A creditor made a compromise with his debtor for sixty cents on
the dollar, and subsequently sued him to recover the balance of the
claim on the ground of fraudulent action by the debtor in obtaining
the compromise, and that the debtor had violated his agreement not
to voluntarily pay any other creditor more than 60 percent.
Held, that he could not recover because --
(1) There was no breach of good faith on the part of the debtor,
and no misrepresentation as to his assets, and no false answer made
by him to any question.
(2) The payment of more than 60 percent to another creditor
having been made when the latter had an attachment suit against the
debtor, which was about to be tried, was not a voluntary payment
within the meaning of the agreement.
This is an action of assumpsit, brought in the circuit court of
the United states for the Northern District of Illinois in
September, 1884, by George C. Richardson, Charles S. Smith, George
K. Guild, Ralph L. Cutter, and Harrison Gardner, partners,
composing the firm of George C. Richardson & Co., against James
O. Cleaveland, Cornelius B. Cummings, Charles W. Woodruff, and
Washington Libbey, partners, composing the firm of Cleaveland,
Cummings & Woodruff. The declaration contains the money counts,
and annexed to it is a copy of an account showing various items of
merchandise sold by the plaintiffs to the defendants in August,
September, and October, 1883, amounting in debit items to
$12,125.25, with a credit item of cash, December 31, 1883,
amounting to $7,275.15, leaving a balance due to the plaintiffs on
the last-named day of $4,850.10.
The defendants were served with process, and put in various
pleas, and there were replications and rejoinders raising issues
covered by the findings of the court on the trial. The defendant
Woodruff having died, it was ordered that the suit proceed
Page 132 U. S. 319
against the surviving defendants. A trial before a jury was
commenced, but a juror was withdrawn, and the parties duly waived a
trial by jury and consented that the case be tried by the court.
The court filed special findings, as follows:
"1. James O. Cleaveland, Cornelius B. Cummings, and Washington
Libbey, three of the defendants, with one William F. Shelley, on
the 31st of December, 1881, formed a limited co-partnership, under
the statute of the State of Illinois in that behalf under the name
of 'Cleaveland, Cummings & Shelley,' to do a wholesale business
in merchandise in Chicago, in which the said Washington Libbey was
a limited partner, having put in $50,000 of capital."
"2. About the 1st of May, 1883, the said Shelley went out of the
firm, and Charles W. Woodruff, the other defendant in this cause,
came into the firm, which assumed the name of 'Cleaveland, Cummings
& Woodruff,' and continued to do business until as hereinafter
stated."
"3. Said firm of 'Cleaveland, Cummings & Woodruff' intended,
as between themselves, to do business as a limited partnership, but
they did not take the steps required by law to make said firm a
limited partnership under the statute of Illinois in that
behalf."
"4. The plaintiffs sold to the firm of Cleaveland, Cummings
& Woodruff, upon the 28th, 29th, and 30th of August, 1883, and
upon the 14th and 15th of September, 1883, merchandise to the
amount of $8,064.03, payable by the said firm in sixty days from
September 15th, and on the 24th of October sold to Cleaveland,
Cummings & Woodruff merchandise to the amount of $1,291.83,
payable in sixty days from November 1st, and the plaintiffs were
also the holders of two notes of said Cleaveland, Cummings &
Woodruff, dated Chicago, September 15, 1883, due in four months
from the date thereof, payable to the order of the defendants, and
endorsed by them, one for $1,347.99 and one for $1,421.40, which
two notes matured January 18, 1884, said several amounts
aggregating $12,125.25."
"5. On the 30th of October, 1883, Washington Libbey paid
Page 132 U. S. 320
to James O. Cleaveland $1,000 for his interest in the firm of
Cleaveland, Cummings & Woodruff, and said James O. Cleaveland,
Cornelius B. Cummings, Charles W. Woodruff, and Washington Libbey
signed and delivered to James O. Cleaveland an instrument in
writing as follows,
viz.:"
" The co-partnership heretofore existing between James O.
