Jefferson Transfer Co. v. Hull

Winslow, C. J.

Several questions are raised in this case which may be stated as follows: (1) Is sec. 3716&, Stats., a valid law? (2) If valid, what is the nature of the right which it gives, and is that right in the present case affected by sec. 67 f of the national bankruptcy law of 1898 (ch. 541), providing that all levies, judgments, and other liens obtained through judicial proceedings within - four months prior to the filing of the petition in bankruptcy shall be deemed mill and void? (3) Is the plaintiff’s judgment a provable claim in the bankruptcy proceedings ? (4) Is it a dischargeable claim? (5) If provable and dischargeable, what disposition should be made of the nonexempt portion of the defendant Bhealy’s salary falling due during the pend-ency of the bankruptcy proceedings and prior to the determination of the question of discharge? These questions will be taken up and answered in the order stated. The authorities are not in accord upon some of them, but we have adopted the principles which seem to us most logical and reasonable.

1. We entertain no doubt as to the validity of the statute in question. Its manifest purpose is to furnish to the creditors of an employee of the public a remedy practically equivalent to garnishment, it being the policy of the state not to subject the state or its municipalities to garnishee process. Sec. 2752, Stats.; Burnham v. Fond du Lac, 15 Wis. 193. The administration of the statute may be attended with some difficulties on the part of public officers, but this is no reason for holding it to be unconstitutional. Similar legislation has been sustained in other states. Ruperich v. Baehr, 142 Cal. 190, 75 Pac. 782; Hanson v. Hodge, 92 Wash. 425, 159 Pac. 388.

2. The right given by this statute is that of a lien on the fund, not ownership thereof. It is closely analogous to the right of a judgment creditor to goods of the debtor seized upon execution; in fact the proceeding may rightly be called an equitable execution. It is plainly a lien obtained through legal proceedings; hence, so far as it affects wages or salary due at the time of the filing of the petition in bankruptcy, it is rendered “null and void” by the express terms of sec. 67 f of the national bankruptcy act. The judgment itself is not affected by the section named, only the lien which has been created under it (1 Remington, Bankr. (2d ed.) § 682 and cases cited), hence the salary falling due afterwards is not a part of the estate which passes to the trustee, but is the property of the bankrupt. 7 Corp. Jur. 115. Inasmuch as the provisions of the bankrupt law avoiding liens on property are only intended to facilitate the carrying out of the distribution of the estate of the bankrupt subject to its provisions, it seems clear that the only liens avoided are liens upon the estate which passes to the assignee. From this it follows logically that the lien in favor of the plaintiff given by see. 3716a, Stats., upon the salary of Shealy, while avoided as to the salary earned on December 7, 1916, remains in full effect upon the salary accruing after the adjudication in bankruptcy.

3. The plaintiff’s claim having been reduced to judgment prior to the commencement of the bankruptcy proceedings was a provable debt under sec. 63 of the bankrupt act, although it was a judgment for a tort. It is a fixed liability evidenced by a judgment absolutely owing at the time of the filing of the petition, and hence answers the calls of the first subdivision of the section last cited. 1 Remington, Bankr. (2d ed.) § 680 and cases cited; 7 Corp. Jur. p. 299, § 480.

4. Being a provable debt, it is dischargeable unless it comes within the exceptions named in sec. 17 of the bankrupt act, sub. (2), which excepts from the operation of a discharge liabilities for obtaining money under false pretenses or false representations, or wilful and malicious injuries to the person or property of another. The judgment in question was simply a judgment for damages resulting from a negligent act; it is not claimed or shown that the act was wilful or malicious, hence the debt will be discharged if the bankrupt be granted a discharge. 7 Corp. Jur. p. 398, § 708; 3 Remington, Bankr. (2d ed.) § 2740 and cases cited.

5. If the plaintiff’s judgment be discharged by a discharge in bankruptcy, his lien on the salary falling due after the December instalment will necessarily be discharged. If the bankrupt be refused a discharge, the plaintiff will be entitled to have enough reserved by the secretary' of state out of the after-acquired earnings to pay any balance on his judgment not discharged hy dividends in the.bankruptcy proceedings. The secretary of state should for his own protection hold enough of the bankrupt’s salary as it falls due to protect himself from liability until the question of discharge is finally determined.

By the Court. — Order affirmed. No costs to be taxed in favor of the secretary of state, the other two defendants to recover their disbursements and one bill of attorneys’ fees to he divided equally between them.