Renard & Co. v. Tuller — 17 N.Y. Super. Ct. 107

Majority

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Renard and Co., Plaintiffs and Appellants, v. Tuller, Hart and McCorkle, Respondents.

Headnote

Where a written agreement, dated January 6, 1857, was signed by some, but not by all the creditors of the firm of T., H. & McO., which declared that “ we, the undersigned creditors of the firm of T., H. & McO., in consideration of one dollar to each of us paid, agree to accept the sum of sixty cents on the dollar, in their notes at six, nine and twelve months, from the 1st of February, 1857, without interest, in full settlement of our respective claims against said T., H. & McO.; all claims to be put on the same basis and considered as due 1st February, 1857, by allowing or deducting interest; and the original notes are to be held as collateral until the notes given in compromise are paid,” it was held:

1. That such agreement was, in effect, a contract of the creditors signing it with each other, as well as between them severally and their common debtor.

2. That it was obligatory on those signing it, though not signed by all the creditors, and although some who did not sign it, had been paid sixty per cent cash; and others whose claims were very small in amount, had been paid a larger per centage.

3. That the agreement of the several signing creditors to relinquish a part of their demands, was a sufficient consideration for the promise of each, to accept a part in satisfaction of his whole debt.

4. That a tender of notes of such firm, dated January 1, 1857, for proper amounts, at seven, ten, and thirteen months, from that date, was a performance by such firm of the agreement, on their part, to give notes at six, nine, and twelve months, from the 1st of February, 1857.

5. That the fact, that one of such firm expected that the firm would make $10,000 by the compromise, and so declared, was immaterial, and did not affect its validity; there having been no misrepresentation or concealment by the firm of any material fact, to induce the signing of such agreement

(Before Bosworth, Ch. J., and Hoffman and Moncrief, J. J.)

Heard, January 11;

decided, January 29, 1859.

This is an appeal by the plaintiffs, from an order of the 1st of June, 1858, denying a motion made by them for a new trial; and also from a judgment entered on the 2d of June, 1858, in favor of the defendants, Hart & McCorkle, for the sum of $111.31, their costs of the action; and from a judgment, entered the same day, in favor of the defendant Tuller, for the sum of $108.05— his costs of the action.

The action was to recover the amount of several promissory notes, made by the defendants, and delivered to the plaintiffs.

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The defendant Tuller, appeared by P. G\ Clark, and put in a separate answer; and the defendants Hart and McOorkle, appeared by D. D. Lord, and put in an answer.' The defendants, in their answers, admitted the making of the notes, and their delivery, and set up by of way defense; a composition agreement, and performance of it, on their part. The composition agreement is as follows, viz.:

“We, the undersigned creditors of the firm of Tuller, Hart & McOorkle, m consideration of the sum of one dollar, to each of us paid, agree to accept the sum of sixty cents on the dollar, in their notes at six¡ nine, and twelve months, from the 1st of February, 1857, without interest, in full settlement of our respective claims, against said Tuller, Hart & McOorkle.”

“ All claims to be put on the same basis, and considered as due February 1, 1857, by allowing or deducting interest; and the original notes are to be held as collateral, until the notes given in compromise are paid.

“New York, 6th January, 1857.”

It was proved, at the trial, that creditors to the amount of about $87,000, signed this, and a duplicate instrument in the same terms. Creditors to about $29,000 signed that which the plaintiffs signed, prior to their signature. Their demand was $16,335.07. And creditors to about $24,000, in amount, signed the same paper subsequently. The liabilities of the firm- were about $225,000. Their assets were valued at about $189,000, by themselves; and at about $164,000, by the creditors.

A number of creditors, who did not sign the agreement, were subsequently settled with; some at under sixty cents on the dollar, for cash; some for sixty cents cash, less interest; some small amounts, not exceeding $300, were paid in full. Some other creditors remain, who have neither signed, nor been settled with in any way, especially E. D. Morgan, to the amount of $28,000, and Earle, Porter & Co., to the amount of about $5,000.

