Ames v. Moir/Opinion of the Court

The only question for the determination of this court is whether Ames' discharge in bankruptcy was a bar to the present action; and that question depends upon the inquiry whether the defendant is sued on account of a debt created by fraud, within the meaning of the bankruptcy act. It is the settled doctrine of this court that 'fraud' in the act of congress defining the debts from which a bankrupt is not relieved by a discharge in bankruptcy means 'positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, as does embezzlement, and not implied fraud, or fraud in law, which may exist without the imputation of bad faith or immorality.' Neal v. Clark, 95 U.S. 704, 709; Wolf v. Stix, 99 U.S. 1, 7; Hennequin v. Clews, 111 U.S. 676, 682, 4 Sup. Ct. Rep. 576; Strang v. Bradner, 114 U.S. 555, 559, 5 Sup. Ct. Rep. 1038; Noble v. Hammond, 29 U.S. 65, 69, 9 Sup. Ct. Rep. 235; Upshur v. Briscoe, post, 365, (the present term.)

The argument, in behalf of the defendant, proceeds, mainly, upon the ground that the claim or debt, on account of which he is sued, was created by the writing of June 9, 1870; and as that writing was executed in good faith, nothing done by him at a subsequent date, for the purpose of obtaining possession of the highwines for which he contracted, could be proved under the issue as to whether the claim or debt was created by fraud. This view of the transaction is inadmissible. The writing referred to did not, in itself, create a debt within the meaning of the bankruptcy act. It could not become effective as an instrument creating a debt in favor of plaintiffs until, pursuant to a call by defendant prior to July 20th, they delivered, or offered to deliver, to him the highwines he agreed to take, at the price stipulated, or-the defendant failing to make a call for them within the time limited for his doing so-until the highwines were delivered or tendered to him by the plaintiffs after the 20th and before the end of the month of July. When the plaintiffs delivered, or offered to deliver, the highwines at the defendant's place of business on the 18th of July, in fulfillment of the agreement of June 9th, and defendant failed to pay for them, then, and not before, was a debt created within the meaning of the bankruptcy act. Until the 18th of July, or, at least, until the defendant took possession, without making payment, of the highwines that were left at his place of business in discharge of the plaintiffs' obligation to deliver upon three days' notice, there was no debt for which the plaintiffs could maintain an action against the defendant, or which would have been provable against his estate in bankruptcy. If the month of July, 1870, had passed without any call by the defendant for the highwines, and without the plaintiffs' exercising the privilege they reserved of delivering or offering to deliver before the end of that month, the writing of June 9, 1870, would have been of no value to any one; which fact shows that that instrument did not, in itself, create a debt, and that no debt could be created by it without the exercise by one or the other of the parties of the privilege reserved to each respectively.

The vital inquiry, therefore, is whether the defendant in making the call on the 15th day of July for the highwines, and in taking possession of them without payment on the 18th, and shipping them on the cars, committed such fraud, in fact, as involved moral turpitude or intentional wrong upon his part. As the jury was instructed that Ames' discharge in bankruptcy was a complete defense to the action unless it appeared, by a preponderance of evidence, that he was guilty of positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, it must be assumed that they found that in the creation of the debt in question he had committed fraud of that character. When the wines were delivered, Moir & Co. were entitled to payment. Delivery and payment were, substantially, concurrent acts. And if Ames made his call, with the knowledge that he was then insolvent, and with the purpose of getting possession of the wines, and shipping them out of the state without paying for them according to the terms of the executory agreement of June 9th, and received them with that preconceived intent,-and there was evidence that justified the jury in so finding,-he was guilty of fraud in fact, involving moral turpitude or intentional wrong, and is not protected against the claim of the plaintiffs by his discharge in bankruptcy. Such was the view taken by the court of original jurisdiction and by the supreme court of Illinois.

There is no error in the record in respect to the question of federal law arising in the case, and the judgment is affirmed.