1. The district court sitting in bankruptcy has no jurisdiction
to proceed by rule to take goods seized, before any act of
bankruptcy by the lessees, for rent due by them in Louisiana, under
"a writ of provisional seizure" -- and then in the hands of the
sheriff, and held by him as a pledge for the payment of rent due --
out of his hands, and to deliver them to the assignee in bankruptcy
to be disposed of under the orders of the bankrupt court; neither
the sheriff nor the lessor having been parties to the proceedings
in bankruptcy nor served with process to make them such.
2. The circuit court may under the second section of the
Bankrupt Act entertain on bill as an original proceeding, a case
thus involving a question of adverse interest in goods so
seized.
3. Under the Civil Code of Louisiana, a lessor has a right to
seize, for rent in arrears, goods on the premises, and until he is
paid his rent, retain them as against an assignee in bankruptcy
subsequently occurring.
4. In such a case where the goods have been taken out of his
hands and given to the assignee in bankruptcy by an order of the
district court acting summarily and without jurisdiction, and sold
by such assignee, the circuit court, having got possession of the
case by bill filed by the lessor, to be regarded as one in an
original proceeding, will proceed and decide the whole
controversy.
5. And it will give the lessor the full value of the goods sold
clear of all expenses, whether the assignee obtained that value or
not (limited, of course, by the amount of rent which he is entitled
to have paid to him), and also to all the taxable costs to which he
has been put by the litigation.
Page 83 U. S. 552
Damages beyond this refused as hardly due in the particular
case, and at any rate more properly to be claimed in a proceeding
at law.
Marshall was the owner of a plantation in the Parish of
Avoyelles, in Louisiana, and on the 7th of February, 1867, leased
it to Nathan Smith and Henry Fuller for three years, from January
1, 1867, at $3,000 a year, payable in two equal payments. At the
end of the first year the tenants were in arrear $1,400, and on the
4th of January, 1868, Marshall commenced an action therefor in the
district court of the parish, and applied for and obtained a writ
of provisional seizure (as it is called), being the usual process
by which a lessor takes possession of his lessee's property found
on the premises, for the purpose of enforcing his lien thereon.
This writ was served by the sheriff on the 6th of January, 1868, by
serving a copy on the lessees, and by a seizure of their property
on the land, consisting of mules, wagons, farming implements, and
stock, grain, furniture &c., appraised at $1,744.
On the 15th of January, 1868, Smith, one of the lessees, filed
in the District Court of the United States for Louisiana a petition
to be declared a bankrupt, and was declared such accordingly; and
on the 12th of February, 1868, the defendants were appointed his
assignees. The controversy in this case arose from the proceedings
undertaken by the assignees to take the property aforesaid out of
the hands of the sheriff, and to dispose of it under the orders of
the bankrupt court. They first obtained from the court a rule upon
the lessor and the sheriff to show cause why they should not
deliver up the property to the assignees, alleging that various
creditors of the bankrupt claimed a privilege on the property, and
that it was necessary for a proper adjustment of all claims,
privileges, and liens, that the possession should be surrendered to
the assignees, to be subject to the bankrupt court. The lessor
contested this rule, stated his own rights and proceedings, and
claimed possession of the property
Page 83 U. S. 553
through the sheriff, for the purpose of selling the same to
raise the amount of his rent. The rule, however, was made absolute,
without, so far as appeared, any other proof on the subject. The
lessor appealed, but the district judge would not allow the appeal,
and there was no justice of this Court at that time (April, 1868)
assigned to that circuit to whom application could be made. The
lessor thereupon filed a bill, the present bill, in the court below
for an injunction to prohibit the assignees from proceeding under
the said order of the bankrupt court, and from taking possession of
the property, and for a decree that they be directed to pursue any
residuary interest of the bankrupt in the lessor's suit in the
district court of the parish, and not molest him in detaining and
subjecting the property to the payment of his rent, and for further
relief. Failing to obtain a preliminary injunction, and the
property being taken and sold by the assignees, the lessor filed a
supplemental bill, complaining of the illegality of the
proceedings, asking for a review of the same, and for an account
and damages. The bill and supplemental bill set out the lease, the
provisional seizure, the proceedings in the bankrupt court, and the
acts of the assignees; and complained that the lessor was injured
by a sacrifice of the property; and stated that before filing the
original bill he had offered the assignees a bond, with sufficient
sureties, to protect any persons claiming any superior liens to his
on the property, if any such there were, which, however, he
denied.
