The provisions of the Bankruptcy Act of 1898 preventing
preferences, apply not only to mortgages and voluntary transfers,
but also to preferences obtained through legal proceedings, but the
act was not intended to lessen rights already existing, nor to
defeat inchoate liens given by statute of which all creditors were
bound to take notice. The general lien given by the laws of Georgia
to the landlord on the property of the tenant is the equivalent, as
to goods levied on by distress warrant, to the common law distress;
while it does not ripen into a specific lien until the distress
warrant is issued, it exists from
Page 225 U. S. 632
the time of the lease, and the lien of the distress warrant is
not one obtained through legal proceeding within the meaning of the
the preference provisions of the Bankruptcy Act.
Under the Bankruptcy Act of 1867 a statutory attachment for rent
in the nature of a landlord's distress warrant levied within the
preference period was not nullified or discharged by the bankruptcy
proceedings, and there is nothing in the Act of 1898 opposed to
this conclusion.
The general provision of the Bankruptcy Act of 1898 indicate a
purpose and intent, as against general creditors, to preserve
rights such as those given by the Georgia statute to landlords,
even though not enforced until within four months of the
bankruptcy.
175 F. 633 affirmed.
Samuel Mayer owned a plantation in Dooley County, Georgia, which
he rented to Joseph Burns for one year. The rent not having been
paid at maturity, Mayer, on November 13, 1908, made an affidavit in
conformity with the statute, and a justice of the peace thereupon
issued a distress warrant, which, on the same day, was levied upon
the cotton, corn, and other products of the place. The crops found
on the premises being apparently insufficient to pay what was due,
the sheriff at the same time levied upon other property by virtue
of § 2795 of the Code of Georgia, which declares that
"landlords shall have a special lien for rent on crops made on
land rented from them, superior to all other liens except liens for
taxes, . . . and shall also have a general lien on the property of
the debtor liable to levy and sale, and such general lien shall
date from the time of the levy of a distress warrant to enforce the
same."
Three days after the levy, a petition in bankruptcy was filed
against Burns, the tenant, who was subsequently adjudged a
bankrupt. The trustee, when elected, obtained possession of all the
property seized by the sheriff, and subsequently sold it in the due
administration of the estate. The proceeds of the cotton and corn
were paid over to Mayer, it being conceded that the landlord's
Page 225 U. S. 633
special lien on the crops had not been affected by the
bankruptcy proceedings.
Mayer also claimed that, by virtue of his general lien, he was
entitled to have the balance of the rent paid out of the proceeds
arising from the sale of the other property levied on, and filed
his intervention to secure such an order. The trustee's objection
was sustained by the referee on the ground that the landlord's
general lien was discharged because it had been "obtained by legal
proceedings" or levy made three days before the filing of the
petition in bankruptcy. His ruling was reversed by the district
court (175 F. 633). That judgment was affirmed by the circuit court
of appeals without opinion. The case was then brought here by writ
of certiorari, granted at the instance of the trustee, who claims
that, under the Georgia Code, the landlord had no lien on the
property prior to the levy of the distress warrant, and that
whatever right had been acquired by that seizure was discharged by
§ 67f, which declares 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 the filing of a petition in
bankruptcy against him shall be deemed null and void in case he is
adjudged a bankrupt. "
Page 225 U. S. 636
MR. JUSTICE LAMAR, after making the foregoing statement,
delivered the opinion of the Court.
The provisions of the Bankruptcy Act preventing an insolvent
from giving or the creditor from securing preferences for
preexisting debts apply not only to mortgages and transfers
voluntarily made by the debtor, but also to those preferences which
are obtained through legal
Page 225 U. S. 637
proceedings, whether the lien dates from the entry of the
judgment, from the attachment before judgment, or, as in some
states, from the levy of execution after judgment. But the statute
was not intended to lessen rights which already existed, nor to
defeat those inchoate liens given by statute of which all creditors
were bound to take notice and subject to which they are presumed to
have contracted when they dealt with the insolvent.
Liens in favor of laborers, mechanics, and contractors are of
this character, and although they may be perfected by record or
foreclosure within four months of the bankruptcy, they are not
created by judgments, nor are they treated as having been "obtained
through legal proceedings," even when it is necessary to enforce
them by some form of legal proceeding. The statutes of the various
states differ as to the time when such liens attach, and also as to
the property they cover. They may bind only what the plaintiff has
improved or constructed, or they may extend to all the chattels of
the debtor or "all the property involved in the business."
