Anderson v. Ashford & Co.

• Decision Date: 13 April 1932
• Docket Number: 8746.
• Citation: 163 S.E. 741,174 Ga. 660
• Parties: ANDERSON v. ASHFORD & CO.
• Court: Georgia Supreme Court

163 S.E. 741

174 Ga. 660

ANDERSON v. ASHFORD & CO.

No. 8746.

Supreme Court of Georgia

April 13, 1932

Syllabus by the Court.

Service of garnishment summons creates inchoate lien, completed when creditor obtains valid judgment against debtor, and then dating from service of garnishment (Civ. Code 1910, § 5273).

Where adjudication in bankruptcy nullifies judgment against bankrupt, lien created by judgment creditor's prior garnishment of bankrupt's debtor falls with judgment.

Judgment on homestead waiver note held not nullified by bankruptcy, but was enforceable against fund set apart as homestead to bankrupt homesteader (Civ. Code 1910, §§ 5290, 5948).

As respects fund set apart as homestead, creditor obtaining judgment on homestead waiver note takes fund he garnished in preference to one who has obtained from bankrupt debtor after service of garnishment assignment of fund garnished (Civ. Code 1910, §§ 5290, 5948).

1. The service of a summons of garnishment in all cases operates as "a lien on the garnishee's indebtedness at the date of the service, and also all future indebtedness accruing up to the date of the answer," which said lien is inchoate or incomplete. Such inchoate lien becomes completed when the creditor obtains a valid judgment against the debtor, and such lien then becoming perfected dates from the service of the garnishment. If, by reason of adjudication in bankruptcy the judgment becomes null and void, the lien created by the garnishment is void and falls with the judgment. Where the suit is on a homestead waiver note and a homestead is set apart to the bankrupt, the judgment on the note is not discharged, but is valid and enforceable against the fund set apart as a homestead. Since the lien on the fund dates from the service of garnishment, the judgment creditor takes the fund in preference to one who has obtained from the bankrupt after the service of garnishment, an assignment of the fund garnished.

2. After mature consideration of the facts of the case as applied to previous decisions of this court, the judgment of the Court of Appeals is affirmed.

Petition for certiorari to Court of Appeals.

Action by Ashford & Co. against E. C. Anderson, in which plaintiff recovered judgment and instituted garnishment proceedings against O. L. Anderson, administrator of the estate of Emma L. Anderson, deceased. To review a judgment of the Court of Appeals (44 Ga.App. 176, 160 S.E. 804), affirming a judgment against the garnishee, the garnishee brings certiorari.

Affirmed.

Green & Michael, and John L. Green, all of Athens, and John S. Adams of Dublin, for plaintiff in error.

Wolver M. Smith and Lamar C. Rucker, both of Athens, for defendant in error.

GILBERT J.

This case came, by writ of certiorari, from the Court of Appeals. E. C. Anderson executed to Ashford & Co., a firm composed of three individuals, a promissory note which contained a complete waiver of homestead. Judgment was obtained against Anderson on the note, July 28, 1930, in a suit begun on December 16, 1929. On May 12, 1930, Anderson filed a voluntary petition in bankruptcy, in which he listed Ashford & Co. as an unsecured creditor in the amount of the note. They were duly notified of the bankruptcy, but filed no proof of the debt and in no way participated in the proceedings. Anderson listed among his assets a twelfth interest in the estate of Emma L. Anderson, valued at $400, and other assets amounting to $187, and claimed a homestead, which was duly set apart. On April 14, 1930, Anderson transferred and assigned in writing "all of his exemption property claimed *** as a bankrupt, or that may be set apart *** by order of the court of bankruptcy," to Mrs. S. F. Anderson, to whom he was indebted as much as $1,085 at the time of filing his petition in bankruptcy, and she was listed in his schedules as an unsecured creditor.

On December 17, 1929, garnishment was served on the administrator of the estate of Emma L. Anderson. To his answer of "not indebted" a traverse was filed, and the issue thereby made was submitted to the trial court with a jury, who found that the plaintiff in execution, Ashford & Co., do recover of the garnishee as administrator of Miss Emma Anderson, deceased, out of the funds in her hands belonging to E. C. Anderson, defendant in fi. fa., the sum of $400, and costs. The administrator excepted, and the judgment was affirmed by the Court of Appeals. 44 Ga.App. 176, 160 S.E. 804.

