Jaques & Tinsley Co. v. Carstarphen Warehouse Co.

• Decision Date: 15 July 1908
• Citation: 62 S.E. 82,131 Ga. 1
• Parties: JAQUES & TINSLEY CO. v. CARSTARPHEN WAREHOUSE CO.
• Court: Georgia Supreme Court

62 S.E. 82

131 Ga. 1

JAQUES & TINSLEY CO. v. CARSTARPHEN WAREHOUSE CO.

Supreme Court of Georgia

July 15, 1908

Syllabus by the Court.

Where A. bought from B. a stock of goods in bulk, in part payment of a debt then due by B. to A., without complying with the provisions of the act approved August 17, 1903 (Acts 1903, p 92), "to regulate the sale of stocks of goods, wares and merchandise in bulk," etc., A. was liable in garnishment to a creditor of B. for the value of the goods when the same was not more than the amount of the indebtedness sought to be collected from B., although A. had disposed of the goods before the service of the summons of garnishment.

The act above referred to is not violative of the provision of the Constitution of Georgia, which declares: "No person shall be deprived of life, liberty, or property except by due process of law." Nor of the provision of the federal Constitution, which declares: "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws."

Action by the Carstarphen Warehouse Company against the Jaques & Tinsley Company. On reserved questions. Judgment for plaintiff.

Atkinson J., dissenting in part.

C. H. Hall, Jr., for plaintiff in error.

Martin & Morecock and Jas. R. L. Smith, for defendant in error.

FISH C.J.

The Court of Appeals has certified to this court the following questions:

"(1) In a garnishment suit, instituted in a justice's court, when it appears that the garnishee had bought from the defendant in the main action a stock of goods in bulk, in part payment of a debt then due by the main debtor to the garnishee, without complying with the provisions of the act of the General Assembly approved August 17, 1903 (Acts 1903, p. 92), 'to regulate the sale of stocks of goods, wares, and merchandise in bulk,' etc. (this question assuming that act to be constitutional), and that prior to the service of the summons of garnishment the garnishee had sold the stock of goods to a third person and had none of them in his possession, is the plaintiff entitled to a judgment to the extent of the value of the goods against the garnishee, who, by answer, denies the indebtedness, but admits the facts above set out?

"(2) Is the act of the General Assembly mentioned above violative either of the following provision of the Constitution of the state of Georgia, to wit: article 1, § 1, par. 3: 'No person shall be deprived of life, liberty, or property except by due process of law'-or of the following provision of the Constitution of the United States, to wit: Section 1 of the fourteenth amendment: 'No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.'"

1. As a general rule, a garnishee's liability to a creditor of the principal defendant is conditioned upon his liability to such defendant; in other words, a creditor cannot reach by garnishment any assets which his debtor could not recover from the garnishee. Tim v. Franklin, 87 Ga. 93, 13 S.E. 259. This rule is subject, however, to an exception, where the garnishee is in possession of effects of the defendant under a transfer fraudulent as to his creditors. In such a case, though the defendant can maintain no action against the garnishee, yet a creditor of the defendant may subject the effects in the garnishee's hands by garnishment. Such exception to the general rule has in several states been created by statute, but in many jurisdictions the courts have recognized it in the absence of a statute. 14 Am. & Eng. Enc. L. 790; 20 Cyc. 663, 993; Drake on Attachment, § 458; Rood on Garnishment, § 76; 2 Shinn on Attachment & Garnishment, § 546 (m); Waples on Attachment & Garnishment, §§ 425, 426. This court has held that assets in the hands of an assignee under an assignment void as to creditors may be reached by garnishment. Dawson v. Figueiro, 16 Ga. 610; Miller v. Conklin, 17 Ga. 430, 63 Am.Dec. 248; Norton v. Cobb, 20 Ga. 44. In such a case the assignor could not have maintained an action against his assignee. Yet it was held that the assignee was liable to the assignor's creditors under process of garnishment. In the cases cited, however, the assignee was in possession of the effects and credits assigned or collections thereon when served with the summons. The ruling in Phillips v. Wesson, 16 Ga. 137, is not authority that property held under a fraudulent transfer cannot be reached by garnishment. It was there held that, under the facts alleged in the bill in equity, the remedy by garnishment was not so full and complete as a proceeding in equity, for the reasons: (1) That the time had passed for traversing the garnishee's answer; a satisfactory reason being given why this was not done at the proper time. (2) That the creditors wanted both discovery and relief. And (3) that as the proceeding was a creditor's bill, if there should be a recovery, a court of equity would be the most appropriate forum for distributing the fund amongst the creditors. It is true that in the opinion a technical difficulty as to the remedy by garnishment was suggested, which it was said could not well be overcome; but evidently the ruling was not based on such technicality, but on the grounds above stated. If the garnishee, at the time he is served with summons of garnishment, has in his hands property or effects held under a transfer fraudulent as to the defendant's creditors, then, as no title passed to the garnishee, as against the creditors, his liability to them would be the same as if he held the property and effects without such transfer.

