Beach v. Ollendorf — 1 Hilt. 41

Majority

p. 41

Oakley Beach v. John Ollendorf.

Headnote

When the creditors of a debtor have signed a composition deed, every agreement, securing an advantage to one of them witheld from the others, is void. Nor in such a case is it necessary to show an execution of the compromiso deed by all the creditors. A fraud upon any one of them is sufficient to invalidate the agreement.

A composition deed, though under seal, if executed by one of the partners in the firm name, is binding upon the partnership.

Appeal by defendant from a judgment of the Marine Court. This was au action upon a promissory note. The defence was, that the note was given to induce a firm, of which the plaintiff was a member, to sign a compromise agreement, releasing the defendant from his indebtedness to his various creditors; that it

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was given without the knowledge or consent of the other creditors and was therefore void. Upon the trial, the defendant introduced a compromise agreeement under seal, purporting to have been executed by the various creditors of the defendant. lie proved its execution by one of the creditors and also the firm of Beach, Case & Company, of which firm the plaintiff was a member. The signature was the firm name and made by the plaintiff, not by the partners individually. The note in suit was given to the firm to induce them to sign this compromise deed, and was passed by the firm to the present plaintiff. The compromise was then offered in evidence, but was objected to by the plaintiff’s counsel, upon the grounds that it did not ap-pjjjiir that the plaintiff was authorized to execute an agreement under seal for the firm; nor did it appear that the release was executed by the other creditors. The objection was sustained, the compromise excluded, and judgment was rendered for the plaintiff.

Tyler and Brown, for the appellants.

Nathan Oomstoclc, for the respondent.

The note in suit was given by defendant to plaintiff, as one of the firm of Beach, Case & Co., in addition to twenty per cent, in cash, which the creditors of the defendant had agreed to accept in full discharge of their debts and as a condition of that firm uniting in the composition deed, which they did. It was also agreed, at the time the note was given, that it was to be kept secret from the other creditors. There can be no doubt that where the creditors of a debtor have signed a composition deed, every agreement securing an advantage to any one of them, withheld from the others, is a fraud upon them and void. Beck v. Coll, 4 Sand. S. C. R. 79, and cases cited.

The composition deed was proved by the witness, Case, to have been signed by the plaintiff on behalf of the firm, with au

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thority so to do, and sucb act was subsequently ratified by Case as one of tbe firm. Even if sucb ratification bad not occurred, tbe act of tbe plaintiff would be binding on bis copartners. It created no obligation and incurred no liability. It was tbe sale or compromise of a debt wbicb one partner may malee under seal. It was not necessary to prove tbe signatures of all tbe persons appended to tbe composition deed, a fraud upon any one of them was sufficient to invalidate tbe note. Tbe witness Gray proved tbe signature of John Caswell & Co., Gregory & Co., and Balen & Co., and tbe deed should, when offered, bave been received in evidence. Tbe justice erred in this respect and tbe judgment must be reversed.

Judgment reversed.