"GOmmLl LAW LIBRARY CJortifU ICam i^rtjool ffiibrat^ Corntll Unlvarslty Library KF 830.H93 A treatise on the law of accord and sati 3 1924 018 822 530 /€^^-^- ■^:f\ KK ■^^ 'Xi Cornell University Library The original of tiiis bool< is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018822530 A TREATISE ON THE LAW OF ACCORD AND SATISFACTION COMPROMISE AND COMPOSITION AT COMMON LAW WITH FORMS FOR USE IN COMPOSITION PROCEEDINGS IN THREE BOOKS By ALVA R. HUNT OF THE MINNESOTA BAR AUTHOR OF A TREATISE ON THE LAW OF TENDER, BRINGING MONEY INTO COURT AND OFFER OF JUDGMENT; ALSO "TENDER" IN CYC. Kansas City, Mo. VERNON LAW BOOK CO. 1912 /3 /S'O A^ ^ . COPYEIGHI, 1912 BY ALVA R. HUNT "■ (HuntAcc.&S.) PREFACE This work is the result of four years of almost constant applica- tion during what might be termed the leisure moments of a prac- ticing lawyer. That such moments so devoted, mean in the aggregate, days — and nights — and months of toil, can i;eadily be proven by any one merely reading and analyzing a few hundred decisions of the five thousand examined by us. It was our aim to write a small volume coverfag^th^ threa cognate subjects that should be practically useful; but the size of the volume has ex- ceeded our expectations. Our purpose to make it useful did not permit of any abridgment and we sincerely hope that those of the profession into whose hands this volume may come will ap- preciate our effort to make it comprehensive and will find it help- ful in lightening their labor. We know from experience that such a work as this is needed. The lawyer in general practice is constantly making settlements; in fact more than half of his business is adjusting disputes and avoiding litigation ; and in trying to relieve clients who have been overreached in a previous settlement. A client authorizing a set- tlement wants repose, and nothing is more damaging to the repu- tation of a lawyer than to effect a settlement that leads to another and more acrimonious controversy. The subjects of Accord and Satisfaction, and of Compromise, do not appear ever to have been the subject of a text book; but Composition at Common Law has twice been considered: first, by Basil Montagu, in a small volume of some forty four pages of text, published in London in 1823; now chiefly valuable for the appendix containing a full report of the early English cases, where the doctrine of Composition at Common Law has its origin; and (iii) iV PREFACE lastly, by the late Orlando F. Bump, in a volume of less than eighty pages of text, published in St. Louis in 1879. The latter, although without a table of contents, chapters or sections, in- dicating methodical treatment, is nevertheless a methodical and an excellently written treatise; and, although a copy of the work did not reach our hands until after we had collected and digested the cases, we wish to acknowledge obtaining from it much valua- ble information. The forms, for use in composition proceedings, found in our book, are taken from this work and used by permis- sion of Sarah E. Bump, to whom we acknowledge our grateful ap- preciation. The labor of preparing these pages has been in a very great measure agreeable to us, notwithstanding we were at all times weighed down with the consciousness of an unfinished task and the end, at times, by reason of the call of professional duties, seem- ed beyond hope of successful attainment. We scarcely know whether it was the mental relaxation arising from a cessation of constant thinking and studying innumerable legal questions, to- gether with the relief derived from having completed a lingering task, or pride in the production, that, at the conclusion of our labor, afforded the pleasure experienced. Be that as it may, we are not without pride in the production, nor hope, that in send- ing forth these pages they will receive indulgent consideration from the profession and some measure of praise. Ai.vA R. Hunt. Htchtield, Minnesota, October, 1912. BOOK ONE ACCORD AND SATISFACTION BOOK TWO COMPROMISE BOOK THREE COMPOSITION AT COMMON LAW APPENDIX FORMS FOR USE IN COMPOSITION PROCEEDINGS Hunt Acc.& S. M) TABLE OF CONTENTS BOOK ONE ACCORD AND SATISFACTION Sec. 1. Definition — Accord — Accord and satisfaction— Distinguisted from payment and release — Novation. Requisites — In general. Execution necessary — Accord executory — Right of action how extin- guished. Part performance. Tender of performance of an accord. Accord how executed. Accord unenforceable — Specific performance. Acceptance in satisfaction necessary. Effect of an accord and satisfaction — Absolute bar— Discharges joint debtor, joint and several debtor, surety, indorser. Subsequent promise to pay residue. Time when an accord and satisfaction may be made — Sunday con- tracts. Rescission — Tender — Rescission on a Sunday. The agreement — Writing unnecessary when — Must be certain — Must be in absolute discharge — Mutuality. Mistake as to amount — Legality of consideration. The agreement may be implied. Agreement arising from acceptance of a conditional offer or tender — Prescribing terms of acceptance by debtor, by creditor — Receding from or persisting in claim. Sec. 17. Same subject — Acceptance without words of assent — Transaction when a contract — Rule in equity. Sec. 18. The condition may be implied — When an offer or tender is condi- tional. Sec. 19. Same subject. Hunt Acc.& S. (vii) Sec. 2. Sec. 3. Sec. 4. Sec. 5. Sec. 6. Sec. 7. Sec. 8. Sec. 9. Sec. 10. Sec. 11. Sec. 12. Sec. 13. Sec. 14. Sec. 15. Sec. 16. VUl TABLE OF CONTENTS Sec. 20. Whether an offer or tender is conditional or unconditional is not nec- essarily a question of law. Sec. 21. Agreement arising from acceptance of check in full. Sec. 22. Same subject — Erasing words "in full" from check. Sec. 23. ' Subject matter— In general — Legal demands — Existing demands — Severance. Sec. 24. Right of action ex-contractu — Simple contracts — Damages — Con- tracts under seal. Sec. 25. Same subject. Sec. 26. Actions — Appeals — Writ of error — Judgments. Sec. 27. Right of action concerning realty. Sec. 28. Right of action ex-delieto. Sec. 29. The particular claim or demand discharged — Proof. Sec. 30. All demands — Claims — Quarrels— Actions — Causes — Writs of error — Appeals. Sec. 31. Demands in prwsenti. Sec. 32. Future liability — Contingent liability — Contingent demands — Coun- ter-claims — Mutual demands settled when. Sec. 33. Demands under consideration — Whole subject matter. Sec. 34. Accrued damages — Future and consequential damages — Continuing nuisance — Undiscovered injury. Sec. 35. Parts of demands — Splitting causes. Sec. 36. Construction of release — Of contracts of compromise — Words of lim- itation. Sec. 37. Receipt in full of all demands, claims, accounts — Restricted to what — Not conclusive when — Receipts containing contracts — How con- strued. Sec. 38. What persons may make an accord and satisfaction — In general — Between partners — Ignoring lien holders — Where obligor and tort feasor are liable for loss of property — By pledgee of note — As- signee. Sec. 39. By partner, as debtor, as creditor. Sec. 40. By joint and several debtor— By joint debtor— Settlement of individ- ual liability — Joint creditors. Sec. 41. Same subject — Statutory provisions. Sec. 42. By one joint tort feasor — Covenant not to sue one— No contribution. Sec. 43. By attorney — Agent- Corporation officers. Sec. 44. Liability of attorney or agent for unauthorized settlement. Sec. 45. By executor — Administrator — Administrator de son tort — A common law right — Statutory authority not exclusive. Sec. 46. Same subject — Good faith and prudence required — Liability of per- sonal representative. Sec. 47. By guardian— Next friend— Guardian ad !i. R. A. 514. s. p. Reed v. McCrum, 91 N. Y. 412; Cromwell v. Brooklyn F. Ins. Co., 44 N. Y. 42, 4 Am. Rep. 641; Ennis v. Harmony F. Ins. Co., 3 Bosw. 516; Baltis v. Dobin, 67 Barb. 507. In such eases, the lien holder is not a necessary party, though the debtor will ordinarily have him brought in. 1 A debtor cannot ignore an assignee of a part of a judgment: Alexander V. Monroe, 101 Pac. (Or.) 903. 8 Larned v. Dubuque, 53 N. W. (Iowa) 105. Hunt Aco.& S. — 5 66 ACCORD AND SATISFACTION [§ 38 to receive what is due him, the debtor is liable to him for his interest in the fund.* A client may always release and discharge his claim upon terms agreeable to him/" but the attorney will be protected, providing he has brought himself within the law giving him a lien, as to notice.^* Where a plaintiff compromises his cause of action upon which his attorney has a lien, in an ac- tion by the attorney against the defendant with notice of the lien(, the* amount paid upon the compromise and not the amount of the demand forms the basis of the judgment against the de- fendant.^'' A compromise of an action by the parties without the knowledge of the plaintiff's attorney is viewed with suspicion and will be closely scrutinized for fraud, ^' and the courts will protect the attorney by allowing him to proceed with the action and recover the amount of his fees,^* or if judgment has been obtained, the satisfaction will be set aside and the judgment re- » It was decided In Minnesota under the 1894 statute that actual notice to the judgment debtor of the attorney's claim either verbal or written, will protect the rights of the attorney, and if payment be made by the debtor to the creditor, the judgment may be reinstated to the extent of the attor- ney's lien: Northrup v. Hay ward, 102 Minn. 307, 113 N. W. 701; Taylor V. St. Louis, etc., Bridge Ry. Co., 105 S. W. (Mo.) 740. 10 Coughlin V. Ne^* York Cent. Ry., 71 N. X. 44 ; Simmons v. Almy, 103 Mass. 36 ; Plummer v. Great Nor. R. Co., 110 Pac. (Wash.) 989. An attorney cannot enjoin the client from compromising an action : Hendrix v. Bull, 74 Atl. 572. An agreement that the client may not settle his cause of action without the consent of his attorney who is employed to enforce it is champertous and void: Kauffman v. Phillips, 134 N. W. (lo.) 574. 11 An attorney's lien can be enforced only under statutory authority: Plummer v. Great Nor. R. Co., 110 Pac. (Wash.) 989. No such lien exists at common law: Kauffman v. Phillips, 134 N. W. (lo.) 575. 12 Parsons v. Hawley, 60 N. W. (Iowa) 520 ; Boyle v. Metropolitan St. R. Co., 114 S. W. (Mo. App.) 588 ; Fischer v. Railway Co., 173 N. Y. 492, 66 N. E. 395. After verdict or judgment, the amount paid on a collusive settlement does not limit the extent of the attorney's lien: Desaman v. Butler, 136 N. W. (Minn.) 747. 18 Miedreich v. Rank, 82 N. E. (Ind. App.) 117. "Carpenter v. Myers, 51 N. W. (Mich.) 206; Collier v. Hecht, 66 S. B. (Ga. App.) 400. § 38] WHO MAY MAKE AN ACCORD AND SATISFACTION 67 instated to the amount of the fees to enable the attorney to pro- ceed by execution to satisfy hjs claim.^» So, if necessary to pro- tect the attorney, he will be permitted to sue in the name of his client ; thus, where, after a defendant was taken into custody upon execution and had given bond for his release, the creditor settled and discharged the judgment and bond, the attorney was per- mitted to sue upon the bond in the name of his client, to recover his fees.^* Receiving a part of the damages for the wrongful de- struction of property by fire from the wrong-doer and reserving 18 Northrup v. Hay ward, 102 Minn. 307, 113 N. W. 701. (See opinion for a review of authorities upon tbe question of notice of lien) ; Knickerbocker V. Voorhees, 112 N. Y. Supp. 842 ; Andrews v. Morse, 12 Conn. 444, 31 Am. Dec. 752. See extension note in 31 Am. Dec. 18 Hobson V. Watson, 34 Me. 20, 56 Am. Dec. 632. Tn Michigan it has been held that where the action has been settled by the client, in order to enable the attorney to proceed in the original action, it Is necessary to have the stipulation of settlement set aside, or stricken from the files ; thereupo* the attorney, upon proof of the agreement for fees and the compromise, may re- cover in his client's name the amount due him under his agreement : Grand Rapids R. Co. v. Cheboygan Circuit Judge, 126 N. W. 56, 17 Det. Leg. N. 270. Where a defendant has knowledge of the agreement that the attorney is to have a certain per cent, the lien attaches Immediately upon the amount of the settlement being determined: Faley v. Grand Rapids R. Co., 134 N. W. (Mich.) 446. The attorney may proceed direct against the defend- ant in the original action : San Antonio R. Co. v. Sehom, 127 S. W. (Tex. Civ. App.) 246; Whitewell v. City of Aurora, 123 S. W. (Mo. App.) 1045; St. Louis, etc., R. Co. v. Dysart, 130 S. W. (Tex.) 1047. An attorney may proceed in equity to enforce his lien although pending an appeal the ac- tion was settled and dismissed and the case has never been remanded: In re Nethaway, 121 N. W. (Minn.) 418. Where the attorney Is to have 40 per cent, of the cause of action, a compromise by the debtor and creditor to which the attorney is not a party, will not limit his fee to 40 per cent, of the amount paid claimant, when the debtor undertakes to pay claimant whatever sum she is compelled to pay her attorney. The amount paid the claimant will be treated as 60 per cent, of the amount of her recovery: Boyd V. Chase, 115 S. W. (Mo. App.) 1052. A contract for a contingent fee including a stipulation that the client shall not compromise the de- mand without the attorney's consent is not void as against public policy: Beagles v. Robertson, 115 S. W. (Mo. App.) 1042 ; Wright v. Kansas City, etc., R. Co., 126 S. W. (Mo. App.) 517. If plaintiff is irresponsible and the judgment settled by him has not been satisfied, the attorney may enforce his lien by execution against the defendant: Bloch v. Bloch, 121 N. Y. Supp. 475 68 ACCOED AND SATISFACTION [§ 38 a right to recover from the insurer, does not preclude the insured from recovering upon the policy, the balance of his loss. The wrong-doer is, in legal effect, principal, and liable to the owner and whoever joins with him in assuming the risk of loss, for the full amount of the damages ; and the insurer, after paying the bal- ance of the value of the property up to the limit of the policy, may recover of the wrong-doer, in his own name or in the name of the insured, the amount paid upon the policy,^' and, where the insurer pays the insured first, the latter cannot defeat the insurer's right of subrogation by executing a release to the wrong- doer.^' Nor, can the wrong-doer, with knowledge of the pay- ment by the insurer, escape his liability to the latter, by paying the insured.^" The power of a pledgee of a promissory note extends only to col- lect the money upon the note, and he cannot compromise with the payee for a less sum than is due on the note pledged,^" without the pledgor's consent."^ The pledgee has no right to accept a part in money and a note for the balance ; ^^ nor can he surrender the note pledged and take another note.^' In such cases the pledgee will be presumed to have received payment of his debt in full. A pledgee is not bound to accept an accord and satisfaction of collateral held by him, by accepting property in discharge of the 17 Continental Ins. Co. v. Erie Ry. Co., 73 N. Y. 399, 29 Am. Rep. ITl. 18 Hart V. Western Ry. Co., 13 Mete. 99, 46 Am. Dec. 719. 18 Continental Ins. Co. v. Erie Ry. Co., 73 N. Y. 399, 29 Am. Rep. 171, citing Clark v. Wilson, 103 Mass. 223, 4 Am. Rep. 532 ; Mon. Mut Ins. Co. V. Hutchinson, 21 N. J. Eq. 107 ; GrafC v. Kipp, 1 Edw. 621. 2oGarllck v. James, 12 Johns. 146; Bowman v. Wood, 15 Mass. 534; Grant v. Hallen, 1 B. D. Smith, 545 ; Gage v. Punchard, 6 Daly, 229 ; Foltz V. Hardin, 139 111. 405, 28 N. E. 786. 21 Union National Bank v. Post, 64 111. App. 404; Zlmpleman v. Veeder, 98 111. 613; Depuy v. Clark, 12 Ind. 427; Union Trust Co. v. Rigdon, 93 III. 458. 22 Depuy V. Clark, 12 Ind. 427. 23 Gage V. Punchard, 6 Daly, 229. § 38] WHO MAT MAKE AN ACCORD AND SATISFACTION 69 note, even though requested to do so by the pledgor, and he is hot liable for any loss occasioned by a refusal.''* Nor is he under any obligation to notify the pledgor that an offer of settlement by way of an accord and satisfaction or compromise by the delivery of property, has been made to him.^° If a payee of a collateral note be insolvent and the note is uncollectible by process of law and the pledgee makes an advantageous settlement for less than the face of the note, he will not be liable for any thing beyond what he received,^" upon the well established rule of damages ap- plicable in conversion of chose in actions, that damages must be shown. If a pledgee surrenders a pledged note without pay- ment or transfers it as his own, he is prima facie liable for the full amount,^^ but he may reduce this amount by showing the note was not worth its face value by reason of the insolvency of the maker. So he may show that the maker had a good defence, but he may not prove a set-off."* Where a joint debtor pledged his individual property as security for the joint debt, his co-debtor cannot complain of any agreement between the pledgor and the creditor made before or after the pledging, as to the value at which the creditor shall take the pledged property.''" An assignee of all money to become due under a contract, where the assign- ment is made as security for advances, has no authority where a dispute has arisen over the amount due, to compromise for the contractor, and the acceptance by the assignee of city warrants drawn in full payment of the work done will not preclude the contractor from recovering the entire amount claimed by him to be due.^" 2* Rhinelander v. Barlow, 17 Johns. 538. 2 5 Rives V. M'Losky, 5 Stew. & P. (Ala.) 330. 2 6 Exter Bank v. Gordon, 8 N. H. 66. 27 Union Trust Co. v. Eigdon, 93 111. 458 ; Wood v. Mathews, 73 Mo. 477. 28 Union Trust Co. v. Eigdon, 93 111. 458. 2 9 Foltz V. Hardin, 139 111. 405, 28 N. E. 786. so Matheney v. Eldorado, 82 Kan. 720, 109 Pac. 166. 70 ACCORD AND SATISFACTION [§ 39 Sec. 39. By partner, as debtor, as creditor. — Each member of a firm is authorized to transact any business for the co-partner- ship within the scope of the partnership agreement, and debt ow- ing by the firm may be discharged by an accord and satisfac- tion entered into by one partner in the name of the firm. In so doing he may transfer a single item of property,^ or all the part- nership effects direct to a creditor,^ although the latter right has been questioned. It would seem that where there are other as- sets and the partnership solvent, one partner could not bind his co-partner by a transfer of property without which the co-part- nership business could not go on, as this would amount virtually to a dissolution. One partner may compromise the debt by giv- ing his individual note,' and when conducting a commercial busi- ness, he may give the firm note with surety or other security. He may transfer nptes, checks, and drafts of third persons be- longing to the firm, or effect a compromise by surrendering to the creditor any property which he would be authorized under the partnership agreement to sell for cash. He can not bind his co- partner by deed, but he may assign a debt and the mortgage se- curing the same ; and, binding the firm by a sealed instrument in such a case, was held not to violate the common law rule that 1 Harrison v. Sterry, 5 Cranch, 289; Deckard v. Case, 5 Watts, 22; Du- bois' Appeal, 38 Pa. St. 231, 80 Am. Dec. 478. 2 Mabbett v. White, 12 N. Y. 442 ; Egbert v. Wood, 3 Paige Ch. 517, 24 ■Am. Dec. 236. See, upon the subject of implied authority of one partner to transfer firm property in satisfaction of firm debts. Bussell v. Leland, 12 Allen, 349; Randolph v. Armstrong, 11 Iowa, 5JL5; Ullman v. Myrick, 93 Ala. 532, 8 So. 410 ; Bernheim v. Porter, 4 Pac. (Cal.) 446 ; White v. Vinson, 14 Mont. 405, 36 Pac. 828; Barnet v. Houston, 18 Tex. Civ. App. 134, 44 S. W. 687. Release by one partner binds all. Bulkley v. Dayton, 14 Johns. 387; Pierson v. Hooker, 3 Johns. 68; Wells v. Evans, 20 Wend. 251, n. ; McBrlde v. Hogan, 1 Wend. 326, n. ; Salmon v. Davis, 4 Binn. 375, 5 Am. Dec. 410; Wood v. Goss, 21 111. 604. Fraud will vitiate a release. 1 Lindley on Part. 293. sLuddington v. Bell, 77 N. Y. 138, 83 Am. Rep. 601; Waydell v. Luer, 3 Den. 410 ; Watts v. Robinson, 32 U. C. Q. B. 362 ; Thompson v. Percival, 5 B. & Ad. 925 ; Clement v. Brush, 3 Johns. Cas. 180. § 39] WHO MAY MAKE AN ACCORD AND SATISFACTION 71 one partner cannot bind his co-partners by a sealed instrument whereby an original obligation was imposed upon the firm, as this was not a charge but a discharge.* One partner in a non- trading partnership, without express authority, cannot bind his co-partner by a bill or note even for a debt of the firm." And in such cases, of course, he cannot give the firm note for a less sum with surety so as to constitute a valid accord and satisfaction. The transaction, however, would become binding if ratified by the remaining partner. Where all the partners are agreed, a firm, as such, may enter into an accord and satisfaction, or compromise any demand, either due to them or owing by them, tch the same extent as may a sole debtor or creditor. One partner cannot make a valid accord and satisfaction with a creditor of the firm, of his separate liability for the firm debt and leave the other bound; nor of the aliquot portion for which he is bound as between his co-partner and himself. An accord and satisfaction must discharge the entire demand.' Dissolution of a partnership does not revoke the authority of one partner as agent for the others, to arrange, liquidate and settle, and pay the debts created before dissolution,'' and this power to settle nec- essarily includes the power to effect an accord and satisfaction or compromise of claims due from and to the partnership and give the necessary acquittance. But, for all other purposes, the agency of one for the other, is revoked, and thereafter as to all parties having previous dealings with them they stand as joint debtors merely, and, in effecting an accord and satisfaction or 4 Dubois' Appeal, 38 Pa. St. 2§1, 80 Am. Dec. 478. B Smith V. Sloan, 37 Wis. 285; Ulerg v. Ginricb, 57 III. 531; McCrary v. Slaughter, 48 Ala. 230 ; Hunt v. Chapin, 6 Lans. 139 ; Benton v. Roberts, ,4 La. Ann. 216 ; Breckenrldge v. Shrleve, 4 Dana, 375 ; Brown v. Byers, 16 M. & W. 252; Thlcknesse v. Bromilow, 2 Cr. & J. 425; Hedley v. Bainbridge, 3 Q. B. 315. 8 See Luddington v. BeU, 77 N. Y. 138, 33 Am. Dec. 601. See Sec. 9, Effect of Accord and satisfaction by partners and joint and several obligors. 1 Clement v. Clement, 69 Wis. 599, 35 N. W. 17. 72 ACCOED AND SATISFACTION [§ 39 compromise they have no power to bind the partnership by a new contract or make admissions against a copartner's interest' A covenant not to sue one partner is not a release of either and both may be sued upon the partnership demand to recover the part not paid.* As to debts due to a partnership, each partner has power to receive payment and give a receipt or release,^" or compound the partnership demand,^^ but he has no implied power- to compromise a debt in any way he likes without payment. A partner cannot compromise by receiving land from a debtor in- stead of money, money being due.^^ He cannot off-set his in- dividual debt against a debt due the firm without- the consent of the remaining partners.^' 8 See Sec. 103, as to admissions made after dissolution of the partnership. 8 Hosack V. Rogers, 8 Paige Ch. 29. 10 Pierson v. Hooker, 3 Johns. 68, 3 Am. Dec. 467; Ruddock's Case, 6 Co. 25; Wheeler v. Curtis, 11 Wend. 653; Cook v. Blake, 98 Mich. 389, 57 N. W. 249. A release by one of two partners obtained through connivance is void: Breatson v. Harris, 60 N. H. 83. Getting a partner drunk for the purpose of securing the release vitiates it: Clark v. Lonmann, 52 111. App. 637. 11 Pierson v. Hooker, 3 Johns. 68 ; Noyes v. New Haven, 30 Conn. 1 ; Dor- mus V. McCormick, 7 Gill, 49; Cunningham v. Littlefleld, 1 Edw. Ch. 104. 12 Russel v. Green, 10 Conn. 269. Where a debtor surrendered certain land in satisfaction of a debt due to a firm, and it was accepted by one of the partners who dies, it was held that the other partner could not maintain an action for the recovery of the debt. It not being alleged by the plaintiffs that there was any fraud tn the transaction and no allegation by the defendant that the deceased partner had authority to do what he did: Crowe V. Lysaght, 12 Ir. C. L. 411. Where a settlement and compromise was beneficial to the firm a settlement made by one member was not dis- turbed: Connow v. Wildman, 28 Conn. 472. 18 Rust V. Hauset, 41 N. X. Super. Ct. 467; Nail v. Mclntire, 31 Ala. 532; Hust V. Clark, 56 Ala. 19; Bunwell v. Springfield, 15 Ala. 273; Todd v. Lorah, 75 Pa. St. 155 ; McKinney v. BMght, 16 Pa. St. 399 ; Purdy v. Powers, 6 Pa. St. 492; Noble v. McClintock, 2 Watts & S. 152; Leonard v. Winslow, 2 Grant Cas. 139; Filley v. Phelps, 18 Conn. 294; Jones v. Lusk, 2 Met. 356; Buck v. Mosley, 24 Miss. 170; Minor v. Gaw, 19 Miss. 322; National Bank v. Mapes, 85 111. 67; Rogers v. Batchelor, 12 Pet 221 ; Pierce v. Pass, § 40] WHO MAT MAKE AN ACCORD AND SATISFACTION 73 Sec. 40. By joint and several debtor — By joint debtor — Settle- ment of individual liability — ^Joint creditors. — ^A creditor may ac- cept from one joint and several debtor a less sum than is due upon his demand and covenant never to sue him for the remainder of the debt, and such covenant, as between the covenantor and covenantee, to prevent a circuity of action, will be treated as a release,^ and the creditor may recover the residue of the debt from the remaining co-debtor.^ As to the remaining co-debtor 1 Port. 232 ; Bourne v. Woodbridge, 10 B..Mon. 492 ; Cadwallader v. Kroesen, 22 Md. 200 ; Woodward v. Horst, 10 Iowa, 120 ; Camp v. Page, 42 Vt. 729 ; 1 Lindley on Part. 277. See Emerson v. Baylies, 19 Pick. 55, holding that a feond given by one partner to a debtor of the firm to pay the debt and save the debtor harmless, cannot be pleaded in bar to an action by the firm against the debtor. 1 Harrison v. Close, 2 Johns. 448, 3 Am. Dec. 444; Sewall v. Sparrow, 16 Mass. 24; Stebbins v. NUes, 25 Miss. 267; Jones v. Qumniplack Bank, 29 Conn. 267 ; Walker v. McCuUoch, 4 Greenl. 421 ; Jackson v. Stackhouse, 1 Cow. 122 ; Brown v. Williams, 4 Wend. 360. 2 Harrison v. Close, 2 Johns. 448, 3 Am. Dec. 444 ; Rowley v. Stoddard, 7 Johns. 207; Couch v. Miller, 21 Wend. 424; CatsklU Bank v. Messenger, 9 Conn. 37; Goodnow v. Smith, 18 Pick. 414, 29 Am. Dec. 600; Shed v. Pierce, 17 Mass. 623 ; Crondolet v. Desnoyer, 27 Mo. 36. It is no release of the re- maining co-debtor though made upon a good consideration: Catskill Bank V. Messenger, 9 Conn. 37. Oral agreement not to sne termed a covenant — Consideration. — An agreement not to sue the paying co-debtor for the residue, or to look to the other co-debtor for the the balance, is usually termed a covenant not to sue, even though it lies in parol, or is a writing not imder seal. See Catskill Bank v. Messenger, Harrison v. Close, and Goodnow v. Smith, Ante. This Is a confusion of terms. In such cases in order to be of avail to the paying co-debtor there must be a new consideration. Paying a part of the debt, or even half of it, will not do : Harrison v. Close, 2 Johns. 448, 3 Am. Dec. 444 ; Eldred v. Peterson, 45 N. "W. (Iowa) 754. Payment of one-half of the note before due and taking at par the note of a third person for a small sum, was held to constitute a sufficient consideration: Goodnow v. Smith, Ante. But where it is a technical covenant, the seal imports a sufficient consideration. . Release of joint debtor.— A release of one joint debtor or joint and several debtor is a release of all, as it Is an admission that the debt is paid. 74 ACCORD AND SATISFACTION [§ 40 it is not a release as to either, for if it discharged one co-debtor the creditor could have no remedy against the other although he had expressly or impliedly reserved the right to proceed against him.^ This rule is the same both at law and in equity.