Case ID: la_132/html/0232-01.html
Source: Caselaw Access Project
Author: {"author": "LAND, J. BREAUX, O. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(61 South. 212.)
    No. 19,521.
    LEHMAN, STERN & CO., Limited, v. E. MARTIN & CO. et al. In re S. GUMBEL & CO., Limited.
    (Oct. 21, 1912.
    On Rehearing, March 3, 1913.)
    
      (Syllabus by the Court.)
    
    1. Bankruptcy (§ 198*) — Administration op Estate — Attachment.
    Section 67 of the United States bankrupt act (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3448]) strikes with nullity all attachments sued out against an insolvent within four months prior to the filing of the petition in bankruptcy, and wholly discharges and releases the property affected by the attachment, if the insolvent is adjudged a 'bankrupt. Hence a state court has no jurisdiction in such a case to enforce garnishment process under a writ of attachment against property in the hands of a third person, for the purpose of subjecting the same to a vendor’s lien and privilege claimed by the plaintiff, but not enforced by seizure of the property under some other writ.
    [Ed. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 289, 296-316; Dec. Dig. § 198.*]
    On Rehearing.
    2. Bankruptcy (§ 210*) — Administration op Estate — Atta chment.
    An attachment by means of a writ of garnishment does not change the possession of the property and place it either in the possession of the court, or the one who has obtained the writ; for it may be that the property may never pass out of the hands of the garnishee. The writ of attachment does not, therefore, create any lien in favor of the attaching creditors which is recognized by the 'bankruptcy law, and the property is subject to the jurisdiction of the ba nkrupt court notwithstanding the attachment; and it is in.that court that the attaching creditor must assert his rights against the debtor.
    LEd. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 321-323; Dec. Dig. § 210.*]
    Provosty, J., dissenting.
    Action by Lehman, Stern & Co., Limited, against E. Martin & Co. and others. Application by S. Gumbel & Co., Limited, for writ of prohibition.
    Granted.
    Hall, Monroe & Lemann, of New Orleans, for relator. Denegre & Blair and Henry H. Chaffe, all of New Orleans, for respondent Lehman, Stern & Co., Limited.
   LAND, J.

On March 13, 1912, the plaintiff sued the defendant to recover the sum of $19,238.53, representing the cash price of 392 bales of cotton, no part of which had been paid. The petition represents that the checks given by defendant for said price were worthless, and payment of the same were refused by the drawees, and that the bills of lading for said cotton were fraudulently delivered by defendant to S. Gumbel & Co., the relator. The petition represents that said cotton was in the possession of the railroads, which had issued said bills of lading.

The plaintiff represents that it is entitled to a vendor’s lien on all of said cotton under Act 63 of 1890, and prayed for a writ of sequestration, directing the seizure of the cotton and bills of lading, and also for writs of attachment. The relator and the Hibernia Bank & Trust Company and other parties were duly made garnishees. It does not appear that any of the cotton described in the petition was seized under the writ of sequestration. It appears, however, that the New Orleans, Texas & Mexico Railroad Company, as garnishee, answered that it had possession of 52 bales of the cotton; but the same was claimed by S. Gumbel & Co., Limited, as holder of the original bills of ladiug.

Gumbel & Co. excepted to the garnishment and to the jurisdiction of the court, on the ground that the defendant firm and all of its members had been duly adjudicated bankrupts in the United States District Court for the Eastern District of Louisiana on March 19, 1912.

The Hibernia Bank & Trust Company filed a similar exception. The receiver of the bankrupts intervened in the suit, and also excepted on the ground that the court had been divested of all jurisdiction in the matter, and the conservatory writs issued in the suit had been dissolved by the adjudication in bankruptcy. The receiver prayed that the proceedings be dismissed and the parties relegated to the proper court of bankruptcy to determine their conflicting claims.

The court below overruled the exceptions and ordered the garnishees to answer, -for the following reasons:

“The plaintiff is seeking to enforce against specific property a vendor’s lien, which is granted by Act No. 63 of 1890, p. 51. It invoked the powers of this court at the time when no other court was open to it. The defendants were served with citation and the writs were issued and garnishment process served prior to the adjudication of the defendants in bankruptcy. As above stated, one of the garnishees has answered, admitting that it has in its possession some of the cotton on which plaintiff claims a vendor’s lien. If either or both of the two garnishees, who have filed exceptions, have in their possession, or had at the time of service herein, the balance of the cotton on which plaintiff claims a vendor’s lien, then this court seized, prior to the bankruptcy, and had under its control and subject to its jurisdiction, all of the cotton on which the statutory lien rests. But, even if they had none of this cotton, the court has seized the part admitted by one garnishee to be in its hands.
“Under the well-settled jurisprudence of this state and of the United States courts, where a state court has jurisdiction of the parties, and prior to bankruptcy of the defendant has seized the property on which the plaintiff claims a statutory lien, the jurisdiction of the state court is not ousted by the adjudication in bankruptcy of the defendant.” (Citing authorities.)

By Act No. 63 of 1890, p. 51, there was granted to any person who may sell the agricultural products of the United States in any chartered city or town of the state of Louisiana—

“a special lien and privilege thereon to secure the payment of the purchase money for and during the space of five days only after the day of delivery, within which time the vendor shall be entitled to seize the same in whatsoever hands or place found, and his claims for the purchase money shall have preference over all others.”

