Court Opinion

ID: 7809556
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:11:11.096016+00
Date Added: 2024-06-11T16:30:25.876951
License: Public Domain

McCULLOCH, C. J., (dissenting). This is a suit in equity, and we are called on to enforce rights upon equitable principles, and I am unable to discover any principle upon which appellee can rightfully insist upon payment of more than was agreed should be paid in the composition of creditors. To do so is to violate the agreement which appellee entered into with the other creditors of Ledwidge to accept fifty per centum of its claim in full satisfaction; and on the other hand, a mere correction of the mistake in the settlement would give to appellee just what it agreed to accept, and would result in the enforcement of • all its rights. Appellee endeavored to prove that it had a secret agreement with Ledwidge that the latter was to execute his note for the other half of the debt notwithstanding his composition of creditors, but learned counsel of appellee concede in their brief that such secret agreement was wholly void and unenforcible because it operated as a fraud on the other creditors. That is undoubtedly the law on the subject. 2 Pomeroy’s Equity Jurisprudence, sec. 967; 1 Corpus Juris, 547, sec. 56; Willis v. Morris, 63 Tex. 458, 51 Am. Rep. 655; Howe v. Litchfield, 3 Allen (Mass.) 443; Harvey v. Hunt, 119 Mass. 283; Kullman v. Greenebaum, 92 Cal. 403, 27 Am. St. Rep. 150; Hayes v. Davidson, 70 N. C. 573. Prof. Pomeroy states the prevailing rule very fully and correctly as follows: “Where a composition is made by a debtor with his creditors upon the basis of his payment to all who join in the transaction the same proportionate share of their claims, and of being therefore discharged by them from all further liability, a secret agreement by the debtor with one of these creditors, expressly or impliedly as a condition for the latter’s joining in the composition, whereby the debtor pays or secures to the favored creditor a further sum of money or amount of property, or greater advantage than that received and shared alike by all the other creditors, is a fraud upon such other creditors, and is voidable. The agreement, if executory, can not be enforced against the debtor in equity or at law; the security may be set aside by a court of equity, and the amount paid by the debtor in pursuance of the contract may be recovered back by him. The relief, defensive or affirmative, thus given to the debtor does not rest upon any consideration of favor due and shown to him, but wholly upon motives of policy, to protect the rights of the other creditors and to secure them against such fraud.” The same rule is stated in Corpus Juris, as follows: “The consideration which supports the agreement of each creditor is the undertaking of the creditors to release their common debtor from a portion of their respective claims. The agreement of each creditor with the other creditors of the common debtor constitutes a good and valid consideration. After a creditor has thus agreed to relinquish part of his claim and induced others to become parties to the composition, it would be a fraud on them to annul the agreement and collect the full amount of his claim.” Now, the facts of the case are- that appellee agreed, as did the other creditors of Ledwidge, to accept one-half of its debt in full, and Ledwidge paid the other creditors said proportion of their respective debts, and, pursuant to the agreement, went to appellee’s place of business and paid to the latter’s cashier what was supposed to be the amount of its proportion, and received a full acquittance, but it was afterwards ascertained that a mistake of $225 had been made in the payment. There was, and still is, a controversy between the parties as to whether or not a mistake has been made in that respect, but the chancellor has found in accordance with what appears to be a preponderance of the testimony that there had been a mistake in the amount paid and that Ledwidge still owes appellee the sum of $225 on the composition agreement, but the occurrence of that mistake, and even Ledwidge’s failure or refusal to correct it, does not enlarge appellee’s rights under the new contract. It seems to me that a decree in appellee’s favor for recovery of $225, with interest, would do complete justice between the parties and that a recovery of more than that amount would result indirectly in the perpetration of fraud on the other creditors. A court of equity should, in other words, merely correct the error in the settlement and put the parties in the same position they would have been in with reference to the settlement as -if no mistake had been made. Russell & Co. v. Stevenson, 34 Wash. 166; Carpenter v. Kent, 101 N. Y. 591. I think that the majority missed their mark entirely in deciding this case on the doctrine of accord and satisfaction, and in holding that it is an ordinary case of partially unexecuted accord. The consideration for the .agreement to accept in full satisfaction a less sum than the whole of the debt was, as has already been shown by quotations from the authorities, the mutual agreement of creditors of Ledwidge to accept that same proportion. That being true, there was a valid consideration for the agreement and the partial payment on the stipulated sum to be paid brings the case squarely, I think, within the rule laid down by this court in former decisions. Whipple v. Baker, 85 Ark. 439; Hill-Ingham Lumber Co. v. Neal, 89 Ark. 385. I can see no distinction between the cases, and it seems to me that the court has in effect disregarded them. There was, in other words, an independent consideration, i. e., the mutual’agreement of the creditors, to support the new contract. An acceptance of a partial payment left the creditors with no remedy except to enforce the new contract by suit for recovery of the balance due under that contract. Such is the effect of our decisions, and the case of Russell & Co. v. Stevenson, supra, is directly in point on this subject. In the New York Court of Appeals case cited above, that court speaking upon a state of facts calling for application of the same principles as the present case said: “We do not think that the defendants had the right to have the whole account opened, but that they were bound by the account actually settled, unless they could show some mistake or fraud in the settlement. * * * Where an account has thus been adjusted by the parties, if any mistake is subsequently discovered, the whole account need not be opened and readjusted, but the mistake can be corrected and the rights of the parties readjusted as to such mistake. Here, leaving everything to stand just as the parties actually adjusted and settled the items of the account, there still remains due to the plaintiffs the sum which they claim in this action, and that sum they were entitled to recover without opening the account.” I, therefore, record my dissent from the conclusion of the majority, as I think that not only has violence been done to settled principles of law, but that the decision brings about a miscarriage of natural justice.