* But an accord and satisfaction being a bar to the entire demand, a settlement of the share of one jointly and severally liable upon a debt or demand does not amount to an accord and satisfaction.' Upon the question of an accord and satisfaction by one jointly liable, Mr. Parsons, in his valuable work said: "If an action be brought against many, and to this an accord and satisfaction by one be pleaded in' bar, it must be complete, covering the whole ground, and fully executed. It is not enough if it be in effect only a settlement with one of the defendants for his share of the damages ; nor would it be enough if it were only this in fact, although in form an accord and satisfaction of the whole claim," * for the reason that he is contracting for a discharge of half of the debt or demand for which he is liable and not all of it. The accord and satisfaction must go to the whole demand, and if it does it discharges the debt as to all. One joint and several debtor may make an accord and satisfac- tion or compromise of the entire demand,^ and if it be a case where contribution should be made he may recover over from his co-debtor his aliquot portion of the amount paid.* Where an Couch V. Miller, 21 Wend. 424 ; Hosack v. Rogers, 8 Paige Ch. 229 ; Morgan V. Smith, 70 N. Y. 537 ; 1 Lindley on Part. 433. In equity if an Instrument, which is otherwise a technical release, contains any reservation against a co-debtor as to the latter's liability, it will be construed as a covenant not to sue: Kerby v. Taylor, 6 Johns. Oh. 242. 8 Goodnow V. Smith, 18 Pick. 414, 29 Am. Dec. 600." 4 Miller v. Fenton, n Paige Ch. 18. t Clark V. Dinsmore, 5 N. H. 136. 6 1 Pars. Cont. 29, citing Clark v. Dinsmore, 5 N. H. 136 ; Rayne T. Orton, Cro. Eliz. 305 ; Lynn v. Bruer, 2 H. Bl. 317. T Strange v. Holmes, 7 Con. 224. 8 See Morgan v. Smith, 70 N. Y. 537. § 40] WHO MAY MAKE AN ACCORD AND SATISFACTION 75 obligation is joint and not joint and several, in absence of statu- tory authority, one joint obligor cannot settle with his creditor the proportion of the debt for which he would be liable to con- tribute as between his co-debtor and himself, and leave the other liable, and if the creditor releases one, or enters into an accord and satisfaction with one with respect to the liability of the one for the entire demand, he releases all." If a sum is to be paid in solido to many, the propiise to pay is to all jointly. The agree- ment as to the creditors is single in its nature, and not joint and several. Hence, there arises an implied authority to act each for the other.^" There is such a unity of interest that all the persons interested in the matter must join in an action to recover the sum due,' and, whether the sum is due by an implied or ex- press contract, or recoverable by way of damages for a breach of contract or for a tort, a release or discharge by way of an accord and satisfaction ^^ by one binds all.^^ Thus, where tenants in com- mon are entitled to recover damages for a trespass,^' or for rent 8 Luddington v. Bell, 77 N. Y. 138, 33 Am. Rep. 601. In King y. Hoare, 13 Mees. & W. 494, Parks, B. said: "An action on a joint debt, barred against one, is barred altogether." In Ward v. Johnson, 13 Mass. 148, the court said: "We know of no principle of law which can authorize us to give separat e .lu^ gments In an action on a joint contract." 10 1 Par. Cent 24. Ill Par. Cont. 25, citing Wallace v. Kelsall, 7 M. & W. 264; and Osborn r. Railway Co., 140 Mass. 549. 12 Bradley v. Boynton, 22 Me. 290; Hall v. Gray, 54 Me. 231; Fitch v. Porman, 14 Johns. 172; Austin v. Hall, 13 Johns. 286, 7 Am. Dec. 376; True V. Huntoon, 54 N. H. 121 ; Grossman v. Lauber, 29 Ind. 622 ; Stapleton V. King, 33 Iowa, 35; State v. Story, 57 Miss. 738. See cases relating to release and compromise by partners. Erwin v. Rutherford, 1 Terg. 169 ; (Dictum) Wallace v. Kelsall, 7 M. & W. 264; Husband v. Davis, 10 C. B. 645 (Trustees) ; Salmon v. Davis, 4 Binn. (Pa.) 375. Where one person con- tracted to do a certain piece of work with two for a certain price, but be- fore it was completed, one of the two made a new agreement with the con- tractor whereby he was to finish the work by the day, it was held binding on both: Lattimore v. Hausen, 14 Johns. 330. IS Austin V. Hall, 13 Johns. 286, 7 Am. Dec. 379. 76 ACCORD AND SATISFACTION [§ 41 arising out of land,^* or upon any other cause of action merely- personal,^^ a release or discharge by way of accord and satis- faction by one binds all.^' Where several are joined as defend- ants in trespass or replevin and judgment goes against them, they have no such joint interest, that upon an appeal or writ of error to discharge themselves of damages and costs, a release by one will bind the others. Otherwise, as was said in Ruddock's Case, a plaintiff "might by confederacy join one with them who would release all errors to him." ^' Sec. 41. Same subject — Statutory provision. — ^Under the statute m some of the states a creditor may compromise or otherwise dis- charge one partner, or one joint debtor, without impairing his right to recover from the other co-obligors or partners their equal portion of the debt.^ In New York, however, a release or other instrument exonerating the joint debtor must be given. And, as to a partner- ship liability, one member cannot compound for the partnership debt 14 Decker v. Livingston, 15 Jotina. 479. 10 People V. Keyser, 28 N. X. 226. 18 It was decided in Harrison v. Barney, 3 T. R. 249 (according to Spencer J. in 15 Johns. 479) that a tenant holding under tenants in common cannot pay the whole rent to one of them, after notice from the other not to do so. A release by one of several joint creditors discharges the debt: Chitty on Cent. p. 676. 17 Ruddock's Case, 6 Coke, 26. iMinn. Rev. Code 1905, Sec. 4283; Allen v. Christianson, 83 Minn. 21, 85 N. W. 824; Randahl v. Lindholm, 86 Minn. 16, 89 N. W. 1129. The Minnesota statute also provides that in an action agaiast the other co- obligor the plaintifE must allege the discharge. The last case holds that the burden of proving the discharge is upon the plaintifE. Tenn. Code, Sec. 5570, 5571 ; N. Y. Code Civ. Pro. Sec. 1942 ; Bolin v. Crosby, 49 N. Y. 183 ; Farm- ers' Bank v. Hawn, 79 N. Y. App. Div. 640, 79 N. Y. Supp. 524. Similar statutes are in force in Pennsylvania, Vermont, Missouri, Wisconsin, Mon- tana, Nevada, Mississippi, and South Carolina. See Mich. Comp. Laws, 10, 449. In Bohrabacher v. Walsh, 135 N. W. (Mich.) 907, the statute was held to apply to judgment debtors. § 42] WHO MAT MAKE AN ACCORD AND SATISFACTION 77 until after a dissolution.^ In some states the statute provides that a release of one joint debtor will not release the others, unless they are guarantors.* Sec. 42. By one joint tort feasor — Covenant not to sue one — No contribution. — Where several unite to do an unlawful act, each is responsible for the acts of the others, and the injured party may elect to sue them jointly or severally and may pursue them until he obtains satisfaction, but he can have but one recompense for the same injury.^ The cause of action is single and indivisible.'' An accord and satisfaction by one enures to the benefit of all.' By making the claim and accepting compensation therefor, all persons against whom an action might be brought for such injury are released, whether the party with whom the compromise was made could have been legally 2 N. T. Code Clr. Proc. Sec. 1942. s (1895) N. D. Code, Sec. 5279 ; (1887) S. D. Comp. L. Sec. 3493 ; (1891) Cal. Civ. Code, Sec. 1543. iln Knickerbocker v. Colver, 8 Cow. Ill, two joint trespassers were sued jointly, but appeared separately and the action was thereafter conducted separately as to each; judgments by confession for $5 damages and full costs against each were entered. It was held that a payment of one judg- ment satisfied the damages, although costs of both actions were collectible. If he obtains two or more separate judgments, he may receive payment of the damages on one and recover his costs in each action; but if he settles with one against whom he has obtained judgment, he cannot recover the costs in another action then pending, for costs can only be recovered as inci- dent to the damages, and if the damages are discharged there is nothing to which the costs can be an Incident : Ayers v. Ashmead, 31 Conn. 447, 83 Am. Dec. 154. The party injured may collect all his damages from any one joint wrongdoer : Kropidlowski v. Pflster, 135 N. W. (Wis.) 839. 2 Almquist v. Wilcox, 131 N. W. (Minn.) 796. 3 Wallner v. Chicago Traction Co.. 245 111. 148, 91 N. E. 1053 ; McReady V. Rogers, 1 Neb. 124, 93 Am. Dec. 333 ; Lovejoy v. Murray, 70 U. S. 1, 18 L. Ed. 129 ; Peytoe's Case, 9 Co. 79 ; Ellis v. Bitzer, 2 Ohio, 89, 15 Am. Dec. 534 ; Barrett v. The Third Ave. Ry. Co., 45 N. T. 635; Chicago v. Babcock, 143 111. 358, 32 N. E. 271 ; Knapp v. Roche, 94 N. Y. 333 ; Lord v. Tiffany, 98 N. Y. 412, 50 Am. Rep. 689 ; Knickerbocker v. Colver, 8 Cow. Ill ; Livingston V. Bishop, 1 Johns. 289, 3 Am. Dec. 330 ; Long v. Long, 57 Iowa, 487, 10 N. 78 ACCORD AND SATISFACTION [§ 42 held in an action for such damages or not.* It has never been held permissible to apportion the damages; nor in an action against the one not released to establish that one was liable and the other not.' However, a mere gratuity paid by one as to whom no claim is as- serted, will not constitute a satisfaction of a claim against the actual tort feasor.* So where it is admitted pending an action, that one co- defendant is not liable and the action is dismissed as to him, a gratuity paid by the latter does not release the other defendants.^ The injured party and the party paying can make no agreement impairing the rights of the remaining tort feasors,* and he may avail himself of the discharge as a defence although the parties agreed that only the party W. 875; Turner v. Hitchcock, 20 Iowa, 310; Chapin v. Chicago, 18 111. App. 47; Ruddock's Case, 6 Coke, 26; Thurman v. Wild, 11 A. & E. 453, 3 P. & B. 489 ; Kropidlowski v. Pfister, 135 N. W. (Wis.) 839 ; The St. Cuthbert, 57 Fed. 799; Leddy v. Barney, 139 Mass. 394, 2 N. E. 107; Hubbard v. Railway Co., 173 Mo. 249, 72 S. W. 1073 ; Packard v. Railway Co., 181 Mo. 421, 80 S. W. 951, 103 Am. St. Rep. 607; Hartigan v. Railway Co., 86 Col. 142, 24 Pae. 851 ; Fitzgerald v. Union Stockyards Co., 131 N. W. (Neb.) 612. * Hartigan v. Dickson, 81 Minn. 284, 83 N. W. 1091 ; Cl.abaugh v. Southern W. G. Co., 181 Fed. 706 ; Snyder v. Mutual Tel. Co., 135 Iowa, 215, 112 N. W. 776, 14 L. R. A. (N. S.) 321. See Turner v. Hitchcock, 20 Iowa, 310, and Wilson V. Reed, 3 Johns. 175, which hold that a release of a person as a joint trespasser who is not in fact liable to the releasor does not destroy the right of such releasor against those who are liable. Hartigan v. Dickson, 81 Minn. 284, 83 N. W. 1091. The comparative degree in the culpability of the two will not affect the liability of either. If the negligence of both contributed to the injury, they are liable jointly or severally: Barrett v. 3rd Ave. Ry., 45 N. Y. 628. 6 (Dictum) Snyder v. Mutual Tel. Co., 135 Iowa, 215, 112 N. W. 776, 14 K R. A. (N. S.) 321; Wagner v. Union Stockyards, 41 111. App. 408, citing Wilson V. Reed, 3 Johns. 175; Turner v. Hitchcock, 20 Iowa, 310. Paying $5 and promising to pay $50 more, by a person who was not shown to be in any way responsible for the injury, on representations being made to him that the plaintiff was needy was held not to be an accord and satisfac- tion, but a mere gratuity by one not a joint tort feasor: Sieber v. Amunson, 78 Wis. 679, 47 N. W. 1126. T Warden v. McConnell, 25 Neb. 558, 41 N. W. 548. 8 Ellis V. Bitzer, 2 Ohio, 89, 15 Am. Dec. 534. § 42] WHO MAT MAKE AN ACCORD AND SATISFACTION 79 paying shall be discharged.* Nor will an offer on the part of the injured party to surrender that which he had received in satisfaction deprive the other tort feasor of his defense.^" An accord and satisfaction between an infant and one joint tort feasor is no bar to an action by the infant against any or all of them, as the law will not trust an infant to fix a value on his own rights. ^^ A payment by one joint tort feasor, in order to constitute a dis- charge of all, must be in full satisfaction of the damages, as to the one paying.^* The money must be received as an accord and satisfac- tion of the whole injury.^' Receiving a part of the damages from one and covenanting never to sue him for the balance of the dam- ages, or what is the same thing, promising to look to the other tort feasors for the balance, does not release any of them, and the injured party may pursue those not paying or all of them until he obtains full satisfaction.^* In such cases the amount paid by one amounts to a 8 Ellis V. Eitzer, 2 Ohio, 89, 15 Am. Dec. 534 ; McBride v. Scott, 132 Mich. 176, 93 N. W. 343, 61 L. R. A. 445, 102 Am. St. Rep. 416; Ayer v. Ashmead, 31 Conn. 447, 83 Am. Dec. 154; Arnett v. Missouri Pac. R, Co., 64 Mo. App. 368. Where different parts of a crop are converted by the same co-defend- ants, a settlement with one tort feasor as to one portion so converted and reserving a right to proceed against the other for the balance of the rent due, will not bar an action against the other tort feasor, as the conversion of different parts of the crop were not joint torts: Sexton v. Sexton, 106 S. W. (Tex. Civ. App.) 728. 10 Ellis V. Bitzer, 2 Ohio, 89, 15 Am. Dec. 534. 11 Baker v. Lovett, 6 Mass. 78, 4 Am. Dec. 88. 12 McBride v. Scott, 132 Mich. 176, 93 N. W. 243, 61 L. R. A. 445, 102 Am. St Rep. 416 ; Chicago v. Babcock, 143 III. 358, 32 N. E. 271 ; Smith v. Gayle, 62 Ala. 446. IS Ellis V. Esson, 50 Wis. 138, 6 N. W. 518, 36 Am. Rep. 830; Kropidlowskl T. Pfister, 135 N. W. (Wis.) 839. 1* Ellis V. Esson, 50 Wis. 138, 6 N. W. 518, 36 Am. Rep. 830 ; Chicago v. Babcock, 143 111. 358, 32 N. E. 271. In all cases where a defendant may set up a covenant not to sue as a release as to him; it is permitted to be done to prevent a circuity of actions; for manifestly the damages recovered for a breach of such a covenant would be the sum the covenantor had forced the covenantee to pay upon the orig- 80 ACCOKD AND SATISFACTION [§ 43 partial payment and is available as such to all.^" It appears that the weight of modern decisions, both in England and in this country, support the rule that an instrument in the form of a technical release, given to one joint tort feasor, will be construed as a covenant not to sue, if it contains any reservation of a right to recover from the other tort feasors, or otherwise discloses that the sum received was intended as a part payment only.^* It is held that as between the tort feasor not released and the injured party, the former is a stranger inal demand in violation of his covenant. Again it but carries out by a short method the real intention of the parties ; that is to receive part satisfaction, release one and reserve a right to recover the residue from the other. But where suCh a covenant is made in cases where the obligation is joint and not joint and several, the intention of the creditor to accept only a part of the demand and reserve a right to recover the balance of his demand cannot be carried out if the covenant is treated as a release, for that would release the whole joint demand. It would be contrary to the covenant itself which discloses upon its face an intent to recover the whole demand. Hence, in such cases, the covenant must stand as a covenant. This is so, even though technical words of release are used, if the Instrument discloses otherwise an intent to accept a part satisfaction only. Gilbert v. Finch, 173 N. T. 455, 66 N. E. 133, 61 L. E. A. 807, 93 Am. St. Rep. 623^ IB Smith V. Gayle, 58 Ala. 600; Merchants' Bank v. Curtiss, 37 Barb. 317; Walsh V. New York Cent. R. Co., 124 N. Y. Supp. 312 ; Chicago v. Babcock, 143 111. 358, 32 N. E. 271; Ellis v. Bsson, 50 Wis. 138, 6 N. W. 518, 36 Am. Rep. 830; Kropidlowski v. Pfister, 135 N. W. (Wis.) 839. 18 Duck V. Mayell, L. R., 2 Q. B. 511; Price v. Barker, 2 Ellis & Bl. 760; Sloan V. Herrick, 49 Vt. 327; Kirby v. Taylor, 6 Johns. Ch. 250; Irving V. Millbank, 56 N. Y. 635; Judd v. Oil Co., 124 N. Y. 565, 21 Am. St. Rep. 708, 33 Cent. Law J. 50; Gilbert v. Finch, 173 N. Y. 455, 66 N. E. 133, 61 L. R. A. 807, 93 Am. St. Rep. 623 ; Ellis v. Esson, 50 Wis. 138,' 6 N. W. 518, 36 -Am. Kep. 830 ; Kropidlowski v. Pfister, 135 N. W. (Wis.) 839 ; Bishop V. McGUlis, 82 Wis. 120, 51 N. W. 1075. Contra, Abb. v. Northern Pac. Ry. Co., 68 Pac. 954. In Hartigan v. Dickson, 81 Minn. 248, 83 N. W. 1091, the release given to one tort feasor embraced "All causes of action, costs, charges, claims, or demands of every name and nature arising and growing out of said injuries set forth in the complaint." This was held to discharge all the tort feasors. In Gilpatrlck v. Hunter, 24 Me. 18, 41 Am. Dec. 370, where the plaintiff received of one co-trespasser, five dollars "in full of said Leon- ard's trespass, where he and Wilson P. Hunter were in company, together and others," it was held to discharge the other joint trespassers. § 42] WHO MAT MAKE AN ACCORD AND SATISFACTION 81 to the instrument and either party may contradict it by parol.'' Where the contract between the injured party and the joint wrong-doer is not of such a nature that the law deems it conclusive evidence that the injured person has been satisfied for the wrong, then it is a ques- tion .of fact for the court or jury whether what he has received was received in full satisfaction of the injury or as part payment.'* In absence of evidence of an express agreement or of other facts in the case disclosing that the amount received was not to be accepted as the full amount of the damages, a court or jury, in cases where the damages cannot be ascertained by any fixed legal measure but are based upon opinion and judgment, as in the cases of assault, slander, false imprisonment and cases of that nature, will more readily infer that the acceptance of a specific sum from one joint tort feasor was intended as full satisfaction of the whole injury, than where a sum has been received from one of two or more joint tort feasors who have tortiously converted property, where damages is a matter of computation based upon some fixed data.'* If it is apparent that the sum received from one was in full satisfaction and discharge of the liability of the party paying, all are discharged, even though a right to recover from the other tort feasors is reserved by the agreement.^" The question turns upon the right of the injured person to have but one satisfaction, and having received that, any attempted reservation IT In Fitzgerald v. Union Stock Yards, 131 N. W. (Neb.) 612, It was held that oral evidence was admissible to show that a written instrument dis- charging one wrong-doer was intended only as a release of one. That in Nebraska under the statute a, private seal does not effect the legality of contracts. See O'Shea v. New York Ry. Co., 105 Fed. Rep. 559. 18 Ellis V. Esson, 50 Wis. 138, 6 N. W. 518, 36 Am. Rep. 830; Chicago v. Babcock, 143 111. 358, 32 N. E. 291. 10 Ellis V. Esson, 50 Wis. 138, 6 N. W. 518, 36 Am. Rep. 830, citing Brown V. Cambridge, 3 Allen, 475 ; Stone v. Dickinson, 5 Allen, 29. See upon the same question, Eastman v. Green, 34 Vt. 390. 20 McBrlde v. Scott, 132 Mich. 176, 93 N. W. 243, 61 L. R. A. 445, 102 Am. St. Rep. 416 ; Ellis v. Bitzer, 6 Ohio, 89, 15 Am. Dec. 534. HnNT ACC.& S. — 6 82 ACCORD AND SATISFACTION [§ 43 would be repugnant to the law.^^ Mr. Cooley said: "The bar arises not from any particular form that the proceedings assume, but from the fact that the injured party has actually received satisfaction, or what in law is deemed the equivalent." '^^ The sum paid by one joint tort feasor or one claimed to be jointly liable must be paid uncondi- tionally in satisfaction. If it is to be returned upon a certain con- tingency it is not paid by way of an accord and satisfaction.^^ It is a general rule that as between joint tort feasors there exists no right of contribution, each being liable on account of his own wrong for the whole damages, and, if before judgment, one wrong-doer make an accord and satisfaction or compromise the damages he cannot re- cover any portion paid by him from those jointly responsible for the wrong done.^* Sec. 43. By attorney — ^Agent — Corporation officers. — In the ■ conduct and management of prudential affairs a person may always do through an attorney or agent that which he may lawfully do in person, and an accord and satisfaction or compromise entered into by an attorney or agent under express authority from the cli- ent ^ is binding upon the client. The instruction of the client must be strictly followed and the thing authorized must be done, and not • something else.^ Authority to compromise, settle and arrange the 21 See Guntlier v. Lee, 45 Md. 60, which was a case of a release under seal, reciting a consideration to be in full satisfaction of the wrong com- plained of, with a reservation that the release should not prejudice the plaintiff's right to proceed against the other wrong-doers for damages. 2 2 Cooley on Torts, 139. 23 Musolf V. Duluth Elec. Co., 122 N. W. (Minn.) 499. 24 Miller v. Fenton, 11 Paige Ch. 18. See Note to same case, 5 t.. Ed. 40. It has been said that the rule is confined to cases where it must be presumed that the parties knew they were doing an unlawful act. See Armstrong v. Clarion Co., 66 Pa. 220, 5 Am. Rep. 369. 1 Mallory v. Moriner, 15 Wis. 172 ; Freeman v. Brehm, 30 N. E. (Ind. App.) 712; Vickery v. McClellan, 61 111. 311; AUee v. Hayden, 25 Minn. 267; Small V. Gray, 6 Mass. 239 ; Wilson v. Life Ins. Co., 114 N. W. (Minn.) 251. 2 Nephew v. Railway Co., 128 Mich. 599, 87 N. W. 753. § 43] WHO MAT MAKE AN ACCORD AND SATISFACTION 83 matter as to the attorney may seem fit, does not authorize the attorney to forgive the debt; nor postpone or discharge the security, except upon receiving payment in full, or such amount, as upon compromise, will be taken as satisfaction.* If the power is delegated to three one cannot execute it.* Nor can an attorney or agent delegate his author- ity to another.'' Otherwise a principal would be deprived of the judg- ment and discretion of the person upon whom he relied to effect a judicious settlement. In the United States, with possibly a few excep- tions,* the decisions hold that an attorney without special pow- er, is not by reason of a general retainer, authorized to settle his client's claim by an accord and satisfaction or compromise,' s ChUton T. Willford, 2 Wis. 1. * White V. Davidson, 8 Md. 169, 63 Am. Dec. 699. 5 Lyon V. Jerome, 26 Wend. 485, 37 Am. Dec. 271. 6 See Bonney v. Morrill, 57 He. 368, where it is held that an attorney em- ployed to recover possession of land may compromise a claim for mesne profits during the pendency of the action. 7 (1910) Nelson v. Nelson, 126 N. W. (Minn.) 731, and cases cited ; D. C. Heath & Co. v. Commonwealth, 113 S. W. (Ky.) 69; Trenton St. R. Co. v. Lawlor, 71 Atl. (N. J.) 234; Mygatt v. Tarbell, 85 Wis. 457, 55 N. W. 1031; Jones V. Ransom, 3 Ind. 327 ; Repp v. Wiles, 3 Ind. App. 167, 20 N. B. 441 ; Maddox V. Bevan, 39 Md. 483; Rohr v. Anderson, 51 Md, 205; Lockhart V. Watt, 10 Ala. 231, 44 Am. Dec. 481 ; Barrett v. Third Ave. Ry. Co., 45 N. Y. 628; De Louis v. Meek, 2 G. Green. 50, 50 Am. Dec. 491; McCarver v. Nealey, 1 G. Green, 360 ; Martin v. Insurance Co., 85 Iowa, 643, 52 N. W. 542 ; Baton v. Knowles, 61 Mich. 625, 28 N. W. 740 ; Treasurers v. McDowell, 1 HUl (S. C.) 184, 26 Am. Dec. 166 ; Taylor v. Evans, 16 Tex. Civ. App. 407, 41 S. W. 877; Senn v. Joseph, 106 Ala. 454, 17 So. 543; Ball v. Bank, 8 Ala. 590, 42 Am. Dec. 649; Hallock v. Loft, 19 Colo. 74, 34 Pac. 568; Kaiser v. Hancock, 106 Ga. 217, 17 So. 543 ; Preston v. Hill, 50 Cal. 43, 19 Am. Rep. 647 ; Heifer v. Spunner, 147 111. App. 448 ; Schreiber v. Straus, 147 111. App. 581 ; Pomeroy v. Prescott, 76 Atl. (Me.) 898 ; Dewort v. Loomer, 21 Conn. 245 ; Jones v. Innis, 32 Kan. 177, 4 Pac. 95 ; Fitch v. Scott, 3 How. (Miss.) 314, 34 Am. Dec. 86 ; Smith v. Dixon, 3 Mete. (Ky.) 438 ; Dalton -v. Railway Co., 159 Mass. 221, 34 N. E. 261, 38 Am. St. Rep. 410 ; Brockley v. Brockley, 122 Pa. St. 1, 15 Atl. 644; High v. Emerson, 62 Pac. 455; Fosha v. Prosser, 97 N. W. (Wis.) 924; CuUin v. Vulcan Iron Works, 124 S. W. (Ark.) 1023. Cases are to be found to the same effect in almost every state. 84 ACCORD AND SATISFACTION [§ 43 or discharge it upon receiving a part payment,' either before or after judgment.* The same rule applies with equal force to agents who are not attorneys.^" The general power of an attorney pending an action, by stipulation, to waive a particular de- fence, or dismiss an action without consulting his client, has its foun- dation upon the right of the attorney to form and act upon his pro- fessional opinion as to whether his client has in fact a cause of ac- tion or defence, and is a usual proceeding in an action, but a com- promise of an action and dismissal pursuant thereto is held to be clearly not within the power of the attorney to manage and conduct the litigation.^^ It has been held that where an attorney is confronted with an emergency, and prompt action is necessary to protect the in- terest of his client, aiid there is no opportunity for consultation with him, a coiftpromise and dismissal of the action will be sustained.^^ 8 Bigler v. Toy, 68 Iowa, 687, 28 N. W. 17; Hall Safe Co. v. Howell, 88 Ala. 441, 6 So. 750; "Watts t. French, 19 N. J. Eq. 407; Pickett v. Bates, 3 La. Ann. 627; Barron v. Farrow's Heirs, 7 B. Mon. 126, 45 Am. Dec. 60; Vanderlin v. Smith, 18 Mo. App. 55 ; Pierrepont v. Sassee, 1 Tex. App. Cir. Cas. Sec. 1294 ; Kelly v. Wright, 65 Wis. 236, 26 N. W. 610. 8 Johnson v. Dun, 75 Minn. 533; BurgsafC v. Byrnes, 94 Minn. 418, 103 N. W. 212 ; Sebastian v. Rose, 122 S. W. (Ky.) 120. Accepting the costs of a discontinuance and dismissing ap action does not amount to an accord and satisfaction where the attorney was not autliorized to compromise and settler the claim, although It is within his authority to discontinue the action: Barrett v. Third Ave. Ry. Co., 45 N. Y. 628. i"o First Nat. Bank v. Prior, 10 N. D. 146, 86 N. W. 362. 11 Thomas v. Armltage, 126 N. W. (Minn.) 731 ; Housenick v. Miller, 93 Pa. St. 514. 12 Nelson v. Nelson, 126 N. W. (Minn.) 931. In Bates v. Bates, 66 Minn. 131, 68 N. W. 845, the court refused to vacate a judgment for $1,500 entered upon a stipulation. The action was to recover damages for malicious prose- cution and had been pending for about a year ; the defendant resided In an- other state several hundred miles away, and his attorney had not heard from him and was afraid he would not be present. The court, however, based its decision more upon the conduct of the defendant In neglecting his own inter- est in leaving home and placing himself beyond reach of a communication from his attorney, presumable after he knew the case was noticed for trial at a certain term. § 43] WHO MAT MAKE AN ACCORD AND SATISFACTION 85 But, it would seem that the circumstances should be exceptional, and the compromise within reason. It has been said that where the compromise is bona fide and works no considerable hardship, the courts will be slow to disturb it,^' but this seems to have more to do with the evidence required to convince the court of the absence of authority. An attorney cannot make an assignment of his client's property for the benefit of creditors.^* The fact that the client resides abroad or in another state does not confer any greater powers upon the attorney.^" The fact that his fee is con- tingent upon success does not give him such an interest in his client's claim that he would be, under a general retainer, authorized to com- promise it; and such contingent interest will not preclude the client from effecting a compromise independent of the attorney.