*1 for proper been It would have sought. which credit is in in a question suspense debt carry taxpayer of the ultimate determination awaiting account thus indi- upon it, could be realized amount in financial debt statements the status cate order practice, But that proper condition. taxpayer’s might sought from whom credit to advise those -assets, realization of affect does not uncertainties or make debt deduct- statute, the construction worthless, when the entire debt was not when ible yet prove which would uncollectible was not amount rather than 1923 when that amount was ascertainеd, deduction its allowed. ascertained and ruling conclude Court We Circuit correct. Appeals
Judgment affirmed. ARMOUR FERTILIZER SANDERS WORKS et al. February 5, April 1934. Decided 106. Submitted No. *2 Mr. Thomas D. Gresham submitted for petitioner. *4 Faulkner, Jr.,
Messrs. Charles J. and Mark McMahon submitted for Armour Fertilizer Works, respondent. George Wright
Mr. S. submitted for National Fire Co., respondent. Insurance McReynolds opinion delivered the
Mr. Justice Court. v. Dunlevy (1916),518,
New York Ins. U.S. Life Co. the serious encountered problems insurance exhibited conflicting when demands are made resi companies individuals, States. There resi dents two different Pennsylvania, dents of California and claimed sur unsuccessfully policy.' render value of life insurer Pennsylvania sоught through interpleader proceedings liability. to secure release all difficulties, Congress, mitigate In order 27, 1917, authorized insur- February Stat. Act interpleader in District bills of to file companies ance An States. amendment followed of the United Courts
195 41 February 25, 1925, 976, 28, (26). § 43 Stat. U.S.C.A. May And Act of 44 8, 1926, Stat. U.S.C.A. 41 Supp., (26) (in margin amplified rewrote and 1), § provisions earlier enactments. 8, 1926, Chap. The dis approved May Act Stat. 273 — “ original jurisdiction to trict courts of the United shall have States interpleader equity begun entertain and determine suits bills of duly verified, by any casualty company, surety company, insur filed company society, and anсe or association or fraternal or beneficial averring persons more that one or who bona fide claimants company, association, society such or resides within the ter or reside jurisdiction court; association, ritorial company, of said that such or society custody has in possession money property its or value or of the more, $500 or or has policy issued a bond or a cer of insurance or membership providing $500 tificate of payment for the more or obligees obligee indemnity, or such bond insurance, or as or benefits beneficiary, beneficiаries, legal to a heirs, kin, or the next of assignee representatives, or person member; insured or two or more claimants, adverse States, citizens of different are claim ing money property to be entitled such or or penalty of such bond, insurance, or such indemnity, benefits; or company, that such association, society deposited or has such money property or has paid the amount policy of such bond or into the registry court, of the there abide the of the court. “ Sec. 2. In all such policy cases if the pay- certificate is drawn estate able of the insured has assigned not been in accord- ance with terms of the policy or certificate the district court of the district of personal the residence representative of the of the in- jurisdiction sured shall have of such suit. In policy case the or certifi- assigned cate has been during the life of the insured in accordance with the terms policy or certificate, the district court of the district of the residence of assignee or personal repre- of his jurisdiction. sentative shall have In the policy case or certifi- payable cate is drawn a beneficiary or beneficiaries and there has assignment been such no jurisdiction aforesaid the shall be in the district court of the district in which the beneficiary or beneficiaries personal representatives or their In reside. case there are claimants money of such or property, or in case there are beneficiaries under any policy such bond or resident in more districts than one, then jurisdiction shall inbe the district court in any district in which a Fire and Hartford Company Fire Insurance
National pol- under corporations, Connecticut Company, Insurance *6 Sanders, D.W. him, to became indebted to icies issued Texas, fire by for loss of the Eastern District resident of his therein 1927) part located 3, property (July from execution exempt statutes homestead. Texas of the two The indebtedness of such insurance. proceeds $3400.00 at adjusted insurers respectively Both Com- they pay. $4250.00; agreed these sums foreign attachment proceeding a panies garnished were July 18, 1927, in an against instituted Sanders Works, Fertilizer by corporation court Armour of that proceeding This was based his notes upon State. which undertook to exemption rights. waive homestead garnishees liability The admitted to Sanders but gave notice his claim that proceeds policies were exempt under Texas laws. He did After appear. proper publication, judgment was entered him September 19, 1927. This sustained the at- tachment