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[NO NUMBER IN ORIGINAL] County Court of New York, Erie
County 36 Misc. 2d 381; 232 N.Y.S.2d
783; 1962 N.Y. Misc. LEXIS 2571 September 28, 1962 DISPOSITION: [***1] Motion denied, submit order. HEADNOTES: Garnishment — prior Canadian
bankruptcy — New York court need not recognize prior Canadian bankruptcy
assignment; New York creditor properly garnisheed Canadian’s wages by serving
employer at latter’s New York office. Defendant resides in Canada and works
there for a Canadian corporation. He borrowed money from a Buffalo, New York,
bank, and he failed to repay the loan, and the bank entered a judgment against
him in Erie County. Two months after such judgment, he made a voluntary
assignment to a trustee in bankruptcy under the Canadian Bankruptcy Act, and
there he scheduled this debt. But the New York bank did not appear there.
Instead, about two months after said bankruptcy assignment, the bank garnisheed
his salary, by means of a garnishment served by the Sheriff of Erie County upon
defendant’s employer at said employer’s Buffalo office. In these circumstances,
the New York courts need not recognize the Canadian bankruptcy or give it
comity as against the rights of the New York creditor. The Canadian Bankruptcy
Act permits the trustee, too, to make claim to these wages; but the trustee has
not asserted any such claim. The New York [***2] garnishment will
stand. COUNSEL: David J. Goldstein for
plaintiff. Vaughan, Brown, Kelly, Turner &
Symons for defendant Vesterfelt. JUDGES: Frederick M. Marshall, J. OPINION BY: MARSHALL OPINION: [*382]
[**784] The defendant moves this court for an order vacating and
setting aside a garnishment of wages payable by the Canadian Railroad Company
to the defendant and further moves for a direction to the Sheriff of the County
of Erie to refund any and all moneys in his possession collected by virtue of
said garnishment. Defendant who is a resident of and
is employed in Canada, on the 23rd day of September, 1960 negotiated a loan
with plaintiff, a domestic corporation with offices in the City of Buffalo, New
York.
On February 22, 1962 the defendant
made a voluntary assignment in bankruptcy under the Canadian Bankruptcy Act.
The debt of the plaintiff was scheduled in said bankruptcy. Plaintiff did not
appear.
The question before the court is:
What effect does defendant’s Canadian voluntary assignment in bankruptcy have
on a New York State creditor’s right to garnishment? It is said to be “well
established” that “a discharge of a contract by the law of a place
where the contract was not made, or to be performed, will not be a discharge of
it in any other country.” (Story, Conflict of Laws [8th ed.], ¤ 342.) The Supreme Court has held in McMillan
v. McNeill (4 Wheat. [17 U.S.] 209, 213) that “a discharge under a foreign
law, was no bar to an action on a contract made in this country”. In Ogden v. Saunders (12 Wheat. [25
U.S.] 213, 272) the Supreme Court reaffirmed the McMillan principle, saying it
“is one of universal law, and so obvious and incontestible, that it need
be only understood to be assented to.” (See “A Treatise on the
Conflicts of Laws”, Ehrenzweig [1962], § 50, p. 179.) [**785] Where the
defendant failed to establish that the situs of the contract was within the
jurisdiction [***4] of the country of discharge, a foreign
discharge has been held ineffective as a bar. (Green v. Sarmiento, Fed. Cas.
No. 5,760.) [*383] In Phelps v.
Borland (103 N. Y. 406) the defendant, a citizen of this country, drew his bill
of exchange upon a Liverpool firm, which he sold to plaintiffs, residents of
this State. The bill was accepted by the drawers, but they having failed, it
was protested for nonpayment. The acceptors were discharged in bankruptcy by an
English court. The New York court held (pp. 411-412) “that the foreign
discharge would have been, in and of itself, no defense to the American holder
of the bill. If property of the bankrupt should be found in our jurisdiction,
the plaintiffs were at liberty to proceed against it by attachment and collect
their debt out of such property, and the foreign bankruptcy proceedings would
neither prevent nor stand in the way”. (See, also, Gardner v. Oliver Lee
& Co. Bank, 11 Barb. 558; Matter of Waite, 99 N. Y. 433; Ogden v. Saunders,
supra; Baldwin v. Hale, 1 Wall. [68 U.S.] 223.) In the instant case the contract in
question was established and executed in the State of New York.
