Gretz v. Esslinger's, Inc.

236 A.2d 508, 428 Pa. 90, 1967 Pa. LEXIS 445

• Court: Supreme Court of Pennsylvania
• Decided: November 14, 1967
• Docket: Appeal, 156
• Status: Published

Opinions

Opinion by

Mr. Justice Cohen,

Appellee, Karl Gretz, in December, 1963, received an arbitration award of $40,000; ultimately judgment was entered on the award and was affirmed by this Court. Gretz v. Esslinger’s, Inc., 416 Pa. 111, 204 A. 2d 754 (1964). Subsequent to the rendition of the award, Gretz was adjudicated a bankrupt and the judgment was marked to the use of the trustee of the bankrupt estate. On February 2, 1965, the trustee as judgment creditor garnished one of appellant’s (Esslinger’s) bank accounts; the garnishee then paid the amount of the judgment plus interest and costs to date and the judgment creditor’s attorney ordered the judgment satisfied against the garnishee.

Thereafter, appellant filed the present petition to have the main judgment satisfied of record. In his answer to the petition, the trustee in bankruptcy admitted receipt of payment of the amount of the judgment plus interest and costs; but asserted that because the funds were “tied up” as a result of further proceedings instituted after payment to him by appellant in the federal district court which enjoined trustee from distributing the money to creditors of the bankrupt estate, he would not satisfy the judgment until appellant paid interest to the bankrupt estate. The court below denied appellant’s motion for judgment on the pleadings.

The effect of the lower court’s opinion is to permit a fiduciary who has been paid the full amount of a judgment plus interest and costs, to refuse to satisfy the judgment even though two acts of the' legislature make the satisfaction mandatory. Act of March 14, 1876, P. L. 7, 12 P.S. §978 j¹ Act of March 27, 1865, P. L. 52, 12 P.S. §977.²

At the moment that the garnishee paid the judgment in full plus interest and costs to date, an unqualified right accrued to the appellant to have the original judgment marked satisfied. It is clear that when the trustee executed on the judgment against the garnishee and received full satisfaction thereof, the defendant-appellant on the original judgment had met his full obligation on that judgment to the plaintiff-appellee, and satisfaction of the original judgment is required by the plain intendment of either Act.

The court below relied principally upon two cases: Felt v. Cook & Hackett, 95 Pa. 247 (1880) ; O’Connor v. Flick, 265 Pa. 49 (1919), wherein we held that in order for a defendant to be entitled to a decree requiring satisfaction of a judgment, he must produce competent evidence to support a finding of actual payment in full. Since, according to the lower court’s view, no competent evidence was produced, it concluded that defendant-appellant was not entitled to satisfaction of the judgment. However, unlike the two cases relied upon by the lower court, here the defendant-appellant has produced the requisite competent evidence to support a finding of actual payment in full. Since proof of actual payment is the only prerequisite necessary to establish an unqualified right to have a judgment marked satisfied, appellee’s answer admitting that the full amount of the judgment plus interest and costs had been paid clearly supplied the quantum of competent evidence required.

The lower court held that since the appellant chose to proceed on petition and answer rather than taking depositions, the court was bound to accept as true all averments of fact in appellee’s answer properly pleaded. Accordingly, it accepted as true the averment that appellant caused the proceeds of the judgment to be unavailable for distribution by the trustee. Admitting as true the averment that the trustee was denied the availability of the funds for distribution purposes, this should not and does not preclude a court from determining the legal consequences flowing from the admitted averment.

The court below unwittingly foreclosed a consideration of the bankruptcy law when it asserted that because the funds were “unavailable for distribution” a fortiori appellee’s claim for interest owed must be sustained. Since the appellee is admittedly a trustee in bankruptcy, it is our view that this Court must analyze the meaning of the language “unavailable for distribution” in the framework of a trustee in bankruptcy situation.

Under §47a(2) of the Bankruptcy Act, 11 U.S.C. §7?a(2),³ a trustee shall deposit funds held by him in interest-bearing savings deposits, if authorized by the court. Even though there is a restraining order preventing the trustee from distributing the funds, the trustee is not at all precluded from investing such funds. Since the trustee in this case did not seek court approval to deposit the money in an account which would have generated interest, he should not now be permitted to obtain from appellant that which he himself could have secured for the bankrupt estate by proper management of its funds. In a situation such as the instant one, the fiduciary has the funds, can invest them with consent of the court, and thereby earn interest for the creditors or beneficiaries. If the trustee could have earned interest on the funds in his possession, it cannot be said that he now has a claim for that interest against an appellant who in no way has prevented the trustee from realizing interest on such funds.

Moreover, the order restraining distribution in this case was the result of action commenced in the federal system, and the courts of Pennsylvania have no jurisdiction to impose sanctions upon a disputant in a federal bankruptcy case. In fact, as indicated at argument, the federal district court required appellant to post bond before it restrained distribution, and appellee if he has any claim for interest or has suffered any harm whatsoever out of the federal courts proceedings, should pursue his remedy upon the bond to which alone he has recourse. The appellant’s liability, if any, should be imposed by the federal courts and not by the courts of Pennsylvania.

The order of the court below is reversed and the case remanded to the lower court so that satisfaction of the judgment may be required.

1 “In oM cases where a judgment has been . . . entered in any court of record in this Commonwealth, . . . the court having jurisdiction shall, upon application by the defendant ... in the said judgment, . . . setting forth, under oath, that the same, with all legal costs accrued thereon, has been fully paid, grant a rule on the plaintiff ... to show cause why the said judgment should not be marked satisfied of record, at his . . . costs; and upon the hearing of such rule, should it appear to the satisfaction of the court that said judgment has been fully paid, as set forth in the application of the defendant . . ., the said court shall then direct the prothonotary to marh such judgment satisfied of record, and shall also enter a decree, requiring the plaintiff ... to pay all costs incurred in the premises.” (Emphasis supplied.)

2 “In all cases where a judgment has . . . been . . . entered in any court of record in this commonwealth, . . . and it shall appear, by the production of the record, that the same has . . . been fully paid, under or by virtue of an execution or executions issued thereon, and satisfaction has not been entered upon the judgment index or judgment docket of said court, it shall be the duty of the court, in which said judgment . . . has been entered, at the instance of any party interested, upon the payment of a fee of twenty-five cents to the prothonotary, to direct said prothonotary to enter satisfaction upon the judgment index or judgment docket, and the record thereof.” (Emphasis supplied.)

3 “§75. Trustees; duties (a) Trustee shall ... (2) deposit all money received by them in designated depositories initially in demand deposits; and subsequently, if authorized by the court, in interest-bearing savings deposits, time certificates of deposit, or time deposits-open account; . . . .”