1. "A garnishment is a suit." Ahrens & Ott Co. v. Patton Co., 94 Ga. 250, 21 S.E. 523, 524. "It is against the garnishee and his creditor." Id. "While ancillary to the main suit, a garnishment is a distinct cause of action between different parties, requiring a separate and independent judgment." Dent v. Dent, 118 Ga. 853, 45 S.E. 680. "The main suit and the garnishment proceeding are separate and distinct. While it is true that the garnishment, where sued out in a pending action, is contingent on the pendency of the action as a condition precedent, yet, where the affidavit and bond have been filed, and the summons of garnishment has issued, it then becomes a proceeding entirely distinct from the main action. Its course is stayed until judgment has been had against the defendant in the main suit, and when this occurs the garnishment case becomes at once vitalized and active, and the issue, if any, raised by the answer of the garnishee and traverse by the plaintiff, is ripe for trial." Warlick v. Neal Loan & Banking Co., 120 Ga. 1070, 1071, 48 S.E. 402, 403. There can be no dispute that, when a summons of garnishment has been served as provided by law, with proper foundation, it legally binds the garnishee to hold whatever funds he may have or may owe to the defendant debtor until he has, by the judgment of the court, been released from the effect of the garnishment proceeding, or the fund has been paid into court or as directed by the court.

A garnishment proceeding, after service, is generally said to create a "lien." In this case it is denied that a lien is created. Courts and text-writers have in different ways undertaken to describe the effect created by serving a process of garnishment. It is at least an inchoate or an incomplete lien. It is not a perfected lien until there is a valid judgment in favor of the garnishing creditor against the defendant debtor. In this case the summons of garnishment was served more than four months before the defendant was adjudicated a bankrupt. Subsequently to this the debtor assigned the fund, and was duly adjudged a bankrupt. After the bankruptcy, the judgment was rendered. If the judgment was nullified and made void by the bankruptcy, the garnishment would fall with it. On the other hand, if the judgment was not discharged by bankruptcy, the inchoate lien would become perfected by the judgment and would date from the service of garnishment. If it were otherwise, that is, if the lien when perfected dated from the rendition of the judgment, the garnishment would so often fail of its purpose that it would be worthless. Such construction would be tantamount to declaring that, when a garnishment is served, the garnishee is free to dispose of the funds as he pleases until a lien is created by judgment in the main case. It would follow, by such rule, that the debtor of the garnishing creditor would be free to assign or direct the fund as he chooses, until the judgment is rendered against him. That is exactly what is contended in this case. It cannot be that our garnishment law is susceptible of that construction. If the lien fixing the priority of claim comes into existence with and as a part of the judgment against the debtor, and not with the service of garnishment, the latter would be useless. To so construe it would throw the garnishment machinery out of gear, or completely wreck it.

The office of a garnishment proceeding is to make sure that property or effects in the hands of a third party is held subject to the order of the court until conflicting claims are adjudicated. It has frequently been held that "a judgment creates no lien on choses in action belonging to the defendant." Armour Packing Co. v. Wynn, 119 Ga 683, 46 S.E. 865, and cit.; Fourth National Bank v. Swift, 160 Ga. 372, 376, 127 S.E. 729; Civ. Code 1910, § 5948. Where no garnishment has been served upon the holder of property of the bankrupt debtor, his assignment of homestead exempt property "would be superior to a subsequently rendered judgment on a homesteadwaiver note executed prior to bankruptcy." Morris Fertilizer Co. v. White, 158 Ga. 38, 122 S.E. 692. To enforce the liability of the garnishee there must be a separate judgment rendered subsequently to that against the debtor. The garnishment which brings the funds or property into court, or the judgment which creates a liability on the garnishee, does not determine who among several creditors shall receive the proceeds. The court, having obtained jurisdiction to determine the fact, orders it "paid over to the creditors of the defendant, according to the priorities now established by law." Civ. Code 1910, § 5290. The older judgment takes the fund, although such creditor may have sued out garnishment and had it served subsequently to one served by another creditor. Garrard v. Moffett, 51 Ga. 94. Or the older judgment may take the fund without having instituted garnishment, if the fund has been caught and placed within the jurisdiction of the court by another. So it was decided in Armour Packing Co. v. Wynn, supra. "The lien obtained by the service of a summons of garnishment issued on an existing judgment is created by the garnishment, and not by the judgment." And see Citizens' Bank & Trust Co. v. Pendergrass Banking Co., 164 Ga. 302, 138 S.E. 223. The Civil Code 1910, § 5273, in part...