[***5] The plaintiff did not appear in the Canadian action. Under
the principles outlined above, this court is not compelled to recognize the Canadian
bankruptcy proceedings. Defendant urges, however, that this
court should under the principles of comity, recognize the Canadian bankruptcy
proceedings. The Court of Appeals in Matter of
Waite (supra) said (p. 448): “the comity of nations which * * * is part of
the common law, allows a certain effect here to titles derived under, and
powers created by the laws of other countries, and from such comity the titles
of foreign statutory assignees are recognized and enforced here, when they can
be, without injustice to our own citizens, and without prejudice to the rights
of creditors pursuing their remedies here under our own statutes”. (See,
also, Abraham v. Plestoro, 3 Wend. 538; Oakey v. Bennett, 11 How. [52 U.S.] 33;
Stone v. Penn Yan etc. Ry., 197 N. Y. 279; Union Guardian Trust Co. v. Broadway
Nat. Bank, 138 Misc. 16; Petersen v. Chemical Bank, 32 N. Y. 21; Ann. 115 A. L.
R. 813; Matter of Cobham, 193 Misc. 363; Koninklijke Lederfabriek etc. v. Chase
Nat. Bank, 177 Misc. 186.) [***6] To grant comity to the Canadian
bankruptcy proceedings in this case would jeopardize the rights of a local
creditor. Defendant further argues that to
allow the garnishment to stand would be unjust in that the employer would be
exposed to possible double [**786] liability. Defendant cites the
Canadian bankruptcy law which provides that all assets of the bankrupt vest in
the bankruptcy trustee including all wages and accruing wages of the bankrupt,
if the said bankruptcy trustee makes [*384] claim for them. Defendant
cites the case of Weitzel v. Weitzel (27 Ariz. 117). The facts of the Weitzel
case are as follows: Josephine Weitzel obtained a judgment for alimony against
her husband, Harry E. Weitzel, in Arizona, an action in which he was personally
served and which he defended. She thereafter garnisheed the Southern Pacific
Railway Company of Mexico in an effort to reach a debt it owed to Weitzel on
account of wages he had earned in Mexico, in order to apply it to her judgment
for alimony. The garnishee, Railroad Company, admitted its indebtedness to
Weitzel, but claimed, among other things, that the Mexican courts would not
recognize a forced payment in [***7] Arizona as satisfaction of the
debt, but would make the company pay it over again in Mexico. The court held that,
although the garnishee was within the jurisdiction of the court, a payment
under the judgment in Arizona would not be an acquittance of the debt in Mexico
and refused to recognize the Arizona garnishee. The court in the Weitzel case relied
upon the English rule laid down in Martin v. Nadel ([1906] 2 K. B. 26). In the later case of Swiss Bank
Corp. v. Boehmische Ind. Bank ([1923] 1 K. B. 673), the English court refines
the earlier Martin rule. In this case the garnishee argued that, should they be
required to pay the amount due from them, it would still leave them liable in
an action to recover the same debt in a competent court in a foreign place, and
that in such an action they would probably be ordered to pay the amount now
sought to be recovered by the judgment creditors over again to the judgment
debtors. This defense was overruled, and judgment rendered for the garnishor,
upon the ground that mere probability that the garnishee may be required to pay
again was regarded as being insufficient ground for withholding a judgment. There [***8] are two New
York cases, although not involving garnishment proceedings which are relevant
to the question of double liability. In Petrogradsky M. K. Bank v. National
City Bank (253 N. Y. 23) one of the questions involved was the liability of a
New York bank to Russian depositors and directors of a Russian bank, abolished
by the Soviet Republic. The court held that the mere possibility of adverse
claims does not relieve the defendant from liability when sued in an action at
law. In the case of Russian Reinsurance Co. v. Stoddard (240 N. Y. 149) the
court observed that the danger of double liability was not imminent, but
negligible, that, even if it were imminent, it was not a defense at all, and
that whatever risk the bank ran [*385] was assumed as part of the
business of a bank, on the theory that the chance of double payment is a common
risk of life. [**787] It should be
observed that in the case of Parker, Peebles & Knox v. National Fire Ins.
Co. (111 Conn. 383) it appeared as a fact, and was admitted that the foreign
court would not recognize a judgment in garnishment rendered in Connecticut.
Consequently, in that case the danger of double liability [***9]
was positively established and was not a mere possibility. In the instant case the Canadian
Bankruptcy Act entitles the trustee to the wages of defendant only if he makes
claim for them. The double liability of the
garnishee in this case is at most remote and it should not be permitted to
stand in the way of plaintiff’s rights under the existing law. Motion denied,
submit order. |