#### In the Matter of the Application of Adolphe H. Benoit, Appellant, to Have a Certain Judgment Canceled and Discharged of Record. Darsa J. Densmore and Robin Dale Compton, Respondents.

First Department,

February 7, 1908.

. Bankruptcy—discharge—when judgment hot recovered for fraud.

To constitute a judgment one recovered for fraud so as to prevent its release by a discharge in bankruptcy under'subdivision 2 of section 17 of the Bankruptcy Law, fraud and deceit must have been the gist and gravamen of the action.

Where the complaint in an action by the assignee of a lease against the lessee alleged that at ,the time of the assignment the defendant stated that he had collected no rents from sub-tenants, except from, certain named sub-tenants, and that said statements were false, and that the defendants had received from one sub-tenant'a promissory nóte, which he had procured to be discounted; and had received the proceeds, thereof; that the plaintiff had demanded the amount of said note, and the defendant had neglected and refused to pay, and that the amount so received by the defendant was due and owing the plaintiff, to which the defendant interposed an answer, but subsequently, at the Trial Term, consented that judgment be taken against him for the amount demanded in the complaint, which was done without the introduction of evidence, the action is one sounding in contract, and hot for fraud, and the judgment is released by a discharge in bankruptcy under section 17 of the Bankruptcy Law.

Houghton and-Scott, JJ., dissented, with.opinion.

Appeal by the'petitioiier, Adolphe H. Benoit, from an order of the Supreme Court,- máde at the New York Special Term and entered- in the office of the- clerk of -the county o£ New York on the *14315th day of November, 1907,' denying the petitioner’s motion to have a certain judgment canceled and discharged of record.

*Eugene Lamb Richards, Jr.,*for the appellant.

*William J. Reid,*for the respondents.

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 *144had 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 *145N. Y. 689) 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 *146the 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.

Patterson, P. J. (concurring):

I think the complaint in the action of *Densmore*v. *Benoit*is not to be regarded as one in an action to recover damages for fraud and deceit, but that the allegations contained therein respecting false statements and representations are statements of fact constituting reasons why *ex aequo et bono*the' defendant should restore to the plaintiffs the money the latter had collected from tenants of the premises mentioned in that complaint. The precise, claim of the plaintiffs, as stated in that complaint, is that they demanded of the defendant, the sum of money mentioned in the complaint; that the defendant • refused and neglected to pap the same and that the same “is now due and owing from defendant to plaintiffs with interest.” From the structure of this complaint,, it seems to me that it miist be. regarded as sounding in contract and not in tort; but if it were at all doubtful and . the complaint ambiguous, every intendment is in favor, of construing it as- being an action *ex .contractu. (Goodwin*v. *Griffis,*88 N. Y. 629; *Foote*v. *Ffoulke,*55 App. Div. 617; *Reed*v. *Hayward,*82 id. 416; *Town of Green Island*v. *Williams,*79 id. 263.)

Ingraham and Clarke, JJ., concurred.

Houghton, J. (dissenting):

While the complaint in the action in which judgment was .^obtained .against the petitioner prior to his bankruptcy, is very bad,. *147still all it really lacks to make it a good complaint in fraud is the allegation of reliance upon the false representations.

The making of the representations as to no advance rents having been collected on the lease and their falsity as to the tenant Rue are properly set forth. The written affidavit of defendant is appended to the complaint, from which knowledge of falsity can 1 e fairly inferred.

Facts are stated from which damages can be computed, to wit, loss of rent from April 1, 1904, at the rate of $3,300 per year. It is not fatal that the pleader called the damages resulting from the fraud which he particularly set forth an “indebtedness” or money “ due and owing.”

'The facts pleaded did not show any indebtedness *in assumpsit*or for money had and received. The assignment of the lease which is made a part of the complaint contains no covenant against receipt of advance rents, or that they had been collected only to a specified date. The action, therefore, was not based on any covenant in the assignment. In the absence of any agreement on the subject the assignor of the lease was not under obligation to repay to the assignees any advance rents which he had collected prior to his assignment.

The defendant did not, therefore, owe the' plaintiffs any sum of money either by implication of law or by agreement.

If he was liable to them at all under the facts alleged, he was liable because he had deceived them by his representations that he had not collected any advance rent from Rue.

No other inference than that the complaint, is based on fraud can be gathered from the allegations. It is true the defendant could have demurred and succeeded. But he answered, and admitted the representations contained in his affidavit and that he had taken arid discounted Rue’s note, but plead that the agreement with Rue had been abrogated to plaintiff’s knowledge. The omission of the allegation of reliance upori the representations was but a . technical defect, concerning which an amendment could have been allowed on the trial.

In the absence of any demurrer or motion on defendant’s part the complaint was good, enough, especially as he allowed judgment to go against him in open court when the case was' called for trial.

*148Although fraud is not expressly charged in a cqmplaint, if the facts showing it are pleaded, such omission is .not material after judgment. *(Goldsmith*v. Goldsmith, 145 N. Y. 313.) Technical objections to a pleading should be taken by demurrer or otherwise, and after judgment they will be disregarded even in an action for fraud. (*Whittlesey*v. *Delaney,*73 N. Y. 571; *Disbrow*v. Harris, 122 id. 362.)

In my view the judgment was clearly based on fraud and hence wasjiot discharged by the bankruptcy proceedings. The appellant, therefore, was not entitled to have it discharged of record and. the order refusing so to .do. should be affirmed.

Scott, J., concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.