Martin v. Righter

Williamson, C. On the 5th of July, 1842, Stephen W. Bighter recovered against Michael Bighter, the defendant in this suit, a judgment in the Circuit Court of the county of Morris, for the sum of eleven hundred and sixty dollars and forty-two cents, damages and costs of suit. Afterwards the defendant, becoming further indebted to the said Stephen W. Bighter, for the purpose of securing such indebtedness, and as collateral and further security for the judgment’ debt, on the seventh of September, 1842, gave — 511 — the bond and mortgage, in controversy in the present suit, conditioned for the payment of $1333.65 on demand, with interest. As to the amount, or the honesty of the debt, there is no dispute. On the 19th of May, 1847, Stephen W. Eighter executed, in due form of law under his hand and seal, a release to the defendant. It expresses to be for the consideration of one dollar paid, and to remise, release, and for ever discharge the defendant, his heirs, executors, and administrators, of and from all and all manner of action and actions, cause and causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variance, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law or in equity, which the said Stephen W. Eighter ever had, then had, or which his heirs, executors, or administrators thereafter could, should, or might have, for, upon, or by reason of any matter, cause, or thing whatsoever from the beginning of the world to the day of the date of the release. This release is set up as a bar to a recovery upon the bond and mortgage. About eighteen months after the execution of the release, Stephen W. Eighter assigned the bond and mortgage to Peter Martin and William Martin, the complainants. They caused an execution to be issued upon the judgment. The defendant then interposed this release, and obtained a rule of the Cireuit Court of the county of Morris upon the complainants to show cause why the judgment should not be cancelled of record. The complainants then filed this bill, praying that the said release may be declared fraudulent and void as to them, or that it may be declared to have been executed by mistake; or that it may be reformed, so far as respects the bond and mortgage, so as not to apply to them, and that the mortgaged premises may be sold, &c. An injunction was — 512 — allowed. The cause is now brought to a final hearing upon its merits. There can be 'no controversy but that the release is comprehensive enough to include the judgment and bond , and mortgage. That release must be removed out of the way before the judgment or mortgage can be enforced. No parol testimony can be admitted for the purpose of showing that the intention of the parties, or either of them, was different from that expressed in and by the release itself. If it can be shown that the instrument was procured by fraud, that will vitiate it, and it will be set aside in ioto. If it can be shown that there was a mistake in the drawing up and executing it, for instance, that the scrivener was instructed that in preparing the release he should exclude the judgment and mortgage, and that it was executed under the impression that it was drawn according to such instructions, but that by mistake the scrivener had omitted to make the exception, in such case this court will relieve the party whose rights are affected by such mistake. But such mistake must be established by evidence so clear and incontrovertible that the court may feel an assurance that it cannot itself make any mistake in confiding its judgment upon it. Courts of equity have gone quite far enough in reforming sealed instruments. There are instances where it would seem that the supposed hardship of the case has had more weight than the evidence in influencing the judgment of the court. Parties are not entitled to relief against their own mere carelessness and negligence. A mistake in a sealed instrument can be proved only by reliance upon parol testimony. It is always dangerous, where parties have reduced their intention and agreement to writing, to undertake to substitute what they intended to do for that which they actually did do. The complainants endeavor to' avoid the release upon three grounds: first, fraud; second, mistake; third, that the defendant’s conduct induced them to advance their — 513 — money and to purchase the judgment and mortgage, and that he is chargeable, therefore, with standing by and seeing the complainants advance their money upon obligations of his own which were worthless. First. "Was there anything in the manner in which the release was executed which subjects it to the charge of fraud, or to make it fraudulent for the defendant to apply it to the judgment and mortgage ? Let us take the case as it is made by the bill. The bill alleges, that one Joseph O. Lighter and the defendant were connected in business ; that they held the drafts of Matthias Kitchel for about $1250, which had been drawn in their favor upon different mercantile houses at the South, and which had been protested for nonpayment; that Joseph C. Lighter and the defendant dissolved their business connections, and in their arrangements the drafts became the individual property of Joseph C. Lighter; that Joseph C. Lighter, being desirous of bringing suits