, there is nothing in the bankrupt law pointing to such a result. [288] 2. The bankrupt law certainly contemplates that all the-property and rights of property of the bankrupt, shall vest in the assignee, on the assignment by the register, and the-assignment has relation to the filing of the petition for adjudication. It is true, the assignment by the express terms-of the law, includes all property the bankrupt has conveyed in fraud of creditors. The assignee must nevertheless take and hold the estate, as it was held by the bankrupt, subordinate to all liens, with which it was charged at the time of the bankruptcy, and which are not impaired but preserved by the bankrupt law. The premises in controversy doubtless passed to the assignee, if there were debts existing against the bankrupt at the time of the voluntary conveyance to the appellant, continuing to the time of the adjudication; or, if' there were subsequent debts, and the conveyance was tainted with actual fraud. If the premises passed to him, they passed in the plight and condition in which they would have-been in the bankrupt, if that conveyance had not been made. If in that condition they were encumbered with valid liens,, the encumbrance remained after bankruptcy. 3. The premises passing to the assignee, by no subsequent proceeding against the bankrupt, though founded onpre-existing judgments against him, could a lien be acquired which would override his title ? It may be true, that neither-the judgment, nor the execution issuing oh it, in favor off Graham, were a lien on the premises at the time of the-bankruptcy, and that none was acquired by the subsequent issue of execution. If this be conceded, the inquiry is, was there a lien in favor of Gallups, Appleman & Fish? Iff there was, the execution was a proper mode of enforcing it, and the levy and sale under it, will support the title of the-purchasers, though the execution in favor of Graham, was-without a lien or even void. At the time of the filing of the-petition there was, and had been for over four months, am execution in the hands of the sheriff of the county, in which the premises are situate, issuing on the latter judgment,, which is founded on a debt antecedent to the conveyance-under which the appellant deduces title.. There can be no doubt this execution was from the day it was received by the-sheriff, a lien on all the property real and personal of the bankrupt within the county. — Revised Code, § 2872. The-conveyance to the appellant being voluntary, and as a matter of law, fraudulent and void as to existing creditors, did not prevent the lien from attaching. The lien thus acquired prior to, and existing at the time of the bankruptcy, it is289 insisted was lost before the levy and sale, by the failure of the creditor to sue out execution from term to term. It is true that under the statutes of force at the time of Sanders’ bankruptcy, the lien of an execution was lost if the writ was not kept alive from term to term. The right to sue out execution might remain,- and if thé rights of bona fide purchasers, or of diligent junior creditors acquiring liens during the suspension of execution, did not intervene, a new lien could be acquired. But when bankruptcy intervenes,’and at the time of its occurrence there is a valid lien, the bankrupt law preserves it as it then exists against the assignee in bankruptcy. While the bankrupt law of 1841 was operative, our statutes gave judgments of courts of record, from the-.day of their rendition, a lien On lands, and to executions a lien on personalty within the county, from the day they were received by the sheriff. The lien of an execution was lost if it was not sued out from term to term. In Doremus, Snydam & Co. v. Walker, 8 Ala. 202, it was said: “The lien of a judgment is recognized as operative against the assignee, as it respects the real property of the bankrupt, and the personalty will be bound by the execution. In either case the lien. is preserved according to the rights of the creditor at the time the bankruptcy is established. If the lien is then absolute, it completely overrides the decree, and the creditor will be let into the enjoyment of its fruits.” 4. The lien of the execution was absolute at the time of Sanders’ bankruptcy. A levy and sale were the steps which must be taken to enable the creditor to realize its fruits, but were not essential to its creation or validity. The estate of the assignee, at its inception, was subject to the lien. If by proper proceedings he had drawn the property within the jurisdiction of the court of bankruptcy, the lien would have followed it, and would have been there enforced. It was his duty to determine whether he would draw the property within the jurisdiction of that court, have the lien there liquidated and enforced, or leave it to the creditor encumbered with the lien. He elected the latter course, and more than two years having elapsed after his appointment before the sale by the sheriff, operating prima faeie a bar to any claim to the premises he could allege, he must be regarded as having yielded to the lien, and recognized its priority over his title. The appellant failed to establish an outstanding title in the assignee in bankruptcy superior to that of the appellees. It was on the strength of this title, not on the strength of [290] her own, the defense was rested. The first charge given by the Circuit Court was warranted by the evidence. It has not been insisted the second charge is erroneous, if the first was correct. In the view we have taken of the case, the evidence admitted against the objection of the appellant was merely redundant. Its tendency was to show actual fraud in the conveyance to the appellant. As matter of law, the conveyance was fraudulent and void as to antecedent creditors, and in this relation it was an admitted fact that the creditor stood, having the lien enforced by the sale under execution. The evidence was unnecessary, and its admission was not injurious to the appellant. The judgment must be affirmed.