Palmer v. Preston

The opinion of the court was delivered by Ross, J. It is conceded by the pleadings that the judgment which is in suit, was obtained upon the defendant’s contract as the drawer of the draft which the plaintiff’s testator indorsed at the defendant’s request, and afterwards was obliged to pay. It is also conceded by the pleadings that the indorsement by the testator was procured by the fraudulent representations of the defendant, but that this fraud was not the foundation of the judgment now in suit. The question presented is, whether this fraud on the part of the defendant can be set up and become operative to defeat the bar which the defendant’s discharge in bankruptcy would otherwise be to the prosecution of this suit. The 33d section of the bankrupt act provides, among other things, that “a debt created by fraud” shall not be discharged by the operation of the bankrupt law. The vital question in the case is, whether the debt sought to be collected in this suit was “ created by fraud.” If so, the defendant’s discharge in bankruptcy is no bar to the enforcement of its payment by the court. If the record of the judgment in suit is examined, it will be found that the debt evidenced by the judgment, was created by the contract which the defendant entered into when he, as drawer, obtained the indorsement of the testator upon the draft, that if the testator should be compelled to pay the draft to the drawee, or his assignee, he, the drawer, would pay it to the tpstator. There is nothing in the record of the judgment sought to be enforced by [157] this suit, that furnishes the slightest intimation that the transaction by which the debt was created, was tainted with fraud. The plaintiff’s testator has elected to treat it as a debt created by contract, and so far as the judgment in suit is concerned, has waived all fraud. In an unreported decision in this county, Charles M. Reed v. James M. Currier, special term, 1851, and another case against the same defendant,* †it was held by this court that a party, having the right to enforce the collection of a debt, either by action on a contract, or by an action on the case for fraud, who has pursued his remedy by action on the contract to judgment, cannot afterwards pursue it by action on the case for fraud-† This is in accordance with the decisions of courts of other states. It is also well settled that the judgment in suit is, as against the defendant, for the enforcement of a debt created by contract. The defendant would not now be allowed to impeach that judgment by showing that no such contract, as the record of the judgment discloses, existed between the testator and himself, or that the indebtedness evidenced by the judgment was created by fraud and not by contract. The judgment, being conclusive upon the defendant as to the manner in which the indebtedness evidenced by the judgment was created, ought to be equally conclusive upon the plaintiff’s testator in the same particular. We think the judgment in suit must be equally conclusive and binding upon both parties to it, in regard to the manner in which the indebtedness was created, unless the judgment itself was procured by the fraud of one of the parties. These views are not in conflict with the decisions of the United States courts in regard to this section of the bankrupt act. In re Whitehouse, 4 Bank. Reg. 15, on the petition of the bankrupt to be discharged from arrest on an execution issued by the state court on a judgment, in which the record showed the cause of action to have been deceit, Lowell, J., with the concurrence of Shepley, J., held that the judgment of the state court did not so far merge the cause that the court could not look into the record and see that the cause of action was deceit, and says: “ We are of the opinion, however, that [158] the record of the action, whichever way the execution issues, may be looked at, and if it shows a material and traversable allegation of fraud as its sole foundation, the debt or demand may fairly be said to be one founded in fraud, and the action to be one founded upon a debt or claim from which the bankrupt’s discharge would not release him. I do not intend to express any opinion upon the question whether a judgment in an action of contract, in which an allegation of fraud, if made, would be immaterial, might not be such a merger, or waiver, as is contended for. It might be very difficult to admit evidence to vary or contradict the record in favor of the creditor, when the debtor would be concluded on his side. Nor do I even mean to say that a suit on this judgment might not remove-the fraud beyond the view of the court.” The judgment of the state court under review, was evidently iecovered under the practice prevailing in some of the states, which allows the plaintiff to join several distinct causes of action, arising ex-contractu, and tortwise, in the same bill of complaint, and permits him to take an execution • either against the defendant’s body, or against his property, if he prevails on that portion of the complaint sounding in tort. Hence the remark of judge Lowell, “The record of the' action, whichever way the execution issues, may be looked at, and if it shows a material and traversable allegation of fraud as its sole foundation, the debt or demand may fairly be said to be one founded in fraud.” In re Ward E. Robinson, 2 Bank. Reg. 108, S. C. 6 Blatch. R. 258, on an appeal from the district court to the circuit court by the bankrupt, because the district court refused to discharge him from arrest and bail, and refused to hear evidence to show that the debt was not created by fraud, where the record showed the debt, which had gone into judgment in the court of common pleas, and which was being enforced by the arrest of the bankrupt, originated in fraud, Judge Nelson says: “ The court below held that the proceedings and judgment in the common pleas, the record of which was produced before it 'according to the practice and course of proceedings in that court under the New York law, carried on the face of them that the suit was one to recover a debt created by the fraud of the debtor ; and that it would not go behind that record, [159] to call in question its verity in the bankrupt court. We concur in this view.” If the record, where it shows the indebtedness sought to be enforce'd was created by fraud, is to be held conclusive of that fact upon the defendant in the record, it must be equally conclusive upon the plaintiff in that record. If the fact that the debt was created by fraud is res adjudieata as to one of the parties to the judgment, it must be as to the other. Nor is the rule or law different where the record of the judgment shows that the debt sought to be enforced was created by contract. The defendant in the judgment cannot go behind the judgment, to call in question its verity, neither can the plaintiff. The matter is res adjudieata as to both parties to the judgment. This being so, the plaintiff, executor in this action, cannot be allowed to plead, or show, that the debt sought to be collected was created by fraud, when the record of the judgment in suit, and which was recovered by the testator in his lifetime against this defendant, shows, that this very indebtedness was created by contract, and, for that reason, discharged by the defendant’s discharge in bankruptcy. Judgment of the county court is reversed, and judgment that the defendant’s rejoinder is sufficient. Footnotes [*] I am indebted to judge Redfield for a statement of these eases. [†] See Dyer v. Tilton, 23 Vt. 313, 318; and Poor v. Woodbury et al, 25 Vt, 234, 241, where that case is cited appyoyingly, — Reporter.