at law to collect the amounts due on the drafts against the drawer, and being in embarrassed circumstances, and fearful that the collection of the drafts might be embarrassed by his creditors if he should bring suit in his own name, applied to Stephen W. Lighter to take the drafts, and institute a suit upon them in his name, but for the benefit of him, Joseph C. Lighter; that Stephen W. Lighter did accordingly commence the suit; that when the said suit was about to be tried, the defendant alleged that he was interested in the said drafts and in the event of the suit, and John S. Hager, esq., who was attorney in the suit, thereupon advised that it might be necessary to examine the defendant as a witness, and that it was necessary for that purpose to release him, in order to discharge any interest he might have; that the said attorney then filled up a printed form of general release, and requested Stephen Wr. Lighter to sign it; that he objected, on the ground of the release being too broad and general in its terms; whereupon the defendant replied, that it was no — 514 — matter, as the release should be given up to him as soon as the trial was over, and that it was necessary to execute the release in order to discharge his interest in the suit (the defendant then well knowing that he had no interest, and that the release was unnecessary); that the attorney advised that it was right and safe to execute the release, and that no harm could come from it; that the defendant was examined as a witness in the cause, and that the only intention of the parties was to release the defendant’s interest in that suit; that no consideration passed for the release, and that the defendant has frequently since admitted his indebtedness on the bond and mortgage. What was there in this transaction to justify the court, in declaring that the defendant procured the release by fraud ? The proposal did not come from him to give the release. It is said he committed a fraud in pretending he was interested in the drafts, when he was not, and when he knew he was not. If this were so, it was no fraud. Joseph ~W. Eighter, who declared the drafts belonged to him, was standing by to contradict the assertion. But the evidence in the cause shows that there was a dispute as to the ownership of the drafts, and the weight of the testimony is, that the defendant was interested in the drafts to the amount of one half. But it is said there is another fact: he promised the release should be given up as soon as the trial was over; that there was no consideration given for the release, and the only object of it was to make the defendant a competent witness in the suit. But all this is at variance with the instrument itself; and to permit the complainants to prove it, would be admitting parol testimony to contradict and vary the plain and unambiguous terms of a sealed instrument. If the object was not to release the defendant from anything except from such liabilities as made him incompetent to be a witness in the suit, why was not such a release drawn ? There is no pretence that the defendant dictated the terms of the release. It was drawn — 515 — by the attorney of the other party, and was retained for some time, and then delivered; there can he no pretence that it was done hastily or through inadvertence. But there is another view of this feature of the case. This release was offered in evidence, and was received by the court as a valid release between the parties. Upon the faith of it, the defendant was admitted as a competent witness, and was permitted to give evidence in the suit at law. Stephen W. Righter, or the complainants, who stand in his place, now come into a court of equity, and allege that the release was to be delivered up after it had effected its purpose with the court; and the defendant not fulfiling his promise, this court is called upon to declare it fraudulent and void. Such a case cannot he favored in this court. The agreement, if there was such a one, was fraudulent. It was imposed upon the court as a valid release, when the parties had agreed it should be considered a mere matter of form, and be cancelled. But there is another circumstance connected with this part of the case, as the complainants state it in their bill, very unfavorable to a party seeking redress in a court of equity. It is stated, as a favorable circumstance to the complainants’ case, that it is admitted by all parties that Stephen W. Righter had no interest in the suit at law. It is then asked, why, then, would he release this defendant of a debt of fifteen hundred dollars well secured without deriving any advantage to himself? The answer is, he did release it, and there is his release tinder his hand and seal. But the misfortune of Stephen W. Righter is, that while assuming a position to avail himself of this argument, he is obliged to admit that he was conducting the suit for the benefit of Joseph C. Righter, and doing it in his own name, for the purpose of enabling Joseph C. Righter to protect his property from his creditors. The fraudulent position which he occupied forced upon him the necessity of executing the release. Where a party in committing a — 516 — fraud,' has a still greater one practised upon himself, he can' have no redress against it in