Mechanics & Traders Ins. Co. v. McVay

• Decision Date: 08 March 1920
• Docket Number: 231
• Citation: 219 S.W. 34,142 Ark. 522
• Parties: MECHANICS & TRADERS INS. CO. v. MCVAY
• Court: Arkansas Supreme Court

219 S.W. 34

142 Ark. 522

MECHANICS & TRADERS INS. CO. v. MCVAY

No. 231

Supreme Court of Arkansas

March 8, 1920

Appeal from Sebastian Circuit Court, Fort Smith District; Paul Little, Judge; affirmed.

Judgment affirmed.

Jas. B McDonough, for appellant.

1. The judgment of the Tennessee court is valid and binding and the satisfaction of it constitutes a complete defense to appellee's cause of action. 198 U.S. 215; 241 Id. 518; 174 Id. 710; 200 Id. 176; 240 Id. 620; Shinn on Att. & Garn., § 707; 12 Lea (Tenn.), 398; 90 Tenn. 161; 12 Tenn. (4 Yerg.), 461.

2. Appellee can not now rely upon the insufficiency of the garnishment service in the Tennessee court. Supra. See also 45 Ark. 37; 80 Id. 543; 33 Id. 465; 96 U.S 258; 122 Tenn. 248; 100 Id. 366. The courts of Tennessee, as well as other courts, have upheld garnishment suits of this nature regardless of the question as to the situs of the debt. 3 L. R. A. (N. S.) 608 and note; 91 Tenn 395; 120 Id. 302; 243 U.S. 269; 123 Tenn. 428. See also 120 Tenn. 302; 14 Am. & Eng. Enc. of L. 801.

3. The Tennessee judgment being valid, defendant is fully protected by the full faith and credit clause of the U. S. Constitution. Const. U.S. § 1, art. 4; 222 F. 453; 174 U.S. 710; 241 Id. 518; 198 Id. 215; 240 Id. 620; 132 Mass. 432; 238 F. 285; 242 U.S. 357; 243 Id. 271; 189 S.W. 784; 84 S.E. 482; 113 Ark. 467.

4. The adjudication in bankruptcy of Flynn & Ritter did not affect or destroy the garnishment lien of the Austin Clothing Company in the Tennessee court. Bankruptcy Act, §§ 67, 67-c, 67-f, of Fed. Stat. Anno., pp. 1112-1130; 178 F. 187; 194 Id. 793; 115 Id. 906; 47 S.W. 1087; 59 So. Rep. 6; 94 F. 476; 1 Fed. Stat. Anno., p. 1113; 185 F. 931; 108 F. 529; 102 Miss 160. An adjudication in bankruptcy does not invalidate the issuance of an attachment. 126 A.D. 48; 111 N.Y. 102; 38 S.E. 918; 187 U.S. 165; Collier on Bankruptcy, 1087 and notes; 125 F. 154.

5. The claim is barred by limitation in the policy of insurance. 71 N.W. 172; 21 Id. 781.

Daily & Woods, for appellee.

1. The garnishment was valid and a lien on the funds in the hands of the insurance company. 229 U.S. 511; 30 Am. B. R. 619; 140 P. 665; 32 Am. B. R. 327; 151 N.W. 752; 34 Am. B. R. 678; 107 Tenn. 148; 64 S.W. 48. The judgment was rendered within four months, and the insurance company's answer as garnishee was filed within the four months period, and the lien commenced when the insurance company filed its answer as garnishee. It admitted its indebtedness. There was no waiver by the letters written by the agent of Flynn & Ritter.

2. No reply to the set-off was necessary, as it was waived. 69 Ark. 114.

3. The suit is not barred by any provision in the policy. Kirby & Castle's Digest, § 5108.

OPINION

WOOD, J.

Appellant is a fire insurance company of New Orleans, Louisiana. Flynn & Ritter were general merchants, doing business at Monroe, Oklahoma. They had a policy of insurance on their stock of merchandise with appellant. The merchandise was destroyed by fire March 26, 1917. Flynn & Ritter became bankrupt. The appellee, as trustee of their estate in bankruptcy, brought this action against the appellant to recover the sum of $ 1,000 alleged to be due Flynn & Ritter on their policy.

After the destruction of the stock of merchandise of Flynn & Ritter the loss was adjusted at the sum of $ 1,000, as the amount which the appellant, by compromise agreement, was willing to pay.

The general agents of appellant in a letter to the attorney of Flynn & Ritter, on September 22, 1917, stated that they were ready to make payment of the above sum as soon as a suit of Austin Clothing Company against Flynn & Ritter, pending in the justice court in Memphis, Tennessee, was dismissed and a certificate given to appellant to that effect. The suit referred to in the letter was a suit brought by the Austin Clothing Company, a corporation, against Flynn & Ritter, in which appellant had been garnisheed. The writ of garnishment against appellant in that suit was directed to and ran in the name of S. M. Williamson & Company, agents, and not in the name of appellant. The appellant, though a Louisiana corporation, was duly authorized to do business in Tennessee.

