Wilson v. Van Buren County Farmers' Mutual Fire Insurance

Brooke, C. J. In this suit the trustee in bankruptcy seeks to recover possession of a certain fund in the hands of the defendant, which is the property of Elizabeth A. Humphrey. ■ The said Elizabeth A. Humphrey was possessed of certain goods and chattels covered by a fire insurance policy issued by the defendant company. On October 13, 1910, these goods were partially destroyed by fire. On the following day, October 14, 1910, Elizabeth A. Humphrey assigned the insurance money to become due under said policy to one Thomas J. Cavanaugh, as trustee for certain creditors. On October 15, 1910, Alice Brown commenced a suit at law against the said Elizabeth A. Humphrey, and on October 17, 1910, served a writ of garnishment upon the defendant company. On December 10, 1910, the loss was adjusted at the sum of $675, and on February 5, 1912, the defendant insurance company filed a disclosure in the garnishment proceedings showing an indebtedness to Elizabeth A. Humphrey in that amount. On January 30, 1912, Alice Brown secured a judgment against Elizabeth A. Humphrey in the sum of $820.53. In the garnishment proceeding Thomas J. Cavanaugh was impleaded, and claimed the fund under his assignment bearing date October 14, 1910. Such proceedings were had therein that it was determined that he was entitled under said assignment to the sum of $178.80 and costs taxed at [532] $30.20. A judgment was entered in his favor for this amount on November 14, 1912. Deducting this sum from $675, the amount shown by the disclosure of defendant to be due Elizabeth A. Humphrey, left $466, for which amount judgment was rendered in favor of Alice Brown on February 7, 1913. Elizabeth A. Humphrey was adjudged a bankrupt on February 16, 1911. This adjudication occurred two days more than four months after her assignment of the insurance money to Thomas J. Cavanaugh, and one day less than four months after the service of the writ of garnishment by Alice Brown upon the defendant company. The plaintiff, as trustee in bankruptcy, claims to be entitled to the sum of $466, for the reason that the lien of Alice Brown as fixed by the service of the writ of garnishment on October 17, 1910, was so fixed within four months of the adjudication of bankruptcy against Elizabeth A. Humphrey. Subdivision of section 67 of the bankruptcy act provides: “That all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment or other liens shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a.part of the estate of the bankrupt,” etc. This section of the statute has been construed in many cases, and has been given effect according to its tenor. In re Kenney, 105 Fed. 897 (45 C. C. A. 113); In re Lesser (D. C.), 108 Fed. 201; In re McCartney (D. C.), 109 Fed. 621; and In re Beals (D. C.), 116 Fed. 530. At the conclusion of the introduction of evidence both parties moved for a directed verdict. The mo [533] tion made on behalf of the defendant was granted by the learned trial judge upon the ground principally that the plaintiff had been guilty of laches in not having secured the right to intervene in the case of Alice Brown v. Elizabeth A. Humphrey, and by such failure permitting a judgment to go in favor of Alice Brown and against the defendant company for the sum of $466. While it is doubtless proper for a trustee in bankruptcy to act with diligence lest the rights of parties may be changed, we are unable to see how the delay in the present instance worked any harm to Alice Brown. The application of the trustee in the district court for the western district of Michigan for an order compelling the insurance company to pay over the money to him as trustee was made prior to the rendition of said judgment in the circuit court in favor of Alice Brown, and a temporary injunction was issued on said application on the 6th of December, 1912, preventing the defendant from turning over said fund. This injunction was dissolved on February 25, 1913, whereupon, as was intimated to the trustee by the referee in bankruptcy in his order dissolving the injunction, the trustee secured authority to bring this suit. We are of opinion that it cannot be said that the trustee did not act with reasonable diligence in the premises. In this court it is contended on behalf of the defendant that there was no adequate proof of the fact that the plaintiff is trustee of the estate of Elizabeth A. Humphrey, and many cases are cited to the effect that such proof is necessary. A sufficient answer to this proposition is found in the fact that the case proceeded to trial in the court below upon the assumption that the plaintiff was, in fact, the trustee of Elizabeth A. Humphrey, as he claimed. Exhibit B introduced in evidence is his verified petition filed in the district court for the western district of Michigan, in which [534] there is set up the fact of his appointment. Further than this, although a motion was made for a directed verdict on behalf of the defendant for several reasons, no claim was made by the attorney for the defendant that proof upon this point was lacking or insufficient. It is urged on behalf of counsel for defendant that to permit a recovery by the plaintiff in this case would result in two judgments against the defendant for the same sum. This view we think untenable, for the reason that a judgment in the case at bar against the defendant can only be predicated upon the fact that the Federal statute above quoted makes absolutely null and void all levies, judgments, etc., obtained through legal proceedings within four months prior to the filing of the petition in bankruptcy. It follows, of course, that the entry of judgment in favor of the plaintiff in this suit operates as a vacation of the prior judgment against the same defendant for the same fund in favor of Alice Brown. We are of opinion that the learned trial judge was in error in directing a verdict in favor of defendant, and that he should have directed in favor of plaintiff. The judgment is reversed, and a new trial ordered. McAlvay, Kuhn, Stone, Ostrander, Bird, Moore, and Steere, JJ., concurred.