Raia v. Goldberg

• Decision Date: 10 February 1948
• Docket Number: 6 Div. 528.
• Parties: RAIA v. GOLDBERG.
• Court: Alabama Court of Appeals

34 So.2d 620

33 Ala.App. 435

RAIA v. GOLDBERG.

6 Div. 528.

Alabama Court of Appeals

February 10, 1948

Rehearing Denied March 2, 1948.

Appeal from Circuit Court, Jefferson County; Leigh M. Clark Judge.

Chas. W. Greer, of Birmingham, for appellant.

Silberman & Silberman and Victor H. Smith, all of Birmingham, for appellee.

The complaint is as follows:

'Plaintiff claims of Defendant the sum of Three Hundred Sixty and no/100 Dollars ($360.00) due by eighteen notes, being notes numbered 31 to 48, inclusive, made by Defendant on, to-wit, the 27th day of February, 1940, and payable with interest at the rate of Five Per cent (5%) per annum, and Plaintiff avers that as part of said instruments Defendant waived his right of exemption to personal property. And Plaintiff says that the consideration of said notes was for money obtained by the defendant for the Plaintiff while the Defendant was acting in a fiduciary capacity for the Plaintiff and which money was not paid to the Plaintiff by the Defendant. Each of said notes are for the sum of $20.00. Each of said notes is due and unpaid.

'Plaintiff waives any and all sums above the amount of $500.00.'

Plaintiff avers that all of said notes sued on arose from the same transaction, between plaintiff and defendant.'

CARR Judge.

In the court below the cause was tried without the aid of a jury. We are not authorized, therefore, to disturb the findings of the trial judge unless the conclusions he reached are plainly and palpably contrary to the great weight of the evidence. Hackett v. Cash, 196 Ala. 403, 72 So. 52; Jackson v. Hagin, 17 Ala.App. 216, 84 So. 547.

The record includes a well prepared opinion of the judge. We incorporate it in our opinion and adopt it as expressive of our views on the questions therein decided.

'The complaint, as amended, seeks recovery upon a series of promissory notes executed by defendant and payable to the order of plaintiff. Subsequent pleadings were in short by consent with leave for both parties to offer in evidence any testimony which would be admissible under appropriate pleadings to have effect as if well pleaded.

'The evidence discloses without dispute that defendant, while acting as an agent of plaintiff, had collected and converted to his own use and benefit money rightfully belonging to plaintiff. This fact was made known to plaintiff by defendant and thereafter defendant's brother-in-law paid plaintiff a part of the money involved and defendant executed a series of notes, some of which are here sued upon, for the balance. Subsequent to the execution of the notes and after a number of the notes had been paid by defendant, defendant was adjudicated a bankrupt and received in due course a discharge in bankruptcy.

'Counsel for plaintiff and defendant have submitted briefs setting forth their respective contentions. Recognizing that by express provision of the Bankruptcy Act, U.S.C.A. Title 11, § 35, a bankrupt is not released from his liability for 'willful and malicious injuries to the person or property of another' nor from his liability 'created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity', Counsel apparently agree in the general application of the principle as set forth in 8 C.J.S., Bankruptcy, § 573 (cited in defendant's brief) as follows: '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 this provision of the Act.'

'It would seem from an examination of the authorities that the principle is now well established that in an action upon promissory notes executed by one thereafter adjudicated a bankrupt the court will look behind the notes to determine whether the nature of the debt was such that it was dischargeable. American Surety Co. v. McKiernan, 304 Mich. 322, 8 N.W.2d 82, 145 A.L.R. 1235. See annotation in 145 A.L.R. 1238.

