American Exchange Bank v. Bornstein

RoseNBerry, J. A considerable part of the argument both in the briefs and upon the hearing here related to the extent and nature of the fraud claimed by the plaintiff to have been practiced upon it by the defendants. In view of the fact that the plaintiff had not yet finished its proof upon that point and that the court took from the jury further consideration of the case on the ground that there was an accord and satisfaction, it must be assumed here that there was at least sufficient evidence to go to the jury on the question of defendants’ fraud and that the jury would have found thereon favorably to the plaintiff’s contention. We shall for that reason confine our discussion to the question of whether or not the acceptance of the dividend under the circumstances amounted to an accord and satisfaction. That composition agreements such as that referred to in this case are valid, and when executed operate to discharge the claims of all creditors joining therein, is well established. It is equally well established that the agreement need not be in writing, and where executed is valid although resting in parol: Mellen v. Goldsmith, 47 Wis. 573, 3 N. W. 592; Continental Nat. Bank v. McGeoch, 92 Wis. 286, 311, 66 N. W. 606. A'Vhile this is true, yet the acceptance by a creditor, who has not- joined in the composition, of the dividend, does not make him a party to the composition so as to discharge his claim, and he may proceed against his debtor for the amount of the: claim less the dividend received. First Nat. Bank v. Ware, 95 Me. 388, 50 Atl. 24; Loney v. Bailey, 43 Md. 10. In this case, however., the plaintiff did not join in the [222] composition agreement and made.it perfectly clear that such payment made to it was not to be accepted by it under the composition agreement but as a distribution of the assets of the insolvent partnership, and that it would not release or satisfy its claim against the defendants. There was therefore no room for an inference that the acceptance of the payment amounted to an agreement to accept it in full satisfaction of the debt. It is very doubtful whether under the terms of the instrument, even if it had been accepted, the claim of the plaintiff would be barred. The acceptance was to operate in full accord and satisfaction of all their respective claims and demands against said parties of the first part (the partnership) to the same extent and in the same manner and with the same legal effect as ivould be accomplished upon a discharge under the laws of the United States relating to bankruptcy. By sec. 17 of the Bankruptcy Act, liabilities for obtaining property by false pretenses or false representations, are expressly exempted from a discharge in bankruptcy. See, also, Strang v. Bradner, 114 U. S. 555, 5 Sup. Ct. 1038; In re McBachron, 116 Fed. 783; In re Waite, 223 Fed. 853. The ground upon which oral agreements to composition are held valid is that a creditor having brought about a situation whereby his debtor has parted with his assets which he would not otherwise have parted with in consideration of the agreement of his creditors to release their claims, a creditor accepting benefits under such an arrangement is estopped to assert his claim against the debtor. Mellen v. Goldsmith, 47 Wis. 573, 3 N. W. 592. There can be no estoppel in this case for the reason that the position of plaintiff bank was made perfectly clear by the letter of September 6, 1922, set out in the statement of facts, nor were the defendants or other creditors misled as to plaintiff’s position, We find no support in the evidence for the contention that the plaintiff altered its position by subsequent oral agreement. [223] It is considered that the trial court was in error in holding that plaintiff’s claim was barred by acceptance of the dividend under the facts and circumstances shown in this case. By the Court. — Judgment reversed, and cause remanded for further proceedings according to law.