Case Name: Stull Brothers, appellants, v. Walter R. Beddeo et al., appellees
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1907-01-05
Citations: 78 Neb. 114
Docket Number: No. 14,454
Parties: Stull Brothers, appellants, v. Walter R. Beddeo et al., appellees.
Judges: Albert and Jackson, CC., concur.
Reporter: Nebraska Reports
Volume: 78
Pages: 114–124

Head Matter:
Stull Brothers, appellants, v. Walter R. Beddeo et al., appellees.
Filed January 5, 1907.
No. 14,454.
1. Bankruptcy: Discharge: Debts Fraudulently Contracted. One who- collects rents as the agent of another is acting in a fiduciary capacity and holds the amount so collected in trust for his principal; or if, without authority so to do, he collects rents due his employer and converts the same, he becomes indebted to his em ployer to the amount of the rents collected and the debt so created is fraudulently contracted. In either event a discharge in bankruptcy does not release him from the debt so contracted.
2. Injunction: Action on Bond: Damages. The plaintiffs took out an execution on a judgment in their favor against one Beddeo, and the sheriff levied on property of Beddeo sufficient to satisfy the same. Beddeo thereupon obtained an injunction against the enforcement of the judgment, and one Means became his surety on the injunction bond. Within four months from the levy of the execution Beddeo was, on proceedings duly instituted in the district court of the United .States, by his creditors declared a bankrupt and subsequently duly discharged. The trustee appointed in the bankruptcy proceedings took possession of the property levied on by the sheriff and administered the same as a part of the bankrupt estate. The injunction action instituted by Beddeo was dismissed and the injunction dissolved. An action was brought on the injunction bond, in which it was sought to recover the full amount of the judgment enjoined by Beddeo and other damages alleged in consequence of the wrongful issue of the injunction. Held, That as the sale under Stull Brothers’ execution would have taken place prior to the institution of bankruptcy proceedings against Beddeo, the injunction issued against the sale was the direct cause of Stull Brothers’ inability to collect their judgment, and the amount of that judgment a proper element of damages in a suit on the injunction bond.
Appeal from the district court for Harlan county: Ed L. Adams, Judge.
Affirmed.
John Everson, for appellants.
Flcmsburg & Williams, contra.
Rehearing allowed. See opinion, p. 119, post.

Opinion:
Duffie, C.
In January, 1903, Stull Brothers recovered a judgment in justice court of Douglas county against Walter R. Beddeo for $113, and costs taxed at $6.40. A transcript of this judgment was filed in the office of the clerk of the district court for Douglas county and afterwards duly transcribed to the district clerk's office in Harlan county, Nebraska. February 7, 1903, an execution was taken out on this judgment and delivered to the sheriff of Harlan county, who on February 18, 1903, levied on personal property of Beddeo of sufficient value to satisfy the judgment and costs and all accruing costs. On the same day Beddeo commenced an action in the district court for Harlan county to enjoin said judgment, and procured a temporary order of injunction, which remained in force until June 6, 1904, when the injunction action was dismissed and the injunction dissolved. Means was surety on the injunction bond given by Beddeo. In his petition for an injunction Beddeo attached a transcript of the judgment against him which, among other matters, recites the following: "January 9, 1908. Plaintiff filed bill of particulars, alleging that the defendant is indebted to plaintiff in the sum of $107 for rents collected by defendant while in the employ of plaintiff, which said sum defendant has failed, neglected and refused to pay, or any part thereof, but has converted the same to his own use." June 4, 1903, a petition in involuntary bankruptcy was filed in the district court of the United States for the district of Nebraska against Walter R. Beddeo, and on September 11, 1903, Beddeo was adjudged an involuntary bankrupt, and thereafter, on proceedings duly had, he was discharged. The judgment of Stull Brothers against him, above referred to, was duly scheduled in the bankruptcy court, but no personal notice thereof was given to Stull Brothers, notice by publication only being had. Pending the proceeding in bankruptcy against Beddeo, the trustee in bankruptcy took possession of the personal property on which the sheriff of Hlrlan county had levied and scheduled the same as a part of the bankrupt estate, and thereafter administered upon the same. The sheriff of Harlan county returned his writ issued upon the judgment of Stull Brothers against Beddeo, setting forth that the property levied on by him had been taken by the trustee in bankruptcy and that he was unable to repossess himself of the same. This action was brought by Stull Brothers upon the injunction bond filed in the district court for Harlan county in the action in which Beddeo obtained his injunction against the enforcement of the Stull Brothers' judgment. The facts above set forth all appear from a stipulation entered into between the parties on the trial in the district court. The district court gave judgment for the defendants, and Stull Brothers have taken an appeal.
