Hitchcock v. Galveston Wharf Co.

50 F. 263 | U.S. Circuit Court for the District of Eastern Texas | 1880

Woods, Circuit Judge.

The contention of the plaintiffs, that this court has no jurisdiction of the matter set out in the answer of the garnishee, because they present equitable defenses to the garnishment, and can therefore be considered only by a court of equity, will not hold. By the act of 1875, (Sess. Acts 1875, p. 102,) if, on the coming in of the answer of an incorporated company served as garnishee, it appears that the judgment debtor is the owner of any shares in such company, the court should order and decree a sufficient number of shares in such company, describing them in such judgment, as shall be sufficient to pay the debt of the plaintiff, to be sold. By this enactment it is made the duty of the court to consider whether the answer denies the fact that the judgment debtor is the owner of the stock, and, upon the review of that question, the court is authorized to make, or refuse to make, a decree or judgment directing the sale. The court is called upon to act upon the averments of this answer of the garnishee. If it appears that the judgment debtor has no stock in the company garnished, no sale will, of course, be ordered. If it appears that he is merely a nominal, but not real, owner of the stock, no sale will be ordered. If he holds as a trustee, the ownership being in another party, no sale will be ordered. To suppose that the court would order a sale of property not subject to execution, or to which a sale could confer no title, would be to attribute to the court the making of a vain and fruitless order. When a garnishee answers a writ of garnishment, it is his duty to state, with accuracy and directness, all facts that may be necessary to enable the court to decide intelligently the question of his liability. Drake, Attachm. § 629. To require an answer, and then disregard it because the garnishee showed that while he was apparently, he was not equitably, indebted, and to render a judgment against him on such apparent liability, and thereby compel him to go into a court of equity for relief, would be to do a vain and absurd thing. No court of law is bound to any such course. They have and habitually exercise control over their process so as to prevent wrong and oppression. Suppose that the answer of the garnishee declared that the city of Galveston held stock in the wharf company as trustee for an orphan asylum situate within its limits, would the court order a sale of the stock on the ground that the city held the legal title, and compel the trustee to go into equity to restrain sale? If the contention of the plaintiffs is right, that is what it would be the duty of the court to do in such case. The true rule is that if the answer of the garnishee discloses 1hat the property in his possession is not subject to levy, or if it is held by the judgment debtor as a trustee, to refuse the order of sale; and, if the judgment creditor believes that his debtor has an equitable interest in the property, it is his place to fde his bill in equity to render it subject to the payment of his debts. No court of law will order a sale of what is not subject to execution. That this stock of the city of Galveston in the wharf company is not subject to execution is, in substance, what is set up in the answer of the garnishee. We believe that this court, as a court of law, ought to consider this objection to an order of sale, and, if made out by the proof, to refuse the order. The motion to strike out such parts of the answer as set up the facts, which, it is claimed, show that the stock of the city in the wharf company is not subject to be sold to pay the debts of the city, because such defense is of an equitable nature, must be overruled.

We are next to consider whether, upon the facts set up in the answer of the garnishee, the court should order a sale of the shares held by the city in the stock of the wharf company. On the one hand, it is claimed that the answer shows that the city holds the stock as a trustee for the benefit of the present and future inhabitants of the city, and that it cannot, therefore, be seized and sold, and that the very terms by which it holds the stock exempts it from seizure and sale to pay the city’s debts. On the other hand, it is claimed that this stock is held by the city just as it holds any other municipal property, and not otherwise; that the trust is not for any specific purpose; that it is held for profit; and that it is not necessary to carry on the city government; and therefore it is liable for the city’s debts. Property held by a trustee is not liable for his debts, and cannot be taken in execution upon judgment against him personally. It is not every legal interest that is made liable to a sale of a fieri facias. The debtor must have a personal interest in the property. Lessee of Smith v. McCann, 24 How. 398. The question is therefore presented: Does the city of Galveston hold this stock in the wharf company by such a trust that it is exempt from execution and sale for the debts of the city? The source of the city’s title to the stock is fully set out in the answer of the garnishee. The city claimed the water front abutting on the harbor. It claimed the right to extend its north and south streets to the channel of the harbor, and to erect wharves at the harbor ends of the streets, and to charge wharfage, by virtue of an act of the legislature of Texas. The title of the city to this part of the water front was sustained by the decree of the supreme court of the state, referred to in the answer. The city also claimed, by the dedication of the original proprietors, those portions of the water front lying between the streets terminating at the harbor.

