Smith v. Beneficial Finance Co. of Indianapolis, Inc., 20388

Decision Date16 August 1966
Docket NumberNo. 2,No. 20388,20388,2
Citation218 N.E.2d 921,139 Ind.App. 653
PartiesLeslie W. SMITH and Eva Smith, Appellants, v. BENEFICIAL FINANCE CO. OF INDIANAPOLIS, INC., Appellee
CourtIndiana Appellate Court

[139 INDAPP 654] Robert H. Staton, Indianapolis, for appellants.

R. M. Kroger, Indianapolis, Kroger, Gardis & Regas, for appellee.

SMITH, Chief Justice.

This action is an appeal from a judgment rendered by the Municipal Court of Marion County, Room No. 1. The case was tried by the court without the intervention of a jury.

The appellee sought collection upon a promissory note, dated December 6, 1961, executed by the appellants, in the sum of four hundred thirty-five dollars, sixty-two cents ($435.62) together with interest thereon. The appellants filed their separate petitions in bankruptcy on February 25, 1963, and received their discharge in bankruptcy on the 14th day of November, 1963. The appellee filed its action on the promissory note on November 27, 1963. The appellants executed the above promissory note jointly as husband and wife.

In their respective petitions in bankruptcy the appellants listed certain real property, held by them as tenants by entirety, as being excluded from the assets to be distributed by the trustee in bankruptcy to discharge the claims of individual creditors.

The appellee received notice of the filing of the petitions in bankruptcy and notice of the first meeting of creditors but took no action during the bankruptcy proceedings to change the character of the joint promissory note from a debt to a judgment lien.

The trial court found that the discharge in bankruptcy was a good legal defense against the appellee's complaint on the [139 INDAPP 655] note as to the several liability of the appellants, but that the appellants were jointly liable upon said note.

Appellants' motion for a new trial was overruled, and they now assign such action by the trial court as error, claiming that the decision of the trial court is not sustained by sufficient evidence and is contrary to law.

Appellants maintain that upon the filing of separate petitions in bankruptcy by a husband and wife debtor, a creditor who has notice of the filing in bankruptcy and holds a promissory note signed jointly by the husband and wife must exercise his remedy in the state courts to change the character of his debt from an ordinary dischargeable debt to a judgment lien against real estate held by the entireties. Otherwise, the creditor's debt will be extinguished upon the issuance of a discharge in bankruptcy to the husband and wife debtors.

To support their argument, appellants cite Phillips v. Krakower (1931), 46 F.2d 764, a Maryland case in which the court held 'if the liability on the note of one of the spouses be discharged in bankruptcy, a judgment on the note against the other cannot be collected out of the property during the lifetime of the first.'

We note that the Krakower case was decided pursuant to Maryland law. Many courts turn to decisions of tribunals in other jurisdictions to aid them through analogy or interpretation, in deciding their own cases. This practice is appropriate when there is a lack of authority in a court's own jurisdiction, but where authority exists, a court is bound to give it primary consideration. The Supreme Court of Indiana has determined the law in Indiana, and it was incumbent upon the Municipal Court of Marion County, as it is upon this Court, to follow the Indiana law as so defined and not the law of other jurisdictions.

The question presented to us here is whether a court of bankruptcy may adjudicate property held by the entirety so [139 INDAPP 656] as to prevent a creditor from reaching it for payment of an established joint debt.

Since no portion of an estate by entireties passes to the trustee in bankruptcy of either of the spouses as an asset of the estate of the bankrupt, the appellants' real property was not affected by their petitions in bankruptcy. Echelbarger v. First National Bank of Swayzee (1937), 211 Ind. 199, 5 N.E.2d 966; First National Bank of Goodland v. Pothuisje (1940), 217 Ind. 1, 25 N.E.2d 436, 130 A.L.R. 1238; Cullom v. Kearns, 4 Cir., 8 F.2d 437, 47 A.L.R. 432; 75 A.L.R.2d 1176.

Appellants argue that the appellee 'slept on his rights' by failing to obtain a joint judgment upon the promissory note in order to create a lien against the property held by ...

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10 cases
  • Hunter, Matter of
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 28 July 1992
    ...the decision of the trial court and approved the post-discharge action against the couple. See also Smith v. Beneficial Fin. Co., 139 Ind.App. 653, 218 N.E.2d 921, 923 (1966) (following Pothuisje Both the bankruptcy court and the district court rejected the Bank's argument on the ground tha......
  • Loza v. State
    • United States
    • Indiana Appellate Court
    • 23 September 1974
    ...our courts must be given great weight, and persuasive authority from other jurisdictions may be considered. Smith v. Beneficial Fin. Co. (1966), 139 Ind.App. 653, 218 N.E.2d 921 (transfer However, there have been no cases decided by our courts interpreting any other similar statute, and we ......
  • Paeplow, Matter of
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 10 August 1992
    ...creditor held a joint claim against both spouses, rather than a claim against the filing debtor alone. See Smith v. Beneficial Fin. Co., 139 Ind.App. 653, 218 N.E.2d 921, 923 (1966); First Nat'l Bank v. Pothuisje, 217 Ind. 1, 25 N.E.2d 436, 438-40 (1940); Echelbarger v. First Nat'l Bank, 21......
  • In re Paeplow, Bankruptcy No. 82-30928-RKR
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana
    • 24 September 1990
    ...966 (1937), First National Bank of Goodland v. Pothuisje, 217 Ind. 1, 25 N.E.2d 436 (1940), and Smith v. Beneficial Finance Co. of Indianapolis, Inc., 139 Ind.App. 653, 218 N.E.2d 921 (1966), arguing that the while a husband and wife's bankruptcy may wipe out their personal or several liabi......
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