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Bliss v. Schwarts

64 Barb. 215 Court N.Y. Sup. Ct. Decision date 1872-11-04 English

Judges Ingraham, Leonard and Gilbert, Justices.]

Contents

Majority

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Bliss and others vs. Schwarts.

Headnote

It cannot be questioned that payment of a portion of a liquidated demand, in the same manner as the debtor was legally bound to pay the whole thereof, although it be received in satisfaction of the debt, is payment only in part; and that the agreement to receive such part payment in satisfaction is, in effect, one to give up the residue of the demand, which, being without consideration, is nudum pactum, and void.
But a debtor may offer anything as a substitute for the money due, whether of less or greater value, and if the creditor take it in satisfaction, it is a valid agreement, and the debt is discharged. The obligation of a third person, for any amount, operates in the same way, to discharge the debt.
The plaintiffs and defendant, through their agents, agreed upon a compromise of a debt owing to the former by the latter, whereby the defendant was to pay twenty-five cents on the dollar, and $380 in addition. The plaintiffs received a negotiable bill of exchange drawn by third persons, for a part of the debt, and the defendant’s note for another portion, and in consideration thereof signed a receipt, stating that the same “ were in fall settlement of their claims” against the defendant. Held that this was a sufficient consideration to uphold the discharge.
Held, also, that if the agreement, in terms, had been that the plaintiffs should receive the draft, in satisfaction of their claims against the defendant, there could be no doubt that the subsequent receipt of the draft, in pursuance of
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the agreement, would have discharged the debt. And that such was the substance and legal effect of the transaction; and it did not affect the principle, that the defendant's note was received, in addition to the draft.
APPEAL, by the defendant, from a judgment entered at the circuit. The action was brought to recover an alleged balance of an account for goods sold and delivered. The answer set up a defence, in substance, of an accord and satisfaction. The trial commenced with a jury; but, at the close of the evidence, it being agreed that there was no question for the jury, the jury was waived, and the case submitted to the judge, for his decision.
The following facts were found, by the judge:
1. On or prior to September 3, 1866, the plaintiffs sold and delivered to the defendant, on a four months’ credit, goods, wares and merchandise, amounting in price to $4,634.84, for which the defendant gave to the plaintiffs his promissory note for $4,634.84, payable four months after date to their order, and dated September 3, 1866. The defendant then resided and continued to reside and do business at Galveston, Texas.
2. At different dates from May 8, 1868, down to June 2,1868, different creditors of the defendant, representing indebtedness in the aggregate to the amount of over $35,000, and so far as appeared, with the plaintiffs, being his sole creditors, accepted this composition and signed their names, with the exception of the plaintiffs, to a composition instrument, dated May 8,1868, by which they severally agreed to accept the composition in full.
3. Early in May, 1868, Egleson P. Clegg, of Galveston, Texas, on behalf of the defendant, called upon the plaintiffs in the city of Hew York, and applied to them to accept the above composition for their claim against the defendant, informing them that the composition had been or was about to be effected with all his other creditors. The plaintiff Bliss replied that they would not then accept the proposition. - On or about May 14, 1868, Mr.
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Clegg had a second interview in reference to the said composition with the plaintiff Bliss, when he said that the whole matter was in the hands of Mr. Philip W. Kopper, who was then in Texas, and that whatever he did in reference to compromising their claim against the defendant would be acceptable to the plaintiffs, and that the plaintiff Bliss would do nothing about a compromise in ISTew York.
4. Mr. Clegg immediately telegraphed the substance of this conversation to his partner, Mr. George Butler, at Galveston, Texas. Subsequently and on June 3, 1868, at Mr. Butler’s office in Galveston, Philip W. Kopper, for the plaintiffs, agreed upon a settlement of their claim against the defendant, which had been reduced by payments on account of the note to $3,659.55, including interest, upon the following terms, viz: twenty-five per cent, half cash and half in his note at twelve months; and in addition thereto, $250 cash added to the cash payment, and $50 added to the note; the cash payment amounted to $707.44; and to carry out the settlement, Mr. Butler gave Kopper his draft of his own firm, in favor of the plaintiffs, for $629.25, being the amount of the cash payment, $690.44, to be made on the settlement, less the commissions of his firm. The note of the defendant had been previously placed in the hands of Mr. Butler’s firm for collection. The draft of Mr. Butler s firm was drawn on Duncan, Sherman & Co., and was subsequently paid by them. Mr. Butler also delivered to Kopper the note of the defendant, which was for $507.44, at twelve months, and which was paid at maturity by Mr. Butler’s firm, for the defendant. Mr. Butler, in this transaction, acted for the defendant.
