App. Div.]

First Department, May, 1908.

day of June, 1903. This statement shows that plaintiff's account was credited with the draft for $2,500 on the 22d day of May, 1903. The plaintiff claims that he was not informed of the loss of the draft until his return from Europe, which was several weeks after the date on which he drew the check. The plaintiff drew and forwarded the check to defendants from Darlington on the 20th day of June, 1903, and shortly thereafter left that place on his way to New York, from which he sailed for Europe on the 1st day of July, 1903. The statement of the bank contradicts the testimony of the plaintiff with respect to the time the draft for $2,500 was deposited to the credit of his account. Assuming the statement of the bank to be true with respect to the date of that transaction, it is probable that the loss of the draft was discovered and communicated to the plaintiff before he drew and forwarded the check to the defendants. No one connected with the bank was called as a witness to corroborate the plaintiff with respect to the time he was informed concerning the loss of the draft. The plaintiff further testified, in substance, that prior to obtaining the order of arrest, counsel for the defendants was at Darlington, S. C., investigating the question and was informed of the facts with respect to the deposit and loss of the draft; that later on one of the defendants called on him at Winston Salem, N. C., where plaintiff resided, with respect to a settlement of defendant's claim against him on account of the check, and at this time plaintiff made a proposition to give a note secured by collateral, concerning which the defendant who called on him said he would have to consult with the other members of his firm before deciding thereon; that plaintiff agreed to call on the defendants in New York within a week or ten days thereafter, and after his arrival in New York he made an appointment to meet them at three o'clock on a Saturday afternoon, but before the hour of the appointment he was arrested. The explanation of the plaintiff is far from conclusive. On the loss of the draft it would seem that plaintiff might have obtained another, and it does not appear but that he could have obtained the money for the payment of which the draft was given. He had obtained the benefit of the credit of this check with the defendants, and if he did it in good faith, it would be reasonable to expect that he would act promptly and diligently in paying the indebtedness after learning that the check was

First Department, May, 1908.

[Vol. 126. not honored. Obtaining credit on a check which is not good is a serious matter and those who do so innocently ordinarily adjust the matter promptly or are able to satisfy the creditor of their inability so to do. The conduct of the defendants in having plaintiff arrested before meeting him to consider the question of settlement further, seems ill advised and somewhat arbitrary; but the fact that he was a non-resident and that process could not be issued on the following day justified preliminary steps to enforce their rights and the course pursued is not entirely inexcusable and does not necessarily indicate either malice or want of probable cause. They had already been to considerable expense in endeavoring to secure a settlement and a long period of time had elapsed. It seems probable that the jury rendered the verdict on account of the circumstances under which the arrest was made, rather than upon a dispassionate consideration of the evidence bearing upon the question of probable cause.

It follows that the judgment and order should be reversed, and a new trial granted, with costs to appellant to abide the event.

INGRAHAM, MCLAUGHLIN, CLARKE and SCOTT, JJ., concurred.

Judgment and order reversed, new trial ordered, costs to appellant to abide event.

ALICE FISCHER HARCOURT KING, Appellant, v. WILL J. BLOCK AMUSEMENT COMPANY, Respondent.

First Department, May 15, 1908.

Bankruptcy-warrant of attachment issued within four monthseffect of adjudication on surety.

A warrant of attachment issued within four months of the filing of a petition in bankruptcy against defendant and discharged by an undertaking for which the surety takes no security will not be vacated after the adjudication in bankruptcy so as to discharge the surety.

Subdivision f of section 67 of the Bankruptcy Act discharges the lien of an attachment, but does not vacate the writ.

APPEAL by the plaintiff, Alice Fischer Harcourt King, from an order of the Supreme Court, made at the New York Special Term

App. Div.]

First Department, May, 1908.

and entered in the office of the clerk of the county of New York on the 23d day of March, 1908, vacating a warrant of attachment.

Paul N. Turner, for the appellant.

David Gerber, for the respondent.

LAUGHLIN, J.:

The order recites that the motion was granted solely upon the ground that defendant has been adjudicated a bankrupt and discharged in bankruptcy and on account of its insolvency.