On the 29th of January, 1857, the defendants tendered, as performance, on their'part, of the composition agreement, three notes to the plaintiffs, all dated January 1, 1857; one at thirteen

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months, for $3,226.14; one at ten months, for $3,226; and one at seven months, for $3,225. The plaintiffs refused to accept of the notes. Some evidence was given, tending to prove that, if all the creditors of the defendants (except those whose demands were regarded as confidential) had accepted sixty per cent in compromise, there might have remained, to the defendants, a surplus estimated at not exceeding $10,000. And, also, that one of the defendants believed his interest in the assets of the firm to be worth $10,000.

The cause was tried before Mr. Justice Woodruff, and a jury, in May, 1858. When the parties had rested, the Judge stated that he did not perceive that there was any disputed question of fact to be submitted to the jury. The counsel of the plaintiffs requested the Court to submit to the jury, as a question of fact, whether the defendant William G. Tuller, did or did not intend to make $10,000 by the compromise with his creditors; and if so, that that was a fraud upon the plaintiffs.

The Court refused to submit this question to the jury, and the plaintiffs duly excepted.

The Judge charged the jury that the compromise agreement constituted a defense; to which the plaintiffs excepted.

The Court directed the jury to find a verdict for the defendants, which was done accordingly.

A motion was made at Special Term for a new trial upon a case and exceptions, and denied by order of the 1st of June, 1858.

Judgments for the costs were entered on the 2d of June, 1858, as before stated. From such judgments, and from the order, denying a new trial, the plaintiffs appealed to the General Term.'

C. Bainbridge Smith, for appellants (the plaintiffs).

I. The agreement on the part of the plaintiffs to accept, without accepting sixty per cent of their claim in notes of the defendants, at nine, twelve and fifteen months, is without consideration, and not binding upon the plaintiffs. (Heathcote v. Crookshanks, 2 T. R., 24; Greenwood v. Lidbetter, 12 Price R., 183; Lynn v. Bruce, 2 H. Bl., 317; Lowe v. Eginton, 7 Price, 604; Fitch v. Sutton, 5 East. R., 228; Thomas v. Courtnay, 1 Barn. & Ald., 1; Fellows v. Stevens, 24 Wend. R., 294, 302; Acker v.

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Phœnix, 4 Paige R., 305; Breck v. Cole, 4 Sandf. S. C. R., 79, Dolsen v. Arnold, 10 How. Pr. R., 530.)

1. The agreement is not under seal. (Acker v. Phœnix, 4 Paige R., 305.)

2. All the creditors did not execute it. (Boothbey v. Sowden, 3 Camp., 175.)

In this case there was an agreement for an extension of payment merely, and the Court held there was sufficient consideration for each of the creditors that it was subscribed by all the others.

(1.) Such agreements stand upon a different footing than composition deeds, and are looked upon with more favor. (3 Chitty’s Com. Law.)

(2.) In Norman v. Thompson, 4 Exchequer, 755, (Welsby, Hurlstone & Gordon,) the Court said : “The only question here is whether there is a variance between the agreement as stated in the special verdict, and the averment of it in the plea.” The plea stated that the defendant agreed with the plaintiff and divers other creditors, and the plaintiff and the said last mentioned creditors then mutually agreed with each other to accept ten shillings in the pound as a composition upon and in full satisfaction and discharge of their demands, and it was found by the special verdict that such agreement was made, and that all the creditors, except three, then agreed with each other to accept said compromise. The Court held that there was no variance between the plea and the facts found by the special verdict, and an agreement by each individual to give up part of his claim is a sufficient consideration.

(3.) The case at bar is distinguishable from that of Norman v. Thompson in this respect: (1.) It involves the validity of the composition agreement, and not the construction of the plea; and (2) the creditors in this case did not agree with each other to give up part of their claim, and, consequently, lacks the essential ingredient of that case. (See Brown v. Dakeyne, 11 Jur., 39; Reay v. Richardson, 2 Cr. M. & R., 422.)

(4.) No case in the books can be produced (except Norman v." Thompson, if it decide otherwise) where an executory agreement such as the one in question has been held to bind the creditors who signed it. It is mere nudum pactum. And those cases in which it has been held that it was not essential to the validity

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of the agreement, that all should enter into it to render it binding on those who executed it, are cases where the agreement was under seal, or where a higher security was given, and which agreement of itself, independent of its being a composition, was a sufficient accord and satisfaction. Such were

Bradley v. Gregory, (2 Camp., 383,) which is said by the Court in 24 Wend., 302 , to be the strangest case, and there a higher security was given.

