Irwin v. McKechnie

Mitchell, J. The garnishees were appointed, by the United States Circuit Court for this district, receivers of the Northern Pacific Railway Company, and while operating its road under the authority of that court became indebted to the defendant for labor and services. The plaintiff, having a cause of action against the defendant for money due on contract, brought an action for its recovery, and sought therein to garnishee in the hands of the receivers the money due from them to the defendant. No question is made, nor could well be, but that, under the “removal act” of March 3, 1887, the receivers are subject to suit in respect to any transaction of theirs in operating the road; the only point made being that the money sought to be reached was in custodia legis, and hence not subject to garnishment. No one will question the correctness of the proposition that property in the hands of receivers appointed by the court is in custodia legis, and not subject to levy or garnishment. This doctrine receives additional force, in this case from the rule of judicial comity [148] between state and federal courts by which each will refuse to interfere with property in the custody of the other, — a rule which we are always solicitous to observe. But in this case it will be noticed that what is sought to be reached by garnishment is the property, not of the railway company, but of the defendant, viz. a debt due him from the receivers. Moreover, while garnishment of a debt is often calléd a mode of attachment, yet it does not effect a specific lien on any property of the garnishee, such as is acquired by the actual seizure of property. The effect of the judgment is merely to determine the existence and amount of the debt, and to substitute the plaintiff for the defendant as the person to whom it is payable. The judgment against the receivers ijould not be against them personally, but against them officially. No executory process could be issued on it, for that would interfere with the control of the property in the custody of the federal court. The manner in which the judgment so rendered shall be paid must be under the exclusive control of that court. It can only be satisfied as other demands may be satisfied, viz. by an application to the court in which the receivership proceedings are pending for an order directing its payment in the due order of the settlement of the affairs of the insolvent company by that court. Under the “removal act” the defendant himself could have sued the receivers, and recovered judgment, and we are unable to see why the plaintiff may not, through garnishee proceedings, recover judgment against them for the same claim, or why a judgment in Ms favor interferes with property in the custody of the federal court any more than would a judgment in favor of the defendant for the same claim. We'understand that the order of the court appointing these receivers is even broader than the statute, and authorizes suit to be brought in any court of competent jurisdiction on claims against the company which accrued before the receivership, as well as those subsequently incurred by the receivers. We only refer to this as showing that the federal court does not consider such suits as at all interfering with its jurisdiction over the receivership or with the property in its custody. In view of the fact that the receivers of railway companies, as ancillary to winding up the insol- . vent estate for the benefit of creditors, are authorized to operate the [149] road in lieu of the directors, — sometimes for years, — any other rule would work great injury, and would often leave the creditors of the emplo-yés of the receivers remediless. There is nothing in the point that the indebtedness of the receivers is only contingent. The indebtedness is absolute; the only contingency is as to their ability to pay. Order affirmed. Buck, J., absent, sick, took no part. (Opinion published 59 N. W. 987.)