5. Kopper thereupon gave a receipt to the defendant, (his brother acting for him in the transaction,) dated June 3,1868, in full settlement of all claims of the plaintiffs, and surrendered the original note to him.
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6. All that Kopper did in the transaction was authorized by the plaintiffs.
7. That on or about the 1st day of June, A. D., 1868, the defendant paid to the plaintiffs, on account of said indebtedness of $4,634.84 before mentioned, the sum of $690.44, and thereafter, to wit, on the 1st day of June, 1869, the defendant paid to the plaintiffs, on the like account, the further sum of $507.44.
8. That on or about the 3d day of January, A. D., 1867, the defendant returned to the said plaintiffs certain of the goods so purchased by him as aforesaid, of the value of $1,301.66, which goods the said plaintiffs accepted in lieu and stead of so much of the indebtedness first named as was represented by the value thereof, above stated, and credited the said defendant with so much money paid on account of said indebtedness.
9. That there was due and owing from and by the defendant to the plaintiffs, on account of said sale and delivery of merchandise, the aggregate sum of $3,850.87.
And, upon the facts so found, the judge further found and decided, as a conclusion of law, that the plaintiffs were .entitled to judgment against the defendant for the sum of $3,850.87, together with the costs and disbursements of this action; and he directed that judgment be entered accordingly.
Jno. E. Parsons, for the appellant.
The exceptions to the findings of fact raise no question upon contradictory testimony, but simply call upon this court to determine the legal conclusion of fact which follows from circumstances or transactions which are conceded not to be in dispute.
I. The note given by the defendant for the goods sued for, the plaintiffs sent for collection to the firm of which Mr. G-eorge Butler was a member. When the terms of the settlement were agreed upon, $690.44 being due as the first installment, Mr. Butler gave Kopper, the plain
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tiffs’ agent, the draft of his own firm on Duncan, Sherman & Co. for that amount, (deducting commissions,) “to carry out the settlement.” The defendant claims that the plaintiffs had no right to Butler & Co.’s credit, or to the security of that firm, and that, obtaining that by the settlement, it furnished ample consideration to sustain the compromise. The principle is beyond dispute. (Brooks v. White, 2 Metc. 283 . Kellogg v. Rich ards, 14 Wend. 116 . Keeler v. Salisbury, 33 N. Y. 648 , 653.) To prevent the application of the principle, the judge found that in the transaction, Mr. Butler acted for the defendant; that Ms draft was, therefore, presumably paid by the defendant. TMs, the appellant claims, cannot be sustained. It is in conflict with what the judge himself had decided, that the plaintiffs had themselves placed the note in the hands of Butler & Co. for collection. The compromise was in the direct line of the agency. The evidence of Mr. Butler was to the same effect. In conference with Kopper, and on a telegram from Hew York received from his own partner, who had called on the plaintiffs, Mr. Butler, who held the note for collection, acqmesced in the settlement. He deducted from the amount coming to the plaintiffs, Ms own commissions for the settlement and collection. The judge justifies Ms conclusion, in Ms opinion, by the statement that it is to be presumed that the defendant furnished Butler & Co. with the money to pay their draft. Suppose he did; the plaintiffs could hold Butler & Co., whether the defendant furnished them with the money or not; the draft was not drawn by Butler & Co., as agents for the defendant, but bound them personally. The plaintiffs got the benefit of their credit, and that furmshed ample consideration to sustain the compromise.
II. The judge found that, in making the settlement, Kopper acted under the authority of the plaintiffs, and that the defendant paid his note given for the second installment of the compromise. The defendant, therefore,
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fully, performed Ms part of the compromise, and his defence is complete unless the judge is correct in his conclusion, that the settlement had no reference to the' defendant’s general compromise; and he is to be sustained in refusing to find the reverse, as requested by the defendant. The appellant claims that the judge did find all the elements from which necessarily resulted the conclusion wMch he refused to find. 1. Between May 8th, 1868, and June 2d, 1868, the defendant was engaged in effecting a general compromise with Ms creditors. 2. The plaintiffs were early applied to,-to accept the compromise, and were informed of the attempt to make a general compromise. They did not refuse absolutely (as the judge assumes in Ms opinion,) but said they would not then accept. 3. On May 14,1868, while the general compromise was still being effected, the plaintiffs were again applied to in reference to the general composition; they did not then refuse absolutely, but referred the whole matter to Kopper, who was then in Texas, where the defendant resided and did business; the plaintiffs simply declining to do anything about the compromise, in New York. The “whole matter,” of course, was the defendant’s attempt to have the plaintiffs umte in his general compromise; what he wished was a release by all his creditors; anything short of that was of little value. The facts so found by the judge prove that the defendant’s settlement with the plaintiffs was with reference to his general compromise. The defendant so understood it; he made the settlement on telegrapMc information of what had passed in New York. The plaintiffs so understood and intended it. They referred the very matter to Kopper. The judge holds otherwise, upon the sole ground that it did not appear that Kopper, the agent, knew of the general compromise. It is a well settled principle, that in a transaction effected tMough an agent, notice to, and knowledge by the agent, binds the principal. (Pars, on Cont. 64, et seq. Bank of U. S. v. Davis, 2