If we understand the position of the defendants, it is that Beddeo's discharge in bankruptcy relieved him from liability on this judgment, as well also as upon the bond given when he procured the injunction against its collection. The plaintiffs, on the other hand, claim that the judgment is of that character that a discharge in bankruptcy does not release Beddeo from liability thereon and (hat it is still a valid claim against him. The seventeenth section of the bankruptcy act provides: "A discharge in bankruptcy shall release a bankrupt from all his provable debts, except such as were created by fraud, embezzlement, misappropriation, or defalcation while acting as an' officer or in any fiduciary capacity." U. S. Comp. St., vol. 3, p. 3428, sec. 17. The bill of particulars filed in justice court recites that Beddeo, while in the employ of the plaintiffs, collected rent due them, which he converted to his own use, and it was upon this claim that the judgment in favor of Stull Brothers was rendered. While the bill of particulars does not disclose the nature of Beddeo's employment with Stull Brothers, it must, we think, receive one of two constructions — either that he was employed as their agent to collect rents for them, or that while lie was in their employ he did, without authority, collect rents belonging to them and converted them. In the first case he would be acting as their agent in making the collection, and the rents collected by him would be a trust fund in his hands. In the second case, if he collected without authority and converted the rents, it would be a debt created by his fraud. In either event we think that he falls within the exception to section 17 of the bankruptcy act, and the debt is one from which he would not be released. Clark v. Iselin, 21 Wall. (U. S.) 360; Fulton v. Hammond, 11 Fed. 291. It follows from this that Stull Brothers held a valid judgment against Beddeo which they were entitled to enforce.
The next question is the measure of damages. The plaintiffs claim that, where an injunction against the collection of a judgment is procured by the execution defendant, the measure of damages in a suit upon the bond, in case the injunction is dissolved, is the amount of the judgment, interest and costs, and such other damages as have been' sustained. Authorities in support of this position are cited, but from states having a statute differing from ours and where the conditions of the bond were different from the one in suit. The ordinary measure of damages has, we think, been settled in this state by our former holding. Gibson v. Reed, 54 Neb. 309, was an action on an injunction bond given by an execution defendant in an action to restrain the sale of property taken on execution against him. The measure of damages fixed by this court was the depreciation in value of the property levied on while the injunction was in force, reasonable fees of counsel, costs and expenses which plaintiff had incurred, or for which he had become liable in consequence of the injunction. The condition of the bond is to pay all damages sustained if the writ was wrongfully obtained, not the judgment, the collection of which is enjoined. In this case, however, Beddeo's property was levied on February 18, 1903, and had it not been for the injunction the sale would have taken place and Stull Brothers received their money upon the execution long prior to the institution of bankruptcy proceedings against Beddeo. There is nothing in the record tending to show that Stull Brothers had knowledge of the insolvency of Beddeo at the time the levy was made, nor, in fact, at any time prior to the filing of the bankruptcy proceedings against him, or that their proceedings were in fraud of the act of bankruptcy. Consequently, they could retain any money received from a sale of the property seized on their execution. The injunction which prevented the sale was, therefore, the direct cause of their inability to collect their judgment, and they have been damaged in consequence to the full amount of that judgment.
1. Principal and Surety: Discharge of Principal in Bankruptcy. A surety on an injunction bond, given in a suit brought to restrain the enforcement of a judgment, is not released from liability thereon by the discharge of his principal in bankruptcy.
2. Injunction: Action on Bond: Damages. In an action on such bond, the extent to which the amount collectible on the judgment has been reduced in consequence of the. injunction is a proper element of damage.
3. Bankruptcy: Principal and Agent: Misappropriation of Funds. Whether a debt due from an agent to his principal for rent collected and converted to his own use is one created by fraud, embezzlement, misappropriation, or defalcation while acting in a fiduciary capacity, within section 17 of the bankruptcy act, quiere.
4. Former opinion modified, and former judgment vacated.
We recommend an affirmance of the judgment of the district court.
Albert and Jackson, CC., concur.
By the Court: For the reasons stated in the foregoing opinion, the judgment of the district court is
Affirmed.