Haynes v. Thrift Credit Union

• Citation: 14 S.E.2d 871,192 Ga. 229
• Decision Date: 17 May 1941
• Docket Number: 13724.
• Parties: HAYNES v. THRIFT CREDIT UNION et al.
• Court: Supreme Court of Georgia

14 S.E.2d 871

192 Ga. 229

HAYNES v. THRIFT CREDIT UNION et al.

No. 13724.

Supreme Court of Georgia

May 17, 1941

Syllabus by the Court.

1. The wages of a bankrupt earned after adjudication do not come into the possession and exclusive jurisdiction of the Federal bankruptcy court; and a State court is authorized to protect such wages from the claims of a dischargeable debt scheduled in bankruptcy, pending the grant or refusal of a discharge by the bankruptcy court.

2. A motion to dismiss is the equivalent of a general demurrer and an objection to a petition on the ground of nonjoinder of parties can not be raised thereby.

3. Where the trial court sustains a motion to dismiss which limits its attack upon the petition to the questions of jurisdiction and nonjoinder of parties, and these are the only questions passed upon by the trial court, this court will not pass upon the sufficiency of the petition to state a cause of action.

Carl Grady Haynes filed a petition for injunction against Thrift Credit Union and named officers of the credit union, in which he made the following allegations: On May 16, 1939, the plaintiff borrowed $700 from the Thrift Credit Union, and gave a note to secure the indebtedness. On the same date he executed a 'salary-deduction order' authorizing the credit union to have the Southern Railway Company, his employer, deduct $15 from his salary each pay day, to be applied on the indebtedness. The plaintiff has been unable to procure a copy of the deduction order for the purpose of attaching it to the petition as an exhibit, but the defendants are familiar with and know the contents thereof. On July 17, 1940, he filed a voluntary bankruptcy petition in the District Court of the United States for the Northern District of Georgia, and he was duly adjudicated a bankrupt by that court on October 30, 1940. He now has an application for discharge pending in that court. The note and the indebtedness in favor of the credit union was duly scheduled in the bankruptcy proceedings among the unsecured claims against the plaintiff, and the defendants were given notice as an unsecured creditor as required by law. The adjudication in bankruptcy and the discharge, when granted will release the plaintiff from all liability on the indebtedness to the crdit union. Nevertheless it has continued to make regular deduction from the plaintiff's salary, which is contrary to justice, law and equity. The prayer was that the defendants be restrained for a period of eighteen months from October 30, 1940, or until such time as the plaintiff will receive his discharge in bankruptcy, from using the deduction order and causing to be made any deduction from his salary in connection with the indebtedness mentioned in the petition. On December 20, 1940, a temporary restraining order conforming to the prayer of the petition was granted. On Ianuary 15, 1941, the plaintiff moved to rule the defendants for contempt of court, because deductions were made from his pay checks on January 1 and January 15, 1941. The defendants answered this motion by stating that the employer remitted the salary deductions as usual, but that they had not applied the same to the note, and were holding the money subject to the order of the court. When the case came on for an interlocutory hearing the defendants moved that the petition be dismissed, because (1) the superior court does not have authority to decide whether or not the claim in question is a secured or unsecured claim, but this question should be decided by the bankruptcy court; and (2) because of nonjoinder of the Southern Railway Company as a party defendant. The court sustained the motion upon both grounds, and dismissed the action and the contempt proceedings. The plaintiff excepted.

Claude O. Garvin and Alton T. Milam, both of Atlanta, for plaintiff in error.

E. L. Davis, E. A. Wright, Neely, Marshall & Greene, and Edgar A. Neely, Jr., all of Atlanta, for defendant in error.

DUCKWORTH, Justice.

1. This case presents the question whether a bankrupt who before adjudication executed a 'salary-reduction order' to secure a debt which is scheduled in bankruptcy is entitled to come into a State court for protection of his wages earned after adjudication against this salary assignment, pending the grant or refusal of a discharge in the bankruptcy court. One side contends that the bankruptcy court has exclusive jurisdiction on the matter, while the other contends that the State court has exclusive jurisdiction thereof. However we believe that it is a matter which either court may determine. Although salary earned by the bankrupt after adjudication does not pass to the trustee and is not a part of the estate to be administered by the bankruptcy court (Rogers v. Georgia Finance Co., 58 Ga.App. 871, 200 S.E. 476; In re Brown, 2 Cir., 4 F.2d 806; In re Kane, 2 Cir., 48 F.2d 96; 8 C.J.S. 662, Bankruptcy § 197), it has been held that the bankruptcy court has authority to protect salary earned after adjudication from claims which are dischargeable in bankruptcy. In re Lineberry, 183 F. 338; In re Fellows, D.C., 43 F.2d 122; In re Potts, D.C., 54 F.2d 144; In re Skorcz, 7 Cir., 67 F.2d 187; Seaboard Small Loan Corporation v. Ottinger, 4 Cir., 50 F.2d 856, 77 A.L.R. 956. As was stated in Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 699, 78 L.Ed. 1230, 93 A.L.R. 195), 'one of the primary purposes of the Bankruptcy Act is 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.' * * * This purpose of the act has been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of bankruptcy, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.' In that case it was held that an assignment of wages to be earned in the future, to secure a present debt, does not constitute a lien within the meaning of § 67, sub. d of the Bankruptcy Act, 11 U.S. C.A. § 107, bub d, excepting liens from the effect of the act, and is not enforceable after discharge, in respect of wages earned after adjudication. A discharge in bankruptcy relates to the date of adjudication; and it has been held that the bankruptcy court has authority under section 2, subsection (15), of the Bankruptcy Act, 11 U.S. C.A.§ 11(15), to protect the bankruptcy against the collection of dischargeable debts during the period between adjudication and the grant or refusal of a discharge. In re...