Beckham v. Carter

Philips, P. J. This case has been presented before us, both by brief and oral argument, with much zeal and ability, and we' have given the material points involved much consideration. The insistance of appellant, in the first instance, is, that after forfeiture under the chattel mortgage and possession taken by the mortgagee, he is the absolute owner of the property, and the mortgageor has no interest in the propel as the subject of further mortgage; and, therefore, the second mortgage made by bim is inoperative. This may be conceded to be the general doctrine. Robinson v. Campbell, 8 Mo. 365; Hulson v. Watter, 34 How. Pr. 385; Burdick v. Mc Vanner, 2 [602] Denio 170 ; Chapman v. Hunt, 13 N. J. Eq. 370; Jones on Chattel Mortgage, sect. 454. It may further be conceded that the second mortgage, if effective at any time, had to be so at the instant of its execution, and could not ripen into a valid security on the arising of a surplus after sale under the first mortgage. Hulson v. Watter, supra. But I apprehend there can be as little question that it was within the competency of the legislature of the state of Kansas to regulate this matter by statute. The contract having been made in the state of Kansas, respecting* property situate there, and to be executed and performed within the state, we are to look to the local laws, and the construction placed thereon by the judiciary of that state for our guidance and government. Section fifteen of said statute declares that, in the absence of any contrary stipulation, the mortgagee of personal property has both the legal title and right of possession. The subsequent sections of the statute unmistakably indicate that in the mind of the framers of the law, there might be a second mortgage placed upon such property. On what could the second mortgage take effect or rest, save the equitable interest — the equity of redemption — of the mortgageor ? This, it seems to me, is too clear to require argument or the aid of judicial construction. Brewer, C. J., we think, in Wolfley v. Rising (12 Kansas, 535), has determined that the rule of the common law, as above expressed, does not apply under the statutes of that state. He says: “We know that there are authorities holding that after condition broken the title to the mortgaged property becomes absolute in the mortgagee without redemption. But sections seventeen, eighteen and nineteen of our mortgage act, contemplate a different rule. The first two sections provide for a sale of the mortgaged property, and said section nineteen reads that ‘if, after satisfying the mortgage and costs of sale, there be any surplus remaining the same shall be paid to any subsequent mortgagee entitled thereto, or to the mortgageor or his assigns.” So that, in the action ? of replevin, which was the case pending, the mortgagee was held not to be entitled to an assessment of damages equah to the whole value of the mortgaged property, but only to the extent of the mortgagee’s debt, the surplus, belonging to the mortgageor or his assigns. It must follow that the second mortgage was valid. The interest conveyed, upon which it operated, was the equity of redemption, the surplus after satisfying the-first mortgage debt. This surplus, the statute made it the duty of the first mortgagee, to pay over to the-second mortgagee, unless it was intercepted by some prior equity or light. I am unable to comprehend how this surplus could be intercepted by the process of garnishment. It was a mere equitable interest. Tootle, Hanna. & Company were rightfully in possession of the goods-under their mortgage. They had the right to hold them until their debt'was satisfied. They held the whole legal title and the possession. No subsequent process of any court, on a junior claim, could interrupt that title or possession. On what, then, did the garnishment operate, unless it-was the equitable interest of the mortgageor ? That was all that then remained. No rule of law is more firmly rooted than that the process of garnishment is essentially a proceeding at law. It extends only to legal assets, and intercepts only legal credits. It is not equitable in its nature or procedure, and never can touch mere equitable interests and assets in the hands of the garnishee. Lackland v. Garesche, 56 Mo. 270; Atwood v. Hale et al., 17 Mo. App. 81. “Upon general principles, and in the absence of statutory interposition, an execution cannot be levied on a mere equity. The interest of a mortgageor in personalty mortgaged, is the mere equitable right of redemption, by paying the debt. * * * Hence personalty so-situated is not subject to sale under execution, and, therefore, not attachable. It follows that the mortgagee of personalty cannot be held as garnishee of the mortgageor while the property is the subject of the mortgage.” Drake on Attachment, sect. 539. [604] The attachment when served had nothing to operate or rest on. And before the equitable interest ripened, if ever, into a mere legal asset or debt, it was mortgaged to the second mortgagee by the unquestioned owner of the equity of redemption. The only possible answer for the appellant to make to this demonstration and legal conclusion is, that our statute (sect. 2520), provides that the notice of garnishment shall have the effect also to bind in the hands of the garnishee all sums owing by him to the debtor between the time of service and filing his answer. I have always understood the general rule to be, that an attachment, which is, in effect, a proceeding in rem must operate upon something in esse. It may be debitv/m in praesenti, solvendum in futuro ; but. it must exist on an