This difference in the rule with respect to the judgment being or not being barred by the discharge, arising out of difference of practice under the Act of 1841, with regard to granting a stay, is clearly pointed out in Bradford v. Rice, 102 Mass. 474, and Re Gallison, 5 Nat. Bank. Reg. 355.

The Bankruptcy Act of 1867 adopts and incorporates the Massachusetts practice of granting a stay for a reasonable time to enable the bankrupt to apply for and plead his discharge if obtained.

The reason for the New York decisions under the Act of 1841 that a judgment on a provable claim is barred by a subsequent discharge, therefore, no longer exists, and the propriety of adopting the principle of the Massachusetts decisions on this point is evident. Cessante ratione, cessat lex. Eadem ratio, eadem est lex.

The decisions made by this court under the Act of 1867 (Monroe v. Upton, 50 N. Y. 593, and Palmer v. Hussey, 87 N. Y. 303), relied upon by defendant, are not opposed to this view. They do not hold that as matter of law the subsequent discharge is a bar to a suit on the judgment obtained on the original debt; on the contrary, they proceed on the assumption that it is not a bar. They hold that a bankrupt against whom such a judgment has been obtained, may, by excusing his laches and showing adequate grounds for equitable interference, obtain relief from the court which rendered the judgment by having it vacated or having its enforcement restrained. The necessary implication is that in the absence of interference on equitable grounds by the court which rendered the judgment, the judgment may be sued, and the subsequent discharge will not be a legal defense to the suit.

Therefore, under the general rule, and without claiming or insisting upon the benefit of the express terms of the order of the bankruptcy court of the 25th of February, 1873, the plaintiff was entitled to have a verdict directed in his favor for the amount of the California judgment and interest.

But even if the general rule were as asserted by the defendant, nevertheless, the plaintiff, by reason of the order of the bankruptcy court of the 25th of February, 1873, was entitled to such direction.

The bankruptcy court had the power to make the order.

A bankrupt, by his laches in prosecuting his proceedings for discharge, loses his right to restrain creditors, and loses the benefit of his discharge as to a creditor who pursues and obtains his remedy, as the plaintiff in this case did, by motion to vacate the stay and proceed to judgment and execution. Such a creditor has a right to collect the judgment, if obtained, out of after acquired assets.

Bump, Bankruptcy, 240; Re Woolums, 1 Nat. Bank. Reg. 131; Re Bodenheim, 2 Nat. Bank. Reg. 133; Re Martin, 2 Nat. Bank. Reg. 169; Re Willmott, 2 Nat. Bank. Reg. 76; Re Canaday, 3 Nat. Bank. Reg. 3; Belden's Case, 6 Nat. Bank. Reg. 443; Dingee v. Becker, 9 Nat. Bank. Reg. 508; Re Gallison, 5 Nat. Bank. Reg. 353.

The direction of the verdict in plaintiff's favor was also proper, because he was precluded from availing of his defense in this action by the previous adjudication adverse to him in his proceeding in California to set aside the judgment.

Pepin v. Lachemeyer, 45 N. Y. 27; Dwight v. St. John, 25 N. Y. 203.

Peckham, J., delivered the opinion of the court:

The judgment sued on herein was obtained in the State of California against defendant, intermediate the commencement by him of voluntary proceedings in bankruptcy in that State and the granting of the discharge therein. The judgment was founded upon a debt which existed at the time the bankruptcy proceedings were commenced, which debt was provable and was in fact proved in the bankruptcy proceedings.

Under the Bankrupt Act of 1841, this court held that a discharge in bankruptcy operated upon such a judgment. Clark v. Rowling, 3 N. Y. 216.

The ground upon which that decision rested was that although technically a judgment upon a contract merged the original debt, yet it did not do it so completely that the court could not look behind the judgment to see upon what it was founded, for the purpose of protecting the equitable rights of the parties in their original relations to each other. It was said that in such a case a judgment, instead of being regarded strictly as a new debt, was to be looked upon as the old debt in a new form so as to prevent a technical merger from working injustice.

The learned counsel for the plaintiff claims however that there are some provisions of the late bankrupt law which differ in such a material degree from those of the Law of 1841 as to call for a different disposition of the case.

hence, a judgment obtained prior thereto should be discharged by the certificate, while in the later Act there is an express provision for such a stay and a defendant has a legal right to it. The argument then is that if, having the legal right to a stay, he does not procure it, or having once procured it, if it has

ing matured on the 19th. Instead of paying it, the plaintiff, in accordance with the exchange system, marked it Certified" and returned it to the City Bank, to be used the next day in the settlement of its exchange with the plaintiff, charging it to Gordon as having been paid.