Cleaveland, Cornelius B. Cummings, Charles W. Woodruff, and
Washington Libbey, under the firm name of Cleaveland, Cummings
& Woodruff, has this day been dissolved by mutual consent, and
such dissolution to take effect Nov. 1, 1883. All accounts and
indebtedness due the late firm of Cleaveland, Cummings &
Woodruff must be paid to Cummings, Woodruff & Brown, successors
to Cleaveland, Cummings & Woodruff, by whom all liabilities of
the late firm must be paid, and said Cleaveland held harmless
therefrom."
" Dated Chicago, Illinois, Oct. 30, A.D. 1883."
"JAMES O. CLEAVELAND"
"C.B. CUMMINGS"
"CHARLES W. WOODRUFF"
"WASHINGTON LIBBEY"
" 6. It was contemplated, October 30, 1883, that a new firm
would be formed, composed of Cornelius B. Cummings, Charles W.
Woodruff, and Swan Brown, as general partners, and Washington
Libbey as special partner, but said firm was never formed; but the
said Cleaveland supposed it was so formed when he sold out his
interest to the said Libbey."
" 7. The firm of Cleaveland, Cummings & Woodruff stopped
business on or before November 14, 1883. Said firm owed for
borrowed money about $179,000, which was unsecured, and for
merchandise about $461,000, and the assets of said firm were
sufficient to pay the borrowed money in full, and not quite 60
percent on the dollar upon the mercantile debts. The said
Washington Libbey was reputed to be a man of large wealth."
" 8. On the 14th of November, 1883, all the bills receivable,
notes, and accounts of Cleaveland, Cummings & Woodruff
Page 132 U. S. 321
were sold to Columbus R. Cummings for his two notes for
$201,110.43, one for $110,000, which was delivered to the Union
National Bank, in full payment of borrowed money due by said firm
to said bank. The other, for $91,110.43, was delivered to a member
of said firm of Cleaveland, Cummings & Woodruff. Columbus R.
Cummings was a brother of Cornelius B. Cummings and a director in
the Union National Bank, to which he had introduced said firm, and
felt in honor bound to see that the bank suffered no loss."
" 9. Immediately thereafter, Cleaveland, Cummings & Woodruff
sent J. J. Knickerbocker, as their attorney, to New York and
proposed to the mercantile creditors of that firm to pay them sixty
cents on the dollar of their respective claims. When application to
the plaintiffs was made to accept sixty cents on the dollar of
their claims, some had settled at that rate and some had not. The
attorney of Cleaveland, Cummings & Woodruff explained the
situation of the assets of Cleaveland, Cummings & Woodruff,
saying that the borrowed money was to be paid in full, which would
not leave enough to pay quite 60 percent of the remaining
indebtedness. Libbey's liability as a member of the firm was spoken
of, when said attorney stated to the plaintiffs that he had not had
opportunity to examine into the question, and was not in possession
of information to know whether Libbey could make a successful
defense or not, but that it was a question they could investigate
for themselves. One of said plaintiffs said to said attorney they
had sold no goods to the defendants on the strength that Libbey was
more than a special partner; that no credit had been given to the
firm on the faith that Libbey sustained any other relation to it;
that Libbey had lost his special capital, and that they had no
desire to make him pay more. It does not appear, however, from the
evidence that the defendants or their attorney communicated to the
plaintiffs the fact that Libbey had signed the instrument in
writing referred to in the fifth finding, or that he made any
statement as to Libbey's financial ability to pay the debts of said
firm. The plaintiffs at first refused, but about the 29th of
December, 1883, upon the receipt of the sum of
Page 132 U. S. 322
$7,275.15, which was 60 percent of their entire claim, they, by
their agent, Walter M. Smith, executed and delivered to the said
John J. Knickerbocker, the attorney for the defendants at Chicago,
an instrument in writing, as follows:"
" For and in consideration of the sum of seven thousand two
hundred and seventy-five and 15/100 ($7,275.15) dollars to us in
hand paid by John J. Knickerbocker, of Chicago, Ill., the receipt
whereof is hereby acknowledged and confessed, we have sold,
assigned, transferred, and delivered, and do hereby sell, assign,
transfer, set over, and deliver, to said Knickerbocker, his heirs,
executors, administrators, and assigns, the above and foregoing
claim in our favor and against the late firm of Cleaveland,
Cummings & Woodruff, and all other claims and demands which we
now have, or might or could have, against the said Cleaveland,
Cummings & Woodruff, by reason of the happening of any matter
or thing from the beginning of the world to the day of the date
hereof, without recourse to us, and authorize and empower said
Knickerbocker to sue for, collect, settle, compound, and give
acquittance therefor as fully as we could do in person."
