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 act of 1898 made provision in section 17, clause 2, excepting "judgments in action for fraud" from the operation of a discharge; and in clause 4, excepting debts which were created by the bankrupt's "fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity." Accordingly, if a debt has been created by fraud, but has not been reduced to judgment and the fraud was not committed by one acting in a fiduciary capacity, there was a divergence of judicial opinion as to whether such debt is barred by discharge. By one view a claim for fraud was held to be included under the head of "judgments in actions for fraud," even if not reduced to judgment, and hence by clause 2 of section 17 of the bankrupt act of 1898, is not affected by the discharge.1 By another view, such a debt is not affected by a discharge because of clause 4 of section 17. This conclusion is reached by holding that the clause "while acting as an officer or in any fiduciary capacity" does not refer to debts "created by his fraud," but only to the classes of debts subsequently enumerated.2 A third view is that such a debt is not exempt from the operation of a discharge. This conclusion is reached on the ground that such a claim is not a "judgment" under clause 2; and if not incurred in a fiduciary capacity is not included under clause 4.3 The question has in part been settled by the amendment of 1903, which substitutes the word "liabilities" for "judgments" in clause 2. The object of this amendment was to except from the operation of the discharge liabilities of the class specified in the statute, whether such liabilities had been reduced to judgment or not; and, accordingly, liabilities of such class are not barred by the discharge, even though they were not reduced to judgment when the proceedings in bankruptcy were instituted.4 Provisions similar to those of the amendment of 1903 are found in earlier bankrupt acts. The word "judgment" is not employed, some expression like "claim," "debt" or "liability" being found in its place.5
15 Cooke v. Plaisted, 181 Mass. 82, 62 N. E. 1054.
16 Croeby v. Miller, 26 R. I. 172, 55 Atl. 328.
17 Bullis v. O'Beirne, 105 U. S. 606, 49 L. ed. 340.
18 Olds v. Forrester, 126 la. 456, 102 N. W. 419.
1 In re Wallock, 120 Fed. 516; Louis ville Dry Goods Co. v. Lanman, 1S5 Ky. 163, 28 L. R. A. (N.S.) 363, 121 8. W. 1042.
2 In re Butte, 120 Fed. 966; Craw-ford v. Burke. 201 III 581. 66 N. E. 833 [affirming, 102 III. App. 5661.
3 Crawford v. Burke, 195 U. S. 176, 49 L. ed. 147; Tindle v. Birkett. 205 U. S. 183, 51 L. ed. 762; J. C. Smith