er.

In Chancery.-Storm and others v. Waddell, Assignee in Bankruptcy.

vested on the service of the subpoena or on the order for or appointment of the receiv. There is no occasion to go beyond the appointment, because by force of the order and appointment, (if not by the order alone) Glover's right in the debt of De Kay was transferred to the receiver. The execution of the assignment to the receiver gave to him no new right. Such assignment is convenient to establish a legal title, and has become customary in these suits; but it is the order of the court which works the transfer of the right of the judgment debtor. Second. These causes have been fully argued upon the effect of the proviso in the second section of the Bankrupt Act. And perhaps creditors stand stronger upon the proviso, than they do upon the general principle which I have discussed. It is there. fore proper that I should consider the question as it is presented in this aspect. The proviso is in these words: "And provided also, that nothing in this act contained shall be construed to annul, destroy or impair any lawful rights of married women, or minors, or any liens, mortgages, or other securities on property, real or personal, which may be valid by the laws of the States respectively, and which are inconsistent with the provisions of the second and fifth sections of this act."

It is not alleged that there is any thing in the second or fifth sections of the act, which nulitates against the receiver's right to the benefit of this provision, if it be brought within its terms.

But it is strenuously contended on the part of the official assignee, that the right which the receiver represents, is not such a lien or security, vahid by the laws of this State, as comes within the saving clause of the bankrupt act.

First. What is the meaning of a lien or security on property, real or personal in this proviso?

The terms used are not synonymus, nor is it to be supposed that Congress would load a statute with words purely superfluous. The word security is the most general term, and in its usual acceptation embraces liens as well as mortgages. But it is not a legal phrase. It signifies that which makes secure or certain; in its proper use it relates to primary matters; and often consists of a promise or right not attended with possession of the thing upon which it reposes. It implies in its common acceptation that

which prevents loss, or makes safe. Dr. Johnson defines it as "any thing given as a pledge or caution"-Dean Swift used it as synonymous with "safety, certainty"— Dr. Webster gives us six definitions of the word, one of which is "safety, certainty," and another is, "Any thing given or deposited to secure the payment of a debt, or the preference of a contract; as a bond with surety, a mortgage, the indorsement of a responsible man, a pledge, &c."

It is not to be found in the old law dictionaries. Bouvier defines it as that which renders a matter sure; an instrument which renders certain the performance of a contract. (2 Bouv. Law Dict. 493.)

I have no doubt that the word securities in this proviso was used in its popular sense. Congress had provided in the words which precede it, for liens and mortgages, the former, a very comprehensive term of itself; and the generic term securities was added to sweep into the proviso every other vested right which was attached to, or was a charge upon property.

These terms are to be construed in a liberal and enlarged sense. Else what becomes of the very numerous rights in property, which are known as privileges in the State of Louisiana? No such legal word as lien is known to the laws of that State, and mortgages there are a distinct class of interests.

The literal words of the proviso being out of view, "other securities," viz. liens and mortgages on real or personal property, convey but little of their intent, in a state where liens as such are unknown, and where no property is recognized as being real or personal. Without going more minutely into this discussion, I will say at once, that the term other" securities" in the bankrupt act, in my view, includes every interest or right attached to or which is a charge upon specific property, or which entitles the owner thereof to be paid out of specific property; whether legal or equitable absolute or contingent.

In the Matter of Muggridge, before cited, (5 Law Reporter, S51, &c., 2 Story, 334.) Judge Story treats the proviso in the manner which I have attempted to illustrate, and he upheld a right in property as founded upon a contract, because it created an equi table lien or security, or a constructive trust in the property; and gave to the claimants a superior equity therein to that of the gen

In Chancery.-Storm and others v. Waddell, Assignee in Bankruptcy.

eral creditors represented by the assignee. the thing recognised by local statutes, long The word "lien" is of well known signi- established usages, or the general law; and fication. In law it signifies an obligation, that in his judgment, the word lien in the tie, or chain, annexed to or attaching upon bankrupt act, imported any charge fixed by any property; without satisfying which such law upon the property, or imposed by the property cannot be demanded by its owner, party in consonance with existing laws (4 Jacob's Law Dict., by Tomlins, 159.) and usages. And see the Matter of Allen, 5, Law Reporter 362, in the Northern District Court, per Conkling, J.

In a late law dictionary it is thus defined. "In its most extensive signification this term includes every case in which real or personal property is charged with the payment of any debt or duty; every such change being denominated a lien on the property. In a more limited sense it is defined to be a right or detaining the property of another until some claim be satisfied (2 Bouvier's Law Dict. 54.)