" In witness whereof we have hereunto set our hand and seal this
29th day of December, 1883."
"GEORGE C. RICHARDSON & Co. [Seal]"
"Per WALTER M. SMITH [Seal]"
"Attached to said instrument are the following:"
"Chicago, Sept. 15, 1883"
" Four months after date, we promise to pay to the order of
ourselves, one thousand three hundred and forty-seven 99/100
dollars at the Mechanics' National Bank, N.Y. value received."
" Due Jan'y 18, 1884."
" $1,347.99 CLEAVELAND, CUMMINGS & WOODRUFF"
"[Endorsed] 'CLEAVELAND, CUMMINGS & WOODRUFF'"
"Chicago, Sept. 15, 1883"
" Four months after date, we promise to pay to the order of
ourselves one thousand four hundred and twenty-one dollars
Page 132 U. S. 323
and 41/100 at the Mechanics' National Bank, N.Y., value
received."
" Due Jan'y 18, 1884"
" $1,421.41"
"[Endorsed] 'CLEAVELAND, CUMMINGS & WOODRUFF'"
"
Mess. Cleaveland, Cummings and Woodruff to"
"
George C. Richardson & Co., debtors"
1883
Aug. 28. To mdse., 60 days, Sept. 15 . . . . $ 333.94
29. " " " . . . . 853.79
" " " " . . . . 156.06
30. " " " . . . . 859.35
" " " " . . . . 4,783.65
Sept. 14. " " " . . . . 324.74
15. " " " . . . . 227.17
" " " " . . . . 525.33
Oct. 24. " " Nov. 1 . . . . 1,291.83
---------
$9,355.86
"And Charles W. Woodruff, one of the said defendants at the same
time, and as part of the same arrangement, delivered to the said
agent of the plaintiffs an instrument in writing as follows,
viz.:"
" John J. Knickerbocker. Jesse Holdom. Knickerbocker &
Holdom, attorneys at law, 164 La Salle St."
"Chicago, _____, 188_"
" In consideration of a compromise this day made by Messrs. Geo.
C. Richardson & Co. and Messrs. Jay, Langdon & Co., of New
York city, of their respective claims against the late firm of
Cleaveland, Cummings & Woodruff, of Chicago, Ill., the said
Cleaveland, Cummings & Woodruff stipulate and agree not to pay
voluntarily to any of their creditors holding claims in excess of
one thousand dollars, to exceed 60 percent on the dollar in
settlement: providing, however, that the payment of attorney's fees
and court costs, in all cases
Page 132 U. S. 324
where suits have been heretofore or may hereafter be commenced,
shall not be considered as an evasion or violation of this
agreement."
"CLEAVELAND, CUMMINGS & WOODRUFF. Dec. 29th, 1883"
"10. In April, 1884, all the mercantile debts of Cleaveland,
Cummings & Woodruff had been settled at sixty cents and
released except about $88,000. The firm of Vietor & Achelis had
not released their claim, but had brought a suit by attachment
thereon against James O. Cleaveland, Cornelius B. Cummings, Charles
W. Woodruff, and Washington Libbey which was about to be tried. The
attorney of Cleaveland, Cummings & Woodruff paid to Vietor
& Achelis sixty cents on the dollar of their claim, who
thereupon released their said claim, but at the same time, said
attorney of Cleaveland, Cummings & Woodruff gave his check,
which was afterwards paid, to the attorneys of Vietor &
Achelis, for twenty-five percent on the dollar of said claim, and
said attorneys remitted twenty of said twenty-five percent to
Vietor & Achelis. This payment to the attorneys of Vietor &
Achelis was a cover under which Vietor & Achelis were to and
did receive on their claim more than 60 percent, and such payment
was made, after Vietor & Achelis had refused to take 60
percent, by agreement between the attorneys of Cleaveland, Cummings
& Woodruff and Vietor & Achelis that Vietor & Achelis
should receive eighty percent."
