Court Opinion

ID: 9865206
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:27:01.671326+00
Date Added: 2024-06-11T12:37:53.809373
License: Public Domain

Mr. Justice Bouck, dissenting.
I reluctantly dissent. My views are, of course, known to my colleagues. Were it not that I fear the creation of a bad precedent by the majority opinion herein, I would merely note my dissent now as I did when the original decision was announced; for the reason given, however, I feel constrained to state in writing the grounds of my original dissent, which are the basis of my belief that the majority’s present denial of a rehearing is not justified under any sound principle of law, equity or justice. Some of the unfortunate results flowing from the majority opinion, as I read it, are these: (1) It deliberately nullifies the sanction of a valid contract. (2) It gives the garnishing' creditors of a principal *189debtor what the debtor himself could not demand. (3) It usurps the functions of the, trial court by upsetting the latter’s findings of fact. (4) It ignores the res judicata represented by direct and final decisions of both the state and the federal courts on the very subjects involved in this case.
1. The contract set out in the opinion was entered into in 1932 between Bowman, an original mortgagor, and Norman Apartments, Inc., his successor in interest, on the one hand, and those representing the mortgagees under the first mortgage upon the apartment property, on the other. The validity of the contract is not questioned. There is no suggestion anywhere of fraud, accident or mistake in its making or in its performance. The original parties were bound by its terms. They undeviatingly acted upon it and in accordance with it. Presumably it possessed every sanction given to validly existing contractual rights. That contract commendably undertook to substitute for the expensive procedure of receivership (and the first mortgage creditors are conceded to have been entitled to a receiver if they had chosen to apply therefor) a fair and effective method of handling the income from the property so as not to be within the reach or control of the mortgagor, but to be promptly deposited in the defendant bank and applied by the bank in strict accordance with the terms of the first mortgage, which had been executed nearly twelve years before the garnishment was attempted under the judgment now owned by plaintiff in error Fisher. That mortgage covered not only the lands and the improvements thereon but “all the rents, uses, and privileges thereof, which are hereby assigned.” The meaning of the contract seems plain, and I fail to see how the instrument could lend itself to such an unnatural interpretation as is placed upon it by the majority opinion.
If a receiver had been appointed by a court, Fisher would admittedly have had no right whatever to assets of Norman Apartments, Inc., as against the claimants under *190the first or second mortgage, or as against the creditors arising in the course and by reason of the receivers ’ operating the apartments. The aforesaid contract properly attempted to accomplish the same result. Nothing in the law forbids such a contract or requires it to be recorded. The contract should therefore have been upheld as against the garnishing creditors. See Peterson v. Marple, 75 Colo. 389, 225 Pac. 814, and the following authorities there cited with approval: Barnes v. Shattuck, 13 Ariz. 338, 114 Pac. 952; McDaniels v. Maxwell, 21 Ore. 202, 27 Pac. 952, 98 Am. St. Rep. 740; 3 Pomeroy Eq. Jur. (3d ed.), §1280.
The decision of the court, in the face of the situation so existing, confers a preference upon a single subsequent creditor, advancing him ahead of both the first and the second mortgage, and ahead of all other creditors, and diverting to him as a special beneficiary the very income created by other creditors’ services and supplies found necessary to continue operation of the apartments and thus to conserve the property.
2. In view of the fact that the total assets fall short of paying the mortgage creditors themselves, the decision of this court amounts to an abrogation of long established legal liens arising- out of lawful contracts, and to giving to the process of garnishment a power unheard of before. It is settled law in Colorado that a garnishing creditor can get no more from the garnishee than could the primary debtor himself if the latter were to sue the garnishee. Universal Fire Ins. Co. v. Tabor, 16 Colo. 531, 27 Pac. 890; Collins v. Thuringer, 92 Colo. 433, 21 P. (2d) 709. Norman Apartments, Inc., the debtor here, could not have recovered the funds in question.
3. That the decision is an unjustifiable interference with the lower court’s functions as a fact-finding tribunal is apparent from the record. The findings below based upon the inviolability of a contract in full force, and upon the limitations to which all garnishments have hitherto been subject, and upon res judicata, have been *191supplanted by pronouncements not resting upon any principles heretofore known in our state. The lack of pertinent citations in support of those pronouncements is significant.
4. Litigation directly involving the issue now before this court has gone into final judgment in the foreclosure suit itself.' With full jurisdiction of the subject matter and of all creditors of Norman Apartments, Inc., including Fisher, the district court of Denver decided that the funds in question were not the property of the Apartments, but were the property of the bondholders’ committee as representatives of the creditors under the first mortgage. From that decision no appeal was taken. A like judgment was entered by the federal district court of Colorado in the Norman Apartments bankruptcy case, wherein Fisher was an actual party. The federal district court ruled the same way in a second case. In all instances the question was a direct issue. The second federal district court judgment was affirmed by the circuit court of appeals of the tenth circuit. Morrison v. Rockhill Improvement Co., 91 Fed. (2d) 639, decided on August 10, 1937. These adjudications, I think, clearly constitute res judicata.
Time is not available for further discussion. The foregoing is therefore respectfully submitted as my statement of dissent.