Lehman Stern Company v. S. Gumbel & Company/Opinion of the Court

On March 12, 1912, Lehman, Stern, & Company sold to Martin & Company 392 bales of cotton for the sum of $19,238. The checks given in payment were not honored when presented to the bank, and, on the day after the sale, the Lehman Company brought suit in a state court to obtain a general judgment against Martin & Company, and to foreclose the lien, given by the Louisiana statute, on agricultural products '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 it may be found, and his claim for the purchase money shall have preference over all others.'

Writs of sequestration and of attachment issued, requiring the sheriff to seize the cotton in whatsoever place it might be found, and to attach other property of Martin & Company and the individual members thereof, and hold the same subject to the further judgment and order of the court. The New Orleans Railway Company, Gumbel & Company, and the Hibernia Bank were served with summons of garnishment.

On March 19th the defendants, Martin & Company, were adjudged voluntary bankrupts. On the next day Thompson was appointed receiver of the bankrupts' estate. Shortly afterwards the New Orleans Railway Company, garnishee in the state suit, answered that it had in its possession 83 bales of the cotton mentioned in the pleadings; stating, however, that the cotton was claimed by Thompson, receiver of Martin & Company, bankrupts, and that he had notified the railroad company not to surrender the same.

By virtue of an order of the bankrupt court Thompson, receiver, thereafter intervened in the suit pending in the state court. Calling attention to the fact that the attachment proceedings had been commenced within four months prior to the petition in bankruptcy, and averring that the action did not involve property within the possession of the court, the receiver filed a motion 'to dismiss the proceedings herein, relegating the parties to the proper court of bankruptcy to determine their conflicting claims.' Gumbel & Company, garnishees, also excepted to the jurisdiction of the court on the ground that Martin & Company had been adjudicated bankrupts. Both of these motions were overruled by the judge presiding in the state court, who held that the bankruptcy act did not dissolve the vendor's lien; nor did it prevent the court from enforcing that lien against the cotton which had been brought into the custody of the court by means of garnishments served before the bankruptcy proceedings were filed.

Thereupon Gumbel & Company applied to the supreme court of Louisiana for a writ of prohibition forbidding the judge of the civil district court of the parish of New Orleans from proceeding further in the cause. The petition set out the history of the litigation, and averred that although § 67f [30 Stat. at L. 565, chap. 541, Comp. Stat. 1913, § 9651] dissolved the attachment, the court below had retained jurisdiction; that the receiver had given notice that he claimed title to any property of Martin & Company in the hands of Gumbel & Company, and would proceed to enforce the same by proceedings in the bankrupt court. By reason of these facts, and to avoid conflicts of jurisdiction between the courts, Gumbel & Company claimed to be entitled to the benefit of the writ of prohibition forbidding the judge of the parish court from proceeding further in the case as against them, garnishees, and claimants of the cotton under bills of lading issued by the railway company. A rule nisi issued and was served upon the judge of the civil district court. He answered, and after argument the supreme court of Louisiana ordered that the peremptory writ be issued 'on the ground that, as § 67f dissolved the attachment, the state court had no jurisdiction to enforce the garnishment process under the writ of attachment for the purpose of subjecting the property to the vendor's lien claimed by the plaintiff.'

A petition for a rehearing having been granted, the court, one judge dissenting, held that unless the state court had possession of the res, its jurisdiction was destroyed by the bankruptcy proceedings; and as the summons of garnishment did not operate to transfer the cotton from the possession of the garnishee into the possession of the court, there was no jurisdiction to foreclose the vendor's lien. It also held that the state court was without power to afford relief to the attaching creditors, who would therefore be obliged to have their rights adjudicated in the bankrupt court.

The case having been brought here by writ of error, the plaintiffs cited Louisiana cases in support of the contention that, in their suit for the recovery of the purchase price of agricultural products, they were entitled to an attachment, not only to secure a fund out of which to satisfy a general judgment, but also as a means by which to bring the cotton into court so as to have the vendor's lien foreclosed. In the light of those cases the plaintiffs further insisted that the garnishment operated as a seizure of the cotton; and that while § 67f may have dissolved the lien created by the attachment, it did not affect the lien given by statute on the cotton which the garnishment had brought into the legal possession, custody, and control of the civil district court of the parish of Orleans.

But this court cannot entertain an argument based on the theory that the decision of the supreme court of Louisiana was in conflict with the law of the state. Its opinion in this case is to be taken as conclusively establishing that, in Louisiana, the vendor's lien can only be enforced against property in the possession of the court, and also that such possession was not acquired by means of the service of the summons of garnishment.

From this ruling,-on a matter of state law, not subject to review here,-it follows that the proceedings in the civil district court to foreclose the vendor's lien failed for want of possession of the cotton. That, then, left the case an ordinary suit for purchase money against Martin & Company, in which an attachment had been levied on property in the hands of the certain garnishees. But the lien thus created by attachment and garnishment was dissolved by the express provisions of § 67f of the bankruptcy act. The judgment granting the peremptory writ of prohibition, and relegating the parties to the bankruptcy court, is therefore affirmed.