Wood v. Roberts, (2 Starkie R., 417,) which Lord Abutger said, (in Reay v. Richardson, 2 Cr. M. & R., 428,) “ must have been decided on the particular facts of the case,” and there also a higher security was given.

■ Good v. Gheeseman, (2 Barn, and Adol., 328; id., 22 E. O. L. R., 89,) was an extension agreement, signed by some of the defendant’s creditors. The debtor covenanted to pay two-thirds of his annual income to a trustee of their nomination, and give a warrant of attorney as collateral security. Held a defense to the action.

(5.) On the other hand, all the authorities concur in the proposition that the agreement in question is not binding. (The counsel commented on Acker v. Phœnix, 4 Paige, 305; Heathcote v. Crookshanks, 2 J. R., 24; Greenwood v. Lidbetter, 12 Price, 183; Lynn v. Bruce, 2d H. Black., 317; Lowe v. Eginton, 7 Price, 604; Fitch v. Sutton, 5 East. R., 230; Thomas v. Courtnay, 1 B. and Ad., 1.)

3. There is no pretense that any creditor was lured to accept the composition by any act of the plaintiffs; if such had been the case, it should have been pleaded; such an act would have been a fraud, and fraud cannot be presumed; and where it is stated that if any creditor has induced any other creditor to compound with the debtor, the creditor luring the other will be bound by the compromise, applies only to those cases where the creditor has parted with his debt, so that he could have no recourse upon his original demand. Such is not the case at bar, even if the plaintiffs induced all the other creditors to sign it. The authorities from which this principle is cited in the elementary works, and referred to in the books, in which it was not necessary to the decision of the cases, do not carry out that principle to the extent in which it is generally stated. (Greenwood v. Lidbetter, 12 Price,

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183; Bradley v. Gregory, 2 Camp., 383; Wood v. Robert, 2 Stark, 416; Hawley v. Foote, 19 Wend., 516 .)

II. The defendants failed to perform the agreement on their part. The compromise notes, according to the agreement, were to bear date on the first of February, 1857; those tendered, bore date on the first of January, and had seven, ten, and thirteen months to run, instead of six, nine, and twelve, as called for by the composition agreement. It also appears that the plaintiffs’ claim amounts to but the sum of $7,236.56, while the compromise notes that were tendered amounted to the sum of $9,677.14.

1. All the cases hold that if the terms of' the composition agreement be not exactly followed by the debtor, the creditor is remitted to his original rights; and the onus is with the debtor to prove -such - performance. (Fellows v. Stevens, 24 Wend. R., 302; Dolsen v. Arnold, 10 How. Pr. 530 ; Oughton v. Trotter, 2 Nev. & M., 71; Cranley V. Hillary, 2 M. & S., 120; Rosling v. Muggeridge, 16 M. & W., 181.)

2. Where it is necessary for a party to plead, or aver performance or a tender thereof, an exact performance must be stated. (1 Chitty on Pleading, 325; Spencer v. Tilden, 5 Cow. R., 144; Oakey v. Morton, 1 Kern,, 25.) '

3. The compromise notes, if accepted by the plaintiffs, according to the testimony in the case, would have been fraudulent and void.' (Breck v. Cole, 4 Sandf. S. C. R., 79).

III. The agreement, if otherwise valid, has become inoperative upon the plaintiffs by reason of the defendants’ having paid some of their creditors in cash as much as the defendants were to receive in notes.

1. It was necessary that all the creditors should sign the agreement.- It is* headed) “ We, the undersigned,- creditors,” which means ALL, and not "a PORTION of them; and only $69,000 out of $225,000 would execute the agreement. It also provides that all claims shall be put upon the same basis. -

2. The payment by the defendants to some of their creditors in cash, although those creditors never acceded to the arrangement, or executed the agreement, was a fraud upon the plaintiffs - and the other creditors who did sign; a composition' agreement is, in its spirit, if not' in its terms, an agreement that all the creditors shall stand in the same situation; and-where - the debtor

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allows any creditor to obtain an advantage over the others, or pays one in preference to another, such an act is a fraud upon .the other creditors, and renders the whole agreement inoperative and void. (Spooner v. Whiston, 8 J. B. Moore, 580; Id., 17 E. C. L. R., 112; Leicester v. Rose, 4 East. R., 372; Breck v. Cole, 4 Sand. S. C. R., 79—and cases cited.) The judgment should be reversed, and a new trial granted.