"11. The amount due on the original claim is $4,850.10, and the
interest thereon from December 29, 1883, to April 14, 1886, is
$67.35; making $5,529.45 in all."
Thereupon a judgment was entered, which states that the court
finds the issues for the plaintiffs and assesses their damages at
$5,529.45, and overrules a motion by the defendants for a new trial
and orders that the plaintiffs recover from the defendants
Cleaveland, Cummings, and Libbey, survivors of Cleaveland, Cummings
& Woodruff, $5,529.45 damages and $147.80 costs. To review this
judgment, the defendants have brought a writ of error. There is a
bill of exceptions, which states that both parties
Page 132 U. S. 325
adduced evidence tending to prove the issues on their respective
sides; that when the written paper dated October 30, 1883, set
forth in the fifth special finding, was offered in evidence the
defendants objected to its introduction on the ground that it was
incompetent and irrelevant, but the court overruled the objection
and admitted the paper in evidence, and the defendants excepted;
that the plaintiffs also offered in evidence the paper dated
December 29, 1883, signed "Cleaveland, Cummings & Woodruff,"
set forth at the close of the ninth special finding; that the
defendants objected to its introduction on the grounds of variance
and incompetency, but the court overruled the objection and
admitted the paper in evidence, and the defendants excepted; that
evidence was introduced touching the matters named in the tenth
special finding, and the defendants adduced evidence tending to
show that no payment was made to either of the mercantile creditors
by preference, or with a view to discriminate between one of the
said creditors and another; that the defendants objected to the
evidence tending to show that Vietor & Achelis were paid more
than 60 percent on the ground that such payment, if made as claimed
by the plaintiffs, was not made voluntarily; that the court
overruled the objection and held that, under the contract of
December 29, 1883, signed "Cleaveland, Cummings & Woodruff,"
any payment over 60 percent was made voluntarily, unless such claim
had gone to judgment, that the defendants excepted to such ruling,
and that it appeared from the evidence that the borrowed money was
paid in full during November, 1883, and each of the mercantile
creditors received 60 percent on their claims from Cleaveland,
Cummings & Woodruff.
Page 132 U. S. 326
MR. JUSTICE BLATCHFORD, after stating the case as above
reported, delivered the opinion of the Court.
It is contended for the plaintiffs that their assignment to
Knickerbocker was not binding upon them because the defendants did
not disclose to them the financial standing of Libbey nor the fact
of his liability as a general partner in the firm of Cleaveland,
Cummings & Woodruff nor the liability in regard to the debts of
that firm assumed by him by the paper set forth in the fifth
finding. But the ninth finding sets forth fully what took place
between Knickerbocker and the plaintiffs on the visit of the former
to the latter at New York to propose to them to accept from the
defendants sixty cents on the dollar. That finding states that
Knickerbocker explained the situation of the assets of Cleaveland,
Cummings & Woodruff, saying that the borrowed money was to be
paid in full, which would not leave enough to pay quite 60 percent
of the remaining indebtedness (a fact which was true, according to
the seventh finding); that Libbey's liability as a member of the
firm was spoken of, when Knickerbocker stated to the plaintiffs
that he
Page 132 U. S. 327
had not had opportunity to examine into the question, and was
not in possession of information to know whether Libbey could make
a successful defense or not, but that it was a question they could
investigate for themselves, and that one of the plaintiffs said to
Knickerbocker that they had sold no goods to the defendants "on the
strength that Libbey was more than a special partner," that no
credit had been given to the firm on the faith that Libbey
sustained any other relation to it, that Libbey had lost his
special capital, and that they had no desire to make him pay
more.
