A. Klipstein & Co. v. Allen-Miles Co.

• Decision Date: 11 January 1905
• Docket Number: 1,359.
• Citation: 136 F. 385
• Parties: A. KLIPSTEIN & CO. v. ALLEN-MILES CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

136 F. 385

A. KLIPSTEIN & CO. v. ALLEN-MILES CO. et al.

No. 1,359.

United States Court of Appeals, Fifth Circuit.

January 11, 1905

On the 10th day of December, 1902, the plaintiff brought suit against the Allen-Miles Company on complaint and summons, and on the 26th day of February, 1903, sued out a writ of garnishment, which was directed to and served on the Fourth National Bank of Atlanta, Ga., as the debtor of the said defendant.On said 26th day of February, 1903, the defendant gave bond under the provisions of the garnishment law of Georgia, with the Fidelity & Deposit Company of Maryland as security, by the terms of which it was provided that should the said defendant, or said Fidelity & Deposit Company security, pay to the said plaintiff'the judgment that shall be rendered on said garnishment proceedings, then the bond to be void; otherwise of full force and effect. ' On the 28th day of May, 1903, the garnishee answered an indebtedness to the Allen-Miles Company of $53,579.98.Subsequently, on the 26th day of June, 1903, a petition in involuntary bankruptcy was filed against the said defendant and on the 13th day of July, 1903, it was adjudged an involuntary bankrupt, and within 12 months thereafter was discharged as a bankrupt, as provided by the bankrupt act.This discharge was, among other things, pleaded in bar to this suit.It was agreed in writing by the parties that the account sued on in the case was a claim that was provable in bankruptcy; that at the time the garnishment was sued out and served on the garnishee the defendantAllen-Miller Company was then, and has since -hat date been, insolvent.It was also understood and agreed that no verdict and judgment in the case was to be rendered against the Allen-Miles Company unless under the law and the evidence a verdict and judgment could be rendered against said company after a final discharge in bankruptcy, the truth of which was fully admitted on the trial of the case.The court directed a verdict in favor of the defendant the Allen-Miles Company and refused to enter judgment against the Fidelity & Deposit Company, as surety aforesaid, to which action of the courtthe plaintiff excepted, and now assigns the same as error.

The following is the opinion of the court below:

PER CURIAM.

The question for determination now, without reference to the other questions in the case, will, if determined in favor of the plaintiff, necessarily control the case.That question is this: It is admitted as a fact in the case that the Allen-Miles Company has been discharged in bankruptcy, and that within four months prior to the institution of the bankruptcy proceedings against the Allen-Miles Company garnishment proceedings were taken out and garnishment served on the Fourth National Bank, which garnishment was dissolved by a bond signed as surety by the Fidelity & Deposit Company of Maryland.The verdict and judgment asked for here against the Allen-Miles Company is to be formally entered for the purpose of taking judgment finally on the bond given to dissolve the garnishment.I think the case is controlled very largely by the peculiar statute of Georgia with reference to garnishments and the dissolution of the same, contained in Civ. Code 1895, Secs. 4717-4719.The case of Garden v. Crutchfield,112 Ga. 274, 37 S.E. 368, clearly states the rule which is to be observed in taking judgment in the case of a bond given to dissolve garnishment.In the opinion in that casethe court discusses the law prior to the act of 1885, and mentions the fact that under the old law the filing of a bond relieved the garnishee from all liability with regard to service of summons and the garnishee's right to pay over the money, or turn over the property in his hands to the defendant, no answer being required of the garnishee, and as to the further state of the old law that the dissolving bond made the principal and sureties liable for whatever judgment might be recovered in the suit, without regard to the amount of money or property in the hands of the garnishee.The court then states that the purpose of the act of 1885 was to limit the liability of the defendant and sureties on the dissolving bond to an amount which would represent the money or property in the hands of the garnishee.The court then proceeds, as pertinent to the present question, and says: 'The bond under the present law is conditioned for the payment of the judgment that shall be rendered on said garnishment; and it has been held that a judgment of the garnishee is a condition precedent to a judgment on the bond given to dissolve the garnishment'(citingLinder v. Benson,78 Ga. 116;Whitehead v. Patterson,88 Ga. 748, 16 S.E. 66;Small v. Mendel,96 Ga. 532, 23 S.E. 834).'The statute makes it the duty of the garnishee to file his answer notwithstanding the garnishment has been dissolved, and the amount of the judgment upon the bond given to dissolve the garnishment is dependent upon the judgment rendered on the garnishment proceeding.When the garnishee files his answer, it becomes the duty of the court to determine whether the fund or property which the answer shows was in the hands of the garnishee at the date of the service, or which came into his hands between the date of the service and the date of his answer, would have been subject to the garnishment if it had not been dissolved; and, if so, the court should enter a judgment to that effect, stating in the judgment the amount that the garnishee would have been held liable for in the event the garnishment had not been dissolved.Upon the rendition of a judgment of this character, the court has authority to enter a judgment against the defendant and the sureties on the bond given to dissolve the garnishment. ' This clearly shows, therefore, that, where a bond has been given to dissolve a garnishment in Georgia since 1885, three judgments in effect are necessary to reach the sureties on the dissolving bond.There must first be a judgment in the main suit against the defendant; then there must be a judgment finding that the garnishee had in his hands at the time the garnishment was served, or between that time and the date of the answer funds or effects belonging to the defendant, and the amount thereof; then a judgment against the defendant and the sureties on the bond given to dissolve the garnishment.

