United States Fidelity & Guaranty Co. v. Murphy

60 S.E. 831, 4 Ga. App. 13, 1908 Ga. App. LEXIS 184

• Court: Court of Appeals of Georgia
• Decided: March 16, 1908
• Docket: 773
• Status: Published

Opinion

Hill, C. J.

1. The forthcoming bond executed by Clements, claimant, with the United States Fidelity and Guaranty Company as surety, was, by its express terms, “joint and severable,” and upon a breach of the bond- the obligee therein could sue either one or both of the obligors.

2. The ¡olea of non est factum as to the principal was properly stricken on demurrer. It is not necessary that the agent who executes a forthcoming bond for his principal should have written authority; neither is it necessary that such bond should be under seal; and the fact that the agent executes such bond under seal does not affect its validity. Civil Code, §3035; Head v. Woods, 92 Ga. 548 (17 S. E. 928). Even if the principal should repudiate the act of the agent, this would not affect the liability of the surety; for in any event the surety is-bound.' Civil Code, §3035. In this case the act of the agent was fully ratified by the principal. The personal property described in the bond was delivered into the possession of the claimant upon the execution of the bond, and the claimant subsequently withdrew his claim and consented that the execution proceed.

3. The contention that there was no approval and acceptance of the forthcoming bond by the levying officer is eliminated by the stipulation that the sheriff did in fact approve and accept the bond; though he did not write his approval upon the bond itself, but wrote his approval upon the claim bond which was given at the same time and written upon the same piece of paper as the forthcoming bond. Besides, the parties to the bond all acted on it. The sheriff released the property and delivered it to the claimant, upon the .execution of the bond; and the principal and the surety will now be estopped from questioning either its formal execution, or its approval and acceptance by the levying officer.

. There is no merit in the point that the suit should have been dismissed because the execution under which the property was advertised the second time was proceeding illegally, in that the execution had been changed by striking therefrom the amount of $180, attorney’s fees. It is admitted in the agreed statement of facts that these attorney’s fees were written off voluntarily by the defendant, as required by'the judgment of the Supreme Court. After the judgment of the Supreme Court had been made the judgment of the lower court and the judgment for attorney’s fees written off, the claimant, in judieio, withdrew his claim and consented that the fi. fa. based upon the said judgment should proceed. It therefore matters not who struck the attorney’s fees from the execution in order that it might conform to the judgment. It certainly could not result in injury to the defendant that the amount of the claim against him had been reduced to the extent of the attorney’s fees. The alteration of the fi. fa. in this respect in no way affected the case, and was made in compliance with the judgment of the Supreme Court, and in conformity to the Civil Code, §5114. In short, we think every fact material and necessary to show the liability of the defendant in this case is admitted: to wit, the execution and the levy, the value of the property levied upon, The giving of the bond and the breach of the bond; and the finding in favor of the plaintiff was demanded, unless the principal obligor in the bond and his security were released from their obligation by the bankruptcy of the Minnesota Lumber Company, the defendant in execution, and the seizure by the bankruptcy court of the property levied upon.

4. The bankruptcy court had no right to seize the property, which, four months prior to the adjudication in bankruptcy, had been levied upon under a valid process from the State court. If the forthcoming bond had not been given, clearly no other court or officer could take the property which had been seized by the sheriff by virtue of the execution against the defendant; and the forthcoming bond is simply a substitute for the property levied upon. It is well settled that the lien of a judgment obtained more than four months prior to the petition in bankruptcy is superior to the adjudication in bankruptcy, and that subsequent proceedings in bankruptcy do not divest jurisdiction of the State court'to enforce such lien. 7 Rose’s Notes on U. S. Reports, 1036. Kaminsky v. Horrigan, 2 Ga. App. 332 (58 S. E. 497) ; National Surety Co. v. Medlock, 2 Ga. App. 665 (58 S. E. 1131). More than four months before the adjudication in bankruptcy, the personal property described in the forthcoming bond was in the hands of the sheriff on final process. This property could not be legally taken from his possession by the bankruptcy court. Fleming v. Odum, 59 Ga. 363, The forthcoming bond being for the protection of the sheriff in surrendering his possession of the personal property to the principal in said bond, the trustee in bankruptcy had no legal authority to dispossess him; and it is not to be presumed that be could have done so if objections had been interposed either by the principal or the surety. It is true that the surety in this case did bring to the attention of the bankruptcy court the judgment lien of Iiobbs & Livingston upon the property described in the forthcoming bond, but it does not appear that any objection was made by the surety or the principal to the seizure of the property bj the bankruptcy court. If timely and. appropriate legal objection had been interposed, it can not be doubted that the bankruptcy court would have recognized the prior jurisdiction of the State court and released the property virtually in custodia legis under process from the State court. The seizure of the property by the bankruptcy court being illegal, and neither the surety nor his principal interposing any objection to such seizure, the surety, the defendant in this ease, can not claim any benefit from the illegal seizure.