The ninth finding does not state that Knickerbocker was in
possession of any information such a that which he stated to the
plaintiffs he was not in possession of. The ninth finding further
says that it does not appear from the evidence that the defendants
or Knickerbocker communicated to the plaintiffs the fact that
Libbey had signed the paper set forth in the fifth finding, or that
Knickerbocker made any statement as to Libbey's financial ability
to pay the debts of the defendants' firm. It is not shown that
Knickerbocker made a false answer to any inquiry put to him by the
plaintiffs.
It thus appears that Libbey's liability as a member of the
defendants' firm was spoken of between Knickerbocker and the
plaintiffs; that Knickerbocker made to them no representation that
Libbey was not liable, but substantially stated to them that the
question of Libbey's liability was a matter to be examined into,
and one which they could investigate for themselves; that the
plaintiffs communicated to Knickerbocker at the time the idea that
in their dealings with the defendants they had always acted on the
view that Libbey was only a special partner, and that Knickerbocker
did not state to the plaintiffs that Libbey was not financially
able to pay the debts of the defendants' firm.
The exact date of this interview in New York between
Knickerbocker and the plaintiffs does not appear, but it would seem
from the eighth and ninth findings that an interval of between five
and six weeks must have elapsed between the time of that interview
and the 29th of December, 1883, when the assignment to
Knickerbocker was executed.
Page 132 U. S. 328
It is not found by the court that it was known to the
defendants' firm or to Libbey that the latter was not merely a
special partner, nor is it found that the defendants were guilty of
any fraudulent concealment. The suggestion by Knickerbocker to the
plaintiffs that there was a question as to the liability of Libbey
as a general partner was full enough to put them on inquiry, and to
call upon them to investigate the question for themselves during
the five or six weeks that elapsed before they made the assignment
to Knickerbocker.
As to the statement in the ninth finding that it does not appear
that the defendants or Knickerbocker communicated to the plaintiffs
the fact that Libbey had signed the paper set forth in the fifth
finding, it is to be remarked that that paper sets forth that the
liabilities of the defendants' firm were to be paid by the proposed
new firm of Cummings, Woodruff & Brown, and that the sixth
finding states that it was contemplated, on the day that paper
bears date, that a new firm would be formed composed of Cornelius
B. Cummings, Charles W. Woodruff, and Swan Brown, as general
partners, and Washington Libbey, as special partner, but that such
new firm was never formed, although Cleaveland supposed it was so
formed when he sold out to Libbey his interest in the firm of
Cleaveland, Cummings & Woodruff on the day that paper was
signed. As the new firm was never formed, that paper had no
effective force at the time of the interview between Knickerbocker
and the plaintiffs or at the time the assignment to Knickerbocker
was made. Besides, Libbey was to be only a special partner in the
new firm.
We are unable to see in this case any breach of good faith on
the part of the defendants or any misrepresentation as to the
assets of their firm or any false answer by Knickerbocker to any
question put to him by the plaintiffs.
It is found as a fact by the court below that Cleaveland,
Cummings, and Libbey, with one Shelley, in December, 1881, formed a
limited co-partnership under the statute of Illinois, under the
name of "Cleaveland, Cummings & Shelley," in which Libbey was a
limited partner, having put in $50,000 of capital; that, about the
1st of May, 1883, Shelley went out of
Page 132 U. S. 329
the firm, and Woodruff came into it, the firm being then called
"Cleaveland, Cummings & Woodruff;" and that that firm intended,
as between its members, to do business as a limited partnership,
but did not take the steps required by law to make itself a limited
partnership under the statute of Illinois. It is not found that
either Cleaveland or Cummings or Woodruff or Libbey supposed at any
time that the co-partnership was other than a limited one, and it
distinctly appears by the ninth finding that the plaintiffs, in
selling their goods to the defendants, all the time regarded Libbey
as only a special partner.
In a case very like the one before us,
Dambmann v.