The condition of the bond dissolving the garnishment here is that the surety shall pay 'the judgment that shall be rendered on said garnishment proceeding. ' By the bankrupt act of 1898(ActJuly 1, 1898, c. 541, Sec. 67f,30 Stat. 564(U.S.Comp.St.1901, p. 3450)) it is perfectly clear that, if no bond had been given, this garnishment proceeding and the lien obtained thereby, being within four months of the institution of the bankruptcy proceedings, would have been dissolved.So much is admitted by counsel for the plaintiff in this case.The contention is that the giving of the bond to dissolve the garnishment in effect ended the garnishment proceedings, substituted the bond therefor, and the surety on the dissolving bond became simply a surety for the Allen-Miles Company, and liable as a surety under section 16 of the bankruptcy act (30 Stat. 550(U.S.Comp.St. 1901, p. 3428)).This is an interesting question, and one not entirely free from difficulty.In my judgment, however, the fact that under the statutes of Georgia it is necessary to have a judgment fixing the liability of the garnishee is controlling against the plaintiff.In order to get a judgment finding the fund in the hands of the garnishee subject to the garnishment, it seems to me that the garnishment proceeding must be treated as a live and existing proceeding, and that it certainly is not, under section 67f of the bankruptcy act.If, as was true under the old law in Georgia, a bond had been given for whatever judgment might have been recovered in the main suit, and all that was necessary to do after such judgment in the main suit was obtained was to enter up judgment against the principal and sureties on the bond, even then an interesting question would be presented as to whether, under the practice in Georgia, a formal judgment in case of discharge in bankruptcy could be entered against the principal defendant solely for the purpose of obtaining a judgment on the bond dissolving the garnishment.But the difficulties under the present garnishment law would not then exist, and the only question would be as to the right to take a mere formal judgment in Georgia for the purpose of reaching the surety.

The fact that, notwithstanding the giving of the bond to dissolve the garnishment, the garnishee is required to answer for the purpose of fixing the amount of liability on the bond, shows that the garnishment proceeding is still alive, and is not superseded by the giving of the bond in a sense which, it seems to me, would be necessary in order to prevent section 67f of the bankruptcy act from operating on the proceeding and make the situation such that it would be controlled by section 16 of the bankruptcy act.I think, in view of this peculiar statute, it would be impossible for the plaintiff to obtain a judgment on the bond and against the surety on the bond, because of the necessity of going through the intermediate proceedings against the garnishee, without reference to the question of whether it could be done, even if this intermediate proceeding was not in the way, and fatal to the plaintiff's contention.If no judgment could be obtained on the bond, then the court would not allow a mere formal verdict and judgment here (supposing that the jury should agree that the plaintiff was entitled to recover), where it would have no effect afterward.The purpose of the verdict and judgment sought to be obtained now...