In re Peebles. Ex parte Watkins, Assignee.

The present case does not fall within any of the exceptions mentioned in Green v. Farmer; and if the banking company has a lien at all, upon the collaterals in its hands, beyond the note for eighteen hundred dollars, it has it only by virtue of its charter and by-laws. Do these give the lien which it claims? They certainly do in terms as to the one hundred and sixty-eight shares of the company's stock, and the only question is, will this court enforce the provisions of the charter and by-laws. The decisions in this country construing the charters and by-laws of corporations on this subject of liens, are conflicting; and if there were no particular precedents imperative upon this court, there might be room for doubt what the decision in the present case ought to be. But the Supreme Court of the United States has passed upon this question in Bank of Georgetown v. Laird, 2 Wheat., 390, and Brent v. Bank of Washington, 10 Pet., 596. It has decided that "the lien of a bank under its charter, on its shares, for a debt due from their owner, is superior in equity to a lien acquired from the owner by a third person, and is not waived simply by taking other security for the debt."

In the case at bar it was contended that the taking of the collaterals expressly as security for the eighteen hundred dollar note, and of indorsers as specific security on the other notes, was a virtual waiver of the lien which the banking company might otherwise have had on the collaterals for the security of the other notes. But the law is otherwise. Two points were decided in 2 Wheat., 390, where the case was essentially the same as the present one:

1st. That the provisions of the company's charter giving a general lien upon its shares are valid; and 2d, that taking other security for the debts due to the bank does not waive the lien given by the charter, on the stock of the bank itself.

Under that, as well as under the well settled general law, I must hold, that the charter and by-laws of the Petersburg Savings & Insurance Company did create a lien upon the shares of the company owned by Peebles, beyond the note

In re Peebles. Ex parte Watkins, Assignee.

for which the collaterals deposited by Peebles were given, for the satisfaction of all the other notes due by Peebles to the bank. It is not necessary to decide, whether the by-law of this company is valid, which claims power for the directors. of the company "to prescribe which one or more of several debts due the bank shall be paid out of the stock of the indebted member." As between the company and Peebles, himself, this power may be valid; but as between the bank and third persons interested in the apportionment, I incline to the opinion that the provision of the 15th By-law of the company is ultra vires and invalid. (See Bullard v. National Eagle Bank, 18 Wall., 589.)

If this were a suit at law, it is plain, that the provisions of the charter would be held to give a lien upon the one hundred and sixty-eight shares of the capital stock of the company for all the notes of Peebles; but that there was no lien on the other collaterals, for any other notes. If it were a suit in equity, the equities of the stockholders of the banking company on one hand, and of the other creditors of Peebles on the other, being equal, and the company having the legal title, the court would have to decree for the company, as to all the collaterals.

The only question is, whether the same principles obtain in a Court of Bankruptcy. I see nothing in this case to authorize and induce a different decision in bankruptcy from such as would have to be given if the case were before the court as a court of equity. It is not alleged or pretended that there were any circumstances attending the deposit of these collaterals with the company, by Peebles, which make it a case of preference under the 35th Section of the Bankrupt Law. There is no allegation or proof that there was any contemplation of bankruptcy by Peebles at the time; and knowledge of insolvency, and intention to defraud the act, on the part of the company. Unless such circumstances are alleged and proved, I do not see how this court, as a Court of Bankruptcy, can give any other decision than that which it would be bound to give, if the case were before it on its equity or common law side.

Bank of Columbia v. Overstreet, etc.

My opinion is, that the charter of the company and its by-laws give the company a lien upon the shares of stock which it holds for the payment, first, of the debt for which they were expressly pledged; and after that, of any and all other debts of Peebles to the company due or to become due, which it held at the time of the deposit. I am also of opinion that the equities of the company in the remaining collaterals being equal to those of the creditors of Peebles, and the company having the legal title and possession, these other collaterals should follow the same course. I will give an order accordingly.

COURT OF APPEALS-KENTUCKY.

The provisions of the Bankrupt Law for the dissolution of attachments apply to attachments sued out in State courts.

BANK OF COLUMBIA v. OVERSTREET, etc.

