Court Opinion

ID: 6948076
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:28:00.144339+00
Date Added: 2024-06-11T16:07:59.313852
License: Public Domain

Caton, J. The important question in these cases is, whether the contract of compromise made between Caldwell and Sloo and wife, is valid and binding, and such a one as a court of chancery will enforce. We think it is not, for several reasons. The law authorized Caldwell and Ryan to compromise the debts due the banks at Shawneetown and Laurenceville, but it did not authorize either one of them to do it alone. It was the design of the law, that those who were interested in the collection of the debts of the bank, should have the benefit of the united judgments of those two assignees, in any compromise of a debt which should be made. Without this no compromise could be valid and binding. It was not enough that one of the assignees should authorize the other to compromise debts and to sign his name to the composition agreement. If such an arrangement were tolerated, the cestuis que trust would have the benefit of the judgment and discretion of but one, while they are only bound by compromises made by both. The mere name of the other trustee, signed to the agreement by the one who makes it, cannot help the case. It was not the mere name of Ryan to which the parties interested were entitled, but his judgment and financial skill. This was a power which he could not delegate, either to his coassignee or to any other person. We have carefully examined the evidence in this case, and are entirely satisfied that Ryan never took part in this agreement of compromise, or exercised his judgment upon it until the first of October, 1851, when he indorsed his approval upon it. The whole negotiation had been conducted by Caldwell under the authority given him by Ryan for that purpose; that he alone made and executed the agreement on behalf of himself and Ryan. Indeed, such is the purport of the agreement upon its face. In that way and in that alone was the agreement made and executed, with the consent and approbation of Ryan. At the time that Ryan did exercise his judgment upon it and actually became a party to it, which was on. the first of October, 1851, by the decree of the Circuit Court of the United States and the act of the legislature of the fifteenth of February, 1851, he had been superseded in this trust. As the agreement of compromise was not made in pursuance of the authority vested in the assignees of the bank, the court should not have recognized or enforced it. But even if it had been well executed, we think its terms are such as a court of equity should not enforce. It is true the assignees were authorized to compromise debts due the bank; but in exercising this power they acted not in their own right but as trustees ; and the courts will not enforce the specific performance of an agreement of a trustee against the cestui que trust, although the agreement may have been made within the literal scope of the authority vested in the trustee, where it is manifest that the authority has been abused. Here was a large debt secured by mortgage upon a large amount of property. Under the agreement of compromise, the assignees of the bank are to take a part of the property mortgaged, in discharge of the whole debt, and to release the balance, amounting to over five thousand dollars in value, according to the estimate of appraisers. It was the duty of the assignees to collect the debts due the bank, and not to undertake to speculate in real estate. In that view of their duty, it is manifest from the first inspection of the agreement that it could not further the collection of the debt, but might very probably result in the loss of a part of it. At least it amounted to a release of a part .of the ¡Security without any corresponding benefit or consideration. Before the agreement was made, the assignees were entitled to have the whole property sold, and the proceeds applied in satisfaction of the debt. Under the agreement, if valid, they could only realize the value of a part of it, without any possibility that the part not realized would bring any more than as if the agreement of compromise had not been made. Where, then, was the possible benefit to the trust fund from the compromise, while there is no difficulty in pointing out the probable loss ? We do not hesitate to say that this was not such a compromise as was contemplated by the law, which authorized them to make compromises. The design was to authorize them to recover a part of a debt and to release the whole, where the debt was not secured; but it was certainly intended that there should be a consideration for this entire release by the security, as payment of a greater amount of the debt than was already secured. The very idea of a compromise suggests an advantage to be derived to the creditor, more than he is supposed to have the means of enforcing, in consideration of his extinguishing the whole debt. It is reasonably supposed that a debtor will make an extra effort through his friends or otherwise to pay a greater proportion of a debt than the creditor is sure of collecting, in consideration that the balance of the debt not paid shall be extinguished, so that it cannot embarrass him in the future. The release of the equity of redemption to a part of the land mentioned in the mortgages, did not make them more valuable or more salable than they were before, and the trustees were entitled to have them sold, and then- full value applied upon the debt, as well before as after the compromise. Where, then, was the justice in, or justification for, the release of five thousand dollars’ worth of the security ? It could not be in the release of dower which was to accompany the release of the equity of redemption, for the wife of the mortgagor had joined in the execution of the mortgage, and the title to be derived under a foreclosure of the mortgage was every whit as good as it could be under a voluntary release of the equity of redemption. We do not hesitate to say that this agreement, had it been executed with all formality, is not such an agreement as a court of equity should enforce. We were asked to enter a final decree in this court; but we think that in cases of this kind, where something has to be done in execution of the decree, as in foreclosure of a mortgage, that the more convenient practice is to remand the suit with instructions to the circuit court to enter a decree in conformity to the views of this court, and see that it is duly executed. Such will be the course pursued in this case. The decree of the circuit court must be reversed and the suit remanded, with directions to the circuit court to enter a decree setting aside the agreement of compromise, and foreclosing the bank mortgages, taking care to preserve the equities of prior incumbrancers where such exist. It is hardly necessary to state, that in reference to the three mortgages which áre averred to have been executed and recorded, or filed for record simultaneously, the proceeds of the mortgaged premises should be distributed pro rdta. Decree reversed.