Challenge Co. v. Sartin

260 S.W. 313, 1924 Tex. App. LEXIS 266
CourtCourt of Appeals of Texas
DecidedMarch 8, 1924
DocketNo. 9056.
StatusPublished
Cited by14 cases

This text of 260 S.W. 313 (Challenge Co. v. Sartin) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Challenge Co. v. Sartin, 260 S.W. 313, 1924 Tex. App. LEXIS 266 (Tex. Ct. App. 1924).

Opinion

LOONEY, J.

The Challenge Company, a corporation, sued E. & P. Oil Company, a joint-stock association, in the Forty-Fourth judicial district court, Dallas county, to recover a, debt in the sum of $1,725.

During the pendency of the suit, and before judgment, plaintiff applied for and secured the issuance of a writ of garnishment in due form to compel B. D. Sartin, receiver of the Southwestern Producing & Refining Company, to answer as to his indebtedness as receiver to the E. & P. Oil Company. The writ of garnishment was served on November 2, 1922, returnable to the term of the court that convened January 1, 1923. On December 11, 1923, the garnishee answered the writ, by motion to quash, on the ground that the garnishee was acting as receiver under appointment by the Seventy-Eighth judicial district court of Wichita county, Tex., and, as such, the funds in his possession were not subject to garnishment.

Subject to the motion to quash and the action of the court thereon, garnishee answered that he was at the time of the answer, and of the service of the writ, indebted to the defendant E. & P. Oil Company, in the sum of $516.30.

The case was tried by the court without a jury on an agreed statement of facts, and resulted ,in a judgment sustaining appellee’s motion to quash. The suit was thereupon dismissed, to which action of the court the appellant excepted, gave notice of, and has perfected its appeal.

The facts as agreed to are substantially as follows:

B. D. Sartin, as receiver of the Southwestern Producing & Refining Company, was indebted to the defendant E. & P. Oil Company for crude oil sold to the receivership and used in operating the refinery under his charge.

In May, 1921, the master in chancery classified the claims against the receivership as provided by article 2135, Revised Civil Statutes, and the claim of E. & P. Oil Company was classified as belonging to the fifth class mentioned in the statutes. In November, 1922, the receiver sold all property belonging to the Southwestern Producing & Refining Company; the sale was confirmed by the court, and, on or about November 20th, 1922, the court entered an order authorizing the receiver to pay the funds in his hands in discharge of the claims in the order of classification. The receiver paid all costs and expenses and claims down to class 5, and apportioned the balance of the money on hand among the several creditors of class 5, and paid the same accqrdingly, except the amount apportioned to E. & P. Oil Company, to wit, $516.30, which was ready to be paid and would have been- paid but for the service of the writ of garnishment.

By appropriate assignments appellant complains of the action of the court below in quashing and dismissing the garnishment proceedings and in refusing to render judgment in its favor on the, answer of the garnishee.

The question for our decision is whether, under the admitted facts, the fund in the hands of the garnishee apportioned and ordered paid to the E. & P. Oil Company, was garnishable at the suit of appellant? Appel-lee contends, and the court below adopted the view, that the fund was in custodia legis, and not subject to garnishment.

The general rule, universally recognized, is that funds and properties in the hands of receivers, trustees in bankruptcy, disbursing officers, sheriffs, clerks, executors, administrators, and guardians, when held in obedience to law, or subject to the control of court, are in custodia legis and exempt, from levy or garnishment. This rule is based upon a public policy to prevent conflicts of jurisdiction and insure an orderly judicial procedure. Kreisle v. Campbell, 89 Tex. 104, 33 S. W. 852, and cases cited; 28 C. J. 71, and notes.

This general rule, however, fias its modifications, and should end when the,reason for its application no longer exists. Accordingly, it is generally held that where the court .enters a decree for distribution, or where, in view of events, nothing remains for the custodian of the fund or property to do but to make delivery or payment to the person entitled, the exemption from levy and garnishment ceases. This modification of the general rule seems to be based on good reason and common sense, and is supported by the overwhelming weight of American authority.

In this case all claims against the receivership had been established and classified by the master in chancery, all properties in the hands of the receiver had been sold under orders of court, the sales approved, and an order entered directing the receiver to pay the claims according to classification. The claim of E. & P. Oil Company had been approved along with other claims in,the fifth *315 ■class, described in article 2135,.Revised Statutes, and the receiver paid all the claims down to class 5„ and apportioned the remainder of the money on hand and paid said apportionment on all claims in the fifth class, except the amount apportioned to the claim of E. & P. Oil Company, and would have paid this hut for the service of the writ of garnishment.

These facts bring the case clearly within the exception to the general rule mentioned above. The court had fully administered the affairs of.the receivership, had entered its final order, in so far as establishing claims and providing for the distribution of the funds were concerned, and there remained nothing to be done by the receiver except to make payments to the respective claimants.

' The cases cited by appellee have received most careful consideration. In the main they all come within the general rule, and are not in point on the question under consideration. There are three cases, however, to which our attention has been called, that seem to support the contention of appellee. The first is the case of Pace v. Smith, 57 Tex. 555, in which an original attachment was levied upon goods that were sold under orders of the court, and the proceeds deposited with the' clerk. The attachment yvas quashed and the money ordered paid to the defendant. Thereupon a writ of garnishment was sued out and served on the clerk. In this case the Supreme Court held that the money was in custodia legis and not subject to garnishment. This decision was not unanimous, as a very strong dissenting opinion was filed by Justice Bonner.

The case of Curtis v. Ford, 78 Tex. 269, 14 S. W. 614, 10 L. R. A. 529, was very similar in its essential facts to the case of Pace v. Smith, supra. In the Curtis-Ford Case, money was paid into the hands of the district clerk, being the proceeds of the sale of cattle that had been sequestered and sold by the sheriff. The case was removed from the state to the federal court, and, in the latter court, the money was adjudged to belong to Wells, the defendant in the action for debt. The argument was strongly made that, as the case had terminated and the right to the fund in the hands of the clerk was adjudged to be in the defendant to the suit, the reason for the rule that protects funds in custodia legis from garnishment no longer existed. This argument was answered by the court, to the effect that the exception to the general rule was not recognized in this state, and that, so long as the funds remained in the hands of the officer, they were not subject to garnishment. The only authority cited by the court was Pace v. Smith, supra.

A later case to the same effect is Loftus v. Williams, 24 Tex. Civ. App. 393, 59 S. W. 291.

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Bluebook (online)
260 S.W. 313, 1924 Tex. App. LEXIS 266, Counsel Stack Legal Research, https://law.counselstack.com/opinion/challenge-co-v-sartin-texapp-1924.