
    In the Matter of the Application of William J. Arkell, the Judgment Debtor, for an Order Discharging the Judgment Recovered against him in an Action Entitled Wilbur E. Cushman and Others, Plaintiffs, v. William J. Arkell and Others, Defendants. William J. Arkell and Others, Defendants; Wilbur E. Cushman and Others, Judgment Creditors, Appellants; William J. Arkell, Respondent.
    
      Discharge in bankruptcy—what judgment entered on a stipulation is not in an action for fraud or for obtaining property by false representations — competency of parol proof of fraud.
    
    The complaint in an action to recover damages for a breach of contract alleged that the defendants made certain false representations to induce the plaintiff to execute the contract. The answer, which was verified, specifically denied the making of the false representations. No order of arrest was obtained, and before the case was tried a compromise was effected, in pursuance of which a judgment was entered in favor of the plaintiff and a stipulation was made between the parties, reciting, “It is stipulated that the claim set out in the complaint in this action be limited to and construed as asking for the recovery of a money judgment, and enforcible against property, but not against the person.”
    
      Held, that the legal effect of the stipulation was to eliminate from the complaint all allegations which would justify a judgment entitling the plaintiff either to an order of arrest or an execution against the person, and that, in the absence of independent evidence upon the subject, it could not be said that the judgment entered upon the stipulation was a judgment recovered in an action for fraud or for obtaining property by false representations, which is excepted from the operation of a discharge in bankruptcy by subdivision 2 of section 17 of chapter 3 of the National Bankruptcy Act.
    
      Qucere, whether upon a motion by the judgment creditor to vacate an order canceling the judgment on the ground that it had been discharged in bankruptcy, it would be competent for the judgment creditor to show that, notwithstanding the form of the pleadings and the stipulation, the original debt was created by the fraud of the judgment debtors.
    Appeal by Wilbur E. Cushman and others, judgment creditors, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 31st day of December, 1900, denying their motion to vacate an order entered in said clerk’s office on the 2d day of May, 1900, discharging a judgment recovered by them against William J. Arkell.
    
      Frcmk Moss, for the appellants.
    
      Henry K. Davis, for the respondent.
   Ingraham, J.:

The defendant, a judgment debtor, made a motion" to vacate a judgment entered against him in this action upon the ground that the iudgment had been discharged in bankruptcy subsequent to its rendition. This motion was granted by default, and an order was entered on the 2d of May, 1900, canceling the judgment. On November 21, 1900, the plaintiff noticed a motion to open the default and permit the plaintiff to oppose the motion, and that the said motion be denied. This latter motion came on to be heard at Special Term, and the court seems to have considered it upon its merits and'denied it upon the ground that the judgment entered in this action was discharged by the discharge in bankruptcy.

Section II of chapter 3 of the National Bankruptcy Act of 1898 (30 IT. S. Stat. at Large, 5'50) specifies the debts not affected by a discharge; and subdivision 2 provides that a discharge in bankruptcy shall not apply to “ 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; ” and it seems to be conceded that unless the judgment recovered in this action comes within this provision, the motion was properly denied. The complaint in the action in which the judgment was obtained is quite involved, and it is somewhat difficult to determine just the cause of action the plaintiffs intended to allege. An examination, however, would seem to indicate that the cause of action was for a breach of a contract made by the defendants to organize a corporation, which corporation was to purchase certain business and property owned by the plaintiffs. It is alleged that in pursuance of such a contract, the plaintiffs delivered the possession of the building in which their business had been carried on to the defendants, who commenced to make certain alterations in the building which were never completed; and the complaint alleges various representations and assurances made by the defendants to induce the plaintiffs to execute this agreement and to deliver the possession of the premises to the defendants; that such representations were not true; that the defendants did not intend to organize the corporation for the purpose of carrying on the business described, but were endeavoring to organize what is called a bread trust; ” that a corporation was to be formed for that purpose, which purpose was not carried out, and that thereupon the defendants redelivered the possession of the property to the plaintiffs.

These allegations of misrepresentations are somewhat indefinite, and there is considerable doubt whether there would be sufficient to sustain a recovery for a fraud.

Thé defendants interposed an answer denying most of the allegations of the complaint, setting forth a contract that was made between the plaintiffs and the defendants, but specifically denying all of the allegations that could be said to allege any misrepresentations by either of the defendants. When the action was ready for trial a compromise was suggested, and, as a result of the negotiations for such a compromise, the defendants offered the plaintiffs a judgment for $20,000, which offer was accepted, and upon which offer the judgment in question was entered.

The cause of action alleged was for a breach of a contract by the defendants; and so far as a recovery in the action is concerned, the allegations of misrepresentations were merely surplusage and did not at all affect the right of the plaintiffs to recover. Under the Code of Civil Procedure, however, to have entitled the plaintiffs to an order of arrest against the defendants upon the ground that the contract sued on was induced by fraud, it would have been necessary to allege in the complaint and prove upon the trial the allegations of fraud thus relied on. So far as appears, these allegations of fraud were only essential if the plaintiffs intended to obtain an order of arrest. As no such order of arrest had been obtained, the plaintiffs would have been entitled to judgment by proving a breach of contract and the damages sustained thereby, without proving the allegations of misrepresentations contained in the complaint. When, however, the compromise was effected, the stipulation offering to allow the plaintiffs to take judgment for $20,000, which was signed by the parties to the action and upon which the judgment was entered, contained this provision: It is stipulated that the claim set out in the complaint in this action be limited to and construed as asking for the recovery of a money judgment, and enforcible against property but not against the person.” There is some dispute between the attorneys for the respective parties as to the agreement upon which this stipulation was based. The attorney for the defendants says that the understanding was that all allegations of fraud should be eliminated from the complaint, but this is denied by the attorney for the plaintiffs, who says that the understanding was that the defendants should not be arrested. But however that may be, the provision of the stipulation is not that the plaintiffs will not obtain an order of arrest or issue an execution against the persons of the defendants, but that the claim set out in the complaint in the action be limited to and considered as asking for a money judgment, and enforcible against property and not against the person. The parties to that stipulation could only have intended that the complaint must be considered as one asking for a judgment which could be enforced only against property; and the complaint thus considered would be one based upon a breach of a contract and not upon fraud or misrepresentations. The judgment entered on that stipulation could not be a judgment in an action for fraud or for obtaining property by false pretenses or misrepresentations. The legal effect of this stipulation would, therefore, be to. eliminate from the complaint all allegations which would justify a judgment entitling the plaintiffs either to an order of arrest or an execution against the person ; and with such allegations eliminated the judgment would not be one recovered in an action for fraud or obtaining property by false pretenses or misrepresentations. Whether or not it would be competent for the plaintiff to prove upon this application that, notwithstanding the form of the complaint and the stipulation, the original debt was created by fraud of the debtor, it is not necessary that we should determine as no effort was made to prove that fact. We have only the allegations of the verified complaint met by the direct denial of the defendant and verified by him. If the plaintiffs had desired to raise that point, they should have offered independent evidence upon the motion which would have justified the court in finding that the damage to recover for which the action was brought was in fact caused by the fraud of the defendants.

I think that thé question was correctly decided below and that the order appealed from should be affirmed, with ten dollars costs and disbursements.

Van Brunt, P. J., O’Brien, McLaughlin and Hatch, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements.  