Now, it is clearly settled that whatever property the city had in the water front it held for the benefit of the public, and that it was not liable for the city’s debts. Klein v. New Orleans, 99 U. S. 149. And such property could not be alienated by the city, any more than its streets and squares, save by consent of the legislature. Hart v. Burnett, 15 Cal. 530. When the city, therefore, undertook, by the adjustment and compromise between it and other claimants, which Avas embraced in a consent decree referred to in the answer, to transfer to a private corporation its title to the water front of the city, it undertook to' do what required the legislative sanction to give it validity. In our judgment, the adjustment and compromise derives all its vitality from the ratifying act of the legislature, and the case stands precisely as,if,, before the making of the adjustment and compromise, the legislature had authorized it to be made upon the terms and conditions embraced therein. It Avas competent for the legislature, in authorizing' the sale of the title of the city to the water front, to prescribe the conditions of the sale, and to direct what disposition should be made by the city of the consideration received for the property sold. This the legislature, by the confirmatory act, has undertaken to do. It has said that the city shall hold the proceeds of the property “in trust, for the present and future inhabitants of the city of Galveston, and all and every part thereof shall be inalienable, and not subject to conveyance, assignment, transfer, pledge, mortgage, or any liability for debt whatever, in any other manner than by the vote of four fifths of all the qualified Amters in favor of some clear and specific proposition therefor. ” These very limitations appear written on the face of the stock certificate issued by the wharf company, to the city. The city, by the authority which permitted a.sale of the water front, which Avas itself trust property, inalienable except by legislative consent, and not liable to be taken in execution, is made a trustee of the proceeds of the sale, not for the benefit of the municipal corporation known as the “City of Galveston,” but of the present and future inhabitants of the city. Those proceeds: are decreed by the legislature inalienable, except upon the vote of four fifths.'of the. qualified citizens,'and not to be at all liable for the debts of the city of Galveston.

, The plaintiffs in this cause propose to sell this property for a debt of the-.city, the trustee, and to convey it to the purchaser at a forced sale, Avithout first: obtaining the consent of the court thereto. In other words, they .propose to disregard the law of the state by virtue of which the city of .Galveston holds title to this property. To .us i-t appears that the city of ..Galveston, holds, the stock-in th.e,wharf company as a trustee for the present.and, future inhabitant's of. Galveston., It cannot, therefore, be sold for the debts, of .the trustee,-. The legislature of the-state has said ' that the stock, shall- not be liable for the debts of the city. - By what authority can this-or-tiny other court,, say that it. shall? The seizure and 1 sale of 'this stock w.ould also be in violation of the rights of the' wharf company, assured by the compromise and adjustment, and which have been recognized and confirmed by the act of the legislature. This stock Avas.issued.to the city.-by the wharf compan}7 with the -reservations set out in the compromise. These reservations ljav.e been adopted by the legislature; To allow a sale of-the.stock; in- defiance, of the terms of the compromise, wb.uld bAierride rights and privileges;-conferred .on .the wharf company, by the .confirmatory act of the legislature. :

,b;To, sum. up my .views on the merits of th.e case:. The.-title .of the city oif Galy.feston to the'Avater front Avas held by the city as. a trustee for the-puhlic. Hart v. Burnelt, 15 Cal. 531. That title.wag. inalienable, .save by consent of the legislature, and the property was not liable to execution and sale for the debts of the city. By the compromise between the city and the wharf company, and the confirmatory act of the legislature, a sale of this property so held by the city for public use to a private corporation was authorized and confirmed. The legislature, by the same act, directed that the proceeds of the sale should be held by the city on the same trust, substantially, as the properly sold, namely, for the use of the present and future inhabitants of the city of Galveston, and should not be liable for its debts. In my judgment, tlie city holds as a trustee, and for that reason the trust property cannot ho sold for its debts. The legislature has, in effect, said that it should not be sold for the city’s debts, and this is another reason why it cannot be sold on execution against' the city. The same reasoning applies to the dividends declared, upon the stock.. They are not the property of the city, nor liable for its debts. The city is a trustee of the dividends, as of the stock itself. It would be a futile thing for the legislature to say that the stock should not be liable for the debts of the city, if all its fruits and profits could be seized as they accrued, and subjected to the payment of the city’s debts. It seems, therefore, to be the duty of the court to refuse any decree or judgment directing the sale of this stock, or a sequestration of its dividends; and it is so ordered.