Madison Tp. v. Dunkle

• Decision Date: 31 March 1888
• Citation: 16 N.E. 593,114 Ind. 262
• Parties: Madison Tp. v. Dunkle.
• Court: Indiana Supreme Court

114 Ind. 262

16 N.E. 593

Madison Tp.

v.Dunkle.

Supreme Court of Indiana.

March 31, 1888.

Appeal from circuit court, Montgomery county; James M. Seller, Judge.

Kennedy & Kennedy and E. C. Snyder, for appellant. Paul & Humphries, for appellee.

Elliott, J.

The material allegations of the appellant's complaint are these: That in 1874 the defendant was elected trustee of Madison township, and qualified according to law; that he resigned the office in September, 1877, and James S. McMurray was appointed his successor; that, after McMurray had qualified, he and Dunkle settled the accounts between Dunkle and the township, and ascertained that the latter was indebted to it in the sum of $2,056.71, and that he then executed to McMurray, as trustee, his note for that sum; that the note was executed as evidence of the indebtedness, and for the purpose of allowing McMurray, as trustee, to file the claim in the court of bankruptcy,Dunkle having applied for the benefit of the bankrupt law; that the note was filed as a claim in bankruptcy, and the sum of $56.45 was received from Dunkle's estate, and that no other amount was ever received on the debt; that (we quote the language of the pleading) “James S. McMurray filed the note in the United States district court at Indianapolis, sitting as a court of bankruptcy, alleging in his written proof of the claim that the note was executed as evidence of a debt due from Dunkle to the township, the same being for a balance in his hands as a former trustee of the township, which he had appropriated to his own use, and failed to pay to his successor.” A copy of the note is set forth in the complaint. The sixth paragraph of the answer avers that the appellee was adjudged a bankrupt on the 17th day of October, 1877; that the appellant proved its claim in bankruptcy; that its claim was based solely on the note; and that the appellee received his discharge in bankruptcy by the judgment of the proper court. It was also averred, in this paragraph of the answer, that the successor of the appellee made a settlement with him, and accepted the note described in the complaint in payment of the sum found due from the appellee to the township. To this paragraph of the answer the plaintiff unsuccessfully demurred.

The complaint very clearly shows the nature and origin of the debt which Dunkle owed the township. The answer expressly concedes that the debt was due from Dunkle to the township for money he had failed to pay over to his successor, and it tacitly admits that he had wrongfully converted the money to his own use. The failure to controvert the averments of the complaint is an admission of their truth; but, if there were no such averments in the complaint, the facts stated in the answer are sufficient to show the character of the debt. We have therefore a case where the debt is for money wrongfully appropriated by a public officer. It is perfectly clear that such a debt is not barred by a discharge in bankruptcy. It is equally clear that the creditor, by accepting a dividend, does not lose his rights to resist the bar of his discharge. The act of congress expressly provides that such a debt shall not be barred; and that, if proved, and a dividend received on it, the amount so received shall be treated as a payment. Section 5117; Bump, Bankr. 728; Blum. Bankr. 539.

It is, however, argued that the fact that the successor of Dunkle received from him a promissory note relieves the debt of its fiduciary character, and brings it within the effect of the discharge. This position cannot be maintained. The execution of the note did not change the character of the debt. The note is not the debt; it is a mere evidence of the debt. Waterman v. Morgan, ante, 590, (March 30, 1888.) The appellee was indebted to the township because he had, in direct violation of law, converted money intrusted to him as a public officer. He did not owe the township simply because he had executed a promissory note to its trustee, but because he had violated the law, and converted the money belonging to the township. It is well settled that the courts will look behind a note, a mortgage, or even a judgment, to ascertain the nature of the debt; and, if it is ascertained to be one which a discharge does not bar, it will be so adjudged. Donald v. Kell, 111 Ind. 1, 11 N. E. Rep. 782, and cases cited; Wade v. Clark, 52 Iowa, 158, 2 N. W. Rep. 1039;Young v. Grau, 14 R. I. 340, and cases cited; Carlin v. Carlin, 8 Bush, 141;Simpson v. Simpson, 80 N. C. 332;Calvert v. Peebles, Id. 334;Councill v. Horton, 88 N. C. 222. In Young v. Grau, supra, it was said: “The statute looks back to the origin, and change of form is not change of origin.” In another case it was said: “The fiduciary character of the debt does not depend upon its form, but upon the manner of its origin, and the acts by which it is incurred.” Simpson v. Simpson, supra. Substantially the same statement of the rule was made by this court in Donald v. Kell, supra. The case of Sorden v. Gatewood, 1 Ind. 107, carries the rule somewhat further, and declares that the party who relies on a discharge in bankruptcy must aver and prove that the debt was one which the discharge would bar. But it is enough for us, in the present case, to decide...