National Surety Co. v. Medlock

58 S.E. 1131, 2 Ga. App. 665, 1907 Ga. App. LEXIS 490

• Court: Court of Appeals of Georgia
• Decided: October 22, 1907
• Docket: 478
• Status: Published

Opinion

Powell, J.

(After stating the facts.)

1. A discharge in bankruptcy does not release the bankrupt from liability for “wilful and malicious injuries to the person or property of another.” Bankruptcy act of 1898, c. 541, § 17 (2) (30 Stat. 550, U. S. Com. St. 1901, p. 3428). A libel is a wilful and malicious injury to the person of another. Johnson v. Bradstreet Co., 87 Ga. 79 (13 S. E. 250); Cole v. A. & W. P. R. Co., 102 Ga. 479 (31 S. E. 107); Cox v. Strickland, 120 Ga. 106 (47 S. E. 912). Only suits which are “founded upon claims for which a discharge would be a release” are to be stayed by reason of an adjudication in bankruptcy (Bankruptcy act, c. 541, §11, 30 Stat. 549, U. S. Com. St. 1901, p. 3426); other actions may properly proceed to judgment. A judgment so'obtained is to be given as full and extensive force and effect as if bankruptcy had not intervened. ■

2. A corporation, by being adjudicated bankrupt, is not thereby civilly dead; it is not thereby dissolved. Holland v. Heyman, 60 Ga. 181. To use the sententious language of Judge Bleckley in the case just cited, "'your money,' not 'your life,' is the demand made by the bankruptcy act.'

3. Having legally obtained a judgment against the defendant corporation, the plaintiff was further entitled to pursue its enforcement by every means known to the law of the State and not forbidden by the Federal statute. Let us see if any obstacle stood between it and the end of subjecting the dissolving bond filed under the ancillary proceedings by garnishment. Before judgment can be rendered upon such dissolving bond, two prior judgments are necessary, under our practice: first a judgment in the main action, and then a judgment declaring the money or property, admitted or found to be in the hands of the garnishee, subject. The first judgment being obtained, the second follows as a matter of course, if the answer of the garnishee admits sufficient effects and no traverse is offered and no statutory claim is filed, seeking to have the fund declared, for any sufficient reason, not subject. Garden v. Crutchfield, 112 Ga. 274 (37 S. E. 368). In the present case no traverse or claim was filed to the answer of the garnishee, and the second judgment was therefore properly entered; indeed, to the rendering of this judgment no exception is filed by either of the plaintiffs in error. These two judgments having been obtained, it is the duty of the court to enter the final judgment against the bond, the condition of which is that the defendant and his surety ''shall pay the judgment thát shall be entered on the garnishment/’ — that is to say the second judgment mentioned above, — unless good cause to the contrary be shown. In Klipstein v. Allen-Miles Co. (136 Fed. 385, 69 C. C. A. 229, 14 Am. Bk. R. 15), the Hnited States Circuit Court of Appeals for the fifth circuit had under review a ease involving a similar bond given under this statute of our State in a garnishment proceeding, sued out» within four months of the adjudication in bankruptcy against the defendant in the main suit, which was an action upon a debt from which a discharge in bankruptcy would be a release. In that case the court held that the original action being founded on a debt discharg^ble in bankruptcy, no judgment could be rendered against the defendant in the main action; and that the lien of the garnishment upon the funds in the hands of the garnishee having arisen within four months prior to the adjudication in bankruptcy, no judgment could be had upon the answer of the garnishee, without working a preference under the bankruptcy act; hence, neither of the two preliminary judgments essential to a judgment on the dissolving bond being obtainable, the third or final judgment, necessary to fix the liability of the surety on the bond, could not be rendered. A very exhaustive discussion of the garnishment proceedings of this State appears in that case. The gist of the decision is contained in this extract: “The liability of the surety on the dissolving bond is not. altered by the discharge of the bankrupt defendant, but the discharge prevents the happening of the contingency on which liability depends.” . The decision of our Supreme Court in the case of Odell v. Wootten, 38 Ga. 225, to the same effect, is quoted approvingly. Compare Philip Carey Co. v. Viaduct Place, 1 Ga. App. 707 (58 S. E. 274). Tn the case at bar, the contingency on which the liability of the surety depends has happened; judgment has been regularly obtained both against the defendant in the main action and against the fund impounded by the garnishment; and, as the court says in the Klipstein ease, the liability of the surety is not altered by the bankruptcy of the principal. See Bankruptcy act, §16. The judgment against the surety on the dissolving bond was therefore properly rendered. If the enforcement of the judgment has the effect of giving to this plaintiff a preference over the other creditors of the bankrupt corporation, in that she will receive .a higher percentage of her debt than they will receive, the answer is that such preference, in the first place, is not being enforced against the assets of the bankrupt estate; and, in the second place, it arises not in contravention of the bankruptcy act, but through its very terms, which render debts of the character of the one held by the plaintiff not discharged, and which do not prevent a creditor of the bankrupt from taking full satisfaction from a personal surety. *