^" A party to a compromise may serve notice of a dismissal of the action upon the other party, notwithstanding a statute or rule of court requiring all papers to be served upon the attorney and not upon the client. Such provisions "have reference more particularly to notice of motion and other proceedings served during the pendency of the ac- tion." " The effect of a compromise by the client where the attorney has a valid lien is mentioned elsewhere. ^^ A party negotiating a compromise with an agent or attorney is bound to take notice of the extent of his authority to compromise.^' After a debtor is informed « 13 White V. Davidson, 8 MA. 469, 63 Am. Dec. 699; Block v. Rogers, 75 Mo. 441 ; William v. Nolan, 58 Tex. 708 ; Potter v. Parsons, 14 Iowa, 286. 1* Jones V. Horsey, 4 Md. 306, 59 Am. Dec. 81; Hatch v. Smith, 5 Mass. 42. 15 Branger v. Batchelder, 54 Vt. 248, 41 Am. Rep. 846. 18 Lamed v. Dubuque, 53 N. W. (Iowa) 105 ; Coughlin v. N. T. Cent. Ry. Co., 71 N. Y. 443, 27 Am. Rep. 75; Wright v. Wright, 70 N. Y. 96; Shank V. Shoemaker, 18 N. Y. 489. See Toy v. Hoskin, 128 Cal. 558, 61 Pac. 89, 79 Am. St. Rep. 70, where the general rule is recognized, but the right of the client to appear in an action and sign a stipulation for dismissal is denied. 17 Thomas v. Armitage, 126 N. W. (Minn.) 731. 18 Sec. 38. 10 Nelson v. Nelson, 126 N. W. (Minn.) 731. 86 ACCORD AND SATISFACTION [§ 43 that an agent or attorney is authorized to compromise, he may rely upon the information until notified that the authority has been with- drawn or abridged; or receives knowledge from other sources suffi- cient to put him upon inquiry. The fact that the written instrument remains in the hands of the attorney is a strong circumstance warrant- ing the creditor in negotiating a compromise with him although it be somewhat delayed."" A principal may by his conduct be estopped from denying the authority of his' agent or attorney to effect a com- promise, but the acts or silence, must be such that the other party was warranted in relying upon them and changed his position upon the faith thereof.*^ Corporate officers are governed by the general rules oif agency, and an officer cannot compromise a claim due the company in absence of authority from the corporation. The authority need not necessarily be in express terms, but may be implied from custom. Cashiers of banks, general managers and other executive officers of business corporations intrusted with the management of its business, have authority to compromise claims due the company when actmg in accordance with the general practice, usage and course of busi- ness."^ Officers other than those mentioned must have special au- thority in order to bind the corporation, either expressed through a resolution of the board of directors, or in the charter, or by laws."* A president of a bank is not authorized to make a compromise,"* unless specially authorized, or the general management of bank is given up to him."" aoMallory v. Mariner, 15 Wis. 172. 21 See Mygatt v. Tarbell, 85 Wis. 457, 55 N. W. 1031. 22 Young V. Hudson, 99 Mo. 102, 12 S. W. 632 ; Corser v. Paul, 41 N. H. 24, 77 Am. Dec. 753; Eastman v Coos Bank, 1 N. H. 23; Bridenbecker v. LoweU, 32 Barb. 9; U-. S. v. Columbian Bank, 21 How.'U. S. 356, 16 L. Ed. 130. 2 8 Delta Lumber Co. v. Williams, 73 Mich. 86, 40 N. W. 940. 24 Wheat V. Louisville Bank, 9 Ky. L. Rep. 738, 58 S. W. 305. 28 Coke T. PottsviUe Bank, 116 Pa. St. 264, 9 Atl. 302, 2 Am. St. Rep. 600. § 44] WHO MAT MAKE AN ACCORD AND SATISFACTION 87 Sec. 44. Liability of attorney or agent for unauthorized settle- ment. — ^An attorney, or agent, is liable in damages or in trover, for an unauthorized compromise of his client's claim, or for the surrender of a note ^ or satisfaction of a judgment on receiving a part of it,'' or on receiving anything other than money.* The measure of dam- ages, where the matter compromised is a note, book account, judg- ment or other debt, is prima facie the amount of the debt, less the amount received upon the compromise.* If the debt is of less value by reason of facts over which the law has no control, as insolvency of the debtor, that may be shown in reduction of the damages. ° No debt can be said to be of no value, and a client (or principal) is enti- tled to nominal damages in any event.® If something else than money was received upon the compromise, as between the attorney and client it would be taken at its value as established by evidence and not at the estimate placed upon it on the compromise. No rule of law is more firmly settled than the rule that if one, with full knowledge of the facts, accepts the avails of an unauthorized compromise made in his behalf by another, he thereby ratifies the transaction and is bound by the terms as fully as he would be had he negotiated it himself.' 1 Fitch v. Scott, 3 How. 314, 34 Am. Dec. 86. 2 Johnson v. Dun, 75 Minn. 533 ; Burgraff v. Byrnes, 94 Minn. 418, 103 N. W. 212; Rivinus v. Langford, 75 Fed. Rep. 959; Woodrow v. Hennen, 6 Mart. (La.) 156 ; Beers v. Hendrickson, 45 N. Y. 665; Jackson v. Bart- lett, 8 Johns. 361 ; Trumbull v. Nicholson, 27 111. 149 ; Chapman v. Cowles, 41 Ala. 103. 8 Smock V. Dade, 5 Rand. 639, 16 Am. Dec. 780. * Johnson v. Dun, 75 Minn. 533 ; Burgraff v. Byrnes, 94 Minn. 418 ; Rivinus V. Langford, 75 Fed. Rep. 959. This rule is applied to actions foi the con- version of a note (Hersey v. Walsh, 38 Minn. 521; Felch v. Scott, 3 How. 314, 34 Am. Dec. 86), or book accounts (Casey v. Ballon Bank Co., 98 Iowa, 107, 67 N. W. 98 ; O'Donoghue v. Corby, 22 Mo. 393). Rivinus v. Langford, 75 Fed. Rep. 959; Johnson v. Dun, 75 Minn. 533. 8 See Cox v. Livingston, 2 Watts & S. 103, which was an action for dam- ages for a failure to sue upon a note. 7 Strusser v. Conklin, 54 Wis. 102, 11 N. W. 254; Reid v. Hibbard, 6 Wis. 175; Zelenka v. Port Huron Mach. Co., 123 N. W. (Iowa) 332 ; Coans 88 liCCOED AND SATISFACTION [§ 44 And the rule is applicable alike to compromises effected through at- torneys, agents, or strangers. If the principal does not want to be bound by the compromise, he must upon discovery of the agent's un- authorized acts, repudiate the transaction and return or tender back what was received by the agent. But the rule requiring a tender does not apply to those transactions where the agent or attorney merely receives a part of a demand about which there is no dispute as to the liability or amount due, in satis- faction of the whole; as where an attorney compromises a note,* judgment," or other debt, by receiving a part of the amount due in satisfaction of the whole. In such cases the client is entitled to retain the amount received in any event and the debtor is entitled to have it credited upon the demand. As between the attorney and client it is not necessary to rescind the transaction and return the money or other thing to the debtor. And it is no defense that the client may have the satisfaction of a judgment vacated, or his security reinstated. In such a case the court said : "They had a right to acquiesce in what had been done and look to the parties through whose interference with their property the contest had been thrown upon them, and hold the parties for a conversion." ^^ Nor is it necessary for the client to refuse to accept the money or other thing from the attorney. The thing received upon the compromise does not belong to the attorney and the client may, by summary process, ^^ or other appropriate pro- ceedings, compel the attorney to turn over what he has received. If the client accepts the property received by his attorney upon an un- authorized compromise, his remedy is an action for damages; if he V. Hunter, 28 N. Y. 389 ; Keeler v. Salisbury, 33 N. Y. 648 ; Evans v. Wells, 22 Wend. 224; Arpistrong v. Gilchrist, 2 Johns. Cas. 424; Trenton St. R. Co. r. Lawlor, 71 Atl. (N. X) 234. 8 Fosha V. Prosser, 97 N. W. (Wis.) 924. oBtirgraff v. Byrnes, 94 Minn. 418, 103 N. W. 212; Johnson v. Dun, 75 Minn. 533. 10 Johnson v. Dun, 75 Minn. 533. 11 Burgraff v. Byrnes, 94 Minn. 418, 103 N. W. 212. § 45] WHO MAY MAKE AN ACCORD AND SATISFACTION 89 rejects it he may bring trover; and, a recovery in such action and satisfaction of the judgment, vest the title to the property converted in the wrongdoer.^* Sec. 45. By executor — Administrator — Administrator de son tort — A common law right — Statutory authority not exclusive. — Executors and administrators at common law have power to com- promise a claim or compound a debt in favor of the estate,^ and it is the duty of a personal representative to effect an accord Jtnd satisfaction or compromise whenever it will be for the best in- terest of the estate to do so.^ The right is founded upon their legal title to the assets of the deceased, and is a necessary in- cident to their power to collect the assets and settle and adjust claims in which the estate is interested. The power may be exercised in reference to all claims and demands the title to which, under the law, is vested in the executor or administrator. A claim for life insurance, or for damages for wrongfully causing the death of the intestate may be compromised by an administra- tor.* An administrator may employ an attorney to prosecute 12 Johnson v. Dun, 75 Minn. 533 ; Cooley on Torts, 458. 1 Chouteau v. Suydam, 21 N. Y. 179; Wood v. Pannicliff, 74 N. Y. 38; Auken v. Kiener, 9 N. T. St. 661 ; Bailey v. Dilworth, 10 Sm. & M. 408, 48 Am. Dec. 760; Berry v. Parkes, 3 Sm. & M. 625; Woolfork v. Sullivan, 23 Ala. 548, 58 Am. Dec. 305; Johnson's Appeal, 71 Conn. 590, 42 Atl. 662; Washington v. Louisville R. Co., 136 111. 49, 26 N. E. 653 ; Kelly v. Chicago, etc., R. Co., 114 N. W. (Iowa) 536; Jenkins v. Schields, 47 Iowa, 708 ; Wilks V. Slaughter, 49 Ark. 235, 48 S. W. 766; Pittsburg Ry. Co. v. Gipe, 160 Ind. 360, 65 N. E. 1036; Pusey v. Clemson, 9 Serg. & B. 204; Parker v. Provi- dence Steamboat Co., 17 R. I. 376, 22 Atl. 284, 23 Atl. 102, 33 Am. St. Rep. 869, 14 L. R. A. 414 ; Alexander v. Kelso, 3 Baxt. 311 ; Boyd v. Oglesby, 23 Gratt. 674; McCall v. Peachy, 3 Munf. 288; Siddall v. Clark, 89 Cal. 321, 26 Pac. 829; Moulton v. Holmes, 57 Cal. 337. An administrator of a deceased partner may compromise with the surviving partner; Boyd v. Oglesby, 23 Gratt. 674. 2 Matter of Oatman, 5 N. Y. Leg. Obs. 378. 8 Hartigan v. Southern Pac. Ry. Co., 86 Cal. 142, 24 Pac. 851 ; Washington V. Louisville Ry. Co., 136 111. 49, 26 N. B. 253, aff'm'd. 34 111. App. 6o8 ; Brink 90 ACCORD AND SATISFACTION [§ 4:5 a claim and empower him to compromise it.* Where there is more than one administrator a compromise effected with one or more, without the concurrence of the remainder, will not be set aside where no collusion or bad faith is shown." One executor or administrator is not chargeable with the devastavit of his com-, panion,* and is only chargeable with the assets which come to his hands. Each may act independently as to assets coming to his hands,' but, having once received assets he is answerable for the due administration of them, even if he delivers them over to his co-executor or co-administrator.* As to such assets the one first having them would be answerable only for the fraudulent or collusive compromise of the other resulting in a loss to the estate. An administrator de son tort cannot convey a good title to property belonging to the estate for which he assumed to act and cannot therefore enter into a valid accord and satisfaction or compromise of a claim due to the estate.* But if the one as- suming to act is afterwards appointed 'administrator, his title to the property relates back and vests as of the date of the death of the intestate and the appointment legalizes all intermediate acts of the administrator. A court will not set aside a compromise made by such administrator before his appointment, if free from collusion and not prejudicial to creditors. Thus where an ad- V. O'Donnell, 88 111. App. 459; Pittsburg Ry. Co. v. Glpe, 160 Ind. 360, 65 N. B. 1034; Parker v. Providence, 17 R. I. 376, 22 Atl. 284, 23 Atl. 102, 33 Am. St. Rep. 869, 14 L. R. A. 414. 4 Jeffries v. Mutual Life Ins. Co., 110 U. S. 305, 28 L. Ed. 156. B Murray v. Blatchford, 1 Wend. 583. The power to compromise does not authorize an executor to receive personal property in payment from a 'debtor who is perfectly solvent : Gulledge v. Barry, 31 Miss. 346. 8 Douglass V. Saterlee, 11 Johns. 16.- 1 Douglass V. Saterlee, 11 Johns. 16; Boget v. Hertell, 4 Hill, 492. 8 Douglass V. Saterlee, 11 Johns. 16 ; Cross v. Smith, 7 East, 246. » Woolfork V. Sullivan, 23 Ala. 548, 58 Am. Dec. 305; Vroom v. Van Home, 10 Paige, 549, 42 Am. Dec. 94. § 45] WHO MAY MAKE AN ACCORD AND SATISFACTION 91 ministrator before his appointment delivered a horse to another for his expenses in burying the decedent, it was held that the ad- ministrator could not recover the horse against his own agree- ment.^" The rule that a subsequent appointment as administrator cures his tortious acts, is applied all the more strictly where the appointee is entitled to the succession as heir or sole legatee.^* In a case where a person before his appointment as administrator received a sum of money from an employer of the decedent in satisfaction of the damages for wrongfully causing the latter's death, it was held that the receipt of the money did not operate as an accord and satisfaction ; that ■ the rule above referred to had no application to cases for the recovery under a statute, by the next of kin, of unliquidated damages.^^ In such cases the per- son liable, may settle and compromise the claim for damages di- rectly with the parties for whose beneiit an action may be brought.^' A person in possession of the entire estate of a decedent, either under a deed,^* or as heir or devisee, takes the estate burdened with the debts of decedent, and he may, to avoid the expense of an administration or threatened litigation, compromise and set- 10 Whitehall v. Squite,' Holt, 45, Cath. 103 ; Alvord v. Marsh, 12 Allen, 603. See Witt v. Klmoife, 2 Bailey, 595. iiWoolfork V. Sullivan, 23 Ala. 548, 58 Am. Dec. 305; Vroom v. Van Home, 10 Paige, 549, 42 Am. Dec. 94. The rule was applied where the settle- ment was made by the widower in presence of the only child. The latter as administrator after thirty months was not permitted to recover on the claim: Herrington v. Lowman, 22 N. T. App. Div. 226, 47 N. Y. Supp. 863. 12 Stuber v. McEntee, 142 N. T. 200, 30 N. E. 8T8. A settlement of dam- ages for wrongfully causing death made by an administrator prematurely appointed was held good: Leach v. Owensboro City R. Co., 125 S. W. (Ky.) 708. 18 Sykora v. J. I. Case Thresh. Mach. Co., 39 Minn. 130, 60 N. W. 1008. The provision that such actions must be brought by the personal representa- tives is designed for the benefit of the defendant by making it certain that the party entitled thereto will receive it and thus escape the danger of having to pay twice ; but he may waive the provision for his benefit. 1* Bull V. Hepworth, 124 N. W. (Mich.) 569. 92 ACCOED AND SATISFACTION [§ 4:5 tie a claim against the estate, and forbearance to sue is a sufficient consideration to uphold the agreement. Authority to compromise may be given by will.^^ In some jurisdictions the probate court is empowered by the statute to authorize an executor or admin- istrator to compromise claims due the estate.^" A necessity for a compromise must be shown.^'' And, it must be something more than the mere belief of the executor or his attorney that it will be for the best interest of the estate.^^ Authority to compromise will be granted where there is doubt as to the- validity of the claim or of the solvency of the debtor/" Upon a proper show- ing the court may authorize a debt compounded whether the debtor is solvent or insolvent.^" The New York statute authorizing a court to empower an administrator to compromise, has been held not to authorize joining in a composition deed giving a long term of' payment.^^ A previous agreement fixing definitely the terms of settlement is not necessary. ^^ Ordinarily the personal repre- sentative must make oath that the compromise is made in good faith.^^ In some states the power to compromise is vested in IB BuerMus v. De Saussure, 41 S. C. 457, 19 S. E. 926, 20 S. E. 64. 18 Chouteau v. Suydam, 21 N. Y. 179; Johnson's Appeal, 71 Conn. 590, 42 Atl. 662 ; Kelly v. Chicago, etc., Ry. Co., 114 N. W. (Iowa) 536; MulvUle v. Insurance Co., 19 Mont. 95, 47 Pac. 650 ; Hartigan v. Southern Pac. Ry. Co., 86 Cal. 142, 24 Pac. 851 ; Moulton v. Holmes, 57 Cal. 337 ; Leach v. Owens- boro St. R. Co., 125 S. W. (Ky.) 708; Fraky v. Thomas, 98 Ga. 375, 25 S. E. 446. . 17 Brosnan v. Kramer, 135 Cal. 36, 66 Pac. 679. IS In re Richardson's Estate, 9 N. Y. Supp. 638, 2 Connoly's Surr. 276. 10 Shepard v. Saltus, 4 Redf. Surr. (N. Y.) 232 ; In re Patten, Tuck. Surr. (N. Y.) 56. 20 Berriens' Est., 16 Abb. P. (N. S.) 23, disapproving Howell v. Blodgett, 1 Kedf. Surr. 223. 21 Matter of Loper, 2 Redf. Surr. 545. 22 Mulville V. Insurance Co., 19 Mont. 95, 47 Pac. 650. 28 Ponce V. Wiley, 62 Qa. 118. In Rhode Island the power under the stat- ute, to authorize compromises is held to be limited to demands existing at the date of decedent's death. Fairbanks v. Mann, 19 R. I. 449, 34 Atl. 1112. § 45] WHO MAY MAKE AN ACCORD AND SATISFACTION 93 personal representatives direct.^* Acts authorizing personal rep- resentatives to compromise claims due the estate, in most states are held not restrictive of their common law powers, but designed to aiford them additional protection.^" And an executor or ad- ministrator may make a compromise of a demand or compound a debt due the estate without first obtaining an order of the court,^* excepting in Kansas ^' and possibly some other states. If he neglects to obtain express authority from the court, and his acts are questioned the burden is upon him to show that he acted prudently and for the best interest of the estate.^* Ob- taining an order of the court authorizing a compromise does not release an administrator of his liability for negligence which ren- dered the compromise imperative or advisable.^' It merely affords him more complete' protection in the exercise of his common law power.'" 2* McFarland's Adm'r v. Louisville, etc., R. Co., 113 S. W. (Ky.) 82. 25 Chouteau v. Suydam, 21 N. Y. 179; Wood v. Tunnlcliff, 74 N. Y. 38; Kelly V. Chicago, etc., Ry. Co., 114 N. W. (Iowa) 536; Wyman's Appeal, 13 N. H. 18; Johnson's Appeal, 71 Conn. 590, 42 Atl. 662; Wilks v. Slaughter, 49 Ark. 264, 4 S. W. 766 ; Moulton v. Holmes, 57 Cal. 337. 2 6 Chouteau v. Suydam, 21 N. Y. 179; Wood v. Tunnlcliff, 74 N. Y. 38; Washington v. Louisville Ry. Co., 136 111. 49, 26 N. B. 653, affirming 31 111. App. 658. Brink v. O'Donnell, 86 111. App. 457; Moulton v. Holmes, 57 Cal. 337 ; Wyman's Appeal, 13 N. H. 18 ; Kee v. Kee, 2 Gratt. 116 ; . Pittsburg Ry. Co. V. Cipe, 160 Ind. 360, '65 N. E. 1034. This was an action to recover damages for wrongfully causing the death of decedent; the right to com- promise was held to be incident to the right to maintain an action. 27 See .aJtna Ins. Co. v. Swayze, 30 Kan. 118, 1 Pac. 36. 28 Chase v. Bradley, 26 Me. 531; Chadboum v. Chadbourn, 9 Allen, 173; Wyman's Appeal, 13 N. H. 18 ; Fridge v. Buhler, 6 La. Ann. 272 ; Wilks v. Slaughter, 49 Ark. 235, 4 S. W. 766 ; Matter of Farley, 15 N. Y. St. 727. 2» Fraley v. Thomas, 98 Ga. 375, 25 S. B. 446. 30 Johnson's Appeal, 71 Conn. 590, 42 Atl. 662 ; Chouteau v. Suydam, 21 N. Y. 179. See" Taylor v. Funk, 2 Iowa, 84 94 ACCORD AND SATISFACTION [§ 46 Sec. 46. Same subject — Good faith and prudence required — Liability of personal representatives. — ^Whether they act independ- ently or pursuant to an order of the court, executors and admin- istrators in the management of their trust, are held to the most exact good faith, and are bound to the exercise of such prudence and caution in the administration, as a judicious man would ex- ercise in regard to his own affairs.^ At common law if the com- promise resulted in a loss to the estate it was regarded as waste.'' But under modern authorities it seems that a compromise will be upheld and the executor or administrator protected if he acted with prudence and without fraud, misconduct, or negligence,' even though the compromise proves not to be the best that could have been made.* An accord and satisfaction or compromise by a per- sonal representative is always at some risk." But only parties in interest who have not given their assent can attack the com- promise and hold the executor or administrator for the loss oc- casioned by his acts.® If a personal representative is guilty of fraud, negligence or gross error amounting to a fraud in making a compromise he will be held liable for the loss. Thus, where an administrator in good faith entered into a composition of a lease-hold estate believing it had been forfeited, but afterwards, on learning that the estate had not been forfeited but belonged 1 Bailey v. Dilworth, 10 Sm. & M. 404, 48 Am. Dec. 760 ; Boyd v. Oglesby, 23 Gratt. 674; Neal v. Lamar, 18 Ga. 746. 2 See Wood v. Tunnicliff, 74 1^. Y. 38 ; De Dlemar v. Van Nogenen, 7 Johns. 404. 3 People V. Pleas, 2 Johns. Cas. 376 ; Bailey v. Dilworth, 10 Sm. & M. 404, 48 Am. Dec. 760; Jacobs v. Jacobs, 99 Mo. 427, 12 S. W. 457; Pusey v. Chemson, 9 Serg. & R. 204; Turpin v. Chesterfield, 82 Va. 74; Jenkins v. Schields, 47 Iowa, 708; Blue v. MarshaU, 3 P. Wms. 381. « Jenkins v. Schields, 47 Iowa, 708. Johnson's Appeal, 71 Conn. 590, 42 Atl. 662 ; Wyman's Appeal, 13 N. H. 18 ; Blue V. Marshall, 3 P. Wms. 381, 24 Eng. Reprint 1110. 6 Jones V. Jones, 118 N. C. 440, 24 S. B. 774 ; Black's Appeal, 25 Pa. St. 235; Delabigarre v. New Orleans, 3 La. Ann. 230. § 46] WHO MAY MAKE AN ACCORD AND SATISFACTION 95 to the heirs, and that his former acts did not amount to a sur- render of the estate, his execution of a release of the estate to complete the contract, was adjudged wilful and done in fraud.' As to compromising secured debts the test seems to lie in the actual value of the security.* Advice of counsel will be taken into consideration by the court m determining whether the administrator acted judiciously and honestly," but it will afford no protection for negligence.^" A court of equity will not decree specific performance of "composition of claims by executors or other fiduciaries, unless the party pray- ing it will first unfold and' disclose the whole circumstances of the case to the court, that it may see there has been no fraud, and that everything was fair." ^^ An approval of a compromise by a probate court, will not operate as a condonation of any fraud on the part of a debtor in negotiating the compromise.^* Under a probate system which provides for the proving of all claims against the estate, a personal representative cannot bind the estate by an account stated, or by admissions. Nor can he compromise a T People V. Pleas, 2 Johns. Cas. 376; Strutter v. Peltz, 18 Pa. St. 278; Klein v. French, 57 Miss. 662; Ellis v. Appleby, 18 Pa. St. 278; Jones v. Jones, 118 N. O. 440, 24 S. B. 774; Haile v. McGhee, 29 La. Ann. 350; Eoun- tree v. Stevens, 8 Ky. L. Rep. 433; GuUedge v. Barry, 31 Miss. 346. A re- lease obtained by one who concerts with an administrator in the application of assets of the estate to the administrator's individual use will be set aside : Weir V. Mosier, 19 Wis. 311. If an administrator in collusion with the ad- verse party, settles a claim for the negligent death of the decedent in fraud of the beneficiaries, the settlement may be opened and the case tried on Its merits: Leach v. Owensboro St. R. Co., 125 S. W. (Ky.) 708. 8 Buerhaus v. De Saussure, 41 S. C. 457, 19 S. E. 926, 20 S. E. 64 ; Sanford V. Story, 15 Misc. (N. T.) 536, 38 N. Y. Supp. 104. » People V. Pleas, 2 Johns. Cas. 376. 10 Kletn V. French, 57 Miss. 662. 11 Clay V. William, Z Munf. (Va.) 105, 5 Am. Dec. 453. s. p. Cleeve v. Cleeve, 82 Ala. 581, 3 So. 107, 60 Am. Rep. 750. 12 Kelly V. Chicago, etc., Ry. Co., 114 N. W. (Iowa) 536. 96 ACCORD AND SATISFACTION [§ 47 claim against the estate. They must be proven.^' But an execu- tor, who, as residuary legatee, has given bond to pay the debts and legacies of the estate, may compromise a claim against the estate as he may see fit. Upon the giving of the bond the debts and legacies become the personal obligations of the executor.^* It has been held that an administrator is not bound to defend against a just claim against an estate, upon a revivor of action against the estate, but may consent to a judgment against the estate.^^ A compromise effected with an administrator whose ap- pointment is voidable is binding on the administrator appointed after the removal of the illegal appointee.^" Sec. 47. By guardian — Next friend — Guardian ad litem — Par- ent. — ^At common law a general guardian has power to compro- mise and release claims due the estate of his ward.^ A general guardian is required to take into his custody the property of the ward, manage the same, keep the funds invested and protect the property for his benefit, and the law gives him the necessary pow- er to accomplish the purpose of his appointment. The rights of infants by reason of their immature years and inexperience have at all times been guarded with jealous care by the courts and a guardian's transactions with respect to his ward's estate is sub- ject to a more searching scrutiny than are the acts of most any other trustee, though all trustees are held to absolute good faith and fair dealing. A compromise by a guardian upon his own 13 Grece v. Helen, 51 N. W. (Mich.) 1106; Matter of Farley, 15 N. Y. St. 727 ; Durfee v. Abbott, 50 Mich. 283, 15 N. W. 454. 14 See Durfee v. Abbott, 50 Mich. 283, 15 N. W. 454. IB Sheldon v. Warner, 59 Mich. 444, 26 N. W. 667 ; Grece v. Helen, 51 N. W. (Mich.) 1106. le McFariand's Adm'r v. Louisville, etc., R. Co., 113 S. W. (Ky.) 82. See Leach v. Owensboro St. R. Co., 125 S. W. (Ky.) 708. 1 Ordinary v. Dean, 44 N. J. 64; Worthington v. Worthington, 35 S. W. 1039, 18 K. L. Rep. 215 ; Torry v. Block, 58 N. Y. 185 ; Malpass v. Graves, 111 Ga. 743, 36 S. E. 955 ; Fretelliere v. Hindes, 57 Tex. 392. § 47] WHO MAT MAKE AN ACCORD AND SATISFACTION 97 responsibility is at best a perilous undertaking. If a compromise is fairly made, free from fraud, and made in the exercise of a sound discretion it is binding upon the ward upon his arriving of age.^ And, the converse is true, and the ward is not bound by a compro- mise if made in fraud of his rights and unfair to him.' A com- promise by a guardian of a baseless, improvident and unjust claim will entitle an infant to a rescission, and the same relief would be afforded the guardian when free from blame and there was actual or constructive fraud, surprise, or ignorance of fact.* A guardian cannot be held for a loss occasioned by a compromise unless the compromise was made in bad faith and in fraud of the rights of the ward, and the burden of impeaching the compromise is upon the ward." Actual fraud or unfair dealing is not necessary in all cases ; the guardian's conduct may be so negligent or grossly lack- ing in sound discretion that his conduct amounts to legal fraud. Thus, where a guardian accepted on a good claim less than was due, he was held liable.' In many, if not all the states, the courts having jurisdiction of guardianships have power under the statute to authorize compromises,'' and a guardian who obtains the pre- vious sanction of the court is more amply protected. If the statute requires it the order of the court must first be obtained.' Notice to the minor of the application is not required." 2 Torry v. Block, 58 N. Y. 185 ; Ordinary v. Dean, 44 N. J. 64. 8 Lunday v. Thomas, 26 Ga. 537 ; Luton v. Wilcox, 83 N. C. 20 ; Gulp v. Stanford, 112 N. C. 664, 16 S. E. 761 ; Taylor v. Hite, 61 Mo. 142. * Underwood v Brockman, 4 Dana, 309, 29 Am. Dec. 407. 6 Torry v. Block, 58 N. Y. 158. 6 Emonot's Succession, 109 La. 359, 33 So. 368. ' In Louisiana it appears that a compromise should be ratified by a family meeting, followed by the sanction of the Court. Btirney v. Ludeling, 47 La. Ann. 73, 16 So. 507 ; Mahle v. Elder, 26 La. Ann. 681 } Graham v. Hester, 15 La. Ann. 148 ; Nantz v. Wyatt, 1 Rob. 10. 8 Knights V. Clayton, 209 111. 550, 70 N. E. 1066, affirming 110 111. App. 648; Hayes v. Ins. Co., 125 111. 