Farmers & Merchants State Bank v. Lemley

The opinion of the court was delivered by Porter, J.: At the commencement of an action for the foreclosure of a mortgage, the plaintiff filed an affidavit in garnishment alleging that the Chetopa State Bank was indebted to the defendants, and a garnishment summons was duly issued and served. The answer of the garnishee denied that it had in its possession or under its control property of the defendants, or property in which either of them had any interest. The plaintiff gave notice that it elected to take issue with the garnishee's answer, and the court heard evidence upon that issue; but while the matter of the exceptions to the answer was pending, plaintiff obtained leave to amend the petition and to make additional parties. The defendants to the original action were L. A. Lemley and J. A. Lemley, who executed the note and mortgage. The amended petition, after repeating the statements in the [16] first petition with reference to the note and mortgage, alleged that L. A. Lemley and J. A. Lemley admitted the amount of the indebtedness on the note, and alleged that they were both insolvent, and that the real estate secured by the mortgage would not sell for more than $200. The amount of the note was $1,000, and interest. It was further alleged that J. A. Lemley and Earl Lemley had been engaged in the auto livery business under the ■ name of Lemley & Son, and -that the Chetopa State Bank held a deposit in the firm name at the time the garnishment summons was issued, amounting to $1,-292.86, which was the money of the defendant, J. A. Lemley. The garnishment proceedings were pleaded, and it was alleged that after the filing of the first answer the Chetopa State Bank ' filed another, in which it was shown that the bank had money on deposit in the name of Lemley & Son. The petition alleged that Lemley & Son .owed no debts and had recently sold their business; that the deposit in the.bank is the money and property of J. A. Lemley, and not that of the firm; that if the garnishee should be discharged, plaintiff would lose the greater portion of its claim; that plaintiff had no remedy at law by which to hold the money in the bank and subject it to the payment of its claim; and that unless restrained by the order of the court, defendants and the garnishee would dispose of the money, and it would be lost to plaintiff. The amended petition asked for judgment against the makers of the note and for the foreclosure of the mortgage, and also for an order that until the final disposition of the cause the garnishee be enjoined from paying out any part of the deposit to the credit of the firm of Lemley & Son. The court was asked to require the garnishee and the defendant, Earl Lemley, to show what interest, if any, they had in the money, and that the court decree the money to be that of J. A. Lemley, and it be ordered paid into court, subject to the court’s further orders. A demurrer to the amended petition was sustained, and from this ruling the plaintiff appeals. Among the specifications of error is one that the court erred in overruling plaintiff’s exceptions to the garnishee’s answer, but this goes out of the case because the plaintiff now admits that the exceptions were not overruled or disposed of until the final judgment, and the evidence upon which the ruling was [17] made has not been brought up. There remains simply the question whether the court rightly sustained the demurrer. The judgment must be sustained for the reason that the amended petition amounts to nothing more than a creditor’s bill, which cannot be maintained until the creditor has reduced his claim to judgment. The garnishee proceedings are in the nature of an equitable attachment, and under the authority of Tennent v. Battey, 18 Kan. 324; Young v. Buck, 97 Kan. 195, 154 Pac. 1010; Knox v. Farguson, 97 Kan. 487, 155 Pac. 929, and other authorities cited in those opinions, an attachment creditor cannot maintain a creditor’s bill. In Tennent v. Battey, supra, Justice Brewer said: “A question, upon which courts have ruled so differently, cannot be perfectly plain and easy of settlement. Many considerations of weight can be urged on either side, and it is not easy for either to answer fully the arguments of the other. . . . While an attachment is doubtless a specific lien, it is a lien of very uncertain tenure.” (p. 328.) The opinion quotes the following reason for the rule as stated by Chancellor Kent: “ ‘Until the creditor has established his title he has no right to interfere, and it would lead to an unnecessary and perhaps fruitless and oppressive interruption to the exercise of the debtor’s rights. Unless he has a certain claim upon the property of the debtor, he has no concern with his frauds.’ ” (p. 327.) The opinion then proceeds— “Is not the language above quoted from Chancellor Kent, most apt? Ought not a party to have a certain claim upon the property of the defendant before he attempts to inquire into the bona fides of the defendant’s transactions, and invokes the processes of the law, and appropriates the time and labor of courts in the prosecution of such inquiry? and can a party who has simply asserted a claim (and that is all an attachment amounts to, the mere assertion by the plaintiff of a claim), be said in any just sense to have a certain claim upon the defendant’s property?” (p. 329.) The doctrine of Tennent v. Battey, supra, has been often referred to with approval by this and other courts, and, without attempting to determine where the weight of authority lies on the much vexed question, we adhere to former decisions and hold that an attachment creditor is not entitled to maintain a creditor’s bill until his claim has been placed in judgment. [18] The plaintiff insists that because the amended petition alleges that the debtors admit the plaintiff’s claim, and also alleges that they are insolvent, the rule to which we have referred does not obtain; the theory being that the law will not require the doing of a useless thing, and that since a judgment against the defendants could not be collected, the law will not require plaintiff to exhaust a useless remedy and obtain judgment before being permitted to maintain an equitable garnishment. It is true that many courts have made a distinction as to the necessity of first securing a judgment, and have held that equitable relief may be afforded to a general creditor, where it would be impossible for him to obtain a judgment, or where to secure one would be useless because the debtor is insolvent. Authorities on both sides of this proposition are cited in a note to 23 L. R. A., n. s., 88. In Ladd v. Judson, 174 Ill. 344, it was held that the only exception to the general rule is when the demand is of such an equitable character that judgment at law cannot be obtained thereon; and that to reach equitable assets, a judgment establishing complainant’s demand is an indispensable prerequisite to the maintenance of a creditor’s suit, although the fund to be reached is accessible only by the aid of a court of chancery. In a quite exhaustive note to the same •case, reported in 66 Am. St. Rep. 267, there are citations to additional authorities on both sides of the question whether or not the exhaustion of legal remedies may be excused by insolvency. The author of the note states that the cases are in almost hopeless conflict on the question, and in the same note it is said that “as to whether an attachment lien will furnish a basis for a creditor’s bill without the recovery of a judgment, the authorities are also in conflict,” and that “on the mere matter of authorities a decision well fortified could be rendered either way,” citing Tennent v. Battey, 18 Kan. 324. The principal ground upon which the doctrine of Tennent v. Battey rests, is, that the best evidence of the judgment debtor’s insolvency is that afforded by the issuance and return of an execution unsatisfied. The court has consistently adhered to the doctrine of that case, and sees no reason for departing from it now. Plaintiff seeks to rely upon certain expressions in the opinion in the recent case of Bank v. Scheutz, 103 Kan. 229, 173 Pac. 278, where the assets of a firm were reached by garnish [19] ment by the creditor of an individual partner, and the action of the court in talcing an account of the partnership affairs, in order to determine what portion of the fund belonged to the defendant partner, was approved. In that case the plaintiff brought suit against an individual, and garnishee summons was served on a bank, which answered that it had certain money on deposit to the credit of the defendant. Intervening petitions were filed by other parties, including one by the defendant’s father, who alleged that he was a partner of the defendant in a farming enterprise and that an accounting of the partnership would show that the most of the money belonged to him. The action was not a creditor’s bill to begin with, and none of the parties claimed that it could not be maintained on that ground, nor that the proceeding by which the interest of the various claimants in the fund was determined- developed into the nature of a creditor’s bill. The garnishee’s answer showed that it had money on deposit to the credit of the original defendant. In order to try out the issues raised by the intervening petitions, it became necessary for the court to take an account of the partnership affairs. Incidentally, the plaintiff, before reducing his claim to judgment, obtained all the benefits he could have- secured by a creditor’s bill, but the issues were only those raised by the garnishment and intervening petitions. The question presented in the present case was not involved, and nothing said in the opinion is inconsistent with the decision of the trial court in this case. (Filed June 7, 1919.) The judgment is affirmed.