Daniel D. Lord for the respondents, Hart & McCorkle.

I. There was no error in refusing, to submit to the jury whether William Gr. Tuller did or did not intend to make $10,000 by the compromise, and to charge that it was a fraud upon the plaintiffs.

1. There was not evidence enough to sustain this fact if the jury had so found it.

The only evidence to the point, is in Tuller’s deposition. He states that at the time of the settlement he believed his interest to be worth $10,000; but this is on the supposition that all the creditors not confidential, would accept the terms.

2. Even if the evidence proved it, an intention, much less a mere expectation of saving $10,000, is not necessarily or legally a fraud.

(a.) It does not appear that any misrepresentation or concealment existed, as to assets or liabilities.

(b.) The expectation may have arisen, and in fact, as appears by the testimony, did arise from an expectation of realizing by good management, more than the balance of the assets.

H. There was no error in charging that the compromise agreement constituted a good defense.

I. It was an agreement signed by plaintiffs and several others, creditors of defendants, releasing them on receiving sixty per cent in notes. It must be held a valid release, unless the plaintiffs show some fatal defect in it. The plaintiffs claim that it is invalid for want of consideration, want of seal, omission of some creditors; none of these objections are sufficient.

2. There was a valid consideration; the agreement by each creditor being consideration enough to support the agreement by the others. (Norman v. Tompson, 4 Exch., 759.) Held that an

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agreement to release, made by a portion of the creditors, is binding.

Pollock, C. B. “ It is a good consideration for one to give np part of his claim that another should do so, this appears not to need an authority.” (Boothbey v. Sowden, 3 Camp., 174; Bradley v. Gregory, 2 id., 383.) Oral promise to accept a compromise held valid. (Steinman v. Magnus, 2 Camp., 124.) Composition not under seal, held valid. (Cranley v Hillary, 2 M. & S., 120.)

Composition not under seal, admitted to be valid, but creditor allowed judgment, because defendant did not tender the compromise notes.

These cases are approved in Fellows v. Stevens, ( 24 Wend., 298 , 296.)

' The following cases which may perhaps be cited against the principle of the above decisions, will be found on examination not to contradict it.

' Heathcote v. Groolcshanh (2 T. R., 24.) Demurrer to a plea setting up a composition by way of defense. The judges decided against the composition on the ground, that it was an accord without satisfaction. It was not expressly pleaded that plaintiff’s agreement to accept it was in consideration of all the creditors coming in. Duller, J., admitted, that if the latter had been averred, the accord and tender might have been a bar, (see Fellows v. Stevens, 24 Wend., 299 ,) but this decision is overruled by the subsequent decision of Norman v. Thompson, above cited.

Fitch v. Sutton (5 East. R., 228.) The composition in this case was a mere accord not supported by the mutual consideration arising from agreements by several creditors.

Fellows v. Stevens ( 24 Wend., 294 .) Decides only that an accord without satisfaction is invalid, it admits that an oral composition would be valid. (297.)

• In this case plaintiffs recovered because defendant had expressly released him from the composition.

Acker v. Phenix ( 4 Paige 305 .) The composition was by deed, but contained a proviso that it should not be binding, unless each and every creditor united in it.

Some creditors did not unite in it, and the debtor endeavored to show a parol agreement that some_ might be left out. Held that the written agreement could not be varied by parol. What

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was said by the Chancellor about the necessity .of a seal, did not arise in the case, no objection of that sort being made to the composition.

Greenwood v. Lidbetter (12 Price, 183.) In this case the plaintiff had not signed any composition agreement.

Thomas v. Courtnay (1 B. & A., 1.) Only question was upon the construction of the agreement which was held valid though not under seal.

Lowe v. Eginton (7 Price 604.) Seal required to this composition because deed to be released was a specialty.

Cockshott v. Bennett (2 T. R. 763.) Does not decide a composition not under seal to be invalid.

