Maclary v. Reznor

3 Del. Ch. 445

• Court: Court of Chancery of Delaware
• Decided: September 15, 1870
• Status: Published

Opinion

The Chancellor :—

The motion is to dissolve the injunction issued in this cause, and.is made upon two grounds.

First. The want of equity in the bill.

It is insisted for the defendant, that his promise to accept $1000, in full satisfaction of the debt due from Ridgely & Maclary, was without consideration, and that this appearing on the face of the bill, removes the equity which,¿rima facie, the complainant has arising out of the written release executed by the defendant.

We need not consider whether, supposing Reznor’s promise to compound this debt still remained executory, there arose out of the circumstances a sufficient consideration to make it obligatory. That is not the question, but, rather, what is the legal operation of the paper executed by Reznor. A copy is set forth in the bill. It is a formal release to Maclary of “all further liability” on the judgment, signed, sealed and delivered. Being an instrument under seal, no consideration is required to make it effectual. A man may give a voluntary bond, or he may gratuitously release to another, any right whatever, provided he does not thereby defraud his creditors, and executes the bond, release, or other instrument, with due legal solemnities, as by writing, sealed and delivered. This technical effect of a sealed instrument is too familiar to need authority ; yet I may refer to 2 Black. Com., 446; Plowden, 308 ; Cruise's Digest; Tit. Deed, Ch. II, Sec. 33. T. T. R., 475. The effect is the same in equity as at law. 1 Fonblanque, 334. (Ed'n of 1793); Chitty on Cont., 5.

Second. The other ground of the motion to dissolve is that the answer denies the equity of the bill. I am not able so to read it. The relief sought by the complainant is against the collection of the judgment. His equity arises out of the payment of part and the release of the residue by writing under seal, alleged to have been voluntarily delivered by Reznor, the release to be upon condition that Maclary pay the defendant’s counsel fee and all costs. It is alleged that the costs were paid and counsel fee tendered and refused. It is now brought into Court. These facts the answer admits, or, certainly, does not deny; but it alleges in defense that, although true it is, that Reznor did so execute and deliver the release, yet that he did it in ignorance of judgment having been obtained, and execution issued and levied, whereby his debt had been secured ; that had he known these facts, he would have chosen to abide by the judgment and execution ; that it was the duty of Maclary to have communicated these facts; that the omission to do so was a fraudulent concealment; that he also falsely represented that he had sold his store, and had no property, except some lots at Ridgely, worth about $100. In all this, the defendant does not deny the execution of the release, which is the ground of the complainant’s equity, but he sets up a counter equity in himself, to be relieved against the release upon the ground of mistake and fraud. It is plainly an answer by way of confession and avoidance, and not a traverse ; and, according to the settled practice, it does not sustain a motion to dissolve the preliminary injunction. Adaids Equity [196], note and cases cited.

This is not like the case put in argument for an answer, alleging that a paper,relied on by the bill, as a release, has been stolen or obtained by artifice, or otherwise than by a voluntary delivery. Such an answer would, in effect, traverse the execution of the release ; for a voluntary delivery of the paper is.one of. the legal requisites. But in this case, all the requisites to the execution and legal effect of the release are admitted, i. e., that, in terms, it discharges the judgment, and that is was signed, sealed and delivered.

The motion to dissolve the injunction must be denied.

There is an allegation in the answer which may properly be noticed at this stage of the cause. It is the absence of a revenue stamp on the note for $500, given by Maclary as part payment of the judgment. The complainant will be required to do equity while himself seeking it ; and if, at the hearing of this cause, he shall be found entitled to a perpetual injunction, it will be decreed upon terms protecting the defendant’s rights under this note-.

