Court Opinion

ID: 9637667
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:14:45.214172+00
Date Added: 2024-06-11T18:09:58.912279
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting).
The conclusion of the majority is in'effect that an inchoate garnishment proceeding by publication, begun in Illinois, limits the general jurisdiction of a federal court in Texas in an interpleader suit to hear, determine, and decree, by compelling it to deny to the head of a Texas family, the homestead exemption which Texas laws guarantee. I feel strongly that the decision, in requiring a Texas court to deprive a Texas family of its homestead exemption to pay a debt incurred and payable in Texas, is harsh and unjust, subversive of the public policy of Texas and its established social order. Beeairse I do, and because I think it plain that the opinion bases and proceeds on premises and reasoning wholly unsound, I am constrained not only to dissent, but to give my reasons for doing so.
On the former appeal, National Fire Ins. Co. v. Sanders, 38 F.(2d) 212, we held that the garnishment proceeding had not vested jurisdiction of any res in Illinois, and that “any judgment to be rendered against the g'arnishee there would he a personal judgment to be satisfied out of personal property and not out of any particular fund or segregated property.” On this appeal the majority takes just the opposite view. They find that there was a res impounded and a lien fixed thereon. On the former appeal we held: “The District Court has jurisdiction to determine which of the claimants is entitled to the fund deposited in court, and to award it accordingly.” On this appeal the decision of the court is in effect that the District Court had not full jurisdiction of the cause to inquire into the merits of the claim that the proceeds of the policies were exempt and determine accordingly; that the jurisdiction the court had was merely a ministerial and perfunctory one to render the judgment in the interpleader suit which the HLinois court would have rendered if the garnishment had proceeded to judgment there; that, in short, the only effect of the interpleader suit and the injunction against the Illinois proceeding was in substance to transfer it to Texas to be consummated there under the control of the stipulation of the parties that in Illinois the exemption would not be allowed.
The views of the majority, I think, run counter, not only to the essential right and justice of this cause, hut to the settled rules of law governing matters of this kind. First, as to the justice of the exemption claim.
I oppose, to the view expressed in the majority opinion that creditors “are favored in the court of conscience” as against those holding exemptions, the settled law that a court of equity, having jurisdiction of the parties, will restrain a creditor from resorting to the courts of another state in order to defeat an exemption allowed by the laws of the state where the debt is created and is payable, as well as when suit is brought to- defeat any other policy of the state, and that the full faith and credit clause does not prevent its doing so. Moton v. Hull, 77 Tex. 80, 13 S. W. 849, 8 L. R. A. 722; Cole v. Cunningham, 133 U. S. 107, 10 S. Ct. 269, 33 L. Ed. 538; Wilser v. Wilser, 132 Minn. 167, 156 N. W. 2, 71; Kansas City Rys. Co. v. McCardle, 288 Mo. 354, 232 S. W. 464, 468; Weaver v. Alabama Great Southern R. Co., 200 Ala. 432, 76 So. 364, 365. The notes executed by Sanders were Texas obligations. They were signed in Texas; they were payable there. They were captioned “State of Texas, DoKalb, Texas, May .1, 1926”; they provided, “This note shall he payable at Stockyards National Bank, Fort Worth, Tarrant County, Texas.” There is no doubt that, if a Texas court could have obtained jurisdiction of Armour, it would have enjoined his prosecution of the suit in Illinois.
In the light of these authorities, to say, as the majority does, that a court of conscience sitting in Texas has jurisdiction of a creditor who has undertaken shrewdly to circumvent its exemption laws so as to compel a Texas debtor to pay a Texas obligation out of exempted proceeds of insurance policies on his home, is, in my opinion, to incorrectly state the law.
To the view implicit in the opinion, that the Texas homestead exemption laws are too liberal, and because too liberal the federal courts justly deny them effect, I oppose not only the observation that it is for Texas alone *908to determine the level of domestic peace and security 'which the genius of the state requires ánd to fix its exemptions accordingly, but the (observation that “it has always been the policy of Congress, both in general legislation and in bankrupt acts, to recognize and give effect to the state exemption laws.” Holden v. Stratton, 198 U. S. 214, 25 S. Ct. 656, 659, 49 L. Ed. 1018. In that case it was said: “This was cogently pointed out by Circuit Judge- Caldwell, in delivering the opinion in Steele v. Buel, where he said (44 C. C. A. 287, 104 F. 968, 972): ‘From the organization of the Federal courts under the judiciary act of 1789, the law has been that creditors suing in these courts could not subject to execution property of their debtor exempt to him by the law of the state.’ * * * The same rule has obtained under the bankrupt acts, which have sometimes increased the exemptions, *. * * but have never lessened or diminished them. An intention on the part of Congress to violate or abolish this wise and uniform rule, observed from the ■creation of our Federal system, should be inade to appear by clear and unmistakable language.”
