144 N.Y.S. 1014 | N.Y. App. Div. | 1913
Lead Opinion
The question presented by this appeal is when will a moral obligation survive the release of a debt by a composition agreement so as to furnish a .sufficient consideration to support a subsequent promise to pay the debt.
The latest and most comprehensive decision upon this subject in this State is to be found in Taylor v. Hotchkiss (81 App. Div. 470; affd., 179 N. Y. 546). In that case Mr. Justice Hiscocic, writing for the Appellate Division, stated the general rule as follows: “ If plaintiff under proceedings in bankruptcy or in other involuntary form, had been compelled to accept the stock received by him in full legal settlement of an indebtedness which it did not in fact actually pay, a moral obligation upon the part of the debtor to pay the deficiency would have survived his discharge from his legal and enforeible obligations which would be a sufficient consideration for a subsequent
The facts alleged in the complaint in the present case, which for the purpose of this appeal must be taken as true, are that in March, 1905, the firm of Ellingwood & Cunningham owed the plaintiff the sum of $27,000; that said firm entered into a composition agreement with certain of their creditors wherein and whereby said creditors for certain consideration therein expressed agreed to release said firm and the members thereof from all their legal obligation to pay the debts and obligations due to said creditors; that plaintiff signed said agreement and became a party thereto. The complaint then proceeds as follows: ££TV. That prior to and simultaneously with the making of the said agreement, the defendant expressly reserved from the operation of the said agreement and release his moral obligation to pay the debt of the plaintiff, amounting, as aforesaid, to the sum of twenty-seven thousand ($27,000) dollars and interest, and duly acknoiuledged and recognized said moral obligation as then existing and continuing to exist thereafter.
££V. That thereafter and on or about the 19th day of April, 1905, the defendant, recognizing his said moral obligation to pay to the plaintiff the said debt of twenty-seven thousand ($27,000) dollars, and, in consideration thereof, did then and there promise that he would pay to the plaintiff the said sum of twenty-seven thousand ($27,000) dollars with interest from April 19th, 1905, as follows: $8,000 on or about May 22nd, 1906, and the balance within a year thereafter, the said defendant, however, to be credited on account of said payment with all sums which the plaintiff might receive from the trustees or assignees under said composition agreement.
££ VI. That thereafter, from time to time, the defendant made payments upon account of the said sum agreed to be
It is also alleged that from time to time plaintiff sent to defendant statements of account which were received and accepted by defendant. Attached to the complaint is a schedule showing the payment of several thousand dollars by defendant to plaintiff between June 1, 1905, and January 20, 1908.
These allegations, as it seems to us, bring the present case fairly within the principle of Taylor v. Hotchkiss.
It was certainly competent for the defendant to reserve a moral obligation to pay his debt in full if possible, and perhaps most honorable men would feel that such an obligation rested upon them. It may well be, although not so alleged, that the defendant’s recognition and reservation of this moral obligation had weight with the creditors in consenting to compromise and release the debts.
The rule is, we think, satisfied by holding that, unless specially reserved, no moral obligation to pay the debts survives a voluntary composition and release, but that where at the time of the release the debtor expressly recognizes and reserves a moral obligation to pay notwithstanding the release, that express reservation keeps alive the obligation after release to the extent that it will furnish a sufficient consideration for a subsequent and quite distinct promise to pay. It is entirely optional with a debtor, under such circumstances, whether or not he will reserve a moral obligation, and if he elects to do so we can see no rule of law which is violated by holding that that reservation will support a subsequent promise to pay.
The appellant devotes no small space in his brief to demonstrating that it does not appear on the face of the complaint that the alleged reservation was a fraud upon other creditors. It is quite clear that it does not so appear, and the respondent expressly disclaims making any such contention, admitting in
. The order appealed from must, therefore, be reversed, with ten dollars costs and disbursements, and plaintiff’s motion for judgment on the pleadings granted with ten dollars costs, with leave to the defendant to withdraw his demurrer and answer over, within twenty days, upon payment of all costs of the action.
Clarice, Dowling and Hotchkiss, JJ., concurred.
Concurrence Opinion
I understand the law in this State to be well settled that the discharge of an indebtedness based upon a composition between a debtor and his creditors generally, the discharge having been voluntary, leaves no moral obligation on the part of the debtor sufficient to support a subsequent promise of payment of the. balance. (Stafford v. Bacon, 1 Hill, 532; Zoebisch v. von Minden, 47 Hun, 213; 120 N. Y. 406. See, also, note in 53 L. R. A. 363.) There is, therefore, no consideration for this promise alleged, unless the agreement between the plaintiff and defendant, that prior and simultaneously with the making of the composition agreement the defendant expressly reserved from the operation of the agreement a release of his moral obligation to pay the debt of the plaintiff and duly acknowledged and recognized said moral obligation as then existing and continuing to exist thereafter, amounts to an allegation of consideration. It was held in Taylor v. Hotchkiss (81 App. Div. 470; affd., 179 N. Y. 546) that where a debtor wrote to all his creditors a proposal to accept certain securities from the debtor in full satisfaction of his indebtedness, and as part of the proposal stated to his creditors, “We propose to offer our moral obligation to take these securities back from our creditors at 80% at a date not later than April 1, 1895,” such a moral obligation, recognized by the debtor, was a sufficient consideration for a subsequent agreement to take from the creditors the securities at eighty per cent of their par value. And this case is an authority for holding that where a debtor proposed a settlement with all his creditors, which reserved the moral
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs, with leave to defendant to withdraw demurrer and answer on payment of costs.