Chicora Fertilizer Co. v. Dunan

46 A. 347, 91 Md. 144, 1900 Md. LEXIS 37

• Court: Court of Appeals of Maryland
• Decided: April 27, 1900
• Status: Published

Opinions

McSherry, C. ].,

delivered the opinion of the Court.

This proceeding was commenced by a bill in equity to procure the specific performance of an agreement proposed on the third and accepted on the fifth day of December, eighteen hundred and ninety-eight, and thus concluded between Dunan, one of the plaintiffs, and the Chicora Fertilizer Company, through Wagener, its treasurer and agent. The decree of the Circuit Court of Baltimore City was in favor of the plaintiffs and the defendants have appealed. The facts, which it is necessary to state in order that the legal questions involved may be properly presented, are disclosed by the pleadings and the evidence, and are as follows : Dunan was indebted to the Chicora Company in a considerable sum for fertilizers purchased by him from it. When his payments fell due he was unable to meet them, and on June the twenty-second, 1898, a written agreement, under seal, was entered into between him and the company, whereby the sum of $5,089.98, part of the total indebtedness, was to become payable December the first, 1898, and the residue at later periods, which will be stated in a moment. As security for the payment of the first named sum Dunan delivered to the company bills receivablé — promissory notes owing to him — aggregating $4,872.32; and these were to. be collected by the company and applied to Dunan’s indebtedness. The remaining indebtedness, amounting to $6,088.62, was made payable in equal instalments to fall due on the first days of January, February, March, April and May, 1899. As collateral security for this sum Dunan transferred to the company two hundred and twenty-one shares of the capital stock of the Rasin Fertilizer Company,, and a claim of $3,333-33 which he held against the Chesapeake Guano Company. This stock had, however, been previously hypothecated to.several banks for $5,800 due by Dunan to the banks. The Chicora Company paid this indebtedness and accordingly took the stock as collateral for the $6,08.8.62 due to the company and for the $5,800 advanced by it to liberate the stock from the antecedent pledge to the banks.' The Chicora Company therefore held the stock as collateral for $11,888.62; but this stock by the terms of the agreement was not to be sold by the company before May the first, 1899. With the first part of the indebtedness practically settled by the transferred bills receivable, and not included in the $11,888.62 which formed the basis of the adjustment finally made.; and with no portion of the other indebtedness, which was secured by the pledge of the Rasin Company’s stock, yet due, Dunan met Wagener by appointment on December the third, 1898, in New York. At that interview this is what transpired, according to Dunan’s testimony: “ I met Mr. Wagener at the appointed time, and told him that I had a friend who would be willing to lend me $9,000 in full payment for the amount due him of $11,888.62, and that was the best settlement I could make for some time to come ; I told him that I was trying to get on my feet and would appreciate the settlement ; he said he could not accept it, and after some thought, made me a proposition back of a difference on the account of $2,000; I asked him if he would hold the proposition open until the 5th day of December, until I could submit the same, as I did not have the authority to accept that settlement, which he agreed to; then I left him.” Wagener’s version of what took place is as follows : “ I think he wanted me to reduce the account between twenty-five hundred and three thousand dollars on the whole claim; I finally agreed that if he could arrange with his friend or friends to settle the claim within $2,000, I was willing to lose $2,000 on the business to help him out.” The proposition of Dunan having been met by this counter-proposition from Wagener, Dunan returned to Baltimore and conferred with Mr. Lanahan, who was to furnish the $9,000 already alluded to ; and Dunan was finally authorized by Mr. Lanahan to telegraph Wagener accepting the proposal to abate the two thousand dollars and naming the fourteenth day of December as the time for payment. The telegram is in these words : “ My party accepts our transaction, will pay over money Wednesday, December 14th, for the two accounts, net nine thousand eight hundred and eighty-eight, less number of empty bags now on hand your works at five cents. This is agreeable to your proposition.” On the same day Wagener wrote in reply : “ Your two telegrams are to hand, and I will attend to the matter when I reach Charleston. 1 will leave here on Friday. Send me to Charleston a memorandum of bags. I presume you wish me to draw with securities attached to draft. ” This is the agreement which the Chicora Company afterwards refused to carry out; and it is to procure a decree requiring it to be specifically performed that the pending bill was filed.

