Keystone State Corp. et al. v. Union Indemnity Co. et al.

• Docket Number: March term, 1933, no. 17, and C.P. No. 2, March term, 1933, no. 20.
• Decision Date: 29 October 1941
• Citation: 43D.&C.69
• Parties: Keystone State Corp. et al. v. Union Indemnity Co. et al.
• Court: Pennsylvania District and County Court

Page 69

43 D.&C. 69

Keystone State Corp. et al. v. Union Indemnity Co. et al.

March term, 1933, no. 17, and C.P. No. 2, March term, 1933, no. 20.

The Judicial Districts of Pennsylvania.

October 29, 1941.

Bankruptcy and insolvency — Effect on preexisting liens — Writ of foreign attachment issued before appointment of ancillary receivers.

1. The appointment of receivers for a defendant corporation in the State of its domicile before writs of foreign attachment are levied, and the appointment of ancillary receivers in Pennsylvania by the United States district court and by a court of common pleas of another county after the attachments are executed, will affect neither the validity nor the lien of the attachments, as the action is primarily in rem and the court which first acquired jurisdiction of the property is entitled to retain control over it in order to effectuate its final judgment free from the interference of any other court.

Execution — Foreign attachment — Property of defendant in hands of garnishee — Municipal bonds deposited as security under agreement with municipality — Sufficiency and scope of execution — Acts of June 13, 1836, and June 16, 1836.

2. Municipal bonds are subject to attachment in the jurisdiction where they are found, but only the custodian of them and not the municipality which issued them can be summoned as garnishee.

3. Under section 44 of the Act of June 13, 1836, P.L. 568, providing for the issuance of a writ of foreign attachment against the real or personal estate of a nonresident defendant, "personal estate" includes all kinds of personal property and not merely debts due defendant, or deposits of money made by him or goods pledged or demised as provided for under section 35 of the Act of June 16, 1836, P.L. 755, relating to attachment execution; hence in foreign attachment proceedings it is not essential that there be a debt due to the defendant from the garnishee in whose possession there is property of the defendant.

4. Service of a writ of foreign attachment with summons against the garnishee is valid without a specific seizure or attachment of the goods or credits or any manual handling of the property, and the attachment binds as well any property of the defendant coming into the possession of the garnishee after the service of the attachment, provided there is property belonging to the defendant in the hands of the garnishee at the time the attachment was served on him.

5. In actions begun by foreign attachment, where it appears that the garnishee named in the writs holds municipal bonds registered in defendant's name and subject to an agreement between defendant and the municipality issuing the bonds providing that they shall remain in the possession of the garnishee as long as there are any outstanding obligations of defendant as surety for the municipality, defendant being entitled to their surrender on proper certification of the termination of its obligations, verdicts are

properly directed in favor of the plaintiffs in the amounts of their respective claims out of the bonds in the garnishee's hands, with specific provision, however, that the plaintiff whose writ was first served on the garnishee shall have satisfaction of its judgment before the other plaintiff may levy, and with the further proviso that the bonds shall be subject to the prior rights of the municipality as set forth in the deposit agreement between defendant and it, and that until those rights are finally determined execution on plaintiffs' judgments shall not be had.

Writs of foreign attachments. C.P. No. 4 of Philadelphia County.

John W. Kephart and Daniel Lowenthal of Fox, Rothschild, O'Brien & Frankel, for plaintiff Keystone State Construction Co.

Frederick H. Spotts, for plaintiff Nazareth Cement Co.

Arthur Littleton, for garnishee.

Felix & Felix, for ancillary receiver.

John A. Skelton, Jr., and Claude T. Reno, Attorney General, for Insurance Commissioner of Pennsylvania.

Albert M. Shapiro, assistant city solicitor, for City of Philadelphia.

BROWN, JR., J., October 29, 1941.

A writ of foreign attachment was issued by Keystone State Corporation on January 12, 1933, in the Court of Common Pleas No. 4, as of March Term, 1933, No. 17, and a similar writ was issued by Nazareth Cement Company on January 16, 1933, in the Court of Common Pleas No. 2, as of March Term, 1933, No. 20, in which Union Indemnity Company, a Louisiana corporation, was named as defendant and Fidelity-Philadelphia Trust Company was summoned as garnishee. Each writ was served upon garnishee the day of issuance. Interrogatories and rule to answer directed to garnishee, and the latter's answer and plea of nulla bona in each case were filed, and the issues raised thereby in the two cases were tried together. The evidence disclosed no dispute in the facts, and so verdicts were directed in favor of plaintiffs, the trial judge reserving the questions of law involved for subsequent determination. Motions for judgment n.o.v., filed in each case by garnishee and by the ancillary receiver of defendant, were argued before the court in banc, and as the two cases have in effect been combined, the essential facts and the applicable legal principles being similar, we will consider them as one.

