U.S. Supreme Court
Henderson v. Mayer, 225 U.S. 631 (1912)
Henderson v. Mayer
Argued April 19, 1912
Decided June 7, 1912
225 U.S. 631
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE FIFTH CIRCUIT
The provisions of the Bankruptcy Act of 1898 preventing preferences, apply not only to mortgages and voluntary transfers, but also to preferences obtained through legal proceedings, but the act was not intended to lessen rights already existing, nor to defeat inchoate liens given by statute of which all creditors were bound to take notice. The general lien given by the laws of Georgia to the landlord on the property of the tenant is the equivalent, as to goods levied on by distress warrant, to the common law distress; while it does not ripen into a specific lien until the distress warrant is issued, it exists from chanroblesvirtualawlibrary
the time of the lease, and the lien of the distress warrant is not one obtained through legal proceeding within the meaning of the the preference provisions of the Bankruptcy Act.
Under the Bankruptcy Act of 1867 a statutory attachment for rent in the nature of a landlord's distress warrant levied within the preference period was not nullified or discharged by the bankruptcy proceedings, and there is nothing in the Act of 1898 opposed to this conclusion.
The general provision of the Bankruptcy Act of 1898 indicate a purpose and intent, as against general creditors, to preserve rights such as those given by the Georgia statute to landlords, even though not enforced until within four months of the bankruptcy.
175 F.6d 3 affirmed.
Samuel Mayer owned a plantation in Dooley County, Georgia, which he rented to Joseph Burns for one year. The rent not having been paid at maturity, Mayer, on November 13, 1908, made an affidavit in conformity with the statute, and a justice of the peace thereupon issued a distress warrant, which, on the same day, was levied upon the cotton, corn, and other products of the place. The crops found on the premises being apparently insufficient to pay what was due, the sheriff at the same time levied upon other property by virtue of § 2795 of the Code of Georgia, which declares that
"landlords shall have a special lien for rent on crops made on land rented from them, superior to all other liens except liens for taxes, . . . and shall also have a general lien on the property of the debtor liable to levy and sale, and such general lien shall date from the time of the levy of a distress warrant to enforce the same."
Three days after the levy, a petition in bankruptcy was filed against Burns, the tenant, who was subsequently adjudged a bankrupt. The trustee, when elected, obtained possession of all the property seized by the sheriff, and subsequently sold it in the due administration of the estate. The proceeds of the cotton and corn were paid over to Mayer, it being conceded that the landlord's chanroblesvirtualawlibrary
special lien on the crops had not been affected by the bankruptcy proceedings.
Mayer also claimed that, by virtue of his general lien, he was entitled to have the balance of the rent paid out of the proceeds arising from the sale of the other property levied on, and filed his intervention to secure such an order. The trustee's objection was sustained by the referee on the ground that the landlord's general lien was discharged because it had been "obtained by legal proceedings" or levy made three days before the filing of the petition in bankruptcy. His ruling was reversed by the district court (175 F.6d 3). That judgment was affirmed by the circuit court of appeals without opinion. The case was then brought here by writ of certiorari, granted at the instance of the trustee, who claims that, under the Georgia Code, the landlord had no lien on the property prior to the levy of the distress warrant, and that whatever right had been acquired by that seizure was discharged by § 67f, which declares that
"all levies, judgments, attachments, or other liens obtained through legal proceedings against a person who is insolvent at any time 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. "
MR. JUSTICE LAMAR, after making the foregoing statement, delivered the opinion of the Court.
The provisions of the Bankruptcy Act preventing an insolvent from giving or the creditor from securing preferences for preexisting debts apply not only to mortgages and transfers voluntarily made by the debtor, but also to those preferences which are obtained through legal chanroblesvirtualawlibrary
proceedings, whether the lien dates from the entry of the judgment, from the attachment before judgment, or, as in some states, from the levy of execution after judgment. But the statute was not intended to lessen rights which already existed, nor to defeat those inchoate liens given by statute of which all creditors were bound to take notice and subject to which they are presumed to have contracted when they dealt with the insolvent.
Liens in favor of laborers, mechanics, and contractors are of this character, and although they may be perfected by record or foreclosure within four months of the bankruptcy, they are not created by judgments, nor are they treated as having been "obtained through legal proceedings," even when it is necessary to enforce them by some form of legal proceeding. The statutes of the various states differ as to the time when such liens attach, and also as to the property they cover. They may bind only what the plaintiff has improved or constructed, or they may extend to all the chattels of the debtor or "all the property involved in the business." In re Bennett, 153 F.6d 3.
