
    Arnold Russell, William M. Winborn and Mark R. Gower, Copartners under the name of Arnold Russell & Co., Use of Harry W. R. Hill, vs. John H. Cheatham.
    In construing the act of congress to establish a uniform system of bankruptcy throughout the United States, the state courts must be governed by the construction given to it by the courts of the United States.
    The district courts have jurisdiction over liens and incumbrances on the property of bankrupts ; and the assignees of bankrupts may in those courts compel a foreclosure of mortgages and the enforcement of liens generally, with a view to the ascertainment and proper distribution of the bankrupt’s assets.
    The act of congress does not necessarily withdraw from the state courts their jurisdiction over the subject of liens; the interests of general creditors, who claim under the act, must be involved, or the district courts will not interfere.
    The liens of judgments recovered in the state courts are protected by the second section of the act of congress, to establish a uniform system of bankruptcy throughout the United States, and the state courts may proceed to enforce the liens according to the state laws, unless the protection of the rights of creditors, who have presented their claims against the estate of the bankrupt, may render the interposition of the district court necessary; in which case the district courts may, through the instrumentality of an injunction on the person, suspend the action of the state courts, and withdraw the subject of controversy for adjudication and settlement; and the decision of the federal court in such cases will be final.
    In May, 1842, It. & Co. recovered a judgment against C.; an execution which issued thereon was, on the 20th day of April, 1843, levied on sundry slaves as thq property of C.; C. denied the ownership of the slaves, but claimed to hold them as executor for S. W. C., and filed an affidavit to that effect. An issue was made up to try the right of property at the May term of the Madison circuit court in the year 1843, and when it was about to come on for trial at the November term, 1843, C., as executor of S. W. C., moved to quash the execution, because on the 21st day of November, 1842, C. had filed his petition praying the benefit of the bankrupt act, which was granted on the 23d day of February, 1843, and be was finally discharged on the 29th day of May, 1843; the circuit court sustained the motion, and quashed the execution. Held, that the judgment being recovered before the petition to be declared a bankrupt was filed, was a lien on the property of the defendant; and as the execution was not levied on property surrendered by the bankrupt, nor any steps taken by his assignee to have the matter withdrawn from the state court, by asserting a right to interfere with the lien on behalf of creditors, the motion to quash the execution should have been overruled.
    ERROR from the circuit court of Madison county; Hon. John H. Rollins, judge.
    The record in this case discloses the following facts, to wit: That on the 6th day of May, 1842, Arnold Russell, William Winborn and Mark R. Gower, copartners, doing business under the name and firm of Arnold Russell & Co., for the use of Harry R. W. Hill, recovered a judgment in the circuit court of Madison county, against John H. Cheatham, for $>1178 30 damages, and $14 37J costs; upon which judgment an execution was issued on the 18th day of March, 1843, which was levied on the 20th day of April, 1843, on sundry slaves, as the property of John H. Cheatham. The slaves were claimed by John H. Cheatham, as executor of Sarah W. Cheatham, and an affidavit was filed to that effect. At the May term, 1843, an issue was made to try the right of property in the slaves. On the 20th day of November, 1843, when the issue was about to be called, the claimant moved the court to quash the execution, which had been levied upon the slaves, and also the levy made and all proceedings had under it, because John H. Cheatham, on the 21st day of November, 1842, filed bis petition in the district court of the United States for the southern district of Mississippi, praying to be discharged from all his debts, and was on the 23d day of February, 1843, duly declared a bankrupt; and on the 29th day of May, 1843, he was fully and entirely discharged from all his debts. The court sustained the motion, and ordered the execution to be quashed, to which the plaintiffs excepted, and removed the case to this court by writ of error.
    Lawson, for plaintiffs in error.
    The question presented by the record is, whether the cause stated in the motion to set aside the execution, is sufficient in law to sustain the judgment rendered by the circuit court 1 That cause is, that the execution was issued and levied after the defendant in execution, John H. Cheatham, had been declared a bankrupt, but before his final discharge.
    The record does not show that any evidence was introduced to prove the facts as stated in the motion. If the cause assigned in the motion for setting aside the execution were sufficient in law to support the judgment, yet it could not be sustained without proof. But let us presume the facts to be fully sustained by evidence, introduced upon the hearing of the motion, then the question arises, whether a bona fide judgment creditor of a bankrupt, before his petition filed, but not enforced, has a lien upon the property of the -bankrupt, which is preserved by the proviso in the second section of the bankrupt law, which protects “ any liens, mortgages or other securities on real or personal property, which may be valid by the laws of the states respectively.” The judgment is a lien by our state laws from the time of its rendition. The plaintiff in the present case had a lien on the properly of the defendant, as appears from the date of the judgment recited in the execution, nearly twelve months before the defendant was declared a bankrupt, and this lien being preserved by the bankrupt act, could not be divested by the assignee of the bankrupt of any other person becoming the legal owner of the property. That the judgment lien is preserved has been fully settled in the case of Savagés Assignee v. Best, 3 How. S. C. R. 111. This case went up from Kentucky. By the laws of that state, an execution is a lien from the time it is delivered -to the sheriff. The judgment is no lien. An execution was delivered to the sheriff before the act of bankruptcy, but levied after and before the petition filed. The property being land, was sold by the execution creditor, and the purchaser went into possession. An action was brought by the assignee to recover the land against Best, the purchaser at the sheriff’s sale. The supreme court held that Best had the title by virtue of the execution lien and sheriff’s sale thereon. If the execution lien be preserved in Kentucky, so must the judg-merit lien be in the case before the court. If the judgment lien be protected, the circuit court must have sustained the motion upon the supposition that the lien could be enforced only through the sanction of the bankrupt court. It was at one time supposed that the case of Ex parte Christy, 3 How. S. C. R. 292, favored this supposition, but when examined it contains the opposite doctrine, (see p. 318.) In that case the court says, “ where suits are pending in the state courts, and there is nothing in them which requires the equitable interference of the district court to prevent any mischief or wrong to other creditors under the bankruptcy, or any waste or misapplication of the funds, the parties may well be permitted to proceed in such suits, and consummate them by proper decrees and judgments, especially where there is no suggestion of any fraud or injustice on the part of the plaintiffs in those suits.” Again in the case of Norton’s Assignee, Ibid. 426, the court fully settles the question, that the liens within the proviso of the second section of the bankrupt act, may be enforced by the state courts. There does not appear then any sufficient cause in law for the judgment which was rendered.
    The record shows that after issue joined to try the right of property, the claimant of the property, John H. Cheatham, as executor, and not as defendant in the execution which had been levied, moved to set aside the execution. He was a stranger to the original execution in his representative capacity, and had no right by law to take advantage of any irregularity in the same.
    