The return of the sheriff on the writ was as follows: "Garnisheed S. M. Williamson & Company, agents for the Mechanics & Traders Insurance Company of New Orleans, Louisiana." No personal service was had on Flynn or Ritter and no property of theirs seized.

The attorney of Flynn & Ritter, on October 10, 1917, wrote the general agent of appellant to the effect that the justice court of Memphis did not have jurisdiction over the parties or the subject-matter, giving as a reason that "the situs of the debt was such that the Austin Clothing Company could not legally attach funds in the hands of the insurance company owing Flynn & Ritter."

Appellant, in November, 1917, answered the garnishment issued in the suit of Austin Clothing Company against Flynn & Ritter and set up that under a fire policy, issued by it in favor of Flynn & Ritter, it owed the latter the sum of $ 1,000.

After the filing of this answer, judgment was rendered by the justice on the 15th of December, 1917, in favor of the Austin Clothing Company against Flynn & Ritter in the sum of $ 440 and against the appellant in the sum of $ 462.78. Appellant paid the amount of the judgment against it March 20, 1918.

Flynn & Ritter were adjudged bankrupts January 15, 1918, and the appellee as trustee, as above stated, instituted this action.

Appellant answered and admitted that it owed Flynn & Ritter the sum of $ 527.22 and alleged that it had tendered that sum to the appellee. It further set up the proceedings above mentioned and the judgment rendered against it by the justice court of Tennessee as a defense to any further judgment in the present action. It alleged that the lien of that judgment was binding from the 11th of April, 1917, the date upon which the writ of garnishment was served upon appellant's agent.

The above are the material facts upon which judgment was rendered in favor of the appellee for the sum of $ 1,000 with interest, from which is this appeal.

First. The appellant contends that the judgment of the justice court of Tennessee against it was valid and binding, and that the satisfaction of such judgment by it constitutes a complete defense to the appellee's cause of action.

The appellant is correct in his contention that the legality of the judgment of the Tennessee court is governed by the laws of Tennessee, and that according to those laws the judgment rendered against it by the justice court in Tennessee is valid. See Harris v. Balk, 198 U.S. 215, 49 L.Ed. 1023, 25 S.Ct. 625; B. & O. R. R. Co. v. Hostetter, 240 U.S. 620, 60 L.Ed. 829, 36 S.Ct. 475; N. Y. Life Ins. Co. v. Dunlevy, 241 U.S. 518, 60 L.Ed. 1140, 36 S.Ct. 613; L. & N. R. R. Co. v. Deer, 200 U.S. 176, 50 L.Ed. 426, 26 S.Ct. 207; Shinn on Attachment & Garnishment, § 707.

It does not follow, however, that because the judgment of the Tennessee court was valid and binding at the time it was rendered, the satisfaction of that judgment is a defense to the present action.

In Kittrell v. Perry Lumber Co., 107 Tenn. 148, 64 S.W. 48, it is held (quoting syllabus) that: "Notice of garnishment is insufficient to require appearance and answer by a corporation which is addressed to an individual, naming him as agent of the corporation, and only requiring him personally to answer as to the debtor's assets in his hands."

The writ of garnishment in that case was in all essential particulars the same as in the case at bar. The service of the writ upon S. M. Williamson & Company, agents of appellant, did not give the justice court of Tennessee jurisdiction over appellant according to the above decision, and if that were all, the judgment of the Tennessee court against appellant in the garnishment proceeding would have been void. But the proof shows that appellant in November, 1917, filed an answer to the garnishment. It was this appearance and answer of the garnishee which operated as a waiver of the defects in the summons and gave the Tennessee court jurisdiction over the appellant. Moody & Bigelow v. Alter-Winston & Co., 59 Tenn. 142, 12 Heiskell 142; see also Hearn v. Gruther, 4 Yer. 461, 474; Railway v. Brooks, 90 Tenn. 161.

The lien of the judgment in the garnishment proceeding must, therefore, date from the time of the appearance of the appellant in that proceeding, and not from the date of service of summons upon its agent.

Flynn & Ritter filed their petition in bankruptcy and were adjudicated as bankrupts on January 15, 1918. The lien of the judgment in the garnishment proceeding must run from some time in November, 1917, when appellant first appeared in that proceeding. The time when that lien was obtained was less than two and a half months prior to the adjudication in bankruptcy.

Section 67-f of the Bankruptcy Act, among other things, declares that: "All * * * liens, obtained through legal proceedings against a person who is insolvent at any time within four months prior to the filing of a petition in bankruptcy against him shall be deemed null and void in case he is adjudged a bankrupt and the property affected by the levy, judgment, attachment or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt."

In Chicago, B. & Q. R. R. Co. v. Hall, 229 U.S. 511, 57 L.Ed. 1306, 33 S.Ct. 885, the Supreme Court of the United States, construing this section, said "Barring exceptional cases which are especially provided for, the policy of the act is to fix a four-months period in which a creditor can not obtain an advantage nor a lien against...