50 A.2d 817 | Conn. | 1946
Lead Opinion
The plaintiff brought this action to the Superior Court in Fairfield County seeking recovery upon a judgment it had obtained in the Court of Common Pleas in Luzerne County, Pennsylvania. The Superior Court rendered judgment in its favor. The defendant made motions to stay the execution on the judgment, and, while the pleadings are somewhat confused, the parties have regarded them as presenting this issue: The defendant on October 24, 1944, filed a petition in bankruptcy and on December 13, 1944, received a discharge, and he claims that the debt evidenced by the Pennsylvania judgment was included within that discharge; the contention of the plaintiff is that, while the Pennsylvania judgment was based upon a note executed by the defendant which contained a confession of judgment, the note was without consideration other than a pre-existing debt owed by the defendant to the *319 plaintiff which, as alleged in an "answer" it filed to the first motion of the defendant, was created by his "fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity," and that the discharge was no defense. At the hearing on the last motion to stay the execution, the plaintiff offered evidence in support of this allegation, but the trial court excluded it, ruling that the defendant's debt to the plaintiff was "created" by the Pennsylvania judgment and that it was, therefore, included within the discharge. Intrinsic in this ruling, as an examination of the memorandum of the trial court shows, was the conclusion that the plaintiff, seeking to enforce a judgment it had secured upon a note, could not show, to avoid the effect of the defendant's discharge, that the note in fact represented an obligation created by the defendant's misappropriation of money of the plaintiff while acting in a fiduciary capacity. No question was raised as to the right of the court, if the debt was discharged, to stay execution, or as to the sufficiency of the pleadings and judgment to present the question, and we do not consider these matters.
The Bankruptcy Act (17) provides: "A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as . . . (4) were created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity. . . ."
Upon this question the Supreme Court of the United States has not, so far as we have discovered, spoken the final word. In Strang v. Bradner,
In the decisions of other courts, there is a sharp conflict. In the following cases it was held that it was not permissible, in determining whether a debt on judgment was discharged, to look beyond the judgment and the record of the action in which it was rendered. In re Stone, 278 F. 566; Rice v. Guider,
The decisions which have held that in determining the nature of the indebtedness a court cannot go behind the judgment and record seem generally to have overlooked two principles which the cases place beyond dispute: Where an action is brought upon a note, and a discharge in bankruptcy is set up as a defense, proof is admissible to show that the underlying *323
debt was created by fraud or one of the other excepted causes; American Surety Co. v. McKiearnan,
The purpose of the Bankruptcy Act was "to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes." Williams v. U.S. Fidelity Co.,
Our conclusion is that the plaintiff is entitled to prove, if it can, by evidence dehors the record of the action, that the note upon which the Pennsylvania judgment was based represented money misappropriated by the defendant, and that the debt was not within the defendant's discharge in bankruptcy. The trial court relied, and the defendant relies, quite largely on our decision in Consolidated Plan of Connecticut, Inc. v. Bonitatibus,
There is error, the judgment is set aside and the case is remanded to be proceeded with according to law.
In this opinion BROWN, JENNINGS and ELLS, Js., concurred.
Dissenting Opinion
A considerable part of the majority opinion is devoted to the argument that the purpose of the Bankruptcy Act was to relieve an honest debtor from the weight of oppressive indebtedness and not to furnish a means of escape for the dishonest one whose debt is founded in fraud. I have no quarrel with this argument. My position is that, having obtained a judgment in another state for what bears the indicia of an honest debt and having sued upon that judgment in this state, the plaintiff may not, in this action, attack the character of the debt by evidence of fraud dehors the record. That is not to say that the plaintiff has no other means of setting aside the discharge as to the debt because of fraud in its creation. See Brown v. Hannagan,
The authorities are in substantial agreement that in such cases a judgment itself is not conclusive of the nature of the debt but that the courts may examine the record to ascertain the nature of the cause of action upon which it is based. In Boynton v. Ball,
By the weight of authority, while the trial court may go behind the judgment into the record to ascertain the character of the action in such cases, it may not go behind the record to establish a different cause. 8 C.J.S. 1591.
As to decisions cited in the majority opinion as holding a contrary view, some relate to proceedings before judgment and others are based upon independent actions in equity, distinguishing them from the instant case. See Brown v. Hannagan, supra; Howland v. Carson,
Such a proceeding as the plaintiff attempted and the majority opinion sanctions will require the trial here of a new cause of action arising in another state. Pursued to its logical conclusion, the action on the contract judgment will disappear temporarily from consideration and one for defalcation will take its place. When, and if, it is decided in that proceeding that the "original debt" had its basis in a defalcation, presumably the bar of the discharge will be removed and execution will issue on the Pennsylvania judgment, although that judgment is based upon a contract between the parties including a provision for the payment of a 10 per cent attorney's fee. "A judgment creates a debt, on the ground that a liability is ascertained and established, by the decision of a tribunal, which might rightfully adjudicate upon it; and such adjudication derives its whole force and effect from the laws of the state under whose authority it is made." Wood v. Watkinson,
This was the position we took in Consolidated Plan of Connecticut, Inc. v. Bonitatibus,