Davis v. Aetna Acceptance Co

• Decision Date: 03 December 1934
• Docket Number: No. 68,68
• Parties: DAVIS v. AETNA ACCEPTANCE CO
• Court: U.S. Supreme Court

293 U.S. 328

55 S.Ct. 151

79 L.Ed. 393

DAVIS

v AETNA ACCEPTANCE CO.

No. 68.

Argued Nov. 9, 1934.

Decided Dec. 3, 1934.

Messrs. Franklin D. Trueblood and Edward A. Zimmerman, both of Chicago, Ill., for petitioner.

Mr. W. S. Kleinman, of Chicago, Ill., for respondent.

Mr. Justice CARDOZO delivered the opinion of the Court.

A discharge in bankruptcy, pleaded as a defense to a declaration in trover for the conversion of a chattel, has been ruled by the courts below not to constitute a bar. The question is whether upon the evidence and the findings the bar should have been upheld.

The petitioner was a dealer in automobiles, selling them at retail and maintaining a salesroom where his wares were displayed. To put himself in funds for the acquisition of the cars, he obtained loans from the respondent, the AEtna Acceptance Company, in thirty-five or more transactions. In particular he borrowed $1,181.87 on July 10, 1929, procuring title thereby to an Auburn sedan. This was 90 per cent. of the cost of the car; the residue of the price being paid out of his own money. At once upon receipt of the sedan he delivered to the respondent a set of four papers: A promissory note for $1,181.87 to the order of the respondent payable in sixty days; a chattel mortgage covering the automobile and securing payment of the note; a trust receipt, acknowledging receipt of the automobile, and agreeing to hold it as the property of the respondent for the purpose of storage, and not to sell, pledge, or otherwise dispose of it except upon consent in writing; and finally a bill of sale, absolute in form.

On August 3, 1929, the automobile, then on exhibit in the petitioner's showroom, was sold by one of his salesmen, and thereupon or soon afterwards petitioner received the price. There is a stipulation that the sale was made without concealment and in the ordinary course of business, though without written consent. According to the petitioner's testimony, notice of the transaction was given the same day to one of the respondent's officers. There is also testimony tending to support the inference that on many other occasions cars held upon like terms had been sold without express consent and the proceeds accounted for thereafter. On this occasion the petitioner promised to make prompt remittance of a check, subject to an offset or credit growing out of other dealings. He did not keep his promise. Instead, he filed a petition in bankruptcy on September 13, 1929, obtaining later his discharge after duly listing the respondent in his schedule of creditors. The filing of that petition was followed by this action for conversion. The trial judge, overruling the special plea of a discharge, gave judgment in favor of the respondent for damages and costs. The Illinois Appellate Court affirmed. There was a refusal of leave to appeal to the Supreme Court of the state; permission being requisite because of the amount involved. The case is here on certiorari.

The effect of a discharge in bankruptcy is to 'release a bankrupt from all of his provable debts,' with excepted liabilities enumerated in the statute. Bankruptcy Act § 17, 11 U.S.C. § 35 (11 USCA § 35). There is no dispute that the respondent had a provable debt. It might have proved upon the note, 'a fixed liability, as evidenced by * * * an instrument in writing.' Bankruptcy Act § 63a(1), 11 U.S.C. § 103(a)(1), 11 USCA § 103(a)(1). If its grievance was the sale, it might have proved 'upon a contract express or implied' (section 63a(4), 11 USCA § 103(a)(4), waiving the tort and standing upon the implied assumpsit. Crawford v. Burke, 195 U.S. 176, 193, 25 S.Ct. 9, 49 L.Ed. 147; Tindle v. Birkett, 205 U.S. 183, 27 S.Ct. 493, 51 L.Ed. 762. What it did is not decisive. Crawford v. Burke, supra; Tindle v. Birkett, supra. Enough that a method of proof had been provided to be used at its election.

The debt being provable, the next inquiry must be whether the liability back of it is within one of the excepted classes. For present purposes, only two of the exceptions (section 17, subds. (2) and (4), of the act (11 USCA § 35(2, 4) will have to be considered. The others by concession have no relation to this case. Subdivision 2 excludes from the release 'liabilities for * * * willful and malicious injuries to the person or property of another.' Subdivision 4 excludes the liabilities of a bankrupt 'created by his fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.'

1. The respondent contends that the petitioner was liable for a willful and malicious injury to the property of another as the result of the sale and conversion of the car in his possession. There is no doubt that an act of conversion, if willful and malicious, is an injury to property within the scope of this exception. Such a case was McIntyre v. Kavanaugh, 242 U.S. 138, 37 S.Ct. 38, 61 L.Ed. 205, where the wrong was unexcused and wanton. But a willful and malicious injury does not follow as of course from every act of conversion, without reference to the circumstances. There may be a conversion which is innocent or technical, an unauthorized assumption of dominion without willfulness or malice. Boyce v. Brockway, 31 N.Y. 490, 493; Laverty v. Snethen, 68 N.Y. 522, 527, 23 Am.Rep. 184; Wood v. Fisk, 215 N.Y. 233, 239, 109 N.E. 177; Stanley v. Gaylord, 1 Cush.(Mass.) 536, 550, 48 Am.Dec. 643; Campau v. Bemis, 35 Ill.App. 37; In re De Lauro (D.C.) 1 F.Supp. 678, 679. There may be an honest but mistaken belief, engendered by a course of dealing, that powers have been enlarged or incapacities removed. In these and like cases, what is done is a tort, but not a willful and malicious one. Turning to the findings here, we see that willfulness and malice have been unmistakably excluded. Cf. In re Dixon (D.C.) 21 F.(2d) 565, 566; In re Burchfield (D.C.) 31 F.(2d) 118, 119. The trial court made a special finding as follows: 'The court finds that the defendant in this case was not actuated by willful, malicious or criminal intent in disposing of the car in question.' In these circumstances the respondent is not helped by the later and general finding that the petitioner was 'guilty of legal conversion of the property, as described in the count in trover.' The special controls the general, just as upon the verdict of a jury. Walker v. New Mexico & S.P.R. Co., 165 U.S. 593, 598, 17 S.Ct. 421, 41 L.Ed. 837; Victor American Fuel Co. v. Peccarich (C.C.A.) 209 F. 568, 571.

Nothing in the judgment of the Illinois Appellate Court is at war with the exculpatory finding made upon the trial. The Appellate Court repeats the words of the trial judge without hint of disapproval. Its only comment is that under the law of Illinois malice and wrongful intent are not necessary constituents of a cause of action in trover. This, of course, is true, but, though true, it is beside the mark. The discharge will prevail as against a showing of conversion without aggravated features.

2. The respondent contends that, irrespective of willfulness or malice, the petitioner is within the exception declared by subdivision 4; his liability arising, it is said, from his fraud or misappropriation while acting in a fiduciary capacity. The meaning of these words has been fixed by judicial construction for very nearly a century. Chapman v. Forsyth, 2 How. 202, 11 L.Ed....