a court of equity. The proof does not sustain the allegation of fraud on the part of the defendant in procuring this release. It was given to him without his solicitation. I can see no fraud in his setting it up as a defence against a recovery upon this bond and mortgage. They are embraced in the legal construction of the instrument, and it is not competent, under the circumstances, to show that it was the intention of the parties that it should be limited in its legal application. Second. The bill prays that the release may be declared to have been executed by mistake. The power of the court to correct a mistake in the execution of a written instrument was well considered in the cases of Smith v. Allen and others (Saxton 46), and of Hendrickson et al. v. Ivins (Saxton 568). The mistake alleged is this: that when-the attorney of Stephen "W. Righter had prepared the release, he objected to sign it, on the ground that it was too broad and general in its terms, as covering everything; whereupon the defendant replied, it was no matter, as the release would be given up; and then Mr. Hager, the attorney, advised Stephen W. Righter to sign it. • It is manifest that the mistake was not in Stephen 'W. Righter’s signing the release under a misapprehension as to it comprehensiveness; for when he made this objection, neither the defendant or the attorney questioned the correctness of his judgment as to the character of the instrument. He did not execute the release under any misconception or mistake as to its contents or as to its comprehensiveness or effect. He executed it relying upon the promise of the defendant that he would return it to him. In that respect, the result has proved he was mistaken; but that kind of mistake this court cannot remedy. It is ah"'obligation of honor, which the parties must settle between themselves. Third. The complainants insist that the defendant — 517 — should not be permitted to set up the release as against them, because they were induced by the acts and conduct of the defendant to advance their money upon the bond and mortgage. The complainants are the assignees of the bond and mortgage. They are bona fide assignees. Do they stand in any better situation, in respect to the defence set up, than the obligee himself did at the time of the assignment? The assignee of a bond takes it subject to all the legal objections and equities which exist against it in the hands of his assignor. If at the time of the assignment this release was a legal defence as against the the obligee, it is a legal defence against the complainant, his assignees. But they may avoid this defence in equity by showing that they were induced to take the assignment, and advance their money upon it, by the acts and conduct of the defendant, which make him guilty of a constructive fraud, or by such omissions or gross negligence as imply fraud. If the complainants had made application to the defendant to know what amount was due upon the bond and mortgage, and the defendant had told them the amount without apprizing them of the existence of the release, or if the defendant had stood by silently, and seen the complainants advance their money upon the assignment, he would not, in a court of equity, be permitted to set up the release against the party claiming under such assignment. A man who designedly or knowingly produces a false impression upon another, who is thereby drawn into some act or contract injurious to his own rights or interests, is guilty of constructive fraud, against which a court of equity will afford an adequate relief. This is a familiar principle of equity. It will be found supported by numerous authorities in 1 Story's Eq. Ji, § 384, and following sections and notes to the same. Let us see whether the complainants can avail themselves of this principle. It is said that the defendant treated the bond and mortgage as valid and subsisting — 518 — obligations binding upon him after the execution of the release. An acknowledgment of the amount of money-due upon the bond, and that it was a subsisting debt, would not, either in a court of equity or law, prevent the defendant from pleading the release as against the obligee. Such an acknowledgment would not destroy the release. To make it available to these complainants, they must show that the act was prejudicial to them, and was made under circumstances to induce them, upon the faith of such acknowledgment, to part with their money. If the acknowledgment was not made for the purpose, or under circumstances calculated to mislead the complainants, it could not be construed as a fraud upon them. The only acknowledgment proved to have been made by the defendant is by a witness, who says, that some time in 1848, he had a casual conversation with the defendant, and asked him how he was getting along with his business. “ He said, very well; his business had done well, so far as he had gone with it; that his debts were mostly paid, with the exception of the mortgage that Stephen held upon his property in Rockaway.” There certainly was nothing in this conversation which Stephen "W. Righter could take advantage of in any way. It was about this time that he sent the bond and mortgage, by Mr. Chandler, to the defendant to collect the interest upon it, when the