On the same day the plaintiff held commercial paper, payable at the City Bank of Rochester, and on presenting it at that bank received its certifications, in lieu of payment, to the amount of over $1,900, which were held by the plaintiff to be charged to the City Bank on the settlement of the exchange account, leaving a balance at the close of the day's transactions in favor of the plaintiff against the City Bank of over $1,100, after crediting the $800 draft.

At the close of the same day (December 19, 1882), there was a balance due to the plaintiff from the defendant on their exchange account for the day, and on the morning of the 20th of December the items of the previous day in favor of the plaintiff in its exchange account with the defendant, amounted to $26,423.15, and were undisputed, and the defendant, in settlement of this amount, sent in to the plaintiff $21,790.59 in cash and an account of items, which it claimed in its favor, amounting to $4,632.56, but in which was included the before mentioned $800 Gordon acceptance which had been certified by the plaintiff on the 19th for the City Bank of Rochester, and which belonged in the exchange account of the plaintiff with the City Bank of Rochester.

The City Bank of Rochester had finally stopped business at the close of the business day on the 19th of December and was then insolvent and did not afterwards resume.

The plaintiff on the morning of December 20, on discovering that the Gordon acceptance was among the items of credit claimed by the defendant in its exchange account, refused to allow it, and immediately returned it to the defendant, with a statement that the plaintiff had off-sets to a much larger amount in its account with the City Bank. The defendant insisted on being credited with the Gordon acceptance, and has never paid the balance of $800 claimed by the plaintiff; and hence this action.

The trial court found that defendant had received the certified Gordon acceptance from the City Bank of Rochester on the 19th of December, 1882, under the following circumstances: although by the usual custom between the banks the exchanges were to be made on the day following the certifications, the defendant (instead of exchanging with the City Bank in the usual way) had, for a month previous to the 19th of December, 1882, required of the City Bank a settlement each day, of the balance of that day, instead of settling on the morning after. On the 19th of December, on exchanging their respective demands due on that day, there was found due from the City Bank to the defendant a balance of $8,000, and the said Gordon acceptance, certified by the plaintiff, was thereupon transferred by the City Bank to the defendant as a payment of $800 of that balance, the remainder being otherwise paid, and the defendant surrendering its demands

against the City Bank in consideration of such payment and transfer.

It was further found by the trial court that prior to November 19, 1882, the exchanges between the defendant and the City Bank had been settled in accordance with the general custom among banks before stated, that is on the day after the paper became due and was certified, but that the defendant had adopted the course of requiring from the City Bank a settlement on the same day, because it was unwilling to give credit to the City Bank; that this Gordon acceptance was taken by the defendant from the City Bank, under circumstances which charged the defendant with notice that it was intended to be used in settling the exchanges between the plaintiff and the City Bank; that the intention of the plaintiff in certifying the Gordon acceptance, instead of paying it, was that it might be offset by any cash demands which the plaintiff might have against the City Bank, and that such certification carried with it notice of such intention to the defendant, and that the defendant took the said Gordon acceptance, with notice that it was diverted from the purpose for which it had been certified by the plaintiff.

On the 19th of December, and before the Gordon acceptance was passed off by the City Bank to the defendant, the City Bank had certified paper held by the plaintiff, to the amount of $1,900.

On the first trial of this action the special term held that the certification in question was not negotiable, and rendered judgment in favor of the plaintiff. This judgment was reversed at general term, and a new trial ordered. On the second trial the court at special term, conforming to the decision at general term, rendered judgment for the defendant, and that judgment was affirmed; and the plaintiff now appeals to this court.

It is claimed on the part of the plaintiff that the certification, being of an acceptance payable on time, was notice that the paper had matured and been presented for payment at maturity, and that as to all the parties to the bill the certificate was a payment which discharged them, and the paper had lost its negotiable character. On the other hand it is claimed that although all the parties to the bill were discharged, and as to them the paper had ceased to be negotiable, yet as to the Bank certifying it, the certification was equivalent to a certificate of deposit payable to bearer on demand, and as such was negotiable as against the Bank.

We do not deem it necessary to pass upon this question, because to entitle the holder of the certification to recover upon it, without regard to the equities between the certifying Bank and the party to whom the certification had been issued, it was necessary not only that it should be negotiable, but that the party claiming on the certification should have received it in good faith and without notice of those equities.

