Majority
p. 312MICHAEL L. DOYLE, et al., Plaintiff and Appellant, v. GEORGE H. SHARP, Defendant and Respondent.
Headnote
U. S. BANKRUPT LAW.MArshal.
Powers and duties m seizure of property of bankrupt.
The question in the case at bar related almost entirely to the title of the plaintiff to the property in question, as a bona fide purchaser and holder in the usual course of business. The plaintiffs bought and paid for the goods in good faith, and for a valuable consideration, without knowledge of the bankrupt, or the circumstances of his bankruptcy, or the manner in which the goods had been disposed of by him.
While a United States marshal acts within the command of his writ, he will be protected; but when in the execution of the same, he takes property belonging not to the bankrupt, but to others, he is as much a wrong-doer as if acting in a private capacity, and the act is not different from any other • trespass (Mollison «. Eaton, 16 Min. R. 426). It is now well settled that the 40th section of Bankrupt Law, confers no authority upon the court, upon the filing of a petition in a case of involuntary bankruptcy, to order the seizure of property from the possession of a person to whom the bankrupt had transferred it, or disposed of it, prior to the filing of the creditor’s petition.
The proceedings in bankruptcy are for the purpose of adjudging debtors as bankrupts, and distributing their property among their creditors.
Conflicting claims of the title to property of the bankrupt may arise, and actions at law and in equity may be instituted, in which those claims can be determined, and persons claiming the property as against the creditors be made parties, and their claims to the same be adjudicated upon. Such actions are very different from the ordinary proceedings in bankruptcy, and may be instituted in the federal or state courts (In the matter of Alexander Hursthill, 4 Benedict’s Report, 451).
p. 313Before Sedgwick and Speir, JJ. Decided, June 5, 1876.
This was an appeal from a judgment entered upon an order made at the trial directing a verdict in favor of the defendant.
The action was brought for the wrongful conversion by the defendant, of eight cases of merchandise, the property of the plaintiffs, of the value of seven thousand dollars. The plaintiffs claim to have purchased the goods of John Sanders, on the 10th of June, 1872.
The answer justified the seizure of the goods under a provisional warrant in bankruptcy, against Lagrave and Otis, to whom it was alleged the property belonged.
When the plaintiffs purchased the goods, they gave their note for five thousand dollars, at four months, which was paid at maturity. The seller gave them the invoice of the goods, and a receipt for the note, and a few days thereafter they received a warehouse receipt of the goods. The plaintiffs did not know Lagrave and Otis, the bankrupts, until the 19th of June, 1872. Hor did they know that the bankrupts had any connection with the goods.
It appears that proceedings in bankruptcy were commenced against the plaintiffs, on the 30th day of May, 1872, and a short time before the injunction was issued, Lagrave and Otis directed his shipping clerk to ship the goods to Philadelphia, for sale, and to have them marked in his clerks’ name, and pay a balance due himself out of the proceeds. This was done, and fearing the goods might be attached by Lagrave’s creditors, he re-shipped them to Hew York. The goods arrived in Hew York on the 29th of May, when it was ascertained that Lagrave had fled. The next
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day the father of the clerk, who was a clerk for La-grave, and to whom Lagrave owed one thousand two hundred dollars, sold the goods to John Landers, a clerk of H. B. Clafflin & Co., on condition that Landers would pay him one thousand two hundred dollars. Landers wanted the goods of Lagrave, to hand over to Clafflin & Co., to protect himself from a guarantee liability he was under to Clafflin & Co., for having made a sale of other goods of theirs to Lagrave & Co. The provisional warrant was issued in the Lagrave bankruptcy proceedings, on the 1st of June, and on the 8th of June, the adjudication in bankruptcy was had.
Arnoux, Ritch and Woodford, for appellants.
Wards, Jones and Whitehead, for respondents.
The contention on the trial related almost entirely to the question of the plaintiff’s title to the property as bona fide holders in the usual course of business. As the case, in my view, must depend upon the want of power in the marshal to take these goods under his warrant, it will not be necessary to consider any other question. The only justification pleaded, is the provisional warrant in bankruptcy. The warrant of seizure authorized the marshal to take possession of the property of the bankrupts, Lagrave and Otis, but not of any other person. While the marshal was acting within the command of the writ, he is protected ; but when in the execution of the writ he takes property belonging not to the bankrupt, but to another person, he is as much of a wrongdoer as if acting in a private capacity, and the act is not different from any other trespass (Mollison v. Eaton, 16 Min. R. 426).
It now seems to be well settled that the 40th section
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of the bankrupt law confers no authority upon the court, on the filing a petition in the case of involuntary bankruptcy, to order the seizure of any property or effects, except such as belong to, and are in the possession of the debtor. No authority is conferred for ordering the seizure of property from the possession of a person to whom the debtor transferred it, prior to the filing of the creditor’s petition. The proceeding in bankruptcy is for the purpose of adjudging debtors as bankrupts, and distributing their assets among creditors. Circumstances may arise which render it necessary that other proceedings be instituted in which other persons shall become parties. Conflicting claims of title to property claimed to belong to the debtors arise, and actions at law, as in equity, must be instituted, in which persons claiming interests adverse to the debtor must become parties in order to determine their rights by due course of law. These actions, when instituted, are very different from the proceedings in bankruptcy, and may be instituted in the federal or state courts. In matter of' Alexander Hursthill (4 Benedict's R. 451), Mr. Justice Blatchfobd says : “Such proceedings must be taken by a pleading, making proper averments, and calling for an answer on which an issue raised can be tried, leading to a determination which the aggrieved party can have reviewed.”
The judgment must be reversed, with costs to the plaintiff to abide the event.
Sedgwick, J., concurred.