defendant produced the release, and claimed it as a discharge of the bond and mortgage. But how did anything said by the defendant, in the conversaalluded to, prejudice the complainants ? They do not allege that what was then said was even known to them at the time of the assignment, and there is no proof that it was ever heard of by them until testified to by the witness. There can be no pretence that they advanced their money upon the strength of that conversation. If they did, that circumstance would not help them, for they ought not to have relied upon it. There is only one other fact upon which the complain — 519 — ants rely to show a constructive fraud, and that is the payment of interest on the bond on the 20th of October, 1849. Of what took place at the time of this payment, and of the circumstances under which it was made, we have no legal proof. The statements of the bill, as to the particulars of the transaction, are denied by the answer, and neither the statements of the bill or answer, as to the particulars, are sustained by proof. The evidence of the attorney, detailing the negotiation between himself and Stephen W. Righter, and the declarations of the latter, are ruled out as incompetent to be given in evidence. We have the fact, that on the 20th of October, 1849, the defendant paid to Stephen W. Righter seventy-three dollars and twenty-nine cents for interest money due on the bond; that when the payment was made the bond was not there, and a loose receipt was given for the payment; that no money was paid, but the defendant gave his due-bill for $12.86, payable in time, and the balance, making up the amount of $78.29, was settled by an account which the defendant had against Stephen W. Righter. The mere fact of this payment is no bar or estoppel to the defendant’s pleading the release at law, or setting it up in this court against the obligor. The release the defendant might or might not set up, as he pleased. It was a legal discharge to the whole amount due; but because the defendant did not choose to take advantage of it to its full extent, what reason has the obligor to complain ? The payment was for his benefit, and did not or could not prejudice him in any manner. A sealed instrument could not be defeated by such an act. If it is said the payment is an admission of the obligor that the release does not extend to the bond, or that it was not the intention of the parties that it should extend to it, the answer is, the release speaks for itself, and as to its embracing the bond there is no question; the instrument must be construed as to its legal effect, and the intention of the parties cannot be substituted. Do the complainants stand in any better situation than their as — 520 — signor ? The complainants had the opportunity of making-application directly to the defendant to know whether he had any defence, legal or equitable, against the bond. If such application had been made, and the defendant had told them the sum of $1500 was due, and had not disclosed their release, then the defendant would have been estopped from setting it up against them. This is quite as far as any of the cases referred to go. In Davison v. Franklin (1 Barn. & Adol. 142; 20 E. C. L. 253), a warrant of. attorney was given to confess judgment for a gaming debt. The plaintiff, Davison, purchased the judgment ; but before doing so, his attorney produced the bond to the defendant, and informed him it had been offered for sale, and asked him whether he admitted it to be a good debt, and whether it was given for a good and valuable consideration. The defendant replied, “Yes, this is my handwriting; I owe Mr. Davison the money, and have no objection to make to it; it will be paid when it is due.” In Watson’s Executors v. McLaren (19 Wend. 557), the extent of the principle established was, that declaring a note to be good, to one about to purchase it, or standing by in silence when it is transferred for consideration, is an estoppel in pais against a debtor. In Foster v. Newland (21 Wend. 94), the principle settled was, that where a debtor admits to a third person an existing balance due from him on a bond or other chose in action, and upon the strength of such admission such person takes an assignment of the bond or other chose in action, the debtor, in a suit subsequently brought for the recovery of such balance, is estopped from showing a claim against the original creditor for the purpose of reducing the amount of the recovery, although the assignment was taken for a precedent debt. How in this case no application was made by the complainants, or on their behalf to the defendant, to ascertain the validity of the bond, or what was due upon it. He was not apprized of their intention to purchase the bond. — 521 — He was guilty of no act of commission or omission having any reference to the complainants’ purchase. The payment of the interest was a private dealing between the debtor and creditor without any reference to third persons, and affecting no one’s interest but their own. The complainants may have been induced by it to run the risk of purchasing the bond, but they cannot say that they have been defrauded by the defendant’s conduct. The bond in the hands of a third person was prima facie evidence that the amount