To the view announced by the majority that exemptions are matters of local law, ¡having in themselves no extraterritorial effect, .and that they will not ordinarily be enforced in states other than that of their creation, I oppose the settled policy of substantial^ all the states to insure, by statuté and .decision, the exemption from seizure for debt of.the home and the proceeds of insurance policies on it (Chase v. Swayne, 88 Tex. 218, 30 S. W. 1049, 53 Am. St. Rep. 742; Ketcham v. Ketcham, 269 Ill. 584, 109 N. E. 1025) and the modern view that comity re■quires that exemptions allowed in a state be ¡not .defeated by suits brought in another state '¡to avoid them (Reames v. Morrow, 193 Ill. App. 155; Singer Mfg. Co. v. Fleming, 39 Neb. 679, 58 N. W. 226, 23 L. R. A. 210, 42 Am. St. Rep. 613; Strawn Mercantile Co. v. First National Bank [Tex. Civ. App.] 279 S. W. 473, 474; Jackson & Co. v. Republic Iron & Steel Co., 141 Ill. App. 453; Baltimore & Ohio S. W. R. R. Co. v. McDonald, 112 Ill. App. 391).
The majority holding to the confused notions of debt situs advanced in Chicago, Rock Island & P. R. Co. v. Sturm, 174 U. S. 710, 19 S. Ct. 797, 43 L. Ed. 1144; King v. Cross, 175 U. S. 396, 20 S. Ct. 131, 44 L. Ed. 211, as 'determining jurisdiction in garnishments,, exploded in-Harris v. Balk, 198 U. S. 215, 25 S. Ct. 625, 49 L. Ed. 1023, 3 Ann. Cas. 1084, ¡treat garnishment proceedings as now in personam, now in rem, and contrary to the universally recognized rule that priority of judgment rather than priority of garnishment controls seeks to rest upon the universally denied theory that the garnishment impounded a res in Illinois its conclusion that a lien was fixed there.
Questions of justice and comity aside, however, I think that a correct understanding of the nature and effect of garnishment proceedings, the nature and effect of a federal interpleader suit, and the law governing federal courts sitting in a state as to the exemptions allowed in that state, make it plain that the District Judge was right, and that the reversal of his judgment was wrong. And, first, as to the nature of a proceeding in garnishment.
Garnishment proceedings, though they undoubtedly derive generally from the custom of London (Chicago, R. I. & P. R. Co. v. Sturm, 174 U. S. 710, 19 S. Ct. 797, 43 L. Ed. 1144), are in the United States purely statutory. In each state their nature and results are those which the courts of that state conceive that the statutes impart to them. Beale, in his very interesting article, “The Exercise of Jurisdiction in Rem to Compel Payment of Debts,” 27 H. L. R. 107, shows how far in ■the United States garnishment proceedings have departed from the custom of London, and how, though in the beginning treated as based on the notion that the situs of the debt fixed the place of suit, with varying views as to where that situs was (Chicago, R. I. & P. R. Co. v. Sturm, 174 U. S. 710, 19 S. Ct. 797, 43 L. Ed. 1144; King v. Cross, 175 U. S. 396, 20 S. Ct. 131, 44 L. Ed. 211), they are now, under the influence of Harris v. Balk, 198 U. S. 215, 25 S. Ct. 625, 49 L. Ed. 1023, 3 Ann. Cas. 1084, and the general current of authority, regarded as suits in personam, the jurisdiction to maintain which is based, not at all on theories of situs, but on the power of the court to obtain personal jurisdiction over the garnishee. He shows ■that the notion that garnishment is an ordinary action in personam, jurisdiction to ■maintain which exists wherever the garnishee can be served, has entirely superseded the original notion of garnishment as a proceeding based on jurisdiction in rem over a thing. Minor, in his Conflict of Laws, also interestingly discusses these questions of situs and jurisdiction, and of the nature of a garnishment action. He concludes, page 290, citing Mooney v. Mfg. Co. (C. C. A.) 72 F. 32, that a garnishment is but a proceeding in personam, while in the courts of Illinois the same rule is definitely laid down. They hold that, *909being a personal action, not the filing of the suit, but the obtaining of final judgment, fixes the rights of the parties. McElwee v. Wilee, 80 Ill. App. 338; Lancashire Ins. Co. v. Corbetts, 