Case Name: R. W. WARD v. HARGETT, Administrator, et al.
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1909-12-01
Citations: 151 N.C. 365
Docket Number: 
Parties: R. W. WARD v. HARGETT, Administrator, et al.
Judges: 
Reporter: North Carolina Reports
Volume: 151
Pages: 365–370

Head Matter:
R. W. WARD v. HARGETT, Administrator, et al.
(Filed 1 December, 1909.)
1. Bankruptcy — Trustee — Title Upon Adjudication — Location of Property.
On an adjudication oí bankruptcy followed by subsequent appointment of trustees, tbe property of a bankrupt available for distribution among bis creditors and situate anywhere within the United States or any one of. them, passes to such trustees as of the date of the adjudication.
2. Samé — Liens—Preferences Avoided.
After an adjudication of bankruptcy any and all attempts by an existing creditor to obtain within the United States an advantage or to secure a lien which would result in a preference, is of no avail; and where such attempt is made by means of court process, State or Federal, the same will be avoided on timely and proper application on the part of the trustees.
3. Same — Procedure—Attachment Vacated.
In this case, after the adjudication of the debtor as a bankrupt in the State of New York, the plaintiff instituted his action here to recover judgment for the amount of a note he held against the debtor, and when the summons was issued he levied an attachment upon real estate of the debtor situated within the county, and caused the summons and warrant of attachment to be served by publication. After the levy of the warrant of attachment the petitioners filed their petition showing that they were the duly appointed and qualified trustees in bankruptcy of the estate of the creditor. Sold, the procedure of the trustees was appropriate, and that the attachment should be' vacated.
4. Bankruptcy Laws — Amendment—Adjudication—Registration— Title.
The amendment to the Bankruptcy Act of 5 February, 1903, directing the trustee to file a'certified copy of the decree of adjudication in the office where conveyances of real estate are recorded, in every county where the bankrupt holds real estate not exempted from execution, etc., is directory only and does not affect the principle that the bankrupt’s title passes by operation of law to the trustees in bankruptcy as upon the date of his adjudication.
Appeal from W. R. Allen, JSpring Term, 1909, of ONsnow. Civil action, lieard on motion by trustees in bankruptcy to dissolve an attachment. The relevant facts are as follows:
“On 25 April, 1908, a petition in involuntary bankruptcy was filed against Thomas A. McIntyre in the District Court of the United States for the Southern District of New York, and on 21 May, 1908, the said Thomas A. McIntyre was adjudged a bankrupt, and the petitioners were duly 'appointed trustees of the estate of the said McIntyre, and duly qualified and gave bond on 24 July, 1908.
“On 9 June, 1908, after the filing of the petition in bankruptcy against the said Thomas A. McIntyre, and after he was adjudicated a bankrupt, the plaintiff instituted'-this action to recover judgment for the amount of a note he' held against said McIntyre, and in said suit at the time of the issuance of the summons caused to be issued and levied upon some real estate of the said Thomas A. McIntyre, then standing in his name upon the records of Onslow County, an attachment, and caused the summons and warrant of attachment to be served by publi cation, as shown in the record. After the levy of the warrant of attachment the petitioners filed their petition, showing that they were the trustees in bankruptcy of the estate of the said Thomas A. McIntyre, appointed and qualified as hereinbefore stated, and asked that the attachment be vacated. It further appears that since this suit was instituted the said Thomas A. McIntyre has died and his administrator has been made party defendant.”
The court denied the motion, and the trustees (Burlingham, Peck and Bonynge, petitioners) excepted and appealed.
Louis Goodman, L. K. Bryan and Preston Gumming for appellants.
Prank Thompson and Rountree & Carr for appellees.

Opinion:
Hoke, J.,
after stating the case: Under the present statute, on an adjudication of bankruptcy, followed by subsequent appointment of trustees, the property of the bankrupt available for distribution among his creditors, and situate anywhere within the United States or any one of them, passes to such trustees as of the date of the adjudication. Bankrupt Act, sec. 70; Remington on Bankruptcy, secs. 1112, 1116, 1117; Loveland on Bankruptcy, p; 366.
Remington, supra, sec. 1112, is as follows:
"1112.. Title Tests in Trustee by Operation of Law. That is to say, in every part of the world over which the laws of the United States are paramount, the bankrupt's adjudication, in and of itself, without any assignment, transfer or other act of the bankrupt, operates to divest him of all title and to vest it in the trustee of his creditors."
The same author (sections 1117-1116) further interprets the statute as follows:
"1117. 'The date of cleavage between the old and new estates of the bankrupt is the date of the adjudication."
"1116. Title vests in the trustee for creditors upon his appointment and qualification, but then relates back to the date of the bankrupt's adjudication."