The decision of the motion to dissolve was rendered January 5th., 1870, and on February 5th., following, the cause came on to a final hearing. It was proved by a deposition read for the defendants, that the complainant was in mercantile business at Clayton, in October I869, and also in the spring of the year. The other matters of evidence were certain facts agreed upon by the counsel to be considered as if proved, viz ;

1. That the paper set forth in the. bill as a release is a true copy of the original, which was duly executed.

2. That the costs on the judgment and execution were paid by complainant as alleged in the bill.

3. That the copies of defendant’s letters set forth in the answer, are true copies of the originals.

4. That since the present was filed,George W. Kugler. as a creditor of the defendant, attached the complainant as a garnishee of the defendant, and recovered judgment against him for $417.55, which has been paid.

Massey, for the complainant.

The paper alleged as a release is such in form and effect, and discharged the judgment unless impeached for fraud. This it is sought to do, alleging that it was obtained by fraudulent misrepresentations in the letters of October 23d and November 2d, 1869.

Misrepresentation, even if proved, does not avoid a transaction,' unless it appears that it was relied on and was the inducement. 1 Sto. Eq.Jur., secs. 191-195 ; Dogger t vs. Emerson, et al., 3 Sto. C. C., 700. There was misrepresentation in the letters, but it does not appear that Reznor relied upon it, and was induced by the letters. His offer was first made in the spring without any prior representation by complainant.

Concealment is only fraud when it is of facts peculiarly within a party’s knowledge. Pierce vs. Wood, 3 Foster, 520; Reynolds vs. French, 11 Vt„ 674. The execution here alleged to have been concealed was a. matter of record. The judgment is mentioned and released in the paper signed. Defendant had counsel, and was bound to inquire as to the condition of his claim, and between the 12th October, when the representations complained of were made, and the 8th and xoth of November, when the bargain was made and the release signed, he was in communication with his counsel and had ample opportunities to inquire.

Fulton, for the defendant.

1. There was, in fact, no consideration for the settlement. The seal imports one, but that is a mere presumption, which may be, and, in this case, is, rebutted by the facts. Cabot vs. Haskins, 3 Pick., 83 ; Sweeny vs. Hunter, 1 Murph., 181 ; Smith vs. Bartholomew, 1 Mete., 276 ; Shorb's Ex'r. vs. Shultz, 43 Pa. St., 207 ; Crowhurst vs.,Laverack, 16 Eng. L. & Eq., 497.

2. Acceptance of part of a debt is no satisfaction when the whole is due. Lovelace vs. Cocket, Hobart, 68, and notes ; Geang.vs. Swain, 1 Lutw., 464. 1

3, The misrepresentation is admitted. For what purpose was it, if not to influence Reznor. The motive was unquestionable, and a court of equity will not relieve a party confessedly guilty of fraud and falsehood. The concealment alleged is not of the judgment, but of the execution. The facts constitute a case of fraud under the authorities. Maddeford vs. Austwick, 1 Sim., 89 ; Lewis vs. Gamage, x Pick., 374; Reynolds vs. French, 11 Vt., 674.

This case draws into question the validity of a release under seal by the defendant, Reznor, of a judgment held by him against the complainant, Maclary, for $1633.33, recovered in the Superior Court, at the October Term, 1869.

That the release was executed and delivered, and is in due form, is not disputed ; but the defendant insists that it is invalid upon two grounds ; (1) that it was without consideration ; and (2) that it was obtained by fraudulent misrepresentation.

The first of these grounds of defense, viz ; the want of consideration, has been, heretofore, argued and disposed of upon the motion made to dissolve the injunction for want of equity in the bill. Part payment of a debt is not a sufficient consideration to support an executory promise to discharge' the debtor, and were this the case of an agreement to release, remaining still in fieri, the defense of want of a valid consideration would be available. But this being a release under seal, complete in its terms and duly executed, it needs no consideration to support it beyond what the seal imports. It would be effectual, even had it been wholly gratuitous-and without payment of one cent by the debtor. This point is more fully stated, and the authorities cited, in the opinion given upon the motion to dissolve.