Dolsen v. Arnold (10 How. Pr. R., 528.) Not a question of composition but of accord and satisfaction.

Brown v. Dakeyne (11 Jurist., 39.) The bearing of this case is defined in Norman v. Thompson (4 Exch., 759,) viz., that when it is averred, in a plea that all the creditors united in a composition, it is not enough to prove that only some did so, that if the averment had been that some other creditors united, it would have been a valid composition, and the proof would have supported it.

Reay v. Richardson (2 Cr. M. & R.) Case of accord not composition.

3. The consideration being sufficient there was no need of a seal, nor for the execution by all the creditors, unless such provision was expressed. (Constantine v. Blache, 1 Cox., 287.) .

IY. The subscription by the plaintiffs was an inducement to others to subscribe.

The French and Swiss firms signed the same paper, but not until after plaintiff’s signature.

Y. The notes tendered were a sufficient compliance with the ' agreement.

The notes matured on the day specified in the agreement, if there were any objection to the form of the notes, it should have been mentioned at the time when they were tendered.

YI. There has been no infringement by defendants of any of the provisions of the composition.

“ All claims to be on same basis,” relates only to the time of maturity of claims of those signing the agreement as shown by the words “ And considered as due 1st February, 1857, by allowing or deducting interest.”

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"VIL It is not shown as a fact that any claims were settled at more than sixty per cent, except one claim collected by attachment which defendants could not prevent.

P. G. Clark, for respondent; Tuller.

I do not think that there is anything in the composition agreement to warrant the position of the plaintiffs’ counsel, that the agreement was to be inoperative unless all the creditors signed it. Such a condition ought to be expressly declared, or clearly deducible from unambiguous language. Compositions could rarely be carried into effect if such stipulation is, in every case, or in every doubtful case to be implied, when the contrary is not declared.

The phrase is neither all the creditors, nor even the creditors, but merely “ creditors.” The clause, “ all claims to be put on the ■same basis,” is as applicable to the claims of all who shall sign, .as to the claims of all who may be creditors.

Late English authorities have fully settled that a composition agreement, made between a debtor and a portion of his creditors, is ■valid and binding. The consideration of the relinquishment of a part of their claim by the others, is sufficient to make the promise and discharge of each obligatory. (Norman v. Thompson, 4 Exch. R., 755 [1850]; Good v. Cheeseman, 2 Barn. & Adol., 328 [1831]; Boyd v. Hind, 40 Eng. L. and Eq. R., 428 [1857].)

Williams, J., in delivering the opinion of the Court in Boyd v. Hind, says: “ The law with respect to defenses founded on ■compositions between a debtor and his creditors, appears not to have been distinctly defined until the case of Good v. Gheeseman. It used to be sometimes laid down that a right of action once vested, could only be divested by a release or by accord and .satisfaction-; but since the decision of that case, the law has been considered as settled, that a composition agreement by several -creditors, although by parol, so as to be incapable of operating as a release, and although unexecuted, so as not to amount in strictness to a satisfaction, would be a good answer to an action ■by the creditor for the original debt, if he accepted the new agreement in satisfaction thereof; and that for such an agreement there is a good consideration to each creditor, namely, the

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undertaking by the other compromising creditors to give up a part of their claim. But no such agreement can operate as a defense if made merely between the debtor and a single creditor. The other creditors, or some of them,' must also join in the agreement with the debtor and with each other; for otherwise it would be a bare contract to accept a less sum in satisfaction of á greater, which would be invalid, by reason of want of consideration for relinquishing the residue.” (See the correction of the report of Norman v. Thompson, by Willes, J., at p. 429.)

In Norman v. Thompson, Parke, Baron, said “ an agreement by two or more of the creditors to enter into a composition is perfectly good and binding as to those parties, whether the others do so or not. The agreement by each individual to give up part of his claim is a sufficient consideration.”

Although in Boyd v. Hind and Norman v. Thompson, the instrument recited that “ each of the undersigned creditors in consideration of the agreement therein contained on the part of the others,” agreed with the others, and also with the debtor, yet I apprehend such a clause is not essential. I think an agreement between themselves will be legally inferred from an instrument in which several relinquish part of their demands.