The first question which arises is, whether this contract is valid and binding. Before, however, discussing that question the reasons assigned by the Chicora Company for its non-performance of the agreement will be stated and thus a connected narration of the facts will be preserved.

When this agreement of December the third and fifth was made, negotiations were pending, and had been pending some while before, between the Rasin Company, through Dunan, and the Virginia and Carolina Chemical Company, for the purchase, by the latter, of the real estate and factory of the former; and on December the second Dunan submitted to the Board of Directors of the Rasin Company a proposition for that purchase. A meeting of the Rasin Company stockholders was called to assemble on the twelfth of December to consider the proposal. Dunan was not aware when he made the agreement of December the third and fifth that this meeting had been called. He did not know whether the sale would be consummated or not. When the Rasin Company stock owned by Dunan was pledged to the Chicora Company it was worth, as was supposed, something over thirty dollars a share, though Mr. Lanahan had told Wagener, prior to the pledge being made, that the stock was worth considerably more, and Wagener considered it good collateral. On December the twelfth, the proposal of sale was accepted by the stockholders of the Rasin Company, and a price was obtained which made the stock worth sixty-two dollars a share when the Rasin Company went into liquidation. Dunan’s stock having been transferred to Wagener, the Chicora Company received, after the liquidation commenced, a dividend of thirty dollars per share on February the third, 1899 ; and as there were two hundred and twenty-one shares, it got in cash $6,630. This sum with the value of the bags belonging to Dunan and in the company’s possession, made $6,752.65. Deducting the $2,000 allowed by the agreement of December the third and fifth from the total indebtedness of $11,888.62 leaves $9,888.62, and subtracting from that the $6,752.65 just named, makes the amount due by Dunan $3,125.97. This sum the plaintiffs tendered themselves ready to pay, or to bring into Court to be paid, the Chicora Company. Because the Rasin stock became more valuable, by reason of the sale of the Rasin Company’s property, than it was when pledged, the Chicora Company refused to carry out the agreement of December the third and fifth, to abate two thousand dollars of its claim against Dunan ; and it is alleged that the failure of Dunan to communicate to Wagener, when that agreement was made, the fact that a proposal to purchase the Rasin Company property had been submitted, was such a concealment of a material circumstance which ought to have been disclosed, as to render the agreement for an abatement null and void. And this is the second legal question brought up by the record.

Something was suggested in the argument about Dunan having received a commission amounting to nearly six thousand dollars for effecting the sale of the Rasin Company’s property ; and it was contended that he ought also to have apprised Wagener of that; but we need only observe in relation to that subject that no part of that commission went to Dunan, because the whole of it was applied to the payment of a debt which he owed to another person. The commissions relieved him from that debt, but did not put him in funds, and of funds he was apparently greatly in need.

It is perfectly true that the interposition of a Court in granting relief by the enforcement of a contract is not a matter ex debito justitim ; but is one of sound judicial discretion controlled by established principles of equity. To warrant the Court’s interference, the terms of the contract must be fair at the time it was made, for it is immaterial that it has become less beneficial to one of the parties by force, of subsequent circumstances, unless the change is due to the fault of the party seeking to enforce it. Cochran v. Pascault, 54 Md. 18. It must be founded on an adequate consideration, and must be made under circumstances which favorably commend it. In every case the question must be whether the exercise of the -power of the Court is demanded to subserve the ends of justice, and unless the Court is satisfied that the agreement is right in all respects it refuses to interfere.

We come, then, to consider the two questions already-mentioned ; viz.-, whether the agreement of December the third and fifth was valid, because founded on a sufficient consideration ; and whether the silence of Dunan — his failure to voluntarily disclose what he knew in respect to the pending negotiations for the sale of the Rasin Company’s property — amounted to a fraudulent concealment, or if not fraudulent whether it constituted such a concealment ás will prevent the enforcement of the agreement in a-Court of Equity. There is a subsidiary inquiry relating to the sufficiency of the tender, but that will be considered later on.