recovery and awarded against him in favor of beneficiary personal representative or the of a claimant de- or a [sic] beneficiary ceased claimant Notwithstanding provision or any resides. contrary, I of this Part title to the said power court shall have process its injunc- issue for all such claimants and issue an order of them, enjoining instituting prosecut- tion each of them from or ing any proceeding any or any suit State court or in other Federal money property such court on account of or on such bond or on policy membership such until or certificate of the further order of the injunction court; process and order of shall be returnable at judge said court or such time as the thereof shall determine and shall be addressed to and served the United States marshals for the respective districts wherein said claimants may reside or be found. court shall hear and
“Sec. Said determine the cause and shall complainant discharge thе from further liability; and shall make the injunction permanent and enter all such other orders and decrees as may proper, be suitable and and issue all such customary may writs as necessary be carry convenient to out and enforce the same.” the Fertilizer Works for due the amount the notes— $7,589.81; also is in directed execution. It the margin.2
Before final trial Illinois court under their answers, permitted May 8, the Act stakeholders, Insurance be claiming to mere Companies, filed separate interpleader .in the District Court, Eastern of Texas —June 1928. San- District Armour Works, ders and Fertilizer claim- alleged adverse ants, were made defendants. sums admitted
2“ ganders, plaintiff herein, defendant, motion of the W. On D. instanter, thereupon appear herein said ruled defendant open not, anyone being court comes nor for said de called does default, fendant, herein appearing but said defendant makes publication of duly the court that said defendant was notified according duly notifying pendency notice to law said defendant *7 time required appear of this suit and of the said defendant of herein, days all of which was a sufficient number of the time prior to required appear require of said defendant to as aforesaid to now that said appear said defendant defendant either in this cause at this judgment time that suffer by said defendant default for want appearance, appearing such it further to the court that said de appearance is still in herein, is, fendant default of an on motion of if plaintiff, by the ordered the court that default be entered herein appearance. said defendant for want anof damages the by plaintiff “And as to sustained herein, the the court evidence plaintiff’s hears the contained the affidavit of claim filed herein and finds thеrefrom that there is due plaintiff to the the sum money shown in said due, affidavit claim to be and assessed the damages plaintiff’s the thousand, at sum of seven eighty- five hundred ($7,589.81). nine dollars and 81/100 coming cause on for further proceedings This herein, it is consid- by ered the the court that attachment hereby herein be and it is sus- tained, plaintiff that the have on the default and assessment damages herein, plaintiff and that the have and recover of and defendant, ganders, the damages from W. D. the plaintiff of the amounting the thousand, of seven eighty-nine five hundred sum. ($7,589.81) in form as aforesaid assessed, together 81/100 with plaintiff expended the costs herein and that execution issue therefor.” in-An into court. paid were policies fire under the
due Armour Fertilizer Works restrained junction both court. in the Illinois Answers further proceeding The were consolidated. The causes followed. defendants Sanders; Circuit fund District Court awarded Ferti- to Armour go held that it should Appeals Court of Fire trial court. National lizer Works and reversed Fire Ins. Sanders, (2d) 157; National 33 F. Ins. Co. v. Certiorari, granted upon Sanders, (2d) F. Co. v. here. the matter brings petition, Sanders’s that agree dispute. parties The facts are not statutes; to her according Illinois were claim law there Sanders’s that under the settled judgment given been have denied exemption would if the cause had followed garnishees ordinary course. objections to overruled Appeals
The Circuit Court of and affirmed the District Court jurisdiction of the rights consider and determine authority to latter’s of the claimants. control; that the Texas statutes did
It concluded May 8, 1926, pro- was intended afford the Act of stakeholders, rights not to alter the of adverse tection of each claimant under the law rights that the claimants; they considered; arose should be State where commonly in federal acceрted equitable principles applied. should be courts money the Illinois pay-
It held *8 sequestrated was to Sanders Companies the able of exemption; his claim good against this was followed the fund into paid obtained court. the lien so the him judgment against And directed hearing the first District Upon the should be satisfied. jurisdiction; bill for lack of the Cir- the Court dismissed for Judgment reversed. went San- Appeals of cuit Court on ders the second trial; the Circuit of Appeals Court again reversed.
