In re Levitan

• Decision Date: 07 July 1915
• Citation: 224 F. 241
• Parties: In re LEVITAN.
• Court: U.S. District Court — District of New Jersey

224 F. 241

In re LEVITAN.

United States District Court, D. New Jersey.

July 7, 1915

Charles A. Kalish, of New York City, for the motion.

Henry Kuntz, of New York City (Abraham P. Wilkes, of New York City of counsel), for bankrupt.

RELLSTAB District Judge.

On the 29th day of December, 1914, Wolf M. Levitan was adjudicated a voluntary bankrupt. On the day following, in response to his petition setting forth the recovery against him by the Castle Braid Company of a judgment founded on a promissory note alleged to have been converted by bankrupt, and the necessary allegations showing that such liability was a provable debt in bankruptcy and would be released by a discharge granted in such proceedings, and that the said company threatened to take proceedings against him to enforce such judgment, this court made an order, under section 11 of the Bankruptcy Act enjoining said company from taking any proceedings to enforce such judgment 'for one year from * * * the 28th day of December, 1914, or, if an application for a discharge is made in the meantime, then until the question of said discharge is determined.'

The company now moves to vacate this order, on the ground that such judgment is founded on a willful and malicious conversion of property and falls within the exception of section 17a(2) of the Bankruptcy Act. This section provides inter alia, that:

'A discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as * * * (2) are liabilities for * * * willful and malicious injuries to the person or property of another.'

The company, in its petition seeking a vacation of such order, in substance alleges:

That it delivered two promissory notes to the bankrupt for $375 each; that subsequently, at the request of the bankrupt, it delivered to him two other promissory notes, one for $500, and the other for $250, to take the place of such first-mentioned notes; 'that the bankrupt returned one of said notes of $375, and fraudulently represented that he was the holder of the other one of said notes, and would deliver same to your petitioner; that the said statement was false and fraudulent, in that the bankrupt was not the holder of the said note, but the said bankrupt wrongfully, willfully, and maliciously converted and misappropriated one of the $375 notes; that on or about the 26th day of September, 1914, an action was commenced in the Municipal Court of the City of New York, Borough of Manhattan, Ninth District, wherein your petitioner was plaintiff and the bankrupt herein was defendant, to recover the sum of $375 for damages sustained by the wrongful, willful, and malicious misappropriation and conversion of the said note of $375 and the fraudulent statement made with reference thereto;' that it secured a judgment on the note not returned, and 'that pursuant to the said judgment your petitioner is entitled to an execution against the person of the said bankrupt, and is entitled to have the said bankrupt arrested and imprisoned'; and that the execution of said judgment was stayed by said order of December 30, 1914.

The petition further alleged, on information and belief, that:

Said judgment was 'created by the fraud, embezzlement, misappropriation, and defalcation of the bankrupt herein, while acting in a fiduciary capacity, and the said judgment is not a judgment that is (dis)chargeable under the United States Bankruptcy Act.'

A copy of the complaint filed in the suit above referred to is annexed to said petition. This complaint states two causes of action. The first alleges a conversion of said note, in the following language:

'On information and belief, that said defendant has wrongfully converted and appropriated the said promissory note for $375 to his own use and by causing the same to be discounted.'

The second alleges the obtaining of said note by false representations, charging, on information and belief, that the bankrupt knew that such representations were untrue at the time he made them.

The bankrupt, in his affidavit filed in opposition to such motion, alleges, in substance, that at the time of the delivery of said notes the Castle Braid Company was indebted to him in a large sum of money for goods purchased, and that in good faith he discounted the note in question and applied its proceeds to such indebtedness, without intent to defraud said company; that such company is indebted to his estate in bankruptcy in a sum exceeding the amount of such judgment; that at the trial of said suit the company elected to go to trial upon the first cause of action, and that the said judgment was predicated on said cause of action; that, though the said company conceded at the trial of such action that it was indebted to the bankrupt to some extent, such indebtedness was not permitted to be counterclaimed, as that suit was one for conversion.

The ground alleged in such petition, viz., that the alleged fraud was perpetrated by the bankrupt while acting in a fiduciary capacity, was abandoned on the argument of the motion, and properly so, as there is nothing in the record that shows that the bankrupt bore a fiduciary relation to such company; and the motion is based alone on the ground that the judgment is founded on a liability for a willful and malicious injury to the company's property.

The liability underlying this judgment, as shown by the foregoing recital of facts, and which record controls this motion, is a provable debt in bankruptcy. Sections 17 and 63a (1), Bankr Act; Crawford v. Burke, 195 U.S. 176, ...