Confessedly less money was to be paid under the agreement of December the third and fifth in settlement of the whole of Dunan’s indebtedness than was in fact due by him to the Chicora Company under the contract of June 22d. The payment of a less sum than is actually due, or an agreement to pay a less sum will not of itself, release the residue. Geiser v. Kershner, 4 G. & J. 305. And this 'is so because a mere agreement, without consideration, to accept a less sum than a debtor owes, and to accept it in full satisfaction of all that he does owe is simply a nudum pactum and cannot be enforced. But that is not the situation we are dealing with. We have here, it is true, an agreement to accept in full satisfaction a sum which is two thousand dollars less than the amount really due; but there is besides this a consideration underlying the agreement and beneficial- to the creditor which supports his promise to make the abatement. There is nothing unlawful, immoral or against public policy in a creditor agreeing to accept in full settlement less than is due by his debtor. Such an agreement is neither malum in se nor malum pro Mbitum. Like other ordinary, every day contracts it must not be inequitable in its terms and effects or a Court of Equity will not enforce it. It must have an adequate consideration to support it, and there must be a readiness and ability on the part of the debtor to perform his part of the undertaking. If these conditions or constituents exist there is no reason which can be suggested why a contract of the kind we now have before us should not be specifically enforced by a Court of Equity. That a distinct and definite agreement to abate two thousand dollars of the indebtedness was entered into conditionally on December the third, and was finally closed on the fifth, is abundantly clear from the evidence. The testimony of Dunan is explicit to this point. He made a different proposal, to be sure, but that was met by a counter-proposition which Dunan was unable, at the moment, to accept. When he subsequently saw Mr. Lanahan and procured authority to pay the larger sum demanded by Wagener, and to pay that sum in acceptance of Wagener’s offer, Dunan at once telegraphed his acceptance, designating the precise amount to be paid ; and Wagener wrote on the same day after the receipt of that telegram that he would attend to the matter when he reached Charleston. He did more : He requested Dunan to send a memorandum of the bags, which at an agreed value were to be taken in part payment, and he added, “I presume you wish me to draw with securities attached to draft.” These securities were the shares of Rasin Company stock and the account against the Chesapeake Guano Company. There is no uncertainty about this contract. It was a clear, express agreement to accept in settlement of the $11,888.62 indebtedness, the sum of $9,888.62 less the value of the bags owned by Dunan and then at the Chicora Company’s works. The telegram and letter of December the fifth in conjunction with the verbal testimony of Dunan and Wagener can mean nothing else. The contract being thus definite and definitely proved, is it inequitable in its terms and effect and was there a sufficient consideration to support it ?

Upon the surface, at least, there is nothing inequitable in the contract. A creditor has a perfect right to give up a part of his claim if he chooses to do so. It cannot be affirmed of a contract by which a creditor abates a part of his claim, that the fact of an abatement being made is, in itself, inequitable as respects the creditor who makes the abatement. If the contract was procured by fraud or deception then quite another question arises, which concerns, not the equitable or inequitable character of the contract, but its validity. Whether fraud or deception influenced the making of the agreement is a subject which will be discussed when we come to consider the second of the two questions which underlie this case. Was there an adequate 'consideration supporting the promise to abate? That is the inquiry which is now to be answered.