626, 18 N. E. 322, 1 L. R. A. 303 ; Bunnell » Hagy V. Avery, 69 Iowa, 434, 29 N. W. 409. Hunt Acc.& S. — 7 98 ACCORD AND SATISFACTION [§ 47 If a compromise be made pursuant to the directions of the court, in absence of a showing of fraud or undue advantage, it is legal and binding on the ward,*" even though the estate is charged with new liabilities.** We apprehend, however, that if a compromise of a claim was effected without the sanction of the court, that, as between the guardian and ward, it would be good if shown to be in all respects fair and for the best interest of the ward. The bur- den would be upon the guardian to establish this.*^ A guardian by nature cannot compromise a claim for a minor.*' A parent, of course, may settle his claim for injuries to his child.** A set- tlement by a parent is presumed to cover only his claim. The authority of a prochein ami or next friend is limited merely to conducting the litigation. He has no authority to receive the fruits of the litigation, and he cannot therefore compromise the demand or the judgment obtained for the infant.*" His authority ceases with the entry of the judgment. A guardian ad litem ap- pointed to defend an action brought against an infant has no pow- er to compromise before or after judgment. Any compromise V. Bunnell, 111 Ky. 566, 64 S. W. 420, 65 S. W. 607, 23 Ky. B. R«p. 800, 1101 ; Stephenson v. Chappell, 36 S. W. (Tex. Civ. App.) 482; Davis v. Beall, 32 Tex. Civ. App. 406, 74 S. W. 325. 10 Hagy V. Avery, 69 Iowa, 434, 29 N. W. 409. 11 Smith V. Angell, 14 R. I. 192. 12 Dictum, Hagy v. Avery, 69 Iowa, 434, 29 N. W. 409. See Brown v. Maryland Co., 80 S. W. 693 (Modifying 76 S. W. 944), holding that a payment to a guardian of a less sum than the amount of a note without an order of the court, was a payment pro tanto only. 18 Isaacs V. Boyd, 5 Port. (Ala.) 388 ; De Cordova v. Korte, 7 N. M. 678, 41 Pac. 526, affirmed in 171 TJ. S. 638, 19 S. Ct. 35, 43 L. Ed. 315 ; Miles v. Kaigler, 10 Terg. 10, 30 Am. Dec! 425. 1* Meyers v. Zoll, 119 Ky. 480, 84 S. W. 543. In bastardy the right of settlement is in the parent who is entitled to the minor's services: Heaps v. Dunham, 95 111. 583. 10 Miles V. Kaigler, 10 Terg. 10, 30 Am. Dec. 425; Burt v. McBain, 29 Mich. 260. See Hall v. Wright, 127 S. W. (Ky.) 516, where it is said that a settlement of an infant's rights to land, effected by a brother, Is not binding although he employs counsel to represent the infant. § 48] WHO MAY MAKE AN ACCORD AND SATISFACTION 99 effected pending the litigation must be by order of the court. A judgment recovered in favor of an infant, belongs to his estate and a compromise can only be effected through his general guard- ian. If a judgment goes against the infant it must be paid or compromised with funds in the hands of his general guardian if he has one, if not, and it is necessary in order to protect the es- tate of the infant that the judgment (or other lien upon his prop- erty) be paid or compromised, we apprehend the principles ap- plicable to a tender would apply, and that if the infant be of tender years, that is within the age of fourteen years, his natural guard- ian could effect the compromise.^' Although the prudent course to pursue would be to have a general guardian appointed. Sec. 48. By public official. — Tax collectors and other public re- ceiving and disbursing officers, in absence of statutory authority, do not have power to compromise demands due the state or the political subdivision they serve. In some states county boards are by statute authorized to compromise delinquent taxes and other demands due the county.'^ The law is well settled, how- ever, that public corporations and political subdivisions having power to sue and be sued, acting through their proper boards, in absence of express statutory authority, have power to effect the compromise of claims in favor of or against them. Such power is a necessary incident to the right to sue and be sued.^ The power to compromise is confined to disputed and doubtful claims,' loWatkins v. Ashwick, 1 Croke, 132, Cro. Eliz. 132 (Tender); Brown v. Dysinger, 1 Rawle (Pa.) 407. In the latter case a tender made by an unclei though the mother was living, was held good. 1 Lincoln Trust Co. v. Davis, 92 Pac. (Kan.) 707 ; Martin v. U. S., 4 T. B. Mon. 487. 2 Beach on Pub. Corp. Sec. 638 ; DUlon, Mun. Corp. Sec. 477 ; Washburn Co. V. Thompson, 99 Wis. 585, 75 N. W. 309 ; Sackett v. City of Morris, 149 111. App. 152; HaU v. Baker, 74 Wis. 118, 42 N. W. 104; Supervisors v. Birdsall, 4 Wend. 453 ; Wadsworth v. Board, 124 N. Y. Supp. 334 ; Collins v. Welch, 58 Iowa, 72. 8 See City of New York v. New York City R. Co., 87 N. E. (N. Y.) 1117, where it was held that a payment of a license fee according to the company's 100 ACCOED AND SATISFACTION [§ 48 and may be exercised at any time before the validity of the claim is settled by final judgment.* It has been said that a claim is not so far removed from the region of doubt as to prevent a com- promise, merely because of a judgment in a trial court, if the judg- ment is open to reversal in a higher court and an appeal is pend- ing." Mere threats or an expressed intent to take an appeal it would seem is enough." There must be some reasonable ground for saying that a claim is doubtful. Merely asserting a claim against a county does not make it doubtful so as to justify a com- promise, and a county board will be enjoined from compromising or paying a claim founded upon a contract made in direct violation of the law.' Such contracts are void. A municipal corporation cannot compromise with a county a claim for taxes collected for the municipality and in the county treasury. Such taxes are raised in the exercise of governmental functions and for governmental purposes and held for that pur- pose, and there is a continuing duty of the county to execute the trust by paying over the money.' A public board cannot discharge a debt against a solvent and responsible person without pay- ment ; * nor can it discharge a disputed or doubtful claim without receiving something of value which, as upon a compromise, would be a consideration for a discharge, for a board cannot give away public property. Where a claim has been reduced to judgment estimate was no accord and satisfaction, where the law fixed the amount or the fee to be paid. * Beach on Pub. Corp. Sec. 638 ; Mills County v. Burlington Ry. Co., 47 Iowa, 66. A county board cannot upon a compromise allow a sherifC a greater compensation than allowed by law: People v. Wells, 140 111. App. 235. 5 Quayle v. Bayfield Co., H4 Wis. 108, 89 N. W. 893 ; Board v. Bassett, 95 Pac. (Idaho) 774. 8 Petersburg v. Mappin, 14 111. 193; Agnew v. Btall, 124 111. 312. T Quayle v. Bayfield Co., 114 Wis. 108, 89 N. W. 892. 8 State V. Blsping, 130 N. W. Rep. (Neb.) 1034. » Agnew V. Brail, 124 111. 312 ; Butternut v. O'Malley, 50 Wis. 329. § 49] WHO MAT MAKE AN ACCOKD AND SATISFACTION ^, 101 and all questions pertaining to the rightfulness of the demand put at rest and the occasion for a compromise at an end, a public board may nevertheless settle and compound with the debtor, if his financial condition is such that the board is unable to discover any way of collecting any part of the judgment. "The rules of business condupt, by which a prudent person is governed, are ap- plicable to a county in the management of its affairs under similar circumstances." ^'' This seems to be at variance with the doctrine that a consideration is necessary to uphold an agreement to accept less than the sum due. It has been held that where a debt is against the corporation there must be some consideration to sup- port the agreement of the creditor to take less than the whole sum due.^^ Where a claim is disputed, a compromise effected with an officer authorized to adjust the account, whereby the creditor accepts less than the contract price, is good.^^ One who accepts from a county the fruits of a compromise, will not be permitted to show that the meeting of the board at which the compromise was made was not regular."^' Sec. 49. By assignee — Receiver — Trustee. — ^Assignees appoint- ed by judicial officers and receivers of insolvents, and of estates in process of liquidation have no power upon their own motion to settle_and compromise a demand due from or to the estate.^ Their acts are merely expressions of the will of the court and are not 10 Collins V. Welch, 58 Iowa, 72 ; Washburn Co. v. Thompson, 99 Wis. 585 ; Multnomah Co. v. DeKum, 93 Pac. (Or.) 821. 11 City of Crowford v. Darrow, 127 N. W. (Neb.) 891. See Bailey ville v. Lowell, 20 Me. 178. 12 Mason v. U. S., 17 Wall. 67, 21 L. Ed. 564. 18 Green t. Lancaster Co., 61 Neb. 473, 85 N. W. 439. A compromise by a county board apparently made within the scope of their authority will be taken as valid until successfully questioned In an appropriate proceeding: People V. Wells, 140 111. App. 235. There can be no compromise or accord and satisfaction where an officer has no power to settle: Penitentiary Co. V. Gordon, 85 Ga. 159. 1 Woerz V. Schumacher, 161 N. Y. 531, AfE'g 37 App. Div. 374. 102 ACCORD AND SATISFACTION [§ 49 ordinary contracts.* Authority to compromise ought first to be obtained from the court * upon notice to all parties interested.* In case of private assignments, the insolvent debtor may grant to his assignee power to compromise disputed and doubtful claims and compound debts that are doubtful and precarious.^ A power authorizing an assignee to compound good as well as bad debts is void for it would be an authority to waste the funds. A power "to collect the said choses in action, with the right to compound for said choses in action, taking a part for the whole, when he shall deem it expedient," was held not to be void by reason of the failure to distinguish between precarious debts and those good for their entire amount; that the qualifying words implied a duty to exercise a sound discretion." Where an assignee or receiver without authority has effected a compromise of a demand, or com- pounded a debt of doubtful value, the court will ordinarily make an order confirming it or allow it in his account if the compromise was made in good faith and beneficial to the estate. It has been decided that where a compromise of a demand was conditional upon the money being refunded if the claim is held to be illegal, the court must pass upon the legality of the claim, and that its allowance in the assignee's account on the ground that he acted in good faith was error.' A trustee, acting in good faith, may generally compromise a demand or compound a debt due to the 2 Woerz V. Schumacher, 161 N. Y. 531, AfTg 37 App. Div. 374. An unlawful compromise by a receiver of a corporation of a claim against one of its oflS- cers, or of calls against a stockholder, is no defense by another stockholder ,to an action against htm to recover on his subscription contract: Brown v. AUebach, 166 Fed. 488. 3 Re Croton Ins. Co., 3 Barb. Ch. 642 j Morrison v. Lincoln Bank, 89 N-. TV. (Neb.) 996. * Anonymous v. Gelpicke, 5 Hun, 251. A trustee In bankruptcy may com- promise an action: In re Kranich, 174 Fed. 908. s Dow V. Platner, 16 N. Y. 562; Coyne v. Weaver, 84 N. Y. 386. « Coyne v. Weaver, 84 N. Y. 386. T In re ShotweU, 49 Minn. 170, 52 N. W. 1078. § 50] WHO MAT MAKE AN ACCORD AND SATISFACTION 103 trust estate.* But if he compounds a debt for a grossly inade- quate sum when by the exercise of diligence more could have been realized, or compromise a demand without sufficient ground therefore he will be held for the loss occasioned by his acts.* Only those creditors who have not consented to a compromise may object to it." Sec. 50. By a stranger. — An accord and satisfaction moving from a third person having no pecuniary interest in the subject matter and made without any request by the debtor, if accepted by the creditor in satisfaction of the debt, discharges the debt and is a good defense in an action against the original debtor.^ This rule is not sustained by an unbroken current of authorities. In England during the reign of Elizabeth, a decision was rendered which was reported to have decided that an accord and satisfac- tion moving from one who was a stranger and in no way privy to the condition of the obligation could not be pleaded in bar by the obligor." And this rule was followed in other English decisions.* But doubt was afterwards expressed as to whether the case was 8 Bine V. Marshall, 3 P. Wms. 381 ; Eatcllffe v. Winch, 17 Beav. 216 ; For- shaw V. Higglnson, 8 De G., M. & G. 827 ; 2 Perry on Trusts, 482. 9 Jevon V. Bush, 1 Vern. 342 ; Wiles v. Gresham, 5 De G., M. & G. 770; Re Alexander, 13 Ir. Ch. 137; 2 Perry on Trusts, 482. 10 In re Shotwell, 49 Minn. 170, 52 N. W. 1078. 1 Gray v. Herman, 75 Wis. 453, 44 N. W. 248, 6 L. K. A. 691 ; Pelton v. Knapp, 21 Wis. 64 ; Chicago, etc., Ry. Co. v. Brown, 97 N. W. 1038 ; Leavltt y. Morrow, 6 Oh. St. 71, 67 Am. Dec. 334 ; Harvey v. Tama County, 53 Iowa, 233, 5 N. W. 130 ; Wilson v. Brown, 13 N. J. Eq. 377 ; Harrison v. Hicks, 1 Port. (Ala.) 423, 27 Am. Dee. 638; Webster v. Wyser, 1 Stew. (Ala.) 184; Hawkshaw v. Rawlings, 1 Stra. 23 ; Welby v. Drake, 1 Car. & P. 557 ; Bin- ford V. Adams, 104 Ind. 41; Ritenour v. Mathews, 42 Ind. 7; Oury v. Saun- ders, 77 Tex. 278; National Bank v. Gushing, 53 Vt. 326; Crumlish v. Im- provement Co., 38 W. Va. 390, 23 L. R. A. 120, and extensive note ; Freamster V. Withrow, 12 W. Va. 658. 2 Grymes v. Blofield, Cro. Eliz. 541, Com. Dig., title Accord, A. 2. 3 Edgcombe v. Rudd, 5 Bast, 294. 104 ACCORD AND SATISFACTION [§ 50 correctly reported.* However, later English decisions have ma- terially modified the doctrine by holding that if the discharge be afterwards ratified it is a good defense." The early English de- cision giving rise to the contrary doctrine was approved, and fol- lowed in a decision given in New York in 1810,' and the rule has been recognized as the law in subsequent cases before the courts of that state.' As late as 1881, we find it announced that the de- cision given in that state in 1810, had not been authoritatively overruled, and the question was left undisturbed except possibly by a doubt raised by the court observing that it was unnecessary to determine whether it should any longer be regarded as author- ity.* The early English and New York cases responsible for this doctrine, came before the court upon the sufficiency of the plea, and in New York in a case decided in 1838 the doctrine seems to * Bartley, C J., in Leavitt v. Morrow, 6 Ohio St. 71, 67 Am. Dec. 334, gives a brief historical summary. He says: "And it is not a little remark- able that this same case is reported by Rolle in his abridgment as having been decided exactly the other veay, and in favor of the defendant, and re- ferred to as a decision at Trinity term, 30 Eliz. : 1 Roll. Abr. 471, tit. Con- dition, F. * * * And in the case of Thurman v. Wild, 39 Bng. Com. L. 188, Lord Denman, 0. J., strongly questions the authority, not only of the case of Grimes v. Blofield (Cro. Eliz. 541), but also the case of Edgcombe v. Rudd, 5 East, 294; and in reference to the former says: 'But the reporter, in a note, observes truly that in RoUe's abridgment of the same case the judg- ment is stated exactly the other way — to have been for the defendant, and that the plea was good. This circumstance,' adds Chief Justice Denman, 'and so&e inaccuracies which are manifest in Croke's report, certainly de- tract from the authority of the case in East (Edgcombe v. Rudd) as to this point, which depends on the report In question.' " 5 Simpson v. Eggington, 10 Exch. 845, 24 L. J. Exch. 312 ; Kemp v. Balls, 10 Exch. 607, 3 C. L. R. 105, 24 L. J. Exch. 47; Jones v. Bi-oadhurst, 9 C. B. 173 ; James v. Isaacs, 22 L. J. C. P. 73, 12 C. B. 791, 17 Jur. 69 ; Belshaw V. Bush, 11 C. B. 191, 22 L. J. C. P. 24, 17 Jur. 67 ; Lucas v. Wilkinson, 26 L^ J. Exch. 13. 6 Clow V. B'orst, 6 Johns. Rep. 38. 7 Daniels v. Hallenbeck, 19 Wend. 459; Bleakly v. White, 4 Paige, 566; MuUer v. Eno, 14 N. Y. 605; Atlantic Dock Co. v. Mayor, 53 N. X. 64. 8 Wellington v. Kelly, 84 N. Y. 543. § 51] WHO MAY MAKE AN ACCORD AND SATISFACTION 105 have been materially weakened by the court declaring that the best and most secure form of pleading such a defense is by way of satisfaction.' This doctrine has been followed in Kentucky,^" although it was held that in equity an accord and satisfaction moving from a stranger might be taken advantage of by way of injunction.^^ The better reasoning and the decided weight of the authorities support the rule first stated. The rules governing the rights and liabilities of the parties being applicable alike to a pay- ment by a stranger, and to an accord and satisfaction moving from a stranger, in the succeeding sections upon this topic, the principles will be illustrated and supported by reference to cases of payment as well as cases of accord and satisfaction. Sec. 51. Same subject — Ratification by debtor. — Under the civil law a stranger may discharge the debt of another even against his will.^ But the rule of the civil law goes further than the rule established by the American and English decisions. The pay- ment or accord and satisfaction must be adopted by the debtor. This is the view taken by eminent text writers.^ It has been said that if a stranger steps in and discharges a debt for another, it being for the latter's benefit, the inference is that it was done with his consent or if without his knowledge that he will sub- sequently ratify it.^ "If he refuses to ratify it, he disclaims the payment, and the debt stands unpaid as to him (the debtor.)"* Whether or not the debtor adopts the payment or accord and sat- isfaction as having been made for his benefit, as between himself » Daniels v. Hallenbeck, 19 Wend. 408. 10 Stark v. Thompson, 3 T. B. Mon. 296; Owsley v. Thompson, 5 J. J. Marsh. 127; Groshon v. Grant, 2 Ky. Dec. 268. 11 Stark V. Thompson, 3 T. B. Mon. 296. 11 Pothier Ob. 463. 2 Chitty Cont. 779 ; 2 Par. Cont. 688. 8 Leavitt V. Morrow, 6 Ohio St. 71, 67 Am. Dec. 334. * Crumlish v. Improvement Co., 38 W. Va. 390, 23 L. R. A. 120. 106 ACCORD AND SATISFACTION [§ 52 and the creditor, is of little importance unless the creditor after- wards sues him to recover the debt. Payment or accord and satisfaction being matter of defense, the debtor, if sued, is then bound to ignore the satisfaction made in his behalf or plead and prove it by way of defense. He may have a good reason for not recognizing the discharge, such as a defense founded upon a fail- ure of consideration, recoupment of damages, or, perhaps, set-off; particularly if there is any question about the volunteer's right to recover over. If the debtor pleads the payment or accord and satisfaction he thereby ratifies the act of the stranger, and the creditor cannot recover.^ The debtor may ratify the payment in express terms, but on being informed of the payment, merely asking why the payment was made does not amount to a ratifi- cation.* Nor, it seems, will a statement by the debtor to a third person, expressing an intention to reimburse the volunteer, con- stitute a ratification.' Sec. 52. Same subject — Intent of the parties — Cancellation of the payment — Payment available to subsequent lien holder. — The payment pr accord and satisfaction must be accepted from the stranger in satisfaction.^ If the creditor received the payment be- lieving the debtor authorized it, on discovering the want of au- thority he may cancel the payment by returning the thing paid to the stranger.^ But if the debtor ratified it before he takes steps Leavitt v. Morrow, 6 Ohio St. 71, 67 Am. Dee. 334 ; Gray v. Herman, 75 Wis. 458 ; Chicago, etc., Ry. Co. v. Brown, 97 N. W. 1036 ; Simpson v. Egging- ton, 10 Exch. 845, 24 L. J. Exeh. 312 ; Belshaw v. Bush, 11 C. B. 191, 22 L. J. C. P. 24, 17 Jur. 67 ; Walter v. James, L. B. 6 Exch. 124, 40 L. J. Exch. 104, 24 L. T. N. S. 188, 19 Week. Rep. 472. « Winsor v. Savage, 9 Met. 348. TKenan v. HoUoway, 16 Ala. 53, 50 Am. Dec. 762. 1 Under Art. 2130 CivU Code of La., an obligation may be discharged by a third party in no way concerned in it, provided he acts in the name and for the discharge of the debtor, or that if he acts in his own name he is not subrogated to the rights of the creditor. Gernow v. MeCan, 23 La. Ann. 84. 2 Walter v. James, L. R. 6 Exch. 124, 40 L. J. Exch. 104, 24 L. T. N. S. 188, 19 Week. Rep. 472. § 52] WHO MAT MAKE AN ACCOED AND SATISFACTION 107 to cancel it he will be bound.*' The payment or accord and sat- isfaction must be made by the stranger with the intent of relieving the debtor from his liability.* An implied agreement is sufficient." The intent expressed at the time of the payment to discharge the debt or in absence of an express declaration, that deducible as a matter of law from the act of payment and acceptance, must gov- ern and the debt is discharged. The mere intention of a third party to purchase the debt, not communicated to the creditor at or before the time of payment, will not change the nature of the transaction." If a secret intent could be shown the stranger would be permitted to claim the debt was paid, or that it was not, as it might afterwards suit his purpose. Whether payment by a stran- ger discharges the debt or is a purchase of it, is one of fact,'' un- less the facts admit of but one conclusion. The burden is upon the debtor to show that the third party intended to discharge the debt and that the thing delivered was received in satisfac- tion.* In England it has been decided that where the payment was not a gift to the debtor, the stranger, before it is ratified may withdraw the payment.' But the' correct rule seems to be that if the stranger pays the debt of another with the intent of discharg- ing the liability of the latter and the creditor accepts the thing paid in satisfaction, the debt is paid and the stranger cannot re- claim the thing paid, whether it was intended as a gift to the debtor or the stranger expected to be reimbursed by him. It has 3 Walter v. James, ante. * Dusenburg v. Callaghan, 8 Hun, 541. 5 Griffin v. Pettey, 101 N. C. 380. e Pelton v. Knapp, 21 Wis. 64 ; Champney v. Coope, 32 N. T. 543. 7 Dougherty v. Deeney, 45 Iowa, 443; Binford v. Adams, 104 Ind. 41; Moran v. Abbey, 63 Cal. 56 ; Wilcoxon 7, Logan, 91 N. 0. 449 ; Baloliradsky V. Carlisle, 14 111. App. 289. sWhitlng V. Insurance Co., 15 Md. 297. • Walter v. James, L. R. 6 Bxch. 124. 108 ACCORD AND SATISFACTION [§ 53 been held that if a stranger induces a creditor to accept goods in satisfaction of another's debt he is estopped from avoiding the contract and claiming the price of the goods." Payment by a stranger and its acceptance as such by the creditor extinguishes the debt as to the creditor,^^ although the debtor does not ratify it. No other reasonable conclusion can follow from the act of acceptance. In reality, as has been aptly said, what matters it to the creditor who pays?^^ The discharge is available to any person whose property is relieved by the payment,^^ or whose security would be postponed, if the payment was allowed to be withdrawn or changed to a purchase of the debt.^* After the pay- ment of a judgment by a stranger a purchaser at an execution sale acquires no title to property sold in satisfaction of the judg- ment.^" Although the debt is discharged as to the creditor, noth- ing it would seem, will prevent the creditor from recovering from the debtor, unless the latter chooses to avail himself of the de- fense. For, upon a familiar principle, if a debtor discharges a debt himself and neglects afterwards in an action to recover the debt to set up the payment as a defense he has only himself to blame and must pay the judgment.^* Sec. 53. Same subject — Subrogation — Liability of debtor to stranger — Subsequent promise to pay the stranger — Consideration — Adopting the payment as a defence.— ^If a stranger in no way privy to the obligation, is compelled to discharge the debt of 10 Fowler v. Moller, 10 Bosw. 374. 11 Crumlish v. Improvement Co., 38 W. Va. 390, 23 L. R. A. 120; Harrison V. Hicks, 1 Port. 423, 27 Am. Dec. 638. 12 Gray v. Herman, 75 Wis. 453, 6 L. B. A. 691; Crumlish v. Improrement Co., 38 W. Va. 390, 23 L. R. A. 120. 13 Harrison v. Hicks, 1 Port. 423, 27 Am. Dec. 638. 14 Pelton V. Knapp, 21 Wis. 64; Champney t. Coope, 32 N. Y. 543. 15 Terry v. O'Neal, 71 Tex. 592. 18 Bird V. Smith, 34 Me. 63, 56 Am. Dec, 635. § 53] WHO MAY MAKE AN ACCORD AND SATISFACTION 109 another to protect his interest in certain property as owner,* or junior lien holder," he will be subrogated to all the rights of the creditor. And, it is equally as familiar principle, that the right of subrogation is hever extended to a mere volunteer or inter- meddler who, without any obligation to pay, voluntarily discharges the debt of another.' The rule comprehends persons paying who do so under the belief that they are legally bound.* In such cases, their rights, if any they have, are against the creditor. A volun- tary payment made by a stranger does not entitle him to recover upon the original contract in the name of the creditor," or as as- signee. Nor can he charge the debtor, and recover upon an im- plied contract.* The rule is founded upon the principle that one man cannot make himself the creditor of another without his consent.'' Administrators * and guardians ' are not considered 1 Cockrum v. West, 122 Ind. 372 ; Weiss v. Guerineau, 109 Ind. 438 ; Arnold V. Green, 116 N. T. 566 ; Gans v. Thieme, 93 N. Y. 225 ; Johnson v. Ziuk, 51 N. Y. 333; Ellsworth v. Lockwood, 42 N. Y. 89; Sandford v. McLean, 3 Paige, 117, 23 Am. Dec. 773. 2 Jenkins v. Insurance Co., 12 How. Pr. 66 ; Hosier's Appeal, 56 Pa. St. 76, 93 Am. Dec. 783; Silver Lake Bank v. North, 4 Johns. Ch. 370; Grigg V. Bank, 59 Ala. 317. 3.aEtBa Ins. Co. v. Middleport, 124 U. S. 534, 31 L. Ed. 537; Moody v. Moody, 68 Me. 155; Hoover v. Epler, 52 Pa. 522; Truesdell v. Callaway, 6 Mo. 605; Klelmann v. Geiselmann, 45 Mo. App. 497; Woodbrldg v. Scott, 69 Mo. 669; Wormer v. Waterloo, 62 Iowa, 699, 14 N. W. 331; Bylngton V. Bookwalter, 7 Iowa, 512, 74 Am. Dec. 274; Fay v. Fay, 43 N. J. Eq. 438 ; Wilkes V. Harper, 1 N. Y. 586; Nichol v. Dunn, 25 Ark. 129; Wilson v. Brown, 13 N. J. Eq. 277. * Dawson v. Lee, 83 Ky. 49 ; Norton v. Highleyman, 88 Mo. 621 ; Price v. Estill, 87 Mo. 378. 5 Brown v. Chesterville, 63 Me. 241 ; Simmons v. Walker, 18 Ala. 664. « Kenan v. Holloway, 16 Ala. 53, 50 Am. Dec. 162; South Scituate v. Hanover, 9 Gray, 420; MeGee v. San Jose, 68 Cal. 91. 7 Dawson v. Lee, 83 Ky. 49 (Payment by a surety not bound) ; Baltimore T. Hughes, 1 Gill & J. 480, 19 Am. Dec. 243 ; Durnford v. Messlter, 5 Mau. & S. 446 ; Kenan v. Holloway, 16 Ala. 53, 50 Am. Dee. 162; 1 Par. Cont. 472. 8 Wallace's Appeal, 5 Pa. St. 103. 9 Kelchner v. Forney, 29 Pa. St. 47 ; Hosier's Appeal, 56 Pa. St. 76, 93 Am. Dec. 783. 110 ACCORD AND SATISFACTION [§ 53 strangers and if they advance their own funds for the payment of a claim against the estate, they are entitled to be reimbursed, or if necessary for their protection, to subrogation of the rights of the creditor. Where there is a previous request to pay the debts, or a subsequent ratification of the payment, the question is not one of subrogation, but of an express or implied agree- ment by the debtor to reimburse the stranger for the money paid for his benefit. If there was no previous request and the debtor does not voluntarily ratify the payment, there is no way known to the law whereby the volunteer may force the debtor to ratify it. If sued by the stranger, the debtor may plead and prove that it wis a voluntary payment and the law will leave the volunteer where he placed himself.^" If the payment was made pursuant to a request without any express agreement to repay the third party, an agreement will be implied.^^ And, in this case, as well as where the debtor expressly promises to reimburse the stranger the latter may recover the amount paid by him.