What is the liability of a garnishee, who held goods of the defendant under a transfer void as to the creditors of the latter, but who sold them prior to the service of the summons of garnishment? In Hawes v. Mooney, 39 Conn. 37 Seymour, J., said: "The principle upon which in such cases the creditor may have redress by garnishment is that the transfer, being fraudulent, is as against a creditor void, and, although the title may pass to the fraudulent grantee as between the parties, yet, as against a creditor, the grantee may be treated as mere trustee and bailee of the goods. But in the case under consideration the goods had been sold by the defendant before he was factorized [the factorizing process there being in substance the same as our garnishment proceeding], and the defendant's counsel make the point that the proceeds of the sale are not liable to be taken by this process. But it is difficult to see any sound distinction between the goods themselves and the proceeds of their sale. If the transfer of the goods may be treated by a creditor as void, and the transferee treated as having in his hands the goods of the debtor, then, following out the rule, the proceeds of the sale of the goods are, as against a creditor, the debtor's moneys in the defendant's hands." The factorized defendant, who stands as a garnishee under our process, was held liable for the proceeds of the sale of the goods. The value of the goods fraudulently transferred is stated, and it does not appear what was the amount of the proceeds of the sale by the fraudulent transferee. The question whether the fraudulent transferee was liable for the proceeds of the sale by him, rather than for the value of the goods, was not referred to, and we take it that the court considered the value of the goods as the proceeds of the sale. In Gutterson v. Morse, 58 N.H. 529, one to whom the principal defendant had fraudulently and without consideration conveyed personalty was held liable, under a trustee process, substantially similar to our garnishment proceeding, to a creditor of the defendant for the proceeds of a sale of such personalty made by him. It does not appear that the price realized by the transferee was not the real value of the property, and it seems that the creditor only contended for the proceeds of the sale. In Risser v. Rathburn, 71 Iowa 113, 32 N.W. 198, it was held that a fraudulent vendee of goods, who had sold the same, could not be held liable for the proceeds on garnishment, in a suit against his vendor by a creditor sought to be defeated by the fraudulent transfer. It appears that there was a specific finding by the jury of the actual value of the goods at the time of the fraudulent transfer, and that the judgment of the court against the garnishee was based on such finding. In Jaseph v. Bank, 132 Ind. 39, 31 N.E. 524, it was held that a fraudulent assignee, who disposed of the personalty assigned and converted the proceeds to his own use, was liable to the creditors of the assignor in proceedings in garnishment, subsequently begun, for the value of the property so conveyed to and disposed of by him, overruling Jaseph v. Kronenberger, 120 Ind. 49, 22 N.E. 301, in which it was held that the creditor stands in the shoes of the debtor, and, unless the debtor himself could have maintained an action against the garnishee for the money or the debt, the creditor cannot hold him as garnishee. In Kohn v. Fishback, 36 Wash. 69, 78 P. 199, 104 Am.St.Rep. 941, it was held that one who purchased from a debtor a stock of goods in bulk, without complying with the provisions of the statute regulating sales of stocks of goods in bulk, became a trustee of the goods so purchased, and responsible as garnishee to the seller's creditors for the disposition thereof, and that,...