A consideration is “ any benefit to the promisor, or any loss, trouble or inconvenience to, or charge upon, the person to whom the promise is made. ” Emerson v. Slater, 22 How. 43. “ Either benefit to the promisor, or detriment to the promisee is sufficient.” Brantly, Con., 57. Accordingly it has been held by this Court that if in addition to the part payment of a debt there be some other collateral consideration, such as in law is sufficient to support a contract, then the agreement to relinquish the residue is not nudum pactum ; and the payment of less than the whole debt with the superaddition of such collateral consideration makes a good accord and satisfaction. A “ collateral or additional consideration may consist of anything ” said this Court, “ which would be a burden or inconvenience to the one party or a possible benefit to the other.” Maddux v. Bevan, 39 Md. 499; Booth v. Campbell, 1 5 Md. 569./In the case just referred to in 39 Md., a guaranty by a responsible party of a portion of the indebtedness of a debtor in failing circumstances was held to be a sufficient consideration to support an agreement by the creditor to relinquish the residue. The actual payment of the amount agreed to be paid by Dunan would have constituted a good accord and satisfaction if the collateral consideration relied on was sufficient to support the agreement; but the question is, not whether there has been an accord and satisfaction, but whether there was a valid consideration for the agreement of December the third and fifth ; and if there was, whether the failure of the creditor to perform his part of that agreement, by refusing to accept the money, precludes a Court of Equity from enforcing it. An agreement which is sufficient to support a plea of accord and satisfaction, when but part of a sum due has been paid and accepted in discharge of the whole, is an agreement founded on a valid consideration ; and it is obvious that the sufficiency of the agreement is altogether independent of the fact of payment. If then the agreement is binding after the payment of a less sum, but not because of the payment of a less sum, it is equally binding before payment, because founded on a consideration other than the payment; and a refusal of the creditor to perform that agreement cannot upon any known principle change it from a valid into an invalid agreement.

Now, the agreement, of December the’third and fifth, undoubtedly imposed an additional burden on the debtor, Dunan, and conferred a benefit on the creditor, the Chicora Company. It required Dunan to pay his indebtedness several . months before it was due, and it gave to the Chicora Company the advantage of receiving the amount agreed to be paid considerably in advance of the maturity of the debt, and enabled it to receive in cash and property what it consented to accept without being obliged to wait, under the contract of June 22d, until the first of May, 1899, before realizing on the collateral. This was an adequate consideration to support the promise to reduce the indebtedness to $9,888.62 as stipulated. The agreement to relinquish a part of the debt was therefore not nudum pactum. Such has been the distinct ruling of the Supreme Court in Very v. Levy, 13 Howard, 345. These were the facts. On March 3rd, 1841, Levy executed Ms writing obligatory for the sum of four thousand dollars bearing seven per cent interest, payable to Lindslay in six years after date, and secured the same by a mortgage on real estate. By assignment from Lindslay on March 25th, .1841, Very became the owner of the bond and mortgage. ■Four years before the bond fell due Levy agreed with Very to deliver to the latter within twelve months from March, 1843, jewelry at reasonable prices in satisfaction of the bond and mortgage, and actually did deliver part of the goods to the value of nearly nineteen hundred dollars, and was ready to deliver the remainder, which he kept on hand for the purpose. In April, 1848, after the maturity of the debt Very filed a bill to foreclose the mortgage securing .the bond, and Levy set up in defense the agreement for a ■settlement in jewelry. The Circuit Court of the United -.States, for the District of Arkansas, ascertained the amount .of goods necessary to satisfy the unpaid residue of the bond, and ordered the goods to be delivered to the complainant, on demand, in full satisfaction of the bond and mortgage, decreed the mortgage satisfied and directed the -complainant to pay the costs. This decree was affirmed by .the Supreme Court and in the course of its judgment it was said: “ That the agreement itself imports a consideration, deemed by the law valuable, there can be no doubt. An agreement to give a less sum for a greater, if the time of payment be anticipated, is binding; the reason being as ■expressed in Pennel's case, 5 Co. R. 117, that peradven•ture parcel of the sum before the day, would be more beneficial than the whole sum on the day. Coke's Lit., 212 b; Com. Dig. Accord, B. 2; Brooks v. White, 2 Met. 283.” Savage v. Everman, 70 Pa. St. 319; Lincoln Sav. Bk. v. Allen, 82 Fed. R. 148. It is needless to multiply citations ^-'Support of a proposition so- cleár on principle^.

Such a contract may unquestionably be enforced in equity. “ On the broad principle that what has been agreed to be done, shall be considered as done, the Court will treat the creditor as if he had acted conscientiously, and accepted in satisfaction what he had agreed to accept, and what it was his own fault only that he had not received.” Very v. Levy, supra.

