Vreeland v. Bruen

21 N.J.L. 214

Opinion

The opinion of the court was delivered by

Randolph, J.

The second section of the bankrupt law, passed by Congress August’ 19, 1842, contains this proviso,— “ that nothing in this act contained shall be construed to annul, destroy, or impair any lawful rights of married women or minors, or any liens, mortgages, or other securities on property, real or personal, which may be valid by the laws of the States respectively, and which are not inconsistent with the second and fifth sections of this act.” . No difficulty arising in the case now under consideration, under the second and fifth sections of the act, the only questions for the consideration of the court are, 1st; Is the lien set forth in the replication of such a character as to be valid by the laws of this state, and within the contemplation of the above proviso, and 2dly, If there be such lien, to what extent may the plaintiff avail himself of its beneficial effect?

In the first place, Is the lien created by an attachment against an absent or absconding debtor under the laws of this state, saved by the proviso in the bankrupt act ? Much learning has been elicited in the discussion of this subject, as to the appropriate meaning to be given to the term Ken, and much has been said as to the different kinds-of liens, and whether the proviso is to be construed as applying to all, orto what species of liens, and on this point very able judges have differed in their opinions. The case of ex parte Foster, 5 Law. Rep. 55, is the first case that has come under my observation, and probably the very first which came up for judicial consideration, as it was decided in April, only a fe\v months after the passage of the bankrupt law. In this case, the late Judge Story decided that an attachment under the laws of Massachusetts, did not create such a lien as was intended in the proviso of the bankrupt act. It appears from the report of the case, that some of the creditors of Foster sued him by attachment, and seized certain of his goods and merchandize, which were retained by the Sheriff to answer to the judgment of the creditors when obtained. Foster soon after filed in the district court of that state his petition for the benefit of the bankrupt act, and then applied for an order on the state court to stay proceedings on the attachment, lost judgment should be obtained, and the property attached taken in execution before petitioner could obtain his discharge : the ease was adjourned to the Circuit Court of the United States, and the whole subject of this proviso and its saving effect, was very fully discussed in a learned opinion of Judge Story, in which he granted the application, and decided that the attachment had no such lien as the bankrupt act excepted out of its general operation, and also that a United States Court had the power to restrain the proceedings in a slate court, in a matter of this nature — the grounds of this decision are fully set forth in the opinion. The next case in which the question was raised, is that of Muggridge & al. Bankrupts, 5 Law Rep. 351. This was in the New Hampshire Circuit, and only a few months after the decision in Foster’s case. The subject comes up in rather a different shape from the preceding case; here certain property of the bankrupts was attached, and by various agreements between them and the plaintiffs, judgments were obtained by default. Previous to this the defendants had been deemed bankrupts, and the assignees obtained an injunction prohibiting the plaintiffs from levying their executions on the defendants’ property. After argument, the injunction was dissolved by Judge Story, on the ground that the proceedings and judgment under the attachment being with the consent and agreement of jihe bankrupts, created an equitable lien, which remained in force, notwithstanding the decree in bankruptcy. Next in the order of time is the matter of Cook, 5 Law Rep. 443, in the Massachusetts Circuit, in which Judge Story decided,' that when property was attached, and judgment obtained thereon, and after that, defendant filed his petition for the benefit of the bankrupt laws, the right of the attaching creditors was fixed, and by the laws of Massachusetts was a permanent lien for thirty days —the injunction against the judgment creditors was dissolved accordingly. Some little time after these decisions, the case of Kittredge v. Warren, 7 Law Rep. 77, came before the Superior Court of the State of New Hampshire, upon a state of the case in an action of assumpsit pending in said court. Here the court, Parker, C. J., delivering the opinion, decided directly contrary to the case ex parte Foster, that an attachment bona fide obtained and levied before any act of bankruptcy or petition by the debtor is a valid lien, and within the proviso of the bankrupt act, and that the lien being saved, the means of making it effectual are also saved, and if the discharge is pleaded, plaintiff may reply the existence of the attachment, and the court will render a special judgment, and execution against the property attached. A few months after this decision, precisely the same question was presented to the New Hampshire circuit, Judge Story presiding, in the matters of Bellows & Peck, 7 Law Rep. 119. In the consideration of this case, the court reviewed and reaffirmed the decision in ex parte Foster, and of course decided the points directly contrary to the opinion of the Superior Court in that state. The Judge, in pronouncing his opinion, added some pretty decided remarks as to the power of the United States Courts to compel obedience to their decisions by injunction and attachment for contempt, the decisions of the highest state courts to the contrary notwithstanding. This opinion not only aroused up a spirited discussion on the question of state rights, and produced some excitement and action on the part of the Legislature of New Hampshire, but the Superior Court of that state, was shortly afterwards, called on in Kittredge v. Emmerson, 7 Law Rep. 316, to review it, as well as the grounds of their own former decision, when the court, Parker, C. J., delivering the opinion, reaffirmed the doctrine of Kittredge v. Warren, and deny at length, and in pretty strong terms, the power of the United States courts to stay proceedings in state courts by injunction. Thus, in one or two of the slates, the decisions of the federal and state courts stand directly in collision. The same point, however, has been considered and decided in various other cases which have arisen in, the courts of other states. Thus in the matter of Allen and others, bankrupts, 5 Law Rep. 362: the District Court of New York, Coukling, J., held that the word “ lien,” in the second section of the bankrupt act, embraces equitable as well as legal liens, and that the meaning and application of the term are to be ascertained by the laws of the state, where the question arises. An injunction was refused in this case to stay proceedings on a creditor’s bill in the Court of Chancery of New York, against one who, after the suit in Chancery was commenced, had filed a petition, and obtained a discharge in bankruptcy — the suit in Chancery being a lien in that case, according to the law of the state. The learned Judge who decided this matter, says his decision is not to be understood as in conflict with ex parte Foster ; but his definition of the term lien, under the bankrupt act, is not quite as much restricted as that of Judge Story. The same point was decided in the Vice Chancellor’s Court in the city of New York, in Smith v. Blacket & al., the court holding that the plea of discharge in bankruptcy to a creditor’s bill, did not exonerate the fund from the lien acquired by the filing of the bill. In the State of Vermont, the same subject has undergone judicial investigation, in Downer & al. v. Bracket & al., 5 Law Rep. 392. Judge Prentiss holding the United Slates District Court, determined that a lien under an attachment was embraced by the proviso in the bankrupt law. So in Houston & al. v. Eustis & al., 5 Law Rep. 505, the late Judge Thompson holding the United States Circuit for Vermont, gave the same con straction to alien acquired under an attachment; and I think there have also been one or two other eases in Vermont, in which the term lien has received the same construction. In Pennsylvania, the United States Circuit Court, Baldwin and Randall, JJ., in Dudley’s case (1 Pa. Law Jour. 303), decided that the property of a petitioner for the benefit of the bankrupt law, was not divested till the decree in bankruptcy; and that till then it was subject to judgment and execution. The court also examine very fully the case of ex parte Foster, and disagree to the doctrine of Judge Story in that case, particularly as to the power of the United States Courts to stay proceedings in State courts, by injunction. In the 63d section of the bankrupt act of 1800, it is provided that “ nothing, &c. shall, &c. invalidate or impair any lien existing at the date of the act.” In construing this clause the Supreme Court of Connecticut held, in Ingraham v. Phillips, 1 Day 117, that this clause embraced a lien under an attachment in that state. To these several authorities I will add the opinion of Chief Justice Hornblower

