In re Benoit

124 A.D. 142, 108 N.Y.S. 889, 1908 N.Y. App. Div. LEXIS 2054

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: February 7, 1908
• Status: Published

Opinions

Ingraham, J.:

In March, 1904, Darsa J. Densmore and Robin Dale Compton commenced an action in the Supreme Court against the petitioner to recover certain moneys which the petitioner had collected as the rent of certain real property from the tenants thereof. The complaint alleged that the defendant in that action was lessee of the property No. 307 Fifth avenue, under a lease for sixteen years from October 1, 1902; that on the 10th of March, 1904, the defendant assigned and transferred the lease to the plaintiffs; that at the time of said assignment $nd transfer and as a part of the transaction the defendant stated and represented to the plaintiffs that he had collected no rents from sub-tenants of said premises except from certain subtenants named, which statement and representation were reduced to the form of an affidavit; that said statements were false and untrue; that the defendant had received from one sub-tenant a promissory noté for $3,300 as rental for a floor in the building for one year ■from February 1, 1904, and had procured that note to be discounted and had received the proceeds thereof; that the plaintiffs had demanded from the defendant the amount of said note and the defendant had refused and neglected to pay; that that amount was due and owing from the defendant to the plaintiffs, with interest from March 10,1904, and a copy of the transfer of the lease from the defendant to the plaintiffs, and a copy of this so-called affidavit were annexed to the complaint. The defendant interposed an answer to tills complaint and the case came ón for trial at the Trial Term of the court when the defendant consented that judgment against him should be taken for the amount demanded in the complaint, upon which consent judgment without evidence being taken was entered for the plaintiffs against the defendant. Subsequently the defendant was adjudicated a bankrupt and on October 5, 1906, he received his discharge in bankruptcy. The judgment was included in the schedules filed by the bankrupt, and the judgment creditor had notice of the proceeding. The judgment .was thereby discharged unless the claim was one excepted from the operation of a discharge in bankruptcy by the Bankruptcy Law. Section 17 of the Bankruptcy Law

* provides that a discharge-in bankruptcy shall release a bankrupt from all of his provable debts except such as “(2) are judgments in actions for frauds, or obtaining property by false pretenses or false representations, or for willful and malicious injuries to the person of property of another.” To bring this case within the exception, therefore,.it must appear that .-this judgment was recovered in an action for fraud, as there is no claim that it comes within either of the other provisions of the subdivision referred to.

¡Now, this complaint lacks essential allegations of an action to recover for a fraud. It docs allege that the defendant- made a representation as to the rent that he had collected,-which allegation was untrue, as he had collected rent that he had stated .he -had not collected. The fact that he made this representation. in the form of an affidavit does .not in any way add to its force. There is no allegation that the. plaintiffs relied upon such a representation,, that the defendant intended to deceive, or that the .plaintiffs sustained any damage, but they.asked for judgment for the amount of the rent that it was alleged the defendant .had received in excess of that admitted in the . so-called affidavit. . The action is essentially for money had and received, rather than for fraud. An entirely different question would have been presented if the action had been tried out as an action for fraud; but in an action where the complaint does not contain an essential element of an-action to recover damages for fraud, and- in which an answer was interposed where a judgment is entered upon a consent the judgment cannot,be said to be a judgment in an action for fraud. It is true that the fact that the judgment does not show that the action was to recover -for a fraud is.not conclusive, but the record must show that the action was for one of the causes specified-in section 17 of the Bankruptcy Law to bring it within the exception. That -fact must appear somewhere.in the record.

Matter of Bullis (68 App. Div. 508; affd. without. opinion, 171 ) is not in. conflict with but confirms this .view. The judgment in- that case was obtained in an action in equity to require defendants to convey specific property based upon false and fraudulent representations made by the defendants to the firm of Mewcombe & Co. that a certain tract of land ..to be conveyed was free and clear from all incumbrances, and other representations, in relation to said property. The complaint in that action alleged that the defendants well knew at the time they made said pretended conveyance that the said conveyauce was in .reality .false and fraudulent, by reason of winch irreparable injury .was occasioned to the bondholders, including the plaintiff, unless, a conveyance of certain property was specifically decreed. There was further alleged dereliction of duty by the defendants, by which they had diverted fraudulently and secretly a large amount of property of the corporation, of which they were directors, to their own use. The complaint then asked for a specific performance of a contract to convey the property; or that the defendants pay to the trustees for the security of said bondholders a sum of money equivalent to the value of the real estate that should be conveyed. Fraud was then expressly alleged upon which equitable relief based upon such fraud was demanded. The judgment was based upon a decision of the Special Term finding that the defendants were guilty of fraud and deceit, the court also finding that the statements and representations of the defendants with respect to the lands were fraudulent and made with intent to deceive and that the plaintiff was in fact deceived by the said statements and representations, and that the said statements and representations were false and untrue and the agreement was fraudulently made. The court assumed jurisdiction by reason of the fraud practiced by the defendants on the bondholders, and adjudged that the defendants pay a trust company a sum of upwards of $290,000 for their benefit-. The Court of Appeals in its first review of the case (O'Beirne v. Allegheny & Kinzua R. R. Co., 151 N. Y. 384), held that the action was founded upon the actual positive fraud of the defendants Bullís and -Barse. It was then said: ? As we interpret subdivision 2 of section 17.of the-Bankrupt Law, it does not limit the exception to common-law actions of fraud or deceit-. The gist and gravamen of the action must' have been the positive and intentional fraud of the bankrupt. The record presented must clearly show that -such misconduct was the pith of .the action, and it may not be dependent upon oral proof or other evidence óutside of the record.’! It is because of the failure of the record in the action now before us to show that the fraud and deceit of the petitioner was the “gist and gravamen” of the action that the judgment is not within the exception specified in section 17 of the Bankruptcy Law. Consequently, the judgment was discharged, and the'motion should have been granted.

It 'follows that the order appealed from must be reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars Costs.

Patterson, P., J., and Clarke, J,, concurred; Houghton and Scott, JJ., dissented.

See 30 U. S. Stat. at Large, 550, § 17, This section was amended by 32 U. S. Stat. at Large, 798, § 5.—[Rep.