It seems to us that the defendant in this case does not, under the facts found, occupy that position. The defendant received the certification with notice that it represented an item merely in the exchange account between the City Bank of Rochester and the plaintiff, and

that whether anything would be due or payable upon it would depend upon the state of the exchange account between the two Banks at the close of the day,-that it was certified for the purpose of being used in the settlement of that account. This was notice that it was intended as a mere voucher, and was not made for purposes of negotiation; and it is expressly found that the defendant took it with notice that in transferring it to them the City Bank was diverting it from the purpose for which it had been certified by the plaintiff. It matters not that the defendant did not know the actual state of the exchange account between the City Bank and the plaintiff. As matter of fact it appears from the findings that at the time the defendant received the plaintiff's certification from the City Bank it had been more than paid by certifications which had been made by that bank and were held by the plaintiff. But it is not necessary that the defendant should have had notice of that fact. It knew that there was an exchange account between the plaintiff and the City Bank and that the certification was subject to the settlement of that account on the following day, and also that in the ordinary course of business it was probable that the City Bank held paper certified by the plaintiff against which this certification was applicable.

By insisting on the City Bank settling with it on the 19th, contrary to the general custom, because it doubted the credit of the City Bank, and taking from it this certification for that purpose, it was endeavoring to cast upon the plaintiff, in case it had off-sets, the risk which it was unwilling to incur, and to subject the plaintiff to the chance of the City Bank providing other means, if required, of meeting its liabilities to the plaintiff. Whatever might have been the rights of an innocent party taking the certified draft in ignorance of the purpose for which the certification had been made, and of the right of the plaintiff to apply it on a pending account, we cannot hold, in the face of the facts found, that the defendant in taking this paper from the failing bank, under the circumstances, became a holder in good faith. It purchased what it knew to be a mere voucher for an item in an account to be settled, and necessarily took it, subject to the result of the settlement of that account.

The judgments of the General and Special Terms should be reversed, and a new trial ordered; costs to abide the event.

All concur.

Loftis WOOD, Appt.,

v.

Peter B. AMORY, Respt.

1. The failure to inform another of the existence of a fact is not a fraud, unless there was some legal duty to make the disclosure.

2. There must be some relation of trust and confidence existing between the parties upon which to build the duty to disclose before the right to disclosure can be enforced, and no such trust can be supposed in the case of adverse parties

3.

4.

to a contested lawsuit as to facts connected with the amount of the judgment.

In a suit by the defendant in a former action, against the plaintiff therein, seeking to recover a portion of the amount paid under execution upon the judgment in such former action, alleged to have been erroneously in. cluded in such judgment through inadvertence on the part of the referee, which mistake of fact was alleged to have been known to the plaintiff in such former action but not to the defendant therein, held, that the complaint failed to state facts sufficient to constitute a cause of action.

Where a judgment defendant learned during the pendency of an appeal that the judgment appealed from had been, through inadvertence of the referee, entered for too large an amount, but failed to object or to take any steps to correct the mistake, and after affirmance of such judgment paid the amount thereof under execution,-such payment must be considered as voluntary.

(Decided April 19, 1887.)

APPEAL from a judgment of the Supreme Court at General Term in the First Department, affirming a judgment of the Special Term sustaining a demurrer to the complaint in an action to reform or modify a judgment on the ground of mistake. Affirmed.

The facts and questions raised appear from the opinion.

Mr. Samuel J. Crooks, for appellant: The judgment is a contract, and as such may be reformed: 1, because the mistake is plain and can be clearly made to and does appear from the allegation in the complaint; 2, it was a mutual mistake; and 3, one of fact.

It is no answer to say that the mistake could have been corrected at law; it was not appar ent from the record, nor was it corrected, which is a sufficient answer; nor is it any answer to say that the mistake arose from a want of care on the plaintiff's part, or that the defendant cannot be restored to his original posi

tion.

Kingston Bank v. Eltinge, 40 N. Y. 391; Nerius v. Dunlap, 33 N. Y. 676.

The remedy sought is clearly within the equity powers of the court, and presents a state of facts showing an apparent valid judgment in toto; whereas, in fact, to a large extent, the judgment is not valid, owing to facts aliunde, that is to say, facts that can only be made to appear by evidence outside the record.

Binck v. Wood, 43 Barb. 315; White v. Merritt, 7 N. Y. 352; Paine v. Upton, 87 N. Y. 327; Chap man v. Brooklyn, 40 N. Y. 372, 381; Heywood v. Buffalo, 14 N. Y. 534; N. Y. Ice Co. v. Northwestern Ins. Co. 23 N. Y. 357-361.

"Fraud vitiates all contracts and fraudulent proceedings, and equity as a general rule will relieve against all deeds, writings, and assurances, also against all judgments and decrees, which have been obtained by fraud and imposition.

Willard, Eq. Jur. 160.