U.S. Supreme Court Williams v. Hill, McLane & Co., 60 U.S. 19 How. 246 246 (1856)
Williams v. Hill, McLane & Co.
60 U.S. (19 How.) 246
ERROR TO THE DISTRICT COURT OF THE UNITED
STATES FOR THE MIDDLE DISTRICT OF ALABAMA
The laws of Alabama provide that where there is a judgment against a debtor who is unable to pay, a process of garnishment, which is called in some of the states an attachment upon final process, may be issued and laid in the hands of a garnishee who may owe money to the judgment debtor or have any effects within the control of the garnishee.
The garnishee, having real property under his control by virtue of a deed of trust, cannot retain it for the purpose of reimbursing himself for advances made to the judgment debtor after the execution of the deed in execution of a parol contract between them.
Where the garnishee sets up a claim to the funds in his hands, he must prove the bona fides of his claim if it is derived from the judgment debtor after the origin of the creditor's demand.
Therefore, where the garnishee produced notes signed by the judgment debtor bearing date prior to the judgment, but did not prove their existence before the judgment in consideration, it was properly left to the jury to say whether there was fraud or collusion between the garnishee and the judgment debtor.
The case is stated in the opinion of the Court.
MR. JUSTICE CAMPBELL delivered the opinion of the Court.
The defendants recovered a judgment in the district court in a plea of debt against one Mahone. The latter having no property in possession liable to an execution, the defendants, in consequence, served a garnishment on the plaintiff, Williams, to attach any debt he might owe their debtor or secure any effects of theirs he might have.
The garnishee answered to the process that on the day the writ of garnishment issued, he had sold some personal property
of the debtor under the authority of two deeds of trust for the satisfaction of the debts described in them, and there remaining a balance due, he sold a house and lot, described in one of the deeds, for a sum sufficient to extinguish those debts and to leave a surplus. He further answered that Mahone, prior to the judgment, was indebted to him upon another account, and had so continued a debtor till the sale; that before the judgment and afterwards, before the sale, Mahone had instructed him to apply any surplus that might arise from the sale to the payment of that account, and he had done so in accordance with the instructions.
There was an issue formed upon the answer of the garnishee, and the subject of the controversy was the claim of the respective parties to the surplus above described.
The garnishee produced on the trial a number of promissory notes, dated prior to the judgment, and proved the signature of Mahone to them; he also proved that Mahone had admitted the authority of the garnishee to apply the surplus to the payment of his demands, not described in the deeds, shortly after the sale, and at that time disclaimed any power to control it. No evidence was given of the existence of the notes of a day prior to the answer, nor of their consideration. The defendants proved a conversation between their attorney and the garnishee on the day of the sale relative to the amount of the debt from Mahone to him, and that the notes were not mentioned by him in that conversation. The court instructed the jury that the inquiry for them was whether there was fraud or collusion between the garnishee and the debtor. That if they found that the notes were made in fraud or collusion, they would render a verdict in favor of the attaching creditors for the amount of the surplus in the hands of the garnishee. This charge includes the substance of all the questions presented to the court or jury.
We think the case was submitted as favorably for the garnishee as the facts warranted, and that he has no reason to complain in consequence of the instructions given or refused.
The plaintiff is not entitled to hold the surplus in his hands arising from the sale of the trust property, for the payment of the notes, under any stipulation in the deeds. Those provide for a return of the surplus to the grantor after the payment of the debts described. Nor can the real property conveyed in the deed be retained as a security for advances or debts subsequently made on the strength of a parol engagement. Such a contract would be avoided by the statute of frauds. Nor is the deed of trust such a conveyance or title paper as to afford a security, as a deposit, for subsequent engagements.
In Ex Parte Hooper, 1 Meri.Ch. 7, Lord Eldon said:
"The doctrine of equitable mortgage by deposit of title deed has been too long established to be now disputed; but it may be said that it ought never to have been established. I am still more dissatisfied with the principle upon which I have acted of extending the original doctrine so as to make the deposit a security for subsequent advances. At all events, the doctrine is not to be enlarged. In the present case, the legal estate has been assigned by way of mortgage. The mortgagee is not entitled to say this conveyance is a deposit, because the contract under which he holds it is a contract for conveyance only, and not for deposit."
The only other title that the garnishee has interposed against the claim of the attaching creditor is that the debtor made a valid appropriation of the surplus arising from the sale, to the satisfaction of a bona fide demand of the garnishee against him, prior to the service of the garnishment. The principle adopted by the courts of Alabama for such cases is that the adverse claimant for property or effects seized at the suit of a creditor by attachment or execution must prove the bona fides of his claim if it is derived from the debtor after the origin of the creditor's demand, and the declarations or acknowledgments of the debtor will not be received to support the title. The recitals in a deed or mortgage executed by him, or admissions made at the time of its execution, will not be received. Goodgame v. Cole, 12 Ala. 77; Nolen & Thompson v. Gwinn, 16 Ala. 725. Nor is the consideration of a note in favor of the claimant shown by the production of the note itself. De Vendell v. Malone, 25 Ala. 272. The objection to such evidence is said to be that it can be manufactured by one indebted, and by that means a creditor might be defeated, for in most cases it would not be practicable for him to prove a negative or disprove the statement made by his debtor. In the present case, the consideration of the notes was not proved, nor was their existence before the service of the garnishment shown otherwise than by their date -- that is, by an assertion of the debtor. Nor was the order to appropriate the surplus to their payment proved except by an acknowledgment to a stranger after the writ of garnishment had been issued.
The bona fides of the title of the garnishee to the surplus in his hands was not supported by competent proof, and therefore the lien of the garnishment was properly maintained.
The plaintiff contends that the proceeding by garnishment is a statutory proceeding by which a creditor is enabled to reach a demand in favor of his debtor against a third person,
and that the remedy can only be resorted to when the debtor himself could maintain debt or indebitatus assumpsit, and that the only issue which can be made upon an answer of the garnishee is, indebitatus vel non. The Supreme Court of Alabama have decided, in the cases cited, that merely equitable demands or rights of action, not involving a debt or assumpsit, are not the subject of the garnishee process. But the same court has determined that money or effects in the hands of the garnishee, which are fraudulently withdrawn from the creditors of a defendant, may be reached, in an attachment or judgment, by that process. Hazard v. Franklin, 2 Ala. 349; Lovely v. Caldwell, 4 Ala. 684, and the Civil Code of Alabama, sec. 2,523, provides explicitly for the attachment of a demand similar to that existing in this case.