Court Opinion

ID: 5458692
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:27:17.820106+00
Date Added: 2024-06-11T08:32:46.978443
License: Public Domain

Clerke, J.
I am at a loss to conceive in what respect this differs from any other release, to entitle the plaintiffs to have it set aside “ so that the funds in the hands of the receiver should be distrib*176utecl in the same way as if the plaintiffs had not executed the release.” Is fraud pretended ? Not at all; it is expressly disavowed. Was there no consideration 1 The plaintiffs received an immediate payment of fifty per cent ($4,000) on their claim, with a stipulation that if, after the payment of fifty per cent on their claims and those of the other creditor^ who united with them in this release, and after the payment of expenses, and all claims on the company then existing, and which might arise on existing contracts, there should remain any surplus in the hands of the company, the surplus should be divided among the creditors who executed-the release. This was an ample consideration. It secured to the plaintiffs one half of their claim, and put at once into their pockets $4,000, instead of leaving them in a state of uncertainty as to what proportion of the demand they should receive, if any, and of waiting for the final settlement of the complicated affairs of an insurance company, pronounced to be insolvent, liable to be dissolved, and whose estate and assets would therefore soon probably be placed in the hands of a receiver.
Were not the conditions of the agreement in all respects complied with ? The $4,000 were at once paid; and, as required, instruments of a similar tenor were ex&cuted by other creditors, to the amount of over two hundred thousand dollars, indeed amounting to over two hundred and fifty thousand dollars, including De "Voss & Company’s demand, each of them receiving, at the time of delivering such instrument, fifty per cent on the amount due to them respectively.
To be sure, it is mentioned in the release that it is given for the purpose of restoring the solvency of the company, and prevent- , ing its going into the hands of receivers. But this is stated by way of recital, as a motive then operating on the minds of the parties to perform the act; not as an essential element or condition of the validity of the act. The release did not, indeed, save the company from insolvency, or from going into the hands of a receiver; but are we to pronounce the instrument void on that account, when nothing appears on the face of it, to show *177that, if such did happen, contrary to the motives or wishes thus incidentally expressed, the release was to be of no effect ? If the claimants meant this, they should have said so-; and not having said so, it is fairly to be presumed that they meant no such thing. They have lost nothing by the company’s failure to resume business ; and, as mere creditors, would have gained nothing if they had resumed it.
When releases are limited by courts to the purpose and occasion on which they are made, such purpose and occasion constitute a condition of the ultimate efficacy and validity of' the instrument; and this condition is either plainly expressed, or so manifestly forms an integral and operative part of it, that it cannot be rejected. The release is here in itself unconditional, notwithstanding the incidental expression of the motive, and bears a resemblance to the case of Pratt v. Crocker, (16 John. 270,) where a release was given by a defendant in a cause, for the purpose of enabling the releasee to be a witness on the trial: it was held a discharge of the liability of the witness to the defendant, although he was not sworn at the trial, nor the release produced.
The report should be set aside; costs to abide the event.
Mitchell, P. J.
In addition to what has been said by Judge Gierke, it may be observed, that before the release was executed, the plaintiff and others made application to the company to pay this per centage, and that those who joined in the application should then execute releases, so as to allow non-concurring creditors to be paid in full, and the applicants to have a claim only on the surplus which should then remain, and that this was done in order to make the company solvent. If a sufficient number joined in this application, so as to enable the company to pay that per centage to them and to pay all other claims in full, then the company, on receiving these releases, became solvent in fact, and could pay the per centage to the applicants without infringing the law forbidding insolvent companies to give *178a preference. And a sufficient number did so join. If this were not the meaning of the release, but the claims of the applicants were still to be debts due by the company, for the whole amount or for an equal portion with the non-concurring creditors, then the objects of the applicants would be defeated, the company Would be insolvent in fact, and no payment could be made to them, and the payments since actually made to them have been made against law, and could not be recovered from the applicants. This system of releasing the debts of companies and. taking a per centage and establishing a new claim only as to the, unpaid part of the debt, on the surplus funds merely of the company, after payment of all other claims, was not new. It was, resorted to after one if not both of the great fires in this city. It is wise and beneficial to all parties. It enables the consenting creditor to be immediately placed in funds, and the company to windup its affairs, so far as those creditors are concerned, without the expense and delay of a receivership. It can hardly be doubted that, the amount paid to the plaintiffs some five or six years ago has been more beneficial to them than it would have been for them to have waited to this day, and then to have received their ratable proportion of the whole assets. Contracts when fairly made (as this was) should be honestly carried out. And if a merchant, for the advantage of cash in hand, consents to give their full pay to creditors who choose to wait, he should, after receiving the benefit, allow the other party to receive the benefit which by agreement (or if it be not an agreement because the other party was no. formal party to it, then the benefit which by his consent) the other party was to have who chose to run the risk of delay and of all its consequences. The solvency which the agreement was intended to effect was accomplished by the understanding of the agreement above given: it was a then present, solvency, such as should authorize the payment to the concurring creditors of their per centage; not a certainty that they would be solventa year afterwards. The court would haye sustained the payments made to those creditors if they had been sued to refund, and it should equally sustain the *179rest of the agreement, which was essential in order to make those payments valid.
[New-York General Term,
June 1, 1854.
The report of the referees should be set aside, with costs to abide the event.
Roosevelt, J., concurred.
Report set aside.
Mitchell, Roosevelt and Clerke Justices.]