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Hill, 451 . Boyd v. Vanderkemp, 1 Barb. Ch. 287 .) Surely where the principal has the knowledge, it must affect his own transaction, even though the hand he uses—the agent who is the mere instrument—he keeps in ignorance. (Willis v. The Bank of England, 4 Ad. & Ell. 21, 39. 1 Pars, on Cont. 66.) The principle resolves itself into this: that the plaintiffs could, at will, bind or defeat the compromise, by communicating to, or withholding information from, their own agent of the compromise. The defendant was justified in the belief that the plaintiffs’ agent knew what the plaintiffs themselves knew in reference to the business, and on this belief he acted. Shall the plaintiffs succeed by misleading him ? Again, it was on May 14, 1868, that the plaintiffs, in New York, referred the matter to Kopper, in Galveston. The compromise was not until June 3, 1868; and the same presumption which the judge himself applied to the pretended agency of Butler & Co., for the defendant, that money paid by Butler & Co. was the money of the defendant, applied to the present question, justifies the inference, that the plaintiffs communicated to Kopper what had transpired in New York.
III. Assuming thus, that the plaintiffs participated in a general scheme to compromise the defendant’s indebtedness, is it any the less to be held that they exacted harsher terms, and that they merely gave a receipt instead of signing the composition paper? That they could not sign. It was in New York down to June 2, 1868, and could not be in Galveston on June 3, 1868. 1. Assent to a composition may be as well by surrendering the debt and taking composition notes, as by signing and sealing a composition deed, as between a debtor and creditor. An accord to accept a less sum than the whole debt is no bar, though satisfaction be tendered; but if the accord extends to all the creditors of the debtor, it is otherwise. (Fellows v. Stevens, 24 Wend. 294 .) It.need not extend to all the creditors. (Norman
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v. Thompson, 4 Ex. 754.) 2. Such a composition may be by parol, the debt being a simple contract debt, (Fellows v. Stevens, 24 Wend. 294 ,) where the creditor accepted the composition, but did not sign the deed. See Bradley v. Gregory, (2 Camp. 385,) to the same effect; Williams v. Carrington, (1 Hilt. 515,) where a simple receipt was given; also Butler v. Rhoodes, (1 Esp. 236;) Brady v. Skeel, (1 Camp. 147;) Steinman v. Magnus, (2 id. 124,) holding that a seal is unnecessary ; Thomas v. Courtnay, (1 B. & A. 1,) to the same effect. In this case the debt was represented by a note, and that was surrendered. 3. hi or does it matter that the other creditors signed before the plaintiffs completed the settlements on their part; were that so, the creditor last signing would never be bound. Such a settlement is sustained by the interest all the creditors have, that the debtor shall be released. The plaintiffs were applied to before May 14, 1868, and their settlement followed upon that application. It was subsequent to that, that other creditors signed. (Hall v. Merrill, 9 Abb. 116 , [2.] Renard v. Tuller, 4 Bosw. 107 .) The composition deed provided for payment of half the compromise by the defendant’s note, at twelve months. Until those notes were paid, all the creditors had an interest that the plaintiffs should be bound by the compromise. A suit meantime by the plaintiffs was calculated to defeat the payment of those notes. 4. hi or can the plaintiffs take advantage of the additional $300 they exacted. An additional advantage to one creditor may be a fraud upon other creditors, but it gives no larger right to the creditor exacting the advantage. (Mallalieu v. Hodgson, 5 Eng. L. and Eg. 279. Page v. Carter, 16 N. H. 254 .)
IV. The case resolves itself into this: Between May 6, 1868, and June 2, 1868, the defendant, through his friends, secures a general composition. Mr. Clegg, who acted for him, on May 14, 1868, and once previously,
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called oil the plaintiffs and asked them, to join. On May 14, 1868, (intermediate the execution of the deed,) they substantially say, “Yes; if our agent, Mr. Kopper, sees fit.” Mr. Kopper does see fit. Are not the plaintiffs bound to the other creditors ? If not, then the last party to a composition deed never can be held. Both principle and authority demonstrate that he is. The law favors such arrangements. The execution by each sustains the execution by the other, upon the very consideration that the performance by one party affects the ability of the debtor to perform as to the other ; each party who unites in a general scheme to relieve a debtor is to beheld bound. One creditor may, if he do not deceive the others, compel superior advantage, but that does not affect the principle. It puts him in a less favorable situation to bolt, but surely does not relieve him.
