M. C. Kiser Co. v. Gerald

1. Bankruptcy <&wkey;423(l) — Debt bob Goods Obtained by Fraud not Discharged. Under Bankruptcy Act, § 17a, as amended by Act Feb. 5, 1903 (U. S. Comp. St. § 9601), providing that a discharge does not release liabilities for obtaining property by false pretenses or false representations, a debt created by fraud or fraudulent misrepresentation is not affected by the discharge, and is not within the exclusive jurisdiction of the bankruptcy court. 2. Bankruptcy <&wkey;435 — When Discharge Pleaded to Action on Debt, Replication that it was Created by Fraud does not Change Cause oe Action. In an action on a debt for goods sold, when defendant’s discharge in bankruptcy is pleaded, it is a good replication that the debt was created by fraud or fraudulent misrepresentation, and such replication does not set up a new cause of action or change the cause of action declared on..

Appeal from Circuit Court, Elmore County; B. K. McMorris, Judge. Assumpsit by the M. C. Kiser Company against N. F. Gerald. From adverse rulings on the pleading forcing plaintiff to a nonsuit, plaintiff appealed: The action was on the common counts and promissory notes. In reply the defendant set up his discharge in bankruptcy; that the debt was contracted prior thereto and prior to his petition in bankruptcy; that said debts were provable and were proven and were therefore discharged. Plaintiff’s replication was as follows: “Comes the plaintiff in the above-styled cause, and, for replication to defendant’s plea of discharge in bankruptcy, says that N. F. Gerald obtained from M. C. Kiser Company, a corporation, merchandise upon credit as alleged in the declaration upon a material false statement in writing made to M. O. Kiser Company, a corporation, for the purpose of obtaining such property on credit; that said statement was so made on or about the 17th day of February, 1916, to M. C: Kiser Company, a corporation; that said statement was duly communicated to M. O. Kiser Company, a corporation, by N. F. Gerald, for the purpose of inducing the sale of said merchandise on credit to him by the said M. C.' Kiser Company, a corporation, and that M. C. Kiser Company, a corporation, sold goods to N. F. Gerald in reliance on said statement; that by the same statement of said N. F. Gerald it was represented that he had a net surplus of $7,836.50 over and above all debts and liabilities, and that his total indebtedness was $1,500, and that no part of said indebtedness was then due, where in fact his indebtedness was greatly more than $1,500, and whereas a great amount of the indebtedness owed by N. F. Gerald was past due and unpaid. All of said facts were well known to N. F. Gerald, and said statements were false and were well known to be false by N. F. Gerald, or were so made by him or at his direction as to amount to a willful misrepresentation, in that he failed to ascertain the condition, of his financial standing and that the misrepresentations were not known to M. C. Kiser Company, a corporation, until after the filing of his petition in bankruptcy.” Demurrers were sustained to this replication. The replication did not constitute a departure in the pleading. 89 Ala. 285, 7 South. 2-48, 7 L. R. A. 568, 18 Am. St. Rep. 111. It was not necessary to bring an' action for deceit, and the replication properly set up matters in avoidance of the discharge. 7 C. J. 415; (Tex. Civ. App.) 156 S. W. 1157; 220 Mass. 137, 107 N. E. 543; 182 Ala. 413, 62 South. 755 ; (Tex. Civ. App.) 190 S. W. 1152; (D. O.) 99 Eed. 71; 200 Mich. 554, 166 N. W. 839; 41 S. E. 698; 100 N. E. 1134; 26 S. D. 354, 128 N. W. 317; 126 Ga. 821, 56 S. E. 98, 8 L. R. A. IN. S.) 463, 115 Am. St. Rep. 118; (Tex. Oiv. App.) 142 S. W. 926; 99 Fed. 511, 40 O. C. A. 498. The court properly sustained demurrers to the replication. 108 Minn. 313, 122 N. W. 320; 228 U. S. 27, 33 Sup. Ot. 505, 57 L. Ed. 718; 195 U. S. 175, 25 Sup. Ot. 13, 49 L. Ed. 145; 195 U. S. 606, 25 Sup. Ot. 118, 49 L. Ed. 340; 242 U. S. 138, 37 Sup. Ot. 38, 61 L. Ed. 205; 7 C. J. 31, 32'.