McPherson v. Atlantic & Pacific Railroad

Henry, J. — Whether the Osage Valley and Southern Kansas Railroad Company had capacity to execute the mortgage in question, and if it had, whether, under the mortgage, the mortgagee was entitled to the rents due from the Atlantic and Pacific Railroad Company, or which accrued after its execution, are questions which it is not necessary to determine in this cause, and would, therefore, he more appropriately decided in a suit between the mortgagee and the latter company. If the mortgage gave the mortagee a right to the rents, the plaintiffs were not entitled to the judgment they obtained. If it did not, then the question arises, was the Atlantic and Pacific Railroad Company entitled, under the lease, to retain, against the plaintiffs, an amount of money equal to the taxes assessed against the road ? If so, the judgment must be reversed, because the court below ruled otherwise. It was an express stipulation in the lease, that the lessee should reserve of the rent an amount equal to the taxes assessed, or to be assessed against the property leased. It was of the nature of a contract of indemnity. The lessee did not expressly agree to pay the taxes, but was liable to lose its interest in the road by a sale, if the taxes were not paid. The taxes then levied were, and those to be levied would be, a lien upon the road, and while the lessee did not expressly agree to pay them, the stipulation, was substantially an appropriation by the parties, of the reserved fund to the payment of that indebtedness, and the lessor, (or the mortgagee, if the mortgage he a [110] valid mortgage,) could, by a proper proceeding, compel tbe lessee so to apply tbe money. But could tbe lessor have compelled the lessee to pay to it the amounts so reserved, without first paying the taxes? ¥e apprehend not, and if not, it follows that its judgment creditors could, in a garnishment proceeding, recover against the lessee only what remained of the indebtedness in excess of tbe amount reserved. It is alleged xn the answer of the garnishee, and not denied by plaintiffs, and therefore admitted, that the Osage Yalley and Southern Kansas Railroad Company is insolvent) and that the taxes which, at the date of the garnishment, had been assessed against the property, amounted to about $12,000. If compelled to pay the whole amount of the rents to creditors of the lessor, the defendant must also either pay the taxes or lose its interest in the property by the sale of the same for the taxes. This would virtually annul the contract of the parties, and subject the defendant to a heavy loss, against which it had provided by that stipulation in the lease. The parties were competent to make that contract, and, as nothing is alleged against its validity, the court cannot annul or disregard it, or in any manner abridge defendant’s rights under it. We are not without authorities to sustain these views. In the case of St. Louis et al• v. Regenfuss, 28 Wis. 145, it was held that “ the garnishee is liable to the creditor to the same extent that he was liable to the defendant in the attachment suit before service of garnishee process. This is the limit of his liability.” The facts of the case were that the garnishee had purchased of the debtor a tract of land for $1,200, of which he paid $950, and for the balance signed a note with the debtor as his surety, and that amount was retained of the purchase money. That note had not been paid by the garnishee, and yet the court held that the plaintiff was not entitled to a judgment against him for $250, or any other sum. . In Firebaugh v. Stone, Garnishee, 36 Mo. 114, the court [111] approved the doctrine laid down by Drake in his work on attachment, that “ an attaching creditor can hold the garnishee only to the extent of the defendant’s claim'against the garnishee, and he can acquire no rights against the lattér, except such as the défendant had, and he is not permitted to place the garnishee in any worse condition than he would occupy if sued by the defendant, and it follows necessarily that whatever defense the the garnishee could urge against an action by the defendant for the debt, in respect of which he is garnished, hé may set up in bar of a judgment against him as garnishee.” In Scales et al. v. The Southern Hotel Co., 37 Mo. 524, the court observes that “ in order that an indebtedness may be liable to garnishment, it must be sho.wn to be absolutely due as a money demand, unaffected by liens or prior incumbrances, or conditions of contract.” As the taxes, together with the amounts properly allowed by the court to the garnishee, exceeded in amount the arrears of rent, it is unnecessary to pass upon the other matters of set-off and recoupment, relied upon by defendant. All concurring, the judgment is reversed, and cause remanded. Reversed.