The other defense, and the one mainly relied upon at the hearing, was fraud in obtaining the release. And the fraud was alleged to have been twofold, viz: misrepresentation by Maclary as to his means of payment, and the concealment by him of the fact that an execution had been levied to an amount sufficient for the whole debt. These two charges admit of separate consideration.

fst. As to the alleged fraudulent misrepresentations. The facts material to this point are these : The notes of Ridgely and Maclary, upon which the judgment was recovered, being one for $500, at 4 months, the other for $1,000, at 8 months, both dated October 21, 1867, matured, the former in February, 1868, the latter in June of that year. Reznor took no steps toward their collection until the 3rd of April, 1869, when, by a telegram, he invited Maclary to visit him in Philadelphia, with a view to a settlement. His inattention to the notes until that date, are explained in his answer, by the fact that he had been informed, and supposed, that both Ridgely and Maclary were insolvent, and further, that he did not know where Maclary then resided, the latter having left Maryland, in which state Reznor had last known him ; that, being, about this time, informed that Maclary was residing at Clayton, in this State, he sent the telegram with a view to obtaining some settlement of the notes. Maclary promptly responded by calling on Reznor in Philadelphia, and thereupon Reznor voluntarily offered to take $1,000, cash, in full settlement. This offer, as the answershows, was not induced by any representations then made by Maclary, as to his means, nor even by any solicitation on his part. It was made, as Reznor states, in view of the information he had previously received, that Ridgely and Maclary were insolvent, and also upon his considering that, even, if they were not wholly insolvent, he .might be put to expense, delay, and risk in the collection. So, being anxious to stimulate Maclary to prompt effort, and to save something without further delay or risk, he proposed to. accept the $1,000 in full, intending thereby to make a liberal and tempting offer. Maclary, however, did not then accede to it. Whether, as he alleges, the offer remained a standing one, subject to his further consideration, or whether, as the defendant insists, it was then rejected and withdrawn, is not material. There was no further negotiation until October, 1869, when some correspondence ensued, caused, doubtless, by the institution of the suit, but resulting in nothing. Soon after, a judgment being recovered, execution was issued and levied, November 3rd, 1869, upon a stock of merchandize valued at $2,500, in Maclary’s possession at Clayton, where he was in business as a merchant. The levy quickened Maclary’s diligence, for, having induced the Sheriff to defer closing the store until the 9th of November, by undertaking, in the meantime, to give security for the forthcoming of the goods, he repaired to Philadelphia on the 8th of November, and in an interview then held with Reznor, the latter again assented to accept $1,000, with the costs, and his attorney’s fee, in full discharge of the judgment. Whether his proposal to do so was, as before, voluntary, or whether induced by any representations on the part of Maclary, made during that interview, does not appear, nor is this material. A check was given by Maclary for $200, and a meeting appointed, at Clayton, on the 10th of November, to carry out the settlement. On the day appointed, Reznor attended at Clayton, where he received another check for $300, and a note under seal at four months for $500, making up the $1,000 to be paid, and thereupon the release was executed.

Now, the fraudulent misrepresentations relied upon as avoiding the release are contained in two letters from Maclary, dated, respectively, October 23d, and November 2d, written shortly prior to the settlement. In the letter of October 23d, he writes, “As you persist in [having the money on those notes, immediately, I can only say to you that to cancel those notes I will make to you a full and perfect title.to those lots at Ridgely, which is the only property I own in this world, or, if you prefer, I will give you one hundred ($100) dollars in cash. You maychoose between “the two, which is the best lean do.” He adds in a P. S., “You could hold those lots, or you could sell them for “ more than one hundred dollars, as you choose ; I was “offered that.” In the letter of November 2d, writing of his desire to compromise, he says, “ I own nothing only “as I wrote you sometime ago. I have sold my store “some time since, &c.”

