Court Opinion

ID: 8504254
Source: CourtListenerOpinion
Date Created: 2022-11-23 01:25:34.491528+00
Date Added: 2024-06-11T16:50:49.010443
License: Public Domain

Upham, J.
It appears in this case that the defendant, having failed in business, made propositions to compound with his creditors by giving his own note, signed by a friend of his, as surety for a certain per centage of his debts.
The plaintiffs, who were creditors of the defendant, made no objection to the terms of settlement proposed, but promised to aid in carrying them into effect, and that they would settle with the defendant at the same rate as the other creditors.
After a settlement was made, however, with the other creditors, and security given, the plaintiffs refused to settle *481their claim at the rate paid the other creditors, and brought this suit to recover the whole amount due them.
No suggestion is made in the ease, of any fraudulent rep-reservations on the part of the defendant, as to the condition of his affairs, or of his ability or means of payment. Had such facts been shown, they would clearly have vacated any contract of settlement by compromise; 6 D. & E. 263, Cooling vs. Noyes ; 6 Pet. Ab. 15 and 21, note; but the defence is placed solely on the ground that the promise of the plaintiffs was not binding in law, and that they were at liberty, notwithstanding such promise, to refuse accepting any thing less than their whole demand.
Had no others been concerned in this proposition than the parties to this suit, the exception might have prevailed. Such an agreement, if not under seal, is regarded as without consideration, and void, unless there is something collateral to show the possibility of benefit to the party relinquishing. 5 East 232, Fitch vs. Sulton ; 1 Stra. 426, Cumber vs. Wane; 2 Johns. 448, Harrison vs. Close; 5 ditto 391, Watkinson vs. Inglesby ; 12 ditto 426, Pabodie vs. King ; 1 Dal. 217, Musgrove vs. Gibbs; 5 Pick. 44, Howe vs. Mackay; 10 ditto 304, Makepeace vs. Har. Coll. ; 5 N. H. R. 411, Wentworth vs. Wentworth.
It is well settled, however, that if, on the faith of such agreement, a third person is induced to become a surety for any part of the debts, on the ground that the party will thereby be discharged from the remainder ; or if other creditors have been induced, by the agreement, to relinquish their fur-* ther demands on the same supposition, the creditor cannot recover the residue, as it would be a fraud upon the surety or other creditors. 11 East 390, Steinman vs. Magnus ; 2 Stark. 417, Wood vs. Roberts ; 3 Camp. 175, Boothbey vs. Sowden; 13 Mass. 424, Eaton vs. Lincoln; Yel. 11, a, note.
Such are the mutual rights and interests of the creditors in such a compromise, that it is holden if the creditors of *482an insolvent debtor consent to accept a composition for their respective demands, upon an assignment of his effects, and one of the creditors refuses to execute such agreement, except on the debtor’s giving his note for the residue of his demand, such note is void in law, as a fraud on the rest of the creditors; and a subsequent promise to pay it will not maintain an action. 2 D. & E. 763, Cockshott vs. Bennett; 15 Pick. 50, Case vs. Gerrish ; 12 Johns. 306, Wiggin vs. Bush.
It has already been decided in this state, that where a creditor agrees with his insolvent debtor if he will procure the security of a friend for a certain part of the debt, he will release the residue, and the debtor performs the agreement, it constitutes a valid contract; and if such debt is due on a judgment, and the creditor enforces payment by a levy of the execution, the debtor may recover damages for the violation of the contract, by suit. 1 N. H. R. 297, Colbourn vs. Gould.
And a verbal promise to accept such composition with the other creditors, and execute a deed, will prevent the creditor, if he refuses to perform these acts, from suing for the original cause of action. 1 Esp. 236, Butler vs. Rhodes; 2 Campbell 383, Bradley vs. Gregory.
In this case the original promise has become superseded by a new contract, founded on the consideration of the defendant’s prior indebtedness; in which contract other persons have become interested, and which has been executed by them to such an extent that it cannot now be rescinded by the plaintiffs. The former contract is annulled, and the plaintiff’s sole remedy is on the new contract, substituted in its stead. The suit, therefore, on the note cannot be maintained, and the verdict for the plaintiffs must be set aside, and
A new trial granted.