Reed v. McIntyre

APPEAL from the Circuit Court of the United States for the District of Minnesota.

William H. Shuey, a merchant at St. Paul, Minn., executed, March 13, 1874, a deed of assignment conveying his entire property, including his stock in trade, to William S.C.ombs in trust, for the equal benefit of all his creditors. Upon the same day, immediately after the acknowledgment of the deed, Combs entered upon the discharge of his duties as assignee, and took possession of Shuey's stock. During the succeeding day, Mrs. Reed obtained a judgment in one of the State courts of Minnesota against Barnard and Shuey, for the sum of $5,120.45. An execution was immediately issued, and the sheriff forthwith levied it upon the same goods of which Combs had taken possession. Upon the occasion of the levy, the officer was notified of the assignment and Combs's possession. On the 31st of March, 1874, Mrs. Sanderson, a creditor of Shuey, by petition filed in the proper court, prayed that he might be declared a bankrupt, upon two grounds: 1st, that being a merchant and trader, he had, Jan. 1, 1874, fraudulently stopped and suspended payment of his commercial paper, to wit, the promissory note held by her, and had not resumed payment thereof; 2d, that, March 13, 1874, being then insolvent, he made the said assignment to Combs with intent to hinder, delay, and defraud his creditors, which she alleged was an act of bankruptcy. Before the return of the rule which issued upon this petition, Shuey, by written stipulation, filed in court, without admitting or denying the alleged grounds of bankruptcy, consented that an adjudication might be entered against him. This was at once done, the order reciting that, in consideration of Shuey's written consent, and of the proofs, in the cause, the facts set forth in the petition were found to be true; and it was therefore adjudged that he was a bankrupt, within the meaning of the act of Congress. McIntyre was duly selected as assignee, and to him the usual conveyance by the register was made. Afterwards, to prevent a sacrifice of the goods at a forced sale, and to save expense, a written agreement was made between Mrs. Reed and McIntyre, whereby the latter took possession of and sold all the property levied upon, but without prejudice to such rights as she had acquired under and by virtue of her execution, or to her right to raise any question in a suit in equity, to be promptly instituted, which she might have raised if that property had remained in the custody of the sheriff.

The present suit was commenced by a bill in equity filed by McIntyre for the purpose of obtaining a judicial determination of Mrs. Reed's rights in the property levid on, or rather in its proceeds. She claimed that to the extent of the judgment against Shuey her rights acquired by the levy are superior to those of the assignee in bankruptcy. That view was controverted by him, and a decree having been rendered in his favor, Mrs. Reed appealed.

Mr. E. C. Palmer for the appellant.

Reed obtained the judgment against Barnard and Shuey in the due course of proceedings at law to recover a bona fide subsisting debt, and the execution thereon was duly issued. The levy on the goods in question by the sheriff having been regular, his possession and right of possession thereunder were prima facie lawful. Wilson v. City Bank, 17 Wall. 473; National Bank v. Warren, 96 U.S. 539.

The adjudication in bankruptcy did not affect the levy or impair the lien acquired thereby. The assignee in bankruptcy took the title to the goods subject to all existing valid liens and incumbrances on them. Kelly v. Scott, 49 N. Y. 595; Cook v. Tullis, 18 Wall. 332; Hayes v. Dickinson, 16 N. Y. Sup. Ct. 277; In re Hambright, 2 Nat. Bank. Reg. 498; McDonald, Assignee, v. Moore, 15 id. 26; Dolson v. Kerr, Sheriff, 16 id. 405; Mitchell v. Winslow, 2 Story, 630; McLean v. Moline, 3 McLean, 201; Donaldson, Assignee, v. Farwell et al., 93 U.S. 631; Jerome v. McCarter, 94 id. 734; Goddard v. Weaver, 1 Wood, 260.

Combs is not a party to this suit, and makes no claim to the goods or to their proceeds. The assignment to him of March 14 was declared void, as having been made with the intent to hinder, delay, and defraud creditors, and as an act of bankruptcy. It presents, therefore, no obstacle to the effectual maintenance of Reed's rights under the levy.

Mr. E. G. Rogers and Mr. George L. Otis, contra, cited Mayer et al. v. Hellman, 91 U.S. 496; Johnson, Assignee, v. Rogers et al., 15 Nat. Bank. Reg. 1; In re Steele et al., 16 id. 105; In re M. J. Nelson, id. 312; In re James Croughwell, 17 id. 338; In re Arthur A. Hull, 18 id. 5; In re John C. Walker, id. 56; Dodge v. Sheldon, 6 Hill (N. Y.), 9; Seaman v. Stoughton, 3 Barb. (N. Y.) Ch. 348; Everett v. Stone, 3 Story, 446; Penniman v. Cole et al., 8 Metc. (Mass.) 496.

MR. JUSTICE HARLAN, after stating the case, delivered the opinion of the court.