Fewell v. American Surety Co.

80 Miss. 782

Opinion

Brame, Special J.,

delivered the opinion of the court.*

In 1896 Stowell & Co. entered into a contract with the United States to erect a public building at Meridian, Miss. They gave bond conditioned for the performance of the contract, with the American Surety Company as surety. Said contractors being largely in debt, and not being able to complete the building, on June 30, 1897, entered into a written agreement with certain of their creditors looking to the carrying out of the contract for the benefit of the latter. The parties signing this agreement, besides the contractors, were the American Terra Cotta & Ceramic Co., E. B. Brainard, Michael D. Nlavin, and the Allen Cornice Works, creditors and subcontractors. The Citizens’ Savings Bank of Meridian, another creditor, signed also, and so did the American Surety Company.

This agreement recited the attitude and relation of the parties, and the inability of the contractors to proceed further, and it was stipulated therein that Street and Herzog, styled a committee, should take charge of the work, provide the necessary labor and material, and complete the building. It was further agreed that Stowell & Co. were from that time to have only a nominal connection with the contract, but that if necessary they were to sign all vouchers required by the government, and that the committee, Street and Herzog, should receive all moneys on such vouchers, and, after defraying expenses, distribute the same pro rata among the above named creditors of Stowell & Co. The agreement also provided for pro rata advances to be made by these creditors in order to complete tbe work. Pursuant to tbe agreement, tbe committee completed tbe building, and it was accepted by the government, and a voucher for $10,000 was issued therefor, and the money was collected thereon. In some way not clearly explained in the record, appellees, the said Citizens’ Savings Bank and George M. Hodges, came into possession of this money, and, with full notice of the rights of all concerned, the said garnishees appropriated the money or applied it to the indebtedness of the bank in violation of the rights of the other creditors under said agreement. In December, 1898, Fewell et al., appellants, creditors of said other parties, sued out an attachment ■for $1,000 against them, and, as we understand, against the American Surety Company; at the same time a garnishment was issued against Hodges, the Citizens’ Savings Bank, and others. The record is not explicit as to who the several defendants were, or who was garnished (by agreement of counsel the original proceedings being omitted from the transcript), and the case being brought to this court on an issue made as to two of the garnishees. Plaintiffs in attachment having obtained judgment against the defendants, and the garnishees, Hodges, and Citizens’ Savings Bank, having filed separate answers denying indebtedness to the defendants, the plaintiffs traversed these answers, setting out in a brief way the above facts as to the collection and conversion of the money and averring that each of the garnishees was indebted to defendants. The garnishees demurred to the traverses, and moved to strike the same from the files on various grounds assigned, the substance of which was that the assignment of the government contract was void, that the indebtedness was not such as could be reached by garnishment, and that the traverse was vague and insufficient. This was in July, 1899. The record does not show any disposition of the demurrers or the motions to strike out at that time. Thereupon the plaintiffs presented an amended traverse, averring at length and with more particularity the facts above stated as to the government contract, the agreement of June 30, 1897, the completion, of the building, and the collection and conversion of the money by the garnishees, Hodges, and Citizens’ Savings Bank. The record does not distinctly show the date of presenting this amended traverse, or that it was filed. But the garnishees demurred to it and moved to strike out the same on the grounds substantially as above stated, and an additional ground of the motion was that the amended traverse was filed without leave of court. At the January term, 1900, the record shows that the motion to strike out the original traverses, and the demurrers thereto came on to be heard, and were sustained, and that thereupon the motion of the plaintiffs to file their amended traverse was overruled on the ground that the same presented no sufficient response to the answers of the garnishees. Plaintiffs excepted to the action of the court, and declined to plead further, and thereupon judgment final was rendered in favor of the garnishees, from which plaintiffs appeal.

