Trumball v. Tilton

Eastman, J. The plaintiff in this action, as indorsee, seeks to recover of the defendant the contents of a promissory note made by him on the 5th of March, 1836, for the sum of $65.70, payable to one Jones or order, and by Jones indorsed to the plaintiff on the first day of September, 1848. The defendant pleads the general issue, and files therewith a brief statement of the grounds of his defence, as by our statute he is permitted to do, instead of pleading the same specially. This defence is twofold — first, that Jones while the holder and — 136 — owner of the note, to wit, on the 22d of March, 1842, signed a composition deed, together with the other creditors of Tilton, binding himself to take ten per cent, in full discharge of his debt — and second, that the note is barred by the statute of limitations. The state of the pleadings being such as to leave the matter open to proof by either party, the plaintiff endeavors to' avoid these two positions by showing a new promise made by the defendant in 1843 and repeated in.1846. And to this the reply is made, that the promise was part of a corrupt agreement between said Jones and the defendant, in relation to the composition deed, and therefore void. It is hardly necessary to state the well-known principle that the indorsee of a discredited note, takes it subject to all the defences that can be set up against it in the hands of the indorser. If the grounds of defence therefore to this note would be available against Jones, they would be equally so against this plaintiff. It appears that this note was dated March 5,1836, and six years had elapsed before the execution of the composition deed. Consequently the note, being payable on demand, was barred by the statute of limitations at the time the deed was executed. Were it necessary, in deciding this case, to settle the effect which such a state of facts might have upon the interests of these parties, it would be worthy of consideration whether this note, being barred by the statute of limitations at the time the composition deed was executed, could be considered as a debt legally included within the scope of the deed, or to be affected thereby. By the terms of the deed of composition, the creditors agreed to accept of Tilton, for each and every dollar that he owed and stood indebted to them, the sum of ten cents, in full discharge and satisfaction of all such debts and sums of money as said Tilton owed and stood indebted to them respectively. If this language be construed to embrace not' only all such debts as were legally due and owing, but also all such as were due in conscience, then this note would be included among those to be affected by the deed. But if not — 4f only those that , could be legally enforced at the time, are to be affected, — 137 — then this note is not among the number contemplated by the deed, for it then had no legal vitality, being barred by the statute. Had Tilton’s property all been assigned, and a composition deed been executed, by the creditors agreeing to take such a per cent, upon their claims against him as the property would pay, it would scarcely be conceded by the other creditors, that this debt should be allowed as a legal, existing claim, on which a dividend should be made. The deed before us, it is true, is not such in its terms, nor based upon such a precise state of facts. It is a special contract between the creditors and the debtor to take a specific per cent.; yet if Tilton had made a tender of ten per cent, upon all other claims which Jones had against him, (provided he had others,) and Jones had refused to accept it, on the ground that he intended this debt also to be included, and if Jones subsequently instituted a suit upon this and his other claims, alleging that the ten per cent, had not been paid according to the deed, would not the tender be held a good defence to the action ? and would not the court hold also, that this note, not being at the time a valid debt unless revived by a new promise, could not be included, and therefore no tender was necessary to be made upon it ? Even were this the only claim which Jones had against Tilton at the time of the execution of the composition deed, the bare fact that Jones signed that deed, could not of itself, without some promise or undertaking on the part of Tilton, revive the claim. If then, by the terms of the deed, Jones could not compel the note to be included, and receive his ten per cent, thereon, it could not be held that Tilton should be permitted to include it or not, as should best suit his purposes. But the disposition of the case does not require a decision of this point; nor is it necessary for us to settle to what conclusion we might arrive in regard to it upon more mature consideration. And we propose to examine the case, as though this debt was one of those actually included within the scope of the composition deed, and designed to be affected thereby. From an examination of the authorities, the doctrine appears to be well settled, that no action can be maintained upon a private bargain, between an insolvent debtor and his composition — 138 — creditor, to pay all or any part of a debt not provided for in tbe composition deed. The effect of such a bargain is to place the creditor in a better position than the other creditors, and is a fraud upon them; and the promise or bargain so made, is held to be void. In the language of Bailey, J., in Lewis v. Jones, 4 Barn. & Cress. 