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Equitable Credit Company Incorporated v. Miller

Supreme Court of Georgia1927-04-12No. No. 5559
164 Ga. 49

Summary

Holding. The Court of Appeals erred in holding that the defendant's bankruptcy discharge barred the plaintiff from obtaining judgment based on its retained-title claim and from proceeding against the replevy bond surety. Judgment reversed.

A seller who retained title to property through a purchase-money note attachment sought to enforce its lien even after the buyer received a bankruptcy discharge. The buyer had replevied the property, and the seller subsequently brought an attachment action. When the buyer filed for bankruptcy within four months of the attachment levy and received a discharge, he argued this eliminated the seller's claim. The court held that a bankruptcy discharge does not extinguish the rights of a creditor who holds a contractual lien or retained title to property, nor does it prevent judgment against a replevy bond surety in such circumstances.

The opinion clarifies that Section 67(f) of the federal bankruptcy statute limits liens and levies only as against the trustee in bankruptcy and those claiming through him, not as against other creditors with superior claims. The court emphasized that because the purchase-money contract included a homestead waiver and explicit retention of title, the debtor had no legal interest to protect and could not invoke bankruptcy protections to interfere with the seller's right to subject the property to satisfy the debt.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Effect of bankruptcy discharge on a creditor's retained-title lien in personal property
  • Whether Section 67(f) of the bankruptcy statute voids liens as to non-bankruptcy parties
  • Enforceability of homestead waivers in purchase-money contracts
  • Liability of a replevy bond surety after debtor's bankruptcy discharge

Procedural posture

The case comes to this court on review of a Court of Appeals decision that reversed the trial court judgment in favor of the creditor-seller.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Gilbert, J.

1. Where one sells property, taking purchase-money notes containing a retention of title, and where on default in the payment of such notes the vendor levies an attachment on the property, the vendee replevies the property, the vendor files his declaration in attachment, and the debtor is adjudicated a bankrupt within four months after the levy of the attachment, and thereafter on the trial of the case the defendant pleads his discharge in bankruptcy, such discharge does not affect the right of the vendor, holder of title, to obtain a special judgment against the property and to bring the property to sale to pay the debt.

2. “The effect of 67 f of the national bankruptcy act is not to avoid the levies and liens therein referred to against all the world, but only as against the trustee in bankruptcy and those claiming under him.” McKenney v. Cheney, 118 Ga. 387 (45 S. E. 433); Spradlin v. Kramer, 146 Ga. 396 (91 S. E. 409); McBride v. Gibbs, 148 Ga. 380 (96 S. E. 1004) ; Coker v. Utter, 152 Ga. 157 (108 S. E. 538).

3. The replevy bond takes the place of the property, and in the circumstances above stated the discharge in bankruptcy will not prevent a judgment being rendered against the surety on such bond.

4. These rulings do not conflict with Alvaton Mercantile Co. v. Caldwell, 156 Ga. 317 (119 S. E. 25). In that ease the court was not dealing with the rights of a creditor to subject property which he had sold with retention of title, or on which he held a lien by contract. The lien asserted was one arising by general judgment. The general judgment being void because of discharge in bankruptcy, the lien created thereby and the liability of the surety were also discharged.

5. Moreover, the homestead-exemption feature adds nothing to the benefit of the debtor. In the purchase-money note sued on there was a waiver of homestead, a retention of title, and also the express retention of the right to take possession of the property on default in payment of the debt. Therefore, the debt being for purchase-money, the debtor having no title and having waived homestead, he was absolutely without legal right to interfere with the subjection of the property to payment of the debt. Perdue v. Fraley, 92 Ga. 780 (19 S. E. 40) ; Johns v. Robinson, 119 Ga. 59, at page 63 (45 S. E. 727).

6. It follows that the Court of Appeals erred in reversing the judgment of the trial court. Judgment reversed.

Bankruptcy, 7 C. J. p. 185, n. 35; p. 192, n. 66, 67; p. 196, n. 83; p. 197, n. 89, 90; p. 397, n. 1 New; p. 409, n. 85.

Exemptions, 25 C. J. p. 113, n. 68.

All the Justices concur.

The only assignment of error upon the judgment of the Court of Appeals is as follows: “The Court of Appeals erred in holding and deciding that a discharge in bankruptcy granted to defendant (the same having been pleaded and sustained by proof) was a bar to and would prevent the rendition of a judgment in favor of plaintiff against defendant, with perpetual stay of execution as to him, for the purpose of permitting plaintiff to take judgment against his surety on a replevy bond given by defendant to secure possession of personal property from the levying officer where said property had been levied upon under a purchase-money attachment within four months prior to defendant’s adjudication to be a bankrupt, issued and levied in favor of plaintiff against defendant, based on a contract waiving all rights of homestead and exemption on behalf of defendant and retaining title to the property levied as security for the purchase-price thereof, said property having been claimed by and set aside to said defendant in his bankruptcy proceedings as a part of his homestead and exemption under the bankrupt law, plaintiff having failed to apply for and secure a stay of the granting to defendant of a discharge in the bankrupt court until plaintiff’s rights under the waivers of exemption in its contract could be enforced in the State courts, and the adjudication of defendant to be a bankrupt occurring after the levy of said purchase-money attachment.”

Willingham, Wright & Covington and Frank Carter, for plaintiff.

M. B. Fubanks, for defendant.