Objection jurisdiction to the of Court is now District made upon theory the that the defendants are not adverse claimants within the intеndment of interpleader Act since one admits the debt is payable attached primarily to other seeks to recover because of his indebted- to ness it. The court adequately below answered this contention— think that
“We facts this case show that District Court is mistaken in concluding that claims Armour of and Sanders are not adverse. Each is claiming proceeds policies' to the of exclusion the other. Armour virtue of its Illinois claims the attachment, Sanders, not Sanders while dis- Armour, to obligation his claims the proceeds, not- puting withstanding, by exemption virtue of the under the laws and to liberally оf Texas. The statute remedial be con- cover enough any broad to strued. It is adverse claims of the policies, no matter on proceeds what urged. interpreted terms are to be grounds Its of meaning only adverse claims those pretending insured.” (2d) F. beneficiaries [38 214.] general and effect the Act purpose March were also well stated below— interpleader for Suits actions in other courts familiar when enjoined equity were the Constitution are Spring Co., v. South Ins. adopted Carolina was [see controversy one of the forms of Wheat. 268] arising between States, when citizens different which,_ judicial power extended. The Act enlarges federal District Court cover a broad terri- processes only ordinary authorizes an but otherwise form tory, Court, . . . The District of course, relief. equitable give full interpleader on an faith and credit bound *9 200 Newell, Cooper Illinois. garnishment proceedings
the (2d) F. 567. ... 173 U.S. 903.] [63 “ filing interpleader the federal not think the We do into the money thereunder of the the payment and bring the to it under operated Court in Texas District for interpleader applicant of Texas law. The dominion forum, he cannot at his will a choice of often has set of rights contesting claimants to one subject the The interpleаder another. purpose rather than laws in no- give protection, to stakeholder but was statute rights operation. of the claimants its change wise in equity, equitable princi- suit The is a interpleader federal throughout are the same procedure ples weigh right title of The court is jurisdiction. arose, claimant under the law the State which it each according equity the better. and determine which be the same whether the interpleader The should decision in Texas. one’s rights filed in No are intended court, fund into the paying to be altered F. an neutral is to determine impartial them.” [63 (2d) 906.]
Assertion of entire disinterested complainant bill of Groves interpleader. is essential v. Sen ness tell, U.S. 485. In necessary such a bill it is complainant subject- has in the aver no interest he suit; matter must admit title in the claimants and aver he is indifferent between and he them, against relief in them.” premises cannot seek either of Ebbinghaus, Killian v. U.S. 571. unlike presented here is situation where one himself
voluntarily subjects jurisdiction to its and seeks aid a court enforce his Con claim. See on Story The Armour Fertilizer (8th ed.) flict of Laws § any Brought under Texas law. into nothing Works asks will Court its it held there the District enjoined proceeding further Illinois. its protest It now claims priority right only asks what would have secured for the injunction. but Under such circum- *10 stances, to hold that the of statutes Texas control would destroy rights duly in permit obtained Illinois; would the Companies Insurance by interpleader proceedings change the of in positions defendants; and, effect, seri- ously adjustment interfere with the impartial of exist- ing think equities. Congress We had intention to no of if indeed it permit acquired rights, such had destruction power to do. so
By stated his claim to the fund his answer Sanders thus in court— n by That reason of the fact the property by of covered subject
was the insurance said insurаnce the defendant, was the homestead of W. D. San- policy of have ders, the same which been tendered proceeds the by plaintiff into court herein are to the de- exempt fendant, D. under the laws and Sanders, W. Constitution therein Texas, rights superior of of and his are the State rights defendant, and Armour Fer- prior to the tilizer Works.” Fertilizer Works asserted—
Armour 18th of day July, 1927, filed “On about a suit Court of Cook Chicago, in Municipal County, Illinois, Works, Fertilizer a corporation, as styled trading Armour Fertilizer Chemical Planters and versus Company, being 1,413,423. W. numbered Sanders, D. Said suit was *11 primarily rights not now concerned We their garnisheе. Companies paid The Insurance have discharge. Only Sanders complete debts obtained and the Fertilizer Armour Works are interested.