In Good v. Cheseman, four creditors, including the plaintiff, signed a paper reciting, that the defendant was indebted to them for goods sold and delivered; that he was unable to make immediate payment of the same, and they agreed to receive payment of the same by his covenanting to pay to a trustee one-third of his annual income, and to execute a warrant of Attorney as collateral security therefor.

And in Boothbey v. Sowden, (3 Camp. 174,) the agreement was with the debtor only.

The cases, also, in which, any agreement to pay a particular creditor something beyond the composition amount has been held void, bear upon this point. The agreement in Breck v. Cole, (4 Sandf. S. C. R., 80,) had no stipulation as between the creditors themselves, and Justice Duer says, “ every composition deed is, in its spirit, if not in its terms, an agreement between the creditors themselves, as well as between them and the debtor.”

There was no such clause in the cases of Knight v. Hunt, (5

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Bingham, 432,) Constantine v. Blache, (1 Cox, 287,) or Cullingworth v. Loyd, (2 Beavan, 385,) an important case.

The basis of the doctrine is, the relinquishment to the debtor by the others who sign, of a part of their claims, or the concession of some modification of the right to enforce them; this constitutes the consideration, and as this'exists without any such clause as is referred to the implication of an agreement among themselves is raised, and is equivalent to its expression in the instrument.

Is this rule recognized, disavowed, or modified by any binding decision in our own Courts ?

The general principle that such deeds are agreements between the creditors themselves, as well as between them and the debtor is stated in Breck v. Cole (4 Sandf. S. C. R., 80,) and Hughes v. Alexander ( 5 Duer, 488 -493).

The decision in Fellows, v. Stevens ( 24 Wend., 294 ,) was that the creditor might, under the circumstances of the case, withdraw his assent to a composition deed; and then the debtor was there estopped from setting it up.

Acker v. Phœnix (4 Paige, 305,) was ther case of an explicit condition in the instrument, that the signature should be void unless all the creditors assented to the agreement. An attempt was made to prove a change in this condition by parol, and was rejected.

My conclusion is, that the agreement in question was operative and binding upon the plaintiffs.

2d. The variation in the date of the notes from the 1st of February to the 1st of January, seems to me immaterial. It is not expressly stipulated that the notes should bear date the 1st, of February. They are to be at six, nine and twelve months from the 1st of February. The period of maturity is the principal matter provided for, and the notes at seven, ten and thirteen months from the 1st of January matured at the same time as the others would have done.

It is said that the plaintiffs’ claim is only $7,236.56, as demanded in the complaint; while the notes tendered amount to $9,677.-14; and if accepted would have been a fraud upon others. But the debt to the plaintiff is set down at $16,335.67. Sixty oents on the dollar would be $9,801.40. The statement at the

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bar was, that other notes had been sued upon in another Court. At any rate, there is nothing, upon the case before us, in this point.

The discrepancy between the $9,801.40 (sixty per cent of $16,335.67,) and the amount of the notes tendered, $9,677.14, is readily accounted for. The $16,335.67 was not all of it payable until after February 1st, 1857. By the agreement, there was to be a rebate of interest, so as to determine the amount of the compromise notes by “considering the debts as due” on that day.

3d. It is insisted that the payment to some of the creditors in cash was a fraud, and avoids the composition. The evidence is of various settlements of claims" for cash; two other small ones at sixty cents; many at a rate varying from fifty to sixty cents, less the interest. The amount over sixty cents actually paid does not exceed $250, as far as can be gathered from the evidence. We are satisfied that the inference of fraud from these facts is unwarranted ; but at any rate, such a question ought to have gone to the jury, and the plaintiffs ought to have requested it to be put to them, if they deemed it possible to support the allegation.

4th. Some exceptions were taken to the rulings of the Judge in respect to the evidence. No point connected with them is now made by the plaintiffs’ counsel. We have, however, examined them, and think they are all untenable.

5th. In regard to the exception on account of the refusal of the Judge to submit to the jury whether the defendant Tuller did not intend to make $10,000 by the compromise, and if so, that it was a fraud; no point is now made by the appellants’ counsel. It was slightly adverted to on the argument. We think, that such a point would have been plainly untenable.

The judgment must be affirmed, with costs.

The other Judges who heard the argument concurred in affirming the judgment.

Judgment affirmed.