      William Yerger, on the same side.
    In addition to the points and authorities referred to by Mr. Lawson, I will refer the court to the opinion of this court in the case of Talbot v. Milton, which decides the only point arising in this case, in favor of the plaintiff in error.
   Mr. Chief Justice Shakkey

delivered the opinion of the court.

The plaintiff had recovered judgment against the defendant in May, 1842, and on the 20th of April, 1843, an execution was levied on sundry slaves as the property of Cheatham. He denied the ownership of the slaves, but claimed to hold them as executor of Sarah W. Cheatham, and filed an affidavit to that effect. An issue was made up to try the right at May term, 1843, of the circuit court, and when it was about to come on for trial at the November term, 1843, Cheatham moved to quash the execution, because on the 21st of November, 1842, he had filed his petition praying the benefit of the bankrupt act; which was granted on the 23d of February, 1843, and he was finally discharged on the 29th of May following. His motion was sustained and the execution quashed, which is now relied on as an error for which the judgment should be reversed. The judgment was rendered prior to the petition to be declared a bankrupt, and prior to any act of bankruptcy as far as we know, and it constituted a lien on all the property Cheatham then had, and on all that he might afterwards acquire. His bankruptcy may prevent the judgment lien from attaching on property acquired after his discharge; that is not now a question. The question is, how far the prior lien will be affected by his subsequent bankruptcy, and in what mode, or before what tribunal, that lien may be enforced. This is a question of importance, and it is one which is almost daily brought to our notice in some shape or other, and the sooner it is settled the better for future litigants.

The second section of the bankrupt act contains an express provision that nothing therein shall be construed to annul, destroy, or impair any lawful rights of married women or minors, or any liens, mortgages, or other securities on property real or personal, which may be valid by the laws of the states respectively, and which may not be inconsistent with the provisions of the second and fifth sections of the act. We of course have no power to construe the act of congress so as to produce collision between the federal and state tribunals, but we must adopt the construction which is given to it by the courts of the United States. The question now before us has received the consideration of the supreme court in several instances, and the decisions seem to settle beyond dispute, not only the validity of liens which have accrued under state laws, but the manner by which they are to be protected. In the case of Savage’s Assignee v. Best, 3 How. S. C. Rep. 111, the contest was between the assignee of the bankrupt and a purchaser at sheriff’s sale, under an execution which was delivered to the sheriff before, but not levied until after the act of bankruptcy. The plaintiff, by the laws of Kentucky, acquires a lien by the delivery of a ji. fa. to the sheriff. The lien thus acquired was declared to be valid by the supreme court, and superior to the title of the as-signee ; and not only so, but the consummation of that lien under' process from thef state court, after the act of bankruptcy, was recognized as regular; it must-have been so considered, as the purchaser at sheriff’s sale was protected in his title.

