Court Opinion

ID: 8264179
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:58:51.834134+00
Date Added: 2024-06-11T16:43:17.218477
License: Public Domain

GOODE, J.
(after stating the facts)'. — We consider that the judgment in this case is for the right party and that there is no defense to it on either the facts or the law. For proof of the supposed fraud in procuring the notes in suit, defendants relied on the testimony of Ten Broek that, in the negotiation for the compromise of the action instituted in New York for delinquent installments of the original purchase price of The Lawyer and Credit Man, plaintiffs represented that there were one thousand good live subscriptions to it; that he, Ten Broek, relied on this representation and laid it before the stockholders of the Adjuster Company, which was expected to take over the publication of The Lawyer and Credit Man, and in reliance on it, assented to a settlement. Ten Broek endeavored to convey the impression that plaintiffs sold the journal to the Adjuster Company and took its notes for the purchase price. But the facts testified to by him show this was not true and, indeed, could not have been true. The title to the paper was in him and had not been restored to plaintiffs. Nothing had been said or done toward retransferring the title to plaintiffs, except that he had threatened to offer to return it if plaintiffs continued to prosecute their action for what he owed them. To carry out the settlement Ten Broek sold the paper to the Adjuster Company and transferred the title by a bill of sale. In payment for it the company executed its notes to him for $4,400, and he indorsed the notes to plaintiffs; thus disposing of the then pending controversy in the mode insisted on by plaintiffs’ attorney. Ten Broek initiated the negotiation for a settlement and in the letter in which he did so, stated that he had been conferring *11with the stockholders of the Adjuster Company on a proposition to have the paper publishhed by it consolidated with The Lawyer and Credit Man, which consolidation would enable him to propose terms of compromise to plaintiffs which he thought they would approve. Ten Broek, after recognizing for months the validity of the original sale and his liability for the purchase money, had refused to pay, taking the position that misrepresentations about the live contracts on the books of The Lawyer and Credit Man had been made. The contracts referred to were for advertising in the paper. It is a misrepresentation regarding subscriptions, said to have been made in discussing the proposition for a compromise, that is chiefly relied on for a defense in this case. The contention that a fraudulent representation regarding the number of live subscriptions induced the settlement, is incompatible with the payments made .long after it occurred and with the letter written nearly three years afterwards in which no claim of fraud was put forward. The reason then assigned for the default in paying the settlement notes was that the Post Office Department of the Federal Government had excluded the paper published by defendants from the postal rates charged for second-class mail matter, thereby causing the journal to be circulated at a loss instead of a profit. In that very letter Ten Broek said he was a great deal worried by the fact that the notes in suit were outstanding and was anxious to have them retired at the earliest possible date. So much for the facts, which, fairly considered, leave no doubt that there is no merit in the defense.
In turning to the law of the case, we find that the defendants are concluded by the fact that no offer was ever made to rescind the settlement for fraud or to restore to plaintiffs what had been relinquished by them to bring about the compromise. Plaintiffs had sued for past due installments of the original purchase money, and in consideration of the settlement, they dismissed *12this suit at their own cost and waived $400 of Ten Brock’s indebtedness. He was president of the Adjuster Company and, therefore, the latter corporation had notice ,,of the facts. But this circumstance is immaterial; for the settlement was between plaintiffs and Ten Broek and the latter afterwards sold the property he had acquired from plaintiffs, to the Adjuster Company. The undisputed facts show a complete accord and satisfaction between plaintiffs and Ten Broek and that, pursuant to the accord, the notes in suit and their companion notes which have been paid, were given to plaintiffs in satisfaction of the latter’s claim against Ten Broek. If defendants desired to escape the consequences of the compromise on the ground that a fraud had been perpetrated, it was incumbent on them to ask promptly for a rescission and offer to make the plaintiffs whole. Nothing of the kind was done. Not only was there no attempt to rescind, but there was no' offer to restore to plaintiffs the portion of the purchase money which’they had released, or otherwise to put them in the position they occupied previous to the compromise. The answer in the present case in which the fraud was set up, contained no offer of that kind, but simply averred a partial failure of the consideration for the notes. Now it is true that our Code