Lawrence v. . Harrington

Brown, J. There is no dispute between the parties but that the two notes-which matured February twenty-sixth and March third respectively, were covered by the discharge in bankruptcy, but the respondents assert that the other notes having had their origin in the conversion by defendant’s firm of the proceeds of the note of $671 on July 10, 1877, were taken out of the operation of the discharge in bankruptcy By the 33d section of the Bankrupt Act (R. S. § 5117), which declares that “no debt created by fraud or embezzlement of the bankTupt, or by his defalcation as a public officer, or while acting in a fiduciary character, shall be discharged under this act.” This question, we think, is settled by authority against the respondents’ contention. (Hennequin v. Clews, 111 U. S. 676; 77 N. Y. 427; Neal v. Clark, 95 U. S. 704; Chapman v. Forsyth, 2 How. [U. S.] 202; Palmer v. Hussey, 87 N. Y. 303; Stratford v. Jones, 97 id. 586; Cronan v. Cotting, 104 Mass 245.) These, authorities have established the rule that conversion is not a “fraud,” within the meaning of the Bankrupt Act, •and that the expression “ fiduciary character ” has reference to •cases of technical trust actually and expressly constituted, and •does not include those which the law implies from the contract ■of the parties. , The fraud intended by the law is a positive fraud or fraud in fact, as distinguished from constructive fraud, founded upon some breach of duty. The case of Bradner v. Strang (89 N. Y. 299; 114 U. S. 555), is not in conflict with the authorities cited. In that case ■certain promissory notes were obtained from the plaintiffs by *413 the defendants by false representations, and-hence the case was-one of positive fraud. It was clearly distinguished in this-court and in the Supreme Court of the United States from the cases I have cited, and it illustrates the class of fraudulent debts and obligations which it was intended should not be discharged by the bankrupt law. It has no application to "the present case. The defendant’s firm came rightfully into possession of the note and its proceeds. They were the plaintiffs’ agents to-procure its discount. They violated their duty in appropriating-to their own use the proceeds, and were guilty of conversion in so doing, but within the principle of the cases cited the debt was discharged by the bankruptcy proceedings. To overcome, however, the effect of the discharge in bankruptcy, the plaintiffs gave evidence from which the court found as a fact a new promise to pay the debt made by the defendant and 1ns firm after the filing of the petition in bankruptcy. As to the two notes which matured February twenty-sixth and March third, we think this finding is sustained. These notes were renewed on or about February 25, 1878, by new notes made by the plaintiffs to the order of Bousseau & Harrington, and by that firm indorsed and passed to the bank holding the original notes, and having been given for the accommodation of the defendant’s firm, we think the new promise to pay is to be implied from the contract of indorsement on the renewal notes. And such promise saved the-debt from the operation of the discharge. (Stillwell v. Coope, 4 Den. 225; Lewis v. Wilmarth, 7 Allen, 463.) But as to the balance of the claims we are of the opinion that the finding is without evidence to support it. The General Term appear to have been of the opinion that a payment made upon the account in May or July, 1881, revived the same from the bankrupt discharge. In this we think that the learned court erred. All the authorities agree that a promise by which a discharged debt is renewed, must be express and distinct. It cannot be implied or inferred; and so it was held that a pay *414 ment of interest by tlie maker on a promissory note fro which he had been .discharged in bankruptcy, did. not revrs his liability on .the note. (Inst. for Saving v. Littlefield, Cush. 210.) That payment of a part of a note so discharged and th indorsement thereon by the debtor of the sum paid was nc •sufficient to authorize a finding of a new promise to pay th residue of the debt. (Merriam v. Bayley. 1 Cush. 77; Allen v. Ferguson, 18 Wall. 1.) A different rule prevails in case of a debt discharged i: bankruptcy from that applied to the defense of the Statute o Limitations. In the latter case payment of a part of the deb is regarded as an acknowledgment of the existence'of the debt ■and the law implies a promise to pay the residue. But in tin ■case of a debt discharged in bankruptcy a promise cannot b( .inferred, but must be express, and so all the eases agree tha partial payments will not revive the debt. (Hilliard on Bank ruptcy, 266, 267.) '“Hoiking,” said Judge Hunt, in Allen v. Ferguson, “k sufficient to revive a discharged debt unless the jury arc .authorized by it to say that there is an expression by the debtor of a clear intention to bind himself to the payment oi the debt.” It follóws from these authorities that a new promise could not be implied from the payment referred to. 'The other evidence in the case showed only a promise to do ■certain work for the plaintiffs and apply it upon the account. This could not be construed into a promise to pay the debt in ■any other way than that stipulated in the agreement. And the expressions contained in defendant’s letters to the •effect that “we do not calculate you will suffer any loss by ■us,” “ we will do the best we can and all that is in our power •to save you harmless,” are not indicative of an intention to pay at all events. (Allen v. Ferguson, supra; Elwell v. Cumner, 136 Mass. 102.) In the cases cited, language of similar import was used, but "the court held it insufficient to revive the debt. We are of *415 the opinion that the finding of a new promise to pay the indebtedness is not supported by the evidence except as to the two notes renewed in February, 1878. And as to these notes the question still remains whether the cause of action thereon was not barred by the Statute of Limitations. The renewal notes matured May 28 and June 4, 1878, and were then paid by the plaintiffs, and the cause of action thereon was then complete. • In the years 1-883 and 1884 work was performed by defendant’s firm for the plaintiffs under an. agreement that the amount thereof should be credited upon the old account, and ■credits were accordingly given, and the question now is whether such credits may be considered as payments which will take the case out of the operation of the Statute of Limitations. We are of the opinion that they should have that effect. A payment generally upon a debt within six years before the ■commencement of an action thereon will take it out of the statute, and it makes no difference whether the payment is in money or goods. The claim of the appellant is that these credits having been made under a special agreement have no greater effect than that stipulated in the agreement under which the work was performed, and in the absence of any evidence as to the refusal of the defendant to fulfill that agreement they cannot be taken as an acknowledgment of the ■debt, or as evidence of a promise'to pay in money. There Avould be some force in this argument if the debt had been barred by the statute at the time the Avork was performed; but the debt was at that time an existing obligation enforceable against defendant’s firm. The evidence AATas that defendant’s firm did the work and agreed to alloiv plaintiffs to credit one-lialf thereof on the old account. There was no condition attached to the credit, and it must be treated as if the payment had been made in money. Its effect was to arrest the operation of the statute and to enlarge the time during which an action upon the debt could be brought. This action Avas commenced Avithin six years after *416 the first credit, made in 1883, and the defense of the Statute of Limitations was, therefore, properly overruled. The judgment should he reversed, a new trial granted, with costs to abide the event, unless the respondents shall, within twenty days, stipulate to reduce the judgment by deducting therefrom $671.43, with interest thereon from January 4, 1879, in which case the judgment so reduced is affirmed, without costs to either party in this court. All concur. Judgment accordingly.