it called for was due and owing, and that it was a valid bond. The payment of interest upon it was prima facie evidence that the balance was due. The complainants chose to take the bond upon the representations of the obligee, and not upon the faith of anything that was done by the obligor. The truth is the complainants did not take the bond relying upon anything that was said or done by the obligor. How did they know that the interest was paid on the 20th of October, 1849 ? They derived their information from the obligee alone. He brought to their attorney, written on a paper about two inches long and one inch wide, the following memorandum in the handwriting of the defendant: “$73.79, Eec’d Oct. 20, 1849.” They took his word for it that this was for interest on the bond. In looking at the conduct of the defendant, there can be no doubt that if application had been made directly to him, he would have denied his liability upon the bond, and insisted upon the release. No one can look at the case—the pleadings, the evidence, and the circumstances, and not be satisfied that the procuring of the payment of the interest and of the memorandum referred to was a contrivance of Stephen W, Bighter to obtain something from the defendant which would estop him from pleading the release against an assignee of the bond. This case is an extremely hard one for Stephen W. Bighter, It is evident that he has never received payment of the money intended to be secured by the bond and — 522 — mortgage. But here is a solemn instrument, executed under his seal, hy which he releases the obligee from the payment of that bond. This court has no right to set it aside unless for fraud, or to control its legal effect unless some mistake can be shown. I can make no new principle of law or equity to relieve the particular hardship of any case. The appeal was argued by Whelpley and Dodd, for appellants. Chandler and Zabriskie, for respondents. The opinion of the court was delivered by Potts, J. The object of the bill of complaint in this case was to have a certain release, executed by Stephen Righter to Michael Righter, on the 19th May, 1847, declared fraudulent and void, or to have it reformed, so far as respects the bond and mortgage held by the complainants ; and for an injunction, &c. This bond and mortgage had been given by Michael to Stephen, in 1842, and Stephen assigned to the- complainants for full consideration, in 1849, there being then $1500 due on the bond. The release in question was a general release, and Michael sets it up as a bar to a recovery upon the bond and mortgage. The complainants, in the first place, allege fraud in the inception of this release. Parol evidence is admissible for .the purpose of establishing this allegation; and by this means the facts and circumstances connected with the execution of this paper were brought before the court. They were briefly these: Joseph O. Righter was the holder of certain drafts, drawn by Kitchel on parties at the South, and endorsed by Michael Righter. They had been protested, and were of doubtful value. He put these drafts — 523 — into the hands of Stephen Righter, to be collected for his, Joseph’s, use; and Stephen brought a suit upon them, in his own name, against Kitchel, the drawer. Michael Righter was deemed tobe an important witness for Stephen in that suit; and about the time of the trial, it seems to have been supposed that, to make him competent as a witness, it was necessary that Stephen should release him. The attorney who had charge of the suit filled up a printed form of a general release for Stephen to execute; and after some objection, that it was too broad, which was obviated by the assurance of the attorney that he might safely sign it, he put his name to it. It clearly appears that the object of executing this release was to make Michael Righter a competent witness in the case of Righter v. Kitchel. Ho other purpose was expressed, or even hinted at, by anybody, either before or at the time of the execution. Michael never suggested any other rrse to be made of it. For that single purpose it was prepared by the attorney. For that purpose, alone, Stephen executed it. Michael undoubtedly knew when he received it that that was the sole purpose for which Stephen executed and delivered it to him. He was present with Stephen at its execution, and this purpose was, beyond a question, clearly understood. Hot only the pleadings and the evidence, but the circumstances of the case show this. In the first place, Stephen had no personal interest whatever in the suit against Kitchel. He was merely the nominal plaintiff. He held the drafts merely for collection. He had no earthly motive to execute such a paper beyond a desire to befriend the plaintiff in the suit. And, in the second place, the release was a boon bestowed on Michael; he was the party who received a favor, if anybody. It released him from his liability as endorser on the drafts. It was valuable to him in that aspect of the case. Under these circumstances, it is impossible to conceive why Stephen should have intended to make a great pecuniary sacrifice, to give up a bond and mortgage for a large amount — 524 — for-the purpose of inducing Michael to accept this instrument, or why Michael should have expected