Footnotes

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(a) in this case as to the effect of the term lien, the opinion having been written prior to the decision of some of the cases already referred to, but never delivered in the Circuit Court for which it was prepared; but having been submitted to this court by way of argument, I fully concur with the opinion on this point, and would adopt it as my own view of the case; but it embraces other matters not convenient to be separated.

Without repeating the arguments of the learned jurists who have investigated this subject, I cannot but think that the proviso itself furnishes its own best exposition. By this it appears that neither the decree, or anything in the act, “shall be construed to annul, destroy, or impair any * * * liens, mortgages, or other securities on property, real or personal, which may, be valid by the laws of the States respectively.” Were it not that great minds have thought otherwise, I would have supposed that; the matter was too clear for argument, and that the proviso, in letter and spirit, embraced any liens valid by the laws of the state, whether legal or equitable, arising under contract, or otherwise, or whether perfected by judgment, or only inchoate, but valid until perfected by judgment. If the State law gives validity*to the lien, it comes under the proviso, and it is of no consequence in what way it arises, or whether it comes within the strict technical definition of a lien at common law, or in the equity or the admiralty courts, or whether it arise by the act of the parties themselves, or by the mere operation of law or the rules and practice of the court. Reference to treatises, or to foreign decisions on the question of liens, or to their different kinds and distinctions, can be of little use ; for after all we must come back to the state law, and inquire if it be valid by that. By the 5th section of the attachment act of 1798, Rev. Laws 356, the writ shall bind the property and estate of the defendant, from the time of executing the same, and by the 7th section, the goods, &c. so attached were to be kept by the Sheriff in order “ to answer and abide the judgment of the court,” unless the garnishee give bond with surety for the forthcoming of the goods, or their appraised value, to answer the same purpose. No doubt but under these sections the attachment was a good and valid lien ; so it has been uniformly considered and so decided by this court. The phraseology shall bind is the same as that applied by statute to the operation of a judgment on lands. Rev. Laws 430 § 2. No judgment shall bind, &c. but from the time of entry ; yet in Lummis v. Boon, 2 Penn. 734, the court give validity to the lien of an attachment over that of a judgment, because the former was served before the latter was obtained. In Reeves v. Johnson, 7 Halst. 34, the judgment was first entered, then the attachment served, and then execution issued on the judgment. Ewing, C. J. “the judgment and attachment are both liens — the former the eldest.” The Sheriff has a lien on the personal estate in his hands; he could maintain suit for it if divested of the possession, and the lien would still continue in the hands of the garnishee, notwithstanding his bond; and when judgment is obtained on the attachment, the court will order the auditors to sell the property attached, and sometimes, in case of perishable property, it is directed to be sold on the return of the writ. Prior to the supplement to the attachment act of 1820, the attachment was considered only as the means to compel the ap pearance of the absent or absconding defendant, and in case he did not appear, the property was directed to be sold for the benefit of the plaintiff and other applying creditors ; but if he appeared and entered into special bail, the writ and all proceedings thereon were set aside or dissolved, as it is usually termed; and the defendant being in court the plaintiff and creditors proceeded against him as if by capias at common law, taking no further notice of the property attached. By the 2d section of the supplement of May 30, 1820, if the defendant appeared, in addition to the recognisance of bail, he was required to give bond with surety to the sheriff for the return 'of the goods, chattels and effects seized and taken by the writ, in case judgment be rendered for the plaintiff; and in case of the breach of the condition of the bond, the sheriff was required under the direction of the court to assign over the bond for the benefit of the plaintiff arid applying creditors. The 3rd section of the same act prohibits the defendant from conveying away his land or real estate after the issuing the writ of attachment, but provides that “ the writ of attachment shall immediately on the issuing thereof become and remain a lien on the said lands, &c.” Thus the statutes remained when the controversy arose, except that by the supplement of Feb. 22, 1839, 3 Harr. St. Laws; 295 — 6— the clerk was required, upon sealing a writ of attachment, to enter the same in a book to be procured for the purpose, and so much of the law as required the defendant to enter into special bail, was repealed.

