111 N.Y.S. 102 | N.Y. App. Div. | 1908
The order recites that the motion was granted solely upon the ground that defendant has been adjudicated a bankrupt and discharged in bankruptcy and on account of its insolvency.
The action is to recover damages for breach of a contract and the warrant of attachment was issued on account of the non-residence of the defendant. The warrant of attachment was issued on the 5th day of April, 1907, and under it the sheriff levied on two theatrical productions and took possession of the scenery and of the box office receipts. On obtaining the warrant plaintiff gave the usual undertaking with sureties to pay damages and costs if the warrant of attachment should be vacated, or defendant should recover judgment. On the 9th day of April, 1907, the defendant, pursuant to the provisions of section 688 of the Code of Civil Procedure, gave an undertaking with the American Surety Company of New York as surety for the full amount demanded in the warrant of attachment, and obtained an order discharging the attachment “ as to the whole of defendant’s property.” The condition of this undertaking is that defendant will pay on demand the amount of any judgment recovered against it in the action, not exceeding the s nn of $8,400, and interest from the 5th day of April, 1907. The defendant then received back the property attached, and continued to use the same in its business until the twenty-second day of J nly thereafter, when it was duly adjudged a bankrupt on an involuntary petition in bankruptcy, Sled on the 1st day of July, 1907. The surety company neither received nor now holds any property of the defendant as collateral to its undertaking. Counsel for respondent relies upon subdivision f of section 67 of the Bankruptcy Act of 1898 (30 U. S. Stat. at Large, 565), which provides as follows:
“ That all levies, judgments, attachments, or other liens, obtained*50 through legal proceedings against a person who is insolvent, at anytime within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien, shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien, shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid.”
Counsel for appellant contends that the effect of these provisions is merely to discharge the lien of the attachment, and not to vacate the writ. He concedes that, so far as the bankrupt is concerned, the cause of action has been discharged, but he urges that his client should be permitted to proceed to judgment against the bankrupt with a perpetual stay against the enforcement of the judgment against the bankrupt, which would protect the latter in all the rights guaranteed by the Bankruptcy Act, and at the same time would enable the plaintiff to enforce the liability of the surety on the undertaking. Authority for that course is found in many cases where the warrant of attachment was procured more than four months prior to the filing of the petition in bankruptcy. (Hill v. Harding, 130 U. S. 699; Holyoke v. Adams, 59 N. Y. 233; Metcalf v. Barker, 187 U. S. 165. See, also, Hillyer v. Le Roy, 179 N. Y. 369, and Pickert v. Eaton, 81 App. Div. 423.) In all of these cases it is to be borne in mind that unless the right of the plaintiff to continue the action to judgment were preserved he would lose the lien duly acquired by the attachment or the benefit of the security of the undertaking which took its place. The effect of the contention of the learned counsel for appellant would be to place his client in a better position by having obtained the undertaking, than if the levy had stood upon the property, for it is clear that under the provisions of the Federal statute herein quoted, if no undertaking had been given to discharge the levy, the levy would be discharged by the decree in bankruptcy and the trustee in bankruptcy would be entitled to the property. In that event the plaintiff’s only right would have been to share with other gen
This is the view taken by Collier in his work on Bankruptcy. (Collier Bankr. [5th ed.] 199, 200.) Brandenburg says in effect that in such case the surety never can become liable because the entry of judgment against the principal which is the contingency upon which the liability of the surety depends is forbidden (Brandenburg Bankr. § 415), and the United States Circuit Court of Appeals, fifth circuit, so held, in effect, in Klipstein & Co. v. Allen-Miles Co. (136 Fed. Rep. 385). Our Court of Appeals, however, held under the Bankruptcy Act of 1867,
It follows that the order should be reversed, with ten dollars costs and disbursements, and the motion to vacate the attachment denied, with ten dollars costs.
Ingraham, McLaughlin, Clarke and Scott, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.
See U. S. R. S., § 5044, revising 14 U. S. Stat. at Large, 522, § 14.— [Rep.