The opinion of the court was delivered by: INCH
The petitioner, Alfred E. Devereaux, has been duly adjudicated a voluntary bankrupt and has been duly discharged. In his schedules duly filed he set forth a judgment recovered against him in the state court, in the sum of $500, representing damages for a false imprisonment, awarded to the judgment creditor Harry T. Belsey.
The bankrupt now files this petition, in his bankruptcy proceeding, in which he asks that said judgment creditor Belsey be enjoined and restrained from enforcing or attempting to enforce the said judgment for damages for false imprisonment because of said discharge.
The judgment was entered after a trial in the state court, a jury having been duly waived and the court allowed to determine the matter with the same force and effect as a verdict. Findings of fact and conclusions of law were also duly waived, in accordance with state court procedure.
Belsey had sued Devereaux on two causes of action. The first alleged a false imprisonment. The second alleged a malicious prosecution. The trial court, in a short memorandum decision, awarded Belsey $500, on the cause of action for false imprisonment, and 6 cents on the cause of action for malicious prosecution.
The bankrupt does not make this motion in connection with the judgment for malicious prosecution. He does claim that the judgment for false imprisonment is barred.
The first question would seem to be whether this court should depart from the usual procedure in this circuit and entertain this petition of the bankrupt. The customary procedure, where a bankrupt seeks to avail himself of a discharge from a judgment recovered in the state court, is for him to go into the court where the judgment was obtained and there interpose this alleged bar. In re Scheffler (C.C.A.) 68 F.2d 902; In re Havens (C.C.A.) 272 F. 975; In re Madden (D.C.) 257 F. 581.
This procedure was followed by the bankrupt pursuant to section 150, article 6, of the Debtor and Creditor Law of the State of New York (Laws 1909, c. 17, Consol. Laws, c. 12, McKinney's Consolidated Laws of New York, Ann.).
The bankrupt applied on affidavit and proof of his discharge to the Supreme Court of the State of New York asking that the judgment for false imprisonment be canceled and discharged by record. That court has denied the application. 150 Misc. 337, 269 N.Y.S. 127. Thereupon the bankrupt appealed to the Appellate Division of the Supreme Court, and the order below was affirmed, without opinion, 242 App. Div. 603, 271 N.Y.S. 1018.
In view of the nature of the motion in the state court, the bankrupt by his appeal exhausted his right of appeal and could go no further except by apecial leave granted by the appellate courts which leave is rarely given.
Accordingly, I think it may be fairly said that the bankrupt has exhausted his remedies in the state court. This being so, he now applies to this court.
The adjudication and order of discharge of this bankrupt were decrees in equity, determining the status, and jurisdiction remained in this court to determine the effect of the adjudication and order and enjoin the judgment creditor from his threatened interference therewith. Local Loan Co. v. Hunt, 54 S. Ct. 695, 698, 78 L. Ed. 1230, decided April 30, 1934.
However, Mr. Justice Sutherland, delivering the opinion of the Supreme Court in the above case, made it plain that: "It does not follow, however, that the court was bound to exercise its authority. And it probably would not and should not have done so except under unusual circumstances such as here exist." This plain warning and admonition shows that the Supreme Court did not intend thereby to open the door of the bankruptcy court to every disappointed litigant in the state court, but, on the contrary, suggested that the said customary procedure be followed and only in exceptional cases should this court exercise its authority.
In the Local Loan Case the exceptional circumstances were made apparent, the amount involved was small, although the result was important to bankrupt. That owing to a predetermination by the courts of the state, and a statute of the state, the bankrupt would be put to a long and expensive course of unsuccessful litigation making his state remedies entirely inadequate.
It seems to me that a situation exists here of an exceptional character although not exactly similar to those in the Local Loan Case. Here the amount involved is small, but the judgment carries possibilities of arrest and imprisonment. The bankrupt has exhausted his remedies in the state court and will be exposed to the dangers of the nonpayment of this judgment unless this court entertains his petition and affords such relief as he may be entitled to.
Therefore I conclude that this is a proceeding in which this court can properly exercise its authority, provided the proof justifies such exercise. I ...