^^ However, with the qualification that a subsequent promise to pay must be found- ed upon a sufficient consideration. A consideration sufficient to support the promise is present, if the payment was beneficial to the debtor. In such cases there is a moral obligation to reim- burse the stranger.^' Mere detriment to the party paying is no consideration, where the payment was not induced by a previous request.^* If the debtor is not bound to pay the debt, and makes the promise to reimburse the stranger in ignorance of his non- liability, there is no consideration for the promise.^* 10 Wright V. Garllnghouse, 26 N. Y. 539; Albany v. McNamara, H7 N. X. 168. 11 1 Par. Cont. 471. 12 Wellington v. Kelly, 84 N T. 543. 18 Wellington v. Kelly, 84 N Y. 543. 1* Kenan v. HoUoway, 16 Ala. 53, 50 Am. Dec. 162. IB Kenan v. HoUoway, 16 Ala. 53, 50 Am. Dec. 162. § 63] WHO MAY MAKE AN ACCORD AND SATISFACTION 111 Where the debtor afterwards adopts the payment as his own, either as a defense or by making it the basis for affirmative re- lief, the question then arises — is the debtor liable to the stranger for the money paid for his benefit? Obviously, if the voluntary payment was intended as a gratuity, taking advantage of the pay- ment would in no way render the debtor liable to the donor. If it developed upon an inquiry that the third party purchased the debt, or paid it under circumstances amounting to an equitable assignment of it,^* it is equally obvious that the remedy of the third party is upon the assignment.^' Whether the transaction is a purchase of the debt, or a gratuitous payment, or an. advance with the expectation of being reimbursed by the debtor, is to be determined by the intent of the party making the payment, either expressly stated or implied from the facts and circumstances. It has been said that a simple payment raises the presumption that the stranger merely expected to be repaid by the debtor and that there was no express or implied agreement for an assignment of the debt inferred.^* Recurring to the main question it may be jbserved that it is not free from uncertainty. If a liability arises it is founded upon an inference drawn from the act of taking ad- vantage of the payment. General statements disassociated from concrete facts are always perplexing. Perhaps the supreme court of Alabama has pronounced as clear a dictum upon this question as may be found. It said: "Where, however, the consideration IS "One voluntarily guaranteeing a bond, unknown to the obligors, but at the request of the obligee and of the person he gives it to in payment of a debt, he becomes an equitable purchaser of it on paying the amount thereof, and can recover the same from the obligors." Carter v. Jones, 5 Iredell's Eq. 196, 49 Am. Dec. 425. 17 See Crumlish v. Improvement Co., 38 W. Va. 390, 23 L. E. A. 120, where a third party, in order to get certain bonds that had been attached, out of the way of a new loan to be made by him, agreed with the judgment creditor to take over the bonds after a sale, and pay them the amount of the judgment, which was done, it was held that the third party was the equi- table owner of the judgment, although paid as to the creditor. 18 Neely v. Jones, 16 W. Va. 625, 37 Am. Kep. 794. 112 ACCORD AND SATISFACTION [§ 54 is beneficial to the party sought to be charged, and is actually- adopted or taken advantage of by him, the person executing the consideration becomes the agent of the promisor, by the adoption of his act by the latter." ^» Again, it has been said that a ratifica- tion is equivalent to an original request.^" Similar dictum is to be found in other decisions.^^ In West Virginia in a late case we not only find the same dictum, but another to the effect that if the payment be not ratified by the debtor, the stranger "may bring a suit in equity praying relief in the alternative: that is if the debtor do not ratify such payment the debt may be enforced in his favor, as its equitable assignee, or if so ratified, that he be de- creed repayment of the amount paid for the use of the debtor." ^^ This seems to us to be going too far, notwithstanding the court declared that it does not at all infringe the rule that one cannot at law make another his debtor without his consent, and recover the debt. If applied in cases where the transaction did not amount to an equitable assignment, equity would be invoked to override a strict legal right."' Sec. 54. Consideration — In general. — An accord is unlike oth- er contracts executory on both sides, in that the mutual promises of the parties do not furnish any consideration to uphold the con- tract. This exception arises out of the previous relation of the parties as debtor and creditor, and the object sought to be at- tained; namely, the substitution of one right of action for an- 19 Kenan v. HoUoway, 16 Ala. 53, 50 Am. Dec. 162. s. p. Roundtree v. HoUoway, 13 Ala. 357. See Story on Cont. 2aa Ed. Sec. 373. 20Winsor v. Savage, 9 Met. 348: Merely asking the question "Why did you pay it?" is no ratification. 21 Harrison v. Hicks, 1 Port. 423, 27 Am. Dec. 638; Neely v. Jones, 16 W. Va. 625, 37 Am. Rep. 794. 2 2 Crumlish v. Improvement Co., 38 W. Va. 390, 23 L. R. A. 120. s. p. Neely v. Jones, 16 W. Va. 625, 37 Am. Rep. 794. 2 3 As to subrogation. It has been said it will not be enforced at the ex- pense of a strict legal right. Barnes v. Dickey, 131 Pa. 86. § 54] CONSIDERATION 113 other/ Manifestly, no present benefit or corresponding detriment result from mutual promises to give and receive satisfaction at a future time, where the parties are already legally and morally bound to render and accept satisfaction. A debtor may promise to do something to his detriment and to his creditor's benefit, but until he does it, neither one nor the other result follow. Hence, the necessity for execution. On an accord being executed, and its validity questioned it must be tested by the inflexible principle of law which requires all contracts to be supported by a sufficient legal consideration. It is everywhere held that there must be a new and sufficient consideration to support an accord and satis- faction.'' Where a creditor, moved by the promise of a consid- eration by him deemed sufficient, joins in the execution of an accord, the courts go no further than to ascertain if there is a con- sideration, and if so that it is legal, and uniformly hold that any distinct benefit accruing to the creditor, or even the possibil- 1 Where a lessor is bound by the lease to make repairs an oral agreement to repair is no accord and satisfaction : Adams v. Topling, 4 Mod. 88. 2 Spann v. Baltzell, 1 Flo. 301, 46 Am. Dec. 346; Jeffrey v. Davis, 124 N. T. 164, 26 N. E. 351, 11 L. R. A. 710 ; Allison v. Abendroth, 108 N. T. 470. Scarcely any branch of the law furnishes a more varied assortment of opinions than that concerning the sufficiency of the consideration to uphold an accord and satisfaction. This is due, no doubt, in many cases, from the shock to the moral sense of the individual judge when called upon to apply the inflexible rule requiring a consideration, in disregard of an unequivocal promise. And we find many criticisms of the principles governing the con- sideration required; as, "technical and not very well supported by reason." (Kellogg V. Richards, 14 Wend. 119) ; a "rigid and rather unreasonable rule of the old law." (Johnson v. Brannan, 5 Johns. 268) ; as "purely technical and not very creditable to the common law." Potter, J., said: that while the courts "have rarely failed, upon any recurrence of the question, to criti- cise and condemn its reasonableness, justice, fairness, or honesty, no re- spectable authority that I have been able to find has, after such unanimous disapproval by all the courts, held otherwise than was held in Pinnel's case, supra [5 Coke, 118] and Cumber v. Wane, 1 Str. 426 ; Foakes v. Beer, 9 App. Cas. 605 ; 36 Eng. Rep. 194 ; Goddard v. O'Brien, 9 Q. B. Div. 37 ; 30 Am. Law. Reg. 637, and notes." Jaffray v. Davis, 124 N. T. 164. Perhaps the moral sense would not so often be shocked were it possible and permissible to fathom the minds of the parties and determine their motives. Hunt Acc.& S. — 8 114 ACCORD AND SATISFACTION [§ 64 ity of a benefit, however slight, will support the substituted con- tract.^ "A new and sufficient consideration arises when the sub- stituted contract is advantageous to the creditor, that is, when he derives a distinct benefit from it — something of value to which he would not have been entitled under the original contract." * It must appear that the satisfaction made was advantageous to the creditor.^ An agreement to cancel a part of a judgment, based s Palmer v. Xager, 20 Wis. 91; Allison v. Abendroth, 108 N. T. 470. * Palmer v. Yager, 20 Wis. 91. s. p. Dillon v. Brubaker, 52 Pa. St. 488, 91 Am. Dec. 177; AUison v. Abendroth, 108 N. Y. 470; Ness v. Minn. Co., 87 Minn. 413, 92 N. W. 333 ; Roberts v. Banse, 72 Atl. (N J. Sup.) 452 ; Doug- las V. White, 3 Barb. Ch. 621. The common law rule defining a consideration sufficient to uphold a con- tract, as a benefit to the party promising, or some detriment or loss to the party to whom the promise is made (Pow. on Cont. 343, 344, 2 Kent's Com. 465), undoubtedly, was had in mind by the court in many cases of accord and satisfaction. Indeed, we find it quoted, and expressly stated that "It is not necessary that there should be a benefit. Damage or loss by due party, sustained at the request of the other, is sufficient." Luddington v. Bell, 77 N. Y. 138, 33 Am. Rep. 601. But more often we find the rule stated ia general terms thus — "But when a new duty is undertaken by the debtor, which is or may be burdensome to him or beneficial to the creditor, a new consideration arises out of such undertaking, and sustains the agreement of the creditor:" Rose v. Hall, 26 Conn. 392, 68 Am. Dec. 402. s. p. Maddox V. Bevan, 39 Md. 485. In Watson v. Elliott, 57 N. H. 511, the court said: "It is enough that something substantial, which one party is not bound by law to do, is done by him, or something which he has a right to do he ab- stains from doing at the request of the other party." After an examination of many authorities we believe that the common law definition of a consideration applicable to contracts in general, is too broad and does not fit the case ; but, that upon correct reasoning, the cardi- nal principle governing the consideration necessary to support an accord and satisfaction, arising from the previous situation of the parties, requires, as stated in the text, that in all cases the consideration must move from the debtor to the creditor, that is conferring upon him a distinct benefit or possibility of such benefit. If a debtor inconveniences himself, at the re- quest of the creditor, by discharging his debt or other obligation in a different way from that originally agreed, he may confer a benefit or the possibility of a benefit upon the creditor, and if he does and it satisfies the creditor at the time, whether it afterwards turns out beneficial is immaterial. B Diller v. Blubaker, 52 Pa. St 498, 91 Am. Dec. 177. § 54] CONSIDERATION 115 on the debtor's agreement not to appeal, made after the time to appeal had gone by, is without consideration.* But a waiver of a right to appeal before the time to appeal is by, and the pay- ment of a less sum, is a good consideration to support a promise to accept a less sum than is claimed.' The claim compromised must have some foundation in fact or the new promise will be v>rithout consideration.* An agreement to receive payment of a part of a debt in goods at the market price, confers no benefit upon the creditor beyond what he would receive by a purchase upon the open market." Nor does the performance of that which the party was under a previous valid obligation to do, as by pay- ing a part of an acknowledged debt in money, confer any benefit upon the creditor to which he was not before entitled, and the creditor may enforce collection of the balance.^" Where nine cows were sold but one died before delivery, accepting pay for eight after the vendee had refused to pay for the dead cow, is no ac- cord and satisfaction.^^ An extraordinary effort by a poor man, at the instigation of his creditor, to raise a less sum in satisfac- tion of the whole debt and paying that sum, does not constitute a consideration sufficient to support the agreement to discharge the whole debt.^" Accepting the surplus realized from an illegal tax sale is not an accord and satisfaction of the damages arising from the trespass.^* Restoring to a creditor his own property 9 Denny v. Bean, 93 Pac. 693. f Williams v. Blumenthal, 27 Wash. 24, 67 Pac. 893 ; Roberts v. Banse, 72 Atl. (N. J. Sup.) 452. 8 Smith V. Boruff, 75 Ind. 416: There must be at least colorable groimd of a claim, in law or in fact. « Kromer v. Helm, 75 N. T. 574. . 10 Weidner v. Standard Ins. Co., 130 Wis. 10, 110 N. W. 246. 11 Shaver v. Armstrong, 52 Misc. Rep. 626, 103 N. Y. Supp. 926. 12 Harriman v. Harriman, 12 Gray, 341. isWestfall V. Preston, 49 N. Y. 349. 116 ACCORD AND SATISFACTION [§ 54: is not sufficient to support a plea of accord and satisfaction.^* It is stated in Bacon's Abridgment that in trespass for taking plain- tiff's cattle, if the agreement was to drive them to a certain place so that it would be a charge to him to do it, if performed, it would be a good accord and satisfaction.^^ But here, undoubted- ly, there is a possibility of benefit to the plaintiff. Laying out money by a debtor for his sole benefit, though done at the re- quest of the creditor is not a consideration sufficient to support a promise.^' But where a mortgagor paid delinquent taxes, pur- suant to an agreement with the mortgagee to reduce the amount of the mortgage, it was held to confer a substantial benefit upon the mortgagee by bettering his security and supported the agree- ment to accept less.^^ Mere threats to throw up a contract and incur a penalty is a sufficient consideration for relinquishing the old agreement and substituting another.^* A mutual agreement to discontinue two actions pending, and acted upon, is a good accord and satisfaction.^* An accord that each of the parties should be quit of actions against the other, is not good, because it is not any satisfaction.^" But an accord that each should give the other a quart of wine in satisfaction of action, is good.^^ As the strict legal right founded upon a want of consideration may be urged in violation of good faith, the rule requiring a considera- tion to support a contract, when sought to be applied to an ac- cord and satisfaction, is not extended beyond its precise import, and in such cases where there is any new consideration, or any i4Diller v. Brubaker, 52 Pa. St. 498, 91 Am. Dec. 177; Bac. Abr. Tit. Ac- cord, (A). 15 2 Roll. R. 96, Bac. Abr. Tit. Accord (A). 16 Parker v. Bayles, 2 Bos. & Pul. 73. 17 Day V. Gardner, 42 N. J. Bq. 199, 7 Atl. 365. 18 Lattimore v. Harsen, 14 Johns. 330. 10 Foster v. Trull, 12 Johns. 456. 20 Roll. Abr. 128; Styles, 245; Lut. 57; James v. Davit, 5 T. R. 14. 21 Roll. Abr. 128. § 55] CONSIDEKATION 117 collateral benefit to the creditor which amounts to a technical legal consideration, the rule does not apply." It is not essential that the consideration be adequate in point of value, for the law does not decide upon this.^^ Hence, the value of the thing received in satisfaction is not material.^* Indeed, as before ob- served, a very slight consideration is sufficient,^'' if it be substan- tial and valuable. It is the difficulty of ascertaining and measur- ing the benefit under such contracts, and the policy of the law not to interfere with the rights of parties to make their own con- tracts upon such terms as they may deem advantageous to them- selves, that furnish the reason for not inquiring into the amount of the benefit; the courts only applying the unvarying rule of law requiring a new consideration, and that the consideration be legal. Sec. 55. Pa3mient of a less sum — Recovery of residue — Rescis- sion unnecessary. — ^Lord Ellenborough said, it is impossible to con- tend that acceptance of seventeen pounds and ten shillings is an ex- tinguishment of a debt of fifty pounds ; "There must be some con- sideration for the relinquishment of the residue; something collateral to show a possibility of benefit to the party relinquishing his further claim ; otherwise, the agreement is nudum pactum." ^ This rule, how- ever, is to be understood with reference only to cases where the debt is liquidated and due.^ The rule is supported by an unbroken current 22 Sonnenberg v. Riedel, 16 Minn. 81. 2s Spann v. BaltzeU, 1 Flo. 301, 46 Am. Dec. 346 ; Worcester v. Heald, 72 Atl. (N. J. Sup.) 421; Trenton St. E. Co. v. Lawlor, 71 Atl. (N. J.) 234. 24 Pinnel's Case, 5 Coke, 118. 2 5 Jones V. Perkins, 29 Miss. 139, 64 Am. Dee. 136; Palmer v. Yager, 20 Wis. 91; Waydell v. Luer, 3 Denio, 410; Tuckes v. Dolan, 109 Mo. App. 442, 84 S. W. 1126; PoUman v. City of St. Louis, 145 Mo. 651, 47 S. W. 563; Henson v. Stever, 69 Mo. 136 ; Rotan v. Noble, 36 Tex. Civ. App. 226, 81 S. W. 586. 1 Fitch V. Sutton, 5 East, 231. 2 Stearns v. Johnson, 17 Minn. 142 ; Foster v. Lammers, 134 N. W. (Minn.) 501 ; Chicago, M. & St. P. R. v. Clark, 178 U. S. 353, 44 L. Ed. 1099, 20 Sup. Ct. Rep. 924; Cunningham v. Standard Co., 119 S. W. (Ky.) 765. 118 . ACCOED AND SATISFACTION [§ 55 of authorities from Pinnel's Case to those of the present day.* It has been said that "The rule * * * supposes the part perform- ance of the original obligation — the payment of a part at the time and in the manner originally stipulated for the payment of the whole; 3 [16021 Pinnel's Case, 5 Coke, 118 ; Fitch v. Sutton, 5 East, 230 ; Cumber V Wane, 1 Str. 426; Chicago, etc., Ry. Co. v. Clark, 178 U. S. 353, 44 L. Ed. 1099 ; Hansbrough v. Peck, 5 Wallace, 487 ; Rice v. London Mortgage Co., 70 Minn. 77, 72 N. W. 826; Hoidale v. Wood, 93 Minn. 190, 100 N. W. 1100; Otto V. Klauber, 23 Wis. 471; Prarie Grove v. Luder, 115 Wis. 20, 90 N. W. 1085 ; Weldner v. Standard Ins. Co., 130 Wis. 10, 110 N. W. 246 ; Works V. Hershey, 35 Iowa, 340; Rea v. Owens, 37 Iowa, 262; Bryant v. Brazil, 53 Iowa, 350, 3 N. W. 117 ; Sullivan v. Finn, 4 G. Greene, 544 ; Eldred V. Peterson, 80 Iowa, 246, 45 N. W. 755; KeUar-v. Strong, 104 Iowa, 585, 73 N. W. 1071 ; MarshaU v. Ballard, 114 Iowa, 462, 87 N. W. 427, 54 L. R. A. 862 ; Rauen v. Prudential Ins. Co., 129 Iowa, 725, 106 N. W. 198; Nixon v. Kiddy, 66 S. E. (W. Va.) 500 ; De Buhr v. Thompson, 114 S. W. (Mo. App.) 557; T. J. Scott & Sons v. Rawls, 48 So. (Ala.) 710; Wheeler v. Wheeler, 11 Vt. 60 ; Goodwin v. Follett, 25 Vt. 386; Harrlman v. Harriman, 12 Gray, 341 ; Attorney General v. Supreme Council, 81 N. E. (Mass.) 966 ; Warren v. Hodge, 121 Mass. 106; Smith v. Bartholomew, 42 Mass. 276, 25 Am. Dec. 365 ; Tuttle v. Tuttle, 53 Mass. 554, 46 Am. Dec. 701 ; Twitehell v. Shaw, 64 Mass. 46, 57 Am. Dec. SO ; Curran v. Rummell, 118 Mass. 482 ; Grinnell v. Spink, 128 Mass. 25; Warren v. Skinner, 20 Conn. 559; Douglass v. White, 3 Barb. Ch. 621; Pabodie v. King, 12 Johns. 426 (Payment of part of a debt is not a consideration which will support a promise to forbear to sue) ; Dederick v. Leman, 9 Johns. 333 ; Bunge v. Koop, 5 Robt. 1 ; Ryan v. Ward, 48 N. Y. 204 : SchuUer v. Robinson, 123 N. Y. Supp. 881 ; Watts v. French, 19 N. J. Eq. 407; Eckert v. Wallace, 67 Atl. (N. J. Sup.) 76 ; Russel v. Lytle, 6 Wend. 390, 22 Am. Dec. 537; Potter v. Green, 6 Allen, 442; Whalan v. Klrby, 99 Mass. 3; Lathrop v. Page, 129 Mass. 21; Mechanics' Bank v. Hazard, 13 Johns. 353; Jackson v. Stackhouse, 1 Cow. 224; Inman v. Gris- wold, 1 Cow. 199; Von Gerhard v. Lighte, 13 Abb. Pr. 101; Weinberg v. Novick, 88 N. Y. Supp. 168 ; Ramsdell v. United States, 2 Ct. CI. 508 ; Rising v. Patterson, 5 Whart. 316; Mordecai v. Stewart, 36 Ga. 126; Hardey v. Coe, 5 Gill, 189; Ex parte Zeigler, 64 S. E. (S. C.) 513; Oberndorff v. Union Bank, 31 Md. 126 ; Commercial Bank v. McCormick, 97 Md. 703, 55 Atl. 439 ; Eve v. Moseley, 2 Strobh. 203 ; McKinzie v. Culbreth, 66 N. C. 534; Vance V. Lukenbill, 9 B. Mon. 249; Daniel v. Hatch, 1 Zabriskie, 391, 47 Am. Dec. 168 ; Byrnes v. Byrnes, 92 Minn. 73, 99 N. W. 426 ; Lee v. Oppenheimer, 32 Me. 254; Bailey v. Day, 26 Me. S8; Fitzgerald v. Fitzgerald, 62 N. W. (Neb.) 899 ; Mcintosh v. Johnson, 51 Neb. 33, 70 N. W. 522 ; Sheibley v. Dixon, 61 Neb. 409, 85 N. W. 399 ; Maddux v. Bevan, 39 Md. 485 ; Loney v. Bailey, 43 § 55] CONSIDERATION 119 from which payment of a part rather than the whole no benefit can accrue to the creditor, and no injury to the debtor." * There is no difference between an admitted debt created by the sale of property and an admitted debt created upon a loan of money. They stand upon the same plane, neither can be satisfied by part payment.' The rule is applicable to judgment debts." Reducing the agreement to Md. 22; Jones v. Rlcketts, 7 Md. 108 ; Upton v. Dennis, 133 Mich. 238, 94 N. W. 728; Leeson v. Anderson, 58 N. W. (Mich.) 72; Chamberlain v. Smith, 110 Mo. App. 657, 85 S. W. 645; Reinhold v. Kerrigan, 85 Mo. App. 256; Wetmore v. Crouch, 150 Mo. 671, 51 S. W. 738; Hodges v. Truax, 19 Ind. App. 651, 49 N. E. 1079; Fletcher v. Wurgler, 97 Ind. 223 ; Bostrom v. Gib- son, 111 111. App. 457 ; Snow v. Grieshelmer, 220 111. 106, 77 N. E. 110, aff'ng 120 111. App. 516 ; Wood v. Bangs, 2 PennewiU (Del.) 435, 48 Atl. 189 ; Peachy V. Whitter, 131 Cal. 316, 63 Pac. 468. In Deland t. Hlett, 27 Cal. 611, 87 Am. Dec. 102, a less sum was ac- cepted in satisfaction of a judgment for a larger amount ami a satisfac- tion piece given. The court said that inasmuch as the discharge was of record, it might operate by way of estoppel were it not for the fact that the complaint went behind the record and disclosed that the satisfaction was entered upon a nudum pactum. A written agreement not under seal, expressing a consideration of one dollar, discharging a defendant from aU debts and demands, where the demand was a note for $2,900, was held not to operate as a release and the consideration being nominal, it did not operate as an accord and satisfaction: Seymour v. Mintum, 17 Johns. 169, 8 Am. Dec. 380. Payment of a part of a judgment by a co- debtor furnishes no consideration for releasing the party paying from the whole: Fletcher v. Wurgler, 97 Ind. 223. See Clayton v. Clark, 74 Miss. 499, 21 So. 265, 22 So. 189, 37 L. R. A. 771, 60 Am. St Kep. 521, to the contrary. In this case, however, the creditor accepted a less sum and surrendered the note, which is considered high evidence of an intent to make a gift of the balance of the debt, although the decision is not based upon that ground. An abatement at the time of payment of a debt of part of the debtor's claim for usury paid, is no accord and satisfaction : Rogers V. Ball, 54 Ga. 15. ' * Rose V. Hall, 26 Conn. 392, 68 Am. Dec. 402. s. p. Ryan v. Ward, 48 N. Y. 204. Hendrickson v. Beens, 6 Bos. 639 ; 1 Greenl. Bv. Sec. 212. » Hanson v. McCann, 20 Colo. App. 43; Russell v. Meek, 22 Ky. Law Rep. 498; Upton v. Dennis, 133 Mich. 238, 94 N. W. 728, 10 Det. Leg. N. 132 ; De- land V. Hiett, 27 Cal. 611, 87 Am. Dec. 102; Fletcher v. Wurgler, 97 Ind. 223; Coblentz v. Manufacturing Co., 40 Ark. 180. 120 ACCORD AND SATISFACTION [§ 65 writing does not affect the rule/ unless it be under seal.* Where the agreement was to pay a less sum in cash, an acceptance afterwards of a note in part settlement of the amount agreed to be paid, was held not to furnish any consideration to uphold the agreement to accept a less sum in satisfaction of the entire demand.' The same rule was applied where an agent gave his draft for the amount agreed to be paid in cash,^" and where the debtor passed over the check of a friend who had agreed to loan him the money to pay the less sum,^^ and where the debtor deposited the money in a bank and gave his own check.^^ So, accepting certificates of deposit is- sued by the creditor to the debtor for a less sum than the debt, in full satisfaction,^^ or accepting in the United States a less sum in dollars in satisfaction of a greater sum payable in pounds in London, does not furnish any consideration for the agreement to relinquish the balance due.^* In all such cases the check, draft or other thing de- livered is merely the means whereby the cash is paid. The consid- eration is wanting whether there is a mere agreement to pay a part,^^ or the money has been actually paid over and accepted in full satis- faction.^' And it makes no difference how positive the creditor's T Bingham v. Browning, 197 111. 122, 64 N. B. 317, aff'ng 97 111. App. 442. See Seymour v. Mintum, 17 Johns. 169, 8 Am. Dec. 380. 8 Specialty Co. v. Daley, 172 Mass. 460, 53 N. E. 633. See Ex parte Zeigler, 64 S. B. (S. C.) 513. 8 Mannakee v. McCloskey, 63 S. W. 482, 23 Ky. Law Rep. 515. 10 Bliss V. Schwartz, 65 N. Y. 444. 11 Bunge v. Koop, 48 N. T. 229, 8 Am. Rep. 546. 12 Tucker v. Murray, 2 Pa. Dlst. C. 497. 13 Russell v. Meek, 22 Ky. Law Rep. 498, 58 S. W. 378. 1* Sanders v. Whitcomb, 177 Mass. 457, 59 N. E. 192. IB Bird V. Smith, 34 Me. 63, 56 Am. Dec. 635; City of Memphis v. Brown, 1 Flipp. 205; Daniels v. Hatch, 1 Zahriskie (N. J.) 391, 47 Am. Dec. 169; Lim V. Nelson, 3^ N. J. Bq. 360; Braden v. Ward, 42 N. J. L. 522. 16 Rose v. Hall, 26 Conn. 392, 68 Am. Dec. 402; White v. Jordan, 27 Me. 370. § 55] CONSIDERATION 121 agreement to accept the less sum in satisfaction may be,^^ or whether the debt sought to be discharged is created by simple contract or by a specialty,^' or that it has been reduced to a judgment.^" Payment of a part and a promise to pay the residue when able, puts a creditor in no better condition than he was before, and the promise to forbear until the debtor is able to pay is without consideration." A payment of part in satisfaction of the whole sum due upon an undisputed claim is a payment pro tanto merely, and a creditor may recover the residue of the debt without a tender or offer to return the part received.^ ^ Whether the payment and acceptance of a less sum in satisfaction of the entire debt, will operate as a satisfaction and discharge, de- pends entirely upon whether there is in fact any new consideration existing to support the agreement to relinquish the residue, and not upon the agreement or opinion of the parties fixing the consideration. If the consideration be money, the court will determine its adequacy, as money has a' fixed and known value, but if the consideration be an indeterminate thing, the courts leave the parties to estimate its own value to them.^^ As before observed, a slight consideration will suf- 17 Bung V. Koop, 48 N. Y. 231, 5 Robt. 1. isKeeler v. Salisbury, 33 N. Y. 648; Fitch v. Sutton, 5 East, 230; Harri- son V. Close, 2 Jobns. 448; Dederick v. Leman, 9 Johns. 333; Mechanics' Bank v. Hazard, 13 Johns. 353; Seymour v. Mintum, 17 Johns. 167. loDeland v. Hiett, 27 Calf. 611, 87 Am. Dec. 102; Fletcher v. Wurgler, 97 Ind. 223; Foakes v. Beer, 9 App. Cas. 605. . 20 Fitch V. Sutton, 5 Bast, 231. 21 Leeson v. Anderson, 58 N. W. (Mich.) 72; Parker t. Mayes, 67 S. E. (S. C.) 559 ; Pierce v. Wood, 23 N. H. (3 Foster) 519 ; Ennekin v. Stahl, 9 Mo. App. 390. See Eldred v. Peterson, 80 Iowa, 246, 45 N. W. 755, 20 Am. St. Rep. 416, where a co-maker of a note claimed a discharge by reason of a payment of a part and the unauthorized erasure of his name from the note. The court held that if the erasure had been done by the payee it would not have discharged the co-maker, and therefore he need not notify the co-maker of his repudiation of the unauthorized erasure. Accepting one half of a partnership debt from one partner is no consideration for releasiilg him from the payment of the whole debt: Fensler v. Prather, 43 Ind. 119. 22 See Wolford v. Powers, 85 Ind. 301. 122 ACCORD AND SATISFACTION [§ 56 fice to answer the requirements of the law.''' What, in addition to the payment of a smaller sum, will constitute a valid consideration and make the agreement binding will be considered in succeeding sections. Sec. 56. Same subject — Application of the rule. — ^Where a creditor made a voluntary assignment to an assignor of his own selection, with, a proviso in the deed, that no creditor should re- ceive any payment or dividend, unless he should fully, acquit and discharge the assignor from all demands, it was held that the acceptance of a dividend and the giving of a receipt reciting that . the sum was received under the assignment, in absence of a tech- nical release, was not a bar to a recovery of the residue.'