In some cases, the lien dates from commencement of the work, or from the completion of the contract. In others, prior to levy they are referred to as being dormant or inchoate liens, or as "a right to a lien." In re Bennett, 153 F.6d 7; In re Laird, 109 F.5d 4. But the courts, dealing specially with bankruptcy matters, have almost uniformly held that these statutory preferences are not obtained through legal proceedings, and therefore are not defeated by § 67f, even where the registration, foreclosure, or levy necessary to their completion or enforcement was within four months of the filing of the petition in bankruptcy.
Similar rulings have been made where the landlord has only a common law right of distress. In re West Side Paper Co., 162 F.1d 0. This is often referred to as a lien, chanroblesvirtualawlibrary
but it is "only in the nature of security." 3 Black.Com. 18. The pledge, or quasi-pledge, which the landlord is said to have is, at most, only a power to seize chattels found on the rented premises. These he could take into possession and hold until the rent was paid. Doe ex dem. Gladney v. Deavors, 11 Ga. 84. But, before the distraint, the landlord at common law has
"no lien on any particular portion of the goods, and is only an ordinary creditor, except that he has the right of distress by reason of which he may place himself in a better position."
Sutton v. Rees, 9 Jur. (N.S.) 456. A right fully as great is created by the Georgia statute here in question. For, while giving the owners of agricultural lands a special lien on the crops, there was no intention to deprive the proprietor of urban and other real estate of the lien for rent which there, as in other states, is treated as an incident growing out of the relation of landlord and tenant.
The Code (§ 2787) expressly "establishes liens in favor of landlords." It (§ 3124) gives them "power to distrain for rent as soon as the same is due." It declares (§ 2795) that landlords "shall have a general lien on the property of the tenant liable to levy and sale . . . which dates from the levy of the distress warrant to enforce the same." It is true that, prior to levy, it covers no specific property, and attaches only to what is seized under the distress warrant issued to enforce the lien given by statute. But in this respect it is the full equivalent of a common law distress, the lien of which is held not to be discharged by § 67f. In re West Side Paper Co. supra; Austin v. O'Reilly, 2 Wood 670.
The fact that the warrant could be levied upon property which had never been on the rented premises does not change the nature of the landlord's right, though it may increase the extent of his security. The statutory restrictions as to date, rank, and priority may be important in a controversy with other lienholders, but was wholly chanroblesvirtualawlibrary
immaterial in this contest between the landlord and trustee, where the latter was only representing general creditors. As against them, the landlord had, from the beginning of the tenancy, the right to a statutory lien, which had completely ripened and attached before the filing of the petition in bankruptcy. The priority arising from the levy of the distress warrant was not secured because Mayer had been first in a race of diligence, but was given by law because of the nature of the claim and the relation between himself as landlord and Burns as tenant. In issuing the distress warrant, the justice acted ministerially. Savage v. Oliver, 110 Ga. 638. The sheriff was not required to return it to any court, and no judicial hearing or action was necessary to authorize him to sell for the purpose of realizing funds with which to pay the rent. Such a lien was not created by a judgment, nor "obtained through legal proceedings."
Decisions to the same effect were made under the Bankruptcy Act of 1867 (14 Stat. 517, 522, § 14), which dissolved attachments or mesne process within four months prior to the filing of the petition. In Austin v. O'Reilly, supra, decided in 1875, it appeared that, in Mississippi, the landlord had no lien, but, as in Georgia, was authorized to seize (but by attachment) the tenant's goods wherever found. Justice Bradley, presiding at circuit, said that the landlord's right to a distress at common law was not a strict lien, but,
"being commonly called a lien, and being a peculiar right in the nature of a lien, . . . the Supreme Court of the United States, and most of the district and circuit courts, have regarded it as fairly to be classed as a lien within the true intent and meaning of the Bankrupt Act,"
and that the statutory attachment, being in the nature of a common law distress, was not nullified or discharged by the bankruptcy proceedings.
There is nothing in the Act of 1898 opposed to this conclusion. On the contrary, its general provisions indicate a chanroblesvirtualawlibrary
purpose to continue the same policy, and an intent, as against general creditors, to preserve rights like those given by the Georgia statute to landlords even though the lien was enforced and attached by levy of a distress warrant within four months of the filing of the petition in bankruptcy.