to obtain a large pecuniary compensation for consenting to be released from heavy legal liabilities. Michael Righter is probably the first person who ever gravely pretended in a court of justice that he had been paid $1500, or its equivalent, for consenting to be released from his endorsements on commercial paper. A strange idea seems to have got into this case, that this release had something to do with an interest Michael claims that he had in these drafts. Stephen’s release had nothing to do with that. To effect that interest, if he had any, the release should have been executed by Michael to Stephen. In point of fact, Stephen’s release was unnecessary for the purpose of Michael’s competency as a witness. It was his interest in the drafts, if he had any, that made him incompetent. And upon his own case, as he states it, he got a release from his liability as endorser on the drafts, got $1500 to boot by covering the bond and mortgage with the same release, and then went into court and testified as a disinterested witness in a suit brought to recover the amount of the drafts of which he was the owner of one moiety at the time, and which interest, as far as appears, he has never in any way surrendered or compromised. The fact is established, there can be no doubt about it, that both Stephen and Michael, at the time of the execution of this release, understood perfectly that the object, and the sole object of it, was to make him, Michael, competent as a witness; that no other purpose was intended or dreamed of by Stephen; and Michael knew very well that if Stephen had had the most distant intimation that it was to be used to bar a recovery of the bond and mortgage, it would never have been given. ■ Michael says, in his answer, it was “ a general release from said Stephen W. Righter. to' myself, of such force •and effect as it purports to be, and I. made use of that opportunity to insist upon and obtain it.”. — 525 — Then he insisted upon it; he was instrumental in obtaining it. He insisted upon, he was instrumental in obtaining an instrument without any consideration in the world, which operated as a bar to the recovery of a bond of some §1500, an honest debt due from him to his neighbor, without that neighbor having the least idea that that was to be the purpose of it—he knowing that that neighbor was to be deceived and cheated by its operation. What is fraud but the obtaining an advantage over another by deception, trick, or artifice ? To say that he stood by, -was silent, and said nothing; that it was the negligence of the attorney or the lack of caution in Stephen that induced the execution of such an instrument, is to stick in the bark of the transaction. He who intended at the time to turn the transaction from an innocent to a fraudulent purpose is a fraud doer. There was fraud in obtaining such a release for such a purpose. Upon this ground, in my judgment, the decree below should be reversed. I am of opinion there i» another ground upon which the complainants below are entitled to relief upon the strength of the evidence in this case. Michael Righter was indirectly instrumental in inducing the complainants to take an assignment of the bond and mortgage. He went to Stephen before the assignment, on the 20th of October, 1849, and paid, or settled with him for $73.79 on account of interest due on this very bond, wrote a receipt with his own hand for Stephen to sign for the amount, expressing that it was for interest due on this very bond held by Stephen against him, and gave to Stephen a paper on which he wrote “$73.79, Ree’d Oct. 20, 1849,” in order that he might endorse it on the bond; he said nothing of the release; and though he did not see or communicate with the complainants or their attorney himself, yet he, by this means, authorized Stephen truthfully to represent to the complainants’ counsel that that amount of interest had been paid that day on the bond — 526 — by Michael himself, and that he had thus virtually acknowledged his indebtedness for the balance of principal and interest remaining due. If this transaction had taken place in the presence of the complainants or their attorney, it would have estopped Michael from setting up the release as against the assignees of the bond and mortgage; and the distinction between an act done in the presence of a party, by which he is induced to become a purchaser, and the same act done in the presence of a third party, and which, being truthfully represented to another, induces him, upon that information, to purchase, is a distinction without a difference. An “equitable estoppel,” says Mr. Justice Carpenter, in Den v. Baldwin, 1 Zab. 403, “ rests upon the principle, that when any one has done an act or made a statement which it would be fraud on his part to controvert or impair, and such act or statement has so influenced any one that it has been acted upon, the party making it will be estopped and cut off from the power of retraction. It must appear, first, that he has done some act or made some admission inconsistent with his claim; secondly, that the other party has acted on such conduct or admission; 'and thirdly, that such party will be injured by allowing such conduct or admission to be withdrawn.” The decree of the court below is reversed.