^ Re- ceiving dividends from a receiver, is not available as a defence, by way of accord and satisfaction, to the liability of sureties.^ The payment of a less sum than the total upon two claims, one due to K. and one to K. & Co. under an agreement that it will be received in satisfaction of the two claims ; both accounts being receipted in full, signed by K. & Co., it was held that the total indebtedness was not extinguished, but that the receipt being signed by K. & Co., and the debtor not having directed how the payment should be applied, the account of K. & Co. was extin- guished and the creditor was entitled to receive the balance due upon the individual claim.* Accepting half of the amount due upon a joint note and erasing the signature of the party paying does not discharge the party paying nor estop the payee from recovering of him the balance due on the note.* Where a debtor has an option of discharging a debt in different ways, as where he may pay in money or property, or in a lump sum or in install- as Hinkley v. Avery, 27 Me. 362; Bailey v. Day, 26 Me. 88. 1 Allen V. Roosevelt, 14 Wend. 100. 2 Johnson County v. Chamberlain, 113 N. W. (Neb.) 1055. 8 Otto r. Klauber, 23 Wis. 471. 4 Blred V. Peterson, 80 Iowa, 246, 45 N. W. 755, 20 Am. St. Rep. 416. § 57] CONSIDERATION 123 ments, a payment of a less sum than the debt in full satisfaction, under an agreement whereby the creditor chooses the manner of payment, is binding upon the creditor." Accepting the salary due up to the time of an illegal removal from office is not a final set- tlement.' Sec. 57. Same subject — Acceptance of less than amount fixed by law — Salary — ^Fees. — The principle requiring a consideration to uphold an agreement to accept a less sum than that due, is applied to agreement to accept a less sum in satisfaction than the amount fixed by law, as where a deputy sheriff, fireman, police surgeon or other public officer accepts as his salary a sum less than the amount fixed by law.^ But the agreement is void upon another ground. It has always been held that any contract made before or after the performance of the services, on the part of a public officer to render services required of him, for less than the compensation provided by law is against public policy and void." As between the state, county or municipality and a citi- zen claiming money due for services rendered, the law of es- toppel does not apply, for the reason that an estoppel must be reciprocal and mutual, and is founded upon the principle that the acts of the party estopped resulted in injury to the other party s BaUeyvlUe v. Lowell, 20 Me. 178. e Gracey v. St Louis, 111 S. W. (Mo.) 1158. 1 Bodenhofer v. Hogan, 120 N. W. (Iowa) 659 ; People v. Board of Police, 75 N. T. 38 ; Kehn v. State, 93 N. Y. 291 ; Slaughter v. Hamm, 2 Ham. Oh. Rep. 271. 2 State T. Collier, 72 Mo. 13, 37 Am. Rep. 417 ; State v. Purdy, 36 Wis. 213, 17 Am. Rep. 485; Bodenhofer v. Hogan, 120 N. W. (Iowa) 659, citing Daniels v. Des Moines, 108 Iowa, 484, 79 N. W. 269; Peter v. Davenport, 104 Iowa, 625, 74 N. W. 6 ; Purdy v. Independence, 75 Iowa, 356, 39 N. W. 641 ; Robertson v. Robertson, 65 Ala. 610, 39 Am. Rep. 17 ; Settle v. SterUng, 1 Idaho, 259 ;" Hall t. Gavitt, 18 Ind. 390 ; Emmltt v. Mayor, 128 N. T. 117, 28 N. e! 19; Hope v. Linden Park, 58 N. J. L. 627, 34 Atl. 1070, 55 Am. St. Rep. 614. 7 Bac. Abr. Title Office and Officers. 124 ACCOED AND SATISFACTION [§ 5? and a fraud upon him, which does not arise where a public official's salary is fixed by law.' But where the law fixing the salary of a public official is of doubtful construction, and there is a dispute between the parties in reference thereto, a compromise or accord and satisfaction of the claim for salary is binding.* But as between the public officer and an individual requiring his services, a contract made in ad- vance of the time of performance of the services, whereby he agrees to accept less than the statutory fee, would be upheld on the ground of estoppel, if not upon the general ground that a person may make any contract he pleases, and he will be bound by it, providing, however, there is a consideration to uphold it and it is legal. Any reduction from his fees otherwise than by way of a gift, in absence of such prior agreement, would fall with- in the general principles governing an accord and satisfaction, requiring a new consideration. Sec. 58. Payment of an undisputed claim no consideration for relinquishing another claim. — Payment of a sum admitted to be due to a creditor for work and labor, made upon condition that creditor release the debtor from all demands is without considera- tion and of no validity as to a previous existing disputed claim for a breach of contract,^ or for damages arising out of a wrong- ful discharge,^ or for damages on account of fraud in the sale of a Montague's Adm'r v. Mossey, 76 Va. 307 ; Gallaher v. Lincoln, 65 Neb. 339, 88 N. W. 505 ; Gracey v. St. Louis, 111 S. W. (Mo.) 1158. * Du Moulin v. Board, 124 N. Y. Supp. 901. 1 Ness V. Minnesota Co., 87 Minn. 413, 92 N. W. 333. The court held that there can be no accord and satisfaction unless something of legal value has been received in full payment of the claim, to which the creditor had no previous right. Payment of the amount due for the hire of a wagon train is not an accord and satisfaction and the owner may recover for damages done to the wagons: Kiskadden v. United States, 44 Ct C. 205; Stewart v. Stephens, 67 S. E. (Ga. App.) 199. 2 Walston v. Calkin Co., 119 Iowa, 150. § 59] CONSIDERATION 125 land.' So paying for board actually furnished under a contract is no bar to an action for damages for a failure to furnish other "boarders under the contract.* In all such cases the creditor does not receive anything for the relinquishment of his second demand, or anything to which he was not entitled to receive upon the demand paid. A wife, by receiving from her husband a part of her estate in his possession, is not precluded from recovering the residue of her separate estate by reason of the agreement to ac- -cept a part in satisfaction, or by reason of a contract subsequent- ly made relinquishing her dower interest in her husband's lands and confirming the first contract.* Sec. 59. Insolvency of debtor as a consideration. — The insol- "vency of the debtor does not furnish any consideration for an agreement to accept a less sum than the entire debt in full satis- faction. It was observed by the court in one case, that whether the debtor was insolvent or not, the obligation to pay was not impaired, and the moral duty remained in full force. ^ A few modern authorities are to be found holding that where an in- 3 Stoney Creek Woolen Co. v. Smalley, 69 N. W. 722. * Marr v. Burlington Ry. Co., 121 Iowa, 117, 96 N. W. 716. 6 McKenzie v. SMord, 52 S. C. 270, 29 S. E. 736. 1 Pearson v. Thompson, 15 Ala. 700, 50 Am. Dec. 159. One decision at least, is to be found In the books, holding directly to the contrary, but upon an examination it will be found to be based wholly upon loose and general ^statements in other cases, which led the court to observe that the suggestions in those cases indicated that perhaps such an exception should be made in -a proper case: Engbretson v. Seiberling, 122 Iowa, 522, 64 L. R. A. 75, 98 N. W. 319, 101 Am. St. Rep. 279. Followed by the same court, on demurrer, In Seegmiller v. Kelley, 99 N. W. 1131, where insolvency of one of the judg- ment debtors was alleged, and that the other debtor at the time of the settlement claimed that she had never been served with notice of the ac- tion and was threatening to begin suit to prevent its collection, and that the purpose of the agreement was the adjustment of the indebtedness with- out further litigation. The adjustment of a litigated claim does not seem to have been taken into account, as the court said the case was ruled by Engbretson v. Seiberling. 126 ACCOED AND SATISFACTION [§ ^^ solvent debtor pays part of a debt in satisfaction of the whole in pursuance of an agreement to forego or relinquish some right or privilege vouchsafed by law to a debtor, a sufficient considera- tion arises to uphold the agreement; as where an insolvent con- templates resorting to voluntary bankruptcy,^ or making an as- signment for the benefit of creditors,' and the creditor upon being informed of this agrees to accept a less sum in full satisfaction. So, when an insolvent debtor pays the portion of the debt agreed to be paid out of the proceeds of the sale of exempt property,* or out of salary exempt from execution," it was held that the whole debt was discharged. In our view, the principle announced in these cases seems very doubtful in point of law or of justice. Nevertheless, in those jurisdictions responsible for the decisions they must be taken as the law. When the claim was one that would not be discharged in bankruptcy, an agreement to accept a less sum than is due in satisfaction of the debt, was held not supported by a sufficient consideration.* There are other decisions in which the courts have laid con- siderable stress upoii the insolvency of the debtor, but they may be distinguished, and brought into harmony with the well known rules defining the considerations necessary to uphold an accord and satisfaction. Thus, where it was supposed by all parties that 2 Hanson v. McOann, 20 Colo. App. 43, 76 P. 983; Hinckley v. Arey, 27 Me. 362 ; Dawson v. Beall, 68 Ga. 328. Accepting thirty per cent, of a debt in satisfaction of the whole debt from one contemplating bankruptcy, was held to constitute a sufficient consideration to support the agreement to re- linquish the residue. The reason assigned was that the creditor received a certain sum instead of an uncertain dividend: Melroy v. Kemmerer, 218 Pa. 381, 67 Atl. 699. 3 Rotan Grocery Co. v. Noble, 36 Tex. Civ. App. 226, 81 S. W. 586. * Ward v. Young, 80 S. W. (Tex. Civ. App.) 456. B Meeker v. Regua, 87 N. Y. S. 959, 94 App. Div. 300. See Molyneaux v. Collier, 13 Ga. 406, which also holds that where the debt is joint, insolvency of one joint debtor is not enough ; all must be insolvent. 6 Schlessinger v. Schlessinger, 88 Pae. 970, 8 L. E. A. (N. S.) 863 ; Id. 88 Pac. 972. § 60] CONSIDERATION 127 the estate of an intestate was insolvent, and a mortgagee, by rea- son of that fact, accepted an amount less than his claim in full satisfaction, it was held that the entire debt was satisfied, though it turned out that the estate was solvent. The court said there was sufficient consideration for the acceptance of the less sum in sat- isfaction; for, if the estate was insolvent, the mortgagee would have had to exhaust his security before participating in the dis- tribution of the funds in the hands of the administrator, which rendered it a contingent and uncertain claim, and that by the pay- , ment of the less sum he received it absolutely and without any contingency or uncertainty.' Where an insolvent debtor, before the obligation was due, paid a smaller sum in discharge of a lar- ger sum, out of funds that could not have been reached by the creditor, it was held to be a binding contract.' If after one co- debtor is discharged in bankruptcy he pays a part of a debt dis- charged as to him in such proceedings, on the creditor's agree- ment to accept it in full satisfaction there is a complete satisfac- tion of the debt.' Sec. 60. Payment before due — At another place. — A mere change in the accessory part of the original agreement, whereby there is a possibility of a benefit to the creditor, will be a sufficient consideration for the agreement on the part of the creditor to relinquish the residue of his demand, as where the creditor agrees to accept a less sum in satisfaction of his demand if paid at an earlier date; for, as said in Pinnel's case, "peradventure, parcel of it before the day would be more beneficial to him than the whole at the day." ^ So, if the agree- 7 Rice V. London Mortgage Co., 70 Minn. 77, 72 N. W. 826. 8 Dalrymple v. Craig, 149 Mo. 345, 50 S. W. 884. See Jones v. Jones, 15 Oh. Cir. Ct. R. 618, 8 O. C. D. 628, where a payment of a less sum by an in- solvent debtor was held good as a compromise pending litigation. See also, Larned v. Dubuque, 53 Iowa, 105, where the city, being insolvent, upon a compromise paid certain costs. 8 Ex parte Zeigler, 64 S. B. (S. C.) 513. 1 Pinnel's Case, 5 Coke, 118 ; Co. Litt. 212 b. In Palmer v. Tager, 20 Wis. 87 the court said: "The creditor has his advantage in the earlier payment 128 ACCORD AND SATISFACTION [§ 60 ment be to pay a less sum at a different place than that mentioned in the original contract, and it be paid and accepted in satisfaction of the entire demand, the residue is extinguished. Throughout all the books we do not find any better illustration of the rule than that given in Pinnel's case, where it is said, "if I am bound in 20Iv. to pay you lOL,. at Westminster, and you request me to pay you 5L,. at the day at York, and you will accept it in full satisfaction of the whole lOL,., it is a good satisfaction for the whole: for the expense to pay it at York is sufficient satisfaction." ^ The agreement, however, to pay at of the money." Soimenberg v. Riedel, 16 Minn. 81; Schwelder v. Lang, 29 Minn. 254, 13 N. W. 33, 43 Am. Kep. 202; Boyd v. Moats, 75 Iowa, 151, 39 N. W. 237 ; Scofield v. Clark, 67 N. W. (Neb.) 754 ; Brooks v. White, 2 Mete. 283, 37 Am. Dec. 95; Goodnow v. Smith, 18 Pick. 314, 29 Am. Dec. 600; Bowker v. Childs, 3 Allen, 434; Jones v. Perkins, 29 Miss. 139, 64 Am. Dec. 136 ; Button v. Stoddart, 83 Ind. 589 ; Bryant v. Proctor, 14 B. Mon. 451 ; Ricketts v. Hall, 2 Bush (Ky.) 249; KircbofE v. Voss, 67 Tex. 820, 3 S. W. 548; Singer Sewing Mch. Co. v. Lee, 66 Atl. (Md.) 628; Fire Ins. Ass'n. v. Wickham, 141 U. S. 564, 12 S. Ct. 84, 35 L. Ed. 860. The accord must be executed: Sewell v. Musson, 1 Vern. 210; Harding v. Commercial Loan Co. 84 111. 251. Some mention is made of the rule in the following cases: Wheel- er V. Wheeler, 11 Vt. 60 ; Singer v. Lee, 66 Atl. (Md.) 628 ; McKenzie v. Cul- breth, 66 N. C. 534; Smith v. Brown, 10 N. C. 580; Cavaness v. Ross, 33 Ark. 575; Pope v. Turnstall, 2 Ark. 209; Seymour v. Goodrich, 80 Va. 303; Dalrymple v. Craig, 149 Mo. 345, 50 S. W. 884; Flener v. Flener, 30 Ky. Law Rep. 543, 99 S. W. 258 ; Arnold v. Park, 8 Bush (Ky.) 249 ; St. Louis Ry. Co. V. Davis, 35 Kan. 464, 11 Pac. 421 ; Weiss v. Marks, 206 Pa. 513, 56 Atl. 59; Russell v. Stevenson, 34 Wash. 166, 75 Pac. 627; Baldwin v. Daly, 41 Wash. 416, 83 Pac. 724. 2 Pinnel's Case, 5 Coke, 118. Jones v. Bullitt, 2 Litt. 40. In the last case the court said, "if the creditor accepts of a part of the debt before it was payable, or at a different place, in satisfaction of the whole, it will bar the recovery of the residue ; for the debtor being under no obligation to pay the debt before it was due, or at a different place, and the creditor having no right to demand it, the agreement to accept a part of the debt at such time or place is obviously founded upon a consideration." In Jones v. Perkins, 29 Miss. 139, 64 Am. Dec. 136, the agreement was to pay $1,500 in New York in satisfaction of a $2,000 demand payable in Mississippi. Sonnenbery v. Riedel, 16 Minn. 81; Pearson v. Thomason, 15 Ala. 700; McKenzie v. Cul- breth, 66 N. C. 534; Smith v. Brown, 10 N. C. 580; Fenwick v. Phillips, 3 Met. (Ky.) 87 ; Cavaness v. Ross, 33 Ark. 572 ; Smith v. Brown, 3 Hawks, 580. § 61] CONSIDERATION 129 a diflferent place must be made before the due day, for an agreement made after default to pay a less sum at a different place is no con- sideration for an agreement to relinquish the residue of the debt,' Before maturity a creditor cannot enforce payment at any other time or place than that named, but after maturity he may collect his debt whenever and wherever the debtor may be found.* ' Sec. 61. Less sum furnished by third person. — ^It is a universal rule that where one not the debtor, nor under any legal or moral obligation to pay a debt, agrees to pay, and does pay a sum less than the whole debt, in consideration of an agreement on the part of the creditor to satisfy and discharge the whole, no action will lie against the debtor to recover the balance of his indebtedness.^ The consid- eration must actually move from the third person, as it is his under- taking to pay the less sum and the payment of it by him that fur- nishes the new .consideration. An agreement on the part of a cred- itor that if the debtor would induce his friends to raise and loan him the portion of the debt to be paid in cash, he would accept the sum, together with some further consideration making the total seventy- five per cent of the whole debt, in full satisfaction of the entire debt, 3 Foster v. Lammers, 134 N. W. (Minn.) 501 ; Rising v. Patterson, 5 Whart. 316. effect as the N. Dal£. Statute. The decisions are to the effect that to constitute an accord and satisfaction, performance and acceptance in satisfaction must be shown: Carpenter v. Railway Co., T S. D. 58, 64 N. W. 1120 ; Troy Min. Co. v. Thomas, 15 S. D. 288, 88 N. W. 106; Troy Min. Co. v. White, 10 S. D. 475, 74 N. W. 236. Acceptance of a sum to which the creditor is clearly entitled is not an ac- cord and satisfaction unless expressly accepted in writing as satisfaction: Chrystal v. Gerlach, 125 N. W. 633. 2 Code, Sec. 2881 ; Code 1911, Sec. 4329 ; Tyler v. Chevalier, 56 Ga. 494 (In this case the claim was in dispute) ; Rogers v. Ball, 54 Ga. 15: In this case, which was under the old Code, the court held that a deduction by a creditor at the time a debt is settled of a part of a claim for usury Included in It is a Code 1883, Sec. 574, 575 ; Tiddy v. Harris (N. C.) 8 S. E. 227 ; Fickey V. Merriman, 79 N. C 585; Drewry v. Davis, 66 S. E. 139. In Kerr v. Sanders, 122 N. C. 635, 29 S. E. 943, accepting a check marked, "In full for services," was held a full discharge. Although the creditor wrote over his indorsement "Accepted for one month's services." Accepting a part in cash and a new note for the balance under a compromise agreement, and sur- rendering the old note, was held to preclude a recovery upon the old note: WIttkowsky v. Baruch, 37 S. E. 449, reversing 126 N. C. 747, 36 S. E. 156. *Rev. St. Ch. 84, Sec. 59; Rev. St. 1871, Ch. 82, Sec. 28; Phelps v. Den- nett, 57 Me. 491 ; Fogg v. Sanborn, 48 Me. 432 ; Bisbee v. Ham, 47 Me. 543 ; Weymouth v. Blabcock, 42 Me. 42. In Knowlton v. Black, 102 Me. 503, 67 Atl. 563, the statute is held to cover disputed and undisputed demands, s. p. Fuller v. Smith, 77 Atl. 706. Accepting part and giving the debtor his own time to pay the balance is not within the statute : Mayo v. Stevens, 61 Me. 562; Austin v. Smith, 39 Me. 203. § 70] CONSIDERATION 147 some other states,' the common law rule is entirely abrogated. In Alabama," and Tennessee,^ receipts and agreements in writing, with or without any new consideration, are given effect according to the intent of the parties.* In Texas under the statute providing not an accord and satisfaction although the debtor agrees that the deduction is to be In satisfaction of hl's claim. The reason being that the borrower is still, in the eyes of the law, m vincuUs, when such agreement is made ; but that if the borrower upon an accord becomes a creditor himself by accepting the note of the lender, which agreement Is afterwards executed, he could not deny the legal effect of the accord and satisfaction. See Troutman v. Lucas, 63 Ga. 466, holding that part performance is InsuflBclent. Under 1911 Compilation of the Georgia Code, Sec. 4328, provides that the accord and satisfaction must be of some benefit to the creditor, legal or equitable, or he wiU not be barred from his legal rights. Sec. 4329 provides that an agreement by a creditor to receive a less sum than his debt will not be binding unless it be actually executed by payment. As far as accepting a less sum of a debt due and nndisputed is concerned, these sections can- not well be harmonized, for it cannot be of any legal or equitable benefit to a creditor to receive only a part of his debt after he has a legal right to demand all of it. It could only be convenient to him to get it B See Va. Code 1887, Sec. 2858. 8 Code 1876, Sec. 3039 ; Smith v. Gayle, 58 Ala. 600 ; Cowan v. Sapp, 74 Ala. 44. 7 Code, Sec. 3789, 3790 ; Miller v. Fox, 111 Tenn. 336, 76 S. W. 893 ; Mem- phis V. Brown, 1 Fllpp. 188, 16 Fed. Gas. No. 9,415. 8 After an examination of these statutes and many decisions following the common law rule, we are convinced that the latter is the most salutary rule, and is founded upon the wisdom of the ancient sages. The statutes referred to no doubt are intended to prevent litigation, but avoiding litigation is not to be desired at the expense of justice or by removing the protection af- forded by a law, which, throughout many centuries, has been found to work the greatest good to the greatest number. As weU might the laws of usury be repealed because they occasion litigation. It is common knowledge, gained of experience, that nine creditors out of ten, who accept less than their due in full satisfaction of a liquidated demand, are forced to do so by the debtor taking advantage of their urgent necessity for the money, or by threatening to withhold the money until the end of a law suit, or by working upon their fears of a loss of their claim by causing his means to become visibly le?s, or by pleading poverty; thus, obtaining something for nothing. Who is in- jured if a creditor afterwards insists upon his rightful dues? And, should the coercive debtor be heard to complain because he is not allowed to keep 148 ACCORD AND SATISFACTION [§ 71 that writings not under seal import a consideration as fully as sealed instruments, the question whether a writing acknowledging receipt of a part of a debt due and unliquidated, in satisfaction of the whole, may be attacked for want of consideration seems to be an open question.* Sec. 71. Accepting a less sum and giving a release. — Accepting a less sum than the amount due upon a demand and giving a release of the whole, or of the part remaining unpaid, does not constitute an accord and satisfaction. At common law, as well as by the civil law, a release is one method of satisfying and discharging a debt or demand ; and, at common law, at least, it must be under seal.^ Where delivered in pursuance of the agreement, it discharges the obligation or demand which it is intended to cover as effectually as if actual payment in full be made in money; and its form and effect does not depend upon whether any actual consideration passed between the parties or not; wherein it differs from an ac- cord and satisfaction. The seal imports a consideration, and, it has been said to import a full consideration. This presumption is what in honor he should pay? Occasionally, a creditor out of compassion for a poor debtor reduces his demand, but such, unless willfully deceived, seldom trouble the courts to recover the balance. On the whole, we believe that a law, which does away with the necessity for a consideration to uphold a contract, Is ill advised, and such are these statutes. As to unliquidated and disputed demands such acts add little if anything to the law as it was before. 9 In Warren v. Gentry, 21 Tex. Civ. App. 151, 50 S. W. 1025, the answer averred that the consideration for the release was $350 cash in hand paid and "other good and valuable consideration." This the court held was good upon demurrer, even if it be conceded that the $350 alone would furnish no consideration for the discharge of the debt. Under the Statute, Art. 4868 (4488) writings not under seal import a consideration as fully as sealed instru- ments. 1 "But If the obligee or feoffee doe at the day receive part, and thereof make an acquittance under his seal in full satisfaction of the whole, it is sufficient, by reason the deed amounteth tti an acquittance of the whole." Co. Litt. Sec. 344. §71] CONSIDERATION 149 raised as a barrier to any inquiry into the actual consideration. Solemn acts deliberately done must stand for what the law says they are intended, otherwise, fixed rules of law would be of little force and the end of controversies seldom reached. If there is in fact no consideration for the whole or that part of the debt not paid, it amounts to a gift. From the solemnity of its execution the cred- itor is presumed to have acted with deliberation and with full knowledge of all the facts, otherwise it is not presumed that he would throw away his property without the possibility of any ben- efit. A release ex vi termini imports a seal,^ and the want of a seal, in those states adhering to the common law rule, is a matter of defense. It need not be averred to be under seal.' The subject of release is frequently met with in the field of research concerning an accord and satisfaction, because it is one method of discharging a debtor from his liability for the payment of an entire debt or de- mand upon the payment of a part of it, but it is governed by rules applicable solely to releases, with no relation, as such, to an accord and satisfaction. Therefore, while it would be profitable and in- structive, as well as highly entertaining, to point out the many sub- tilities and nice distinctions pertaining to the law of release, to pur- sue the subject further here, would be a wide digression. Before concluding it may not be amiss to observe that, if an in- strument intended for a release fails to discharge the debt by rea- son of any informality in its execution, the transaction may be, nev- ertheless, a good accord and satisfaction, for there is present the accord or agreement to receive a part in satisfaction of the whole demand (wherein a release differs from a mere gift) provided, how- ever, there is present a new consideration such as will uphold an accord and satisfaction. Thus, where a purported release is made upon a settlement and compromise of a contested suit, pending be- 2 Illinois Cent. Ry. Co. v. Reed, 37 111. 484, 87 Am. Dec. 260. s Bailey v. Cowles, 86 111. 335 ; Illinois Cent. Ry. Co. v. Reed, 37 111. 484, 87 Am. Dec. 260. 150 ACCORD AND SATISFACTION [§ '^^ tween the parties/ or, upon a settlement of damages arising from personal injuries/ or upon a settlement of any other unliquidated or disputed claim and some consideration is present ; * or where property of uncertain value, or the note of a third person for a less sum is given in satisfaction of a debt pursuant to an agreement that it shall be accepted in satisfaction, it is wholly immaterial whether the instrument delivered as a release is a valid technical release or not. Sec. 72. By allowing cross-demand — Set-ofF — Recoupment. — Where two persons, having mutual unliquidated or disputed claims, or mutual pending suits, agree to cancel their respective claims or to dismiss the suits, one claim being the consideration for the satisfaction of the other, or where a part of the considera- tion upon one side is paid in money, and they carry out the agree- ment, the arrangement amounts to a mutual accord and satisfac- tion of their respective claims or suits.^ So where one demand is liquidated and the other unliquidated, or disputed, whether the lat- ter is in the nature of a recoupment, or a distinct demand, oif- setting one against the other, with or without the payment of a difference in cash, under an agreement that both demands shall be extinguished, is a valid accord and satisfaction, for one or both of 4 Benjamin v. McCormlc, 4 Gilm. 536, 46 Am. Dec. 474. 6 Illinois Cent. Ry. Co. v. Reed, 37 111. 484, 87 Am. Dec. 260. 