S. W. ELLERY, as Superintendent of Banks of the State of Arizona and Ex-officio Receiver of SONORA BANK AND TRUST COMPANY, an Insolvent Banking Corporation, Appellant,
E. K. CUMMING, Appellee
APPEAL from a judgment of the Superior Court of the County of Santa Cruz. W. A. O'Connor, Judge. Reversed and cause remanded, with instructions.
Mr. James V. Robins, for Appellant.
Mr. G. A. Little, for Appellee.
E. K. Cumming, hereinafter called plaintiff, recovered judgment in the superior [40 Ariz. 513] court of Santa Cruz county against one H. J. Farmer for $527.30. On September 12th, 1931, and after such judgment, he had a writ of garnishment served upon the Sonora Bank & Trust Company, hereinafter called the bank, which answered denying any indebtedness to Farmer. The answer was controverted by plaintiff and an issue in garnishment duly formed. Before such issue could be heard, the bank became insolvent and its assets were taken over by S.W. Ellery, as superintendent of banks, hereinafter called defendant, and he was substituted as garnishee in place of the bank. Thereafter the issue in garnishment was tried, and the court found that, at the time the writ was served on the bank, Farmer had in a general deposit with it the sum of $281.98, and rendered judgment accordingly. Plaintiff then filed a claim with defendant, as receiver, for the amount of such judgment in garnishment asking that it be allowed as a preferred claim. This defendant refused to do, but did allow it as a general claim, whereupon plaintiff brought this suit to establish his right to a preference. The trial court rendered judgment ordering the defendant to allow and pay the claim as a preferred claim, there being ample funds in his hands for such purpose, and from such order this appeal is taken.
The sole question before us is whether, as a matter of law on the foregoing facts, plaintiff was entitled to a preference as against the assets of the bank, or merely a general claim.
Garnishment is a creature of the statute. It is obtained after judgment through affidavit to the effect that the garnishee is indebted to the judgment debtor or has in his hands effects belonging to such judgment debtor. Upon such affidavit a writ is issued and served upon the garnishee in the same manner as summons in a civil action. The effect of the writ after service, so far as we need consider it [40 Ariz. 514] for the purpose of this case, is set forth in the 1928 Code as follows:
"§ 4264. Liability of garnishee; replevin by defendant; bond; judgment thereon. From and after the service of such writ of garnishment, the garnishee shall not pay to the defendant any debt, or deliver to him any property. . . . "
"§ 4269. Judgment for plaintiff against garnishee. Should it appear from the answer of the garnishee, or otherwise, that the garnishee is indebted to the defendant, in any amount, or was so indebted when the writ was served, the court shall render judgment for the plaintiff against the garnishee for the amount so admitted or found to be due to the defendant from the garnishee, unless such amount shall exceed the plaintiff's judgment against the defendant in which case it shall be for the amount of such judgment.
"§ 4270. Garnishee to deliver property to officer. Should it appear from the answer of the garnishee, or otherwise, that the garnishee has in his possession, or had when the writ was served, any property of the defendant liable to execution, the court shall render judgment requiring the garnishee to deliver to the sheriff or any constable presenting an execution in favor of the plaintiff against the defendant, such property or so much thereof as may be necessary to satisfy such execution, which judgment may be enforced as a contempt."
It is, of course, conclusively established by the record herein that the garnishee bank was indebted to the defendant, when the writ was served, in the sum of $281.98, and the court properly rendered judgment against it for that amount.
A receiver of an insolvent bank under the laws of Arizona takes possession of the assets thereof subject to all equities in favor of third persons which have arisen or been obtained as against any of the property or assets of the bank prior to such receivership, and to any liens obtained more than thirty days prior to such taking over of the bank. Section 246, Rev. Code 1928. The question then is whether or [40 Ariz. 515] not the service of the writ of garnishment created a lien on the assets of the bank or an equity in favor of plaintiff having the effect of a lien.
Attachment and garnishment are in many respects very similar in their nature, and the ordinary rule is that an attaching or garnishing creditor can gain no greater right over the property or interest of the judgment debtor so attached and garnished than the debtor himself has therein. 28 C.J. 241, 242, and notes. This is the law as to a bank deposit. John M. C. Marble Co. v. Merchants' Nat. Bank,15 Cal.App. 347, 115 P. 59; Naser v. N.Y. City First Nat. Bank, 36 Hun (N.Y.) 343. If this be true, it would appear that, when a bank, which is the garnishee, becomes insolvent after a garnishment, if the bank has in its possession property or a special trust fund ...