39 Conn. 540 | Conn. | 1873
The rules and principles which govern contracts of compromise between an insolvent debtor and his creditors, whether in the form of composition deeds, as they are usually styled, or otherwise, are very thoroughly established and very generally understood. The utmost good faith must be observed by all parties ; any fraud taints and makes void the agreement, -however technical or solemn may have been its form, or the mode of its execution. This, indeed, may be said of all contracts, but especially of those of this character. The nature of these transactions, and the situation of the parties, afford at once temptation and opportunity for committing fraud. .The debtor ,in his statement is tempted to swell the amount of his liabilities, or lessen the amount- of his assets, or both, in order to make a settlement at the lowest figure ; and the creditors, though purporting to act together, are found, not rarely, acting individually, and stipulating with the debtor for the payment of their claims, in whole or
While these principles are abundantly plain, the application of them to the case before us requires care and discrimination, and is perhaps not free from difficulty.
The plaintiffs seek to recover of the defendant the balance of an indebtedness agreed to have been about $45,000 in the spring of 1868. The defendant was then unable to pay his debts in full, and on the 27th of March, 1868, ho made a compromise with his creditors, to which the plaintiffs were parties, signing the composition deed of that date with the sum of $25,000 opposite their name. The defendant claimed that the plaintiffs had agreed to call this sum the amount of their debt, and. by the terms of the deed it was to be discharged on the payment within a time specified of twenty-five cents on the dollar. To avoid the effect of this deed the plaintiffs proposed to prove that their signature tq it was procured by fraud ; that the defendant had put a fictitious debt into his schedule to increase his liabilities, and had fraudulently concealed money and other personal propertythus making his ability to pay to appear less than it really was.
. The court charged the jury that if the plaintiffs intentionally concealed from the other creditors the fact of an indebtedness over $25,000, or induced other creditors to join in the composition by representing that the amount affixed to their name in the d&ed represented their entire claim, they could in
If the plaintiffs had set down the full sum due to them, and signed the composition deed without any agreement for a preference over other creditors, the fraud imputed to the defendant, if found proved, would certainly have rendered his discharge a nullity. The concealment of a portion of their indebtedness, it is said, is a fraud on the part of the plaintiffs, and concludes them from any relief against the fraud of the defendant. It should be borne in mind that in the court below it was not claimed by the defendant that the plaintiffs stated their debt to be $25,000 when it was in fact $45,-000 with any fraudulent intent or purpose towards the other creditors, or that there was any understanding or agreement that the plaintiffs should have any preference over other creditors, or should be paid, either in part or in whole, for the residue of the debt thus omitted on the composition deed. On the contrary, the defendant claimed that-the plaintiffs agreed to call their debt $25,000, and to discharge the defendant upon receiving twenty-five per cent of that sum. The plaintiffs’ claim upon this subject varied from that of the defendant, but as no question arises upon it the claim need not be stated.
Was the representation of these plaintiffs on the deed of composition, that their debt against the defendant was $25,-000, when in fact it was over $40,000, such a concealment as to be a fraud on the other creditors ? — -What is fraud, is a question in answer to which as much perhaps has been written and spoken as in reply to the question of the Roman governor, “ What is truth?” In the leading case of Leicester v. Rose, 4 East, 372, Le Blanc, J., page 383, says : “ It
' Applying the most stringent of these principles as tests of fraud ; applying any others more stringent, if such there be; (see the case of Bean v. Amsink, Circuit Court Southern Dist. N. Y. per Blatchford, J., Am. Law Register for June, 1873, p. 379 ;) the question recurs, was the representation of the plaintiffs, of their debt against the defendant at $25,000, on
But waiving these considerations, supposing the manner in which the plaintiffs stated their debt on this deed of composition constituted a fraud on the other creditors, does it lie in the mouth of this defendant to set up such fraud in answer to, and is it an available answer to, the claim of the plaintiffs that the defendant obtained their signature to this deed of composition by fraudulently misrepresenting both the amount of his debts and his means of paying them ? This fraud of the defendant, if perpetrated, would, as we have seen, make
The application of these principles to the case at bar is easily made. These ■ learned judges of the Queen’s Bench were of opinion that where an insolvent debtor had stipulated to give a preference to one creditor, assuring him that no other creditor was thus favored, the giving of a preference to others was not a fraud on such creditor, and so the release signed by such creditor was not thereby made void ; that the whole stipulation for a preference, being a fraud on the part of the plaintiff towards other creditors, no part of it could be legally relied on by him as forming a material inducement for signing the deed. That a statement of fictitious debts, and a misrepresentation as to the amount of the assets, by the debtor, as claimed in this case, would constitute fraud,, is beyond dispute ; not fraud against one only, or a portion of the creditors,' or by which one only was deceived, but against the whole ; not fraud with which the plaintiff, or any one of the creditors, in the language of Mr. Justice Coleridge, was “ mixed up,” but solely the fraud of the plaintiff.
Now we think that such fraud avoids a release, and that it is not answered by showing simply that the plaintiff, stated his debt at 125,000, when it was over 140,000, even supposing; as we now do, that this statement was a fraud. The case of Mallalieu v. Hodgson, from which we have largely quoted, as it is an important one, fully sustains, as we believe, the same views.