White v. Clarke

5 D.C. 102

• Court: U.S. Circuit Court for the District of District of Columbia
• Decided: March 15, 1837
• Status: Published

Opinion

Cranch, C. J.,

after stating the substance of the bill, answer, and evidence, delivered the opinion of the Court;

It is contended by the counsel for the defendants that the bill contains no ground for jurisdiction in equity ; that courts of equity will not*-enforce the specific execution of parol agreements respecting personal property; that all the cases in which those courts have decreed the specific performance of agreements respecting chattels, were cases upon written contracts. But in the present case the equity of the complainant does not depend entirely upon the contract, but upon the refusal of the defendants to deliver up negotiable notes which, under the circumstances of the case, they would unconscienliously withhold even if they had not expressly agreed to surrender them. 2 Story’s Equity, p. 22, § 715, and p. 24, § 717. The danger that the defendants might pass them away before maturity, by which the complainant would be deprived of his legal defence, seems to me to be a sufficient ground for the interference of a court of equity. But the jurisdiction of a court of equity to compel the surrender of instruments, especially of negotiable instruments, unconscientiously withheld, seems to be put beyond doubt by Chancellor Kent in Hamillon v. Cummins; and by Mr. Justice Story in his Commentaries on Equity Jurisprudence, vol. 2, p. 11, § 700, and p. 15, § 705.

Admitting the jurisdiction, three principal questions arise;

1st. What was the contract of the 30th of December, 1833 ?

2d. Was it obtained by fraud or imposition practised by the complainant upon the defendants ?

3d. If it was a valid contract, has it been complied with on the part of the complainant ?

1. What was the contract ?

The defendants, in their answer admit that, on the 30th of December, 1833, there was an agreement with the complainant for a compromise of their just claim upon him, by which he agreed to pay, and they agreed to receive the whole amount of iheir claim, at the rate of seventy cents in the dollar, payable in goods in his store; that in consequence of such compromise he delivered to them, and they received, goods to the amount stated in his bill, • (that is, to the amount of the notes, at seventy cents in the dollar, with the exception of a fraction of $1.41, which the complainant avers he was always ready to deliver,-&c.)

Admitting then (that which the complainant is not bound to admit) namely, that the compromise was upon the terms stated in the answer, the question is, what was the amount of the defendants’ just claim against the complainant on the 30th of December, 1833 ?

The forty-four notes were given for the exact amount of the purchase-money of the goods sold by the defendants to the complainant on the 2d of July, 1832. The complainant never owed them a larger sum for those goods. The amount of the notes was the debt, and the whole debt, compounded. The complainant had paid, punctually, the first fifteen notes, each note being for $274.67 amounting, in all, to $4,120.25. Three more of the notes had been paid by Mr. Van Ness, amounting to $824.01. The sixteenth note, due November 5th, 1833, had been renewed, by mutual consent, for sixty days. The seventeenth note, due December 5th, 1833, was not paid, and was then lying under protest from the 6th to the 30th of December. But the failure of.the complainant to pay that note, at maturity, did not give the defendants any new right, or restore them to any previous right, as in cases of compounding debts, where, if the composition is not punctually paid, the creditor is remitted to his original rights. The remaining notes had lime to run, from one to twenty-seven months. The just claim of the defendants, therefore, on the 30th of December, 1833, was not even to the amount due upon the face of the notes; but to that amount, (minus the discount for the time they had to run,) and the interest and cost of protest upon that which became payable on the 5lh of December, 1833.

The defendants, in their answer, admit payment of the fall amount of the notes, in goods, upon the terms, and at the rates, of the compromise; they, have, therefore, received payment, in the stipulated inode, of at least the full amount of their just claim.

This is my view, of this part of the case, founded upon the defendants’ answer alone; and it is strongly corroborated by the testimony of the witnesses, and by the acts of the defendants themselves.

Mr. Brannan testifies that Mr. Clarke, the defendant, originated the proposition for the compromise; and asked Mr. White, the complainant, how much he would give him for his claim ; and that seventy cents in the dollar was agreed upon, to be paid in goods at the marked cost price. It appears from bis deposition, and those of James L. White and Cornelius G. Wildman, that before the goods were delivered, the complainant asked Mr. Clarke, who was then in the complainant’s shop, for the amount of his claim ; to which Mr. Clarke replied, “ send in your young man to my store and he will get it.” That Mr. Wildman was, accordingly, immediately sent by Mr. White to the defendant’s store for that purpose, and the defendant, Mr. Briscoe, gave him the paper marked A., annexed to the complainant’s exhibit No. 1, which is a statement of forty-four notes, from one to forty-four months; for $274.67 each . *.$12,085.48