Was Dunan under any legal obligation to disclose to Wagener the facts which he, Dunan, knew in regard to the pending negotiations for the sale of the Rasin Company’s property to the Virginia-and Carolina Fertilizer Company; and does his failure to disclose what he knew on that subject invalidate the agreement of December the third and fifth, or furnish a ground for a Court of Equity to deny specific performance of the contract ?

There was no false statement made by Dunan to Wagener, nor was there the suppression of a fact. He was asked no question which required him to divulge what he knew. He was simply silent. There is a distinction between the suppression of a fact and mere silence. Where there is an obligation to speak a failure to speak will constitute the suppression of a fact; but where there is no obligation to speak silence cannot be termed suppression. In Walters v. Morgan, 3 DeG. F. & J. 718, Lord Chancellor Campbell said: “ There being no fiduciary relation between vendor and purchaser in the negotiation the purchaser is not bound to disclose any fact exclusively within his knowledge which might reasonably be expected to influence the price of the subject to be sold.” In Laidlaw et al. v. Organ, 2 Wheat. 123, the facts were that the plaintiff, Organ, purchased from Laidlaw & Company one hundred and eleven hogsheads of tobacco on February 19th, 1815. On the night of the eighteenth some gentlemen brought, to New Orleans from the British fleet, tidings that a treaty of peace had been signed at Ghent by the American and British Commissioners. This news was communicated to the plaintiff on the morning of the nineteenth. Thereupon, though it was Sunday, the plaintiff called at once on one of the members of the firm of Laidlaw & Company, who was ignorant that peace between the United States and Great Britain had been concluded, and, without revealing to the vendors this information, purchased the tobacco at from thirty to fifty per cent less price than the article commanded as soon as the news of peace became generally known. There was no evidence tending to show that the plaintiff had asserted or suggested anything to the vendors calculated to impose upon them with respect to the news of peace, or to induce them to think or believe that it did not exist. Chief Justice Marshall said: “ The question in this case is whether the intelligence of extrinsic circumstances, which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor? The Court is of opinion that he was not bound to communicate it. It would be difficult to circumscribe the contrary doctrine within the proper limits, where the means of intelligence are equally accessible to both. But at the same time, each party must take care not to say or do anything tending to impose upon the other. ” See also Jackson v. Combs, 1 L. R. A. 742, and cases in note; 28 Am. & Eng. Ency. Law, 111; 14 Am. & Eng. Ency. L. (2nd ed.) 66. Chitty, J., after quoting from Watters v. Morgan, supra, the dictum of Lord Chancellor Campbell transcribed above, observed : “ That is a correct statement of the law, and one which, it appears to me, is not to be confined to the sale of lands or goods, but is of general application, except, perhaps in the case of contracts requiring uberrima fides, which involve a duty to make full disclosure.” Turner v. Green, 2 Ch. (1895) 205. In Turner v. Green, supra, the precise question arose which is involved in the case at bar. There was an application in that case to enforce the terms of a contract for the compromise of an action; and,the defendant resisted the application on the ground that the contract was not binding on him, because when the contract for the compromise was made, the solicitor for the plaintiff did not disclose a material fact which he knew, but which the defendant did not know, and which if he had known would have prevented him from making the contract. It appeared that a suit was instituted, wherein the plaintiff claimed an account from the defendant as his alleged manager, and a declaration that, under the circumstances, the defendant was not entitled to exercise a certain option of purchase. On January the eleventh, 1895, the summons came on for hearing before the chief clerk in London, who after going fully into the evidence was of opinion that the summons ought to be dismissed with costs ; the summons was then adjourned to the Judge at the instance of the plaintiff. At 3.30 p. m. in the afternoon of the same day, Fowler, a member of the firm of solicitors acting for the plaintiff, arranged the terms of a compromise of the action with the defendant and his solicitors at Portsmouth. When this compromise was entered into and signed by the defendant, the result of the proceedings before the chief clerk, and which was in the defendant’s favor, had been telegraphed to Fowler, but was not known either to the defendant or to his solicitors. The information contained in the telegram was not communicated by P'owler to the defendant or his solicitors at this interview. The defendant alleged that had he known the result of the proceedings before the chief clerk he would not have agreed to the compromise, and declined to be bound by the compromise. The proceeding was treated as though it were an action for specific performance of the agreement to compromise. “ The question thus raised,” said Justice Chitty, “ is not one of fraud, but one as to the doctrine of the Court in granting relief against a claim for specific performance, where the Court has a discretion; but that is, of course, a judicial discretion, which cannot be exercised arbitrarily, but only according to settled principles laid down for it by the authorities. I will take the proposition laid down by Sir Edward Fry in his book (3rd ed.,page 325, par. 705), as a good exposition of the law ; there he says: ‘ Mere silence as regards a material fact which the one party is not under an obligation to dis close to the other cannot be a ground for rescission or a defense to specific performance.’ It cannot be contended that Fowler was under any obligation to disclose the result of the telegram, therefore, Mr. Butcher, who argued his case with skill and ingenuity, was driven to say that it was a shabby trick on Fowler’s part not to disclose the information he had received, and that such conduct was not consistent with the usual practice of solicitors of high standing in their dealings with one another, who , would ordinarily have disclosed any such circumstance; therefore, he argued, that specific performance ought to be refused, because the course adopted in this case would be generally condemned by high-minded men. I find myself unable to act judicially on any such ground. Had there been any overreaching by Fowler, or any misleading conversation with reference to the proceedings in London before the chief clerk, at the time the terms of the compromise were settled, a very different case might have been presented on behalf of the defendant, and in such a case an obligation might have arisen binding Fowler at law or in equity to make a disclosure of all he knew; but I am satisfied on the evidence that no conversation on the subject took place. * * * I come to the conclusion that Mr. Fowler’s silence, in the circumstances of this case, is not sufficient ground for my refusing specific performance ; and I shall make the order accordingly.”