When property is taken and held under process, mesne or final, of a court of competent jurisdiction, it is in the custody of the law and within the exclusive jurisdiction of the court from which the process has issued, and the possession of the officer can not be disturbed by process from any other court. Corvell v. Heyman, 111 U. S. 176 (28 L. ed. 390, 4 Sup. Ct. 355); Fulghum v. Wiliams Co., 114 Ga. 647 (40 S. E. 695, 1 L. R. A. (N. S.) 1055, 88 Am. St. R. 48). We think the principle here announced applies to property seized under process and released by virtue of a statutory forthcoming bond. Eyster v. Gaff, 91 U. S. 521 (23 L. ed. 409); Carling v. Seymour, 113 Fed. 483 (51 C. C. A. 1). Of course, the discharge in bankruptcy of Clements, the principal in the forthcoming bond, in no wise affected the rights of the plaintiff, or released the surety from the obligation of his bond. Wolf v. Stix, 99 U. S. 1 (25 L. ed. 309); Phillips v. Solomon, 42 Ga. 192; Kaminsky v. Horrigan, supra. It is admitted by the learned counsel for plaintiff in error that the adjudication in bankruptcy, being more than four months after the rendition of the judgment, can not be set up as a matter of defense by the surety. But he insists that he is not setting up this adjudication as a defense, but claiming that before the time arrived for compliance with the obligation of the bond, the property described in the bond had been taken from the possession of the principal by the law, under and by virtue of a lien which was superior in dignity to the lien of the State process, under which the property was first seized. Pie bases this contention on the following facts: It was admitted by the plaintiff in the court below, that the Minnesota Lumber Company, the defendant in execution, had executed and delivered to the Southern Pine Company a valid mortgage upon all of its property, including all that described in the levy of the sheriff and the forthcoming bond; that this mortgage was a lien of superior dignity to the judgment in favor of Hobbs & Livingston, and that the proof of this mortgage lien by the Southern Pine Company in the bankruptcy proceedings was tantamount to a foreclosure of the same. It is contended that as all the property described in the forthcoming bond had been sold under direction of the court of bankrupte3, to satisfy this superior lien of the Southern Pine Compan3, the principal in the bond was discharged from a compliance with his obligation to produce the property at the time and place of sale, because he had no power to do so, it having been taken from his possession by the bankruptcy court before the time arrived for compliance with such obligation. But the Southern Pine Company did not have the Minnesota Lumber Company adjudged a bankrupt. The personal property covered by the forthcoming bond was not seized for the purpose of satisfying the lien of the mortgage in favor of the Southern Pine Company. It was seized by the trustee in bankruptcy, ánd was sold and applied in pa3'ment, not only of the lien of the 'Southern Pine Company, but of other claims that were inferior to the ñ. fa. in favor of the plaintiff in the court below. The balance due on the mortgage of the Southern Pine Company was only $4,000. The property seized by the sheriff, under the fi. fa. in favor of Hobbs & Livingston, described in the forthcoming bond, it is admitted, was of the value of $25,000. The property of the bankrupt, when sold, brought the sum of $18,000, and the mortgage of the Southern Pine Company covered the entire property of the bankrupt. Therefore, the property covered by the mortgage, excluding that which was levied upon by the fi. fa., was more than sufficient to pay off the balance due on the mortgage; and the holder of the fi. fa., under well known equitable principles, could have compelled the holder of the mortgage lien to make the money out of other property than that levied on by virtue of the State-court process, covered by the mortgage. The other liens which were allowed to accumulate against the property levied upon by the State-court process and described in the forthcoming bond were all subsequent to that lien and placed on tlie property after it had been turned back by the claimant into the possession of the defendant in execution, the Minnesota Lumber Company. Laborers’ and supply men’s liens, although superior to a lien of a judgment, under the facts of this case were not entitled to priority of payment out of the property which had been seized by the sheriff; for this property, although it had been turned over to the claimant upon the giving of the forthcoming bond, was, nevertheless, in the constructive possession of the State court by virtue of the levy, and no liens could thereafter be placed upon it which would change the status already acquired in the State court. The only lien, therefore, which was prior in dignity to that of the fi. fa. in favor of Iiobbs & Livingston was that of the mortgage of the Southern Pine Company, on which there was only a balance due of $4,000; and this mortgage covered property which was worth $25,000, and which was actually sold by the trustee in bankruptcy for $18,000. All of the proceeds were administered by the bankruptcy court, and there was nothing left to satisfy the execution in favor of Hobbs. & Livingston.

In our judgment, Hobbs & Livingston acted wisely in not going into the bankruptcy court, or in any way subjecting their rights to its adjudication. They were amply protected, under the facts of this case, by the forthcoming bond; and such rights can not be affected by the conduct of the claimant subsequent to the execution of the forthcoming bond, or the conduct of the defendant in execution in allowing liens to accumulate upon the property delivered into its possession b) the claimant and covered by the forthcoming bond, nor by the unauthorized seizure by the bankruptcy court of the personal property which had been seized under valid process from the State court, and which had been released by the levying officer under the terms of the bond which the law accepted as a statutory substitute for its possession, the terms of which bond required that when it was called for by the State-court process, under which it had been seized, it should be produced.

The judgment in favor of the plaintiff, we think, was demanded by the evidence and the law applicable thereto.

Judgment affirmed.