I have already mentioned Parker v. Muggridge, (5 Law Reporter 357, 2 Story 334,) where Judge Story decided that an equitable lien is as much within the act as a legal lien, and gave effect to a trust or security which was such by operation of law. See also his observations in Ex parte Foster 5, ibid 62, (2 Story's R. 1319) and the case of Kittredge v. Warren 7, ibid 82.

In the every day use of the term liens, include mortgages as well as the more re- In Donner v. Brackett, 5 Law Reporter stricted interests which one may hold in 394, Judge Prentiss of the U. S. District the property of another. And I think there Court in Vermont, said that in common is no doubt but that its usual and accepted acceptation, lien is understood and used to meaning, is quite as extensive as the defi-devote a legal claim or charge on property, nition of it which I have given from Tomlin's Jacob.

either real or personal, for the payment of any debt or duty. By legal, I understand the learned judge to mean lawful or recognized by law; and in that sense his definition embraces all the classes of liens, which I have mentioned.

There is no reason to suppose that Congress intended to limit the proviso to commoa law liens, which exist only where the party entitled to it has possession of the goods, and which are lost whenever he And in Haughton v. Curtis, 5 ibid, 507, parts with the possession. This is one of in the U. S. Circuit in the same district, the smallest classes of liens known to our that eminent judge, the late Mr. Justice jurisprudence. There are numerous statu- Thompson, said that in his opinion it was tory liens, and liens by the maritime law; the purpose of the bankrupt act to preserve some of which require possession to accom-all the securities upon property, which alpany them, while others exist dependent though unknown to the common law, are of possession And besides these there are by the laws of the respective states, as esthe diversified liens in equity, some with, sentially a lien upon the property as those and more without regard to possession of existing at common law. the property; which as is said by Judge Story, are rather deemed a charge upon the thing than either a pis in re or a pis I refer for instances of equitable liens to 1 Story's E1 § 506; 2 ibid § 1215 & succ. & § 1411.

ad rem.

Under the English system of bankruptcy, the variety of liens and securities which are respected in its administration, is very great. See Archbold's Bankruptcy by Flather, 139 to 147, and 149. And so far is the striking of a docket from cutting off such liens, or Nor do I find any distinction in the pro-driving the creditor having a legal lien inviso, between absolute and conditional to the bankrupt court to enforce his claim, liens. Although the latter may be de- that it is held that the court has no jurisfeated by the condition, they are neverthe-diction in bankruptcy against a creditor less liens until the contingency happens.

who obtains execution before the bankruptcy, unless he voluntarily comes in under the fiat-Ex parte Botcherly, 2 Gyln. & J. 367.

In the matter of Coster, 1 N. Y Leg Obs. 53 54., the learned Judge of the U. S. District Court in the Southern District of this State, said that the word lien has The liens and securities in the saving been understood and expounded here as clause in the second section of the act, are used in a familiar sense, and as compre-such as may be valid by the laws of the hending all privileges and charges upon states respectively.

In Chancery.-Storm and others v. Waddell, Assignee in Bankruptcy.

They are not restricted to such as are created by the statutes of the states, but I apprehend include all liens and securities, known to the municipal law of the state, whether they are cognizable at law, or in equity, or in admiralty. In this respect the bankrupt act, in the language of Judge Ware, adopts the law of the states respectively; and in this instance as in others, we are to ascertain what those laws are by the statutes of the states and their judicial rules and decisions.

in support of the effect of such a suit, but as I desire to refer to cases prior to the time when the revised statutes went into operation, I will advert briefly to the earlier history of this jurisdiction.

The power of the court of chancery to aid the creditor in removing fraudulent impediments in the way of levying on the personal property liable to execution, or selling the real estate of his debtor; is an old established ground of jurisdiction which is not in question here. The bill in those cases was auxillary to the carrying into effect the process of the law courts, and different from our creditor's suit now under consideration, in this, that in the suit to set aside a fraudulent conveyance of land so as to give effect to a judgment, the bill need not allege anything more than the recovery of the judgment, and where it was to remove an obstruction affecting movable property, it was only requisite to allege an execution issued to the county where the property was situated; while in the creditor's bill against equitable interests and things in action, the creditor must show the issuing of an execution and its regular return unsatisfied.