provides that when a written contract for the payment of money is the foundation of an action, or defense, the proper party may prove failure of consideration in whole or in part. [R. S. 1899, sec. 645.] That enactment has been on our statute books since 1855, and perhaps longer. [2 R. S. 1855, sec. 24, p. 1290.] Nevertheless, it has not been regarded as impairing the rule that a party to the settlement of a disputed claim cannot escape liability on the accord and satisfaction, for fraud in inducing it, except by offering to rescind and tendering back what he received from the other party. This case is identical in all elements material to the present appeal, with Jarrett v. Morton, 44 Mo. 273. That action was one for the reasonable value of the *13services of a slave belonging to Jarrett, bnt used by Morton for two years. One defense set up was that there had been an accord and satisfaction; and in support of the defense it was proved that Jarrett had fre: quently demanded payment for the services of the slave, but Morton had denied owing anything.- Finally the matter was settled by the latter giving the former a certain promissory note on which Jarrett collected $50. Now in reply to the defense of accord and satisfaction, it was alleged that there was none, because of a false statement regarding the amount of the note, which had induced Jarrett to believe it was for $125 with interest for several years. The court instructed the jury that though Jarrett had received the note in settlement and collected $50, yet if the evidence showed he was induced to accept it by the deception and fraud of Morton, there was no compromise of the claim originally disputed and Jarrett was entitled to recover, though he had never returned the note. A counter instruction to that was asked by Morton and refused. It declared in effect, that though Jarrett had been misled as to the amount due on the note, yet, if after discovering the fraud, he collected the note for his own use, the jury would find for Morton. The giving of the instruction first mentioned and the refusal of the other were held by the Supreme Court to be clearly erroneous, and in commenting on the matter observations were made which are so pertinent to- the persent appeal that we shall quote them;
“The delivery of the note to the plaintiff was not made in payment or part payment of an acknowledged debt, but in settlement of a disputed claim. The defendant never acknowledged that he owed anything — always denied it — but to avoid a controversy, at the solicitation of the plaintiff he ‘squared off’ by giving him the note. It was a compromise— a full settlement of the dispute. It extinguished the claim. But the plaintiff finds the note less than he expected and complains that he is deceived. And what does he do? Does he at once, *14upon discovery of the deception, look up the defendant and repudiate the settlement? Not at all. But he holds on to the price of the settlement, collects the note, pockets its proceeds, and still treats the claim as never having been adjusted. This the law will never permit. If the plaintiff would repudiate the settlement, he must put the other party in the same condition he was before it was made. He cannot appropriate its benefits and deny its obligation. There never was but one doctrine upon this subject; and the books are full of decisions that if a party wpuld rescind a contract for fraud or other cause, he must, as far as in his power, put the other party in the condition he would have been in had the contract not been made. Before commencing proceedings on his original claim, the plaintiff should have tendered back the note received of defendant — should have repudiated the settlement — and then he would have been at liberty to impeach it if set up against his claim. • But, as it is, he hangs onto it, and is not at liberty to deny its validity.”
That decision has been followed by the courts of appellate jurisdiction in this State whenever it was in point, and it is still the leading authority on the subject. [Estes v. Reynolds, 75 Mo. 563; Finlay v. Bryson, 84 Mo. 664, 669; Och v. Railroad, 130 Mo. 27, 47, 31 S. W. 962.] Other cases similar to the one at bar, in which notes given pursuant to a compromise, were enforced over a defense that the compromise was brought about by fraud, are French v. French, 84 Iowa 655, 659, and Hunter v. Lanious, 82 Texas 677.
It will be observed by reading the portion of the an-SAver copied in the statement, that the defendants do not ask damages by way of counterclaim for the deceit alleged to have been practiced on them. Damages were neither alleged nor proved nor any instruction requested submitting a counterclaim for them. Neither did defendants ask for a rescission of the settlement. They sought to defeat plaintiff’s action on the notes on the *15ground that the consideration for them has failed in part. The consideration has not failed in whole or in part; for it consisted of the compromise of the litigation then pending between plaintiffs and Ten Broek. Defendants cannot hold the fruits of this compromise, make no effort to rescind it, but while leaving it intact, escape payment of the notes given pursuant to it.
The judgment is affirmed.
All concur.