Assigned Estate of Hamill ( 1896 )

Opinion by

Reeder, J.,

There is but one question raised by the assignment of error. Hamill was indebted to the First National Bank of Greenville for $5,000, which was secured by transfer, as collateral security, of some whisky in a bonded warehouse (this indebtedness, however, does not enter into our consideration of this case); for a note for $2,000, to secure which lie gave to R. .S. Johnston, president of the bank, a deed to a hotel property owned by him, which, although absolute on its face, was actually given as collateral security; and for two notes, one of $300 and one of $567.94, for which the bank held no security except a note of one M. P. Kelly, for $350 not yet due at the time of the last hearing before the auditor. Judgment was confessed by Hamill on the $2,000 note in Crawford county, on August 28, 1893. Prior to this, there had been a payment of $500 made upon the $2,000 note, leaving a balance of $1,500 still due.

.. After the bank entered this judgment in Crawford county, and on, the same day, viz : August 28, 1893, on an exemplified record, they entered judgment in Venango county and issued an attachment execution, naming the International Bank of Franklin and C. W. Gearing as garnishees. This- attachment wab served on the day following the entry of the judgment.

The amount of money in the hands of the garnishees, belong-' ing to Hamill, was $790.79. After the attachments had arrested the money in the possession of the garnishees, Hamill agreed with Johnston, the president of the bank, that he would give-him an order on the International Bank to pay over the- money in the International Bank, if he, Johnston would apply it to theClift judgment, the first lien upon the hotel property, and would add to it an amount sufficient to pay the Clift judgment. Johnston agreed to this, and the money, $790.79, made up of a balance due Hamill of $190.79, and the proceeds of three notes, for $200 each, given to Hamill' by Gearing was paid over- by the-bank to Johnston, he agreeing to save them harmless, discontinue the attachments, and pay the costs.

This payment was made November 9, 1893. Afterward, on December 4,1893, Hamill made an assignment for the benefit of creditors to R. S. Johnston. At the time of the assignment, the $790.79 was not in the possession of Johnston as an individual, it having been paid over to him as the president of the bank, upon an agreement between the bank and Hamill that it should be used for the purpose of paying the Clift judgment/ This they offered to do, but Mrs. Clift refused to accept the money and assign her judgment. Hamill then agreed that the money should be applied to any shortage there might be on any notes of his, due to the First National Bank.

These are the facts as they are found by the court below, and there is no finding by the auditor which is in opposition to it. This finding is moreover fully justified by the evidence.

Subsequently on June 6, 1894, it was agreed in writing by all the parties in interest, including this appellant, that Johnston should declare in writing a defeasance of the deed to the hotel property as assignee under an order of the court and “ that after said property had been sold the proceeds thereof shall be first applied to the balance due upon a note of $2,000 for which said property was conveyed .... and the balance of the proceeds of the sale of said Hamill hotel property to go into the general fund for distribution among the creditors of the said Hamill according to priority of liens.”

This was done, and the property was sold for $1,975. When the assignee filed his account, he deducted the balance due on the $2,000 note from the proceeds of the sale. The appellant claims that the $790.79 paid after the attachment executions had issued, ought to have been first credited on the balance due on the $2,000 note, and then the amount still due should have been deducted from the proceeds of the sale of the hotel property. He therefore seeks to have him surcharged with that amount.

This the court below refused to do, and this is the only question raised before us by this assignment of error.

If this money had been made upon the attachments, the position of the appellant would be incontrovertible. When this money was paid by the International Bank to the First National Bank, viz: November 9,1898, no interrogatories had been filed, no judgment obtained. If the bank had discontinued all proceedings, as it had the right to do, no claim could have been made against the .bank by any creditor because of its having done so. The learned auditor properly admits that the bank could have abandoned its attachment and permitted the parties named as garnishees to pay over this money to Hamill, without incurring any liability as to the other creditors; but he contends, as the bank did not do so, but only agreed to dissolve the attachments, without actually dissolving them prior to the payment of the money, and although the money was to be devoted to a specific purpose when paid to the bank, and was then paid only upon the order of the only parties in interest, the plaintiff and the defendant in the judgment, the garnishees having no interest, being mere stakeholders, the money must be regarded and treated as having been made upon the attachments in execution, and must be credited upon the judgment.

We agree with the learned court below, that this is an erroneous conclusion. Suppose the agreement between the Bank and Hamill had been carried out, and the money applied to the purchase of the Clift judgment, could Johnston, as assignee, have been surcharged with this money because he did not apply it to the bank judgment, on the application of creditors who had been injured by such payment ? Yet if it was made upon the attachments, he would have been bound to apply it as a credit upon the bank judgment no matter what agreement he might have made with Hamill. The attachments created a lien upon the funds, but when the money was paid over to the bank, in consequence of an agreement between Hamill and the bank that the attachments should, be dissolved and the money appropriated to a specific use, it was an abandonment by the bank of their attachment just as much as if it had been entered of record. It was such an abandonment as any court would have enforced upon this statement of facts upon a petition to dissolve the attachments; and when the money could not be used for the purpose agreed upon, Hamill had the power to direct that it should be appropriated by the bank to any purpose which' he saw fit.

There is but one more question left for our consideration. The unsecured notes that the bank held against Hamill, to the payment of which they claim the right to appropriate this $790.79, amount to $867.94. As collateral security to these notes, they hold a note of M. P. Kelly for $350. If this note is paid, and the $790.79 plus the $350 exceed the amount due the bank from Hamill, the balance must be paid to Johnston as assignee and distributed by him. The fact however that the bank holds this Kelly note as collateral security to Hamill’s note does not oblige, as the appellant seems to contend, the bank to credit Hamill with the amount of the Kelly note. They have the right to appropriate all the money in their hands to the payment of the Hamill notes, and, if that extinguishes Hamill’s liability to the bank, the Kelly note, or its proceeds, must be turned over to Hamill’s assignee.

The exceptions are dismissed, and the decree of the court below affirmed.