165 Ill. 592, 46 N. E. 631, 36 L. R. A. 640, 56 Am. St. Rep. 275; Becker v. Ill. Central R. Co,, 250 Ill. 40, 95 N. E. 42, 35 L. R. A. (N. S.) 1154. In some courts a garnishment is spoken of as a proceeding quasi in rem. Coign v. Plaines, 90 Conn. 293, 97 A. 337. In some as a species of attachment. In others, as a mere personal action at the end of which there is in effect a forced assignment from the original creditor to the garnishing creditor, an action creating no specific lien, hut holding the garnishee to a personal liability, depending upon his liability to the principal defendant. Sargent County v. State, 47 N. D. 561, 182 N. W. 270. In some, as a proceeding creating no lien, but merely a contingent personal liability to respond to any judgment after it is recovered. Murphy v. Bjelik, 87 Or. 329, 169 P. 520, 521, 170 P. 723; Rodgers v. Oliver, 200 Iowa, 869, 205 N. W. 513. In some states it is likened to an equitable trustee proceeding. Weinberg v. Brother, 263 Mass. 61, 160 N. E. 403. In others, it is said that a proceeding in garnishment is merely a proceeding for the purpose of effecting a compulsory assignment of the claim by process of law. Seventy-First St. & Broadway Corp. v. Thorne, 157 A. 851, 10 N. J. Misc. 99.
These different expressions have no absolute, no general, significance. They represent the attempt of each court to set down in its own terms the effect of a g'amishment action which is to warn the garnishee not to pay the debt to the principal creditor, unless and until directed by judgment to do so. They establish that, regardless of the pendency of trustee or garnishment proceedings, the principal defendant may at any time commence and prosecute his action, and that no proceedings against the garnishee short of judgment, and no payment made by him before judgment, will protect or release him from the claim o.£ the principal creditor. McIntosh v. Bramson, 130 Me. 420, 157 A. 234. They establish that, though the principal defendant may not, after his debtor has been garnished, assign his claim or do any other thing to defeat the garnishment, the proceeding is still only a personal action; it fixes no lien; it protects the garnishee against liability only after judgment; and, until it has gone to judgment, it is ineffective as against the rightful claims of the principal creditor that the fund is not garnishablo because of the exemption when asserted in a court of competent jurisdiction. They establish that the pendency of á trustee or garnishment proceeding in another jurisdiction is not a ground in bar of local action; that such proceedings do not bar until they come to judgment, and that they do not even operate to stay, except in the interest of the garnished defendant to save him from double liability. Solomon v. Continental Ins. Co., 261 Mass. 360, 158 N. E. 774.
Under these decisions, no lien was fixed by the inchoate proceeding in Illinois. Nothing occurred there except the starting of a persona] suit the same ás that which Sanders started by filing his clainrin the interpleader suit. Under these decisions, since the time of obtaining judgment in, and not the time of filing, personal suits, fixes the rights of the parties, the matter stood as between Armour and Sanders in the interpleader suit after they had claimed in it, exactly as it would have stood had Sanders filed his suit in Texas., Armour his in Illinois, and both had been enjoined.
It remains to inquire what kind of jurisdiction the District Court exercises in a federal interpleader suit; that is, whether it is a full jurisdiction of the parties and the cause, or a limited one, as the majority assert it to be, and, if a full jurisdiction, what law should be applied. First, as to the nature of an interpleader suit.
“Interpleader is a typo of judicial proceeding admirably fitted to achieve justice in complicated controversies. In order to give full relief to the applicant who seeks inter-pleader, the court must have the power to enjoin the claimants from prosecuting their claims outside of the interpleader proceedings, for otherwise its decree would not terminate the controversy. Chafee, Interstate Interpleader. Y. L. J. Vol. 33.”
