Gregory v. Williams

• Decision Date: 08 May 1920
• Docket Number: 22,674
• Citation: 189 P. 932,106 Kan. 819
• Parties: ELIZABETH GREGORY, Appellee, v. J. C. WILLIAMS, Appellant
• Court: Kansas Supreme Court

189 P. 932

106 Kan. 819

ELIZABETH GREGORY, Appellee, v. J. C. WILLIAMS, Appellant

No. 22,674

Supreme Court of Kansas

May 8, 1920

Decided January, 1920.

Appeal from Saline district court; DALLAS GROVER, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PROMISSORY NOTE--Maker's Discharge in Bankruptcy--Note Created by Fraud--Pleadings--Departure. The plaintiff alleged a cause of action on a promissory note. The defendant pleaded his discharge in bankruptcy. The plaintiff replied that the debt for which the note had been given was created by the defendant's fraud. Held, that the reply did not constitute a departure from the cause of action on the note.

2. SAME--Statute of Limitations. In such an action the statute of limitations runs against the note, and not against the fraud by which the debt was created.

3. SAME--Fraud--Operation of Bankruptcy Law. The acceptance of a note from one who procures a sum of money by fraud, as an evidence of the debt thereby created, after the fraud has been discovered, does not take the debt out of the operation of section 17 of the bankruptcy law.

H. C Tobey, of Salina, for the appellant.

J. O. Wilson, J. F. Corder, and J. H. Wilson, all of Salina, for the appellee.

OPINION

MARSHALL, J.:

The defendant appeals from a judgment against him on a promissory note. The action was commenced before a justice of the peace. Judgment was there rendered in favor of the plaintiff, and the defendant appealed to the district court. The bill of particulars alleged "that the consideration for the note was procured by fraud." A motion was filed in the district court asking that the words quoted be stricken out of the bill of particulars, or that the plaintiff be required to plead a cause of action on the ground of fraud. The plaintiff confessed the motion by striking out those words. The defendant then pleaded a discharge in bankruptcy, and the plaintiff, to avoid that defense, averred that there was fraud on the part of the defendant in incurring the indebtedness for which the note was given; that the defendant by false representations procured from the plaintiff $ 200; and that after the false representations had been discovered by the plaintiff, she accepted from the defendant the $ 200 note sued on. To the reply the defendant filed a motion to strike out all the allegations concerning fraud, on the ground that they constituted a departure from the cause of action set up in the bill of particulars, and filed a demurrer for the same reason and for the further reason that the reply did not contain facts sufficient to constitute a reply to the answer of the defendant, or to constitute a cause of action against him. The motion and demurrer were overruled.

1. The defendant argues that the reply of the plaintiff constituted a departure from the cause of action alleged in her bill of particulars. The action was on a promissory note. The defendant pleaded a discharge in bankruptcy; to avoid that defense the plaintiff alleged that the defendant by false representations procured the money from the plaintiff. Section 17 of the bankruptcy act in part reads, "A discharge in bankruptcy shall release a bankrupt from all his provable debts except such as . . . are liabilities for obtaining property by false pretenses or false representations." The plaintiff's reply brought the debt for the recovery of which this action was commenced, within that section of the bankruptcy act.

A definition of a promissory note might very properly be that it is an evidence of indebtedness from the maker to the payee by which the maker agrees to pay the payee a definite sum at a certain time. That a promissory note is not in and of itself an indebtedness, but is evidence of such indebtedness, seems to be established by unquestioned authority.

Collier on Bankruptcy, 11th ed., 960, says:

"A note or bill of exchange is provable against the bankrupt maker; it is the debt evidenced by the note which is provable."

It is said in 3 Blackstone's Commentaries, 154, that:

"The legal acceptation of debt is, a sum of money due by certain and express agreement; as, by a bond for a determinate sum; a bill or note; a special bargain; or a rent reserved on a lease; where the quantity is fixed and specific, and does not depend upon any subsequent valuation to settle it."

In 1 Bouvier's Law Dictionary, Rawle's 3d revision, 786, this definition of debt is given:

"Debt. A sum of money due by certain and express agreement."

1 Words and Phrases, 2d series, 1234, says:

"'Debt,' as used in the bankruptcy act includes any debt, demand, or claim, provable in bankruptcy."

Meriwether v. Garrett, 102 U.S. 472, 513, 26 L.Ed. 197, uses this language:

"Debts are obligations for the payment of money founded upon contract, express or implied."

1 Daniel on Negotiable Instruments, 5th ed., § 71, says:

"The execution of a note does not import a debt existing previous to the period of its execution, but its effect is to give the debt and the note a contemporaneous origin."

The note was the evidence of the debt created by the fraud of the defendant. That fraud was not extinguished when the note was given. The fraud was set up in the reply, not as a cause of action against the defendant, but to avoid the defense that had been pleaded by him after the bill of particulars was filed. The action continued as an action on the promissory note. The reply did not constitute a departure from the cause of action alleged in the bill of particulars. (Broadnax v. Bradford & Co., 50 Ala. 270; Louisville Banking Co. v. Buchanan, 117 Ky. 975, 987, 80 S.W. 193; Brown et al. v. H. F....