Miller v. Mackenzie

Bowin, J., delivered the opinion of the Court. On the 4th of November, 18*74, the appellant sued out of the Court of Common Pleas, an attachment as mesne process, against Gr. N. Mackenzie, C. B. Mackenzie and C. T. Mackenzie, partners in trade, which was returned by the sheriff, “ laid as per schedule.” The defendants at. January Term, 18*75, moved to quash the attachment, for various reasons assigned, and afterwards on the 21st of [409] May, 1875, filed a special plea, alleging that the defen'dants were duly adjudicated bankrupts upon the 5th of December, 1874, upon the petition of their creditors, filed the 25th of November, 1874; that after said adjudication a meeting of the creditors of said defendants was duly called under the amendatory Act to the National Bankrupt Act, section 17, approved June 22, 1874 ; that at said meeting at which the plaintiff, although present, took no part, and did not vote upon or sign the resolution, a resolution for composition of the debts of said defendants for 25 per cent, cash, was duly passed and confirmed under the provisions of said Act, and the statement required by said Act was duly produced, and therein the name of the plaintiff, his address and the amount of debt due to him were duly shown ; that said resolution and statement'were duly presented to the Judge of the District Court of the United States, for the Maryland District, and said Court duly caused said resolution to he recorded and the said statement to be filed ; that the amount of money properly due said plaintiff under said proceedings for composition was duly tendered to him, and by bim refused, and all the other creditors have accepted said proposition and been paid. It was agreed by the counsel for the plaintiff and defendants, in the Court below, that the motion to quash should he set down for hearing, upon a statement of facts, substantially the same, as those embodied in the plea, and which we deem it therefore unnecessary to recite. Whereupon tbe Court on the 22nd of May, 1875, ordered that the attachment be quashed, from wbicb order the plaintiff appealed. On behalf of the appellant it is insisted, that the jurisdiction of the State Court, having been asserted before the adjudication in bankruptcy, it cannot be divested except in very clear cases. That the power of Congress over State process for the collection of debts, is implied from the express power conferred on it, to legislate on the subject of bankruptcy, which implied power should not he extended by construction. [410] The appellees on the other hand contend, that the claim of the appellant, is in direct conflict with the main object of the Bankrupt Laws — the just distribution of the bankrupt’s assets among all his creditors. “ That it is an attempt of one creditor, by a suit based upon an alleged act of bankruptcy, to obtain for himself payment in full at the expense of the other creditors.” * * * * * It is argued that bankrupts who pay the amount of the composition to all the other creditors, are virtually the purchasers of their respective interests in their estates, and if the appellant, can by his attachment, obtain more than the rate of composition, so much the more, are the respective interests of the other creditors, diminished. The statement of facts admitted, upon which the motion to quash was submitted and decided by the Court below, embraces substantially all the essential conditions, of a composition among the creditors of a bankrupt, prescribed by the 17th section of the Act of Congress of 1874, amendatory of the Act to establish a uniform system of bankruptcy throughout the United States. It is declared by the provisions of the same section, that the composition accepted by the resolution of the creditors, “shall be binding on all the creditors, whose names and addresses and the amounts of the debts due to whom, are shown in the statement of the debtor, produced at the meeting, at which the resolution shall have been passed, but shall not affect or prejudice the rights of any other creditors.” By another clause'of the same section of the supplement to the Act, “the provisions of any composition made in pursuance of the Act, may'be enforced by the Court, on motion made in a summary manner, by any person interested, and on reasonable notice; and any disobedience of the order of the Court, made on such motion, shall be deemed to be a contempt of Court.” The 8th section of the 1st Art. of the Constitution of .the United States declares, “The Congress shall have power to establish uniform laws on the subject of Bank [411] ruptcies throughout the United States.” Chief Justice Marshall, in the case of Sturges vs. Crowninshield, in defining the subject, says it is divisible in its nature into bankrupt and insolvent laws; “that laws which merely liberate the person are insolvent laws, and those which discharge the contract are bankrupt laws.” 4 Wheaton, 194. If the composition, as we have seen, binds the plaintiff as one of the creditors of the appellees, there can be no doubt, that the plaintiff’s claim is discharged ; the debt is extinguished; otherwise the Bankrupt Law, would be virtually annulled by the process of. attachment, pending but not matured at the institution of the proceedings in bankruptcy. The cases cited by the appellant, confirmed the conclusion which we should deduce from general principles. In the case, In re Preston, 6 Nat. B. Register, an attachment was laid on the 20th Eeby., 1871 ; on the 1th of March, there was an order of sale, to prevent loss by delay ; on the 18th of March, the defendant Preston filed a petition in bankruptcy ; on the 20th, sale was made and money deposited. A special case was submitted to the Court — the U. S. District Court for Washington Territory. To the question whether the filing of the bankrupt’s petition on the 18th of March, dissolved the attachment, and rendered null and void, the sale and all proceedings thereunder ? the Court said, “the attachment was dissolved from the date to which the assignment in bankruptcy relates; that is, from the time of the commencement of bankruptcy proceedings. The operation of the assignment in reference to the attachment was not to avoid it, ‘ ah initio, ’ but to arrest all proceedings under it, to dissolve it as of the date of the filing of the petition in the Supreme Court; to leave untouched all previously accrued rights, to prevent the subsequent accrument of rights under the attachment.” [412] (Decided 6th January, 1876.) The case of Johnson vs. Bishop, 8 Nat. Bankruptcy Register, 533, as condensed in the syllabus, decides, where property has been attached by an officer of a State Court on mesne process, within four months prior to the commencement of proceedings in bankruptcy, the attachment is dissolved by the Bankrupt law ; but the assignee in bankruptcy must apply to the'State Court to have the officer directed to turn over the property, and not to the Federal Court. “This rule has been established to avoid conflict of jurisdiction, and through the comity of Courts exercising jurisdiction in the same territory, over the same subjects, and often the same classes of litigants, and drawing their existence from different sources, and which are to one another as foreign tribunals.” Corner vs. Mallory, decided by this Court, 31 Md., 471, recognizes the same general principles. There is not in this case, any assignee to represent the debtor in the attachment suit, or to claim the property attached, or its proceeds bjr virtue of the assignment. But the same reason which compels .the State Courts to recognize the authority of the Courts in Bankruptcy, in cases of assignment, that is, the exclusive jurisdiction of those Courts in matters of bankruptcy — must compel the State tribunals to respect the composition of creditors adopted under the sanction of the Courts of Bankruptcy, in conformity with the provisions of the Bankrupt Law. The debt of the attaching creditor is extinguished by the composition, and the attachment of course falls to the ground. Judgment affirmed.