Very ably it has been argued to us that under the laws of this State, a summons of garnishment creates no lien, and that the lien arises only when the judgment is entered on the answer of the garnishee; and that since the judgment against the funds admitted by the garnishee was dated subsequently to the adjudication in bankruptcy, such judgment immediately falls as being in contravention of the bankruptcy act. In support of this contention we are cited to the case of Willis v. Parsons, 13 Ga. 335, wherein the court, in the discussion, says, of a garnishment founded on a pending proceeding, not an attachment: “It is true, that the act intended to afford a new remedy in certain cases therein specified, by authorizing summons of garnishment to issue 'as in cases of attachment/ but not 'to create a lien as in cases of attachment.”. In that case the court was merely discussing the peculiar rule ■existing in this State in the distribution of funds brought into ■court, between creditors whose respective rights are based upon attachment, garnishment, and common-law judgments. That case merely holds that by the terms of the statutes regulating prioridies, under a rule to distribute, the priority between a garnishing creditor and a creditor by common-law suit is to be determined by a comparison of the dates of their respective main judgments; and the fact that the fund came into court by reason of the service of a summons of garnishment on behalf of one of the creditors prior to the date of the other judgment will not give the dormer the superior right unless his judgment in the main action be also the first obtained. Compare, in this connection, the case •of Andrews v. Kaufman, 60 Ga. 670, wherein it is held that upon rule to distribute, a creditor who holds a common-law judgment, prior in date to the main judgment of another creditor who has proceeded by attachment, is to be preferred to the latter, although the action in which the common-law judgment was obtained was instituted subsequently to the levy of the attachment. Yet it will not be disputed that the levy of the attachment creates a lien. See Civil Code, §§ 4577, 4578. It may be noted that by an amendment (Ga. Laws 1890-1, p. 75), now incorporated as a part of the code section last cited, an attachment will have priority over an-•ordinary judgment obtained on a suit instituted after the levy. In Armour Packing Co. v. Wynn, 119 Ga. 683 (46 S. E. 865), a case wherein the summons of garnishment was sued out within four months of the bankruptcy of the defendant, although the garnishment was predicated upon a- prior judgment more than four months old, the court held that the lien on the funds in the hand of the garnishee was “obtained through a legal proceeding instituted within four months prior to the filing of the petition for bankruptcy,” and was rendered void § 67 (f) of the bankrupt act. In the opinion in that ease, the following (which is plainly obiter) appears: “It has been several times held, where an ordinary action has been brought and a garnishment summons is served, and a judgment is obtained by the plaintiff against the defendant within four months of the filing of the petition in bankruptcy, and a like judgment is obtained thereafter against the garnishee, that the lien of the garnishment is rendered null, even though it may have provisionally attached by being served more than four months before the filing of the petition in bankruptcy. In re Lesser, 108 Fed. 201; in re McCartney, 109 Fed. 621, 6 Am. Bk. R. 367.” The learned Justice who wrote the opinion manifestly overlooked the fact that Lesser’s case, on which this statement is predicated, had been reversed by the Supreme Court of the United States in the case of Metcalf v. Barker, 187 U. S. 165 (9 Am. Bk. Rep. 36, 23 Sup. Ct. 67, 47 L. ed. 122).

Whether the summons of garnishment creates a lien depends, upon the particular shade of meaning given to the word “lien.” If it be used in the old common-law sense of the right to immediately grasp or hold in manual possession a chattel till something be performed or done by the owner, then a summons of garnishment does not create a lien on the funds in the hands of the garnishee. But the word has also a broader meaning. “The term ‘lien,’ in a narrow and more technical sense,. signifies the right by which a person in possession of personal property holds, and detains it against the owner in satisfaction of a demand; but it has a more extensive meaning, and in common acceptation is understood and used to- denote a legal claim or charge on property, either real or personal, for the payment of any debt or duty. Every such claim or charge is still a lien on the property, although the property be not in the possession of him to whom the debt or duty is due.” “A lien is. defined to be a hold or claim which one has upon the property of another as security for some debt or' charge. At common law there could be no lien without possession. It is therein defined as a right in one man to retain that 'which is in possession and belonging to another. In maritime law, liens exist independently of possession, either actual or constructive, and in the courts of equity the term ‘lien’' is used as synonymous with a charge or incumbrance upon the thing where there is neither jus in re nor ad rem, nor possession of the thing.” See 5 Words’& Phrases Judicially Defined, 4144 et seq., where these and a variety of similar definitions are given. See also in re Byrne, 97 Fed. 762, 764; Downer v. Brackett, 21 Vt. 599, 602; U. S. Blowpipe Co. v. Spencer, 40 W. Va. 698 (21 S. E. 769). Whether the service of a summons of garnishment creates a technical lien on the funds in the hands of the garnishee or not, still, especially when the garnishee admits liability and. pays the fund into court, or, in lieu of such actual payment, a statutory bond is substituted, the court acquires such a hold upon the money or the res, such a right to retain and administer the fund (or what has been substituted for the fund, — the bond), that the subsequent adjudication in bankruptcj'-, made more than four months thereafter, will not disturb it. Pickens v. Roy, 187 U. S. 177 (23 Sup. Ct. 78, 47 L. ed. 128), s. c. 9 Am. Bk. R. 47, sub nom. Pickens v. Dent, (45 C. C. A. 522). In that case the court, reasserting the rule that the court which first obtains rightful jurisdiction over the subject-matter shall hold it, quotes approvingly from Frazier v. Southern Loan & Trust Co., 99 Fed. 707 40 C. C. A. 76) 3 Am. Bk. R. 710), as follows: “The bankrupt act of 1898 does not in the least modify this rule, but with unusual carefulness guards it in all of its detail, provided the suit pending in the State court was instituted more than four months before the district court of the United States had adjudicated the bankruptcy of the party entitled to or interested in the subject-matter of such controversy.” See also, in the same connection, Metcalf v. Barker, supra; Collier on Bankruptcy (6th ed.), 571; Boston Merc. Co. v. Ould-Carter Co., 123 Ga. 458 (51 S. E. 466).

Judgment affirmed.