Schulting, 75 N.Y. 55, it was held that a party can commit a
legal fraud, in a business transaction with another only by
fraudulent misrepresentations of fact or by such conduct or
artifice, for a fraudulent purpose, as will mislead the other
party, or throw him off his guard and cause him to omit inquiry or
examination which he would otherwise make; that where there is no
such relation of trust or confidence between the parties as imposes
upon one an obligation to give full information to the other, the
latter cannot proceed blindly, omitting all inquiry and
examination, and then complain that the other did not volunteer to
give the information he had; that ignorance of a fact extrinsic and
not essential to a contract, but which, if known, might have
influenced the action of a party to the contract is not such a
mistake as will authorize equitable relief, and that as to such
facts, the party must rely upon his own vigilance and, if not
imposed upon or defrauded, will be held to his contract. That was
an action brought to set aside a release under seal on the ground
that it was inoperative because obtained by misrepresentation and a
concealment of material facts. It was not found that there was any
fraudulent misrepresentation, and there was none in fact and there
was no misrepresentation of any kind, nor was there any fraudulent
concealment of any facts; nor was any statement or artifice used to
throw off from his guard or to entrap or mislead the party
executing the release. The court says in its opinion:
"A party buying or selling property or executing instruments
must, by inquiry or
Page 132 U. S. 330
examination, gain all the knowledge he desires. He cannot
proceed blindly, omitting all inquiry and examination, and then
complain that the other party did not volunteer all the information
he had."
These views were reaffirmed when the case was again before the
court in 85 N.Y. 622.
In
Graham v. Meyer, 99 N.Y. 611, it was held that a
compromise made by a debtor with his creditor cannot be assailed on
the ground that the debtor omitted to disclose his financial
condition, and that where he is not questioned in regard thereto,
and does nothing to mislead, he is not bound to make any such
disclosure. It was claimed in that case that although there was a
failure to show that any fraudulent representations were made on
the part of the debtor to induce the compromise, yet it ought to be
set aside on account of the undue concealment by the debtor and his
attorney of the true condition of the estate of the debtor, which
he had assigned under a general assignment for the benefit of his
creditors. The court said:
"But the defendant was not bound to make any disclosure of his
financial condition. He was not asked to make any. He made no
misrepresentations, and did nothing to mislead Graham or prevent
him from inquiring or to throw him off from his guard. They
negotiated at arms' length. The defendant was in no trust or
confidential relation with him. It is true that he had made an
assignment, and had thereby created a trust for Graham's benefit.
But he was not the trustee. He bore the simple relation to him of
debtor, and he had the right to make the best compromise with him
he could, using no fraud or culpable artifice to accomplish the
result. Each party to such a compromise has the right to the
advantage which his superior skill, foresight, and knowledge may
give him. The business of the world can be conducted upon no other
basis. If either party desires information from the other, he must
ask for it, and then he must not be misled or deceived by answers
given. These views are fully sustained by the case of
Dambmann
v. Schulting, 75 N.Y. 62, and the court below was not mistaken
in holding that that case was a controlling authority for the
decision it made. The principles of law laid down in that case were
in no way impugned
Page 132 U. S. 331
or questioned when the case again came before this Court in 85
N.Y. 622, but they were reaffirmed."
As to Libbey's financial ability, the seventh finding states
that he "was reputed to be a man of large wealth," not that he was
a man of large wealth. The failure of Knickerbocker to make any
statement as to Libbey's financial ability to pay the debts of the
defendants' firm cannot give rise to any inference of concealment
or fraud, because the importance of Libbey's financial ability
depended entirely upon whether he was a special or a general
partner, and the statement made by one of the plaintiffs to
Knickerbocker that they had acted in their dealings with the
defendants' firm on the view that Libbey was only a special
partner, joined with the fact that Knickerbocker distinctly
suggested to them an investigation of the question as to the
character of Libbey's liability as a member of the firm, shows that
there was no duty on the part of Knickerbocker, as representing the
defendants, to make any statement as to Libbey's actual or reputed
financial ability.
The only remaining question is as to whether the defendants
violated the agreement made by them in the paper signed in their
firm name, dated December 29, 1883, set forth in the ninth finding,
"not to pay voluntarily, to any of their creditors holding claims
in excess of one thousand dollars, to exceed 60 percent on the
dollar in settlement."