Fifteen duly paid, . . . 4,120.05

7,965.43

Three paid by Van Ness, . . . 824.01

$7,141.42

That Mr. Clarke, the defendant, continued to take goods until his claim was satisfied. And it appears by the deposition of James T. Clarke, that an inventory of the goods taken was made at the time and delivered by Mr. Brannan, the complainant’s clerk, to the defendants, immediately after the delivery of the goods, to show the amount, and that they might examine it. The inventory is produced and verified by the witness. It amounts to $4,997.58. The amount of the notes, without allowing any discount for the time they had to run, was $7,141.42, which at seventy cents in the dollar is $4,998.99, being $1.41 more than the goods taken.

There is no evidence that the defendants asked to take any thing more, or even suggested that they had any further claim. The transaction itself shows that the complainant understood the amount of the unpaid notes to be the whole amount of the defendants’ claim, and that the defendants acquiesced in that understanding. At all events, the admissions of the defendants, in their answer, show that the notes have been satisfied, and therefore they ought, not only according to equity and conscience, but by the express agreement of the defendants, to be given up; unless the agreement for the compromise was obtained by fraud practised by the complainant upon the defendants.

2. Was it thus obtained ?

The nature of the fraud, alleged in the defendants’ answer, is that the complainant, by false representations of his inability to pay all his debts, had induced some of his creditors to compound their claims; that the defendants, hearing reports of such compromises, became alarmed, and under that alarm, willing to secure what they could, agreed to the composition, when, in fact, the complainant was able to pay all his debts. That the complainant took an unconscientious advantage of that alarm, knowing himself to be solvent, and that the defendants believed him to be insolvent.

To maintain this defence the defendants must prove, first, the representations; second, that they were false and that the complainant knew that they were false when he made them ; third, that such false representations induced some creditor or creditors of the complainant to compound their claims; fourth, that the defendants had heard of such false representations and composition, and were thereby, or by other false representations of the complainant in relation to his affairs, and his inability to pay all his debts, made to themselves or others, with intent to injure some one, induced to make the compromise; and that the complainant knew, at that time, that the defendants were so induced, and acted under a state of alarm produced by such false representations and information.

There is no evidence that the complainant made any representation or pretence of insolvency before the protest of some of his notes in November, 1833; and his letters to A. Hart & Co., of the 30th of October; to Tiffany & Co., of the 14th and 16th of November, and to Hall & Co., of the 21st of November, produced in evidence by the defendants, show an earnest desire on the part of the complainant to prevent those protests, and to maintain his credit. There can hardly be a stronger proof of his sincerity, and of the good faith in which he made his purchases, that fall, than the faet.that between the 1st of September and the 6th of December, when his shop was closed by an injunction obtained by his Baltimore creditors, he paid debts, in cash, to the amount of $12,000, as appears by the affidavit and deposition of Mr. Wildman, who exhibits an account of the particular items to which the money was applied.

I have said that there was no evidence that the complainant made any representation or pretence of insolvency before the protest of some of his notes in November; perhaps I ought to have excepted the testimony of Mr. Henry B. Clarke, who says that in the fall of 1833, about three weeks before Mr. White went to New York the first time and made his large purchases, in a conversation between Mr. White and Mr. Briscoe, who was regretting the failure of Mr. Henry Carter, he heard Mr. White remark to Mr. Briscoe, that he had better be sorry for himself, for he, Mr. White knew that “he himself was not able to pay his own debts.” What Mr. Briscoe said in reply, the witness does not recollect. Mr. White appeared to be quite serious. The witness afterward, he thinks on the same evening, or shortly after that, heard Mr. Briscoe say that he was fearful of losing the debt due by Mr. White to Clarke and Briscoe.

It seems to be very improbable that Mr. White should have said this seriously, with intent to alarm Mr. Briscoe into a compromise, when he was about to go to New York to purchase his fall supply of goods. Mr. Briscoe took no steps, in consequence of it, to get security for the debt. It can scarcely be believed that it caused the compromise of the 30th of December, 1833. Up to the time when the complainant’s storehouse was shut up by the injunction on the 6th of December, there had been nothing in the complainant’s conduct or conversation to excite alarm, except the protest of one or two of his notes, and an application to some of his creditors for an extension of time. This is testified by Mr. James L. White, and corroborated by Mr. Brannan and Mr. Wildman. There is no evidence of any assertion or pre-tence of insolvency by Mr. White until after his Baltimore creditors or some of them as agents of the others, came here and in a manner compelled him to give them a statement of his affairs, which, when made, showed that he was unable to pay all his debts. His Baltimore creditors then charged him with fraudulently obtaining their goods, under pretence of being solvent when he knew himself to be insolvent; and, upon the idea that the sales to him were void by reason of the fraud, and the right of property not changed, although so mingled with other goods that they could not be replevied at law, they filed a bill in chancery and obtained an injunction to prevent the then defendant but now complainant from selling or removing the goods until the further order of the Court. This injunction remained until the 26th of December, 1833, when it was dissolved on affidavits.

