Crystal Laundry &Amp; Cleaners, Inc. v. Continental Finance &Amp; Loan Company., 97 Ga. App. 823, 104 S.E.2d 654 (1958)

Georgia Court Of Appeals

Status: DECIDED

Docket Number: 37126

Parts: Garnishment, etc. Fulton Civil Court. Before Ju...

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Summary

Judgment affirmed in part and reversed in part. Gardner, P. J., Townsend, Carlisle, Quillian and Nichols, JJ., concur.

Summary

Judgment affirmed in part and reversed in part. Gardner, P. J., Townsend, Carlisle, Quillian and Nichols, JJ., concur.

Text

Moise, Post & Gardner, J. William Gibson, for parties at interest not parties to record.Joel J. Fryer, contra.Smith, Kilpatrick, Cody, Rogers & McClatchey, Thomas C. Shelton, James R. McLain, Jr., James A. Bagwell, for plaintiff in error.

1. The right to avoid the lien of a garnishment proceeding attaching as a lien on a bankrupt's funds earned before bankruptcy and otherwise subject to garnishment is solely in the trustee in bankruptcy. The lien is not automatically voided by bankruptcy.

2. An in personam judgment elected in a trover action is dischargeable by bankruptcy, unless it comes within the exceptions stated in the Bankruptcy Act, insofar as it has no application to the specific property upon which its lien is caused to attach. A garnishee must urge such a discharge in the bankrupt's behalf if it knows of the bankruptcy in time to do so.

3. The burden of proof to show that a provable and listed debt comes within the exceptions stated in the Bankruptcy Act as to dischargeability is upon the creditor asserting the exception. Kreitlein v. Ferger, 238 U. S. 21 (35 Sup. Ct. 685, 59 L. ed. 1184). There was no such showing in this case.

On July 8, 1957, Continental Finance & Loan Company instituted a trover action against Mary Lee Lymon and Eugene Lymon to recover eight pieces of furniture "as described in a certain bill of sale to secure debt." On August 8, 1957, the finance company elected to take a money judgment against Eugene Lymon and his wife, the case being in default. On August 20, 1957, the finance company instituted garnishment proceedings naming Eugene Lymon as defendant and Crystal Laundry & Cleaners, Inc., as garnishee. The garnishee was served on August 21, 1957. On September 27, 1957, Eugene Lymon was adjudicated a bankrupt and subsequently granted a discharge. The above judgment was scheduled in the bankruptcy petition. On September 30, 1957, the garnishee filed its answer in the Civil Court of Fulton County showing that as of September 27, 1957, it had withheld from the wages of the debtor a certain sum which was subject to the process of garnishment, alleged the adjudication of the debtor as a bankrupt and stated that it would hold the money subject to the orders of a court with jurisdiction to control its disposition. On October 3, 1957, and December 12, 1957, the garnishee was served with two additional summonses and filed answers showing additional sums withheld from the wages of the debtor and noted his bankruptcy. The finance company filed a money-rule petition requiring the garnishee to show cause why it should not be compelled to pay it the sums withheld by the garnishee. The trial judge entered orders subjecting the money withheld by the garnishee to the lien of the finance company less attorney's fees for filing the answers and costs of court. On the hearing it was stipulated by the parties that the court should determine whether the garnishee could answer said funds into court when the debtor had been adjudicated a bankrupt. The exception here is made by the garnishee to the judgment finding the sums answered into court subject to the finance company's lien.

1. It was not error for the court to subject to the finance company's lien so much of the debtor's earnings in the hands of the garnishee as were earned prior to the debtor's adjudication as a bankrupt. A lien obtained within four months of adjudication of bankruptcy is voidable only at the instance of a trustee in bankruptcy. Since the debtor could under no circumstances be entitled to such funds if not claimed as an exemption, it is no concern of his or the garnishee's whether it be applied to the lien here asserted or be recovered by the trustee for the benefit of all creditors. Morris Plan Bank of Ga. v. Simmons, 95 Ga. App. 135 (97 S. E. 2d 537).

2. If the wages earned by the debtor subsequently to his adjudication as a bankrupt were discharged by bankruptcy and the debtor had not waived the discharge it was the duty of the garnishee to set up in its answer the proposition that the wages earned after adjudication were not subject to the finance company's lien. Armour Packing Co. v. Wynn, 95 Ga. App. 132 (97 S. E. 2d 188). We think that the rulings in these cases are contrary to the letter and spirit of the bankruptcy law as announced and applied in the Davis case and upon due notice to the parties in this case they are hereby expressly overruled in so far as contrary to what is here held. See also Collier on Bankruptcy (14th ed.) Vol. 1, 1709 at page 1588.

The third headnote requires no discussion.

The court did not err in ordering the sums earned before bankruptcy paid over, but erred in subjecting the sums earned by the debtor after his adjudication as a bankrupt.

ON MOTION FOR REHEARING.

The movants cite Nash Loan Co. v. Yonge, 182 Ga. 672 (186 S. E. 811) as being contrary to our ruling. The Supreme Court did not rule in that case that Davis v. Aetna Acceptance Co., 293 U. S. 328, supra, was not controlling. The court further held that the demurrer to the petition should have been sustained because the bankrupt failed to plead his discharge in the suit pending against him.

The contention that our ruling takes away from the movant the special lien of his money judgment is obviously without merit because our decision specifically states that a money judgment in trover is dischargeable insofar as it has no application to the specific property upon which the lien of the judgment may attach. A brief for parties at interest not parties to the record very strongly urges that the ruling by the Supreme Court of the United States in the Davis case, supra, is not controlling for the reason that the action in trover in Illinois, which was involved in the Davis case, is different from a trover action in Georgia. We face this issue squarely, as there is a difference between an Illinois trover action and a Georgia trover action. However, to our minds there is no difference in principle in the application of the bankruptcy law to both classes of cases. In Illinois a trover action is designed to afford a money judgment for the conversion of goods which cannot be recovered. In Georgia trover is a combination of trover, detinue and replevin. The provision in the Georgia law for the election of a money judgment, in so far as it does not affect the property itself, is the equivalent of permitting the plaintiff to elect to have his action proceed as a common-law trover action. The purpose and philosophy of the bankruptcy act is to provide for the discharge of all provable debts not coming within the exceptions stated in the law. The debt in this case was without question a provable one, a note and bill of sale. The judgment against the bankrupt over and beyond the right to subject the property is so clearly within the purview of the bankruptcy act, unless it comes within an exception, that it is indeed puzzling how the Georgia courts got completely out of step. The best answer we can give is that the decision in Berry v. Jackson, 115 Ga. 196 (41 S. E. 698, 90 Am. St. R. 102) has not been correctly interpreted. In our opinion that decision is based on two propositions, (1) there was no security transaction involved, and (2) there was no showing that the bankruptcy proceedings were ever brought to the notice of the plaintiff. So far as the record in that case showed, the defendant might have had possession of the horse at the time of the trial of the case. If the above case had involved an action in trover based on a bill of sale to secure debt we doubt whether Georgia decisions would ever have varied from the prevailing thought on the subject. It certainly does not appear that the obligation sought to be discharged existed at the time of the adjudication. In the instant case it did exist at such time.

Rehearing denied.

1958