He presented against corporations claims Connecticut under arising insurance contracts he had not un- dertaken from in enforce. These were execution free might Texas. He have there upon Illinois; sued them they subject to valid attachment. were
The Armour Fertilizer an Works, corporation, Illinois presented the judgment rendered against duly Sanders by a court of that State in a proceeding properly begun prosecuted. upоn It had secured lien the claims against Companies. Insurance There no ground for any claim of no judgment gone fraud. final had True, against garnishees; but as between Sanders and judgment against seques- Fertilizer Works stood him; also, tration which would be precise debts. effect this given judgment, garnishees, preliminary against doubtful, their involving rights may proceedings Supreme clearly but opinions Court Illinois that Armour Ferlitizer a lien indicate Works secured upon claims; Sanders but for that, the injunction, final valid judgment would have gone against the Insur- ance Companies, accompanied by good a lien against all the world.
The effect of the Illinois as against one occupying the position of plain Sanders is enough under her statutes decisions. The Illinois courts would rejected have his claim of under exemption laws Texas. This view is affirmed here by agreement.
The Illinois rule is
an in
imposes
choate lien subject to
defeat
certain subsequent events,
none of
present
which are
here.
that final
Also,
the garnishee prior to one in another
jurisdiction
conclusive of the rights
of the parties.
Corbetts,
Lancashire Ins. Co. v.
of lien. specific appropriation property This in rela- may amount as to who something those deal could, at it; any tion to defendant time before else the object sale, and judgment, party by defeat the оf the a jurisdiction of the are of possibly, even the court. We a from opinion, the attachment is lien the date levy, will judgment, when followed and which have relation back to it. is This doctrine sanctioned authorities, [p. which I will not review.” numerous 213] Illi- In the presented proceedings circumstances gave paramount right nois to Armour Fertilizer Works a To superior equity proceeds policies. hold that Texas enjoin District Court in could Fertilizer further proceeding Works and then declare that because the suit had not been step last Sanders, way, taken in some became to priority, entitlеd Moreover, deny inequitable. would be it would plainly garnishment proceedings the credit and effect them in the State where taken. accorded unnecessary It is to enter discussion upon ques of vexed arising tions out of different jurisdictions. different views well stated Laws, 125, 126, Minor on §§ Conflict 209. This Court to consider the general subject has had occasion in Cole & Cunningham, 107; Chicago, Ry. 133 U.S. R. P. v. I. v. Cross, Sturm, King 175 Harris 710; 396; U.S. v. U.S. Balk, “ says— 223. The latter 215, 198 U.S. v. to the debtor (garnishee)
Notice the commence pay and notice not to suit, creditor, ment of his is garnishee whether the given, that can a mere all be aor resident temporary comеr, of the State casual His obligation the attachment laid. where pay thereby arrested lien his creditor created Morgan, itself. Cahoon Vermont 236; debt Chambers, Ins. Fire Co. v. N.J.Eq. National *13 reason why We can see no attachment could be garnishee could laid, provided thus creditor in that State laws the at- himself sue and its permitted tachment.” argument
Petitioner’s erroneous as- proceeds upon that into came sumption money paid court under her dominion of Texas especially exemption law— This view is not in with the settled harmony statutes. an of Illinois that attachment when on the lаw levied fixes a lien the claim prevents debtor subse- also, quent by creditor; reasoning transfer with Sturm, I. & Chicago, Ry. conclusion in R. P. v. supra. Cross, in King latter v. approved supra, and case— Balk, supra v.
