Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-11-09
An IMPORTANT CASE.
DECISION AND OPINION OF THE COURT
IN THE DENNERY CASE.
Relation of Prior Judgment to a Pro
ceeding in Bankruptcy-It Cannot be
Preferred to Other Claims.

Preferred to Other Claims.
Judge Armstrong yesterday rendered the
following decision in the Dennery case.
The case has attracted much attention, and
has excited great interest among lawyers
and business men. We present first syl
labus of the points raled upon, and next
the full text of the opinion of the Court,
which will be found of special interest:
SYLLABUS.
proceeding in insolvency is pending in the
Superior Court. 1t is by his creditors against
A. Dennery. The Sheriff was appointed re-
ceiver pending proceedings. The wife of the
insolvent, who had prior to the institution of
procee dings, obtained judgment against him
for money, and who had taken out an exeeu-
ton, moved the Court to order the Sheriff to
sell the property of the insolvent notwith-
standing the Insolvency proceedings.
On this issue the Court holds that q proceeding
in insolvency vests the Court in which il is
pending with full power and Jurisdiction to
control the entire property and estate OF the
insolvent That it would be Inconsistent
with this power, and III contempt of the au-
thority of the Court, for an officer holding an
execution to proceed TO enforce the same
against the insolvent pending the proceed
ings. That the assignee in bankruptcy must
~--~--~ -
will distribute the proceeds according to the
equities of the several creditors.
The motion is therefore denied.
THE OPINION OF THE COURT.
In the Superior Court of the county of sacra-
mento, etate OF California, d parlment One
Dennery defendant. The plaintiff, by her coun-
sci, now moves the Court for an order directing
the Sheriff, George C. McMullen, to proceed
and sell the stock of goods of the defendant
under an execution III his DO DIS issued on a
judgment in favor of the plaintiff against the
defendant in this case. office was served on
the Sheriff of this motion and he appears by
! his unset to show cause against the motion.
The facts of the case, material 10 the determin-
alton of the motion, are these: On the 18th day
of August 1883, the plaintiff recovered judg-
ment by default against the defendant for the
sum of Sl2 ,595 20. On the same day the execu-
ton was issued thereon, put into the bands OF
the Sheriff, and levied by him on the stock OF
goods in question But on the 22d day OF the
same month certain creditors of the defenCant
duly Instituted proceedings in involuntary in-
| solyeney against him and, thereafter, upon a
sufficient petition filed for the purpose, the
| Court appointed said George c. McMullen, the
/ Sheriff, as the receiver in the insolvency pro.
ceedings to take posses sion of and safely Keep
/ the property of the defendant until the
/ further order of the Court: and, that at the
same time the Court made a further order
| that the Sheriff stay. all proceedings uuder the
| execution till the further order of the Court.
Botn OF those orders remain in full force and
effect. In the petition for the order appointing
/ a receiver it was averred that the plaintiff was
| the wife of the defendant; that she had no
I visible means other than such she might
realize from her judgment and execution; that
| her claim against him WAS sham and fictitious;
! that at the time the action was commenced he
I was insolvent; that she knew it; that at the
! time the complaint was filed the plaintiff pro-
cured an attachment TO issue in the action: that
! it was not delivered to the Sheriff for service
/ that it was not intended to be served when pro
hut Tod tn 10 Of,
venting the fact that the suit had been com.
meneed from being made public: that the sum
nous was no. served by the Sheriff: that the
| Judgment was suffered by the defendant and
procured by the plaintiff with the intent to
! eVade the provisions of the Insolvent Act, and
of transferring all of his property to the posses
| sion of plaintiff ard other circumstances are
! aVerred in the petition tending t. show fraud
menis of the petition are true, then the iudg
| uent aud execution are n fraud upon the othei
creditors of the defendant, and for the purpose
! of the decision of this motion the Court mus
assume them to be true.
| But the counsel tor the plaintiff attacks the
Jurisdiction of the Court to make and enforce
| those orders in the course of the proceedings in
| insolvency; but the position OF counsel cannot
be sustained.
