Parke, Davis & Co. v. Mewhirter

Hallam, J. 1. On December 24, 1920, plaintiff sued defendant and commenced garnishment proceedings. The garnishees were at that time in possession of property belonging to defendant. On January 6, an involuntary [235] petition in bankruptcy was bled against defendant and on January 29, 1921, he was adjudged bankrupt and a receiver appointed. On January 31 the garnishees made their disclosure. Thereupon the receiver made application to the court, showing the adjudication of bankruptcy and his appointment as receiver, and representing that the possession of this property was withheld from the receiver by the gamisheeá and asked that the garnishment proceedings be dismissed.' The hearing was upon affidavits. Plaintiff objected that the court could not properly dismiss the garnishment proceeding before plaintiff’s rights acquired thereunder had been adjudged void in a plenary suit. The court dismissed the garnishment and made a finding, that the receiver “is in possession of the property against which this garnishment lien is being claimed and asserted.” On what showing this finding was made does not appear. We think the contention of plaintiff should have been sustained. Our statutes very clearly outline the practice in garnishment proceedings. If the plaintiff desires to take issue on the disclosure of the garnishee, he may file a supplemental complaint for that purpose. G. S. 1913, § 7870. If there be a claimant of the fund or property garnished, the claimant is made a party to the proceeding. G. S. 1913, § 7869. In both cases the statute contemplates a trial, not in a summary manner upon affidavits, but upon evidence taken as in ordinary litigated actions. G. S. 1913, § 7870; Donnelly v. O’Connor, 22 Minn. 309; Wildner v. Ferguson, 42 Minn. 112, 43 N. W. 794, 6 L.R.A. 338, 18 Am. St. 495. We think plaintiff’s objection was sufficient to preserve its rights in these particulars. 2. Eeference is made to the Federal decisions holding that, where property is in custody of a bankruptcy court, the court may in a summary manner determine the validity of claims asserted against it. First Nat. Bank v. Chicago Title & Trust Co. 198 U. S. 280, 25 Sup. Ct. 693, 49 L. ed. 1051; Stone-Ordean-Wells Co. v. Mark, 227 Fed. 975, 142 C. C. A. 433. It is a well-settled principle that any court, having custody of property, has an ancillary jurisdiction to hear and determine all questions respecting the title, possession or control of the property. This does not arise out of any provision of the bankrupty act. The [236] principle is applicable to all courts, Federal and state. Murphy v. John Hofman Co. 211 R. S. 562, 569, 570, 29 Sup. Ct. 154, 53 L. ed. 327. The fact that, under the bankruptcy act, this jurisdiction may be exercised in the bankruptcy court in a summary manner, is not very important here. That court has not acted in the premises, and, until it does do so, the question of its power to act does not concern us here, nor does the question of proper practice in that court concern us. It may be noted that the property was not in the custody of the bankruptcy court at the time the motion to dismiss the garnishment was made. It is at least doubtful whether the summary jurisdiction of that court could be exercised under those conditions. Fountain v. 624 Pieces of Timber, 140 Fed. 381; In re New England Breeder’s Club, 175 Fed. 501. 3. In-this view of the case some of the questions argued become immaterial. . We may say, however, that plaintiffs contention that the receiver fathed to make a prima facie showing of insolvency of defendant at the time the garnishment proceeding was commenced is not well taken. The affidavits submitted, taken altogether, were, in our opinion, sufficient for that purpose. Order reversed.