The question was again before the supreme court, and very fully considered in Christy, Ex parte, Ibid. 292, and afterwards in Norton’s Assignee v. Boyd, Ibid. 426. A summary of the points settled in these cases will show the reasons on which the jurisdiction of the federal courts rests, and the extent to which it will be exercised.

Liens under state laws are not to be annulled or defeated, but must be protected. But as the object of the law was to insure a speedy collection of the assets of the bankrupt, and a conversion of them into money to be equally distributed amongst all the creditors, the means must be commensurate to the end. The end could not be attained without giving to the federal courts jurisdiction over liens and incumbrances, as by them property which in justice should be converted into assets, may be locked up to the prejudice of general creditors. Without power to inquire into the validity and extent of such incum-brances, the extent of the assets could not be ascertained. Hence it follows that the assignee may apply to the district court to set aside an incumbrance as invalid, for if it be so, the incumbered property becomes immediately assets. He may seek by proper means to have the amount of the lien ascertained, and to that extent enforced, as the residue becomes assets. On the same principle he may redeem pledged property, and he may call in conflicting claimants to litigate their rights with a view to the general benefit of creditors. So too mortgage creditors may go into that court to have the pledged property sold and applied to the payment of their debts pro tanto, and claim out of the general fund for the residue; and to the same end conflicting claimants may have their claims settled there, and obtain the same relief that can be had in the state courts.

But it does not follow that this jurisdiction attaches in every controversy to which a bankrupt is party. The act of congress does not necessarily withdraw from the state courts their jurisdiction over the subjects of liens. The interests of general creditors, who claim under the act, must be involved, or the federal courts will not interfere. There must be a necessity for the exercise of such jurisdiction, to protect the rights of creditors who have presented their claims against the estate of the bankrupt. If there is no such necessity — if creditors are in no way concerned in the controversy, the state courts may proceed to enforce the liens according to state laws. In such cases, the exercise of the federal jurisdiction would not lead to a result useful or beneficial to the creditors ; it could bring no assets into the general fund. But when there is a necessity for the interposition of the bankrupt court, it may, through the instrumentality of an injunction on the person, suspend the action of the state courts, and withdraw the subject of controversy for adjudication and settlement, with a view to the interests of creditors; and it is believed that such adjudication would be final. So, if parties voluntarily resort to that court to have their liens adjusted and enforced, then, as the court has jurisdiction of the subject-matter and of the person, its judgments and decrees must be conclusive. The practical operation of the system may seem to some extent to produce collision between the state and federal jurisdictions. This, as far as it goes, cannot be avoided. Both courts have jurisdiction over the subject of liens, but both have not jurisdiction over the subject of bankruptcy, and from necessity the more limited must, to some extent, yield to the more comprehensive jurisdiction, when both are bound by the same laws. Congress had power to enact the bankrupt law, which implied a power to make it efficient; the end implies the means. The great principle in bankruptcy is, that creditors are entitled to have a distribution of whatever the bankrupt has, either of money, or rights convertible to money. The bankrupt court has the power to declare the distribution, but it would be exceedingly defective without the power to settle the ownership of property, for a claim is not always a right. An incumbrance may cover property worth ten times its amount. The bankrupt court cannot distribute all that creditors are entitled to receive, unless it can also ascertain what constitutes assets, and to this end it may compel the holder to enforce his lien, as it is bound in justice to distribute the residue. In doing this it acts upon a familiar principle of equity, by which mortgagees or others holding incumbrances, may be compelled to foreclose or enforce them, so that other creditors, having general liens, may be entitled to proceed against the residue. The whole sum of this jurisdiction seems to centre in this point ■— a mere power to ascertain what property the bankrupt has, preliminary to its distribution. The jurisdiction of the bankrupt court would be inadequate to carry out the bankrupt act without this power. On this view of the subject, there was no ground whatever for quashing the execution. It does not seem to have been levied on property surrendered by the bankrupt, nor were any steps taken by his assignee to have the matter withdrawn from the state court, by asserting a right to interfere with the lien on behalf of creditors. There was not even a showing that this was a schedule debt, or that the plaintiff had any .notice of the proceedings in bankruptcy. A decree without notice could not bind him. See Miller v. Anderson, in MS., and Talbot v. Milton, in MS.

Judgment reversed.  