Court Opinion

ID: 6122809
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:08:54.447777+00
Date Added: 2024-06-11T08:23:56.556935
License: Public Domain

Davis, P. J.:
The learned justice at Special Term, in deciding this case, pronounced the following opinion:
“ Yan Yorst, J. Tlie agreement, signed by the plaintiff’s firm, with others of the defendant’s creditors, on the 17th day of March. *51867, is in these words, ‘We, the undersigned, agree, in consideration of one dollar paid to us, to discharge H. Schulting from the legal payment of the money loaned to him, February, 1866, said Schulting giving his moral obligation to refund the said money in part or whole, as his means will allow in the future.’
“ I do not regard this paper, as is claimed by the defendant’s counsel as an absolute discharge of the debt in question, and there was substituted and accepted in place thereof a moral duty only, not to be enforced by action in the event that the debtor should afterwards acquire means sufficient to enable him to pay the claim in whole or in part.
“ The agreement to discharge ‘ from the legal payment ’ is, in fact, conditioned upon the debtor’s promise to refund the money loaned should he acquire the means in the future to do so. If he did not acquire such means then all legal claim was abandoned, but if he did, the legal claim existed, to be enforced by action in the event that the conscience of the debtor refused to recognize the obligation to pay the money.
“The paper may, in truth, be regarded as an agreement not to enforce the legal liability, so long as the debtor was without means to pay.
“And the evidence shows that the defendant yet considered himself under a valid obligation to pay; hence afterwards, and on the 6th day of October, 1868, he paid the plaintiff $5,000 of the oidginal loan of ten thousand, and received the signature of the plaintiff’s firm, under seal, to a complete and full release from all claim and demand whatever. The plaintiff claims that the signature of his firm was obtained to the release by false statements and suppression of material facts made by defendant, and that, had the truth been stated they would not have executed the release. In August, 1868, the defendant sold his large stock of merchandise to Stursberg & Co. for the sum of $225,000, the purchasers to pay his debts thereout, amounting to about $192,000. By the conditions of sale the defendant was entitled to one-third of any amount Stursberg & Co. might realize on a resale thereof over and above the amount they had paid for same.
“ Early in the same month the defendant made a statement to the plaintiff of his means, entering into details, and, among other things, gave the particulars of his transactions with Stursberg & Co., and *6added,' ‘ as for that one-third interest in the sum which the goods would realize over $225,000, that was worthless. It was worth little or nothing. In fact, he had offered to sell it the other day for $18,000 or $20,000.
“Now, the facts with regard to such one-third interest and its value may bo in short stated as follows: The defendant did offer to sell the same to one Yon Keller for $20,000, but in a day or two afterwards withdrew the offer, and refused to consummate it. This one-third interest was, in truth, worth about $100,000. Defendant did in the end realize in money $90,000 for the same.
“ When the defendant called in October and paid the $5,000, and obtained the release, Stursberg & Co. had already realized over $400,000 for the goods then sold, and subsequent deliveries increased the total sum realized to $576,981.
“Yet the defendant made no statement to the plaintiffs, when he obtained the release, with respect to the value of his interest in such proceeds. I think he was under a positive duty to have done so. An obligation was resting upon him to pay the debt due plaintiff in full, if his means were sufficient for the purpose. Ilis interest in the one-third of the proceeds of the sales already realized, and with what might be reasonably expected to be realized from the residue of the goods, were enough, with other means in his possession, to pay in full all the claims covered by the agreement of March, 1867.
“ The parties were not standing upon an equal footing. Plaintiff was ignorant of the facts, having been informed, in August, by the defendant that, in his estimation, the value of his interest was little or nothing. lie was under a positive duty to correct the former judgment he had given, and to state the facts fully and truly.
“ His concealment of these facts rendered the release he obtained inoperative as a discharge of the plaintiff’s claim. And as the evidence shows that the defendant has the means to pay, the release must be declared void, and the plaintiff entitled to judgment for the amount of the loan unpaid, with interest.”
This opinion seems to me to be a correct exposition of the law applicable to the facts found by the Special Term, and a careful examination of all the evidence satisfies me that the findings of fact made by the learned judge are sustained by evidence, and are substantially correct.
*7Tlie instrument of March, 1867, by its express terms, leit the defendant- under a moral obligation to refund the money borrowed in February, 1866, in part or in whole, as his means would allow in the future. The moral obligation, thus assumed, was the consideration on which the discharge from legal liability was given. It differed in its nature from that kind of moral obligation which exists when a debt has been discharged by operation of law or by some proceeding in m/oitum, and which, in some cases, has been held to be a sufficient consideration to uphold an express promise to pay; for in this case no future express promise ivas contemplated or required. Tlie fact that the means of the defendant in the future would allow payment of the money in whole or in part, brought the moral obligation into such vigorous operation as to make it a duty to pay, the failure to perform which restored the legal liability. Or, in other words, the instrument was nothing more or less' than an agreement that the legal liability should be suspended until the debtor should be in such condition in the future that a moral obligation to pay would fairly exist, and then his failure to perform the moral obligation was to revive the legal liability. The parties were entirely competent to make such a contract, and it seems very clear that that was what they intended to do, and no forced construction or application of technical rules should prevent a court of equity from carrying out the intent. It is as if the defendant had said to this creditor “You release me now from legal liability, and as soon as my future means become such that I ought conscientiously to pay, I will do so by force of the moral obligation which shall continue in full effect.”
^Representations had been made by the defendant as to the condition of his affairs which may have been believed by him at that time to be true ; and it is clear that the plaintiff’s firm had acted in giving the instrument above mentioned in reliance upon such representations. It was known to the defendant that they so relied. But when he came for the absolute release in October following, his circumstances had materially changed. He had repudiated the sale of his interest in the stock of goods to Yon Keller, and he knew that a sum had already been realized (to wit, $400,000), on the sales then made, and that a large amount remained unsold, which advanced *8the value of his interest far beyond the sum at which he had before represented it to plaintiff’s firm.
The plaintiff’s firm were ignorant of this change of circumstances, and were acting under such ignorance. The defendant knew, or certainly had reason to know, they were so acting. I think it was his plain duty to have undeceived them by a frank and full disclosure of his altered circumstances and prospects. It is true the plaintiff’s firm might have acted precisely as they did had such disclosure been made, but the court cannot speculate upon that probability because they have not had the opportunity of determining for themselves how they would act with such knowledge. They have acted without knowledge of facts hnown to defendant, and which it was his moral duty to state to them, and for that reason they may repudiate their action. The strict rules that apply between parties contracting at arms length, in which the better knowledge of either party is his own property, have no application to these parties, because the obligation does rest upon a debtor who is seeking to get a discharge from his indebtedness for less than its full amount, on the ground of his inability to pay more, not to induce or permit the action of his creditor by any false representation or material concealment or ignorance of any fact touching his own real condition. The utmost good faith is required on the part of the debtor, and he has no right to permit his creditor to act upon his belief in the correctness of representations previously made to him which have become untrue by reason of changes in the debtor’s own affairs.
It is apparent that the changes which had taken place, and were unknown to the plaintiff in this case, were such as made the defendant then, or would soon, make him fully able to pay the whole of the money borrowed. He should have made the facts known to the plaintiff’s firm, and his-failure to do so prevents his using the release as a defense in this suit.
I am not able, therefore, to concur with my brother, Brady, but am of opinion that the judgment should be affirmed for the reasons set forth in the opinion of Yan Yorst, J., indicated in this memorandum.
Daniels, J., concurred.