The plaintiff contends that the cotton sold was seized under garnishment process, and, having been thus brought under the control of the state court, was subjected to its vendor’s lien and privilege.

Article 246 of the Code of Practice provides in part as follows:

“The property and effects in the possession of a third person, belonging to the defendant, or debts due by him to such defendant, shall be decreed to be levied as by the sheriff from the date of the service of the interrogatories on such persons.”

Such seizure, however, is merely constructive. The property remains in the possession of the garnishee, and the court has no authority to order its delivery to the sheriff until the plaintiff obtains a final judgment against the defendant maintaining the attachment. If the attachment be dissolved, all seizures under the writ, actual and constructive, are necessarily released.

Section 67 of the United States bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3448]) reads as follows:

“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 the petition in bankruptcy, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien shall be deemed wholly discharged and released from the same.”

It goes without saying that the attachment sued out by the plaintiff was stricken with the nullity denounced by the federal statute, and the property affected by the attachment was discharged and released from the same. Under said section, which is the supreme law of the land, after an adjudication in bankruptcy, a state court has no jurisdiction to hold property under an attachment for any purpose. A proceeding which becomes null and void can no longer produce any legal effect. A state court cannot retain the possession of property which the federal statute declares shall be wholly discharged and released from a levy, attachment, or judgment.

Counsel for the plaintiff, in their very able and learned brief, have endeavored to bring this case within the purview of authorities, federal and state, holding that, even after an adjudication in bankruptcy, a state court, in actual possession of property subject to a mortgage, pledge, or statutory lien, has jurisdiction to enforce the same by a sale of the property. We premise with the statement that in not one of the cases cited were the proceedings by attachment. The Louisiana cases involved the enforcement of the lessor’s privilege and pledge by provisional seizure or by opposition on property or funds in the actual custody of the state court. See I. Trager Co. v. Cavaroc Co., 123 La. 319, 48 South. 949. If the plaintiff had executed the writ of sequestration by the seizure of any of the cotton alleged to have been sold to the defendant, the case would be different. But this writ, specially provided by law for the enforcement of liens and privileges on movables (C. P. art. 275, No. 7), was not executed on any of the cotton described in the petition. Plaintiff also sued out writs of attachment to reach the property generally of the defendant in the hands of third persons. One of the common carriers made a garnishee admitted the possession of 52 bales of cotton described in the petition, but at the same time further answered that it was bound to deliver the same to the holder of the bills of lading covering the shipment, and that the relator held the bills of lading, and had demanded the delivery of the cotton. This constructive levy on the 52 bales of cotton necessarily fell with the attachment, and the property was released by the force of the federal bankrupt act.

It is therefore ordered that peremptory writs of prohibition issue, as prayed for by the relator in his petition.

On Rehearing.

BREAUX, O. J.

The bankruptcy act is not destructive, of rights already existing at the time that the writ of attachment issues. It gives effect to all liens, except those growing out of the attachment itself. We will not discuss any proposition save that the writ of garnishment does not hold the property; nor does it issue to compel the delivery of a specific thing. Hanna v. Loring, 11 Mart. (O. S.) 276.

We have carefully considered the authorities cited of a date comparatively recent and those of a remote date. We have not found that they would justify us in insisting upon the jurisdiction of the state courts.

As relates to federal decisions cited, they are not pertinent to the issues here.

In the last decision in date, confidently cited by learned counsel, Henderson v. Mayer, 225 U. S. 639, 32 Sup. Ct. 699, 56 L. Ed. 1233, the plaintiff had obtained a distress warrant for rent, which is the common-law expression in matter of proceeding for rent. There was a direct seizure of the, property, and in that way it was brought within the jurisdiction of the state court.

We have not found any decision under which it is possible to maintain the garnishment in this case. There is only one exception, to wit, Gumbel & Co. v. Beer, 36 La. Ann. 494, if it be an exception, as it was- not decided by a unanimous court; moreover, it does not involve a construction of the bankruptcy law. The ease is not absolutely similar nor pertinent.

We will state, by way of illustration, that in case of a provisional seizure the property is seized and brought within the jurisdiction of the court; also in case of a foreclosure of a mortgage. It is different in garnishment proceedings, in that the property remains in the possession of the garnishee, and may never be delivered to the court. Furthermore, there can be no judgment before a judgment has been obtained against the defendant. There will never be a judgment rendered in the state court against defendant whose property has been surrendered. Collins & Leake v. Friend, 21 La. Ann. 7; Proseus v. Mass, 12 La. 16; Caldwell v. Townsend, 5 Mart. (N. S.) 307.

The question is. exclusively one of jurisdiction. Whatever rights plaintiff has will have to be asserted in other proceedings. In other words, the rights of parties have been transferred, and will have to be asserted in the United States- courts. The state court has never had possession of the property, and that is indispensable to its jurisdiction under the bankruptcy law.

It would be different if the property had been taken possession of under the writ of sequestration.

It is therefore ordered, adjudged, and decreed that the judgment heretofore rendered by this court is reinstated and made the judgment of this court, and plaintiff’s demand on rehearing is rejected, at its costs.

PRO YO STY, J., dissents.