
    The Merchants’ Bank of New Haven v. Henry Dwight, Jr.
    Although a debt was fraudulently contracted, or an obligation was fraudulently incurred by a defendant, yet if, subsequently thereto, the plaintiff, with full knowledge of the fraud, settles the original debt or obligation, and enters into a new contract with the defendant, upon different terms, and upon additional consideration, in an action upon the new contract, the defendant cannot be held to bail merely because the original debt or obligation, was fraudulently contracted or incurred. In such a case, if the debt for the recovery of which, or the obligation on which the action is brought, was not fraudulently contracted or incurred, the defendant cannot be held to bail. The order, refusing to vacate an order of arrest, on which defendant was held to bail in the sum of $45,000, reversed. (13 How. Pr. R. 366.)
    (At General Term,
    Dec., 1856.
    Before Oakley, Ch. J., Duer, Bosworth, Slosson, Hoffman and Woodruff, J.J.)
    
      M W. Stoughton, for defendant and appellant.
    
      James T. Brady and Iribbeus Chapman, for plaintiffs.
   In the opinion delivered, after stating the facts at length, Bosworth, J., who delivered the opinion of the court says:—These facts present this question: Is a defendant, who was guilty of a fraud in incurring an obligation, which has been surrendered by another party to the contract, after he had discovered the fraud, and who thereupon took a new obligation, in incurring which the defendant was guilty of no fraud, liable to be arrested on the latter obligation, by reason of his fraud in incurring the first ?

When a defendant is sued in an action arising on contract, to recover a debt, or a sum which he has obligated himself to pay, the Code does not authorize an arrest, because the defendant was guilty of a fraud in incurring a prior and different obligation to pay the same money. To authorize an order for his arrest, he must have been guilty of a fraud in incurring the obligation for which the action is brought, in which the order of arrest is made or applied for. Code, § 197, sub. 4.

......The contract, or obligation, on which this action is brought, was made or incurred without any fraud being practised to procure it. It was accepted as a settlement of the transaction, in respect to which the alleged fraud was practised, and with full knowledge of it. I think this ground sufficient to require a reversal of the order appealed from.  