Y. The hardship to which the judge refers in his opinion, is apparent. The law, however, steps in to relieve the defendant, and compels from the plaintiffs what in the case of a prominent Yew York business firm, good faith to their debtor, and certainly fair dealing with his other creditors, should exact.
- G. A. Seixas, for the respondents.
I. The counsel for the defendant requested the court to find, as matter of fact, “that the settlement and composition between the plaintiffs and defendant, was made with reference to the general composition of the defendant with his creditors, and as part thereof.” The court refused so to find, and the defendant excepted to the refusal. The evidence fully sustains the court in this refusal. From that, it fully appears that it rested entirely with Kopper to join with other creditors in a compromise with the defendant, or, instead of joining with other creditors, to make an entirely distinct and separate settlement of the plaintiffs’ claim by itself. The latter was the course which Mr. Kopper pursued, and
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there is not a scintilla of evidence that Kopper ever-agreed to join in a compromise with other creditors; not a word, so far as appears, was ever said to him or by Mm upon the subject of joining with the other creditors. And there is not a word of evidence in the case tending to show that any creditor ever was, in the most remote manner, given to understand, by the plaintiffs or by any one else, that the plaintiffs had agreed to join, or had joined, in a compromise with them. Add to this that the settlement consented to by Kopper was an entirely different one from that made by the other creditors, and that it was made without a word of reference to or by Mm to the compromise of the other creditors, and it becomes too plain for argument, that the refusal of the court to find as requested by the defendant, is entirely in accordance with the evidence of the case, and much more, that it is not against the weight of evidence.
II. The oMy other point sought to be made by the defence arises out of the fact that the cash payment made by the defendant to Kopper, at the time of the settlement, was made in the draft of George Butler & Co., of Galveston, Texas, on Duncan, Sherman & Co., of New York. There is no evidence, whatever, to show that George Butler & Co. gave this draft, without the money being paid for it by the defendant. Moreover, the court found that George Butler was acting for the defendant, and the evidence shows clearly that both Butler and Ms partner, Clegg, were acting for the defendant. And the court very justly says, in the opinion, “when an agent pays money for Ms principal, it is presumed to be his principal’s money until the contrary is shown.”
III. The state of the case is then simply tMs: The defendant paid to the plaintiffs in cash $690.44, and gave to the plaintiffs Ms note for $507.44, to satisfy a debt due from him to the plaintiffs, in the sum of $2,135.30, besides interest, for merchandise sold Mm, and for which they
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held his note, which note was surrendered, and a receipt given by the plaintiffs in full discharge of the debt.
IV. It does not admit of any question, indeed it was conceded by the defendant’s counsel before the court below, that on such a state of facts the defendant would still continue liable for the balance of the debt, and the plaintiffs still have the right to require full payment for the merchandise sold. 1. There was no consideration to support the new agreement, or to make the compromise binding on the plaintiffs. 2. The settlement made with the plaintiffs through Kopper was nothing more than a promise to accept a smaller sum than that which was due. Such a promise does not operate as an ex-tinguishment of the debt, even when reinforced by additional security from the debtor’s own means. (Keeler v. Salisbury, 33 N. Y. 648 . Hill v. Beebe, 13 id. 556.) 3. To constitute a valid accord and satisfaction, there must not only be a sufficient consideration, but the accord must be executed, and not merely executory. Cumber v. Wane, 1 Smith’s Lead. Cas. 444, 446, 3d Am. ed., [150,150, a].) But here there was, first, an undisputed indebtedness; second, a mere promise by the defendant (in giving his note at twelve months) to pay at a future time, what he was bound to pay at the present moment, which formed no consideration for an agreement, (Moss v. Shannon, 1 Hilt. 175, and cases there cited; Foersch v. Blackwell, 14 Barb. 607 ;) Third, an accord which both the answer and the evidence show to have been only executory, and consequently no bar. (Tilton v. Alcott, 16 Barb. 598 . Russell v. Lytle, 6 Wend. 390 .) 4. The receipt given by the plaintiffs did not operate to discharge the defendant, though expressed to be in full settlement. He can only be discharged by a release under seal. (Williams v. Carrington, 1 Hill. 515 . Buckingham v. Oliver, 3 E. D. Smith, 129,) 5. The surrender of the original note, with only partial payment, left the right of action for the balance due for
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goods sold and delivered unaffected. (Hill v. Beebe, 13 N. Y. 556 . Cole v. Sackett, 1 Hill, 516 .)
Y. The findings of the learned justice, before whom the cause was tried, are fully sustained by the evidence, and the exceptions of the defendant thereto are not well taken.