James Garnett, H. C. Baker and T. T. Alexander, for appellant, cited Civil Code, Sections 250, 287, 288; Constitution of Kentucky, Article IV., Section 1; Judiciary Act of Congress of 1789; Cooley's Constitutional Lim., 2d ed., pp. 11, 12, 18.

John S. Van Winkle, for appellees. (Brief not in record.)

LINDSAY, J.-The Bank of Columbia instituted its suit on the 28th of March, 1868, and on the same day sued out orders of attachment against the estate of the defendants, Overstreet and Hernford. The attachments were levied on certain real estate, the property of Overstreet, on the 1st day of April, 1868. The levy was made subject to the levies of several executions, and also subject to the levy of another attachment.

On the 21st of May, 1868, judgment in personam was rendered against Overstreet for the amount of the debt sued on

Bank of Columbia v. Overstreet, etc.

(seven hundred and thirty-four dollars and eighty cents), with interest and costs; and it was further ordered that the attachment "be sustained against the defendant;" but no order was made to sell the attached property.

Subsequently VanWinkle filed his petition, asking to be made a party to the action. He set up the fact that he purchased the attached realty at a sale made under the execution levies referred to in the sheriff's return, indorsed on appellant's order of attachment, and also that Overstreet, upon his own petition, had been adjudged a bankrupt in the United States District Court for the District of Kentucky, on the 14th of May, 1868, seven days before the order sustaining the attachment was made; that he had purchased from his (Overstreet's) assignee all such right and title to the attached property as passed to said assignee under the provisions of the Bankrupt Act. He claimed that the proceedings in bankruptcy discharged appellant's attachment, and prayed to have the litigation, so far as the appellant sought to subject the attached realty to the payment of its judgment, discontinued. Upon this statement of facts the petitioner was made a party defendant. He subsequently filed amended pleadings, stating that he had sold his interest in the property to Meadows, who had all the while been a party defendant to the action. Meadows amended his answer, first exhibiting the transfers from Van Winkle, and finally the sheriff's deed executed by virtue of the execution sale, and also the deed of the assignee in bankruptcy, conveying to him all right, title, and interest that came to and vested in said assignee by virtue of the proceedings in bankruptcy. He also exhibited the order of the Bankrupt Court discharging Overstreet from the payment of all debts existing at the time he filed his petition in said court. Upon hearing, appellant's petition was dismissed as to Van Winkle and Meadows, and from this judgment this appeal is prosecuted.

The proceedings in bankruptcy were commenced in less than four months after the levy of appellant's attachment.

Bank of Columbia v. Overstreet, etc.

Section 14 of the Bankrupt Act provides that the deed of assignment shall relate back to the commencement of the proceedings in bankruptcy ;" and thereupon, by operation of law, the title to all such property and estate, both real and personal, shall vest in said assignee, although the same is then attached on mesne process, and shall dissolve any such attachment made within four months next preceding the commencement of said proceedings." It is insisted by appellant that the provisions of this section do not apply to attachments sued out in State courts. This position cannot be maintained. The Federal Congress has the undoubted power to establish "uniform laws on the subject of bankruptcy throughout the United States." All laws of Congress, enacted pursuant to the powers delegated to it by the Federal Constitution, are binding as well upon the State as the Federal courts. It may be that the State courts are not bound to administer the Federal laws, but they are bound to respect all rights acquired under them. There is nothing in the Act of Congress from which it can be inferred that an exception was to be made in favor of creditors prosecuting their claims against a bankrupt in the State courts; and if the law had been so framed as that a proceeding in bankruptcy would dissolve attachments sued out in the Federal courts and leave unaffected those sued out in the State courts, it would not have been uniform in the constitutional sense of that term. Nor are we able to perceive that the dissolution of appellant's attachment in any sense impaired the obligation of a contract or divested it of a vested right. The attachment lien was secured by legal diligence and not by contract. The right to subject the attached property to the payment of its debt vested long after the Bankrupt Act had gone into effect. It was therefore a conditional right, subject to be defeated by the debtors being thrown into bankruptcy. In this case no peculiar hardship results to appellant. Its debt was contracted after the Bankrupt Act became a law. The credit was extended to Overstreet, with notice of the fact that the remedies afforded by the State