Russell & Hall v. Rogers

| N.Y. Sup. Ct. | Jul 15, 1833

By the Court,

Nelson J.

The replication, is no answer to the second, third and fourth pleas of the defendant. The covenant declared on bears date 8th March, 1821, and the breach alleged is on the 80th March, 1822, when the demand, or cause of action, if any, accrued to the plaintiffs. The pleas set up in bar of the action a release under seal, executed on the 11th April, 1827, and they expressly aver in addition that it was after the breaches in the covenant assigned, and after the supposed causes of action mentioned and relied on in the declaration.

The plaintiff, in his replication, craves oyer of the release, and it is set forth, by which it appears that the defendant proposed to his creditors to assign to trustees, for their benefit, all his estate, real and personal, and they agreed to discharge him from any demand which they had against him. This was on the 20th March, 1827. On the 11th April the assignment was made, and on the same day the deed of release was executed by the creditors, among whom were the plaintiffs, by which, in terms, they “ remised, released, exonerated and forever discharged,” &c. the defendant “ from all, and all manner of action and actions, cause and causes of actions, suits, bills, bonds, writings, obligations, debts, dues, reckonings, accounts, damages and demands whatsoever, both at law and in equity, or otherwise howsoever against him, which they, or either of them then had, or shall or may have, by reason of any act, matter or cause, from the beginning of the world to the date.” The answer given to this deed of release thus set forth is, that the sum of $922,T\\, the amount set opposite to the plaintiffs’ names to the agreement to accept the proposition of the defendant, and to the deed of release, was a debt and demand wholly distinct and different from the cause of action set forth in the plaintiffs’ declaration, and that the covenant there relied on was not included in the demand released. This presents the question whether the deed of release, which in terms is general and embraces every demand and all causes of action of every name and ¡nature, is to be restrained and deemed to operate only upon the debt set opposite to the names of the plaintiffs.

The question I think settled upon principle and authority against the plaintiffs. In Holmes v. Viner, 1 Esp. R, 131, (which was confirmed by the K, B, at the ensuing term,) the plaintiff at the time of the defendant’s composition with his creditors, held two bills of exchange of which the defendant was acceptor, and was also his creditor to the amount of £81, for goods sold. He signed only as a creditor for the ¿£81, and took his dividend on that sum. Afterwards, when the two bills fell due, he brought an action to recover them of the defendant,- as the acceptor. Lord Kenyon decided that it was not to be allowed a creditor having several demands against an insolvent person to split them, and come in under the composition deed for part, and subsequently sue for the remainder; that it would be fraud upon the other creditors, and defeat the object of the composition, which was intended by them to discharge the insolvent from his debts, as well as an oppression upon the debtor, who had given up all bis property to constitute a fund for their benefit. He considered the bills as discharged, by signing the composition deed. The doctrine of this case has been supported by all the subsequent cases. 15 Com. Law R. 502. Britton et al. v, Hughes, id. 488. Knight v. Hunt, 3 id. 310.

The case of Britton v. Hughes, is like the present At the time of executing the composition deed, which, contained a release of all demands, nearly in the terms of that executed in this case, the plaintiff held two bills drawn by the defendant, one of ¿£400, the other ¿£156 104. The latter sum only was put opposite his name, and that too at the request of the defendant, under an expectation that the acceptor, would pay the other bill, and therefore no composition notes were taken for it by the plaintiffs. The other creditors were ignorant of this arrangement, and the plaintiff was nonsuited on the trial, on the authority of Holmes v. Viner, and the opinion sustained by the K. B. The ground is, that upon the face of the composition deed the creditor assumes to compound for the whole of his demand, and the other creditors, therefore, have a right ■to believe that the sum set opposite his name comprises that amount and to take this fact, with others, into consideration, in forming their judgment as to the propriety of entering into the arrangement; and to allow him subsequently to set up a debt concealed, and in contradiction to the face of the deed, would be a violation of good faith, and a fraud upon the oth= er creditors.

We admit the soundness of the general rule of law in the construction of instruments relied on by the plaintiffs, to wit, that general words or expressions used, may be restrained and qualified by subsequent specifications or recitals; but no one can examine the composition deed in this case, (and Í consider the deed of 20th March, and the two of 11th April, 1827,. as constituting but one instrument, being in pari materia, so far as the construction of them is concerned,) and come to the conclusion that the sums set opposite the names of the respective creditors do not embrace, upon a fair interpretation, every demand which they hold against the debtor. The agreement of the creditors, on the acceptance of his proposition to give up all his property is, to discharge him from any demand they1 had against him ; and after the surrender of his property, they release him from all manner of actions, causes of action, deblsy dues, damages and demands, down to its date. So scrupulous are courts in compelling creditors to the .observance of good faith towards one another in cases of this kind, that any security taken for an amount beyond the composition agreed upon, or even for that sum, better than that which is common to all, if unknown at the time to the other creditors, is void and inoperative. Knight v. Hunt, 4 East, 371. 2 T. R. 763. 15 Ves. 52. 4 T. R. 166. 3 id. 551.

The discharge of the judgment entered upon the bond and warrant of attorney which was assigned to the plaintiffs, by the defendant on the 8th March, 1821, and which constitutes the foundation of their claim in this case, is alleged to have been given 30tlx March, 1822, and the order of this court directing satisfaction to be entered by virtue of it bears date 3d May, 1830. Now, if in point of fact, the plaintiffs were ignorant of the discharge given by the defendant (the nominal plaintiff in the judgment) at the time of the composition deed,, and relied wholly upon that security for the monies due thereon, and therefore honestly believed that the $922,r\% set opposite to their names was the only demand they held, or intended to bold, against the defendant at the time, and which would have been the fact, had it not been for the fraudulent conduct of the defendant, thus concealed from them, I am not prepared to say this would not be an answer to the deed of release set up in the several pleas in this case. I should be reluctant to sustain the defence, if the facts justified this view of the case ; the fraud, in such case, would lie wholly with the defendant. The only difficulty that could exist, under such circumstances, in sustaining the action, would be with regard to the rights of the other creditors, within the cases above referred to, and I am not prepared to admit that difficulty to be insurmountable. But if the plaintiffs knew of the discharge of the judgment when they signed the composition deed, and of course of their claim upon the defendant for the breach of the covenant, there is no difference or distinction between this debt or demand, and any other which they might have against him. Though his conduct had been dishonest, still it was but a debt or demand to be recovered or discharged as any other might be. This is the view warranted upon the pleadings, and upon which the case is determined.

Judgment for defendant on demurrer, with leave to plaintiffs to amend, on payment of costs.