Geilinger v. Philippi

133 U.S. 246 (1890)

GEILINGER
v.
PHILIPPI.

No. 367.

Supreme Court of United States.

Submitted January 8, 1890. Decided February 3, 1890. ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF LOUISIANA.

Mr. Edgar H. Farrar, Mr. B.F. Jonas, and Mr. Ernest B. Kruttschnitt for plaintiffs in error.

Mr. Thomas J. Semmes and Mr. Alfred Goldthwaite for defendant in error.

MR. CHIEF JUSTICE FULLER, after stating the case as above, delivered the opinion of the court.

It is conceded by counsel for the plaintiffs in error that the St. Charles Street property was, under the law of Louisiana, community property, and liable for Green's debts, and should have been surrendered to the syndic; that if Green had casually omitted it from his schedules it would have passed under the control of the syndic; and that if he had fraudulently omitted the property from his schedules and put the title in the name of his wife before the insolvency proceedings, an action would lie by the syndic to recover it. But it is contended that as Green declared the property to be his wife's, and did not intend it to go under his insolvent proceedings, and as his surrender in the form and manner as made was accepted, and the syndic set up no claim of title or possession until after the seizure by the marshal, "the property remaining thus in Green's actual possession was not in gremio legis so as to exclude his foreign creditors, who were in no manner bound, by his insolvent proceedings, from levying their writs upon it."

The Louisiana Code contains these articles (Rev. Civil Code La. 1875, 473):

"Art. 2175 [2171]. The surrender does not give the property to the creditors; it only gives them the right of selling it for their benefit and receiving the income of it, till sold.

"Art. 2178 [2174]. As the debtor preserves his ownership of the property surrendered, he may divest the creditors of their possession of the same, at any time before they have sold it, by paying the amount of his debts, with the expenses attending the cession."

Sections 1781 to 1822, inclusive, of the Revised Statutes of Louisiana constitute a system of insolvent laws. Rev. Stat. La. 1870, 353 et seq.

Section 1791 reads: "From and after such cession and acceptance, all the property of the insolvent debtor mentioned in the schedule, shall be fully vested in his creditors; and the syndic shall take possession of, and be entitled to claim and recover, all the property, and to administer and sell the same according to law."

These provisions have formed part of the laws of Louisiana for many years, and the Supreme Court of that State has repeatedly held in respect to them, that when a cessio bonorum has been accepted by the court and the creditors, and a syndic has been appointed and qualified, all the property and rights of property of the insolvent are vested in his creditors, represented by the syndic as their trustee, and pass to the creditors by the cession, whether included in his schedule or not. Dwight v. Simon, 4 La. Ann. 490; Muse v. Yarborough, 11 La. 521; West v. His Creditors, 8 Rob. La. 123; Dwight v. Smith, 9 Rob. La. 32. These cases sustain and are therefore cited to the proposition by Chief Justice Taney, delivering the opinion of this court in Bank of Tennessee v. Horn, 17 How. 157, 160. The rule relates to possession and disposition, and it has been frequently decided that the surrender of the insolvent does not divest him of the title to the property surrendered, though it strips him of the power to control, alienate or dispose of the same during the administration of his estate, and so vests it in the creditors or in the syndic for them, that it is no longer liable to seizure, attachment or execution, but is held to be administered and disposed of according to law for the benefit of the creditors. Rivas v. Hunstock, 2 Rob. La. 187; Jaquet v. His Creditors, 38 La. Ann. 863; Walling's Heirs v. Morefield, 33 La. Ann. 1174, 1177; Nimick v. Ingram, 17 La. Ann. 85.

It is therefore immaterial that title may not vest absolutely in the syndic or creditors. It is enough that the surrender operates as a transfer for the specific purpose of the disposal of the property and the distribution of the proceeds in concurso among the creditors, and is protected accordingly. Laforest v. His Creditors, 18 La. Ann. 292; West v. His Creditors, ubi supra.

In Nimick v. Ingram, 17 La. Ann. 85, Nimick & Co., judgment creditors of Ingram, issued execution against him from the Fourth District Court of New Orleans, where they had recovered their judgment, and caused property to be seized thereunder after Ingram had gone into insolvency and made a surrender in the Fifth District Court. The proceedings in Nimick & Co.'s suit were transferred to the Fifth District Court and cumulated with the insolvent proceedings. Thereupon, Ingram took out of the latter court a rule on Nimick & Co. to show cause why all further action under the writ, of fi. fa. should not be stayed and set aside, which rule was made absolute; and from that order an appeal was taken to the Supreme Court of Louisiana. There Nimick & Co. urged that by their diligence they had discovered the property seized by them, and that Ingram having fraudulently attempted to screen the property, it was legally incompetent for him to take any steps in relation to it to affect their rights; but the Supreme Court said:

"What these rights are it is not necessary for us to decide, ... being satisfied, as we are, that they can only be determined contradictorily with the mass of the insolvent's creditors, before the court seized of the concurso, as the whole proceedings in the suit pending originally in the Fourth District Court were ... properly ordered to be cumulated with the insolvent proceedings in the Fifth District Court... .

