Under the fourteenth section of the Bankrupt Act, which enacts
that the register shall convey to the assignee all the estate, real
and personal, of the bankrupt, and that such assignment shall
relate back to the commencement of the proceedings in bankruptcy,
and thereupon by operation of law, that the title to all such
property and estate shall vest in the said assignee, although the
same is then attached on mesne process
Page 88 U. S. 643
as the property of the debtor, "and shall dissolve any such
attachment
made with in four months next preceding the
commencement of said proceedings" -- an attachment which,
under state laws, is a valid lien, laid more than four months
previously to the proceedings in bankruptcy begun, is not dissolved
by the transfer to the assignee in bankruptcy. And if such assignee
do not intervene (which in any such case he may do), and have the
attachment dissolved, or the cause transferred to the federal court
sitting in bankruptcy, but, on the contrary, allow the property to
be sold under judgment in the proceedings in attachment, the
purchaser, in a case free from fraud, will hold against him -- that
is to say, the assignee cannot attack collaterally such purchaser's
title.
Doe, lessee of Vaillant, assignee of Montgomery, a bankrupt,
brought ejectment against Childress to recover land in
Tennessee.
The question was this:
When attachment proceedings are regularly commenced, a levy
made, and the property is in the possession of the sheriff before
the filing of petition in bankruptcy -- when there is no stay of
proceedings or other measures in the bankrupt court to arrest the
suit in the state court, there being no fraud, a sale is had under
the judgment of the state court, a deed is given by the sheriff,
and possession taken under it -- can the title acquired under such
sale be attacked by the assignee collaterally in a suit at law?
In other words, can the assignee allege that under these
circumstances the state court had no jurisdiction to proceed in the
action after an adjudication in bankruptcy, and that no title
passed to the purchaser under the judgment of the state court?
The defendant's title rested upon a purchase under two decrees
in the Court of Chancery of the State of Tennessee. Proceedings in
the suit were commenced by attachment on the 15th and 27th days of
April, 1867. Decrees in them were obtained in April and June, 1868,
and on the 17th of September, 1868, sales were made under the
decrees. The purchaser then entered into possession, and the
defendant under him now claimed title and possession by virtue of
that purchase.
Page 88 U. S. 644
By the laws of Tennessee, the levy of an attachment gives a
specific lien in the property described in them. [
Footnote 1]
Montgomery had filed his petition to be declared a bankrupt on
the 18th of February, 1868. This was ten months after the
attachment proceedings had been commenced, and four months before
the decrees were obtained in those suits, and seven months before
the sale took place under those decrees.
He was adjudged a bankrupt on the 27th of February, 1868. This
again was about seven months before the sale under state decrees
took place, and ten months after the actual commencement of the
attachment proceedings in the state court.
The fourteenth section of the Bankrupt Act enacts that the
register shall convey to the assignee all the estate, real and
personal, of the bankrupt. The section thus proceeds:
"And such assignment shall relate back to the commencement of
the proceedings in bankruptcy, and thereupon, by operation of law,
the title to all such property and estate shall vest in said
assignee, although the same is then attached on mesne process as
the property of the debtor, and shall dissolve any such attachment
made
within four months next preceding the commencement of
said proceedings."
The court below held that the attachment was not dissolved, and
gave judgment for the defendant. Thereupon the plaintiff brought
the case here.
MR. JUSTICE HUNT delivered the opinion of the Court.
The Tennessee Court of Chancery having jurisdiction of the
subject of the proceeding in the attachment suits, no defense being
interposed by the assignee, in the state court, and no measures
having been taken to arrest their proceedings or to transfer them
to the bankrupt court (if power to
Page 88 U. S. 645
take such steps existed), and there being no fraud proven or
alleged, we are of the opinion that a good title was obtained under
the decree of sale made in the state court.
Under the fourteenth section of the Bankrupt Act, the title
pendente lite is transferred by operation of law from the
bankrupt to the assignee in bankruptcy. The conveyance of the
register operates as would, under ordinary circumstances, the deed
of a person having the title, with two differences -- first, it
relates back to the commencement of the bankruptcy proceeding;
secondly, the register's conveyance dissolves any attachment that
has been made within four months previous to the commencement of
bankrupt proceedings. Neither of these differences are material in
the present case. The attachments here had been made and levied
more than four months previous to the commencement of the bankrupt
proceedings on the 18th day of February, 1868, to-wit, in the month
of April, 1867, and no change had taken place in the estate between
the filing the petition in bankruptcy and the conveyance by the
register.