6 See cases last above cited. See, also, Smithwick v. Ward, 7 Jones Law, 64, 75 Am. Dec. 453, where the release was rejected for want of a seal. But so far as the report shows, the instrument does not disclose that the dam- ages were released for a consideration. Whether the court had in mind the rule that a cause of action can only be discharged by something of value, in absence of a release or gift, is for conjecture. 1 Vedder v. Vedder, 1 Denio, 257 ; Foster v. Trull, 12 Johns. 456 ; 2 Pars. Cont. 685; Jones v. Sawkins, 5 C. B. 142; Alvord v. Marsh, 12 Allen, 603. See Williams v. The London Commercial Exch. Co., 10 Exch. 569, 20 Eng. L. Eq. 429, where the mutual causes of action were referred to arbitration and the agreement carried out. See Dighton v. Whiting, 1 Lutw. (Eng. Com. PI.) 23; Davis v. Ockham, Style (K. B. Rep.) 245, which appear to hold to the contrary. See Bac. Abr. Accord A. § '^2] CONSIDERATION 151 the parties receive a benefit in avoiding the trouble and expense of litigating the unliquidated demand." If, however, the mutual de- mands are liquidated and due, oflf-setting one demand against the other, without more, under an agreement that both demands shall be fully paid and satisfied, does not amount to an accord and sat- isfaction.* If the demands are equal, the law applies one to the payment of tHe other eo instanter, and both are paid. If one de- mand exceeds the other, the law makes the same application of pay- ment and the larger demand is satisfied pro tanto* At civil law, this mode of payment is termed compensation, and is defined as the extinction of debts of which two persons are re- ciprocally debtors, by the credits of which they are reciprocally creditors." Both demands being liquidated and due, crediting the less upon the greater debt, confers upon the creditor holding the largest debt no benefit to which he is not entitled under the law, 2 In Morehouse T. Bank, 98 N. T. 503, 3 Nat. Bk. Cas. 631, one of the demands was a claim for usurious interest. The bank agreed to apply the interest upon the debt due the bank and satisfy the remaining indebtedness, and the debtor agreed not fo sue or to permit suit to be brought. 8 Webster v. McLaren, 123 N. W. (N. D.) 394 ; Nelson v. Weeks, 111 Mass. 225 ; Walon v. Kerby, 99 Mass. 3. In May v. King, 12 Mod. 538, the court said: "If there be two dealers, and without coming to an account, they agree to be clear against one another, it would not be well, without coming to an account." 4 This is the rule where the agreement is that one debt shall be applied In payment of another in absence of an agreement that the larger debt shall be extinguished by the less. The question is one of payment solely. Davis V. Spencer, 24 N. Y. 386; Hunt v. Clark, 12 Johns. 304; Eaves v. Henderson, 17 Wend. 17 ; Hills v. Mesnard, 10 Ad. & E. (N. S.) 266 ; Gardiner v. Callen- der, 12 Pick, 374. Lord Coke in his Commentaries upon Littleton said: "If the obligor or feoffor be bound by condition to pay an hundred markes at a certain day, and at the day the parties doe account together, and for that the feoffee or obligee did owe twenty pound to the obligor or feoffor, that summe is allowed, and the residue of the hundred markes paid, this is a good satisfaction, and yet the twenty pounds was a chose in action, and no payment was made thereof, but by way of retainer or discharge." Co. Litt. Sec. 244. 6 1 Pothler's Ob. 587. 152 ACCOJID AND SATISFACTION [§ '^ and the agreement to remit the balance of his demand is, therefore, without consideration. The case is not any different, than where one debtor discharges his obligation in money and receives the same sum back in satisfaction of his larger debt. The law invaria- bly avoids idle ceremony. In order to connect one debt with an- other by an agreement in prcusenti it is not necessary that there should be the vain formality of passing the money from one party to the other and returning it again to the party from whom it just came, or that a formal release or receipt be executed.* The courts in arriving at a decision have not always been careful to observe the distinction between payment in full, where something else is accepted as the equivalent of money, and satisfaction by way of an accord and satisfaction; consequently, there is some confusion in the two classes of cases. Although there are border line cases, yet, by keeping in mind the definition of payment, and of accord and satisfaction, and, observing the distinctions, much confusion and perplexity may be obviated. Sec. 73. By surrender of rights — Assuming new obligation. — Any benefit under a new agreement accruing to a creditor, or a pos- sibility of a benefit to which he was not before entitled, furnishes the consideration necessary to uphold an agreement on the part of the creditor to relinquish a part of his debt, as where a lessee in arrears, holding under an unexpired lease, pays a part of the sum due in full satisfaction of the whole and surrenders possession of the premises.^ So, where a mortgagor entitled to hold possession, consents to an immediate sale of the premises and surrenders the 8 Hills V. Mesnard, 10 Ad. & E. (N. S.) 266. It has been decided that to an action hy three plaintiffs for a joint demand, a plea of an accord and satisfaction with one of the plaintiffs by a part payment in cash and a set- off of a debt due from one to the defendant, was good without alleging any authority from the other two plaintiffs to make the settlement: Wallace v. Kelsali, 7 M. & W. 264. 1 Lewis V. Donohue, 58 N. Y. S. 319, 37 Misc. Rep. 514. § 74] CONSIDERATION 153 possession," or permits the mortgagee to collect rent prior to entry/ the agreement on the part of the mortgagee to accept a less sum than the mortgage debt is valid. The assumption of a liabil- ity for an uncertain amount, as where a mortgagor agrees to sup- port the mortgagee during his life, is a sufficient consideration to uphold the cancellation of the mortgage and surrender of the note.* Sec. 74. By acceptance of new or substituted agreement.— A mere naked promise to render satisfaction of a debt or other obliga- tion at a future time either in full according to the terms of the original obligation, or by the performance of something different, is, as before stated, merely substituting one cause of action for an- other, and is without consideration, and no bar to an action brought upon the original demand.^ If performance at a future date is to constitute satisfaction, the accord is merely executory.^ But the rule that a promise to do another thing is not a satisfaction of the original debt or demand, is subject to the exception that if the par- ties agree that the new promise shall itself constitute satisfaction of the prior debt or demand, and the new agreement is based upon a new consideration," and it is accepted in satisfaction, then the ac- ceptance of the new agreement in place of the old constitutes an ac- cord and satisfaction and bars an action on the original demand.* 2 King V. Brewer, 121 Mich. 339, 6 Det. Leg. N. 488, 80 N. W. 238. s Gilson V. Nesson, 84 N. E. (Mass.) 854. * McGiverin v. Keefe, 130 Iowa, 97, 106 N. W. 369. 1 Ellis V. Betzer, 2 Ohio, 89, 15 Am. Dec. 534. 2 Russell V. Lytle, 6 Wend. 390, 22 Am. Dec. 537 ; Kromer v. Helm, 75 N. Y. 574 ; Simmons v. Clark, 56 111. 96. 3 Spann v. Baltzell, 1 Flo. 301, 46 Am. Dec. 346; Palmer v. Yager, 20 Wis. 91. 4 Kromer v. Helm, 75 N. Y. 577, 31 Am. Rep. 491 ; Morehouse v. Bank, 98 N. Y. 504, 3 Nat. Bk. Cas. 631 ; McCreery v. Day, 119 N. Y. 9 ; Billings v. Vanderbeck, 23 Barb. 546; Kellogg v. Richards, 14 Wend. 116; Jaffray v. Davis, 124 N. Y. 164, 43 Alb. L. J. 205, 11 L. R. A. 710 ; Palmer v. Yager, 20 154 ACCORD AND SATISFACTION [§74 It is always competent for the parties by a new contract "to waive, dissolve, or annul the former agreement or in any manner to add to, subtract from or vary or qualify the terms of it," and they will be bound by it ; provided, however, a new consideration is present, and it complies in other particulars to the law." The same consid- eration necessary to uphold an accord and satisfaction where per- formance is to constitute satisfaction, is a necessary element of the new contract. In other words there must exist the same possibility of benefit to the creditor, when the contract is to be performed in the future, as he would receive if present performance constitute the satisfaction. The transaction comprehends the orig- inal debt or demand, the accord or agreement to substitute and its execution, and the substituted agreement. When the new agree- ment is accepted there is a present adjustment and satisfaction of the original obligation.* Thereafter the creditor's remedy is upon Wis. 90 ; Good v. Cheesman, 2 B. & Ad. 328 ; Case v Barb, 4 T. Rayin. 450 ; Cartwright v. Cook, 3 B. & Ad. 701 ; Kinsler v. Pope, 5 Strobh. (S. C.) 126; Carter v. Cbicago, etc., R. Co., 119 S. W. (Mo. App.) 35; Fritz v. Fritz, 118 N. W. (Iowa) 769 ; Simmons v. Clark, 56 111. 96 ; Draper v. Hitt, 43 Vt. 439, 5 Am. Rep. 292; Buchanan v. Paddleford, 43 Vt. 64; Babeock v. Hawkins, 23 Vt. 561 ; Goodrich v. Stanley, 24 Conn. 613 ; Whitsett v. Clayton, 5 Colo. 476 ; Christie v. Craige, 20 Pa. St. 430 ; Hart v. Boilers, 15 S. & R. 162, 16 Am. Dec. 536 (this was a case where a new note for an equal sum was given for an old note); 2 Pars. Cont. 682-683; Foster v. Collins, 6 Helsk. (Tenn.) 1 (a note was given in this case and the court held that an allegation that the money agreed to be paid had been paid was unnecessary) ; Brunswick v. Clem, 80 Ga. 534, 7 S. B. 84; Smith v. Elrod, 24 So. (Ala.) 994; Pope v. Turnstall, 2 Ark. 209; Treadwell v. Himmelman, 50 Col. 9; Merry v. Allen, 39 Iowa, 235 ; Hall v. Smith, 10 Iowa, 45 ; White v. Gray, 68 Me. 579 ; Doyle V. Donnelly, 56 Me. 26; Field v. Aldrich, 162 Mass. 587, 39 N. E. 288; Ap- thorp V. Shepard, Qiiincy (Mass.) 298, 1 Am. Dec. b (which was a case of settlement by giving a note); Stults v. Newhall, 118 Mass. 98; Woodward V. Miles, 24 N. H. 289 ; Banlett v. Moore, 21 N. H. 336 ; Curtiss v. Brown, 63 Mo. App. 431; Gulf R. Co. v. Harriett, 80 Tex. 73, 155 S. W. 556; Bradshaw V. Davis, 12 Tex. 336; Jennings v. Ft. Worth, 7 Tex. Civ. App. 329, 26 S. W. 927; Clark v. Ring, 13 U. C. Q. B. 185 ; Thomas v. MaUory, 6 U. a Q. B. 521. Spann v. Baltzell, 1 Flo. 301, 46 Am. Dec. 346. 6 Ellis V. Betzer, 2 Ohio, 89, 15 Am. Dec. 534. § 74] CONSIDERATION 155 the new agreement/ and a failure to keep or perform the new agreement does not remit the credit to his original cause of ac- tion.* Such a transaction amounts to a novation, both at common law and by the civil law. Pothier says "to render a valid novation it is necessary that the act should contain something different from the former obligation." * The new agreement may be to pay money where property was before due,^" and vice versa; or, to perform services, or to render satisfaction in any thing, or in any manner consistent with the legal requirements as to a possibility of a ben- efit to the creditor. Thus, the unconditional agreement of an in- dorser to pay a note at maturity out of his own funds, changes his contingent liability to an absolute liability, and furnishes the con- sideration to uphold an agreement on the part of the holder of the note to accept a less sum, or bills of a particular bank in satisfac- tion.^^ So, the giving of the individual note of one partner for a less sum than the partnership debt,^^ or merging an unsecured debt into a secured debt for a smaller amount,^" furnishes a considera- tion sufficient to uphold the creditor's agreement to accept the con- tract to pay the less sum in satisfaction of the original demand. The same rules apply to the acceptance of agreements substituted T Palmer v. Tager, 20 Wis. 90 ; Babcock v. Hawkins, 23 Vt. 561 ; Gulf R. Co. V. Harriett, 80 Tex. 73, 15 S. W. 556; Sard v. Rhodes, 1 M. & W. 153; Apthorp V. Shepard, Quincy (Mass.) 1 Am. Dec. 6; Billings v. Vanderbeck, 23 Barb. 546; Merry v. Allen, 39 Iowa, 235 ; White v. Gray, 58 Me. 579. 8 Morehouse v. Bank, 98 N. Y. 504, 3 Nat. Bk. Gas. 631 ; Palmer v. Yager, 20 Wis. 91 ; Woodward v. Miles, 24 N. H. 289 ; Ranlett v. Moore, 21 N. H. 336; Cartwright v. Crooke, 3 B. & Ad. 701; Goodrich v. Stanley, 24 Conn. 613; Whitney v. Cook, 53 Miss. 551 ; Gulf R. Co. v. Harriett, 80 Tex. 73, 15 S. W. 556. See Frost v. Johnson, 8 Ohio, 393. 9 Pothier's Ob. 560. 10 Palmer v. Yager, 20 Wis. 91. 11 Spann v. Baltzell, 1 Flo. 301, 46 Am. Dec. 346. 12 Watts V. Robinson, 32 U. C. Q. B. 332. See ante, Sec. 39. IS In re Black Diamond Copper Min. Co., 95 Pac. (Ariz.) 117. 156 ACCORD AND SATISFACTION [§ 75 in place of demands arising out of torts and other unliquidated demands.^* The agreement to accept the new or substituted con- tract as satisfaction of the old demand may be shown either by an express agreement,'^ or in some jurisdictions, if not in all, by im- plication,^" to be deduced from the circumstances of the case.^^ In any case the intent to receive the new contract as satisfaction must be clearly and satisfactorily established,^* as it is not the ac- ceptance alone (for it may be taken merely as collateral) but the intent to receive the new or substituted agreement as satisfaction, that operates as satisfaction of the original demand.^' Whether the new or substituted agreement was accepted as satisfaction is a question for the jury,^° unless there is an express agreement, clear and unambiguous, admitting of but one construction. Sec. 75. The consideration necessary to support a compromise of unliquidated and disputed demands and of a composition. — ^An accord and satisfaction arising out of a compromise and settlement of an unliquidated and disputed demand, and the consideration necessary to its validity, as well as the consideration necessary to support a composition with creditors, will be treated of in subse- quent portions of this work, under the titles "Compromise" and "Composition with Creditors." 14 Ellis V. Betzer, 2 Ohio, 89, 15 Am. Dec. 534; Holcomb v. Stimpson, 8 Vt. 141. 16 Brunswick v. Clem, 80 Ga. 534, 7 S. E. 84 ; Palmer v. Yager, 20 Wis. 91. 16 Moreliouse v. Bank, 98 N. Y. 504, 3 Nat. Bk. Cas. 631. 17 Hall V. Smith, 15 Iowa, 584; Hart v. Boilers, 16 S. & R. 162, 16 Am. Dec. 536. 18 Eastman v. Porter, 14 Wis. 39 ; Curtis v. Brown, 63 Mo. App. 431 ; Gulf E. Co. V. Gordon, 70 Tex. 80, 7 S. W. 695; Overton v. Conner, 50 Tex. 113. 10 Hart V. Boilers, 15 Serg. & R. 162, 16 Am. Dec. 536 ; White v. Gray, 68 Me. 579 ; Simmons v. Clark, 56 111. 96 ; Goodrich v. Stanley, 24 Conn. 613 ; Prick V. Joseph, 2 N. Mex. 138; Curtice v. Brown, 63 Mo. App. 431; Briscoe V. Callahan, 77 Mo. 134; Yazoo R. Co. v. Fulton, 71 Miss. 385, 14 So. 271; Whitney v. Cook, 53 Miss. 551 ; St. Louis R. Co. v. Davis, 35 Kan. 464, 11 Pac. 421 ; Brunswick R. Co. v. Clem, 80 Ga. 534, 7 S. E. 84. 20 Hart V. Boilers, 16 S. & R. 162, 16 Am. Dec. 536. BOOK TWO COMPROMISE See. 76. Definition. Sec. 77. A compromise a new agreement — Must be executed — Accepting an executory contract — Mutuality of remedies. Sec. 78. Distinguished from payment — Settlement — Account stated — Accord and satisfaction. Sec. 79. Requisites — In general — Parties — Subject matter must be uncer- tain. Sec. 80. Mutuality — Offer and acceptance — Effect of unaccepted offer — Pay- ment under protest — Acceptance of amount allowed by county, town, municipality — Withdrawal of offer. Sec. 81. Mutuality continued — Acceptance of tender — Excluding items from an account — Acceptance of amount allowed by county, town, mu- nicipality — Part disallowed by board — Payment of costs to se- cure a discontinuance — Withdrawal of offer — Agreement upon a settlement how construed. Consideration — In general. Same subject — Unliquidated demand. Same subject — What are unliquidated demands. Same subject — Disputed claims — Dispute must be iona fide. Same subject — Doubtful claims — Must not be legally groundless. Same subject-^Claim of set-off — Counter-claim. Compromise of action — Consideration — Payment of costs — Compro- mise after an arrest — After attachment. Compromise of actions, how taken advantage of, and how enforced. Family settlements. Form of agreement — Certainty — Oral and written compromises. Effect of a compromise — Bars an action on original demand — Ex- tinguishes defense — Set-off and counter-claim — Bars claim for damages. Same subject — Other claims not discharged— Compromise after judgment embraces what — Installments — Splitting demand — Parties and privies concluded. Performance — Kepudlation — Breach — Rights of the parties. Time of performance — Condition as to time waived when — Effect of acceptance after default. (157) Sec. 82. Sec. 83. Sec. 84. Sec. 85. See. 86. Sec. 87. Sec. 88. Sec. 89. Sec. 90. Sec. 91. Sec. 92. Sec. 93. Sec. 94. Sec. 95. 158 COMPROMISB Sec. 96. Default after part payment — Payment pro tcmto — Stipulation for recovery of residue — When a stipulation for the payment of an additional sum on default is a stipulation for a penalty. Sec. 97. Specific performance. Sec. 98. Necessity for a tender before suit for specific performance — Con- trary rule — A tender is necessary to bar right to specific per- formance. Sec. 99. OfCer of compromise inadmissible in evidence. Sec. 100. Same subject. Sec. 101. Same subject. Sec. 102. Admission of Independent facts as evidence. Sec. 103. Admission by vrhom made — Partner — Joint obligor — ^Jolnt and sev- eral obligor — Joint tort feasor. Sec. 104. Admissions by infants — Guardians and personal representatives. Sec. 105. Admissions by agents or attorneys — By attorney after action brought. Sec. 106. Pleading — ^Accord and satisfaction, and a compromise must be pleaded— Kind of plea— Effect. Sec. 107. Allegations necessary. Sec. 108. Same subject. Sec. 109. When pleaded — Practice. Sec. 110. Joining issue — Demurrer — Motions — Amendments. Sec. 111. Reply to avoid the agreement — Pleading a tender. See. 112. Pleading a release. Sec. 113. Same subject — Reply. Sec. 114. Evidence — Burden of proof — Weight. Sec. 115. Same subject — Admissibility. Sec. 116. Same subject — Implied agreement — When question Is for the court or jury. Sec. 117. Rescission — Election of remedies on discovery of ground for re- scission — Mode— Measure of damages. Sec. 118. Ratification — Laches — Time when rescission should be made. Sec. 119. Tender required upon a rescission — Exceptions. Sec. 120. Same subject — Before suit to rescind. Sec. 121. Same subject — Where a party is entitled to retain what he re- ceived — When judgment will give a defendant all he is entitled to — Tender of release — Promissory note. Sec. 122. Manner of making a tender — Actual offer — Ability — Actual pro- duction — Waiver of formalities — Notice of Intention to rescind — Unconditional tender. Sec. 123. Tender by whom made — To whom — Amount. Sec. 124. Place of making a tender. Sec. 125. Rescission by agreement — Agreement implied — ^Abandonment by one party. C0MPR0MI8B 159 See. 126. Hesclssion upon the ground of mistake of law. Sec. 127. Same subject Sec. 128. Same subject. Sec. 129. Same subject — Mistake as to existing legal rights. Sec. 130. Besci^sion on the ground of mistake of fact— Mistake of fact de- fined. Sec. 131. Same subject — Requisite to relief— Materiality of fact— Negli- gence. Sec. 132. Same subject — Mutual mistake. Sec. 133. Kescission upon the ground of fraud — Definition of fraud. Sec. 134. Same subject — Fraud in general— Actual fraud. Sec. 135. Same subject — Misrepresentation of the law — Of matter of opin- ion — Future events. Sec. 136. Same subject — Misrepresentation by debtor as to his finances- Setting up sham claim. See. 137. Same subject — Compromises effected by physicians. Sec. 138. Same subject — Concealment and suppression of facts. Sec. 139. No rescission for fraud after the fraud is compromised. Sec. 140. Rescission for fraud, etc. — Evidence In general — Burden of proof. See. 141. Rescission on the ground of surprise. Sec. 142. Rescission upon the ground of duress — Duress in general. Sea 143. Same subject— Effect of performance of contract on right to re- scind — Right affected by time — Manner of rescission — Pleading — By whom rescinded — Duress to stranger — Defense by surety — Duress of master, of servant. Sea 144. Same subject — Duress by whom exercised — Stranger — Rule by the civil law — At common law — Burden of showing want of knowledge of duress or fraud shifts when. Sec. 145. Same subject — Duress of imprisonment— Lawful and unlawful arrest — In settlement of just claim. Sec. 146. Same subject — Duress of goods — Personal and real property — Refusal to pay a debt. Sec. 147. Same subject — Duress per mmos— Threats of lawful and unlaw- ful arrest — Of battery — Of injury to father or son — Duress a question of fact when. Sec. 148. Same subject — Threats to enforce demand by legal means — Good faith of claimant— Unfounded claim. Sec. 149. Same subject — ^Undue influence. Sec. 150. Same subject — On the ground of infancy. Sec. 151. Same subject — On the ground of insanity — Mental and physical wealuiess. Sec. 152. Same subject — Persons m vincuUs. Sec. 153. Same subject — For illegality— Compounding a felony — Parties in pari delicto — Belief In equity, at law — Unequal guilt. 160 COMPROMISE [§ 76 Sec. 154. Same subject — Gaming contract — Immoral consideration — C!om- promise when liability is both civil and criminal— Contracts violating the statute — By municipalities — ^In violation of rev- enue laws — Sunday contracts — Usury. Sec. 155. Rescission for want of consideration — Failure — Inadequacy. Sec. 156. Avoidance of compromise by a creditor. Sec. 76. Definition. — A compromise is an agreement whereby two or more parties, upon a sufificient consideration/ settle a bona fide controversy concerning a subject of pecuniary value, with regard to which their rights, or the claims respectively set up by them, or by one of them and denied by the other, may be said to have rested in some degree of doubt or uncertainty.^ It is variously defined in the books to be "a settlement of differences by mutual concessions." ' 1 Mr. Parsons, in his valuable work on contract, does not Include the con- sideration in his definition of contract, as he does not consider it as, of itself, an essential part thereof. He bases his idea, in part at least, upon the innovation made by the Statute of Frauds which requires, in certain cases, that the agreement shall be in writing, and some note or memorandum thereof be signed by the party sought to be charged, and, that it is contro- verted, whether the word "agreement" so far implies a "consideration" that it also must be in writing. He does, however, treat of the "consideration" as one of the essential elements of a legal contract. Inasmuch as only legal contracts are enforceable we see no reason for making a definition so general, that it will cover all sorts of mutual agreements and leave the reader, by the mental process of supplying all the legal essentials necessary to an en- forceable contract, to weed out mere mutual engagements not involving any pecuniary benefit or detriment. His definition, "A contract, in legal contem- plation, is an agreement between two or more parties, for the doing or the not doing of some particular thing" (based upon the definition of Marshall, Smith Y. Bach, 81 N. Y. Supp. 1057. 8 See Sees. 13, 74. 1 Home Ins. Co. v. Bredehoft, 49 Neb. 152, 68 N. W. 400 ; Chemical Nat, Bank V. Kohner, 85 N. Y. 189 ; Chesire v. Des Moines, 133 N. W. (la.) 324 ; Babcock v. Farwell, 146 111. App. 307. 2 Henry v. Cass Co. MiU., 42 Iowa, 33. ? Bouv. L. Die. In Heaps v. Dunham, 95 111. 583, it was held that a settle- ment by a party charged with bastardy is conclusive upon the party charged in respect to the question whether the woman was pregnant or not. * Parr v. Greenbush, 112 N. X. 246, 19 N. E. 684, 20 N. Y. St. 725. Draper v. Owsley, 15 Mo. 613, 57 Am. Dec. 218 ; Wahl v. Barnum, 116 N. Y. 87, 22 N. E. 280, 26 N. Y. St. 459, 5 L. R. A. 623 ; Feeter v. Weber, 78 N. Y. 334; Speck t. Jarvis, 59 Wis. 585, 18 N. W. 478; Dyrenforth v. Pal- mer, 240 111. 25, 88 N. B. 290. § 92] EFFECT OF COMPROMISE 195 settling up any matter constituting a set-off, or counter-claim founded on or growing out of the claim settled, existing at the time of the compromise.8 A compromise and settlement of all controversies growing out of a dispute over a deed absolute on its face, precludes the grantor from afterwards claiming that the deed was a mortgage/ In determining the scope of a compromise relative to the matters included therein the language should be so construed as to give effect to the presumed intent of the parties. In general a compromise con- cludes the parties as to every claim and demand of which at the time they have knowledge and which is founded on or grows out of the matters settled. Where, in a general settlement, whereby a certain sum was found to be due "after allowing and deducting all credits, set-offs, or claims due * * * by reason of any and all matters growing out of the business or otherwise," it was shown that the question of a breach of contract was brought up, it was held that the compromise was a bar to any action for damages growing out of the breach of contract mentioned.* A claim for damages and other claims growing out of or founded on a demand compromised, is, in a legal sense, within the contemplation of the parties and is extinguished al- though not mentioned in the agreement.* A compromise will not include existing matters which the parties did not intend to settle.^" « Pabst V. Lueders, 107 Mich. 41, 64 N. W. 872 ; Altman v. Walker, 124 S. W. (Ky.) 329 ; Hill v. Parson, 110 III. 107 ; Rivers v. Blom, 163 Mo. 442, 63 S. W. 812. Where a counter-claim set up is not a proper counter-claim in the action, a settlement of the cause of action, without any reference to the counter-claim, will not discharge the counter-claim: Clancey v. Losey, 20 N. X. Supp. 383, 48 N. T. St. 191. 7 Baldwin v. Davis, 63 Iowa, 231, 18 N. W. 897. Where a party upon a settlement, ratifies a transfer of lands as partnership lands, he is estopped from afterwards claiming that the lands are still partnership lands and in- cluded In a general decree disposing of the remaining partnership property: Northern Chief I. Co. v. Hosmer, 80 Wis. 77, 49 N. W. 115. 8 Deering v. Sechler, 76 N. W. (S. D.) 311. See Sees. 29-35. » See Douglas v. McClellan, 126 S. W. (Mo. App.) 994, where it is held that it bars an action for conversion. 10 Nichols V. Scott, 12 Vt 47; Ballard v. Beverldge, 171 N. Y. 194, 63 N. B. 960. 196 COMPROMISE [§ 93 Sec. 93. — Same subject — Other claims not discharged — Compro- mise after judgment embraces what — Installments — Splitting de- mands — Parties and privies concluded. — ^A compromise of a demand which the creditor asserts is the only one he has will not discharge another independent claim.^ A settlement and compromise after judg- ment applies to every thing embraced in the judgment and in the lit- igation and suit; and a compromise of an action pending, embraces all matters of dispute between the parties that are involved in the action.^ Those matters not disclosed by the pleadings are not em- braced in a settlement made "in full of an account and demand sued upon in this action." * If a party is arrested for a demand claimed to be due, or is arrested in supplemental proceedings, or his property is attached and he chooses to compromise the demand, he thereby waivfs all claim for damages for false imprisonment or for wrongful attachment, unless the payment was made under circumstances amount- ing to duress. A settlement of a claim for money embezzled will not aiTect the criminal liability.* Where several installments upon the same contract are due, they constitute an entire and indivisible cause of action, and a compromise and settlement of an action brought to recover a part of the installments due, will be given the same scope and effect as a judgment in the action, and the entire cause of action will be discharged." The parties to a controversy may settle a part of their demand and leave the question of the liability for the balance to be determined later.* And, when such an agreement is expressly made, or can be inferred from the circumstances, the compromise will 1 King V. Miller, 22 U. C. C. P. 450. 