The defendants, in their answer, alleged that the lessees had a
counterclaim for repairs and permanent improvements, and that a
number of hands employed on the plantation had a privilege for
their wages superior to that of the lessor; but no proof of these
facts was offered in the case.
The principal allegations of the complainant were proved, and
the defendants on their part adduced proof to show that they had
acted in good faith under the orders of the bankrupt court, and
that they had sold the property fairly, and held the proceeds for
distribution, according to the rights of the parties in due course
of the bankruptcy proceedings.
Page 83 U. S. 554
On hearing, the bill was dismissed for want of jurisdiction, and
Marshall, the lessor and complainant, appealed.
Three questions now came before this Court:
1st. Was this decree dismissing the bill for want of
jurisdiction rightly made? Ought not the court below contrariwise,
to have entertained the case and decided it on its merits?
2d. Supposing that it ought to have done so, how stood the case
on the merits? and
3d. If these were with the complainant, what relief ought he to
have?
MR. JUSTICE BRADLEY delivered the opinion of the Court.
The first question is whether the decree dismissing the bill for
want of jurisdiction was rightly made, and this is to be solved by
reference to the second section of the Bankrupt Act. By this
section it is declared that the circuit courts
"shall have a general superintendence and jurisdiction of all
cases and questions arising under this act, and, except when
special provision is otherwise made, may, upon bill, petition, or
other proper process, of any party aggrieved, hear and determine
the case as in a court of equity."
By a subsequent clause of the same section it is declared that
said courts
"shall have concurrent jurisdiction with the district courts . .
. of all suits at law or in equity . . . by the assignee against
any person claiming an adverse interest, or by such person against
such assignee, touching any property, or rights of property, of
said bankrupt, transferable to or vested in such assignee."
The first clause confers upon the circuit courts that
supervisory jurisdiction which may be exercised in a summary
manner, in term or vacation, in court or at chambers, and upon the
exercise of which this Court has decided that it has no appellate
jurisdiction. [
Footnote 1]
Page 83 U. S. 555
The second clause confers jurisdiction by regular suit, either
at law or in equity, in the cases specified -- that is, in
controversies between the assignee and persons claiming an adverse
interest, touching any property of the bankrupt.
The present case is in form a regular bill in equity; but it
also asks a revision of the action of the district court in the
premises. As an original bill in equity it cannot stand, if the
district court had jurisdiction to proceed as it did; for the
matter was already decided in that court. As a bill to review the
proceedings and decision of the district court, it was a very
proper proceeding, and ought to have been entertained by the
circuit court. The revisory jurisdiction of the circuit court may
be exercised by bill as well as by petition; and as this bill
complains of the action of the district court, and asks for a
review and reversal thereof, the circuit court erred in dismissing
it for want of jurisdiction. But regarded as a bill of review, we
could not, according to our decision in
Morgan v.
Thornhill, entertain an appeal from the decision of the
circuit court in the case.
The appeal therefore must be dismissed unless it can be shown
that the district court proceeded without jurisdiction. If this
were the case, then the bill may be regarded as an original bill,
of which the circuit court clearly had jurisdiction, and the appeal
to this Court was properly taken.