Harris proceed- —held in Iowa a for due ings pending wages claim Railway resident of Kansas, to a there exempt execution, good from constituted defense when the wage- subsequently Railway earner Kansas. sued It the doctrine debts approved accompany the debtor he may attached wherever can his be sued cred- Among others, itor. it cited with approval, National Chambers, Fire 53 N.J.Eq. 468; Ins. Co. Atl. 663. the exemption It declared that law no part employment contract of and disapproved the notion that exempt from when debts execution in the State where this follows an privilege created incident into other jurisdictions. Ins. Chambers,
In National Fire supra, (an Co. v. in- proceeding 1895) Vice terpleader Chancellor Pitney — elaborately discussed situation substantially similar to the one before us. After full review of the authorities, he held a pending garnishment proceeding properly instituted under the laws of Pennsylvania against indebt- edness to a due resident of New Jersey сreated lien thereon gave the attaching superior creditor equity Jersey the New transfer claimed one who *14 that he is familiar who principle He the applied
creditor. v. American Bank See also right. in first in time is best 184. 130 Mass. Rollins, 313, Gigie, Garity 99 Mass. v. any other creditor not indicate that The record does The the in Illinois. impounded interested in fund the gave below to the claim of rightly precedence court controversy Works; Fertilizer also ruled the properly in devoting terminated fund should be decree to the Sanders. court Illinois
Affirmed. Mr. Justice Cardozo, dissenting. in Texas is a duty, prescribed
The federal court under (R.S. Surety 905; 687; 28 U.S.C. American statute § § Baldwin, 156, give 287 to full faith and 166), Co. U.S. v. judicial including pro credit proceedings Illinois, attachment. under writs of ceedings Buskirk, 7 does mean Green v. Van Wall. 139. This greater than any have effect Rob they of Illinois. usage have law the courts Pickrell, 109 Ohio 610, ertson v. U.S. Chat 608, 611; v. Co., 439, duty 289 U.S. 443. The ful tanooga Boiler is efficacy if are the filled the force and same. upon in Illinois does not create a lien
Garnishment
subjected
Bigelow
v.
or chose
action
writ.
debt
322,
332
Andress,
330,
(distinguishing
31 Ill.
Brashear v.
West,
608,
upon
7 Pet.
which was based
a different stat
Savage,
Ill.
51
Ill.
ute) Gregg
App.
284, aff’d,
v.
150
;
Wilce, 80 App.
N.E.
McElwee v.
Ill.
312;
161;
whereby
a monition
it is
defendant
In substance
acting at
if
peril
he will be
his
he
mаkes
apprised
original creditor,
voluntary
peril
con
payment
may
pay
he
have to
again. Bigelow
in this, that
v.
sisting
Wilce,
Savage,
Gregg
supra;
Andress,
v.
supra;
McElwee v.
supra.1 The
no
writ
effect
involuntary
has
payments
the stage
judgment.
before
other attaching
Some
credi
tor, suing the same defendant, may garnish the same debt
jurisdiction.
in another
plaintiff, though
first to have recourse to garnishment, will be
postponed
plaintiff
the other
who
first
with execution. Lancashire
Corbetts,
Ins.
What been has written go beyond does not law as in declared Illinois. The is ignored fact that there are jurisdictions other in process which the of gamish-
1 garnishment “A is an attachment of the effects of the debtor creating the hands garnishee; upon anything, no lien but holding garnishee рersonal liability.” Gregg to a supra. Savage, v. 2 Supreme The Illinois did, Court true, case refer to a ” creating lien, coupled in Missouri as an inchoate but description ruling charge with a the inchoate a lien was not upon a action cause elsewhere the same defendant. “ By garnishee Missouri, the service of the summons in Miller [the plaintiff acquired contingent upon or inchoate lien action] in.that debt, appellant voluntary pay could not thereafter make a appellee; ment right acquired but which Miller dependent upon subsequently judgment, acquiring and that was not accomplished state, until had been recovered this any right where the debt was from free claim that he had.” Co., Becker supra. v. Illinois Central R. 208 serv Sometimes the meaning.
ment a different receives a fixed ice of the writ is held to the debt impose enforcement present recognition lien will have 100; Hanna, 5 Johns. everywhere. e.g., Embree v. See, Ransford, re 194 McConnell, 136; 13 Pet. In Wallace v. Sturm, 174 Ry. v. 658, 661; Chicago, Fed. R. & P. Co. I. lien quasi of as a spoken U.S. 710. Sometimes the lien Blum, one. See Tex. e.g., an inchoate Focke v. Ladd, Minn. Boot Co. 441; 770; S.W. North Star Ransford, Cf. supra. 334; 20 N.W. In 381, 383; re In Co., the conflict supra. Central Becker v. Illinois R. reаlities may between important the difference laws organism germ. and the metaphors, between the and there is said Sometimes the Illinois rule is accepted, than restrain lien, to be no or one that does no more voluntary e.g., garnishee making See payments. 158 N.W. 722; 176 Ia. Commercial State Bank v. Pierce,3 81; Co., 237; 93 Mo. 6 S.W. 481; McGarry v. Lewis Coal Farr, 2 331. Little is to be (Pa.) Browne Parker v. they and like for gained by dilating upon decisions, these or customs. Garnishment and are rooted local laws statutory are what They attachment remedies. today It they shall be. creating the state declares them have made effi might their is of no moment that cacy have legislature courts long as her greater preferred make them less. garnishee the law the would have been
In that state of *16 shape prudent if it had faffed to course with its remiss conflicting possibilities. Its recognition of indebtedness 3“ proceedings upon any property garnishment created no lien The original defendant, any, gar if in the hands of the belonging to the garnishment personal a By claim was ac nishee. any money garnishees property to the extent of quired garnishment served, hands might in their at the time was judgment defendant.” Commercial State Bank v. belonging Pierсe, supra, at 732.
