The opinion of the court was delivered by: BARD
This matter arises on a petition by the trustee in bankruptcy seeking: (1) To enjoin A. S. Ashbridge, creditor of the bankrupt, from proceeding further in a garnishment action pending in the state court; (2) to enjoin Herman M. Watkins, debtor of the bankrupt, from paying any money to A. S. Ashbridge; and (3) to obtain an order declaring the writs of attachment sur judgment served upon Watkins to be null and void.
In February 1926 A. S. Ashbridge recovered two judgments against Louisa Boylan, the bankrupt, totalling $ 2753.37 in the Common Pleas Court of Philadelphia County. Writs of attachment execution were issued and served upon Herman M. Watkins in January 1930. The garnishee's answer to the interrogatories admitted a balance due to Louisa Boylan and stated that there was a bill in equity pending in the state courts which would determine the amount due by the garnishee to Louisa Boylan. In July 1930 a decree was filed in the equity action wherein the court found in favor of Louisa Boylan and directed that Watkins pay to her the sum of $ 7,106.22 within thirty days. This judgment was never satisfied. Ashbridge did not file additional interrogatories, nor did he take any other measures to proceed to judgment against Watkins in the garnishment proceeding.
In May 1945 Louisa Boylan filed a voluntary petition in bankruptcy and was adjudicated a bankrupt on May 28, 1945. The bankrupt listed Ashbridge as an unsecured creditor in the amount of the two 1926 judgments, and listed her judgment against Watkins as the sole substantial asset. Ashbridge filed a proof of claim as an unsecured creditor, setting forth the two judgments obtained in 1926 without mention of the garnishment action brought thereon.
Subsequently, Ashbridge returned to the garnishment proceedings in the Common Pleas Court of Philadelphia and filed a 'rule on the garnishee to show cause why additional interrogatories should not be filed by the garnishee (sic)' which was made returnable on October 11, 1945.
The trustee concedes that Ashbridge, the bankrupt's creditor, obtained a lien upon service of the writs of attachment execution, but contends that this lien was abandoned by reason of his failure for fifteen years to prosecute the attachment to judgment against Watkins. The trustee further contends the judgment was property in the hands of the bankrupt on the date the petition in bankruptcy was filed, and that this Court under the bankruptcy law has summary jurisdiction to determine the validity of the lien and the ownership of the property.
Ashbridge contends that he obtained a lien upon the debt and judgment obtained thereon owed by Watkins to the bankrupt by virtue of the service of the writs of attachment execution, that this lien was obtained more than four months prior to bankruptcy, and that the bankruptcy court, therefore, has no jurisdiction in this matter.
Jurisdiction of the Bankruptcy Court.
Before discussing the specific questions involved, a few relevant principles of Pennsylvania law should be adverted to.
Under Pennsylvania law, the lien of a writ of attachment execution upon the property of the debtor in the hands of the garnishee has its origin in the service of the writ and is acquired by service of the writ upon the garnishee or by a levy upon specific property in the garnishee's possession. North Shore R. Co. v. Pennsylvania Co., 70 Pa.Super. 405; LaBarre v. Doney, 53 Pa.Super. 435; Longwell v. Hartwell, 164 Pa. 533, 30 A. 495. Service of the writ binds any existing debt owed by the garnishee to the judgment debtor even though some legal action may be necessary to ascertain the amount of the debt, Hays v. Lycoming Fire Insurance Co., 99 Pa. 621, Welmet Building & Loan Association v. Matchica, 310 Pa. 275, 165 A. 227, and also binds all property belonging to the judgment debtor or money due her which may come into the hands of the garnishee until the time of trial on the attachment proceeding. Frazier v. Berg, 306 Pa. 317, 159 A. 541. The service of the writ of attachment has the effect of an equitable assignment of the thing attached, Reed v. Penrose's Executrix, 36 Pa. 214, Roig v. Tim, 103 Pa. 115, and the judgment creditor is placed in the same position and acquires the same rights as the judgment debtor had at the time of the service of the writ. Fessler v. Ellis, 40 Pa. 248.