I am aware that the Supreme Court of the United States have held that where a question arises, which is governed by the general principles and doctrines of commercial jurisprudence, they will not be controlled by the judicial decisions of the courts of the state where the question arose. Swift v. Tyson, (6 Peters.) But this is wholly different from the usage of that court, in questions growing out of real estate, and others of a local character; and I suppose the departure from that usage was on the ground that a question of commercial law turned not upon the law of any one state, or of the United States, but upon the law merchant of the whole commercial world. In the case of Spader v. Hadden, 5 J. For further illustrations of this subject IC. R. 380, Chancellor Kent in 1821 sus. refer to the Matter of Coster, before Judge Betts, cited above; Smith v. Gordon 6 Law Reportor 313, per Ware J. in the U. S. District Court in Maine; Matter of Muggridge, 5 ibid 351, (and 2 Story 334,) before cited; Matter of Allen, 5 ibid 362; Donner v. Brackett cited above, 5 ibid 392; Haughton v. Eustis, 5 ibid 505; and Dudley's Case, Penn. Law Journal 308, in the U. S. Circuit Court per Baldwin J.

tained a creditor's suit of the description now in use, against moneys in the hands of Hadden, which arose from property transferred to him by the debtor, the transfer being fraudulent against creditors.

This decree was affirmed by the Court for the Correction of Errors in November, 1823, 30 Johns, 554. A majority of the court concurred with Chief Justice Spencer and Mr. Justice Woodworth, (the latter deThe next inquiry is whether by the credi-livered the prevailing opinion) in holding tor's suit in this case, Chester & Co ac- that the case was one of acknowledged quired a lien or security on the judgment equitable cognisance. against De Kay according to the laws of this state. In other words did their suit create a charge upon that thing in action, which entitled them to payment before the bankrupt could resume or dispose of it?

And the reasoning of the judge is applicable as well to the case of the funds being in the debtor's hands as to the case decided.

It is true that in Denovan v. Finn, Hop kins R. 59. 77, decided in November, 1823, The practice of filing bills in this court the Chancellor omitted to follow the result by unsatisfied judgment and execution of the decision in Hadden v. Spader, and creditors, to reach the things in action of the debtor, which has become so well established and familiar, is usually referred to the revised statutes as its origin. (2 R. S. 173, 174.)

The statute is undoubtedly sufficient to sustain all the argument that was presented

viewed the latter as a case of trust and fraud. But I submit with great respect that there was much more in the decision than was acceded to it in Donovan v. Finn. The goods assigned in Hadden v. Spader were sold and converted into money five months before Spader recovered judgment

In Chancery.-Storm and others v. Waddell, Assignee in Bankruptcy.

so that there was no property on which his execution could have become a lien. It was then the plain case of a debtor having things in action in the hands of a third person; and equity deemed it unjust that either the one or the other should withhold them from the payment of his creditors.

The doctrine of Do tovan v. Finn has not been followed in any case since, nor so far as I have seen approved by more than two judges.

or his debtor, and had it actually returned and filed. And he must state in his bill under oath, that the sum claimed upon his judgment or decree, is due to him over and above all claims of the debtor, by way of asset or otherwise. This makes a case which leaves little room for contingency or uncertainty in the result of the suit, so far as the complainant's debt is concerned. is cause of action must be upon the records of some court of law, which of themselves There is abundant evidence that it was are evidence of the existence of the debt; not deemed in accordance with the decisionpon filing the bill an injunction is taken of the highest court in Hadden v. Spader, out and served with the subpœna to answer, and aside from the books I know from my restraining the debtor from parting with any own practice that it was disregarded prior to the time of the Revised Statutes. In the following cases the contrary was decided or opinions to that effect given.

of his property or effects till the further order of the court. And for the better protection of the property and its conversion into money a receiver is speedily appointed, who under the order of the court is vested with all such property, (or with sufficient specific portions of it to pay the complain

Weed v. Pierce, 9 Cowen, 722. 727, decided by Chancellor Walworth when Circuit Judge sitting in equity, December, 1827; Beck v. Birdett. 1 Paige 305, Jan-ant's debt and costs, and all prior claims uary, 1829; Caudler v. Petit, 1 ibid. 427 affirmed on appeal in December, 1829, 3 Wend, 618, 621, 626; and Edmeston v. Lyde, 1 Paige, 673; November, 1829.

upon the same,) and the debtor is compelled to assign and deliver such property to the receiver under the direction of a master of the court.

In Wakeman v. Grover, 4 Paige, 23 Unless the defendant can make a defence affirmed 11 Wend., 187, the bill was filed on some one of the very narrow grounds in 1828, to reach the things in action as-open to him, the decree presently ensues, signed as well as the goods of Grover & which directs the receiver to pay to the Gunn, and the decree was made against complainant out of the funds in his hands, both species of property without discrimin-the judgment, with interest and the costs ation, although the case was most desper. of the suit. ately contested throughout. The Chancellor If there are several creditors' suits, each repeated the doctrine of the above cases at complainant is paid according to his priority, page 33 of 4 Paige. And as recently as in as ascertained by the time of the filing of 1844. he reiterated it in Farnham v. Camp-the respective bills and serving the process bell, 10 Paige, 631.

See also the reviser's notes on introducing the provisions on the subject which are contained in the Revised Statutes (3 R. S. 669, 21 Ed.)

