Court Opinion

ID: 5549981
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:32:55.229299+00
Date Added: 2024-06-11T08:35:02.650314
License: Public Domain

The Chancellor.
The defendant, a debtor, édmpromised with the complainants and others, his creditors, by securing to them one third of the amount of his debtsthey upon that composition, released him from his débts; and the object of this suit is, to vacate the releases' so exécuted by' the" creditors, as having been given in conséqueñce of fraud, misrepresentation or concealment, on the part of-the defendant.
The defendant, a merchant, failed in his payments,- in JaiP 'uamvlRJ 8. After his insolvency Vas kñovri to Ms ereditofS',; *286various negotiations took place between him and them, concerning the payment of his debts. In the course of these negotiations, many statements both verbal and written, of the amount and situation of his property and the state of his affairs, were made by him to his creditors, or such of them as made application for payment. These applications and negotiations terminated in the agreement to compromise ; and that agreement was consummated, by securing one third of the several debts due to the complainants, and by the releases executed to the defendant.
From the pleadings and proofs it appears, that this compromise was founded upon the statements and representations of the defendant, concerning the value of his property and the amount of his debts. It is sufficiently clear, throughout the cause, that the complainants in agreeing to the composition, acted either wholly or to a great extent, upon the representations of the defendant, concerning his ability to pay his debts. The complainants were creditors seeking payment; and they evidently relied much, if not entirely, upon the information which the debtor gave them, concerning his own situation, and the extent of his means to make satisfaction.
If then, the information given by the defendant-to his creditors,, respecting his property and debts, was in any material respect, untrue, the misrepresentation must vacate the compromise. I do not stop to enter into any demonstration of this principle, or to cite the authorities which support it. The principle itself, is a plain dictate of justice ; and the adjudged cases fully show, that it is an established doctrine of courts of equity.
The defendant in the negotiations between him and his creditors, insisted, that certain of his debts, called confidential, should be paid, in preference to all others ; he furnished a statement of those debts, to his other creditors; and when he. did so, he was bound to furnish a true statement. In his statement of confidential debts, furnished to his creditors, he stated his debt to Ten Eyck, at a sum exceeding the true amount of that debt, by more than five hundred dollars : this exaggeration is not explained, in any satisfactory manner; and it stands an important misrepresentation of a material fact.
*287This single misrepresentation, seems to me sufficient to vacate the compromise, and to decide this cause. It is therefore unnecessary, to discuss the other questions of fraud or misrepresentation, which are controverted between the parties.
In other facts and in the general complexion of the cause, I perceive nothing which can mitigate the effect of this misrepresentation of the amount of the defendant’s debt to Ten Eyck. The defendant was a debtor treating with his creditors, for the satisfaction of his debts. It was his duty and their right, that all his property should be applied to the payment of his debts. In paying his debts, he had a right to give preference to particular creditors ; but the condition required by him, that his general creditors should advance a large sum of money, for the payment of his confidential debts, was unreasonable. He did not assign his property for the payment of his debts, nor did he sell-it publicly, and by a public sale, ascertain its true value. Retaining the control of his property, he negotiated with his creditors. They were obliged to rely greatly, upon his statements of the situation and amount of his property and debts ; and they did rely upon his statements. They were indeed at liberty to seek information from oilier sources ; but they were not bound to look to any other, source of information. The defendant was the debtor ; he alone, had full knowledge of the state of all his own affairs ; and he undertook to give his creditors the requisite information of his own situation. The information which he gave, was the basis of the composition ; it is just, that he should be held answerable for the truth of his own statements : and any one material misrepresentation, is sufficient to vacate the contract.
The releases executed by the complainants to the defendant, must be vacated, because they were given and founded upon misrepresentation. The court may either annul the releases absolutely, or may subject the defendant to the paj'ment of his debts, to the extent in which his property has not been fully applied to that object. To annul the releases absolutely and subject the defendant to the full amount of his debts, would be severe, and would also infringe the sense of the agreement to compromise. The spirit of that agreement was, *288that the creditors should receive the fell value of all the .proPertJ °f the defendant; and though they have reason to complain that they have been defrauded or misled, they have no sujgcjent reason tQ subvert altogether, their own contract. The equity of this case therefore is, that the defendant-is liable to his creditors, for the true value of all the property which he possessed, when the agreement to compromise was.made. In the language of some of the adjudged cases, he must, make his representations good; and so far as his property exceeded the third part of his debts already paid, he must now be responsible,
In order to give this relief, proper accounts of the true value of the defendant’s property must be taken ; and a decree for that purpose, will he entered,