Van Ness v. McLeod

MORGAN, J.

This action was brought June 22, 1891, by J. H. Van Ness, plaintiff, against George A. McLeod, defendant, on two promissory notes executed and delivered by said defendant to one David Earhart, who assigned said notes to plaintiff herein before maturity. Defendant demurred to the complaint, on the ground that it did not state facts sufficient to constitute a cause of action. On December 8, 1892, defendant tiled a motion in the district court for Alturas county, where this action was pending, to suspend further proceedings in above cause pending a decision in the case of First National Bank of Hailey v. J. W. Hodgman et ad., then pending in said court, in which proceeding defendant had been garnished, as debtor of said Hodgman, by said bank. By the provisions of section 4308 of the Bevised Statutes of IdahOj the plaintiff in an attachment suit, if he is informed or has reason to believe that any person is owing any debt to the defendant in said suit, may require the sheriff to serve upon said person a copy of the writ, and a notice that such credits or other property or debts are attached in pursuance of such writ. Section 4309 provides that all persons having in their possession or under their control such credits, unless such debts be paid to the sheriff, shall be liable to the plaintiff for the amount of such debts, until the attachment be discharged, or any judgment recovered by him be satisfied. It is a general rule under these statutes, and the decisions of the courts in reference thereto, that the garnishee is liable to the attaching creditor to the amount of his indebtedness to the defendant in the attachment suit; and, if the garnishee is sued by his creditor (the defendant in the attachment suit) he can procure a suspension of proceedings in said action, until his liability to the attaching creditor shall be determined. The method of procuring such suspension is by motion based upon an affidavit stating that he has been garnished in a suit wherein his creditor is defendant, and asking a stay of proceedings until his liability in the attachment suit then pending shall be determined. Hpon presentation of this motion, and a proper affidavit, further proceeding in the cause should be suspended. (3 Estee’s Pleading and Practice, sec. 4175; McFadden v. O’Donnell, 18 Cal. 160; McKeon v. Mc-Dermott, 22 Cal. 667, 83 Am. Dec. 86; Pierson v. McCahill, 21 Cal. 122; Winthrop v. Carlton, 8 Mass. 456; Wade on Attachments and Garnishments, sec. 501.) The plaintiff, how-ever, contends that the indebtedness of McLeod to' Hodgmar cannot be reached by the attaching creditor by garnishment* because the notes which were the evidence of such indebtedness had been transferred to Yan Ness (plaintiff in this action), and cites Waples on Attachments, 202, 215, and .other authorities. These authorities do not sustain the contention. It is true the general rule is, as stated, that the garnishee is not chargeable unless the defendant in the attachment suit could recover of him what the creditor seeks to secure by garnishment; but an exception exists in the case where the debt, or the evidence thereof, is transferred to a third party, for the purpose of its being reached by his creditors, or in fraud of their rights. In such a case the defendant in the attachment could not recover the indebtedness, but his creditor may. The fraudulent transfer debars the defendant from suing for it, but it is no estoppel should the plaintiff in the attachment suit seek tc Teach the property in the assignee’s hands by process of garnishment. (Waples on Attachments, 215.)

The plaintiff in the attachment suit could treat the property or debt as still belonging to the defendant, though in the hands of a third person; yet-the defendant could not claim it as his, and have his right of action against such third person. In the case at bar the defendant, McLeod, alleges in his- affidavit that the said notes are actually the property of J. W. Hodgman, the defendant in the attachment, and that they were given to said Earhart and transferred! to Yan Ness at the request of Hodgman, without consideration, in fraud of and with the view of preventing his creditors from reaching them. If this is true, and it must be taken as true for the purpose of this motion, then the further prosecution of the case against McLeod should have been suspended until the determination of the principal suit. (Sickman v. Abernathy, 14 Colo. 174, 23 Pac. 447.) The validity of the assignment, and the question as to whether the notes in fact were and are the property of the defendant J. W. Hodgman, may be tried in the garnishment proceeding instituted by the First National Bank against Bews, Hodgman >et al., and this suit should await the trial of such issue. (Lee v. Tabor, 8 Mo. 233; Perea v. Bank, 6 N. Mex. 1, 27 Pac. 322.) The contrary doctrine would compel this court to assist in .making successful a fraudulent transfer of choses in action to defeat the claims of creditors, and would enable the debtor in many eases to defeat his creditors by a fraudulent transfer of his property — a position against law and good conscience. It is the opinion of this court that the judgment of the district court should be reversed, and the cause suspended until the ■question of the liability of the defendant, McLeod, to the attaching creditor be determined; and it is so ordered. Costs awarded to appellant.

Sullivan, C. J., and Huston, J., concur.