Good faith and fair dealing require that the settlement made by the parties in this case should be upheld, if it can be done consistently with established rules of law.

It cannot be questioned that payment of a portion of a liquidated demand, in the same manner as the debtor was legally bound to pay the whole thereof, although received in satisfaction of the debt, is payment only in part; and that the agreement to receive such part payment in satisfaction is, in effect, one to give up the residue of the demand, which being without consideration, is nudum pactum and void. A contrary rule, leaving the matter to the agreement of the parties, would have been a better one; but the law is so settled, and we are not at liberty to change it. But a debtor may offer anything as a substitute for the money due, whether of less or greater value, and if the creditor take it in satisfaction, it is a valid agreement, and the debt is discharged. He may give a chattel worth only one dollar in satisfaction of a debt of a thousand dollars. The obligation of a third person for any amount operates in the same way, to discharge the debt. These principles are familiar and well settled. (1 Smith’s Lead. Cas. 444; note to Cumber v. Wane.)

Applying them to this case, it' appears that the parties, through their agents, agreed upon a compromise, at Galveston, Texas, whereby the defendant was to pay twenty-five cents on the dollar, and three hundred dollars in addition. Two hundred and fifty dollars was to be paid in cash, and the balance payable under the agreement

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of compromise, was to be paid half in cash, and half in a note of the defendant at twelve months. The defendant was not present when this compromise was effected, but it was accomplished by Mr. Butler, a member of a firm to whom the plaintiffs had sent their demand against the defendant for collection, and who appears to have acted for both parties in this transaction. The negotiation was had with an agent of the plaintiffs, specially appointed for the purpose. Mr. Butler gave the plaintiffs’ agent his draft on Duncan, Sherman & Co., of Hew York, for the amount of the cash payment, after deducting therefrom some commissions due his firm, and the defendant’s note for the balance was delivered, as agreed, and thereupon the plaintiffs’ agent signed a paper acknowledging the receipt of the sum named in the draft, and of the note, and stating that “the same was in full settlement of their claims against” the defendant. The compromise agreed upon, therefore, was not literally carried out, but the plaintiffs varied the agreement, by taking a negotiable draft drawn by third persons, payable in Hew York, instead of cash at Galveston. IE the agreement in terms had been that the plaintiffs should receive this draft in satisfaction of their demand against the defendant, there can be no doubt that the subsequent receipt of the draft, in pursuance of the agreement, would have discharged the debt. (Boyd v. Hitchcock, 20 John. 76 , approved 33 N. Y. 653 . Sibree v. Tripp, 15 M. & W. 23.) Such, we think, was the substance and legal effect of the transaction under consideration, with the exception, which does not affect the principle, that the defendant’s note was- received, in addition to the draft.

There is no basis for the presumption on which the court below seems to have acted, namely, that the giving of the draft by Mr. Butler was only a mode of applying the defendant’s money in performing the agreement of compromise. On the contrary, the presumption arising from the legal effect of the transaction is, that Mr, But

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ler advanced to the defendant the funds belonging to his firm; and this presumption could be overcome only by evidence to the contrary.

[First Department, General Term, at New York,

November 4, 1872.

Ingraham, Leonard and Gilbert, Justices.]

The case, briefly stated, is that the plaintiffs received a negotiable bill of exchange of third persons for a part of the defendant’s debt, and the defendant’s note for another portion, and in consideration thereof discharged the whole debt.

We are of opinion that this was a sufficient consideration to uphold the discharge; and that for the error of the court below, in holding otherwise, there must be a new trial.'

This conclusion makes it unnecessay to decide whether the transaction ought to be upheld as a valid discharge, on the ground that it formed part of the general compromise which the defendant effected with his creditors.

New trial granted, with costs to abide the event.

Leonard, J., concurred; but with some doubt.

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