Opinion
March, 1903.
George J. Gruenberg, for appellant.
Jacob Newman, for respondent.
The pleadings in this case were in writing, from which it appears that the complaint sets up an indebtedness for goods sold and delivered, and for a second cause of action the plaintiff sues on an account stated.
The defendant in his answer admits the delivery of the goods, but denies an account stated, and for a further defense pleads that he has been duly discharged in bankruptcy, sets up the Statute of Frauds and pleads want of consideration.
On the trial the following facts appeared: That on the 25th day of June, 1902, the defendant owed the plaintiff $205, being the balance of an account for goods sold and delivered. That on August ninth following, the defendant filed his petition in bankruptcy and by scheduling the debt made the plaintiff a party to the proceeding. That a discharge was granted to the defendant in that proceeding on October fifteenth following. That on August twenty-second, after the filing of the petition and before the discharge, the defendant signed and delivered to the plaintiff his written promise to pay the debt in the words and figures following:
"NEW YORK, Aug. 22 nd 1902.
"Mr. Owen Treanor to I.W. Gruenberg, Dr. * * * "1902.
"June 26. To balance, $205.
"This account is O.K. August 22nd. I will pay it.
"(signed) OWEN TREANOR."
Subsequently, both before and after the discharge, there were further sales made by the plaintiff to the defendant, and payments made by the defendant in cash. That on the twenty-fifth day of October following, the plaintiff presented to the defendant a statement of the account, showing the indebtedness of June twenty-fifth as well as the subsequent transactions, and showing the balance of defendant's indebtedness to be $205 on that date — that is October twenty-fifth — at the same time saying to the defendant, "That leaves a balance of $205," to which the defendant answered, "Yes, that is all right," and that at the same time the defendant took from the plaintiff and kept a duplicate of the latter's statement showing these things.
Before the passage of chapter 324 of the Laws of 1882 it was frequently held in this State that while the legal obligation of a bankrupt was by force of positive law discharged and the remedy of the creditor existing, at the time the discharge was granted, to recover his debt by suit was barred, yet that the debt was not paid by the discharge, and that the moral obligation of the bankrupt to pay it remained. That it was due in conscience although discharged in law, and this moral obligation, uniting with a subsequent promise by the bankrupt to pay the debt, gave a right of action.
But the act last cited provided, "That no subsequent or new promise hereafter made by any person duly discharged in bankruptcy to pay any debt so discharged in bankruptcy shall revive such debt against the person so discharged, unless such subsequent or new promise shall be contained in some writing signed by the person to be charged thereby."
This law was, if possible, made more stringent by chapter 417, article 2, section 21 of the Laws of 1897, which provides that "Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking * * * (subdivision 5) Is a subsequent or new promise to pay a debt discharged in bankruptcy."
There can be no doubt but that the balance of account of $205 for goods sold and delivered, having been scheduled in the petition in bankruptcy, was discharged by the discharge in bankruptcy subsequently granted; but in our opinion it is equally clear that the indorsement upon the bill rendered August 22, 1902, "This account is O.K. August 22nd I will pay it," signed by the debtor, took the transaction out of the operation of chapter 324 of the Laws of 1882, and also of chapter 417 of the Laws of 1897, and is at least equally binding upon the defendant as a promissory note, given by him for the debt after he had been adjudicated a bankrupt and before his discharge, would have been, and this has been expressly held to be a good obligation. Jersey City Ins. Co. v. Archer, 122 N.Y. 376, 378.
But the respondent objects that the suit was brought for goods sold and delivered, and was not based upon the new promise to pay, which should have been pleaded.
The necessity of pleading the new promise was carefully considered by the Court of Appeals in Dusenbury v. Hoyt, 53 N.Y. 524, where the court, per Andrews, J., said: "The question whether the new promise is the real cause of action, and the discharged debt the consideration which supports it, or whether the new promise operates as a waiver by the bankrupt of the defense which the discharge gives him against the original demand, has occasioned much diversity of judicial opinion. The former view was held by Marcy, J., in Depuy v. Swart, 3 Wend. 139, and is, probably, the one best supported by authority. But, after as before the decision in that case, the court held that the original demand might be treated as the cause of action, and, for the purpose of the remedy, the decree in bankruptcy was regarded as a discharge of the debt sub modo only, and the new promise as a waiver of the bar to the recovery of the debt created by the discharge. We are of opinion that the rule of pleading, so well settled and so long established, should be adhered to. The original debt may still be considered the cause of action for the purpose of the remedy. The objection that, as no replication is now required, the pleadings will not disclose the new promise, is equally applicable where a new promise is relied upon to avoid the defense of infancy or the Statute of Limitations, and in these cases the plaintiff may now, as before the Code, declare upon the original demand. Esselstyn v. Weeks, 12 N.Y. 635."
In Scheper v. Briggs, 28 A.D. 115, 117, Mr. Justice Rumsey, in delivering the opinion of the court, after stating that "The legal obligation of a bankrupt upon any debt proved under the act is, by force of positive law, discharged, and the remedy of the creditor existing at the time of the discharge is absolutely and entirely taken away. No cause of action is left to the creditor upon the debt thus discharged, and it would seem to be a logical conclusion that, if a new promise to pay the debt was made, the action against the bankrupt must be brought upon the new promise, and not upon the original debt, because, the new promise being the real binding obligation, constitutes the only cause of action," significantly adds: "But, unfortunately, the logical rule of pleadings has never been insisted upon, in this State, at least, and it has been held that, although the old debt has been discharged, yet the creditor may bring his action upon it, and prove the new promise in avoidance of the discharge," citing Dusenbury v. Hoyt, supra.
This being the well-settled rule of law in this State, we think the court erred in dismissing the complaint upon that cause of action, and, having arrived at this conclusion, it is unnecessary to determine at this time whether or not the action could have been maintained as upon an account stated.
We are, therefore, of the opinion that the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.
FREEDMAN, P.J., and GILDERSLEEVE, J., concur.
Judgment reversed and new trial ordered, with costs to appellant to abide event.