To hold, as contended for by plaintiff, that the effect of the adjudication on the property of the debtor is confined to the ordinary territorial jurisdiction of the bankruptcy court, would thus be contrary to the express provisions of the statute, and in many cases frustrate what is perhaps the ehiefest purpose of the law., to insure the equal distribution of the assets of an insolvent among his creditors. From the principle stated, it follows that, after adjudication, any and all attempts by an existing creditor to obtain within the United States an* advantage, or secure a lien which would result in a preference, is of no avail; and where such attempt is made by means of court process, State or Federal, the same will be avoided on timely and proper application on the part of the trustees. Remington, see. 1125; Muller v. Nugent, 184 U. S., 1; Bank v. Sherman, 101 U. S., 403; Reed v. McIntyre, 98 U. S., 507; Bank v. Dickson, 95 U. S., 180; Bank v. Cox, 143 Fed., 91; In re Bank, 137 Fed., 818; Hatfield v. Moller, 4 Fed., 717; Mixer v. Guano Co., 65 N. C., 552; Whitridge v. Taylor, 66 N. C., 275; Randale v. McLean, 40 Ga., 162.
In Mixer v. Guano Co., supra, an attachment had been levied on property of the debtor in this State, and, on motion to dissolve same by the assignee in bankruptcy, appointed in proceedings had in the United States District Court for Rhode Island, it was held: "The defendant is a corporation, created by the laws of the State of Rhode Island, did business in this State and owned property here. Within six weeks after a warrant of attachment had been executed on the estate of defendant situate in this State, it was declared a bankrupt, on its own petition, by the District Court of the United States of the District of Rhode Island, and a deed of assignment of all the estate of defendant was made to the assignee: Held, (1) that the warrant of attachment, although executed on the estate of defendant, is but mesne process; (2) that the effect of the appointment of the assignee was to vest the entire estate of the defendant in such assignee, and that, the order for the dissolution of the warrant of attachment and the restitution of the estate of defendant to the assignee was proper."
And Rodman, J., delivering the opinion of the Court, thus correctly* states the doctrine applicable: "1. It is true that the District Court of Rhode Island has no means of enforcing upon a Superior Court of North Carolina a compliance with the act of Congress or with the orders of the District Court. If the plaintiffs in the present action resided within the district of Rhode Island, the District Court could enforce its orders by process in personam against them. As they reside beyond the jurisdiction of the District Court, that means is not open. But every court of the State of North Carolina owes obedience to an act of- Congress, concerning a matter within the power of Congress (as a bankrupt law confessedly is), as fully as a court of the United States does. Any contumacious attempt to evade such obligation would be defeated finally, upon well-recognized principles. The District Court of Rhode Island having jurisdiction over the person of the present defendant, and having adjudged it a bankrupt, no^ court of North Carolina can rightfully dispute such adjudication, and tbe legal consequences must be submitted to. We consider tbe adjudication of tbe District Court of Rhode Island as equal in all respects, for tbe present motion, to a similar adjudication by a District Court of tbe United States for tbe district of North Carolina."
And tbe same position, in different aspects, finds support in tbe other cases cited, and in Remington, sec. 1125, it is said:
"1125. Nor can a lien by legal proceedings be meanwhile obtained thereon after tbe adjudication."
Tbe authorities are also to tbe effect that tbe course taken by tbe trustees in tbe present instance is tbe appropriate method of procedure. Loveland on Bankruptcy, pp. 99-100. Nor is this position in any way affected by tbe amendment to tbe Bankruptcy Act of 5 February,-1903, to which we were referred by counsel, and which directs tbe trustee to "file a certified copy of tbe decree of adjudication in tbe office where conveyances of real estate are recorded, in every county where the bankrupt bolds real estate not exempt from execution, and pay tbe fee for such filing," etc., etc. This is required for tbe purpose of giving more general notice as to tbe status of tbe property, but more especially with a view of affording more facile proof of title in behalf of local oí other purchasers of tbe estate under tbe bankruptcy proceedings. But tbe title, as heretofore stated, passes by operation of law as of tbe date of tbe adjudication; and this provision, as it affects tbe title, is to be regarded only as directory. Under tbe Bankruptcy Act of 1861, tbe title passed by formal deed from tbe judge or tbe register to tbe assignee, and related back to tbe filing of tbe petition, and tbe assignee was directed by tbe statute to have such deed recorded in tbe various registry offices where tbe realty of tbe bankrupt was situated, within six months, etc.; and, under tbe decisions construing that statute, it was held that this requirement was directory and that tbe title was not otherwise affected. Bankruptcy Act 1867, sec. 14; Bump on Bankruptcy, 6th Ed., 393-394; Phillips v. Helmbold, 26 N. J. Eq., 202-208.
In this last case, speaking to this question, Chancellor Runyon, delivering the opinion, said: "Tbe bankrupt law, indeed, directs that tbe assignment be recorded; but it has been repeatedly held that tbe recording of tbe assignment is not necessary to tbe validity of tbe transfer to tbe assignee, and is not designed to operate under tbe registry acts."
In our case, and under tbe present law, as heretofore stated, tbe title passes by operation of law as of tbe date of tbe adjudi cation; and, under the authorities cited, and for like reason, the requirement of this amendment, that the certified copy of the adjudication shall be filed in the register's office, should be held directory only.
There was error in refusing to vacate the attachment on petition of the trustees, and this will be certified, to the end that proper order should be made in conformity with this opinion.
Reversed.