The United States is not interested in this litigation. The contract was fully executed so far as the government was concerned. The building was completed and paid for, and this controversy is alone between the parties hereto as to the disposition of the money received for its erection. Therefore, secs. 3737, 3477, United .States revised statutes, relating to assignments of contracts made with the government, have no application. The primary purpose of these statutes is to protect the government, and they cannot be relied upon for protection by parties situated as the appellees are. Goodman v. Niblack, 102 U. S., 556; Bailey v. United States, 109 Ib., 432; Hobbs v. McLean, 117 Ib., 567; Freedman’s Savings Co. v. Shepherd, 127 Ib., 494; Yorke v. Conde, 147 N. Y., 486, indirectly approved in 168 U. S., 642.

In Howe v. Jolly, 68 Miss., 323, it was held that the act of 1886, declaring that there shall be no property in intoxicating liquors kept for sale in violation of law, does not apply as between partners in such business so as to permit one partner to convert to his own use liquors unlawfully kept without liability to his co-partner. See, also, Gilliam v. Brown, 43 Miss., 325. The principle is applicable here.

The decision in Surety Company v. United States, 76 Miss., 289, where the transfer or assignment involved here was held void, is distinguishable. In that case the government, for the use of another party, was suing on the bond of the surety company to enforce compliance with the contract. Being a party to the suit, brought to enforce the contract, it was in a position to successfully urge the invalidity of the assignment under the federal statutes.

The solution of the question whether the indebtedness alleged to be due by the garnishees to the defendants is subject to garnishment, has given us considerable difficulty. The garnishee, Hodges, was' not a party to the agreement of June 30, 1897, under which Street and Herzog, styled a committee, were to carry out the contract with the government, complete the building, collect the money, and pay it over to the Citizens’ Savings Bank and other creditors of Stowell & Co., and hence it cannot be claimed that he was a partner of the defendants, or of any of the parties. If the said'agreement of June 30th, and what was done under it, constituted .a partnership, then- it is plain that the garnishment cannot be maintained, certainly as to the bank, for it was a party to that agreement. It is well settled that garnishment, being a legal proceeding, and not -adapted to the investigation of accounts, cannot be maintained" against a partnership for a debt due by one or more of the partners. Williams v. Gage, 49 Miss., 777.

But we do not regard this arrangement of the several creditors of Stowell & Co. as a partnership, at least as' between the parties. It was but a single venture, an agreement made by creditors with a view to collecting their debts. It is true that trustees were selected, and expenses were to be irtcurred, and the money collected and disbursed, but it cannot be supposed that the parties, represented as they were by counsel, in making this agreement, ever contemplated forming a partnership. As between the parties, in a joint venture, the usual test of a partnership is the intent of the persons to form one. If the parties do not intend to become partners, ordinarily they cannot be considered as such. 17 Am. & Eng. Enc. Law (1st ed.), pages 832, 833, and authorities cited. No rights of creditors or third persons are involved here. We regard this, as the parties themselves did, a mere venture of the creditors of a common debtor having in view the carrying out of a contract, and the collection of their debts. No partnership was contemplated, and none was created; the parties were mere joint creditors.

The contract with the government had been executed, the work had been done, and the money paid over. The defendants severally and the Citizens’ Savings Bank were entitled to their respective shares of the same, and under the facts set up in the amended traverse we think an action could have been maintained by either of the parties. for the recovery of the amount due", as for money had and received, or in assumpsit. This being true, garnishment is maintainable if a joint debt— that is, an indebtedness due to the defendant and another or others, can be subjected by that process. On this question the authorities are very much divided. We have carefully examined all those cited, and some others developed by our own research. In 14 Am. & Eng. Enc. Law (2d ed.), page 798, the authorities are grouped, and the conclusion of the text is that such'a debt is not garnishable. But a careful reading of the decisions, especially in view of the liberal provisions of our statutes, convinces us that the true rule is announced in the first edition of the Encyclopedia of Law, vol. 8, p. 1169, where it is said that a joint debt may be garnished. The authorities in support of the proposition are collected in the opinion of the court in the case of Moore v. Gilmore, 16 Wash., 123 (58 Am. St. Rep., 20), and we approve that decision. See, also, Fogleman v. Shively, 4 Ind. App., 197 (51 Am. St. Rep., 213); and Drake on Attachments, 572; and Piper v. Hanley, 48 Vt., 479.

