Court Opinion

ID: 4010086
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:11:15.157133+00
Date Added: 2024-06-11T07:44:42.148474
License: Public Domain

Action commenced by C. L. Hansen to collect a judgment entered November 28, 1933, against Paul A. Eimerman. *Page 140 
From a judgment permanently restraining C. L. Hansen from proceeding with the collection of said judgment, Hansen appeals.
C. L. Hansen and Paul A. Eimerman entered into a written agreement on April 26, 1932, wherein Hansen agreed to perform certain work and furnish materials for improvement of a certain parcel of land in Waukesha county which Eimerman represented as belonging to him.  Thereafter, on August 24, 1932, August and Harvey Klatt commenced an action to foreclose their mechanic's lien against Bernhard H. Helming and his wife, and Paul A. and Hildegard B. Eimerman; C. L. Hansen and Dousman State Bank were joined as defendants. Hansen filed a cross complaint against Eimerman to foreclose his lien upon the premises.  In his complaint he alleged that he entered into a written contract with defendants whereby he agreed to do certain work for the contract price of $3,040; that B. H. Helming, Jr., is the owner of the record title and that Paul A. Eimerman had some interest or claim therein and was acting upon the instructions and under the authority of Helming.  The court made findings of fact that Eimerman never had any interest in the premises; that he had employed C. L. Hansen to perform certain work and provide materials; that said labor was performed and material furnished without the consent or knowledge of Helming; that Eimerman agreed to pay the sum of $3,040 to Hansen and that finally "said defendant Eimerman, at the time he employed the said August Klatt to perform work and furnish materials and at the time he employed said C. L. Hansen to furnish work and materials, he, Eimerman, falsely represented to Hansen that he, Eimerman, was the owner of said described premises . . . and said Hansen, relying on and believing such representations to be true performed the work and furnished the materials he claimed he performed and furnished and for which the said Eimerman agreed to pay."  The court then dismissed Hansen's claim for a mechanic's lien but ordered a money judgment in his favor against Eimerman for the sum of $3,040, plus interest. *Page 141 
In October, 1940, Paul A. Eimerman filed a petition in bankruptcy in the United States district court for the Eastern district of Wisconsin, and was duly adjudicated a bankrupt on October 14, 1940.  On April 29, 1941, Eimerman was discharged from all debts and claims provable under the Bankruptcy Act except such debts as were excepted from operation of a discharge in bankruptcy.
On the 24th of November, 1944, an order was duly entered by the county court directing that execution issue upon the judgment in favor of C. L. Hansen and against Paul A. Eimerman.  Thereafter, on December 22, 1944, Eimerman petitioned the county court for an injunction restraining enforcement of said execution on the ground that said judgment had been satisfied or extinguished by said bankruptcy proceedings. After a hearing, the court found that said debt was fully discharged in the bankruptcy, that C. L. Hansen had waived his action in tort and proceeded on contract and the claim was provable in bankruptcy.  Judgment was entered restraining Hansen from proceeding with collection of his judgment.
The question on this appeal is whether the judgment against Paul Eimerman is excepted from a discharge in bankruptcy for the reason that it is a liability arising out of obtaining property by false pretenses or by false representations.  See sec. 17(a), Bankruptcy Act of 1898, as amended by the Bankruptcy Act of 1903, 11 USCA, sec. 35.
The action, in which the judgment under consideration was entered, was commenced as an action for the foreclosure of a mechanic's lien.  When that action failed for sufficient *Page 142 
reasons, a money judgment was rendered against Eimerman for the amount owed Hansen for the work and materials supplied.  It was a simple action on contract.  There is no reference to fraud or misrepresentation in the court's decision. There was no motion to amend the pleadings to conform to evidence of fraudulent misrepresentation.  All that appears in the record is a finding of fact that Eimerman made false representations as to the ownership of the land in question. But this finding was not essential to recovery.  A cause of action in contract existed despite any possible fraud.  The original complaint makes no allegation that Eimerman was the owner of the land.  The trial judge had before him the record of the proceedings in 1933.  Although, under our system of liberal pleading, pleadings may be amended even though the action is changed from one on contract to one in tort, nevertheless, where the trial is conducted throughout its course, as one involving an action on contract, the existence of a finding of fact involving a false representation is not sufficient to denominate the action as one based on fraud.  It is necessary that the false representations or pretenses should have been relied on by the creditor in parting with his property. 8 C.J.S., Bankruptcy, p. 1515, sec. 573.  And it must be the gravamen of the action.  The character of the fraud necessary to save the claim from the operation of a discharge in bankruptcy is an actual or positive fraud; it means a positive act of fraud involving moral turpitude or intentional wrong.  J. M.Radford Grocery Co. v. Halper (Tex.  Civ. App. 1925),274 S.W. 1023.  The inclusion of a mere finding which is unnecessary to sustain the judgment is not sufficient.
In addition, the damages asked and recovered by Hansen were the price of the goods and materials he supplied.  There was no allegation or recovery of damages suffered because of the failure to secure a mechanic's lien on the property as a result of the mistaken or fraudulent representations of Eimerman. Where one, having a cause of action in contract or in *Page 143 
tort, waives the tort and brings action on the contract, discharge of the bankrupt will be a good defense.  8 C.J.S., Bankruptcy, p. 1515, sec. 573; Ford v. Blackshear Mfg. Co. (1913) 140 Ga. 670, 79 S.E. 576.
By the Court. — Judgment affirmed.