Such a suit is not a suit in rem, it is an equitable proceeding in the nature of a hill or peace, for the purpose of avoiding multiplicity of suits, and the possibility of double liability. It enables one having no interest except to protect himself from double liability, against whom harassing and vexations litigations are, or are about to be brought, to bring into one forum all opposing claimants and compel them to settle there the question which is entitled to the payment each demands. Because, like garnishment, it is a personal suit, and not a suit in rem, personal jurisdiction over the claimants is essential. New York Life Ins. Co. v. Dunlevy, 241 U. S. *910518, 36 S. Ct. 613, 60 L. Ed. 1140. That jurisdiction existing, however, the court in which the interpleader is filed has full authority to hear and dispose of the claim in accordance with the applicable law. It is perfectly clear, in fact, it is conceded by the majority, that federal courts sitting in a state ordinarily apply the exemption laws of the state (Holden v. Stratton, supra), and that ordinarily, if “the decree would have been right in - * - * * . the State of Texas, it was right in a District Court of the United States sitting in the same State.” Union Trust Co. v. Grosman, 245 U. S. 412, 38 S. Ct. 147, 148, 62 L. Ed. 368; Pritchard v. Norton, 106 U. S. 124, 1 S. Ct. 102, 27 L. Ed. 104.
But it is said by the majority that in Chicago, R. I. & P. R. Co. v. Sturm, 174 U. S. 710, 19 S. Ct. 797, 43 L. Ed. 1144, it was held that a garnishment proceeding created a lien, and that courts in the state of the exemption must give effect to the lien so created.
With all due deference, the Sturm Case decided no such thing. It was a suit in which a defendant, against whom judgment in garnishment had gone in Iowa, sought to stay the suit of the creditor of the principal defendant in Kansas until the garnishment proceeding could be finally determined. Proceeding in that ease upon the erroneous view that the garnishment in Iow.a had seized a debt having a situs there, because the garnishee lived there, it did hold that, in order to- save the garnishee double liability, he was entitled to a stay of the suit of the principal defendant for the debt after judgment had gone in the garnishment suit. It did not hold, the question was not before it, that a federal court in the state of the exemption having jurisdiction of both the principal creditor and the garnishing creditor in an interpleader suit filed by the garnishee would be compelled to recognize an inchoate garnishment proceeding in another state, brought there on a Texas obligation to defeat Texas exemption laws, as superior to the exemptions granted by the laws of Texas. It did not hold that a federal court having complete personal jurisdiction of two claimants, neither of whom had obtained a judgment, would be bound by the full faith and credit clause, to render a judgment on a Texas contract in favor of one of them, who, contrary to the fundamental public policy of the state of Texas,» had resorted to another state to defeat its exemption laws.
What the majority has done is to give to the Sturm Case the effect, not only of deciding questions which were not before it, but of laying do.wn a rule which it did not even advert to, a rule contrary to established law, that the full faith and credit clause binds the courts of a state to give effect to inchoate public acts and judicial proceedings of another state, contrary to its established fundamental policies. The majority, in reversing and rendering this cause, has laid down the rule that the bringing of a garnishment suit compels the federal court in another state in which a bill of interpleader is filed to- deny exemptions allowed by the state in which it sits, contrary to the fundamental policy of that state. The full faith and credit clause of the Constitution does not require such action. Courts have never held that it did. On the contrary, they have held, without varying, that courts of a state do not have to enforce public acts or judicial proceedings, though final in their nature, which are contrary to the public policy of that state, and the jurisdiction has always been recognized to- enjoin the prosecution of such suits or actions to obtain the fruits of them. See cases supra, and Rose’s notes to Cole v. Cunningham, 133 U. S. 107, 10 S. Ct. 269, 33 L. Ed. 538.
The true rule is that, though the full faith and credit clause does generally require recognition of the public acts and judicial proceedings of another state, it does not require the courts of one state to give effect to. personal actions looking to the establishment of a right 'or charge while those actions are still inchoate. Becker v. Ill. Central R. Co., supra; Lancashire Ins. Co. v. Corbetts, supra. It does not require the courts of one state to exercise their jurisdiction to enforce the public acts or judicial proceedings of another, when those acts or proceedings, if given effect, would result in subverting the public policy of the forum. Bradford Elec. Light Co. v. Clapper, 286 U. S. 160, 52 S. Ct. 571, 76 L. Ed. 1026.
Because, then, Armour’s proceeding in Hlinois was a mere personal action to obtain a general judgment for moneys, and was not a suit to impound a res or fix a lien or charge upon it, and because that suit “had not resulted in a personal judgment enforceable personally, either against Sanders or the garnishee, and because, if those proceedings be considered to have given Armour any kind of lien or charge, it would be one available only against persons claiming by subsequent acts under Sanders, not one available in a Texas court to defeat Sanders’ exemption claim in subversion of the established policy of that state, I think it plain that, when it filed its claim in the interpleader suit, that claim took rank behind the claim of Sanders.