! The Constitution and Code of Civil Procedure
vest original jurisdiction in the superior Courts
''of proceedings in insolvency." Constitution
Article VI, Section 5; c. C. P. 76) and the juris
diction of the Court attaches in cases of invol
untary insolvency when the petition properly
/ verified is filed, and served, with C Ply of the
| order to show cause. upon the insolvent debtor
| Q-uhrs VS.. Kelly, 81 Cal. $780, Arnold VS.. Kahn
81 Cal 472) and all the creditors of The insolvent
| as well the secured as the unsecured become
and are, by virtue of the insolvency, parties &c
| the proceedings; and they and their debts are
| brought under the jurisdiction and control OF
| the Insolvent Court; and su h jurisdiction and
/ control exist and may be enforced as well before
| as after the proof of debts. This doctrine il
| nod NV NJ IA ara6
4 cases, among which are the cases of P. Phelps
| vs. Selleck, n. B. R., $50; Watson vs. The Cit
zens' Savings Bank, II n. B. r. 16l, and Gooda
/ vs. Tuttle N. B. K. 1873, and Marsh VS.. Arm
| strong IL N. B. r. 125.
! Then the plaintiff as a creditor is a party tc
| the insolvency proceedings. All the property
! of the insolvent debtor except such as is exemp
I from execution vests in the assignee by the
| assignment Qnsolvent Act, Section ~; and the
assignee is required to take possession of all
| such property except as is exempt from execu.
ton and he may redeem all ineumbered prop
erty from raid liens and sell the property under
| the order of the Court, Section 2D, and in
| case he fails to redeem, ana there i:
| no agreement between him and the creditor
where the property is worth less than the debt
then the property shou be transferred il
satisfaction to the extent of its value or if The
prop rty is worth more than the debt and the
creditor paid the excess, then the assignee
should release the property to the creditor; bu
ifno agreement. then the Court must direct
sale according to Section a, and when the prop
eTty is reduced to money it mus be dist ,ibuted
first according to priorities and secondly to the
general creditors pro rata. 1t follows from these
and other provisions Of the Act that the Cour
has full jurisdiction to administer the estate
and to determine the validity and extent of al
liens. The Supreme Court, III the case of 1afts
| VS.. Manlove, IA Cal So said: sit is observable
| that the statute contemplates the double pur-
pose of discharging the debtor and of distlib
| uting the assets among his creditors. He il
| allowed too, by the statute, provision out Of
| the property. The Court having jurisdiction Of
the subject has control over the estate as a por
! ton of the subject OF its litigation. The whole
property of the bankrupt may be considered as
/ in its custody and within its control. The pro
ceedings at least in its preliminary stages i:
! more in the nature of a proceeding in rem tina
/ in personGn." And in line with the principle
! here announced, the Court in considering the
extent of Jurisdiction of the United sta,es Bank
ruptcy Court, by virtue of Section 50T5
| of the United States bankruptcy law,
which is in the exact words of Sec
ton "A of our Insolyent Act, in the
( case of Levy VS. Hoake (53 Cal, 267, s. c. is. N
/ B. R., $40. said The jurisdiction in Courts Of
/ bankruptcy extends to all cases and contro
| verses arising between the bankrupt and any
mand under the bankruptcy; to the collection
of all the assets of the bankrupt. to the ascer.
/ tainment and LIQUIDATION OF the liens and other
specific claims thereon; to the adjustment oil
the various priorities and conflicting interests
of all partie; and the maTshaliDg and DISPOSE
ton OF the different funds and assets. so BIS to
secure the rights OF all parties ana que distrlDu
! ton of the assets among all the creditors; and
to all such matters aud things to be done under
and by virtue of the bankruptcy, until the final
! distribution and close of the proceedings in
| bankruptcy" The question as to the jurisdie-
/ ton OF the bankruptcy Court to ascertain and
determine the validity and extent of the liens
snd to decree sale of real property in satisfac-
/ ton in summary proceedings in bankruptcy was
/ involved and determined in favor of the luris-
dictioa in that case. And in &c pG1te (Foster 2
! story l40) the great equity Judge, Story in de-
liyering the opinion Of the Court. said " | lay
it down as a general principle that the District
( Court is possessed of the full Jurisdiction of q
/ Court of equity over the whole subject matter
which arises in bankruptcy, and is authorized
rrrnnaedils ALI