Graham v. Littleton

Smith, J. Henry Litileton brought suit in the circuit court, which, on motion, was transferred to chancery court, upon four notes, each for the sum of $300, executed by Gus Graham to the order of Mrs. Minnie Littleton, which the plaintiff alleged he had acquired, for a valuable consideration, before maturity, and in due course of business. An answer ivas filed, in which the execution of the notes Avas admitted, as AAras also the fact that they had not been paid. But the ansAver alleged that a decree had been rendered in a suit pending in the chancery 'court, in Avhicli the Farm Credit Corporation was plaintiff and Mrs. Littleton Avas the defendant, in aaíiícIi Graham had been sued as garnishee, and a judgment rendered against him as such for the sum of $1,500, that amount including the four notes here sued on and another note, AAhich Avas also for the sum of $300. The five notes AA^ere all dated November 11, 1930, and Asmre due one, íavo, three, four and five years from date, respectively. That decree recites that Mrs. Littleton made no defense and did not appear. Graham also made default, and the allegation, contained in the complaint of the plaintiff credit corporation, that he Avas indebted to Mrs. Littleton upon the five notes of $300 each, Avas not denied. Upon this state of the pleadings, a default decree was rendered against Graham for the sum of $1,500, and it Avas ordered that Mrs. Littleton be restrained from selling or othenvise disposing of the notes. This decree is pleaded in bar of the present suit. That decree aauis not entered until May 22, 1934, at AAhicli time it was entered, under a nunc pro tunc order, sis of November 22, 1932. Testimony Avas offered to the effect that these notes Avere sold and assigned by Mrs, Littleton to her son Henry on the clay after their execution, which Avas nearly Iavo years before the rendition of the decree in the suit of the Credit Corporation and about three and one-half years before the entry of the decree in that case. Henry Littleton Avas not a party to that proceeding, and the testimony in his behalf is to the effect that he had long been the OAvner of the notes before that suit Avas brought. No attempt Avas made to shoAv that Mrs. Littleton AA’as insolvent, and the question of fact tried in the court below Avas Avhether she had sold and transferred the notes to her son. The court beloAv found, upon testimony AAdiich is sharply conflicting, that she had, and avc are unable to say that this finding is contrary to the preponderance of the evidence. If Mrs. Littleton did sell these notes, the sale was made before the institution of the suit by the Credit Corporation, and Graham Avas not then indebted to her, but Avas indebted to the OAArner and holder of the notes. There Avas no service upon Mrs. Littleton of this restraining order. The circumstance AAdiich lends strong support to the finding of the chancellor is the fact that Henry Littleton pledged the first of these five notes to a bank as collateral for a loan made him, and AAdien the note matured he drew a draft on' Graham for the amount of the note, AAdiich Avas duly honored. This transaction occurred before the institution of the suit by the Credit Corporation, yet, notAAdthstanding this fact, Graham filed no ansAyer AAdien garnisheed. Had lie done so, the hrw AArould have cast upon the Credit Corporation the burden of showing that Mrs. Littleton AATas the holder and OAAnier of the notes. In the case of Knapp v. Gray, 153 Ark. 160, 239 S. W. 757, the maker of a negotiable note Avas served with a Avrit of garnishment. The garnishee filed an ansAver admitting the execution of the note and his liability thereon AAdien it matured, but he also alleged that he did not know Avho the legal owner of the note was and he' prayed that the court require a surrender or impounding of the note before rendering judgment against him. The opinion in that case recites that “a judgment was rendered against him (the maker of the note) without requiring proof that the note was non-negotiable or impounding.it.” In holding that this was error, it was there said: “This court said, in the case of Head v. Cole, 53 Ark. 523, 14 S. W. 898, that ‘where it appears that the garnishee is a debtor on commercial paper given to or held by the defendant, the court should decline to render any judgment against the garnishee unless it. first compels the delivery of the paper into court, or until the paper matures and it is made to appear that the defendant still holds it. That is to say, the court should protect (he garnishee against the danger of paying a debt twice, without destroying the essential properties of commercial paper, -which we are confident the Legislature never intended to impair by the enactment in reference to garnishments.’ ” Graham filed no answer or other pleading,. which would have afforded him this protection. “The answer of the garnishee is taken as prima facie true of the allegations it contains; and if it is not contradicted or if issue is not taken thereon, it will be presumed to be absolutely true. If, therefore, there is no denial or traverse of the allegations of the answer of the garnishee, he is entitled to be discharged.” Beasley v. Haney, 96 Ark. 568, 132 S. W. 646; Magnolia Petroleum Co. v. Wasson, 192 Ark. 554, 92 S. W. 2d 860. While the garnishee could have protected himself as did the garnishee in the case of Knapp v. Gray, supra, he cannot ignore the garnishment. He may, by failing to answer, permit the allegation against him to be taken as confessed. The answer of a garnishee is, of course, not conclusive of the facts which it recites, but it is prima facie true, and must be controverted as provided by the statute (§ 6125, Pope’s Digest). The headnote to the case of Kochtitzky & Johnson, Inc. v. Malvern Gravel Co., 195 Ark. 84, 111 S. W. 2d 478, reads as follows: “Where'no pleading is filed con-troverting the answer of (he garnishee denying that it was, at the time of the service of the writ or since, indebted to the principal debtor, it. is error to permit the introduction of evidence to vary or contradict the answer.” But, here, as has been said, the garnishee filed no answer, and there was nothing for the plaintiff Credit Corporation to controvert, as Graham, by his silence and failure to answer, confessed the allegations of the complaint against him. He took that action, or, rather, remained inactive, at his peril, and now that it has been found that Mrs. Littleton was not the owner of the notes when the judgment wa,s rendered against him, he must pay the notes to the true owner. This was the decree from which is this appeal, and it is, therefore, affirmed.