Opinion
Argued April 21, 1890
Decided June 3, 1890
Nathaniel C. Moak for appellant.
M.M. Budlong for respondents.
The General Term held that the sum secured by the Parshall mortgage was discharged by the composition agreement and deed of release. And that the discharge having been voluntary, it left no moral obligation on the part of the debtor sufficient to support a promise of payment. ( Zoebisch v. Von Minden, 47 Hun, 213.)
Such holding was based upon the authority of Stafford v. Bacon (1 Hill, 532), where it is held that a moral obligation remains which will support a subsequent promise to pay, when the discharge of a creditor is by compulsion of law and, therefore, involuntary, but not where the discharge is voluntary.
Whether the distinction thus made by Judge COWEN should be followed need not be determined here, because the facts found present for consideration a different proposition.
If Von Minden had paid the thirty per cent of the sum of $777.59 which plaintiff promised by the composition agreement to accept in full, and thereafter had voluntarily given the mortgage in controversy for the balance of seventy per cent, about the release of which amount there was neither dispute nor opportunity for difference, then would be presented the question upon which the learned General Term passed. But in this case there was previous to the 29th day of July, 1880, an open account existing between the plaintiff individually and Von Minden, and another between the plaintiff as assignee and Von Minden, which, after considerable dispute, was, at the date last mentioned, settled, and the mortgage in controversy given for a portion of the amount which the parties found, and agreed to be due and owing, to the plaintiff.
The bond and mortgage having been given upon the settlement and adjustment of a dispute between plaintiff and Von Minden, the inquiry is presented whether they must be held to be founded on a legal consideration and, therefore, valid.
"In the absence of fraud or duress, a settlement of a disputed claim preferred in good faith by a promisee against a promisor, is a legal consideration for a promise; and the fact that the promisor had a legal defense to the claim settled is no defense to an action on the new promise." ( Wahl v. Barnum, 116 N.Y. 87. )
The defendants neither allege in their answer nor assert by proof that there was any mistake in the account as presented and settled; or that the settlement was induced in whole or in part by fraud or duress on the part of the plaintiff.
Indeed, the only issue tendered by the answer of Von Minden is that the plaintiff, by reason of the composition deed, became bound to accept from him thirty cents on a dollar for the entire indebtedness, including the Parshall bond and mortgage, and that by reason thereof he was not indebted in any sum to the plaintiff at the time of the giving of the bond and mortgage in question. The position of the defendant, therefore, as manifested by his pleading and subsequent conduct of the trial, is that as to one of the items of the account, which was the subject of controversy and subsequent settlement, there was no liability on his part; that as to it, he had a good defense. Assuming that he had a good defense to any claim based upon the Parshall mortgage at the time of the making of the settlement, and subsequent execution and delivery of the bond and mortgage in pursuance thereof, nevertheless he is without defense to an action based upon the promise resulting from the settlement in the absence of mistake, fraud or duress, if the claim, although doubtful, was preferred in good faith by the plaintiff. As we have already said, there is no pretext that, in the presentation or settlement of the account, there was any mistake, fraud or duress. If, then, the account was presented in good faith, and it constituted even a doubtful claim against the defendant, it furnished a good consideration to support the settlement and subsequent promise based in part thereon. ( Crans v. Hunter, 28 N.Y. 394.)
It is said that the resignation of a plausible or colorable claim by a settlement between the parties, constitutes a good consideration. ( White v. Hoyt, 73 N.Y. 505; Goldsmith v. Glatz, 31 N.Y.D. Reg. 689.)
All the circumstances surrounding the transaction point to the good faith of the plaintiff in insisting that the Parshall mortgage was a valid claim against Von Minden.
Besides himself, there were three mortgage creditors in amounts varying from $2,500 to $11,000. They were not asked to and did not participate in the composition agreement. The plan, of which the defendant had full knowledge, was to arrange a compromise with the unsecured creditors, and, as the plaintiff was also an unsecured creditor in a certain amount, he signed the agreement specifying the amount of his claim. And down to the time of the presentation of his account, the defendant had not tendered or offered to pay him thirty cents on a dollar on account of the indebtedness secured by a mortgage, nor in any way suggested that he was not legally entitled to the full amount, as well as the other mortgage creditors. Indeed, he had reason to believe that in any event he had certain legal remedies against the defendant which might secure to him his demand.
If then it appears that his claim furnished opportunity for controversy, although a favorable result could not have been safely predicted, or the chance of success seemed to have been doubtful, the sufficiency of the consideration required to support the bond and mortgage given, on the settlement, must be deemed established.
Was not the plaintiff's claim at least a doubtful one? He did not intend to include the bond and mortgage in the composition agreement and release, and the defendant so understood it. The referee has so found. As to these parties, therefore, the agreement and release were executed under mistake.
The plaintiff, therefore, had some ground to believe that an action in equity might be maintained to so reform the release as that it should not discharge the Parshall bond and mortgage.
The other parties to such instruments may have defended, and perhaps successfully, had such an action been brought. Whether they would have attempted a defense, or if they had, what would have been the result, there is nothing in the record to indicate.
Again, it is held that where a debtor fails to pay the percentage stipulated for in a composition agreement within the time specified therein, the original debt is revived and the creditor may collect the entire amount. ( H.N.F. Bank v. May, 29 Hun, 404; 99 N.Y. 671.)
At the time of the presentation of the account, more than a year had elapsed since the date fixed by the agreement for final payment of the notes to be given. But, the referee finds that the defendant had not delivered or tendered to the plaintiff any notes whatever on account of the indebtedness secured by the Parshall mortgage. That situation remained unchanged down to the time of settlement, which resulted in the execution and delivery of this mortgage. According to the findings before us, therefore, it would appear that the plaintiff had reason to believe that even if the Parshall bond and mortgage were included in the release that the liability of the defendant had been revived by his failure to perform the agreement as to payment, and that an action could be successsfully maintained thereon upon the authority of H.F.N. Bank v. May ( supra).
The effect upon the release of defendant's agreement to pay one of his creditors more than the others need not be considered, as we think it already appears that the plaintiff had more than a mere colorable or plausible claim for the sum secured by the Parshall mortgage.
That at the least plaintiff is entitled in this action to have it regarded as a "doubtful claim." Such claim was not only included in the settlement made, but it was formally released by the satisfaction of the Parshall bond and mortgage. We are, therefore, led to the conclusion that the claims included in the adjustment and upon which the settlement was, after much controversy, based, were of such a character as to furnish a good consideration to uphold the promise given.
The separate defense interposed by Elizabeth J. Von Minden is without force. She not only expressly charged her separate estate, but in addition received a substantial consideration in the surrender of her indorsement on the $1,250 note and the release of part of the premises covered by the Parshall mortgage.
The order appealed from should be reversed, and the judgment entered upon the report of the referee affirmed with costs.
All concur.
Order reversed and judgment affirmed.