Court Opinion

ID: 8636791
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:46:34.38554+00
Date Added: 2024-06-11T16:55:57.344895
License: Public Domain

BENEDICT, District Judge.
This is a motion in behalf of judgment creditors of a bankrupt to dissolve an injunction heretofore issued by this court, restraining them from proceeding to sell under an execution certain personal property, levied upon prior to the filing of the petition in bankruptcy. The motion is opposed by the bankrupt, on the ground that the judgment under w'liich the judgment creditors seek to proceed, was obtained in fraud of the bankruptcy act, and by the assignee in bankruptcy, on the ground that the title of the property in question is vested in him as an officer of the court, and no person can be permitted to dispose of or interfere with it, except under the order of the bankrupt court, to which the property has been transferred by operation of law. The facts attending the judgment are so fully spread out in the papers before me, and are so simple in their character, that I can without injustice dispose of the question as to the validity of the judgment on the affidavits alone. Upon that question I should gladly hold in favor of the bankrupt if I could do so, as I by no means approve of the manner in which the judgment was obtained; but I do not see how the judgment can be held fraudulent upon the facts. It was obtained in the regular course of judicial proceedings. instituted adversely to the debtor and without collusion. It w’as entered for an amount admitted to. be justly due, and the entry was made as it was, not with the assent of the debtor, but in spite of him. It is in law a valid judgment obtained without fraud or collusion, and can in no proper sense be said to have been procured by the bankrupt with a view to give a preference. This being so. the judgment creditors, by their levy made prior to the filing of the bankrupt’s petition, acquired a security for their debt in the property levied on.
The next question arising is whether such a security is invalidated by the provisions of the bankruptcy act, and upon this question I have heretofore had occasion to express an opinion which I see no reason to modify. It seems to me that such a security is preserved and entitled to be protected, upon general principles of law. and that the general scope of the ‘bankruptcy act indicates that such was the intention of the' framers of the act. Parker v. Muggridge [Case No. 10.743].
*720The remaining question, then, is as to the ¡ manner in which this right of the judgment | creditors shall be protected. Two methods ¡ are open, by either of which the debt will be , secured. One is to allow the creditors to ■ proceed to sell the property at sheriff's sale, , in which case, as the affidavits show, there will be little or no surplus for the other creditors. The other is to direct the assignee in bankruptcy to take possession of and sell the property at private sale, in which case, as also appears by the affidavits, a sum can be realized not only sufficient to pay the judgment, but to leave a considerable sum for the other creditors. As between these two methods upon such a state of facts, it cannot be doubted that it is the duty of the bankrupt court, charged as it is with the interests of all the creditors, to prevent the sacrifice of his property by a sheriff’s sale, and direct a sale by the assignee, provided the power to ; do so has been conferred by the act. A dis- ; cussion of the question of the power of the ¡ court in the premises is rendered unnecessary in this case, inasmuch as the power is conceded to exist by the judgment creditors, and no objection is made to a disposal of the property by the assignee instead of the sheriff. I postpone, therefore, the discussion of that point until a case shall arise where it is raised, with the remark that such a ¡ power seems necessary to a proper administration of the bankrupt law, and that it would seem to be fairly included in the power con- ; ferred by the act to collect all the assets of ; the bankrupt, to ascertain and liquidate all 1 liens or other specific claims thereon, to ad- ■ just priorities and marshal and dispose of • the different funds and assets so as to secure ; the rights of all persons and the due distribu- i tion of the assets among all the creditors. The motion to dissolve the injunction will : therefore be denied, and an order entered di- ■ recting the assignee to take possession of the property levied upon and sell the same, with- , out delay, and to the best advantage, with liberty to the judgment creditors, immediately upon such sale, to apply for an order directing the payment of their judgment out of the proceeds of such sale. ,