A number of the decisions cited in the new edition of the Encyclopedia of Law as being in opposition to the right to garnish a joint debt were made in partnership cases, and hence they are not applicable, it being, we believe, universally conceded that garnishment will not lie in such cases unless specially authorized by statute.

In the ease of Kennedy v. McLellan, 76 Mich., 598, relied upon by appellees, it was held that a judgment in a garnishment proceeding, brought to subject the interest of one of two joint payees in a life insurance policy, was invalid, and the case is cited with others as holding that a joint debt may not be garnished. But the opinion of the court in that ease was rested solely upon the fact that the other payee had not been brought in under an act of 1885 authorizing the interpleader of any third person having a claim to the property or debt, or a “part thereof.” We think if the other payee had been made a party, the garnishment judgment would have been upheld. Therefore the case is as we view it, an authority in support of the proposition that a joint judgment may be garnished where there is an interpleader statute such as we have.

Section 2143 of our code of 1892 provides that where the garnishee, before or after final judgment against him, shall show that another person claims title to or “an interest in the debt,” or property due from him or in his hands, the court shall suspend all further proceedings and summon such person, and provision is made for protecting his interests. This being done, it is impossible by the garnishment proceedings to prejudice the rights of such joint owner or to put him in a worse attitude, and the possibility of doing this is the reason generally assigned against the proceeding by those courts which hold that a joint debt is not garnishable.

It is true as argued that the amount of the indebtedness, due each of the several defendants is uncertain, and that there may be difficulty in fixing it, but this practical difficulty cannot affect the general rule or control the jurisdiction. Similar obstacles are encountered in many actions at law. If the accounts are intricate, the court may direct a trial by -referees under § 743 of the code.

It is urged against the garnishment that as the amount is uncertain, the garnishees could not know what amount to pay into court. If the right of paying into court ever affected the question we are considering, we do not think it does so now. As a condition precedent to the right to interpleading a third person, the code of 1880, § 2449, required that the money should be paid into court, but this was changed by § 2143, code 1892, and now the requirement does not exist, though the garnishee may pay the money in, if he so desire, and by so doing be relieved from all further liability as to the sum so paid. The traverse refers to Street as one of the garnishees, though he is not a party to this appeal. If, as argued^ he was not made a party to the garnishment, he may be interpleaded. In Kellogg v. Freeman, 50 Miss., 127, it was said that our mode of inter-pleader in garnishment cases is a substitute for the remedy by interpleader in equity. As further illustrating the extended powers of the court in matters of procedure under the statute, see Morin v. Bailey, 55 Miss., 570; Horton v. Grant, 56 Ib., 404; Dodds v. Gregory, 61 Ib., 351; Bank v. Smith, 75 Ib., 753. In this connection it is not improper to consider also §§751 and 752, code 1892, providing that such and so many verdicts and judgments, joint, separate and cross, as may bo necessary to effectuate justice, may be rendered in the same case in actions at law.

We do not forget that garnishment as it exists with us is statutory, and is in the main, if not wholly, a legal proceeding. But it is remedial, and in view of the many liberal provisions of our statutes as to procedure, we do not think there is occasion for confining the remedy within narrow and technical limits, or that there is danger of causing any injustice or embarassment to third persons by holdng that a joint debt may be garnished. It is easy to imagine cases in which it would be vitally important to proceed promptly by attachment and garnishment, in order to subject a debt or personal property of the defendant, and the fact that another is jointly .interested in the debt or property is not in our opinion ground for denying the remedy in such cases and compelling a resort to a court of equity.

The amended traverse of the answers, though somewhat defective as a matter of pleading, showed a substantial right to proceed against the garnishees, and it was error not to allow the same to be filed.

Judgment reversed, amended, traverse allowed to be filed, and cause remanded for further proceedings in accordance with this opinion.

Footnotes

*

Judge Terrel recused himself and took no part in the decision of this case; L. Brame, Esq., a member of the supreme court bar, was appointed as special judge and presided in his place.