Opinion
No. 72-127
Decided April 17, 1973.
In action to recover certain commissions on insurance renewal premiums brought by former employee of defendant, trial court denied plaintiff recovery as to advances he had received against those anticipated commissions. Alleging that his bankruptcy discharge operated to free him of his obligation to repay the advances he had received, plaintiff appealed.
Affirmed
1. ASSIGNMENTS — Renewal Commissions — Equitable Lien — Dated Back — Right to Retain — Notwithstanding — Bankruptcy Discharge. Assignment of insurance broker's right to certain renewal commissions created an equitable lien which attached to the commissions immediately when the premiums on which they were based were paid, and that lien related back to the date of the assignment; thus, the assignee's equitable lien was in existence at the time of the broker's adjudication in bankruptcy, and the assignee had the right to retain the commission to satisfy its lien notwithstanding broker's subsequent bankruptcy discharge.
2. BANKRUPTCY — Renewal Commissions — Services Performed — Transfer — Existing Property Right — Not — Assignment — Future Wages. Although, under the Bankruptcy Act, a bankrupt's wages earned subsequent to the filing of a bankruptcy petition are free and clear of a prior assignment of such wages, plaintiff, prior to bankruptcy, had performed the services which entitled him to certain renewal commissions; thus, his assignment of his rights to those renewal commissions was a transfer of an existing property right and was not an assignment of salary, wages, or commissions to be earned in the future such as would make this provision of Bankruptcy Act applicable.
Appeal from the District Court of the City and County of Denver, Honorable Joseph N. Lilly, Judge.
A. Daniel Rooney, for plaintiff-appellant.
White and Steele, P.C., John E. Clough, for defendant-appellee.
Division II.
Plaintiff, Austin P. Williams, was employed as a broker-manager by defendant, Stockman National Life Insurance Co., from April 28, 1969, until April 30, 1970. Under a written employment contract, plaintiff was to receive commissions on new business written and additional commissions upon renewal premiums when paid. On November 28, 1969, plaintiff, filed a petition in bankruptcy and was subsequently discharged pursuant to the Bankruptcy Act. Prior to November 28, 1969, plaintiff had received the commissions due him for the business he produced, and he also received $3,363 in advances on anticipated renewal premiums. Under the contract plaintiff was obligated to repay these advances, and his renewal commissions were assigned to defendant as security for such repayment. Plaintiff listed his debt of $3,363 to defendant in the bankruptcy proceedings. After plaintiff was discharged in bankruptcy, defendant retained $3,363 from commissions accruing to plaintiff on renewal premium payments and applied the amount retained to repayment of the advances.
In November 1970, plaintiff brought this action against defendant to recover commissions and other items of compensation which he alleged were due him. Plaintiff recovered judgment for part of his claims, but the court denied plaintiff's claim for commissions in the amount of $3,363 which the defendant had retained under the assignment. Plaintiff has appealed. We affirm.
[1] A discharge in bankruptcy, being personal in character, releases the bankrupt's personal liability only. A valid lien on the property of the bankrupt existing at the time of the adjudication in bankruptcy, may be enforced notwithstanding the discharge of the bankrupt. Stewart-Noble Drug Co. v. Bishop-Babcock-Becker Co., 62 Colo. 197, 162 P. 159; 1A W. Collier, Bankruptcy ¶ 17.29. Plaintiff's assignment of his renewal commissions transferred to defendant the right to receive the commissions when the premiums were paid. The assignment created an equitable lien which attached immediately to the commissions when the premiums were paid, and that lien related back to the date of the assignment. See Clatworthy v. Ferguson, 72 Colo. 259, 210 P. 693; Caldwell v. Armstrong, 342 F.2d 485. Since defendant's equitable lien was in existence at the time of the plaintiff's adjudication in bankruptcy, defendant had the right to retain the commissions to satisfy its lien notwithstanding plaintiff's subsequent discharge.
[2] The assignment involved here is to be distinguished from an assignment of wages. Under the Bankruptcy Act, a bankrupt's wages earned subsequent to the filing of the petition are free and clear of a prior assignment of such wages. Local Loan Co. v. Hunt, 292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230, 93 A.L.R. 195. This rule does not apply to renewal commissions earned by a bankrupt before bankruptcy. In re Wright, 157 F. 544; In Re Fahys, 18 F. Supp. 529. In the present case, the plaintiff, prior to bankruptcy, had performed the services which entitled him to the renewal commissions. His assignment was a transfer of an existing property right and not an assignment of salary, wages or commissions to be earned in the future.
Judgment affirmed.
CHIEF JUDGE SILVERSTEIN and JUDGE ENOCH concur.