The action is to recover damages for breach of a contract and the warrant of attachment was issued on account of the non-residence of the defendant. The warrant of attachment was issued on the 5th day of April, 1907, and under it the sheriff levied on two theatrical productions and took possession of the scenery and of the box office receipts. On obtaining the warrant plaintiff gave the usual undertaking with sureties to pay damages and costs if the warrant of attachment should be vacated, or defendant should recover judgment. On the 9th day of April, 1907, the defendant, pursuant to the provisions of section 688 of the Code of Civil Procedure, gave an undertaking with the American Surety Company of New York as surety for the full amount demanded in the warrant of attachment, and obtained an order discharging the attachment "as to the whole of defendant's property." The condition of this undertaking is that defendant will pay on demand the amount of any judgment recovered against it in the action, not exceeding the sum of $8,400, and interest from the 5th day of April, 1907. The defendant then received back the property attached, and continued to use the same in its business until the twenty-second day of July thereafter, when it was duly adjudged a bankrupt on an involuntary petition in bankruptcy, filed on the 1st day of July, 1907. The surety company neither received nor now holds any property of the defendant as collateral to its undertaking. Counsel for respondent relies upon subdivision f of section 67 of the Bankruptcy Act of 1898 (30 U. S. Stat. at Large, 565), which provides as follows:

"That all levies, judgments, attachments, or other liens, obtained APP. DIV.-VOL. CXXVI.

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First Department, May, 1908.

[Vol. 126.

through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien, shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien, shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid."

Counsel for appellant contends that the effect of these provisions is merely to discharge the lien of the attachment, and not to vacate the writ. He concedes that, so far as the bankrupt is concerned, the cause of action has been discharged, but he urges that his client should be permitted to proceed to judgment against the bankrupt with a perpetual stay against the enforcement of the judgment against the bankrupt, which would protect the latter in all the rights guaranteed by the Bankruptcy Act, and at the same time would enable the plaintiff to enforce the liability of the surety on the undertaking. Authority for that course is found in many cases where the warrant of attachment was procured more than four months prior to the filing of the petition in bankruptcy. (Hill v. Harding, 130 U. S. 699; Holyoke v. Adams, 59 N. Y. 233; Metcalf v. Barker, 187 U. S. 165. See, also, Hillyer v. Le Roy, 179 N. Y. 369, and Pickert v. Eaton, 81 App. Div. 423.) In all of these cases it is to be borne in mind that unless the right of the plaintiff to continue the action to judgment were preserved he would lose the lien duly acquired by the attachment or the benefit of the security of the undertaking which took its place. The effect of the contention of the learned counsel for appellant would be to place his client in a better position by having obtained the undertaking, than if the levy had stood upon the property, for it is clear that under the provisions of the Federal statute herein quoted, if no undertaking had been given to discharge the levy, the levy would be discharged by the decree in bankruptcy and the trustee in bankruptcy would be entitled to the property. In that event the plaintiff's only right would have been to share with other gen

App. Div.]

First Department, May, 1908.

eral creditors in his proportion of the proceeds derived from the sale of the property. It is conceded that if the surety had taken security, it would be the duty of the court under subdivision f of section 67 of the Bankruptcy Act to vacate the warrant of attachment as a condition of requiring the surety to deliver over to the trustee in bankruptcy the property pledged. It is argued in behalf of respondent that since the attachment was issued within. four months of filing the petition in bankruptcy, and the lien thereof, if the undertaking had not been given, would have been discharged by the bankruptcy of the defendant, the plaintiff has not been prejudiced by the giving of the undertaking, and a construction should not be placed upon the act which would give the plaintiff the advantage of holding the surety on the undertaking when he could not have held the property under the attachment and that the proper construction of these provisions of the Bankruptcy Act is that where the lien is acquired by virtue of a judgment or warrant of attachment recovered or issued within four months of filing the petition in bankruptcy both the lien and the instrument under which it was acquired should be deemed null and void.

This is the view taken by Collier in his work on Bankruptcy. (Collier Bankr. [5th ed.] 199, 200.) Brandenburg says in effect that in such case the surety never can become liable because the entry of judgment against the principal which is the contingency upon which the liability of the surety depends is forbidden (Brandenburg Bankr. § 415), and the United States Circuit Court of Appeals, fifth circuit, so held, in effect, in Klipstein & Co. v. Allen-Miles Co. (136 Fed. Rep. 385). Our Court of Appeals, however, held under the Bankruptcy Act of 1867,* which, although different in terms on this point, is not sufficiently different in substance to warrant us in distinguishing and not following the authority, that a warrant of attachment which had been issued within four months of filing the petition in bankruptcy and had been discharged by a similar undertaking but not vacated, was unaffected, at least as to the surety, by the subsequent adjudication in bankruptcy and discharge of the bankrupt, and that where the action was prosecuted to judgment the liability of the surety became thereby fixed. (McCombs v.

* See U. S. R. S., § 5044, revising 14 U. S. Stat. at Large, 522, § 14.— [REP.