U.S. Supreme Court
Holdane v. Sumner, 82 U.S. 15 Wall. 600 600 (1872)
Holdane v. Sumner
82 U.S. (15 Wall.) 600
When a corporation of Louisiana which had leased premises on which it had goods liable to the landlord's lien was owing rent (for the payment of which by the law of the state the landlord had a right by a judicial proceeding to seize the goods, and for the space of fifteen days, if they were removed, to follow and seize them) undertook, in supposed pursuance of the laws of Louisiana which authorize "any person" to make a cessio bonorum, to make such cession, and the judge having jurisdiction of the matter of cessions generally accepted the cession for the benefit of creditors, and directed that all judicial proceedings against the property be stayed, after which -- things proceeding in regular course -- the syndic took possession of and sold the goods, held, on a contest between the landlord and judgment creditors for the proceeds of them in the syndic's hands, that although it was finally decided in the supreme court of the state that a corporation was not entitled by the laws of Louisiana to make a cessio bonorum, and although, accordingly, the order staying all judicial proceedings was vacated and annulled, yet that the landlord had not lost his lien by omitting to follow and seize the goods in the syndic's hands within the fifteen days after the syndic removed them, and that although the decision in the first instance of the judge staying all judicial proceedings against the property of the corporation might have been void, as it was finally adjudged to be, yet as the subject generally belonged to him, as the parties were before him, and as he had to decide in the first instance the question of his own jurisdiction, his acts were binding till reversed or set aside, and that, as he was acting judicially in what he did, the landlord was not bound, in the face of an express inhibition of judicial proceeding against the goods, to attempt to seize them and thus meet the court with the issue of the strong hand.
This was a bill in equity filed by Sumner and others, as chanrobles.com-red
lessors, against Holdane & Co., one Jeffries, and the Bank of America, to enforce a lien for rent upon certain moneys deposited in the bank, the proceeds of goods which were formerly on the leased premises, and thereby subject to the lessors' privilege. The bank was but a stakeholder. The real defendants were the other parties named, judgment creditors who had garnisheed the moneys for the payment of their judgments. The controversy arose as far back as 1859. The leased premises were known as the Belleville Iron Works, situated near the Mississippi River opposite New Orleans. The tenants were an incorporated company known as the Belleville Iron Works Company. The term of the lease was ten years, commencing the 1st of January, 1856, the rent being a percentage on the amount of work done by the lessees, not to be less than $7,500 per annum.
At the close of the year 1858, the company was insolvent, and sought to obtain the benefit of the insolvent laws of Louisiana by making a cessio bonorum. The existing law on this subject, which was passed in 1855, declared that any person may make a cession of his property to his creditors, provided the surrender be made bona fide, without fraud, and agreeably to the formalities prescribed therefor. It then directed that any debtor wishing to make a surrender of his estate to his creditors must present his petition for that purpose to any judge having jurisdiction. This petition is to contain a statement of the debtor's affairs, with a schedule of his property, debits, and credits, and be sworn to. The sixth section of the action directs as follows:
"That whenever the judge shall be convinced that the debtor who wants to surrender his property has complied with all the formalities prescribed, he shall endorse on the schedule that the cession of all the property of the insolvent is accepted for the benefit of his creditors, and shall order a meeting of the creditors, to be called in the manner and within the time prescribed for respites; he shall also appoint an attorney to represent the creditors absent or residing out of the state, if there be any mentioned in the schedule."
The seventh section enacts: chanrobles.com-red
"That when issuing the order for the meeting of the creditors, the judge shall order that all the proceedings, as well against the person as the property of the debtor, be stayed."
The act then provides for the appointment of a syndic to take possession of the property and to administer and sell the same, and contains other provisions regulating the entire proceedings.
In pursuance of this law, the Belleville Iron Works Company, on the 29th of December, 1858, presented their petition in due form to the judge of the Fourth District Court of New Orleans (the proper judge for the purpose), who took cognizance of the case, and by an order of the same date accepted the cession for the benefit of the creditors, appointed a time and place for their meeting, and further directed that in the meantime "all judicial proceedings against the property of said company be stayed." After this, the cause proceeded in the regular course. A syndic was duly appointed and qualified, and took charge of the property of the company, and having obtained an order of sale, the whole property was sold under his direction by the sheriff, and netted over $50,000. Out of this money he paid the rent of the works up to April 1, 1859, the arrears and interest then amounting to over $14,000. He then made and filed in the court a tableau of distribution by which he arranged the claims against the estate in the order of priority and privilege, and placed the entire rent to accrue on the lease after the 1st of April, 1859, being for six years and nine months, amongst the privileged claims, which, with a few other privileged claims, largely exceeded the proceeds of the property remaining in his hands. This tableau was filed May 23, 1859. It met with strenuous opposition from the ordinary creditors, and a long litigation ensued. Suits were commenced by the defendants and others, and Holdane & Co. recovered judgments in the circuit court of the United States on May 11, 1859, amounting in the aggregate to over $4,000. The other defendant, Jeffries, sued in the Fourth District Court of New Orleans, and the suit was cumulated with the insolvency proceedings. These proceedings being finally carried by chanrobles.com-red
appeal to the Supreme Court of Louisiana, were wholly set aside on the ground that the insolvency law was intended for natural persons only, and that a corporation, like the Belleville Iron Works Company could not make a cessio bonorum under it. After this decision of the supreme court, the cause was remanded to the Fourth District Court of New Orleans, and that court, on the 23d of March, 1860, made the following decree:
"It is ordered, adjudged, and decreed, that the order of the court, entered on the 29th December, 1858, in the case of The Belleville Iron Works Company v. Its Creditors, staying all judicial proceedings against the property of said company, be vacated and annulled, and it is further ordered, that the plaintiff do have and recover of the defendant, The Belleville Iron Works Company, the sum of $,262.86,"
The supreme court subsequently held, when the case came up on another appeal, [Footnote 1] that the effect of this judgment was to annul the order of 29th December, 1858, in all its parts, and to allow the creditors to proceed as if there had been no surrender, and that the money in the hands of the syndic remained the property of the company and could be seized on execution, and did not become the property of its creditors, by virtue of the cessio bonorum.
The defendants having been thus left at liberty to prosecute their judgments to effect, issued executions, and as before said, garnisheed the balance of money in the hands of the syndic, amounting at this time to about $11,000, which he had deposited in bank.
The complainants then, February 23, 1867, filed this bill to have the said moneys applied to the payment of their rent.
The defendants insisted that the complainants had lost their privilege by not proceeding against the goods themselves, before they were removed from the leased premises, or within fifteen days afterwards, within which time, under the provision of the code, the lessor might seize them if chanrobles.com-red
there had been no change of property, and the chattels were still capable of being identified.
The plea of prescription of three years.
The court below, it which the bill was filed, decided that the money belonged to the complainants, lessors of the iron works, and from that decree Holdane & Co., with Jeffries, the opposing creditors, appealed to this Court. chanrobles.com-red