State Bank of New Salem v. Schultze

Decision Date21 May 1924
Citation199 N.W. 138,51 N.D. 66
CourtNorth Dakota Supreme Court

Appeal from the District Court of Morton County, Berry, J.


Reversed and remanded.

Newton Dullam & Young, for appellant.

When a garnishee has contracted with the principal debtor that he will pay the money or deliver the property to some third person, then the plaintiff in garnishment cannot recover because he is placed by the garnishment in the position of the principal defendant, who himself could not recover from the person made the garnishee. Shortridge v Sturdivant, 32 N.D. 154, 155 N.W. 20; Petrie v. Wyman 35 N.D. 126, 159 N.W. 616.

"'When a garnishee has contracted with the principal debtor that he will pay the money, or deliver the property, to some third person, then the plaintiff in garnishment cannot recover because he is only placed by the garnishment in the position of the principal defendant, who could not himself recover from the person made the garnishee.' 2 Shinn, Attachm. & Garnishments, P 516; Baker v. Eglin, 11 Ore. 333, 8 P. 280. And in a case of this character the assent of the creditor to the terms of the contract made for his benefit is presumed. Rodgers v. Gosnell, 58 Mo. 589." International Harvester Co. v. Hanson, 36 N.D. 84, 161 N.W. 608; Hatcher v. Plumley, 38 N.D. 155, 164 N.W. 698; Smith v. Clark, 9 Iowa 241.

The deposit of funds to be paid upon the performance of certain conditions removes the funds from garnishment, as belonging to the defendant, after the performance of the conditions. Hearn v. Foster, 21 Tex. 401.

And it is the universal rule that a disposition in trust takes priority over subsequent garnishment. Fidelity Trust Co. v. New York Finance Co. 60 C. C. A. 189, 125 F. 275; Petrie v. Wyman, supra.

"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. Rights under garnishment are subordinate to a good, pre-existing equitable assignment, though the latter is not perfect at law. . . . Again, the right of subrogation which arises upon payment by sureties of a judgment against the principal debtor takes priority over a lien acquired by garnishment entered after the judgment." 12 R. C. L. p. 848, § 90.

Norton & Kelsch, for respondent.

"When a debtor becomes bankrupt, the creditor is put to an election to proceed against the debtor or take his share of the debtor's assets in bankruptcy. The object of the proceedings against the debtor is in the hope that he may not get a discharge or may not plead it, or may not take the necessary steps to be in a position to plead it. In either of these cases the creditor will get a judgment against the debtor, which he can satisfy out of the property of the debtor, if any acquired after the date of the bankruptcy proceedings. On the other hand if the creditor wishes to entitle himself to his share of the bankrupt's estate he must make his proof against the estate in the court which has the collection and distribution of it." 7 C. J. 349, note 74.

"It is well settled that a party may not take contradictory positions; and where he has a right to choose one of two modes of redress, and the two are so inconsistent that the assertion of one involves the negation or repudiation of the other, and his deliberate and settled choice of one, with knowledge, or means of knowledge, of such facts as would authorize a resort to each, will preclude him thereafter from going back and electing again." Roney v. Halvorsen Co. 29 N.D. 13.




The plaintiff and respondent, State Bank of New Salem, sued the defendant, Fred C. R. Schultze, in contract and garnished the Union Farmers State Bank. The respondent obtained a judgment against the defendant Schultze which became final and remains unsatisfied. The garnishee, Union Farmers State Bank, filed its affidavit denying liability. Respondent elected to take issue with the garnishee. The Farmers & Merchants State Bank of New Salem, a corporation, intervener and appellant herein, made application and was permitted to intervene, and thereafter filed its complaint in intervention to which the respondent interposed an answer. The issue thus arising on the complaint in intervention was tried to the court, which found in favor of the respondent. Judgment was thereafter entered accordingly, and the intervener now appeals therefrom to this court.

