Argued April 5, 1877
Decided April 17, 1877
William Strauss, for the appellants. Cornelius A. Runkle, for the respondents.
The agreement bearing date the twelfth day of June, 1873, between the creditors of Hoffman Weinberg and Weinberg Brothers, was a sale and transfer of their claims upon the payment of twenty-five per cent. of the same in cash, and the giving of their notes for the same percentage endorsed by Hoffman and Weinberg, as provided. The subsequent agreement of July 21, 1873, recited that Weinberg Brothers had agreed to render services in effecting a settlement of the co-partnership debts of the firm of Hoffman Weinberg, and that in consideration of such agreement and of such services, Hoffman Weinberg agreed that if said Weinberg Brothers shall settle the co-partnership debts of said firm of Hoffman Weinberg, and obtain a release from the creditors of said firm, that Hoffman Weinberg will assign and sell to Weinberg Brothers all their stock of goods. Weinberg Brothers paid to the plaintiffs the amount stipulated in the agreement of the creditors, and there was proof to show that some of the creditors, including two who had signed the agreement first entered into, were paid a larger sum. The first agreement was an absolute sale of the plaintiffs' demand, and the second was made over thirty days afterwards, as therein expressed, in consideration of the prior agreement and services rendered in making the settlement, and after the transaction with the creditors was closed. The testimony does not show an intention to establish a fund to pay all the debts, or to assume the payment of the same absolutely or otherwise than as the purchaser and owner under a valid sale and transfer, which conferred a perfect title to the purchaser of the same. The contract was a mere agreement by a creditor with a third person to accept a less sum than the demand in satisfaction of it, which the law regards as valid ( Babcock v. Dill, 43 Barb., 584; Le Page v. McCrea, 1 Wend., 164-172), and is not brought within the principle that an action lies on a promise made for a valid consideration to a third person for the benefit of another. (See Lawrence v. Fox, 20 N.Y., 268.) If the action can be upheld against Weinberg Brothers, it must be on the ground only that they received money or property sufficient to pay the whole debt, and held the same for the benefit of the plaintiffs. There are difficulties in thus sustaining it which we think cannot be overcome. It is not shown what was the value of the goods sold and transferred, and Weinberg Brothers may have paid for anything which appears already under the first agreement more than they received in value from the property sold them by Hoffman Weinberg. It should have been proved at least that they had property or funds more than sufficient to liquidate the debt of the plaintiffs before they could be called to account at all.
This defect in the evidence would be fatal to a recovery, even if a liability was otherwise established. The allegation of fraud is not established by the evidence, and it is nowhere shown that any false representation was made in obtaining a transfer of the property, and the case is not brought within the rule that false representations which affect the price of property, and are relied upon, render the contract void. ( Smith v. Countryman, 30 N.Y., 655; Van Epps v. Harrison, 5 Hill, 63; Hammond v. Pennock, 61 N.Y., 151.) Nor is fraud to be inferred as a conclusion of law, unless the facts clearly point in that direction. Weinberg Brothers are not shown fraudulently to have induced any one to have signed the agreement, and the payment afterwards of more than the creditors stipulated, of itself, and independent of proof that they had realized more than enough to pay the price agreed upon, does not establish fraud. They may have paid more than they actually received in value, and there should at least have been some proof of the value before it can be claimed that there was fraud. The agreement first entered into contained no condition that all the other creditors consent to take the same percentage, and hence is not brought within the rule laid down in Durgin v. Ireland, (14 N.Y., 322-325). And the principle there stated has no application. Nor is the case within the doctrine which is applicable to compromises and compositions made by the debtor with the creditor, where one creditor is prohibited from securing any undue advantage over another. While a deed of composition only extinguishes the debt when it is carried into effect, no such rule can be invoked when the debt has been assigned and transferred to another person for a valuable consideration, as was the case here. We concur with the views expressed in the opinion of the General Term, that the transaction as one of purchase and sale in which the liability of the debtor passes from the original creditor to the purchaser, and the debt is not compromised in such manner that the creditor can enforce any balance of the indebtedness by simply proving that some other creditor received more than himself upon a sale of his claim. We are also of the opinion, independent of the views expressed, that the agreement of Weinberg Brothers with Hoffman Co. in substance was an undertaking of the former to procure a settlement of the debts of the latter, and gave no right of action in favor of the plaintiff or any other creditor against Weinberg Brothers.
The findings of the referee were insufficient to uphold the judgment, and the General Term were right in reversing the same.
The order must therefore be affirmed, and judgment absolute for defendants on stipulation with costs.
All concur, EARL, J., absent.
Order affirmed and judgment accordingly.