Cowart v. Caldwell Co. , 134 Ga. 544 ( 1910 )

Fish, C. J.

(After stating the facts.) The question whether the court erred in allowing the amendment to the plaintiff’s proceedings, by which the words, “W. E. Caldwell Co., a corporation,” were inserted in lieu of the words, “W. E. Caldwell & Co.” wherever the latter occurred, is not before the court,’ as no exception to this ruling was taken. For a like -reason, the overruling of the “special appearance” motion to dismiss is not before us. This last-mentioned ruling, of course, naturally followed the other, as after the amendment was allowed the proceedings were clearly against the W. E. Caldwell Co. as a corporation. We must treat the ease, therefore, as if the proceedings were originally against the W. E. Caldwell Co., a foreign corporation. So treating it, did the court err in sustaining the defendant’s oral motion to dismiss the entire proceedings, upon the grounds that the court had acquired no jurisdiction in rem over any property belonging to the defendant, and nothing had occurred by which the court had acquired jurisdiction to render a personal or general judgment against the defendant? The judgment of the court was partly right and partly wrong. As to the attachment and garnishment proceeding, it was right; as to the declaration in attachment, it was wrong. The untraversed answer of the garnishee showed that at the time of the service of the summons of garnishment he, as an individual, owed nothing to the defendant in attachment, the W. E. Caldwell Co., a non-resident corporation, and had nothing in his hands belonging to that corporation, and had not since such service become indebted to thát company or received any of its property or effects; but that as trustee in bankruptcy of the estate of T. A. Bailey he had in his hands five thousand dollars, the net proceeds of certain lumber, which had come into his possession as such trustee and which he had sold under an order of the referee in bankruptcy, which directed him to make such sale and to pay over the net proceeds thereof to-the W. E. Caldwell Co. The general rule is, that while property or money is in custodia legis, the officer holding it is the mere hand of the court; his possession is the possession of the court; to-interfere with his possession is to invade the jurisdiction of the court itself; and an officer so situated is bound by the orders and judgments of. the court whose mere agent he is, and he can make no disposition of such money.or property without the consent of his own court, express or implied. Among the legal custodians to- whom these principles have been applied are trustees or assignees in- bankruptcy. Rood on Garnishment, §-27, and cit. It has been so held in Georgia in regard to receivers. Zorn v. Wheatley, 61 Ga. 437 (2), 441; Lowe v. Stephens, 66 Ga. 607; Fountain v. Mills, 111 Ga. 122 (36 S. E. 428); Fulghum v. Williams Co., 114 Ga. 643, 647 (40 S. E. 695, 88 Am. St. R. 48). It has been held that even after the bill has been dismissed the receiver is still the officer of the court and not subject to garnishment. Field v. Jones, 11 Ga. 413.

It is contended, however, in the present case that inasmuch as the order of the referee directed the trustee to pay over the net proceeds of the sale to the W. E. Caldwell Company, it was thereby segregated and became a direct indebtedness or amount due to that company, and'hence was subject to garnishment-by its creditor. If a garnishment is-served, a judgment rendered upon it against the garnishee must be upon- it either against .him in his individual capacity or in his official capacity, either against his personal funds, or against the funds in his hands as trustee. This was not a transaction between James-individually and the Caldwell Company, nor an individual indebtedness by him. to that company, even though the company might have a right to proceed against-him if he failed to pay it in accordance with the order, of- the court; for such right would arise out of the fact that he had not carried out such order. The garnishment recognizes the action of the court ordering the sale and the payment of the net proceeds as a valid order, and is founded upon it. Without that order there would have been no sale and consequently no proceeds to pay. The garnishment proceeding, therefore, is'necessarily against the trustee in his representative capacity, and is an effort to subject funds which .lie holds in that capacity under an order- of the referee or bankrupt court. That court has exclusive jurisdiction in matters -of bankruptcy; the State court has none. In the regular order of proceedings, after distribution has been made, the bankrupt will seek a discharge, and the trustee, upon filing his report and account and vouchers, will also apply for a discharge. The court of bankruptcy would- hardly: grant, him a discharge from his trust-so long as he had money in his hands arising under an'order of the court, not finally paid .out or disposed of as the court had directed. If a State court could garnish a trustee in bankruptcy, to catch funds in his hands which had been ordered paid by the court to which he was directly amenable, but which he had not actually paid out, and could compel him to withhold the payment, regardless of the order of the court of bankruptcy, it will be readily perceived that confusion and conflicts of jurisdiction would at once arise, and that a State court, by mean-s of a garnishment, could indefinitely delay- the -fipal winding up of the matter in bankruptcy and the final discharge of the trustee. It has accordingly been held that a garnishment will not lie from a State court to a trustee or assignee in bankruptcy, to catch dividends which have been declared in favor of certain creditors or the amount which will be going to them under a composition. In Re Cunningham (Dist. Court of Iowa), 9 Cent. Law J. 208; Loveland on Bankruptcy (3d ed.), § 268, p. 782; 2 Remington on Bankruptcy, §§ 224, 225, p. 1363.