511, cited by the defendant’s counsel, “ there can be no doubt that if a creditor who signs a composition deed or agreement, and thereby induces other creditors to sign, makes a private bargain, the effect of which is to place himself in a better position than the other creditors, he thereby commits a fraud upon them, and such private bargain is void.” In Cockshott v. Bennett, 2 Term Rep. 763, a suit was instituted upon a note given for the balance of the debt before signing the composition deed. There was also a subsequent promise to pay the note. It was held that the note, being given for an immoral consideration, was void; and that no subsequent promise could make. it a debt binding upon th.e maker. In Jackson v. Lomas, 4 Term Rep. 166, the same doctrine is recognized. This was an action upon an agreement to pay the whole debt in case the creditor would sign the deed — and it was held, that the action could not be maintained. To the same point are Howden v. Haight, 11 Adol. & Ellis, 1033; Yeomans v. Chatterton, 9 Johns. 294; and Wiggins v. Bush, 12 Johns. 306. In these and' all other cases which we have been able to find, that bear upon the question before us, the actions were brought upon some promissory note or other agreement which had been the inducement for the execution of the composition deed, or in some way corruptly connected therewith — or upon promises made to carry out those agreements. The consideration has been the new and corrupt bargain, not the consideration of the original debt. All such contracts, bargains, and agreements are contra tonos mores and void. But while the law appears to be well settled, and upon sound principles, prohibiting the enforcement of all corrupt agreements between creditors and their insolvent debtors, which are in any way connected with the insolvent’s discharge, it is equally well determined that a new promise voluntarily made, after the dis — 139 — charge of a bankrupt or insolvent, to pay a just debt existing prior to the discharge, is binding upon the promisor, and will be enforced 4n a court of law. The moral obligation still exists, although the legal one has been discharged ; and this moral obligation, coupled with the original consideration of the debt, is sufficient to support a new promise to pay. The English doctrine upon this point may be found hi 1 Chitty’s Pleading, 54; Cockshott v. Bennett, 2 Term Rep. 763, before cited; Penn v. Bennett, 4 Campbell, 205; Blackbourn v. Ogle, 8 Price, 526; S. P. Drew v. Jeffries, 8 Price, 531, note; Brix v. Broham, 8 Moore, 261; and Lobb & Knight v. Stanley, 1 Davis. & Merriv. 635. This last case was decided in the Queen’s Bench in 1844. The action was assumpsit for goods sold and delivered, and on an account stated. The plea was the defendant’s bankruptcy certificate and discharge, and the replication a new promise. To sustain the action, the plaintiffs introduced in evidence the following memorandum in yrriting: “ Mr. Stanley begs to inform Messrs. Lobb & Co. that he will take an early opportunity of settling their accounts, but Mr. Stanley .objects to give his bill.” This memorandum was held to contain a sufficient promise to revive the claim barred by the bankrupt’s certificate, and judgment was entered against him. It was held, also, that the memorandum was sufficiently signed to bind the defendant under the statute of 6 Geo. 4, c. 16, which requires that all contracts or agreements to pay a debt barred by a certificate of bankruptcy shall be in writing and signed by the bankrupt, or by some person thereto lawfully authorized by him. Several American decisions have been made, sustaining the same views. Among them are Maxim v. Morse, 8 Mass. 127; Shippy v. Henderson, 14 Johns. 178; and the case of Field’s estate, 2 Rawle, 351. Maxim v. Morse was debt upon a judgment ; plea, a discharge under a commission of bankruptcy; and replication, a new promise. Upon issue joined on the promise, the plaintiff obtained a verdict, and judgment was ordered thereon. In Shippy v. Henderson, it was decided that where a debt has been barred by the defendant’s discharge under an — 140 — insolvent act, and he afterwards promises to pay it, it is proper for the plaintiff to declare upon the original cause of action, without noticing the subsequent promise. Thompson,fl., says: “ I see no reason why this case should differ from that of infancy, or that where the action is barred by the statute of limitations.” In the ease of Field’s estate, Gibson, C. J., says “ It seems to be agreed that a debt discharged by a certificate of bankruptcy, is a valid consideration for a promise.” “It is settled by a train of decisions, not now to be questioned, that a debt discharged by a certificate of bankruptcy is an available consideration for a new promise.” To the same effect is Brown & ux. v. Collier, 8 Humph. 