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GALION IRON WORKS & MANUFACTURING CO. v. RUSSELL

November 4, 1958

THE GALION IRON WORKS AND MANUFACTURING COMPANY, PLAINTIFF,
v.
TRUSS RUSSELL, AS CLERK OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF ARKANSAS, TRUSTEE, A.K. HELMS, AND DORA HELMS BOHON, GUARDIAN OF ARTHUR K. HELMS, AN INCOMPETENT, DEFENDANTS.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

  The plaintiff, the Galion Iron Works and Manufacturing Company (hereinafter referred to as Galion), brought this action on July 17, 1958, denominated as a Creditor's Bill and seeking, in effect, an equitable garnishment of certain funds held in the Registry of the Court and due and owing to the defendant, Dora Helms Bohon, Guardian of the defendant A.K. Helms. The matter is now before the court on the motion of the defendants to dismiss for lack of jurisdiction.

This suit is the latest of a long series of actions involving these and other parties.

The pertinent events leading to this suit have been stipulated by the parties, and may be summarized briefly as follows:

On September 16, 1953, the plaintiff, Galion, recovered a joint and several judgment against several persons, including the defendant, A.K. Helms, in the United States District Court for the Eastern District of Arkansas. A short time later another judgment was recovered against Helms and others in the Pulaski County Circuit Court by the Union National Bank of Little Rock, Arkansas. The latter judgment was assigned to Galion, and the two judgments thus held by Galion totaled in excess of $40,000. Only a comparatively small sum has been collected on these judgments, and there is now owing to the plaintiff a sum thereon in excess of $36,887.37.

On August 14, 1955, almost two years after these judgments had been rendered, A.K. Helms was involved in an automobile accident with one Vouk, as a result of which he received physical injuries and was rendered incompetent. Shortly thereafter the defendant, Dora Helms Bohon, was duly appointed guardian of A.K. Helms by the Probate Court of Miller County, Arkansas. As Helms' guardian she brought suit against Vouk for the injuries Helms received as a result of the accident, and on December 7, 1955, recovered judgment against him in the amount of $25,000. Vouk's insurance carrier, Carolina Casualty Insurance Company, refused to pay any part of this judgment under a contention that there was no insurance coverage.

The guardian then brought suit against the Carolina Casualty Insurance Company, and on August 7, 1956, she obtained a verdict for her ward, A.K. Helms, in the sum of $15,600.

Two days following this verdict, on August 9, 1956, Galion, seeking to enforce its judgment against A.K. Helms, appeared in the United States District Court for the Eastern District of Arkansas and obtained the issuance of a writ of garnishment against the Carolina Casualty Insurance Company. A similar writ was obtained in the Pulaski Circuit Court. The Carolina Casualty Insurance Company denied owing any amount to A.K. Helms or his guardian on the ground that no judgment had been entered on the verdict. No notice of the attempted garnishment against Carolina Casualty was given to either A.K. Helms or Dora Helms Bohon, his guardian, and no further action has been taken in the garnishment proceeding.

On January 7, 1957, a judgment was entered on the guardian's verdict against the Carolina Casualty Insurance Company in the sum of $15,600, and at the same time a lien for attorneys' fees was impressed on that judgment in favor of the guardian's attorneys.

No further action was taken in any of the proceedings until December 12, 1957, at which time the Carolina Casualty Insurance Company filed an interpleader suit in the United States District Court for the Eastern District of Arkansas, and deposited the sum of $16,628.45, which represented the amount of the judgment, interest, and costs held against it by Dora Helms Bohon as guardian of A.K. Helms. The court issued an order restraining all parties from further enforcement of the garnishment proceedings. Shortly thereafter the interpleader suit was transferred to the United States District Court for the Western District of Arkansas, Texarkana Division, being Civil Action No. 685. The United States was allowed to intervene and assert its claim in the interpleader suit. The guardian and Galion answered and asserted their claims against the funds held in the Registry of the Court. On January 31, 1958, all parties stipulated for a disbursement of a portion of the funds, including the claim of the United States in the amount of $1,533.85, representing taxes due it with interest from the date of the judgment in the Probate Court; and the sum of $8,883.99, representing the attorneys' fees allowed by the Probate Court and certain additional expenses allowed by that court to the attorneys on January 22, 1958. On January 31, 1958, an order was issued disbursing the funds in accordance with the stipulation, thus leaving a balance in the Registry of the Court of slightly in excess of $6,000. No further proceedings were taken in the interpleader suit, and no judgment has ever been entered therein.