It is clear, therefore, that, under the law of Pennsylvania, Ashbridge obtained a lien upon the obligation owed by Watkins to the bankrupt and upon the judgment subsequently recovered by the bankrupt when the writ of attachment execution was served upon Watkins in January 1930. But service of the writ, without more, did not transfer ownership of the debt to Ashbridge, nor did it transfer possession of the judgment to the Pennsylvania courts. On the contrary, the effect of service of the writ of attachment execution was to restrain Watkins from paying the amount of the judgment either to his judgment creditor (bankrupt) or to Ashbridge. Ege v. P. & R. Koontz, 3 Pa. 109. Watkins became a stakeholder with a duty imposed upon him to retain possession of the money and to withhold satisfaction of the bankrupt's judgment until judgment was entered in the attachment suit, and thereupon to make payment only in accordance with that judgment. Irwin v. The Pittsburgh & Connellsville R. Co., 43 Pa. 488; Bremer's Sons v. Mohn, 169 Pa. 91, 32 A. 90.
Under Section 2 and 23 of the Bankruptcy Act
the bankruptcy court has jurisdiction to determine summarily claims against, title to, and liens upon property in the actual or constructive possession of the bankruptcy court. Murphy v. John Hofman Co., 211 U.S. 562, 29 S. Ct. 154, 53 L. Ed. 327; Hebert v. Crawford, 228 U.S. 204, 33 S. Ct. 484, 57 L. Ed. 800; Autin v. Piske, 5 Cir., 24 F.2d 626, certiorari denied 277 U.S. 601, 48 S. Ct. 562, 72 L. Ed. 1009. Under this rule all property in the actual or constructive possession of the bankrupt, in which he claims an interest, passes into the custody of the bankruptcy court upon the filing of the petition in bankruptcy. Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 51 S. Ct. 270, 75 L. Ed. 645. Thus where the bankrupt is, at the time of the filing of the petition, the legal owner of a debt owed the bankrupt or a judgment obtained thereon, this intangible right is in the constructive possession of the bankruptcy court with power in that court to determine summarily the rights of the various claimants thereto. Seligson v. Whitney, 2 Cir., 79 F.2d 88.
Under Pennsylvania law the lien acquired by Ashbridge by service of writ of attachment did not divest the bankrupt of legal ownership or possession of the judgment but merely operated as an equitable assignment of the judgment and made the garnishee a stakeholder awaiting judicial determination of the garnishment proceeding. Upon filing of the petition in bankruptcy, the bankruptcy court obtained constructive possession of the judgment and has jurisdiction to determine summarily the validity of Ashbridge's claim upon the judgment. In re Marsters, 7 Cir., 101 F.2d 365; Seligson v. Whitney, supra; In re United States Graphite Co., D.C.E.D.Pa., 161 F. 583; In re Baughman, D.C.M.D.Pa., 138 F. 742.
In support of his contention that the bankruptcy court has no jurisdiction in this matter because of the lien obtained by attachment execution, respondent cites Metcalf v. Barker, 187 U.S. 165, 23 S. Ct. 67, 47 L. Ed. 122; Clarke v. Larremore, 188 U.S. 486, 23 S. Ct. 363, 47 L. Ed. 555; Straton v. New, 283 U.S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. In Clarke v. Larremore, goods and fixtures were levied upon by the sheriff and the proceeds of their sale were in his possession at the time the petition in bankruptcy was filed. It was held that the money in the hands of the sheriff was property belonging to the trustee since the lien created by the levy was obtained within four months prior to bankruptcy. In Straton v. New the creditors had obtained liens upon real property of the bankrupt and, more than four months prior to bankruptcy, had instituted a creditor's suit in the state court to marshall the liens and enforce them by sale of the real estate. The Supreme Court held that the creditor's suit was a proceeding to enforce valid liens not discharged by subsequent bankruptcy, that the state court had obtained jurisdiction over the property, and that the filing of the petition did not oust the jurisdiction of the state court. In Metcalf v. Barker, the Supreme Court held that a judgment obtained within four months of bankruptcy in enforcement of an otherwise valid pre-existing lien ...