510; Graham v. Hunt, 8 B. Monroe, 7; and McNair v. Gilbert, 3 Wend. 344. There is some diversity of opinion among the decisions as to what the character of the new promise shall be, in order to make it effectual. By some it is held that it must be of an equally high degree with the debt that is to be revived, and that a specialty, for instance, cannot be revived by a parol promise. Such is the doctrine of the cases cited from 2 Bawle, and 8 B. Monroe. While in the case from 8 Mass., a simple promise was held sufficient to maintain an action of debt on a judgment; the court remarking that the pleadings were very similar to those which frequently arise under the statute of limitations. Whether there is a distinction to be taken between promises made to pay debts discharged by a composition deed, and those discharged by operation of law, such as bankruptcy and insolvency, is, perhaps, not fully settled. In the one case a party agrees to take a certain per cent, and discharge his debt, and, upon that per cent, being paid, the debt becomes extinguished. It may be regarded as an accord and satisfaction between the parties ; the creditor having agreed, in view of the circumstances, either from benevolence or policy, to discharge the debt. In the other case, except under some special State acts, where a portion of the creditors are required to join in and assent to the proceedings of the in olvent, the discharge is procured without the acquiescence of the creditor. A small dividend may or may not — 141 — be paid. The law takes away all remedy, and the' debt appears equally to be extinguished. In either event the result is the same, the loss of the whole or balance of the debt. In the one case it may be considered voluntary, being the act of the creditor himself. In the other, involuntary, being the operation of law. This question has been considered in New York, in the case of Stafford v. Bacon, 25 Wend. 384, and also in 1 Hill, 533. The facts were these, Bacon owed Stafford $2370.12, and Stafford signed a composition deed to discharge the debt upon receiving one third of the amount due. The one third was satisfied, and Bacon subsequently promised to pay the balance when able. A suit was brought to recover the balance, his ability being shown. And an opinion is given at some length by Bronson, C. J., wherein the promise is .held sufficient to sustain the action. In 1 Hill, the opinion of the court is given by Oowen, J., and it is there held, that the promise will not sustain the action; that the signing of the composition deed, and the payment of the per cent, was a discharge of the debt by accord and satisfaction, and “ that when a debt has been discharged by accord and satisfaction, for less than its amount, there remains no such moral obligation to pay the balance as will support a subsequent promise to that effect. Otherwise of a discharge which is not the mere act of the party, but by operation of law, for example, an insolvent discharge.” This conflict of opinion in these two reports of the same case, is explained in a memorandum in the third of Hill’s Reports, where it is stated that the opinion reported in the 25 Wend., was inadvertently handed to the reporter by the Chief Justice; -that the views there expressed, were subsequently reconsidered, and the whole court acquiesced in the opinion given in 1 Hill. Several cases are cited to sus.tain this opinion, but it is submitted, with all due respect to the very learned judge, who drew up the opinion, that they are not based upon facts very similar to those in Stafford v. Bacon. The leading cases cited are, Cook v. Bradley, 7 Conn. 57; Mills v. Wyman, 3 Pick. 207; Snevily v. Read, 9 Watts, 396; and Eastwood v. Kenyon, 3 Perry & Davidson, (Queen’s Bench,) — 142 — decided in 1840. Cook v. Bradley, was upon an obligation given by a son for necessaries previously furnished to his father by the plaintiff. Held that the consideration was insufficient; that it was merely a moral one, and “ that a moral obligation is available as a consideration for an express promise in those cases, and those only where a prior legal obligation has existed, which by some statute or stubborn rule of law cannot now be enforced.” Mills v. Wyman, was the case of the promise of the father to pay for necessaries furnished for the son by the plaintiff, after the son became of age. Held, that the promise was based upon a moral obligation only, and could not be enforced;' that “ the general position that a moral obligation is a sufficient consideration for an express promise, is to be limited in its operation to cases where a good or valuable consideration has once existed.” Snevily v. Read was founded upon a new promise made by a defendant, to pay a debt after the defendant had been discharged on a ca. sa., and it was held that the arrest and discharge satisfied the debt, and that no action could be maintained upon the new promise. Eastwood v. Kenyon, was a promise made by the husband of a minor to pay for money expended by the plaintiff to improve the lands of the minor before the intermarriage, and the same doctrine is laid down as in Cook v. Bradley and Mills v. Wyman. In all of these cases, it is conceived that the facts differ somewhat materially from those' in Stafford v. Bacon. Snevily v. Read is perhaps the most applicable of either, and yet we find, in the same court, a decision running directly counter to that