'Defendant's counsel argues that the notes in this case were not given as evidence of the antecedent debt but rather constitute an accord and satisfaction thereof precluding the plaintiff from availing himself of the recognized general rule and in support of this argument, reference is made with emphasis to the case of Burleson v. Langdon, 174 Minn. 264, 219 N.W. 155. It is to be noted, however, that the cited case deals with a different situation from that here presented. In that case the original liability of defendant was in tort only without 'any quasi contractual liability to be saved or continued', the defendant not being in privity of contract with plaintiff, and further the notes involved therein were executed jointly by defendant and two co-makers for an agreed amount, possibly a slight reduction of the original debt. Indeed, it is upon these distinguishing features, all of which are absent here, that the court based its opinion. It is, therefore, without application to the facts in this case.

'It seems clear from all the evidence that the notes executed by defendant were given and received as evidence of the debt growing out of his embezzlement of his employer's money, and not as a payment or satisfaction thereof. Reference is made to the case of McWilliams v. Phillips, 71 Ala. 80, in which the following appropriate language is found:

"It is unquestioned that bills or notes or engagements of any kind whether of the debtor himself, or of a third person, will not operate at payment or satisfaction of an antecedent debt, unless it is shown that they were given and received as absolute payment. Payment of a debt is an affirmative plea and an affirmative fact, which must always be proved by the party averring it, and whoever claims that a debt, the prior existence of which is admitted or proved, has been extinguished by the substitution of another security, whether it be of higher or the same dignity as the debt, assumes the burden of proof that the substituted security was taken and accepted in extinguishment.

The extinguishment arises from the agreement of the parties, not from the nature or character of the security, that may form the consideration of the agreement, but there is no implication of law that it shall operate as a payment--no implication that one cause of action is substituted for another. The presumption of law is that all such securities are taken as conditional, not as absolute payment of a pre-existing debt.' The quoted principle of law does not appear to have been departed from in this state, but it has been reaffirmed time and again and emphatically so in the case of the Tuscaloosa Lumber Co. v. Tropical Paint and Oil Co., 211 Ala. 258, 100 So. 236, though in such case the matter presented was in the form of a question vel non of novation.

'The remaining contention in brief of counsel for defendant is to the effect that the notes sued upon are based on an illegal consideration. It has been long settled in this State that if an agreement express or implied to suppress a criminal prosecution forms even a part of the consideration of a contract, the transaction is against public policy and the courts will not enforce it. United States F. & G. Co. v. Charles, 131 Ala. 658, 31 So. 558, 57 L.R.A. 212; People's Bank & Trust Co. v. Floyd, 200 Ala. 192, 75 So. 940; Wilson v. Singer Sewing Machine Co., 214 Ala. 536, 537, 108 So. 358. However, the denial of a recovery because of the fear of a criminal prosecution or the natural hope or expectation that there will be no prosecution if the notes are executed finds no support in the principle stated and will be contrary to an equally well settled principle announced by the Supreme Court. Appropriate is the language of Mr. Justice Foster in the case of Underwood v. Singer Sewing Machine Co., 225 Ala. 680, 145 So. 138, as follows:

"If the note (and mortgage) is otherwise legal, and not executed under duress, it is not rendered illegal on account of the fact that the principal is subject to criminal prosecution, unless there is an agreement to suppress the crime. The fact that such result is contemplated or hoped for, and in fact follows, does not alone render the transaction illegal. There was a possibility of the institution of a criminal prosecution, though not threatened. It could elect to do so or not. That which renders the transaction illegal is an agreement, express or implied, not to prosecute. It is certainly commendable and smacks of no illegality for the debtor, Metcalf, to pay his just debt to defendant. And if his wife's mother voluntarily undertakes to settle the debt on a sufficient consideration in the hope and expectation that as a consequence no criminal prosecution will be begun or continued, but without an agreement to that effect, the transaction is legal. The law does not give effect to a bare hope or expectation in that respect. Moog v. Strang, 69 Ala. 98; Wilson v. Singer Sewing Machine Co., supra.'

'The only testimony pertinent to the question now considered is that of the witness, M. C. Zanaty, and the plaintiff. The defendant did not testify. All of the testimony has...