Court Opinion

ID: 6412233
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:53:33.599708+00
Date Added: 2024-06-11T15:51:24.596176
License: Public Domain

Metcalf, J.
The payment of money by the defendant to some of his creditors, to induce them to execute the deed of composition, was a fraud on the plaintiffs and on all the other creditors who executed that deed without knowledge of such payment. And if the defendant, instead of paying money to induce creditors to execute the deed, had made a contract with them to pay it, such contract, in however solemn form it might have been made, never could have been enforced by them against him. Case v. Gerrish, 15 Pick. 49. Ramsdell v. Edgarton, 8 Met. 227. Addison on Con. (2d Amer. ed.) 138, 139. Or if he had given them a negotiable note for the sum agreed to be paid to them for executing the deed, and they had indorsed it to a bona fide holder to whom the defendant had been compelled to pay it, he might have recovered back from them the amount so paid by him. Smith v. Cuff, 6 M. & S. 160. Horton v. Riley, 11 M. & W. 492. See also Alsager v. Spalding, 6 Scott, 204, Arnold, 181, and 4 Bing. N. C. 407. All the creditors, who execute a deed of composition by which they agree to discharge their debtor on receiving a ratable proportion of their dues, are presumed to do it upon the understanding that they are all to receive the same proportion ; and any private agreement for securing to one or more of those creditors a greater proportion than the others are to receive is a fraud on ihe others. Leicester v. Rose, 4 East, 380. Fawcett v. Gee, 3 Anst. 910. Ex parte Sadler, 15 Ves. 52. 1 Story on Eq. §§ 378, 379. Breck v. Cole, 4 Sandf. 83, 84. “ These agreements for composition,” says Chief Justice Best, “ require the strictest good faith. If I see a man, acquainted with the circumstances of the debtor, agreeing to sign a paper, under which he is to be satisfied with 10s. in the pound, I conclude he has exercised a judgment on the subject. Am I not cheated, if he procures another to give him 10s. more ? The principle to be extracted from all the cases on this subject is, that a man who enters into an engagement of this kind is not to be deceived.” Knight v. Hunt, 5 Bing. 433, 434. See also Howden v. Haigh, 11 Ad. & El. 1038, 1039. *182And surely the plaintiffs in the present case were no less deceived by the act of the defendant himself, in paying to some of the creditors a greater sum than that agreed on in the deed of composition, than they would have been by his procuring another person to pay or secure such greater sum.
We have now to decide whether the release or discharge given to the defendant, by those who executed the deed of composition, can be avoided by the plaintiffs, and they be allowed to maintain an action against him- on their original claim, by reason of the payment made by him, without their knowledge, to procure some of his creditors to become parties to that deed. And it seems to us that the principles on which the cases already cited were determined lead conclusively to the result, that the plaintiffs have a legal right to avoid that release. They executed it upon an understanding, presumed by law, that all the parties to it were to receive an equal proportion of their demands. In this they were deceived by a private transaction, which was a fraud on them. An agreement procured by fraud may be avoided by him on whom the fraud is practised ; he by whose fraud the agreement is procured not being permitted to set up the agreement as a defence against him whom he has defrauded. We are therefore of opinion that the plaintiffs are entitled to judgment. The supreme court of Indiana recently rendered judgment for a plaintiff in a case which cannot be distinguished from this. Kahn v. Gumberts, 9 Ind. 430. See also Spooner v. Whiston, 8 Moore, 580, Mallalieu v. Hodgson, 16 Ad. & El. N. R. 689, 715 and Turner v. Hoole, Dowl. & Ryl. N. P 27. Judgment for the plaintiffs