The case here, then, depends on the question whether the
district court had jurisdiction to proceed by rule as it did. The
goods, it has been seen, were in the custody of the sheriff, under
a writ of provisional seizure, and held as a pledge for the rent of
the lessor. The seizure had been made before the bankruptcy. The
landlord claimed the right thus to hold possession of them until
his claim for rent was satisfied. This claim was adverse to that of
the assignee. The case presented was one of conflicting claims to
the possession of goods, and the sheriff had present possession for
the benefit of the lessor. Neither the sheriff nor the lessor was a
party to the proceedings in bankruptcy. No process had been served
upon them to make them such.
Page 83 U. S. 556
They were not before the court; and the court had no control or
jurisdiction over them.
Under these circumstances the assignees applied for and obtained
from the district court, a rule on the lessor and sheriff to
deliver the goods to them. Had the court authority to make such a
rule? Could such a rule be characterized as due process of law?
The bankrupt law does not distinguish in what cases the district
court may proceed summarily, and in what cases by plenary suit, and
we are left to decide the question on the general principles that
affect the case. The second section, however, in conferring
jurisdiction on the circuit courts, uses this language:
"Said circuit courts shall also have concurrent jurisdiction
with the district courts of the same district of
all suits at
law or in equity, which may or shall be brought by the
assignee in bankruptcy against any person claiming an adverse
interest, or by such person against such assignee, touching any
property or rights of property of said bankrupt."
This language seems to indicate that where there is a claim to
an adverse interest in the property, a suit at law or in equity
will be the mode of redress properly resorted to. The eighth
section, in granting appeals and writs of error from the District
to the circuit court, only does so in cases in equity and at law,
and in cases where the claim of a creditor is allowed or rejected.
If, therefore, adverse claims to property could be decided by the
summary action of the district court, not only would the party
claiming adversely to the assignee be deprived of a trial by due
process of law, but he would be without appeal. An appeal was in
fact denied in this case.
We think that it could not have been the intention of Congress
thus to deprive parties claiming property, of which they were in
possession, of the usual processes of the law in defense of their
rights.
The subject, in one of its aspects, came before this Court in
the case of
Smith v. Mason reported in
81 U. S. 14 Wall.
419. In that case the adverse claim was to the absolute property of
the fund in dispute; not, as in this, to a mere lien, and
Page 83 U. S. 557
to possession by way of pledge under the lien; and we held that
the bankrupt court could not, by a mere rule, make the adverse
claimant a party to the bankruptcy proceedings and adjudge his
right in a summary way, but that the assignee must litigate the
claim in a plenary suit, either at law or in equity. But it may,
with some plausibility, be said that, as the property in this case
is conceded to be in the bankrupt, and the question has respect
only to the right of possession under the lien, the district court,
which has express jurisdiction of the "ascertainment and
liquidation of the liens and other specific claims" on the
bankrupt's property, might properly assume control of the property
itself. The claim, however, is to the right of possession, and that
right may be just as absolute and just as essential to the
interests of the claimant as the right of property in the thing
itself, and is, in fact, a species of property in the thing just as
much the subject of litigation as the thing itself. It is the
opinion of the court, therefore, that the case is not substantially
different from that of
Smith v. Mason. Besides, it has
another point, in common with that case, upon which a direct
adjudication was made therein. The lessor in this case was not a
party to the bankrupt proceeding; and in
Smith v. Mason we
held expressly that
"strangers to the proceedings in bankruptcy, not served with
process, and who have not voluntarily appeared and become parties
to such litigation, cannot be compelled to come into court under a
petition for a rule to show cause."
The court is of opinion, therefore, that the district court
proceeded without jurisdiction in compelling the lessor and the
sheriff, under a rule to show cause, to deliver up possession of
the goods in question to the assignees. It results that the bill in
this case was properly filed as an original bill, and on that
account should not have been dismissed as for want of jurisdiction.
The case should have been heard and decided upon the merits.
We are then brought to the question of merits. If the
complainant had no right to hold the goods, notwithstanding
Page 83 U. S. 558
his claim to hold them, in an action at law against the assignee
he could have recovered only nominal damages; and, coming into a
court of equity for redress, and praying for an account of the
value of the goods, and for damages, if it turn out that he had no
right to withhold the goods from the possession of the assignee,
the court would be very reluctant to compel the latter to place the
value of the goods in his hands to be relitigated in another suit.