The plaintiff, Galion, then brought the instant suit on July 17, 1958, to reach, by way of equitable garnishment, the balance in the Registry of the Court. The Clerk of the Court filed a disclaimer alleging the sum held is $6,065.21, and disclaiming all personal right, title or interest in the sum.

On August 6, 1958, the defendant, Dora Helms Bohon, individually and on behalf of her ward, A.K. Helms, moved to dismiss this suit for lack of jurisdiction. The guardian contends that the Probate Court of Miller County, Arkansas, acquired prior jurisdiction of the subject matter and the parties, and further that its jurisdiction is exclusive and that the claims here have already been adjudicated.

The plaintiff concedes the validity of the principle that prior jurisdiction of the Probate Court would prevent jurisdiction of this court, but contends that the Probate Court never acquired jurisdiction of Galion because, admittedly, notice of the hearing in Probate Court for claims against the estate was mailed to the attorneys for Galion and not to the company itself. This contention rests upon the premise that the notice was insufficient, and further that proper notice was jurisdictional.

The contentions of the parties require consideration of the applicability of two general rules of law. It is well settled that where a state court acquires prior jurisdiction of a proceeding, its jurisdiction may not be disturbed by the federal courts. In Redditt v. Hale, 8 Cir., 1952, 199 F.2d 386, at page 391, the court said:

    "The Arkansas estate of the incompetent is still in
  the possession of the Arkansas Probate Court, and
  that possession once rightfully acquired may not be
  disturbed by another court, State or Federal."

It is an equally well settled rule that federal courts may not engage in the general administration of an estate or disturb the possession of property within the custody of a state court. See Markham v. Allen, 1946, 326 U.S. 490, 66 S.Ct. 296, 90 L.Ed. 256, and cases cited.

From the general statement of these two rules it is clear that if the Probate Court of Miller County, Arkansas, acquired prior jurisdiction of the claims against the estate, or if action by this court would disturb the general administration of the estate, this court has no jurisdiction of the case.

With regard to the plaintiff's contention that the Probate Court of Miller County did not have jurisdiction of the plaintiff, it should be noted that the order of the Probate Court did not purport to affect or distribute the funds held in the Registry of this court. The Probate Court never at any time had actual physical possession of these funds and, in fact, they were not placed in the hands of this court until after the orders of allowances were made by the Probate Court. It is clear that the orders of the Probate Court did not affect these funds, and it did not have jurisdiction over these funds as such unless its right to possession, through the guardian, gave it such jurisdiction. It may be, since the possession of a guardian, as an officer of the appointing court, is possession of the court, Byers v. McAuley, 1892, 149 U.S. 608, 13 S.Ct. 906, 37 L.Ed. 867, that the right to possession on the part of the guardian would confer jurisdiction of the Probate Court over the funds themselves, and that jurisdiction should be recognized as a matter of comity. That question, however, is unnecessary to a decision. It is equally unnecessary to decide whether the notice of hearing given the plaintiff through its attorneys was sufficient to confer jurisdiction of the Probate Court over the plaintiff, because it appears, and there is no contention to the contrary, that the Probate Court did acquire jurisdiction over the general estate and person of the incompetent, and in so doing had sole jurisdiction to allow claims against the estate. No other court, state or federal, could allow claims against the incompetent or his estate. State or federal courts may entertain suits to adjudicate claims against an estate, and those adjudications must be respected by the Probate Court, but it is nevertheless only the Probate Court which can allow such claims. As the Supreme Court said in Byers v. McAuley, supra, at page 620 of 149 U.S., at page 910 of 13 S.Ct.:

    "A citizen of another State may establish a debt
  against the estate, (Yonley v. Lavender, 21 Wall. 276
  [22 L.Ed. 536]; Hess v. Reynolds, 113 U.S. 73, 5
  S.Ct. 377 [28 L.Ed. 927]. But the debt thus
  established must take its place and share of the
  estate as administered by the probate court, and it
  ...

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