This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The bankrupt act of 1898 excepts from the operation of the discharge judgments in actions for fraud or obtaining property by false pretenses or false representations.1 To constitute a judgment for fraud within the meaning of the bankrupt act of 1898, the fraud must have been the very basis of the action, and not merely a fact collateral thereto. A judgment in an action on a simple contract debt, and to set aside a transfer of property as in fraud of the debtor's creditors, is not a judgment for fraud within the meaning of the bankrupt act.2 If an action has been brought for fraud, and judgment recovered thereon, the judgment is not such a merger of the original cause of action as to prevent this section of the bankrupt act from applying and to prevent such judgment from being barred by a discharge in bankruptcy.3 What is an action for fraud in such sense that a judgment rendered therein is not barred by a discharge in bankruptcy is a question on which there is some divergence of judicial opinion. If an action is brought against the debtor for deceit, and judgment recovered against him, such judgment is evidently not discharged in bankruptcy.4 If, on a similar transaction, the creditor waives the fraud, and sues to enforce the contract, this waiver of the fraud has been held binding upon the creditor for purposes of a discharge in bankruptcy, and he cannot, after obtaining such judgment, claim, for the purpose of avoiding the effect of a discharge, that the cause of action was based on fraud.5 A judgment rendered on the common counts in an action the record of which does not contain allegations of fraud is not a judgment in an action for fraud.6 If the debtor obtains a loan of money from the bank by means of false representations as to the amount of property owned by him, and gives his promissory note for the amount of the loan, a judgment taken upon such note is not a judgment in an action for fraud, within the meaning of this section of the statute.7 A judgment in an action for goods sold to a bankrupt, induced by his false representations and fraud, has been held not to be a judgment in an action for fraud or false pretenses,8 even if in that action a writ of attachment issued, one of the grounds of which was that the debt sued for was fraudulently contracted.9 On the other hand, a judgment for goods sold, the sale of which it is alleged and found by the court was procured by false representations, is a debt which is not barred by the debtor's discharge in bankruptcy.10 A judgment rendered in an action brought in part for money had and received, and also in part on an indebtedness created by the fraud and embezzlement of the debtor as trustee, where a general verdict is rendered without showing that it is in any part made up of the latter indebtedness, is not a debt created by fraud, and is barred by the discharge in bankruptcy.11 A judgment in an sction of trover and conversion is not a judgment for fraud.12
7 In re Freche, 109 Fed. 620.
8 In re Maples, 105 Fed. 919.
1 Forsyth v. Vehmeyer, 177 U. S. 177; affirming s. c., 176 111. 359; 52 N. E. 55.
2 In re Blumberg, 94 Fed. 476.
3 Packer v. Whittier. 91 Fed. 511;
33 C. C. A. 658; Bennett v. Justices, 166 Mass. 126; 44 N. E. 121.
4 In re Cole, 106 Fed. 837; Turner v. Atwood, 124 Mass. 411.
5 Hargadine - McKittrick Dry Goods Co. v. Hudson, 122 Fed. 232; affirming 111 Fed. 361.