The preliminary facts essential to an understanding of the controversy are substantially as follows: In 1917 the defendant Fred Schultze was owing the respondent bank on account of a note. His father, Max Schultze, had signed with him as surety. This obligation is the one on which the judgment in the instant case is founded. At the same time Max Schultze was indebted to the appellant for a considerable sum. Max had sold some land in Montana to one Goeschel. Goeschel owed a balance of $ 2,050 on the purchase price, which, under the arrangement made, he was to pay to Fred. An action was brought in Montana to set the transfer aside. In October Goeschel tendered the money that was owing, conditioned upon a favorable termination of this suit. Max Schultze attended to the transaction as agent for Fred. With the consent of Fred, and at the direction of Max, Goeschel conditionally tendered the money to the respondent to be applied on the joint note. The respondent refused to accept the conditional tender. Thereupon on October 23rd, 1917, the money was deposited in the First National Bank of New Salem, which later became the Union Farmers State Bank, the garnishee, in accordance with the terms of a written agreement reading as follows:

"This agreement made and entered into this twenty-third day of October, 1917, by and between Max Schultze, the party of the first part and Oscar Goeschel, the party of the second part.

"Witnesseth, That whereas the party of the first part has sold unto the said party of the second part, sections numbered ten and eleven, in township one north of range twenty-eight east, Montana principal Meridian, situated in the county of Yellowstone, state of Montana, and whereas there is a balance due on said purchaser price of two thousand fifty dollars and whereas the said party of the first part is indebted and owing the Farmers & Merchants State Bank of New Salem, North Dakota, and his attorney, George W. Pierson, and is desirous of having said sum applied to indebtedness of said bank and his attorney and whereas there is a suit pending in the district court of the said county of Yellowstone, wherein the State Bank of New Salem is plaintiff, and each of the parties hereto and Minnie Schultze and Fred C. R. Schultze are defendants and that plaintiff in said cause is alleging, that the said second party is holding said land in trust for the said first party, when in truth and in fact the said second party is the owner of said described lands.

"Now therefore, It is hereby mutually stipulated and agreed by and between the parties hereto, that the said party of the second part shall make a deposit of the said two thousand fifty dollars in the First National Bank of New Salem, and that said deposit shall be paid as follows: Four hundred dollars to George W. Pierson and the remainder to the Farmers and Merchants State Bank of New Salem for the benefit of the said first party in the event it shall be determined in the above entitled action that the plaintiff therein is not entitled to the possession of said lands, or any interest therein or to any part of the purchase price thereof and in the event it is determined said lands or the purchase price can be or shall be subjected to the satisfaction of the claim of the aforesaid plaintiff, then the money aforesaid deposited in the First National Bank of New Salem, shall be payable and returned to the party of the second part.

"In witness whereof, each of the parties have hereunto set their hands in triplicate.

(Signed) Oscar Goeschel.

(Signed) Max Schultze.

It appears that although Max Schultze had no authority from Fred Schultze to do so at the time he made the contract to deposit the money for the benefit of the appellant, he was nevertheless the agent of Fred with reference to the disposition of the moneys; that subsequently Fred was apprised of the facts with reference to such deposit, and the same was ratified and approved by him, and Fred was to be reimbursed by Max.

The First National Bank accepted the deposit on the conditions set out in the agreement and agreed to pay the same according to the terms thereof, as evidenced by its indorsing upon the agreement,

"The undersigned accepts the conditions of the aforesaid agreement and the deposit in so far as it refers to it and agrees to pay said money according to the terms thereof and according to the terms of the aforesaid agreement, and a certified copy of the judgment entered in said cause, together with the certificate of the clerk, that the cause is finally determined will be its warrant and justification for making said payment.

"(Signed) First National Bank of New Salem."

and issued a cashier's check in the sum of $ 1,650 payable to the Farmers & Merchants State Bank, the appellant herein, but which it retained in its possession. Subsequently, the First National Bank was reorganized and reincorporated as the Union Farmers State Bank, the garnishee. The Union Farmers State Bank,...

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