"Any informality in the proceedings, when questioned, must be by direct action. No creditor will be permitted to disregard and treat as an absolute nullity a judgment accepting a surrender made by his debtor, and granting a stay of proceedings.

"The acceptance for the creditors by the court of the ceded estate, vests in them all the rights and property of the insolvent, whether placed on the schedule or not; and the syndic may sue to recover them.

"But any creditor may show, provided it be contradictorily with the mass of the creditors, or their legal representative, that any particular object or fund is not embraced in the surrendered estate, but is subject exclusively to his individual claim. And this is the remedy of the plaintiffs, if any they have."

Nimick v. Ingram is quoted from and approved in Tua v. Carriere, 117 U.S. 201, 207.

In the case in hand, the order of the court in insolvency stayed all judicial proceedings against the insolvent and his property, and, by the acceptance of the cession, passed all the insolvent's assets to the syndic for the benefit of creditors; but its operation was not confined to the property specifically named, nor did the acceptance by the creditors have that effect. If property be omitted by mistake or with fraudulent intention, it is the duty of the syndic to have the schedule amended so as to include it, and to take possession and administer upon it, Chaffe v. Scheen, 34 La. Ann. 686; and it is the duty of the creditors to bring it to his attention, that he may do so. The evidence offered by appellants that Green did not intend to include this property because advised by counsel that it was not liable for his debts was properly excluded, as his intention could not control the operation of the law, or defeat the rights of his creditors.

The property was named in the schedule as belonging to the wife individually and therefore not claimed by the debtor; but any creditor, by inquiry, could have ascertained the circumstances and been informed of its liability under the law. There is nothing to impugn the good faith of the syndic; and if there were, he could have been compelled to act and was liable to removal. Rev. Stats. La. § 1814. Nor was there any element of estoppel involved in the action of the creditors who signed the consents to Green's discharge. The surrender which they accepted covered all the insolvent's assets, and even if they were laboring under the erroneous belief that this particular property was not subject to their claims, they would be entitled, so far as appears from this record, to share in its proceeds when the mistake was discovered. No other creditor was misled to his injury by their action, and no adjudication foreclosed their rights.

And in addition to this, as Geilinger & Blum and the bank in Winterthur recovered their judgments after the insolvency proceedings were commenced and the surrender made by Green, if they wished to attack those proceedings they should have done so, as we have seen, "contradictorily with the mass of the insolvent's creditors, before the court seized of the concurso."

It is said, however, that insolvency proceedings and laws can have no extra-territorial effect, and do not affect or control non-resident creditors, unless they voluntarily make themselves parties to the proceedings.

And it is argued that as these were foreign creditors, who had not made themselves such parties, and had sought relief through the United States Circuit Court, that placed them on different ground as to the property of an insolvent from that occupied by the creditors of his domicil. But so far as the property of an insolvent is concerned in the jurisdiction within which proceedings against him are taken, its destination is fixed (existing priorities being of course respected) by the laws of that jurisdiction. The insolvency decree is in the nature of an execution, and though it cannot by its own force attach assets in another State, it takes the assets within its own. And, while non-resident creditors are entitled to come in pari passu with domestic, if they do not do so they cannot participate in the distribution.

By the insolvency proceedings Green's assets were placed in gremio legis, and could not be seized by process from another court. Peale v. Phipps, 14 How. 368, 375; Tua v. Carriere, 117 U.S. 201, 208. What the rights of the appellants might be if they declined to prove their claims or intervene in the state court, upon the termination of the administration there, it is not necessary to consider. Williams v. Benedict, 8 How. 107, 112; Union Bank v. Jolly's Administrators, 18 How. 503; Green's Administratrix v. Creighton, 23 How. 90, 107. The conclusion that under the particular circumstances disclosed, this property formed part of the assets belonging to an administration pending when the writs of fi. fa. were issued, determines the invalidity of the seizure under them. Rio Grande Railroad Company v. Gomila, 132 U.S. 478.

The judgment of the Circuit Court released the property upon condition that the costs in the making of the seizure be paid by the syndic, and that he present and file an order from the State District Court authorizing and directing him to take possession of the property and administer the same as part of the insolvent estate of Green. This was an eminently judicious and proper order apparently effectual to secure the appropriation of the property to the claims to which it was subject, while these judgment creditors were absolved from the expense incurred in emphasizing the fact of its liability.

We see no error in the record and the judgment is therefore

Affirmed.