209 to Sanders subjected had been garnishment by the Armour in company Illinois, but Sanders was threatening it with suit in judgment Texas. If Sanders there had before Armour inwas a position to issue execution in Illinois, the garnishment in all likelihood would count for nothing, yet there awas even possibility then of dis- pute and litigation. in Plainly for judgments the race and its there aftermath, was the risk em- expense if barrassment, not of payment. double in garnishee this dilemma paid the amount of the indebtedness into the registry of the federal court Texas and had the rival claimants interplead. U.S.C., 41 (26). § The claimant Sanders was entitled to the mоney unless the Armour company lien, had a and the courts of had held there was no lien. True there had been a judgment against Sanders, though not against his codefendant, insurer, but this judgment had been by obtained default after service by fol- publication, not an appearance. lowed It was therefore ineffective aas in personam, judgment the absence of a lien did in rem. operate Pennoyer Neff, v. 714; U.S. New York Dunlevy, Ins. Co. v. joinder U.S. 518. The Life of Sanders had no effect him except give notice of the opportunity and an if in, to come he was so and contest the plaintiff’s Balk, claim. Harris minded, supra, 27. He declined the p. invitation and preferred litigate at home. Whatever lien has been adjudged as the result of his default contingent upon was the consum- of proceedings charge mation the garnishee, and ended when if they just as the suit lapsed, were discontinued. It did not rise the rank interest general property, adhering everywhere to the debt the title qualifying jurisdiction. another no Probably one would contend force of the against Sanders a suit could been have maintained Armour as quasi owner policies outside of If Illinois. before so *17 even thereafter. plainly it was more so interpleader, was terms of the decree stakeholder
By express into the F. registry, the fund paid when was discharged there was no (2d) 212, longer with the result anywhere and garnishee thus possibility pursuing If some inchoate incumbrance perfecting attachment. obliterated then forever. then, until existed .had and clear. The fund was free in Texas driven to a The federal court was thus choice attachment which foreign a claimant with between of no extraterritorial validity creation was the law of its compulsion into under the ripened payment till it had and a title to the claimant whose fund was judgment, unless the lien of the attachment was presently undisputed easy It is not to see how there could be any effective. but one. choice Appeals of the Court of should be
The decree reversed Court affirmed. the District and that of Justice, Brandéis, Me. Justice Chief Mr. in this dissent. join Stone Justice COMMISSIONER AVERY v. OF INTERNAL
REVENUE. Argued April 5, April and 792. Nos. 791 1934. Decided notes upon eight promissory upon based which there was time, due including at that interest and attor- principal, ney’s $7,589.81. sum of fees, the That in connection with a of attachment garnish- said writ and court, ment was, was issued out said and on 19th day July, 1927, plaintiff served herein. That W. D. duly defendant was publiсa- Sanders cited tion, accordance- with the laws of Illinois, State to appear answer Judgment and said suit. was taken on September suit in said W. D. Sanders against said has That case said $7,589.81. sum for the and the defendant between this dismissed been that suit. herein, garnishee plaintiff binding judgment suit a valid said rendered of the State the laws in accordance with was procured the defendant judgment against Illinois, valid impounded the extent of funds D. W. Sanders judg- of said That under the terms said garnishment. ment the said attachment D. Sanders the defendant W. plaintiff herein and with refer- matters dispute and all sustained herein, have ence to the funds involved were and been judgment.” judicially determined said with