The verdicts and findings directed by the trial judge and rendered by the jury were in favor of Keystone State Corporation in the amount of $62,518.06, and in favor of Nazareth Cement Company in the amount of $15,547.50, and that "garnishee has bonds in its hands belonging to defendant of the present value of $107,500., subject to the prior rights of the City of Philadelphia, as defined and set forth in the agreement of April 28, 1925, and also subject to the rights of other parties as they appear in this proceeding" (i.e., the joint trial of the two cases).

The Ordinance of the City of Philadelphia of July 21, 1887, Ordinances and City Solicitor's Opinions, 1887, pages 246-247, requires, inter alia, that before the bond of a surety corporation, not chartered under the laws of Pennsylvania, may be taken by the city authorities as security for the faithful performance of contracts, it shall deposit the sum of $100,000. in the city in such manner as shall be approved by the city solicitor. Pursuant thereto defendant and the city solicitor entered into a written agreement on April 28, 1925, whereby defendant deposited with garnishee that sum in bonds of the United States. Subsequently, bonds of the City of Philadelphia, due July 1, 1947-1977, of the face value of $100,000., paying interest at the rate of four and one-quarter per cent per annum, and registered in defendant's name, were substituted therefor by defendant with the approval of the city solicitor in accordance with the terms of the agreement. The latter bonds were in the possession of garnishee when the writs of foreign attachment were served upon it.

Ordinarily, in order to effect an attachment of the interest of a defendant in a mortgage, note or other chose in action, the defendant's debtor, and not the person who holds the evidence of the indebtedness, must be made the garnishee: Seip et ux. v. Laubach et al., 333 Pa. 225, 228. "But debts due by the state and federal and subordinate governments cannot be reached in this way, because the government cannot be brought into court as garnishee": King, Brown & Co. v. Hyatt, 41 Pa. 229, 233. An attachment will not lie against a municipality or one of its fiscal officers: Bulkley v. Eckert et al., 3 Pa. 368, 369; City of Erie v. Knapp, 29 Pa. 173, 174-175. See also Appeals of City of Philadelphia et al., 86 Pa. 179, 182; Fairbanks Co. v. Kirk et al., 12 Pa. Superior Ct. 210, 211. It is to be noted, however, that the City of Philadelphia, the obligor of the bonds involved in the present controversy, was represented at the trial by an assistant city solicitor, and so it had full opportunity to defend as to anything which might have affected it. The suggestion made on its behalf as to the form of the verdicts to be rendered shows that it does not question its obligation to pay the bonds, but merely desires to safeguard its rights with respect thereto under its agreement with defendant of April 28, 1925.

Municipal bonds are liable to attachment, and a proper subject of sale under such process, for the payment of claims against the person who owns them, for "they are a regular article of commerce" and are "themselves articles of trade": King, Brown & Co. v. Hyatt, supra, 233. It is true that in that case the garnishee was indebted to the defendant, the debt being payable in municipal bonds, and that in the instant one there is no such indebtedness, but that difference does not affect the nature of such bonds or the principle that they are attachable without the municipality, as obligor, being named as garnishee.

Bonds of a private corporation, like municipal bonds, are the subject of sale in open market, and are transferable with such facility that an attachment served on the obligor is not likely to arrest them, and so the general rule throughout the United States is that corporate bonds can only be attached by serving such process upon the person having possession of them. No lien is acquired by service thereof "upon the corporation owning but not holding them": Husband v. Linehan et al., 168 Ky. 304, 313. Thus "an attachment may be levied on them at the place where they actually are, although not at the place where the corporation is and they are not": 4 Cook on Corporations (8th ed.), § 765, p. 3420. "Registered coupon bonds of foreign corporations actually located within the state and within the jurisdiction of the court are property within the meaning of the statute and are liable to attachment": 10 Fletcher on Corporations, § 4758, p. 69. See also De Bearn et al. v. Prince De Bearn, 115 Md. 668, 676. There is no doubt, therefore, that municipal like corporate bonds are subject to attachment in the jurisdiction where...