In
re Bennett, 153 F. 673.
In some cases, the lien dates from commencement of the work, or
from the completion of the contract. In others, prior to levy they
are referred to as being dormant or inchoate liens, or as "a right
to a lien."
In re Bennett, 153 F. 677;
In re
Laird, 109 F. 554. But the courts, dealing specially with
bankruptcy matters, have almost uniformly held that these statutory
preferences are not obtained through legal proceedings, and
therefore are not defeated by § 67f, even where the registration,
foreclosure, or levy necessary to their completion or enforcement
was within four months of the filing of the petition in
bankruptcy.
Similar rulings have been made where the landlord has only a
common law right of distress.
In re West Side Paper Co.,
162 F. 110. This is often referred to as a lien,
Page 225 U. S. 638
but it is "only in the nature of security." 3 Black.Com. 18. The
pledge, or
quasi-pledge, which the landlord is said to
have is, at most, only a power to seize chattels found on the
rented premises. These he could take into possession and hold until
the rent was paid.
Doe ex dem. Gladney v. Deavors, 11 Ga.
84. But, before the distraint, the landlord at common law has
"no lien on any particular portion of the goods, and is only an
ordinary creditor, except that he has the right of distress by
reason of which he may place himself in a better position."
Sutton v. Rees, 9 Jur. (N.S.) 456. A right fully as
great is created by the Georgia statute here in question. For,
while giving the owners of agricultural lands a special lien on the
crops, there was no intention to deprive the proprietor of urban
and other real estate of the lien for rent which there, as in other
states, is treated as an incident growing out of the relation of
landlord and tenant.
The Code (§ 2787) expressly "establishes liens in favor of
landlords." It (§ 3124) gives them "power to distrain for rent as
soon as the same is due." It declares (§ 2795) that landlords
"shall have a general lien on the property of the tenant liable to
levy and sale . . . which dates from the levy of the distress
warrant to enforce the same." It is true that, prior to levy, it
covers no specific property, and attaches only to what is seized
under the distress warrant issued to enforce the lien given by
statute. But in this respect it is the full equivalent of a common
law distress, the lien of which is held not to be discharged by §
67f.
In re West Side Paper Co. supra; Austin v. O'Reilly,
2 Wood 670.
The fact that the warrant could be levied upon property which
had never been on the rented premises does not change the nature of
the landlord's right, though it may increase the extent of his
security. The statutory restrictions as to date, rank, and priority
may be important in a controversy with other lienholders, but was
wholly
Page 225 U. S. 639
immaterial in this contest between the landlord and trustee,
where the latter was only representing general creditors. As
against them, the landlord had, from the beginning of the tenancy,
the right to a statutory lien, which had completely ripened and
attached before the filing of the petition in bankruptcy. The
priority arising from the levy of the distress warrant was not
secured because Mayer had been first in a race of diligence, but
was given by law because of the nature of the claim and the
relation between himself as landlord and Burns as tenant. In
issuing the distress warrant, the justice acted ministerially.
Savage v. Oliver, 110 Ga. 638. The sheriff was not
required to return it to any court, and no judicial hearing or
action was necessary to authorize him to sell for the purpose of
realizing funds with which to pay the rent. Such a lien was not
created by a judgment, nor "obtained through legal
proceedings."
Decisions to the same effect were made under the Bankruptcy Act
of 1867 (14 Stat. 517, 522, § 14), which dissolved attachments or
mesne process within four months prior to the filing of the
petition. In
Austin v. O'Reilly, supra, decided in 1875,
it appeared that, in Mississippi, the landlord had no lien, but, as
in Georgia, was authorized to seize (but by attachment) the
tenant's goods wherever found. Justice Bradley, presiding at
circuit, said that the landlord's right to a distress at common law
was not a strict lien, but,
"being commonly called a lien, and being a peculiar right in the
nature of a lien, . . . the Supreme Court of the United States, and
most of the district and circuit courts, have regarded it as fairly
to be classed as a lien within the true intent and meaning of the
Bankrupt Act,"
and that the statutory attachment, being in the nature of a
common law distress, was not nullified or discharged by the
bankruptcy proceedings.
There is nothing in the Act of 1898 opposed to this conclusion.
On the contrary, its general provisions indicate a
Page 225 U. S. 640
purpose to continue the same policy, and an intent, as against
general creditors, to preserve rights like those given by the
Georgia statute to landlords even though the lien was enforced and
attached by levy of a distress warrant within four months of the
filing of the petition in bankruptcy.
Affirmed.