I may therefore assume that by the law of this State, as settled more than twenty years before this case arose, an unsatisfied execution creditor had a right to file a bill in this court to compel payment of his debt out of the equitable interests and things in action of the judginent debtor.

I will now endeavor to show what is the effect of such a bill when filed and duly prosecuted.

Before filing it the creditor must have obtained a judgment, or a decree for the payment of money, issued his execution against both the real and personal property

to answer.

This is an epitome of the course of proceeding without regard to the injunction, the property of the defendant is subjected to the suit wherever it may be if the receiver can lay hold of it or the complainant can reach it by decree.

The injunction, when served, prevents the debtor from putting it away or squandering it.

The suit does not affect property acquired by the debtor after its commencement. A supplemental bill is necessary to subject such property to the debt.

A receiver is a convenient and important but not an indispensable part of the proceeding.

The effects locked up as it were in the hands of the debtor, by the injunction, may

In Chancery.-Storm and others v. Waddell, Assignee in Bankruptcy.

be decreed to be delivered to the complain- The foregoing cases were before the Reant, or sold by a master and applied in sat-vised Statutes. In Eager v Price 2 Paige, isfaction of the debt and costs. 333, 338, Chancellor Walworth held that by filing a judgment creditors bill, the creditor acquired a specific lien on the property which the debtor had at the commencement of the suit, but that a supplemental bill was necessary to obtain a lien upon after acquired property of the debtor.

No voluntary assignment of the debtor can impair the complainant's right nor any intervening claim of other creditors.

I speak in this outline of equitable interests and things in action. Other personal property will be noted hereafter. And as to lands, I need only say that the court acts upon the rents and profits where the legal title or the right to the possession is in the debtor.

In Corning v. White 2 ibid., 567, the debtor set up in his answer that there were other unsatisfied execution creditors. The Chancellor overruled the defence, and held that It is conclusive to my mind that the right the creditor who first files his bill obtains thus acquired by the creditor is a charge a preference, he says "The filing of the upon the things in action which the debtor bill here under the provisions of the Re had at the commencement of the suit. It is vised Statutes, operates as an attachment of so far contingent that it may possibly be property which cannot be levied on a law. defeated by the event of the suit; although It gives to the vigilant creditor a right to a in this respect the result is immeasurably priority in payment, and the creditor who more certain than in the suits by attach-next files his bill, will have the second lien. ment in our sister States for the collection An assignment under the insolvent acts afof ordinary debts. And except on this contingency it is an absolute claim, to be divested only on satisfaction of the debt and costs of suit. It is just as certain and effectual upon the effects discovered, as a mortgage or a judgment is upon the lands thereby incumbered.

If I am right, in this result, Chester & Co. had a lien or security upon the property in question which was within the proviso of the bankrupt act.

The conclusion is strongly fortified by the course of decisions in this State and the language of our equity judges. In McDer mult v. Strong, 4, J. C. R., 687, the right was upheld as a lien upon the equitable interest sought by the bill.

ter the commencement of the suit, only gives to the assignee a right to the surplus, after the payment of the complainant's debt."

In Clarkson v. De Peyster, 3 Paige 320, the Chancellor, on holding that the creditor might file a bill of this description founded on a decree in equity, again speaks of the right acquired under it, as an equitable lien.

In the Utica Insurance Company v. Power 3 ibid., 365, the Chancellor declared that by the creditor's suit the complainants acquired a specific lien on the demand in question.

Bloodgood v. Clark, 4 Paige 574, was a a case upon the appointment of a Receiver, in which the Chancellor in support of a speedy appointment says in effect that the sworn bill of the complainant shows presumptively that he has an equitable right to all the funds and property of the defendant to satisfy his debt.

The argument of the appellant's counsel in Hadden v. Spader, was upon the ground that the creditor must establish a hen. In Weel v. Pierce, 9 Cowen, 728. 9, Chancellor Walworth held that the creditor in a bill of this kind, acquired a specific lien upon the fund by the commencement of his suit. In Beck v. Burdett, 1 Paige, 305,309, he declared his opinion that the filing of a bill after the return of an execution at law, gave to the plaintiff a specific lien on the fund or In Burrall v. Leslie 6, ibid. 445, where property not liable to execution at law; but eight creditor's bills had been filed against the execution not having been returned in the same judgment debtors before the Chanthat case when the bill was filed, the Chancellor and different Vice Chancellors, there cellor dismissed the suit.

In Ames v. Blunt, 5 Paige, 13, 24, he again speaks of the bill as giving to the complainant a lien on the property in controversy.

had been a reference to a master under the

Chancellor's order to settle the priorities and they were reported to be entitled in the order of their respective suits. The Chancellor made a decree accordingly.