As the garnishment, in so far as it was directed to and served upon James as trustee in bankruptcy of the estate of Bailey, was without authority of law and void, and in so far as it was directed to and served upon him in his individual capacity it failed to reach and fasten upon any property or asset belonging to the defendant, no lawful levy of the attachment was made; and consequently the court was without jurisdiction of the attachment proceeding, and therefore properly dismissed it.

The error which the court committed was in also dismissing the declaration in attachment. The -Civil Code, § 4575, declares: “When the defendant has given bond and security, as provided by this code, or when he has- appeared and made defense by himself or attorney at law, or when he has been cited to appear, as provided by this code, the judgment rendered against him in such case shall bind‘all his property, and shall have'the same force and effect as when there has been personal service.” Section 4557 provides, that where notice in writing has been given, as therein provided, to the defendant of the pendency of the attachment and the proceedings thereon, “the judgment.rendered upon such attachment shall have the same force and effect as judgments rendered at common law; and no declaration shall be dismissed because the attachment may have been dismissed or discontinued, but the plaintiff shall be entitled to judgment on the declaration filed, as in other cases at common law, upon the merits of the case.” These two sections of the code have been construed together; and it has been accordingly held that under their provisions, although the attachment may be dismissed because of its invalidity, still the plaintiff is entitled to-proceed for a verdict and a general judgment on his declaration, if the defendant has appeared and made defense (Joseph v. Stein, 52 Ga. 332 (2)), or if he has replevied the property levied upon under the attachment (Camp v. Cahn, 53 Ga. 558 (2)), or if he has been duly cited to appear (McAndrew v. Irish-American Bank, 117 Ga. 510 (2), 514 (43 S. E. 858)). In the present case the defendant filed a general demurrer to the declaration in attachment. It is well settled that the filing of a general demurrer is equivalent to pleading to the merits of the case. Lyons v. Planters Bank, 86 Ga. 485 (12 S. E. 882, 12 L. R. A. 155); Savannah Ry. Co. v. Atkinson, 94 Ga. 780 (21 S. E. 1010); Southern Ry. Co. v. Cook, 106 Ga. 451 (32 S. E. 585); Paulk v. Tanner, 106 Ga. 219 (32 S. E. 99); Dykes v. Jones, 129 Ga. 99, 103 (58 S. E. 645). Counsel for defendant in error, however, contend that the demurrer was filed subject to the motion for which the defendant made its' “special appearance.” There was no express reservation to this effect in the demurrer; but admitting that the demurrer was so filed, and that, being so filed, it did not, when it was filed, amount to pleading to the merits or to appearing and making defense in the case made by the declaration in attachment, still when this-written motion to dismiss was overruled by the court, and no exception was taken by the defendant to this ruling, the general demurrer stood permanently uncovered; it was stripped of the protection afforded by the motion under cover of which it was made, and thenceforth stood as the equivalent of-a plea to the merits without reservation. Being made subject to the .final determination of the motion to dismiss which preceded it, and this, motion having been finally decided against the defendant, the demurrer was, of course, no longer subject to this motion.' In other words, the demurrer was made for the purpose of being considered in the event that the precedent motion to dismiss should be overruled, and when this motion was' overruled, the demurrer stood as unconditional-pleading in the case.

Judgment reversed.

All the Justices concur.