of Stafford v. Bacon. It is Willing v. Peters, 12 Sergeant & Rawle, 177. This was an action brought to recover the balance of a debt discharged by a composition deed, the facts being almost precisely like those in Stafford v. Bacon. And it was there held, that “ a promise by a debtor, after the execution of a voluntary release under seal by .the creditor at the debtor’s request, to pay the balance of the debt, is founded on a sufficient consideration, and is binding.” In Cook v. Bradley, Mills v. Wyman, and Eastwood v. Kenyon, no legal consideration had ever existed between the parties to the engagements. They were all merely moral obligations, and upon the facts — 143 — stated, appear to have been decided upon correct principles. But in Stafford v. Bacon, a good and valuable and legal consideration had once existed, a consideration of some two thousand dollars, which, although discharged, had never actually been paid. The amount of the balance at the time of the institution of the suit was $2113.57. Unquestionably, the reception of a per cent, agreed upon by the terms of a composition deed, is an accord and satisfaction, which extinguishes the debt. But has there not once existed a valuable and legal consideration for the balance ? The party benefited by the discharge may afterwards become affluent, while the composition creditor may be in straitened circumstances ; and if he sees fit to make a promise to pay the balance, and has not honesty and honor enough to fulfil it, is there any thing in public policy or private morals that forbids its enforcement in a court of law ? Is it not quite as easy to discover a binding moral obligation to fulfil such an engagement, and pay such a debt, as it is to see one where the debt has been discharged by operation of law ? But, inasmuch as the “ ten per cent.,” agreed to be paid by the terms of the deed before us, has never been satisfied, the the question decided in Stafford v. Bacon, does not require to be settled here. We arrive then at these conclusions; that no action can be sustained against an insolvent or bankrupt upon any promise, agreement, or undertaking to pay the whole or any part of a debt existing prior to his discharge, when such promise, agreement, or undertaking is made to procure the acquiescence of the creditor to the insolvent’s proceedings, and is contrary to the agreement with the other creditors, and without their knowledge. AH such promises are fraudulent and void. That after a discharge, obtained by the operation of law, a new promise made by the insolvent, to pay a debt discharged, can be enforced. That the debt is due in conscience, and a sufficient consideration exists by force of the original contract and the moral obligation to pay, to sustain the promise. And that, in instituting a suit for the recovery of such a debt, it is — 144 — proper to declare upon the original cause of action. If the plaintiff can sustain his action upon independent grounds, without calling to his aid in any way the corrupt agreement, he can recover. But if he require any assistance from the illegal transaction to establish his claim, he must fail. In addition to these conclusions, a quaere is suggested, whether any distinction should be recognized between a promise to pay a debt discharged by a release or composition deed, and one discharged by operation of law. The general principle that after a demand has been barred by the statute of limitations, a new promise will take it out of the operation of the statute, is too well understood in this State, to require examination. Exeter Bank v. Sullivan, 6 N. H. Rep. 124; Eastman v. Walker, 6 N. H. Rep. 367; Kittredge v. Brown, 9 N. H. Rep. 377. It is sufficient also to declare upon the original demand, without any averment of a new promise. The matter which takes the case out of the statute maj be given in evidence in answer to the defence of the statute. Belton v. Cutts, 11 N. H. Rep. 170. In the case before us, an action is brought upon a promissory note, barred by the statute of limitations, and barred also by a composition deed, if the terms of that deed had been complied with. Such an agreement, however, was made between Tilton and" Jones, in relation to the execution of the composition deed, and the payment of the debt, as rendered the transaction between them fraudulent, and would prevent Jones or any indorsee of the note from recovering upon that agreement. But, after the execution of the deed, new and independent promises are made to pay the note ; one of them four years after the date of the deed. These promises were such as would take a note out of the operation of the statute of limitations, or furnish good cause of action to. recover a demand otherwise barred by a discharge brought about by operation of law, if not by the act of the party. They are promises, not in anticipation of insolvency, or by way of inducement to effect any object, but are made, one of them at least, when it must be presumed the defendant well knew that the note was due only in conscience. — 145 — They are made to pay a note of good original consideration, good in conscience ; and we can discover no valid reason why they should not be enforced. There must therefore be, Judgment on the verdict.