Case ID: ad_167/html/0259-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Walter V. Ulner, Respondent, v. John R. Doran, Appellant.
    First Department,
    April 9, 1915.
    Bankruptcy — discharge—judgment for conversion — effect of fraud and malice upon right to discharge — effect of discharge upon garnishee lien issued under section 1391 of Code of Civil Procedure.
    A judgment in an action for conversion is provable in bankruptcy and is released by the discharge of the defendant, unless there be evidence of. actual fraud in incurring the liability.
    Mere constructive fraud and malice, which is sometimes said to follow upon the fact of conversion, is not sufficient to prevent the discharge of the indebtedness, whether it has been reduced to judgment or not.
    
      A garnishee execution, issued under section 1391 of the Code of Civil Procedure, providing that said execution shall become a continuing levy upon the wages of the judgment debtor, and that “ said levy shall be a continuing levy until said execution and the expenses thereof are fully satisfied and paid or until modified as hereinafter provided,” remains valid and enforeible until modified as contemplated by said section, and moneys collected under it, even after the date of the judgment debtor’s discharge in bankruptcy, are payable to the judgment creditor.
    Appeal by the defendant, John K. Doran, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 25th day of March, 1914, denying his motion for a modification of an order for an execution under section 1391 of the Code of Civil Procedure.
    
      Benjamin Berger, for the appellant.
    
      Mervyn Mackenzie, for the respondent.
   Scott, J.:

The defendant, appellant, is now a court attendant in the Municipal Court, and in receipt of a salary exceeding $12 per week. In 1907 he was a city marshal, and, as such, was intrusted with the levying of an attachment which had been issued out of the Municipal Court in an action by one Luther F. Heldon against one Fred H. Menger. By virtue of this attachment defendant levied upon and collected, as the property of said Menger, rents from certain tenants of an hotel. The action of Heldon v. Menger resulted in a judgment against said Menger on December 24, 1907, and on February 8, 1908, this defendant paid to the clerk of the Municipal Court to the credit of the action of Heldon v. Menger the sum of $295.35 which it at once paid over to the plaintiff in said action. It appears, however, that in November, 1907, the said Fred H. Menger had assigned to Walter V. TJlner, plaintiff herein, all the amounts and accounts due from tenants of the above-mentioned hotel. It also appears that, before defendant paid over to the clerk of the Municipal Court the moneys so collected by Trim, he had been notified that TJlner, plaintiff herein, claimed to own and be entitled to said moneys, and due demand was made upon defendant therefor. Consequently in dealing with the money collected on the property of Menger, defendant did so with full knowledge of the claim of ownership thereto by Ulner. Ulner thereupon commenced this action to recover the moneys thus collected and paid over, and on February 10, 1909, recovered a judgment against defendant for the sum of $470.75. On April 4,1912, an order was made, pursuant to the provisions of section 1391 of the Code of Civil Procedure, that an execution issue to the sheriff of the county of New York directing him to levy and collect from the salary to grow due to defendant from the city of New York the sum of $2.88 per week. On April 30, 1913, a voluntary petition in bankruptcy was filed by defendant, and such proceedings were had thereunder that a discharge in bankruptcy was granted on August 27, 1913. The debt to plaintiff was duly scheduled, and defendant’s claim is that it is discharged, and the purpose of the present motion is to so modify the order for the execution against salary that no further sum shall be collected thereunder. Neither the judgment roll nor the pleadings in the present action are submitted, but it is stated on the briefs and both parties argue upon the assumption that the action was in form one for damages for the conversion of the moneys collected by defendant and paid over to the clerk of the Municipal Court in defiance of plaintiff’s claim of title thereto.

The question presented by this appeal, therefore, is whether a judgment for conversion is discharged by the discharge of the judgment debtor in bankruptcy proceedings, and, even if the debt was discharged, whether. or not plaintiff’s lien does not survive the discharge.

Assuming that the action against defendant was for a technical conversion, it is now well settled that a judgment in such an action is provable in bankruptcy, and released by the discharge, unless there be evidence of actual fraud in incurring the liability, of which there is no evidence in this case. The merely constructive fraud and malice which is sometimes said to follow upon the fact of conversion is not sufficient to prevent the discharge of the indebtedness, whether it has been reduced to judgment or not. (Maxwell v. Martin, 130 App. Div. 80; Lewis v. Shaw, 122 id. 96; Collier Bankruptcy [10th ed.], 387.) We think, therefore, that the judgment debt was discharged by the discharge in bankruptcy.

It is urged, however, that although the debt may have been discharged, the execution continues in force, and the levy thereunder remains a continuing lien upon salary to be earned after the discharge of the judgment. This claim is made under the following language of section 1391 (supra): “ Said execution shall become a lien and a continuing levy upon the wages, earnings, debts, salary, income from trust funds or profits, due or to become due to said judgment debtor to the amount specified therein which shall not exceed ten per centum thereof, and said levy shall be a continuing levy until said execution and the expenses thereof are fully satisfied and paid or until modified as hereinafter provided.” This clause is not susceptible, as we consider, of the construction claimed for it by the plaintiff. Its purpose was to avoid the necessity of successive levies from time to time whenever an installment of income might become due. It certainly was not intended to create a specific lien upon income or earnings not yet due and which do not become due until after the discharge and satisfaction of the debt upon which the execution issued. Salary earned after the discharge in bankruptcy stands in a position analogous to that of other property acquired after a discharge as to which a judgment included in the discharge is specifically declared not to become a lien. (Code Civ. Proc. § 1268; now Debtor and Creditor Law [Con-sol. Laws, chap. 12; Laws of 1909, chap. 17], § 150.)

The true rule is that as to earnings which become due after the discharge in bankruptcy there remains no indebtedness to be satisfied and consequently the order permitting the issue of what is sometimes termed a garnishee execution should be modified. We think, however, that the execution remained valid and enforcible until modified as contemplated by section 1391 (supra) and that any moneys collected under it, even after the date of the defendant’s discharge in bankruptcy, are properly payable to the judgment creditor. It was the evident intention of section 1391 that such an execution should remain in full force until satisfied by the moneys collected thereunder or modified by the court.

The order appealed from will, therefore, be reversed, with ten dollars costs and disbursements, and the motion granted to the extent that the order of April 4, 1912, authorizing the issue of an execution against defendant’s salary will be so modified as to limit the collection to be made under such execution to those made prior to the date of the order appealed from.

Ingraham, P. J., Clarke, Dowling and Hotchkiss, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted to extent stated in opinion. Order to be settled on notice.