These representations were false, for Maclary, at the time of writing these letters, was still merchandizing, and . held a stock of goods valued at $2500, which had not, so far as any evidence shows, been sold by him, as was stated .in his letter of the 2d of November, but were on the next day, .3d of November, levied on as his goods, and he gave a forthcoming bond for them.

Nevertheless, I am of opinion that these false representations do not, under the circumstances, avoid the release; and this for two reasons. In the first place, it does not appear that it was by Maclary’s statements that Reznor was induced to compromise the debt. His original offer, in April, 1869, to accept $1000 in settlement, was made as the answer itself shows, under no inducement proceeding from Maclary, but was prompted by Reznor’s own distrust of the debt and his anxiety to avoid trouble, caused by rumors of the insolvency of Ridgely and Maclary. This belief of the insecurity of the debt, and his willingness to settle at $1000, continued to possess his mind; nor can I see that the representations in Maclary’s letters made any impression upon him. The same distrust and anxiety for a settlement which prompted his first offer to accept $1000, was the continuing inducement to accept it at the last, and' would have led to precisely the same result had Maclary written nothing about his means. But the other, and perhaps, upon the facts, a less questionable ground for sustaining the release, arises out of Reznor’s negligence in compromising the debt without inquiry of his attorney, who was cognizant of the levy, as to the condition and security of the claim. The most ordinary diligence in this respect would have brought full information of the levy.

The rule of law as to the effect of false representations is a clear and settled one. In order to avoid a transaction on account of them, three things are requisite. 1st. The misrepresentation must relate to something material and substantial. 2d. The transaction sought to be avoided, must appear to have been induced by it. The party aggrieved must have been actually misled by it. And 3rd. His confidence must have been a reasonable one ; as where the matters misrepresented are such as, from their nature, rest peculiarly in the knowledge of the party making the statement, or where there are fiduciary relations between the parties to warrant the trust reposed; or where the party misled is of such weak mental capacity as to be exempt from the requirement of ordinary diligence. Except in these cases, even betrayed confidence is not a ground of relief. Where no confidential relation exists, nor mental incapacity, and the means of information are open to both parties, a diligent use of which would have prevented the injury, Equity will not interfere, Vigilantibus nm dormientibus leges subvenmnt. 1 Sto. Eq. Jur. Sec. 191.

2d, The other circumstance of fraud relied upon, as avoiding the release is, that Maclary, pending the negotiation, did not disclose the fact that an execution had been levied on his goods to the full amount of the debt. But to this'the obvious and conclusive answer-is, that he was under no obligation to communicate these proceedings to Reznor. They were proceedings had under Reznor’s own process, directed by his attorney, and with respect to which it was his duty to seek information from his attorney. He was not warranted to rely, and in fact did not rely, upon Maclary. The duty of disclosing facts which may influence the adverse party to a transaction, springs either from some fiduciary relation between the parties, or from a trust understood to be reposed by one in the other, about a matter of which the latter has peculiar means of information. But these parties were dealing at arms’ length, and the fact not communicated, to wit; the levy of the execution, was equally ascertainable by both. “ The true definition “says Justice Story,” of undue concealment, which amounts to fraud in the sense of a court of equity, and for which it will grant relief, is the non-disclosure of those facts and circumstances which one party is under some legal or equitable obligation to communicate to the other, and which the latter has a right, not merely in foro consciences but juris ¿t de jure to know. 1 Sto. Eq. Jur. Sec., 207; 2 Kent. Com., 482, and note (a,) 5th. Ed’n.

Were this the case of a mere agreement to discharge the judgment remaining still unexecuted, a court of equity might, considering the advantage gained, to be an unconscientious one, refuse to enforce it upon a bill for specific performance ; but the release having been executed, and being such as, under the circumstances, the Court would not, on a cross-bill avoid, I feel obliged to give it its legal effect.

Decree affirmed by the Court of Errors and Appeals, at the June Term, 1871. See 4 Houston’s Del. Rep., 154.