Hatcher v. Plumley

• Decision Date: 03 October 1917
• Parties: HATCHER v. PLUMLEY et al. (FORUM PRINTING CO. et al., Garnishees).
• Court: North Dakota Supreme Court

38 N.D. 147

164 N.W. 698

HATCHER

v.PLUMLEY et al. (FORUM PRINTING CO. et al., Garnishees).

Supreme Court of North Dakota.

Aug. 20, 1917.

Rehearing Denied Oct. 3, 1917.

Syllabus by the Court.

A garnishee's liability is measured by his responsibility and relation to the principal defendant. A plaintiff cannot, by garnishment, place himself in a superior position, as regards a recovery, than is occupied by the defendant.

Priority between garnishment liens and other liens or claims upon the same property is generally determined by priority of time. The right first acquired is, as a rule, superior.

The rights of equitable claimants to funds involved in a garnishment proceeding will be recognized and protected in such proceeding.

Appeal from District Court, Cass County; Pollock, Judge.

Action by O. M. Hatcher against H. C. Plumley and J. P. Edwards, with garnishment against the Forum Printing Company and H. F. Emery, as receiver. From a judgment ordering a dismissal of the garnishment action, plaintiff appeals. Affirmed.

Grace, J., dissenting.Fowler & Green, of Fargo, for appellant. Watson, Young & Conmy, of Fargo, for respondents.

CHRISTIANSON, J.

The defendant Plumley was the president of the Forum Printing Company, and he and the defendant Edwards owned practically all the capital stock of the corporation. On January 19, 1912, these defendants entered into a contract with the plaintiff, O. M. Hatcher, whereby they agreed to sell their stock in said corporation to said Hatcher on or before April 1, 1912, for a stipulated consideration. Thereafter, on April 2, 1912, the plaintiff brought an action to rescind said contract and to recover certain moneys paid to defendants thereunder, and to recover special damages alleged to have been sustained in connection with said transaction. On the same date, to wit, April 2, 1912, the plaintiff instituted, ancillary to said main action, a garnishment action against the Forum Printing Company as garnishee. On April 30, 1912, the Forum Printing Company served an affidavit admitting an indebtedness to the defendant Plumley in the sum of $12,902.42, and an indebtednessto the defendant Edwards in the sum of $11.10. On August 16, 1912, an action was commenced in the district court of Cass county, wherein S. S. Lyon was plaintiff and the Forum Printing Company defendant, in which action the garnishee, H. F. Emery, was duly appointed receiver of the Forum Printing Company by an order duly entered in said last-mentioned action on August 16, 1912. Thereafter the receiver published notice to creditors to present their claims, and on January 3, 1913, the plaintiff, Hatcher, filed a claim reciting the facts above stated. On January 2, 1915, a stipulation was entered into between the parties in the main action, wherein the preceding stated facts, including the facts with respect to the appointment of the receiver of the Forum Printing Company and the presentation by Hatcher of his claim to such receiver, were fully stated. The stipulation provided for entry of judgment adjudging that the contract of purchase be rescinded, and that Hatcher recover judgment against Plumley and Edwards for the moneys paid upon the purchase price, namely $4,583.33, with 7 per cent. interest from March 1, 1912. The stipulation further provided, however, that no execution should issue on such judgment against the defendants, personally, but that such judgment should be collected only out of the indebtedness of the Forum Printing Company to the defendants, and by and through the garnishment proceedings, and the claim of the plaintiff filed against the receiver. Judgment was duly entered upon and in accordance with the terms of such stipulation on July 5, 1915. On February 23, 1915, the garnishee defendant asked for and obtained leave to serve an amended disclosure. In such amended disclosure it is asserted “that at the time of the service of the garnishment summons in the above-entitled matter upon the said above garnishee, to wit, on April 2, 1912, it, the said Forum Printing Company, was indebted to the said defendant H. C. Plumley, upon open book account covering salary for services as president and general manager of said company for preceding years in the sum of $12,902.43; that except as aforesaid, the Forum Printing Company then had no property, money, or effects of the said defendant in its possession, or under its control, save that it was, at said time, further indebted to the said H. C. Plumley in the sum of $184.03 upon a claim which, by decree of the court herein, has heretofore been established as a prior lien upon the assets of the Forum Printing Company; that said debt above mentioned, to wit, $12,902.43, of the Forum Printing Company to H. C. Plumley, was on and prior to April 2, 1912, in all things subject to prior equities and claims as follows: Said sum, as a claim against Forum Printing Company, was subject to the prior payment in full of all the other creditors of the Forum Printing Company; that payment of said debt of $12,902.43 to the said H. C. Plumley by said Forum Printing Company had been by him, the said H. C. Plumley, long prior to April 2, 1912, waived, and the payment thereof postponed in favor of all other creditors of said Forum Printing Company; that such waiver and agreement for postponement of the payment thereof, thus made by the said H. C. Plumley, had been acted upon by creditors of the Forum Printing Company in the matter of their granting credit, making loans, and renewals, and extensions, all of which things were done long prior to April 2, 1912; that the Forum Printing Company, prior to April 2, 1912, received credit, obtained loans of money, and obtained extensions of previously negotiated loans, and notes, upon the basis and strength of the said H. C. Plumley's waiver of his said claim of $12,902.43, and upon the strength and basis of said last-mentioned claim being at all times held and taken to be subordinate and inferior to, and subject to, the payment of all other creditors of the said Forum Printing Company, in full, before any payment whatever should be made or should become liable to be made by the Forum Printing Company in favor of the said H. C. Plumley; and that the said H. C. Plumley, long prior to April 2, 1912, consented and agreed, to and with the other creditors of the said Forum Printing Company, that as consideration for the making of loans, the granting of credit, and the extension of maturing loans of creditors of the Forum Printing Company, he, the said H. C. Plumley, would and did waive and agree that he would never assert said claim of $12,902.43, unless, or until, all other creditors of said Forum Printing Company were first paid in full their claims against said company; that the interest, if any, of the plaintiff, O. M. Hatcher, in and to said claim of $12,902.43 against the Forum Printing Company is subject and subordinate to the claims of all other creditors of said Forum Printing Company which were in existence on or prior to April 2, 1912.”

The receiver, H. F. Emery, who was joined as a party, adopted the disclosure of the Forum Printing Company as his answer in the garnishment action, and that action was tried upon the issue joined by plaintiff on such disclosure.

The undisputed evidence showed that Plumley and Edwards were and had been owners of practically all the capital stock of the Forum Printing Company; that Plumley, up to May 4, 1912, was the president of the company; that the Forum Printing Company was indebted to Plumley in the sum of $12,902.42; that Plumley at various times prior to April 2, 1912, had negotiations with various large creditors of the company and induced them to extend credit to such company upon his promise that his (Plumley's) claim would be secondary and subordinate to the claims of the other creditors of the company; that such promises were made to and relied upon by the following specific creditors, whose claims were as follows:

+-------------------------------------------+
                ¦Wright, Barrett & Stillwell Co. ¦$ 6,671.49¦
                +--------------------------------+----------¦
                ¦A. E. Bestie                    ¦3,205.94  ¦
                +--------------------------------+----------¦
                ¦First National Bank of Fargo    ¦5,790.88  ¦
                +--------------------------------+----------¦
                ¦Merchants National Bank of Fargo¦13,512.55 ¦

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