obligation unconditional, and certainly to mature in the future. If the liability of the garnishee at the time of notice, depends on a contingency which may never arise or be performed, such debt is not the subject of garnishment. Drake on Attachments, sect. 551. Waples on Attachment and Garnishment, says: “It must be certain, not depending upon contingency. There must be no condition precedent, no impediment of any sort between the garnishee’s liability and the defendant’s fight to be paid, such as the attaching creditor himself cannot remove.” Sect. 97. At the time of service of notice, Tootle, Hanna & Company owed Carter nothing. Whether they ever would owe him anything depended entirely upon the future contingency as to whether the garnishees would proceed a step further in selling the goods, and if they did, whether there would be one cent of surplus remaining after satisfying their debt and costs of sale. The attaching creditors could not remove this impediment. It would require an equitable proceeding to enforce the duty of the mortgagees. In Hearne et al. v. Keith et al. (63 Mo. 84), the plaintiffs sought to garnish defendants on account of a liability incurred by them as sureties. The court held, that [605] as the liability of the principal to the surety did not attach until the surety paid the debt of the principal, and as that had not been done when the attachment issued, the judgment was not sustained. The court say: “The debt for which an attachment may issue must possess an actual character and not be merely possible, and dependent upon a contingency which may never happen. * * * In this state the statute authorizes an attachment in some instances where the debt is not due, yet the provision plainly contemplates that, to warrant the proceeding thereon, there must be an actual, subsisting debt which will become due by the mere efflux of time. When this suit was instituted there was no actual, subsisting debt existing in favor of the plaintiffs, and the consequence is that the judgment must be reversed,” etc. In Bishop v. Young (17 Wis. 51), the court say: “ Our statute says that the garnishee, from the day of service of the garnishee process, shall stand liable to the plaintiff in the attachment to the amount of property, moneys and credits in his hands, and debts due or to become due from him to the defendant. The property, moneys and credits are such as in the hands of the garnishee, which belong to the principal debtor. And the debts due or to become due evidently relate to such as the garnishee owes absolutely, though payable in the future. We have no .idea the statute intended to include in the language, a debt which might .possibly become due upon the performance of a contract by the defendant in attachment. * * * There was nothing absolutely due him, the debtor, at the time of service of garnishee process, and whether anything would ever become due depended on a contingency.” II. There is another question presented by this record which renders it, at least, questionable in my mind, whether Tootle, Hanna & Company were subject to this garnishment. The fact appears from the mortgage itself, and other matters, aside from the finding of the trial judge, that at the time the mortgage was made the goods ? were in the state of Kansas. The presumption of law would be that this condition continued until the contrary .appeared. Were then the garnishees, subject to garnishment for this property situate in another state, to be administered by them under the terms of the trust subject to the laws of that state in force when the contract was made % Such a trust, it is reasonable to assume, was within the contemplation of the parties to the contract -to be administered under the jurisdiction of the courts of that state, and be subject to their supervision. Could 'Tootle, Hanna & Company have removed that property from that jurisdiction to this ? In Lackland v. Garesche (56 Mo. supra), the court say: “These provisions demonstrate that the rights, credits and effects in the hands of the garnishee are such as are not encumbered with trusts, and such as may be delivered over or paid to the officer under the direction of the court,” etc. And in Sheedy v. Second National Bank (62 Mo. 25), the court say: “ The statute evidently contemplated that, in order to render a person liable as garnishee, the debt which he owed the defendant should be of such a character that upon being served with process he might pay the amount without being compelled to await the determination of a chancery proceeding,” etc. The goods themselves were not within this jurisdiction, and not subject to the process of the Jackson circuit court. There was absolutely nothing to attach here, except the intangible and contingent liability growing out of a surplus fund in the hands of the garnishee yet to .arise, and which might never arise. It does seem to me that this is straining the proceeding by attachment to a dangerous extreme. The case of Childs v. Digby (24 Pa. St.2 3), would :seem to warrant this proceeding, in so far as reaching property in the hands of the garnishee beyond the state is concerned. But the soundness of this ruling was questioned, and, I think overruled, in the later case of Pa. R. R. Co. v. Pennock (51 Pa. St. 244). The argument, and the reason are certainly with the later case. The supreme [607] court of Kansas, in Wheat v. R. R. Co. (4 Kansas 370), approves the decision in Pa. R. R. v. Pennock, supra. We are not called on to determine this question. We are satisfied that on the whole case the circuit court reached a proper conclusion. The other judges concurring, the judgment is affirmed.