The transfer of his real estate by a debtor against whom an
attachment has been issued, and before judgment or decree, whether
by his own act, or by operation of law, cannot impair or invalidate
the title of a purchaser under such decree or judgment. It is
evident that unless this is so an attachment suit could never be
invoked for the collection of a debt. The debtor need only wait
until judgment is about to be entered, then make a conveyance of
the property attached, and the virtue of the proceeding is at an
end. The authorities so declare. A reference to some of the
authorities in Tennessee will be sufficient.
The statute of that state provides as follows:
"Any transfer, sale, or assignment made after the filing of an
attachment bill in chancery, or after the suing out of an
attachment at law of property mentioned in the bill of attachment
as against the plaintiff, shall be inoperative and void. [
Footnote 2] "
Page 88 U. S. 646
The object of this statute (says the court) was to prevent the
debtor from evading the attachment after the bill had been filed,
and before the levy, by sale or transfer of his estate. [
Footnote 3]
See Drake on
Attachments, [
Footnote 4] that
this is the general rule of law.
The Bankrupt Act is based upon this theory. Thus the enactment
that the register's conveyance shall work a dissolution of an
attachment made within four months next preceding the commencement
of the bankrupt proceedings, is a virtual enactment that where the
attachment is made more than four months before the commencement of
the bankrupt proceeding, it shall not be dissolved, but shall
remain of force. If all attachments were intended to be dissolved,
it would be quite idle to declare that those made within four
months should be dissolved.
Accordingly, it has been held many times in the various courts
of the country, that as to the class of attachments not within the
four months' limitation, the bankruptcy proceedings do not work
their dissolution; that the debtor's title passes to the assignee,
subject to the creditor's lien acquired by virtue of the
attachment, and that a judgment to be enforced against the property
attached, but not against the person of the debtor or any other
property, may be entered, although a discharge has been granted,
and is pleaded in bar of the action. Numerous cases to this effect
are collected in Bump on Bankruptcy. [
Footnote 5]
We think this is a sound exposition of the statute.
Where the power of a state court to proceed in a suit is subject
to be impeached, it cannot be done except upon an intervention by
the assignee, who shall state the facts and
Page 88 U. S. 647
make the proof necessary to terminate such jurisdiction. This
rule gains whether the four months' principle is applicable or
whether it is not applicable.
In
Kent v. Downing, [
Footnote 6] the court said:
"The assignee may on his own motion be made a party, if for no
other reason than to have it properly made known to the court that
the defendant has become bankrupt. He has also a right to move to
dismiss the attachment. The adjudication of bankruptcy must be made
known to the court in some authentic mode. It may be denied, and
the state court cannot take notice of the judgment of other courts
by intuition. They must be brought to the notice of the court, and
this cannot be done without parties."
In
Gibson v. Green, [
Footnote 7] the same principle is stated.
The application of these principles gives a ready solution of
the question presented in the case before us. The issuing of the
attachments against the property of Montgomery took place more than
four months prior to the filing of his petition in bankruptcy. By
the law of Tennessee, the levy of the attachments gave a specific
lien upon the property described in them.
If the assignee had intervened in the suit, he would have been
entitled to the property or its proceeds, subject to this lien. He
did not, however, intervene or take any measures in the case. He
allowed the property to be sold under the judgments in the
attachment suits, and those under whom the defendant claims
purchased it, obtaining a perfect title to the same. The plaintiff
has no title upon which he can recover, and the judgment of the
circuit court to that effect must be
Affirmed.
[
Footnote 1]
See section 3507, Statutes of Tennessee, 1871, and
notes of numerous cases; 2 Thompson & Steger's Statutes,
1463-1464.
[
Footnote 2]
Section 3507, 2 Statutes, Thompson & Steger;
see Snell
v. Allen, 1 Swan, 208, 211;
Green v. Shaver, 3
Humphrey 139, 141;
Perkins v. Norvell, 6
id. 151;
Boggess v. Gamble, 3 Coldwell 148, 154.
[
Footnote 3]
Burroughs v. Brooks, 3 Head 392;
Lacey v.
Moore, 6 Coldwell 348;
Sharp v. Hunter, 7
id. 389.
[
Footnote 4]
Section 221.
[
Footnote 5]
Page 366, where the author cites
Bates v. Tappan, 3 B.R
159;
S.C., 99 Mass. 376;
Bowman v. Harding, 4
B.R. 5;
S.C., 56 Me. 559;
Samson v. Burton, 4
B.R. 1;
Leighton v. Kelsey, 4
id. 155;
S.C., 57 Me. 85;
Perry v. Somerby, ib., 552;
Stoddard v. Locke, 43 Vt. 574;
Daggett v. Cook,
37 Conn. 341.
[
Footnote 6]
44 Ga. 116.
[
Footnote 7]
45 Miss. 209;
see also Johnson v. Bishop, 1 Woolworth
324, opinion by Justice Miller.
