Maryland Casualty Co. v. Fant

Mr. Justice Uailor delivered the opinion of the Court. Defendant, E. J. Fant, who appeals, was, during 1932, employed by a wholesale grocery firm in Nashville, as a *493 city salesman, and as an incident of Ms employment lie collected the accounts of the customers to whom he sold merchandise. During 1932, he commenced to convert various amounts collected to his own use. These peculations continued for several months, and from a full and detailed statement or confession of Fant, which is in the record, there can he no doubt that these conversions were knowingly, willfully and maliciously made by him to the consequent injury of his employer. The conversions were finally discovered and the Insurance Company paid the employer $500, the amount of the fidelity bond which it had issued to insure Fant A faithful accounting, and at the time of this payment the Insurance Company took an assignment from the employer by which it was subrogated to all rights of the employer against Fant. Thereafter, in pursuance of its rights under the sub-rogation, the Insurance Company filed the original bill in this cause against Fant in the Chancery Court of’ Davidson County. After Fant, though personally served with subpoena to answer, had failed to enter his appearance, a pro confesso was taken, and final decree for $500 entered against him. On this decree, several executions were issued and returned “nulla 'bona.'1'' When, however, a sum of money due him as wages at the Consolidated Yultee Aircraft,, Inc., was impounded by garnishment on that corporation, Fant filed a petition in this cause by which he insisted that the executions had been improperly issued, because the debt upon which the judgment herein was rendered had been extinguished by discharge in bankruptcy. There is no dispute that the debt was scheduled in a petition in bankruptcy filed by Fant in the Federal Court at Nash *494 ville, nor that lie subsequently secured a discharge on said petition. The Insurance Company answered said petition and denied that the debt was dischargeable on account of its nature under the provisions of the U. S. Bankruptcy Act, as it was in effect at the time of the discharge, alleging specifically that since the debt arose by reason of Fant’s willful and malicious injury to his employer’s property, the debt fell within the class of debts which are not dis-chargeable under 11 U. S. C. A., section 35, sub. a, as follows : “A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as . . . (2) are liable for obtaining money or property by false pretenses or false representations, or for willful and malicious injuries to the person or property of another, . . .” In a written opinion which is a part of the record, the Chancellor upheld the contention of the Insurance Company, saying, after citing authorities: “The Court is convinced that under these authorities the debt in question falls under the exceptions provided in Title 11, Subsection 2 [sec. 35, sub. a] of the Bankruptcy Act, and is not dischargeable. ’ ’ In accord with this opinion a decree was entered sustaining the execution and directing that the sums of money impounded by garnishment be applied on the judgment of the Insurance Company. From this decree Fant has appealed and made two assignments of error: That the Chancellor erred in holding that the judgment of the Insurance Company (1) was not discharged, and (2) in holding that it came within the exceptions defined by Title 11, section 35, sub. a, exception (2), U. S. C. A. *495 Tbe effect of a discharge in bankruptcy is to release tbe debtor from all provable debts, unless sucb debts fall within certain specified classes. Bankruptcy Act, 11 U. S. C. A., sec. 35, sub. a. Clearly, tbe question here presented is limited to a determination of whether tbe judgment of tbe Insurance Company falls within exception (2) of Title 11, section 35, sub. a, supra. Tbe eases cited and argument made on behalf of appellant with regard to exception (4) of section 35, sub. a, are not in point, and will not be considered, since first, tbe Chancellor’s bolding was not based on exception (4), and second, tbe appellee concedes that sucb exception is not applicable. That tbe thefts of Fant from bis employer’s monies were willful and malicious, cannot be doubted from bis detailed confession which is in tbe record. That sucb a course of action by an employee to tbe injury of bis employer constitutes sucb injury as is not dischargeable under tbe Bankruptcy Act, is clear from all tbe authorities to which we have access. “Tbe rule fairly deducible from tbe leading cases may be said to be that tbe disposal of another’s property without bis knowledge or consent, done intentionally in disregard of what one knows to be bis duty, to tbe other’s injury, is a willful and malicious injury to property within the meaning of tbe Bankruptcy Act. Tbe injury need not, according to tbe well settled rule, involve special or actual malice.” G Am. Juris, Sec. 507, pp. 815, 81G. “Willful and wanton conversion of another’s property may constitute a willful and malicious injury to property of another, tbe debt for which is not discharged in bankruptcy. “Thus, tbe willful selling of a customer’s stock by a bankrupt stockbroker comes within this exception. Simi *496 larly, the conversion or embezzlement by an insurance agent of the balance of premiums collected by him after deduction of Ms commissions and expenses has been held to be willful and malicious injury to property within the meaning of the Bankruptcy Act.” 7 Remington on Bankruptcy (5 Ed.), sec. 3552, p. 816. Prior to the amendment of 1903 to the Bankruptcy Act, 11 XJ. S. C. A., sec. 35 note, it was necessary for the debt in subsection (2) to be in the form of a judgment to prevent its discharge. The cases containing' what was then section 17, sub. a, subsection (2), however, clearly define the meaning of “willful” and “malicious” injury as used in the present Act. The same phraseology was used in the act prior to its amendment in 1903. In the case of McIntyre v. Kavanaugh, 242 U. S., 138, 37 S. Ct., 38, 61 L. Ed., 205, the earlier opinion in Tinker v. Colwell, 193 U. S., 473, 24 S. Ct., 505, 48 L. Ed., 754, is quoted with approval in this regard. The latter opinion embodies a complete brief on the meaning of “willful” and “malicious” as these words have been defined by the Supreme Court of the United States in cases under the Bankruptcy Act, and are quoted and applied in a case under the act as amended in McIntyre v. Kavanaugh, supra. ■ -For further discussion of the distinction between conversion which is “innocent and technical” and so dis-chargeable, and that which is “willful and malicious,” and so not dischargeable, compare the opinion of Justice Caejdozo, in Davis v. Aetna Acceptance Co., 293 U. S., 328, 55 S. Ct., 151, 79 L. Ed, 393, 397. A statement in the opinion of Tinker v. Colwell, supra, which we consider determinative of the issue here before us, is: “. . . a wilful disregard of what one knows to be his duty, an act which is against good morals, and wrongful *497 in and of itself, and which, necessarily canses injury and is done intentionally, may be said to be done wilfully and maliciously, so as to come within the exception. ’ 193 U. S., at page 487, 24 S. Ct., at page 509, 48 L. Ed., 754. We think the Chancellor was right in holding that appellant’s debt arose from a willful and malicious injury to his employer’s property. It was not, therefore, dis-chargeable in -bankruptcy. The assignments of error are overruled and the decreé of the Chancellor is affirmed. GeeeN, C. J., and Neil, Chambliss, and Pbewitt, JJ., concur.