A court of equity having got possession of the case by the lessor's
own act, must proceed to decide the whole merits of the
controversy.
But we think it very clear that the complainant had a right to
the possession which he claimed. The fourteenth section of the
Bankrupt Act, it is true, vests in the assignees all the property
and estate of the bankrupt,
"although the same is then attached on mesne process as the
property of the debtor, and shall dissolve any such attachment made
within four months next preceding the commencement of such
proceedings."
But this clause evidently refers to those cases of original
process of attachment, which only become perfected liens by the
judgment which may ensue. The lessor's lien for rent on the goods
of his tenant situate on the premises is one of the strongest and
most favored in the law of Louisiana. The articles of the Civil
Code use the following language:
"The lessor has for the payment of his rent and other
obligations of the lease, a right of pledge on the movable effects
of the lessee which are found on the property leased. [
Footnote 2]"
"In the exercise of this right the lessor may seize the objects
which are the subject of it before the lessee takes them away, or
within fifteen days after they are taken away, if they continue to
be the property of the lessee, and can be identified. [
Footnote 3]"
"The right which the lessor has over the products of the estate,
and on the movables which are found on the place
Page 83 U. S. 559
leased, for his rent, is of a higher nature than mere privilege.
The latter is only enforced on the price arising from the sale of
movables to which it applies. It does not enable the creditor to
take or keep the effects themselves specially. The lessor, on the
contrary, may take the effects themselves and retain them until he
is paid. [
Footnote 4]"
When the rent accrues, or even before it is due, if the lessor
apprehends that the goods may be removed, he may have a writ of
provisional seizure to the sheriff, who, by virtue thereof, takes
possession of the goods and sells them in due course, as soon as
the court has recognized the amount of rent for which they are
liable.
Such a case is similar to that of an execution, in reference to
which it has been properly held that where the levy is made before
the commencement of proceedings in bankruptcy, the possession of
the officer cannot be disturbed by the assignee. The latter, in
such case, is only entitled to such residue as may remain in the
sheriff's hands after the debt for which the execution issued has
been satisfied. Such, we think, were the relative rights of the
parties in this case. If the assignee apprehended that the sheriff
would, by delay or negligence, waste the goods in his hands, he
could either apply to the District Court of the parish for redress
or aid in the premises, or perhaps file a bill in equity in the
Circuit or District Court of the United States.
The next question is what relief ought to be given to the
complainant?
The goods have been sold by the assignees. They cannot be
returned in specie. The supplemental bill prays that the assignees
be decreed to account to the complainant for the full value of the
property, and also such sum of money as he might be entitled to
receive by reason of the wrongful acts of the assignees in the
premises, and for further relief. The bill, it must be remembered,
was originally filed for an injunction to prevent the assignees
from disturbing the complainant in his possession of the goods.
He
Page 83 U. S. 560
was not in laches in defending his rights. He is clearly
entitled, under the circumstances of the case, to the full value of
these goods, clear of all expenses, whether the assignees realized
that value or not (limited, of course, by the amount of rent which
he is entitled to be paid), and also to all the taxable costs to
which he has been put by this litigation. As to any damages beyond
that, if he has suffered any, we think that he ought not to recover
them in this suit, as he, or the sheriff for his benefit, had an
option to bring an action of trespass for damages, instead of
resorting to a court of equity for relief. Damages are allowed, it
is true, in certain cases, as incidental to other relief; but even
if they could, in strictness, be awarded in this suit, we do not
think that the case is such as to call for the interposition of the
court in directing an inquiry as to damages.
Decree reversed with directions to the court below to
proceed in the cause in conformity with this opinion.
[
Footnote 1]
Morgan v.
Thornhill, 11 Wall. 65.
[
Footnote 2]
Article 2675.
[
Footnote 3]
Article 2679.
[
Footnote 4]
Article 3185.
