Where a claim is founded upon an open account or upon a
contract, express or implied, and can be proved under §
63
a of the Bankruptcy Act, if the claimant chooses to
waive the tort and take his place with the other creditors, the
claim is one provable under the act and barred by the discharge.
The words in the fourth subdivision of § 17, "while acting as an
officer, or in any fiduciary capacity," extend to "fraud,
embezzlement, misappropriation," as well as "defalcation."
Crawford v. Burke, 195 U. S. 176.
13 N.Y. 267 affirmed.
Page 205 U. S. 184
The facts are stated in the opinion.
MR. CHIEF JUSTICE FULLER delivered the opinion of the Court.
This was an action brought in 1899 to recover damages claimed to
have been sustained in consequence of specified false and
fraudulent representations made by the firm of which the defendant
was survivor, by reason whereof plaintiffs alleged
Page 205 U. S. 185
they were deceived into selling goods to defendant's firm, which
they otherwise would not have done. The complaint contained three
counts, setting up separate items of damages, namely, $349.30,
$230.83, and $321.73 for goods sold, and judgment was demanded for
the aggregate, with interest on each item.
One of the defenses was that plaintiffs' claims were barred by a
discharge in bankruptcy of defendant's firm, to which plaintiffs
replied that they were not such as could be discharged in
bankruptcy proceedings.
The New York Court of Appeals held that, according to the
rulings of this Court in
Crawford v. Burke, 195 U.
S. 176, the alleged indebtedness to plaintiffs was
covered by the discharge, and directed plaintiffs' complaint to be
dismissed.
Tindle v. Birkett, 183 N.Y. 267.
This writ of error was then prosecuted, and plaintiffs' counsel
contends that their debts were not provable debts, and therefore
not discharged, and that
Crawford v. Burke might well be
modified in view of certain suggestions deemed to be novel.
Sections 17 and 63
a of the Bankruptcy Act of 1898 read
as follows:
"SEC. 17. 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 or property of another . . . or (4) were
created by his fraud, embezzlement, misappropriation, or
defalcation while acting as an officer or in any fiduciary
capacity."
"SEC. 63. Debts which may be proved:"
"(
a) Debts of the bankrupt may be proved and allowed
against his estate which are (1) a fixed liability, as evidenced by
a judgment or an instrument in writing, absolutely owing at the
time of the filing of the petition against him, whether then
payable or not . . . ; (4) founded upon an open account, or upon a
contract expressed or implied, and (5) founded
Page 205 U. S. 186
upon provable debts reduced to judgments after the filing of the
petition and before the consideration of the bankrupt's application
for a discharge. . . ."
Counsel admit that the claims in question were all liquidated.
By their nature and amount as well as by the form of the complaint,
they stand upon the contracts originally made.
Whiteside v.
Brawley, 152 Mass. 133, 134.
Crawford v. Burke was an action in trover instituted in
the Circuit Court of Cook County, Illinois, by Burke against
Crawford and Valentine, plaintiffs in error, to recover damages for
the willful and fraudulent conversion of the interests of the
plaintiff in certain shares of stock. There were ten counts in the
declaration, five charging fraudulent conversion of that stock and
five the obtaining of money from plaintiff in the way of margins by
means of false and fraudulent representations. Defendants pleaded
their discharge in bankruptcy, but were found guilty on all the
counts, and judgment was entered against them, which was affirmed
by the appellate court and by the Supreme Court of Illinois. This
Court held that plaintiff's claim was "provable under the
Bankruptcy Act" -- that is, was "susceptible of being proved," and
that it might have been proved under § 63
a as "founded
upon an open account or upon a contract express or implied," if
plaintiff had chosen to waive the tort and take his place with the
other creditors of the estate. And that the words, in the fourth
subdivision of § 17, "while acting as an officer, or in any
fiduciary capacity," extended to "fraud, embezzlement,
misappropriation" as well as "defalcation."
That case completely determines this, as the New York Court of
Appeals correctly held.
Judgment affirmed.