“ Simple silence,” again quoting from Walters v. Morgan, supra, “ does not amount to legal fraud, however it may be viewed by moralists. But a single word, or (I may add) a nod, or a wink or a shake of the head, or a smile from the purchaser intended to induce the vendor to believe the existence of a non-existing fact, which might influence the price of the subject to be sold, would be sufficient ground for a Court of Equity to refuse a decree for a specific performance of the agreement.” Now, these are all affirmative acts; but Dunan did nothing affirmative. He simply said nothing. He was under no obligation to speak. He occupiedjno fiduciary relation. He and the company held the relation of debtor and creditor and that is not a relation of confidence. 14 Am. & Eng. Ency. Law, (2nd ed.) 72. As, then, Dunan was under no obligation to disclose what he knew, particularly since, according to Wagener, it was notorious in Baltimore, before the agreement of December the third and fifth was made, that negotiations were in progress which were likely to increase the value of the pledged stock; Dunan’s failure to reveal the information which he had was neither a fraudulent concealment that vitiated the agreement, nor a suppression of fact that will stay the hand of a Court of Equity from specifically enforcing the agreement.

(Decided April 20th, 1900.)

On the question of tender it is only necessary to say that the technical rules governing pleas of tender in actions at law are inapplicable in equity. “To entitle the purchaser to demand a deed it is sufficient that he is ready and offers to comply with the contract on his part, and has the ability to perform it.” Smoot et al. v. Rea & Andrews, 19 Md. 406; Maughlin v. Perry & Warren, 35 Md. 358. The bill avers that the plaintiffs “ now tender themselves ready, willing and able to pay the said Chicora Company,” the designed amount due, “ or to bring the same into Court to be paid to the said Chicora Company upon the transfer ” to Mr. Lanahan of the collateral. This is a sufficient tender in equity under a bill like the one before us.

Finding no error in the decree appealed from, it will be affirmed with costs above and below ; and it is so ordered.

Decree affirmed with costs above and below.