The question now arises, whether after the defendant entered into bond and took the property, it still remained subject to the lien of the attachment. In 5 Halst. 60, this court directed the rule setting aside the attachment to be entered “ saving all liens,” and the real estate by the express words of the statute would remain subject to the lien till the plaintiff and applying creditors were satisfied of their just debts, or judgment should be rendered against them. In the present case, besides the real estate attached, bond was given for the return of the goods, chattels, and credits; do these still remain subject to the lien of the action after the writ and proceedings .thereon have been set aside ? I am unable to find any sufficient reason for coming to that conclusion. The goods were first seized to compel the defendant’s appearance; until that was effected, or judgment and sale, the lien continued ; but when the defendant appeared and ehtered into special bail, the lien was discharged, and the plaintiff and applying creditors were compelled to look to the defendant and his bail. When the Legislature changed the law, and required a bond with surety for the forthcoming of the property, it was only that it might be levied on by the execution, and not that it might be sold by the mere order of the court, without a new seizure or lien, as if the defendant had never appeared. The property is given up, and no power remains with the Sheriff to reclaim it, or even to hold or dispose of it, under the original lien. It must necessarily become subject to the defendant’s sale or disposition, liable to any new liens that the owner or the la\v may create, or subject to be seized and sold under execution, without any power to prevent it. Suppose, after the bond was given, a judgment creditor should cause the property to be sold by execution, could this court, if applied to, stay the sale, or order the Sheriff to pay the money over for the benefit of the attachment? No, the answer would be ; you must look to your bond ; and even if the bondsmen were all insolvent, you must still look to your bond or to the Sheriff who took it. Suppose, instead of the Sheriff, the defendant himself, or since his discharge as a bankrupt, his assignee should attempt to sell the personal estate levied on, could he be restrained at the instance of the plaintiff? I think not; because his lien is divested, and other liens have arisen, leaving the party to his bond. The fact that the third section continues the lien on the real estate, so far from implying that it is continued on the personal property, proves the reverse. Why provide 'in the third section for the continuance of such lieu ? Because it had not before been provided for, it could not be reached by a bond for its forthcoming, neither it or its value could be secured by a bond, but a lien could be continued by statute; and if it required the statute to continue it after the writ aud proceedings were set aside, then clearly, without a statutory provision, the original lien could not hold either on the real or the personal property attached. But the second section neither continues the lien on the personal property or prescribes the means by which it may be holden or resumed; and as there was no lien on the personal property at the time of filing the replication, of course the proviso in the bankrupt law does not apply, and judgment must be rendered for the defendant if that were the only property attached ; but it appears from the inventory that there was also some real estate levied on, and as that could not be included in the bond, and the lien thereon is still valid by the laws of this State, although the attachment is set aside, plaintiff has a right to the benefit of this property notwithstanding the discharge of the defendant. Judgment must therefore be rendered against the demurrer, and a special judgment in favor of the plaintiff, as in the case of Kettredge v. Warren, to be satisfied only out of the real estate attached and held by lien.

[The following opinion of the late Chief Justice Hornblower., referred to by Randolph, J. in the foregoing opinion of the Supreme Court,'has, by his permission been obligingly furnished to the Reporter: a part of the opinion as originally delivered, is omitted.]

See opinion at the end of this case.