Petitioner, on March 21, 1929, recovered two judgments in a Pennsylvania state court against the King Motor Company, the larger one being for something over $6,000. March 26 following, execution was issued thereon, and on March 27 the sheriff levied under the execution upon the personal property of the motor company, indorsing his levy upon the writ. On April 15 the sheriff returned 'goods on hand not sold.' Subsequently, on various dates, a writ, an alias writ, and pluries writs of venditioni exponas were issued, upon each of which the sheriff made return to the effect that goods on hand were not sold or writ not executed for want of time. On August 21, 1930, nearly seventeen months after the levy of execution, petitioner directed the sheriff in writing that he must advertise all the goods taken under the original levy and sell them immediately. On the same day the sheriff advertised the goods for sale to be held August 29 following. August 25 a Pennsylvania state court of equity appointed a receiver for the King Motor Company and ordered a stay of the execution until final determination of the matter. August 30 an involuntary petition in bankruptcy was filed against the motor company, upon which an adjudication of bankruptcy was made on September 19. All the personal property of the motor company having been sold by the trustee, it was agreed that $1,776.17, being 50 per cent. of the proceeds of such sale, represented the value of the goods levied upon in behalf of petitioner on March 27, 1929, and included in the trustee's sale. The referee in bankruptcy, after deducting for the costs which would have been incurred if the goods had been sold by the sheriff, awarded that sum to petitioner.
The referee found, among other things, that petitioner had issued the writ of execution with an intention to collect his money, which he never relinquished or interrupted; that he had no intention to refrain from exacting payment or helping the debtor to hinder other creditors; that the indulgence was good business policy when it is considered that petitioner realized less than one-third of the amount called for by the execution. The referee concluded that petitioner had acted in good faith.
On review the federal district court, sitting in bankruptcy, held that petitioner had no valid lien against the fund and was not entitled to any distribution ahead of certain priority wage claims. The Circuit Court of Appeals affirmed, holding that petitioner had made his levy solely for the purpose of acquiring a lien without a genuine intention of proceeding promptly for the collection of his debt, that he had not met the test of good faith, and, therefore, had failed to establish his lien upon the fund. 66 F.(2d) 561.
Conceding that petitioner intended not to proceed promptly for the collection of his debt, and that his levy was made solely for the purpose of acquiring a lien, we think the conclusion drawn therefrom by the lower court-that he had failed to establish his lien upon the fund-does not follow, since it fails to give effect to the positive order of the petitioner, made nine days before the bankruptcy proceedings were begun, directing the sheriff to proceed at once under the original levy to advertise for sale and sell the goods. The effect of the intention and purpose ascribed to petitioner would be to destroy the priority of the lien obtained by his levy and thereby expose him to the risk of having his execution postponed in favor of purchasers and subsequent execution creditors. It, nevertheless, would continue good against the judgment debtor and all others not acquiring rights or liens. This, undoubtedly, is the general rule (e.g., In re Zeis (C.C.A.) 245 F. 737, 739; In re Schwab Printing Company (C.C.A.) 59 F.(2d) 726, 728; Keel v. Larkin, 72 Ala. 493, 502, 503), and is fully recognized by the Pennsylvania decisions (Kent, Santee & Co's Appeal, 87 Pa. 165, 167; McLaughlin v. McLaughlin, 85 Pa. 317, 322; Mentz v. Hamman, 5 Whart.(Pa.) 150, 153, 34 Am.Dec. 546; Fletcher's Appeal (Pa. 1860) 17 Leg.Int. 300). In Eberle v. Mayer, 1 Rawle (Pa.) 366, it was held that an order given by an execution creditor to stay proceedings on his execution until further directions was a waiver of his priority in favor of a second execution received by the sheriff during the pendency of the stay. By such order, it was said (page 369 of 1 Rawle), 'the plaintiff's execution must be considered as dormant, and constructively fraudulent as against the subsequent execution.'