There is no evidence of any thing said or done by the complainant in order to excite alarm among his creditors.

I deem it unnecessary in this case to inquire whether the complainant in making his purchases in the fall of 1833, intended to defraud those vendors. The purchase made by the complainant of the defendants’ goods, was in July, 1832, and in no manner connected with the purchases made by the complainant in 1833. The alleged ground of fraud in the one case is exactly the reverse of that alleged in the other. The purchases in 1833 were said to be fraudulent beeáuse the complainant represented himself to be solvent when he knew himself to be insolvent. The charge in the present ease is, that he represented himself to be insolvent when he knew- himself to be solvent. They have, in fact, no relation to each other.

The authorities cited to show, that if a debtor, in compounding with his creditors, secretly promises to give to one, more than to the others, in order to induce him to sign the instrument of composition, it is void, are only applicable to cases where the creditors are supposed mutually to agree with each other, as well as with the debtor. But where each creditor is separately compounded with, this principle of mutuality and equality does not apply. Each creditor has a right to make his own bargain with his debtor ; and one bargain cannot be void because it is better than another.

The purchase of a lot in the name of his children and building a house upon it, if he: was solvent at the time, would not be even a technical fraud upon his creditors ; but if he was not solvent, it would be only a technical fraud, which would be set aside in favor of creditors only, or subsequent purchasers. A copy of the deed is not produced in evidence, but it is said that it recites that the purchase-money belonged to his children, and there is no evidenace to contradict the recital. If the deed is offered in evidence it must be taken altogether, and the burden of proof is on the defendants to contradict any part of it. It was made in January, 1832, nearly two years before the compromise ; and even if it was fraudulent, it is no way connected with the compromise. It was registered in July, 1832, and any one interested might at any time have had access to the record.

It is very natural to suppose that the heavy charges of fraud made against the complainant by his Baltimore creditors in the beginning of December, 1833, and the severe proceedings they instituted against him; the sequestration of his whole stock in trade, and the total suspension of his business by the injunction, were sufficient, of themselves, to cause the alarm, under which, the defendants, as soon as the injunction was dissolved, (which was on the 26th of December,) sought a compromise by a payment in the goods which had thus, as to them, been put in jeopardy. There is no evidence to show that that alarm had been voluntarily created by the complainant, and the defendants seem to have been content with their share in the scramble which followed the removal of the injunction. Every one was, no doubt, anxious to save all he could from the wreck ; and the subsequent settlement with other creditors, at fifty cents in the dollar, only shows,that the defendants, in getting seventy, fared better than some of their neighbors. The notes, excepting that which fell due 2d-5th of December, were not payable, having time to run, from one to twenty-seven months, without interest; the immediate payment, therefore, especially in the precarious state of the complainant’s affairs, was a good and valuable consideration for the discount which was agreed upon. Looking upon this compromise, therefore, in every point of view, it seems to me to have been a fair and valid contract, which ought to be executed by both parties in good faith.

3. The third question, then, is, has it been complied with on the part of the complainant ?

The defendants admit, in their answer, that it has been complied with on his part to the extent of the notes.

Being of opinion that the amount due upon the notes constituted the whole just claim of the defendants ; and there being no evidence that at the time of the agreement for the compromise, and at the time of the execution of that compromise by the delivery of the goods, they intimated any further claim, I must say that, in my opinion, the complainant has fairly and fully complied with the terms of the contract, and that the defendants ought to del ver up all the notes to be cancelled.

Morsell, J., concurred; Thruston, J., dissented.

The decree was entered up on the 10th of June, 1837, and was in substance, that the injunction should be perpetual to prevent the defendants from negotiating the notes; that the defendants should bring them into court to be cancelled, and that they should pay the complainant $1,083.55, being the amount paid by the complainant on j udgments obtained against him upon three of the notes which the defendants had passed away, with interest thereon from the date of the decree.

From this decree the defendants appealed to the Supreme Court of the United States, where it was affirmed in February, 1833. 12 Peters, 178.