It appears by the tenth finding that in April, 1884, all the
mercantile debts of the defendants' firm had been settled at sixty
cents and released except about $88,000; that the firm of Vietor
& Achelis had not released their claim, but had brought a suit
by attachment thereon against Cleaveland, Cummings, Woodruff, and
Libbey, which was about to be tried; that the attorney of the
defendants' firm paid to Vietor & Achelis sixty cents on the
dollar of their claim, which they thereupon released, and that at
the same time said attorney gave his check, which was afterwards
paid, to the attorneys of Vietor & Achelis, for 25 percent on
the dollar of said claim, and the latter attorneys remitted 20 of
said 25 percent to Vietor & Achelis; that this payment was a
cover under which Vietor & Achelis were to, and did, receive on
their claim
Page 132 U. S. 332
more than 60 percent, and such payment was made after Vietor
& Achelis had refused to take 60 percent, by agreement between
the attorneys of Cleaveland, Cummings & Woodruff, and of Vietor
& Achelis, that the latter should receive 80 percent.
We are of opinion that the facts set forth in the tenth finding
fail to show that the payment of the 20 percent to Vietor &
Achelis was a voluntary payment. They had brought a suit by
attachment on their claim against their debtors, and the suit was
about to be tried. There was evidently no defense to it, and a
judgment for the full amount of it would be recovered, and it was
secured by attachment. A settlement of the entire claim for 80
percent would be a saving of 20 percent, and would to that extent
increase the assets of the firm, which were not quite sufficient to
pay the sixty cents on the dollar which the firm proposed to pay on
the mercantile debts, and which they had paid, by April, 1884, and
prior to the transaction with Vietor & Achelis, on debts
amounting to $373,000. Under these circumstances, the payment of
the 20 percent to Vietor & Achelis was not voluntary.
It appears by the bill of exceptions that the defendants
objected to the evidence tending to show that Vietor & Achelis
were paid more than 60 percent, on the ground that such payment was
not made voluntarily, but that the court held that under the paper
of December 29, 1883, signed by Cleaveland, Cummings &
Woodruff, any payment over 60 percent was made voluntarily unless
the claim had gone to judgment. If the claim had gone to judgment,
the payment over 60 percent would have been 40 percent, and we do
not see that the payment of the 20 percent at the time it was made
was any the less involuntary than would have been the payment of
the 40 percent after judgment had been obtained.
In
Carey v. Barrett, 4 C.P.D. 379, certain creditors of
the defendant signed an agreement, to which the plaintiff assented,
setting forth that they, in consideration of ten shillings in the
pound on their respective debts, agreed to accept the same in
discharge of those
Page 132 U. S. 333
debts, "the whole of the creditors receiving not exceeding a
like sum in discharge of their debts." At the time the agreement
was entered into, it was known that the debtor was being sued by a
creditor for a sum of money which was afterwards paid in full the
day before the cause was ripe for trial. In consequence of this,
the plaintiff sued the defendant to recover a part of his unpaid
debt. The court (Lord Coleridge, C.J., and Lindley, J.) held that
the agreement of compromise was limited to the creditors who signed
it and that even if that were not so, the payment to the creditor
who was paid in full, being made under pressure, and not in
pursuance of a prior arrangement to give him a preference, did not
render the transaction void. Lord Coleridge said that the payment
in full "was not the less a payment under process of law because
the debtor did not wait to incur the expense of a judgment and
execution."
In
Radich v. Hutchins, 95 U. S.
210,
95 U. S. 213,
it is laid down that where there is an actual or threatened
exercise of power possessed over the property of another by the
party exacting or receiving a payment, there is coercion or duress
which will render a payment involuntary, and the case of
Mayor
v. Lefferman, 4 Gill. 425, is cited, which holds that when a
payment is made to emancipate property from an actual and existing
duress imposed upon it by the party to whom the money is paid, the
payment is to be regarded as compulsory.
The judgment is reversed, and the case is remanded to the
circuit court with a direction to enter judgment for the defendants
on the findings of fact.
MR. JUSTICE MILLER dissented.
MR. CHIEF JUSTICE FULLER, having been of counsel in this case,
did not sit in it or take any part in its decision.