2 See dictum, Parr v. Greenbush, 112 N. Y. 246, 19 N. B. 684, 20 N. T. St. 725. A compromise of an action for wages whereby a certain amount is paid, Is not conclusive upon the employer as to the value of services subse- quently rendered: Briggs v. Smith, 4 Daly (N. Y.) 110. s Bates v. Cobb, 5 Bosw. (N. Y.) 29. * Guenther v. State, 118 N. W. (Wis.) 640. B O'Beirne v. Lloyd, 43 N. Y. 248. f> Escanaba Boom Co. v. Two Rivers Co., 118 Mich. 454, 76 N. W. 980. § 93] EFFECT OF COMPBOMISB 197 be no bar to that part of the demand not actually settled.^ More upon the question of what claim and demands are discharged by an accord and satisfaction or compromise will be found in previous sections.' The question of the effect of a compromise upon the liability of joint debtors, joint and several debtors " and joint tort feasors is considered elsewhere.^" The rule is universal that a compromise based upon a sufficient consideration, when fairly made, and free from fraud, misrepresenta- tion or mistake of fact, concludes the parties thereto, and the courts will uphold it although a judicial determination might show that the rights of the parties were different, or that one of the parties really had no rights and nothing to forego.^ ^ It is binding on all those persons who, with notice of the compromise, claim under the par- ties.^^ Persons interested in the subject matter but not joining in the 7 O'Beirne v. Lloyd, 43 N. Y. 248; Pratt v. Castle, 91 Mich. 484, 52 N. W. 52. See ante, Sec. 35. 8 Sec. 29 et seq. » Sec. 9. 10 Sec. 42. 11 Perkins v. Trinka, 30 Minn. 241, 15 N. W. Rep. 115; Hall v. Wheeler, 37 Minn. 522, 35 N. W. 377 ; Shaw v. Railway Co., 82 Iowa, 199, 47 N. W. 1004 ; Lamed v. Dubuque, 86 Iowa, 166, 53 N. W. 105 ; Pratt v. Castle, 91 Mich. 484, 52 N. W. 52 ; Chittock v. Chittock, 101 Mich. 367, 59 N. W. 655 ; Lauzon V. Belleheumer, 108 Mich. 444, 66 N. W. 345; Prichard v. Sharp, 51 Mich. 432, 16' N. W. 798 ; Canfield v. Robertson, 8 N. D. 603, 80 N. W. 764 ; Vosburg y. Teator, 32 N. Y. 561. The authorities upon this pomt are uniform and very numerous. 12 Northern Chief I. C. v. Hosmer, 80 Wis. 77, 49 N. W. 115. An assignee takes no better title than the assignor had and if before the assignment the debtor agrees to give a creditor certain specified property in settlement of a disputed demand and the creditor accepts it, the assignee cannot hold it as against the creditor: In re Mills, 123 N. Y. Supp. 671. See Baldwin v. Jef- fries, 2 Del. Co. (Pa.) 221. Where a contract to sell land provides that it is to be' void if the adverse party succeeds in the pending litigation, but the ac- tion was compromised, it was held that the compromise was as binding as a final judgment and the party was bound by the contract: State v. Superior Court, 110 Pac. (Wash.) 808. 198 COMPROMISE [§ 94 compromise are not bound/' unless they adopt the agreement by ac- cepting its benefits.^* A compromise made by an ancestor is binding upon his personal representatives and heirs. ^° Sec. 94. Performance— Repudiation — Breach — Rights of the parties. — A party relying upon an agreement to compromise a debt or other demand, in an action on the original demand, must allege and prove actual performance upon his part of every condition pre- cedent by him to be performed.^ When one party has performed his part of an accord or an agreement to compromise, it is then too late for the other party to withdraw. Partial performance, if it amounts to substantial performance by giving the party in substance every thing stipulated for, is ordinarily sufficient and the party receiving the part performance cannot abandon the contract." Dismissing a i3Whlsnand v. Small, 65 Ind. 120; Seabrook v. Brady, 47 Ga. 650. See Sec. 35, ante, as to the conclusiveness of a settlement upon the lien of an attorney. 1* Wilkins v. Hukill, 115 Mich. 594, 73 N. W. 898. IB Bowen v. Lockwood, 26 Mich. 441. A compromise made by an injured person of the damages sustained by the injury is binding upon his personal representatives and heirs although death afterward results from the injury: Perry v. Philadelphia, etc., R. Co., 77 Atl. (Del. Super.) 775 ; Jones v. Tallant, 90 Cal. 386, 27 Pac. 305. 1 Ogilvie V. Hallam, 58 Iowa, 714, 12 N. W. 730 ; Bradley v. Palen, 78 Iowa, 126, 42 N. W. 623; Hart v. Accident Ass'n, 105 Iowa, 71T, 75 N. W. 508; Kinney v. American Yeomen, 106 N. W. (N. D.) 44; Makepeace v. Harvard, 10 Pick. 298; Dalrymple v. Craig, 70 Mo. App. 149; Gardner v. Short, 19 N. J. Eq. 341 ; Hunt v. Wheeler, 116 N. 0. 422, 21 S. E. 915 ; Quarles v. Jen- kins, 98 N. C. 258, 3 S. E. 395; Woolfolk v. McDowell, 9 Dana (Ky.) 268; Louisville Bank v. Wheat, 4 Ky. L. Kep. 443: In this case the agreement provided for payment by a third party; the action upon default, was held to be upon the original cause. Armstead v. Shreveport, 108 La. 171, 32 So. 456; Maurer's Est, 1 Woodw. (Pa.) 268; Thompson v. McMillan, 89 Tenn. 110, 14 S. W. 439 ; Brown v. Spofford, 95 U. S. 474, 24 L. Ed. 508. A cred- itor cannot enforce a composition agreement until the debtor is in default: Sizer v. Miller, 2 How. Pr. 44. Where a note of a third party is to be taken as satisfaction and it requires an indorsement, a tender without the indorse- ment is bad: Bicholtz v. Taylor, 88 Ind. 38. 2 Love V. VanEvery, 91 Mo. 575, 4 S. W. 272. § 94] PEKFOKMANOB 199 suit according to agreement, though the stipulation to dismiss be not filed, is a sufficient performance of an agreement whereby the suit was to be dismissed and the other party was to sign a compromise agreement.* If a party relies upon a compromise agreement, it is suf- ficient to defeat an action on the original cause of action to allege and prove merely the agreement and its delivery and acceptance in satisfac- tion. Upon an abandonment or repudiation of an agreement given and accepted in satisfaction upon a compromise, by one party, the other party has his election, either to rescind the agreement or treat it as a nullity and be remitted to his original cause of action,* or disregard the repudiation and bring an action to enforce it.° In such cases all the willing party need show in order to recover, is that he was at all times ready, able and willing to perform.* Where there is a breach arising merely from a failure of perform- ance of the new agreement, the action should be upon the new agree- ment.'' In an action on a compromise agreement, the plaintiff must » Hamill r. Copeland, 26 Colo. 78, 56 Pac. 901. * Benson v. Larson, 95 Minn. 438, 104 N. W. 307 ; Henderson v. McRea, 148 Mich. 324, 111 N. W. 1057. Conkllng v. King, 10 Barb. 372 ; Clew v. Rielly, 6 N. Y. Supp. 640 ; McClung v. Lyster, 3 Greene (la.) 182 ; Citizen's Bank V. Jorda, 45 La. Ann. 184, 11 So. 876 ; Tomson v. Heidenheimer, 16 Tex. Civ. App. 114, 40 S. W. 425 ; Barkley v. Clark, 43 Kan. 43, 22 Pac. 1025 ; Western Bank v. Kyle, 6 Gill, 343: In this case there was an express stipulation that upon default the agreement should be void. 5 Massillion Eng. Co. v. Prouty, 91 N. W. (Neb.) 384 ; Jones v. PuUen, 66 Ala. 306; Conkling v. King, 10 Barb. 372; In Schweider v. Lang, 29 Minn. 254, 13 N. W. 33, 43 Am. Rep. 202, it was held that an action lies for damages resulting from the breach. Where a judgment has been discharged by an accord and satisfaction, the creditor Is liable in damages for violating his agreement by enforcing the judgment: Colburn v. Gould, 1 N. H. 279. 6 Massillion Eng. Co. v. Prouty, 91 N. W. (Neb.) 384 ; Strobridge v. Randall, 78 Mich. 195, 44 N. W. 134; May v. LeClaire, 11 Wall. 217, 20 L. Ed. 50; Bantle v. Krebs, 13 N. Y. St. 353. 7 Shaw V. Railway Co., 82 Iowa, 199, 47 N. W. 1004 ; Hanley v. Noyes, 35 Minn. 174, 28 N. W. 189 ; Strobridge v. Randall, 78 Mich. 195, 44 N. W. 134 ; Chemical Nat. Bank v. Kohmer, 85 N. Y. 189. In Makepeace v. Harvard College, 10 Pick. 298, the transaction appears to be a simple accord. It was 200 COMPEOMISB [§ 95 show, as in other contracts, that he has performed any condition pre- cedent by him to be performed, or a tender of performance, or facts excusing a strict tender. If the covenants are mutual and dependent he must put the other party in default by performance or tender of performance. Sec. 95. Time of performance — Condition as to time waived when — Effect of acceptance after default. — ^The rule with respect to the time for performance of a new agreement accepted in satisfaction upon a compromise, is the same as applicable to contracts in general. If not performed at the time fixed, or within a reasonable time, if no time be limited,^ the party not in default may have his remedy there- on. If the parties merely enter into an accord, or agreement to com- promise and satisfy a debt upon a certain payment being made, or within a specified time, the condition must be strictly performed.^ If performed within the time limited, and a consideration is present, it becomes an executed accord and is binding, although the agreement before performance is unenforceable. Part payment of the less sum within the time specified in money,' or in property at a valuation,* or a delivery of a portion of certain unvalued property agreed to be received, will not validate the agreement. Until full payment is made held that the debtor having failed to fulfill the terms of the agreement was liable for the balance after deducting the amount at which certain property conveyed, was agreed to be taken. Where there is a stipulation that a fail- ure of performance shall render the compromise inoperative, the creditor may waive a breach and enforce the agreement: Jones v. PuUen, 66 Ala. 306. 1 Jones V. Peet, 1 Swan (Tenn.) 293 ; Boswell v. Gillen, 62 S. E. (Ga.) 18T. Where a party accepts an agreement to pay a less sum than his claim, sat- isfaction to be conditional upon its performance within a certain time, time Is of the essence of the contract: Hutchinson v. Wallace, 7 Kan. App. 612. 2 See Robertson v. Campbell, 2 Call (Va.) 421, where it Is held that if a creditor agrees to remit a part of the debt upon condition that the residue be paid within a certain time, the condition must be strictly performed ; but he may enlarge the time, and such consent will bind him in equity. 8 See Kinny v. American Yeomen, 106 N. W. (N. D.) 44. * Makepeace v. Harvard College, 10 Pick. 298. 95] TIME FOK PEBFOBMANOB 201 and accepted in satisfaction, the accord is not binding and it is re- vokable at the pleasure of either party." A creditor may, of course, voluntarily waive the condition as to time ; ' and, an implied waiver may be invoked against him, where, after the time for performance he demands and received performance of a contract to which he has no right except under the agreement that its performance shall satisfy the original demand. Thus, where the note of a third party was received from a debtor upon an agree- ment that if paid at maturity, it should be in full satisfaction of a larger debt and not otherwise, it was held that non-payment at ma- turity left the original debt unaffected by the agreement to compromise it ; but that the creditor may waive his right to a strict compliance as to time and if he retains the note after maturity and demands and receives payment he cannot declare a forfeiture.'' The same rule ap- plies where a creditor, after default, accepts unvalued property agreed to be accepted as satisfaction of a debt when delivered. But if, in an agreement to compromise a debt, a right is reserved, upon default, to recover any deficiency upon the original cause of action, receiving part payment upon notes received upon the compromise agreement after a default, is no waiver of the right to sue on the original cause of action.' There is no question of rescission, but merely a right con- ferred by contract to enforce payment of the residue. B Kinney v. American Yeomen, 106 N. W. (N. D.) 44. « A court win not dispense with the point as to time but the party may waive it: Western Bank v. Kyle, 6 Gill 346. 7 Conkling v. King, 10 N. Y. 440, 10 Barh. 372. 8 Humphreys v. Bank, 75 Fed. 852, 43 U. S. App. 698, 21 C. C. A. 538; Hagerty v. Simpson, 1 B. D. Smith, 67; Simmons v. Clark, 56 111. 96. The above cases involved merely the question of an accord and satisfaction ; the original cause of action was not to be satisfied until payment of the notes given thereon was made. 202 COMPROMISE [§ 96 Sec, 96. Default after pjirt payment — Payment pro tanto — Stip- ulation for recovery of residue — When a stipulation for pajmient of an additional sum on default is a stipulation for a penalty. — iln absence of a stipulation for refunding money paid upon an accord or agreement to compromise a debt, in case of a breach of the agree- ment by the party making such payment, the money paid cannot be recovered back, but will be held to be a payment pro tanto upon the original demand.^ If the correct amount agreed upon be not paid the creditor may, if he choose, return the amount received and sue for the entire amount of the original claim.^ Where it is agreed that certain unvalued property, if delivered at a specified time, shall sat- isfy a debt, and a part is delivered, upon default as to the residue the creditor may return that portion of the property received and recover the amount of the original debt, or retain the property and recover the debt less the reasonable value of the property received. The property received should be returned if either portion of it is useless or "valueless without the other. If the agreement to compro- mise provides that the situation of the parties is to remain unchanged, if all the less sum be not paid, the creditor's remedy, in case of a fail- ure to pay according to the terms of the agreement, is upon the orig- inal cause of action.* The reason being that such an agreement is but an unexecuted accord. It has been held that the creditor does not waive his right to enforce the original cause of action by failing to make a tender of certain compromise notes received, or the security given therefor.* In such cases there is really no ques- tion of rescission, but merely that of exercising a right given by the agreement. Where a valid compromise is effected by the 1 Abercrombie v. Skinner, 42 Ala. 633 ; McClung v. Lyster, 3 Greene (la.) 182. In Makepeace v. Harvara College, 10 Pick. 292, the transaction was merely an accord. After a default the sum paid was credited upon the orig- inal cause of action. 2 Kinney v. American Yoemen, 106 N. W. (N. D.) 44. 8 Louisville v. Wheat, 4 Ky. L. Rep. 443. * Humphrey v. Bank, 75 Fed. 852, 43 U. S. App. 698, 21 C. 0. A. 538. §96] DEFAULT AFTER PART PAYMENT 203 substitution of a new agreement to pay a less sum, with a proviso, that in case of a default the creditor may enforce the old cause of action, he is not limited to the proviso but may maintain an action to recover the stipulated sum." Where a new agreement accepted upon a compromise provides for the payment of the balance claimed to be due upon the old demand, or for a certain sum beyond that named in the new agree- ment, in case the debtor becomes in default, and such agreement is in the nature of a stipulation for a penalty, the creditor cannot upon default, recover the amount stipulated for. Thus, where an agreement was to pay $1,000 in installments, in satisfaction of a $2,200 claim sued upon, and it was stipulated that in case of •default, the plaintiff might enter judgment for the whole sum sued for, and the defendant having defaulted in the payment of $250, the amount of the last installment, the entry of judgment was enjoined on the ground that it not appearing that the $2,200 was indisputably due, it could not be presumed that the stipula- tion for judgment for $2,200, less the amount paid, was not a stipulation for a penalty." In such cases if the creditor desires to recover any sum beyond that to be paid in the first instance, upon the compromise agreement, his remedy is upon the original cause of action to recover whatever sum he can prove to be due. Where a certain sum of money is indisputably owing and due and the creditor agrees with the debtor to take, in full satisfaction there- of, a less sum, to be secured and to be paid at a specified day, but that, if not so paid, then the creditor shall recover the whole of the original debt, such provision for the return of the creditor to B See Smith v. Shirley, 44 L. J. Ex. 29, 32 L. T., N. S. 234, where a stipu- lation entered into upon a compromise of proceeding in probate, provided that in default of payment of the sums specified within the time named, the defendant should be entitled to call the case and take a verdict by consent upon all the issues, it was held that the defendant could maintain an action to recover the stipulated sums, and that he was not limited to the proviso for taking a verdict in the probate suit 8 Walsh V. Curtis, 73 Minn. 254. 204 COMPROMISE [§ 97 his original rights, is not a stipulation for a penalty, and is en- forceable.' The general rule is that if the amount claimed to be due is unliquidated, a stipulation for the payment of any sum beyond the sum named in the compromise agreement, in case of a default, it is in the nature of a stipulation for the payment of a penalty; but if the agreement provides for the payment of the full amount due upon a liquidated demand, in case of default in the payment of a less sum, or merely reserves the right of the creditor to have full payment in case there should be a failure to pay a smaller sum, it is not a stipulation for a penalty. In the latter case the rule is the same whether the claim be liquidated or unliquidated. In such cases the creditor is merely remitted to his original cause of action. Sec. 97. Specific performance. — A compromise agreement made upon a settlement and compromise of an unliquidated, doubtful or disputed claim, will be enforced in equity the same as other agree- ments.^ A parol agreement made upon a compromise, providing for the division of land claimed under conflicting titles, will be enforced if there has been sufficient performance to take the con- tract out of the Statute of Frauds.^ Family agreements for the division of property, as before observed, are favored in equity even 7 1 Pomeroy Eq. Jur. Sec. 438; Thompson v. Hudson, h. R. 4, H. L. 1, re- yersing L. R. 2 Eq. 612, L. R. 2 Ch. 255 ; Walsh v. Curtis, 73 Minn. 254. See Haggerty v. Simpson, 1 E. D. Smith, 67; Simmons v. Clark, 56 111. 96; Humphrey v. Bank, 75 Fed. Rep. 852, 43 U. S. App. 698, 21 C. C. A. 588. 1 Hall V. Clagett, 2 Md. Ch. 151 ; Reynolds v. Brandon, 3 Heisk. (Tenn.) 151, 593 ; Stapilton v. Stapilton, 1 Atk. 2, 26 Eng. Reprint, 1 ; Phillips v. Berger, 8 Barb. 527 ; See Barton v. Landon, 2 Atl. (Vt.) 374. Settlements of bound- ary line disputes made in writing, will be specifically enforced, if free from fraud or mistake: Fugatt v. Robinson, 18 B. Mon. 680. As to enforcement of compromises of actions, see Sees. 89, 109. 2 Choosing a person to make a division of land, taking part in the division and delivering the possession of the land claimed under conflicting titles, pur- suant to an oral agreement compromising their claims by a division, was held suflBclent performance to avoid the Statute of Frauds, although the court refused to enforce that part of the agreement providing for the release of § 97] SPECIFIC PERrOEMANCB 205 more than ordinary compromises,' and where they "have been fairly entered into, without concealment or imposition upon either side, with no suppression of what is true, or suggestion of what is false," * they will be upheld in equity, and the powers of equity courts will be fully and readily used to enforce them, even when resting on grounds which would not be satisfactory if the trans- action had been between strangers." Where a father and son compromised their differences over the title to certain lands, the father, under seal, binding himself to pay a certain sum in thirty days and the balance afterwards out of the proceeds of the sale of the land, it was held that the son was entitled to a decree of specific performance.' So, an agreement between minor chil- dren and their adult brother for the division of the estate of their deceased father, was specifically enforced against the adult, al- though it was admitted, that, until the minors arrived of age and ratified the agreement, there was no mutuality of remedies.'' A family agreement, by parol, for the partition of land, has been en- forced.* In another case where there had been part performance of a parol agreement by delivery of possession, improvements made and an acquiescence in the arrangement for a long period of time, the agreement was enforced.® An agreement between brothers and sisters for a division of an estate founded upon an assumption that all were entitled under a will, was enforced al- dower. Weed v. Terry, Walk. (Mich.) 501, afE'm'd in 2 Doug. 344, 45 Am. Dec. 257. 3 Sec. 90. 4 Gordon v. Gordon, 3 Swanst. 400. B Smith V. Smith, 36 Ga. 184, 91 Am. Dee. 761. See PuUen v. Ready, 2 Atk. 587 ; Trigg v. Read, 5 Hump. (Tenn.) 529, 42 Am. Dec. 447. 6 Jolmson V. Johnson, 40 Md. 189. 7 Smith V. Smith, 3Q Ga. 184, 91 Am. Dec. 761. 8 Neale v. Neale, 1 Keen, 672. » Stockley v. Stockley, 1 Ves. & B'. 23, 12 Rev. Rep. 184 ; See Stapllton v. Stapflton, 1 Atk. 2, 26 Eng. Reprint, 1. 206 COMPEOMISE [§ 97 though they were mistaken, the court resting its decision upon the ground that there was a neglect on the part of those com- plaining to acquaint themselves with the facts and the legal con- sequences of them.^° So, where the agreement was reasonable, it was enforced, although one of the parties, at the time of making the agreement, was drunk.^^ Equity will not lend its aid to the enforcement of an agreement that in any way induces disobedience to parental authority, or the repudiation of a parent's advice or authority. Thus, a contract made by children in the life time of a parent, providing for a division of his property, to avoid the consequence of a threatened disinheritance of one of them, was held not such a contract as the court would enforce, for to do so, in such cases, would be a guaranty of impunity for any disobedi- ence or want of filial loyalty.^" The agreement to be enforceable in equity must be final and complete, something more than a mere plan for a future adjust- ment of the details.^* If there is a dispute as to the terms of a compromise agreement, it will not be enforced unless there is a clear preponderance of testimony in favor of the agreement al- leged.^* If the agreement of compromise is such that it cannot be specifically performed, the rights of the parties under the orig- inal demand remains unchanged.^" With respect to specific performance of contracts in general, it is said to be not a matter of strict legal right, but rests in the sound discretion of a court of equity; hence it requires a much stronger case on the part of the plaintiff to maintain a suit than loPuUen V. Ready, 2 Atk. 587; See Smith v. Smith, 36 Ga. 184, 91 Am. Dec. 761. 11 Cory V. Cory, 1 Ves. Sr. 19. 12 Mercier v. Mercler, 50 Ga. 546. i» Wister's Appeal, 80 Pa. St. 484. 14 Grove v. Beech, 53 N. W. (la.) 88. IB Playford v. Playford, 4 Hare, 546, 30 Bng. Ch. 546. § 97] SPFCinO PERFOKMANOB 207 it does on the part of the defendant to resist a suit.^' "An agree- ment to be entitled to be carried into specific performance, ought to be certain, fair and just in all its parts. Courts will not de- cree a specific performance in cases of fraud or mistake, or of hard and unreasonable bargains, or where the decree would pro- duce injustice, and generally in any case when such decree would be inequitable under all the circumstances." ^' A court of equity will closely scrutinize a compromise made by an executor or other fiduciary, and will not assist in carrying it into eflfect unless the plaintiff will first unfold and disclose all the circumstances of the case, so that the court may see there has been no fraud and everything is fair.^* Equity will not enforce a compromise or otherwise support it, where the party against whom the relief is sought did not have equal knowledge or equal means of inform- ing himself. There must be a full disclosure of all the facts and circumstances affecting the subject-matter of the compromise, within the knowledge of the several parties, which the others have no reasonable means of knowing, whether the information be ask- ed for or not. "There must not only be good faith and honest in- tention, but full disclosure, and without full disclosure, honest intention is not sufficient." ^° By this, it is meant that the plain- tiff's case, upon his own showing, must be in all respects fair. The appeal being to a court of conscience, the courts do not stop here, but will permit a defendant to resist a decree by evidence which would not always be sufficient to establish his case were he the plaintiff.'"' 16 Trigg V. Read, 5 Hump. 529, 42 Am. Dec. 447. 17 Trigg V. Read, ante. A compromise made through mistake of defend- ant's attorney will not be enforced : Swinfen v. Swinfen, 27 L. J. Ch. 35. Nor, where, at the time of the compromise, a judgment creditor was Ignorant that sufficient property to satisfy the judgment had been levied upon: Cowan V. Sapp, 81 Ala. 525, 8 So. 212. 18 Clay V. Williams, 2 Munford, 105, 5 Am. Dec. 453. i» Kerr on Fraud, 124. 20 With reference to the power of a court of equity to rescind, cancel or direct a surrender o* contracts, securities or deeds, or to enforce them by a 208 COMPEOMISB [§ 98 Sec. 98. Necessity for a tender before suit for specific per- formance — Contrary rule — A tender is necessary to bar right to specific performance. — In suits for specific performances of con- tracts in general, in the greater number of jurisdictions, the rule is that where the covenants are mutual and dependent it is not necessary before bringing the action for the plaintiff to put the other party in default by performance or tender of performance on his part.^ And the rule has been applied in an action to enforce a compromise.^ In some jurisdictions it is not even necessary to aver a willingness or make an offer of performance in the com- specific performance, perhaps no clearer statement of the general principles can be found than that given by Mr. Story — He says : "The application to a court of equity for either of the purposes, is not, strictly speaking, a matter of absolute right, upon which the court is bound to pass a final decree, but is a matter of sound discretion to be exercised by the court, either in granting or in refusing the relief prayed according to its own notion of what is rea- sonable and proper under all the circumstances of the particular case. Thus for instance; a court of chancery will sometimes refuse to decree a specific performance of an agreement, which it will yet decline to order to be deliv- ered up, canceled or rescinded. On the other hand a specific performance will be decreed upon the application of one party, when it would be denied upon the application of the other. And an agreement will be rescinded or canceled upon the application of one party, when the court would decline any Interference at the instance of the other. So that we are to understand, that the interference of a court of equity is a matter of mere discretion, not, in- deed, of arbitrary and capricious discretion, but of sound and reasonable discretion, Secundum arbitrium honi judicis." Story's Eq. Jur. Sec. 693. 1 Hunt on Tender, Sec. 28, citing Fall v. Hazelrig, 45 Ind. 576 ; Minneapo- lis, etc., Ry. Co. v. Chisholm, 55 Minn. 374; Stevenson v. Maxwell, 2 N. T. 409; Vaught v. Cain, 31 W. Va. 424; Ashurst v. Peck, 14 So. (Ala.) 541; Brown V. Eaton, 21 Minn. 409; Nelson V. Nelson, 75 Iowa, 710, 38 N. W. Rep. 134; Winton v. Sherman, 20 Iowa, 295; Broots v. Hewit, 3 Ves. 253; Hunter v. Bales, 24 Ind. 299; Irwin v. Gregory, 13 Gray, 215; Lynch v. Jennings, 43 Ind. 276; Sons of Temperance v. Brown, 9 Minn. 157; Lewis V. Prendergast, 39 Minn. 301; Sheplar v. Green, 96 Cal. 218, 31 Pac. 42, and other cases. 2 Where the acts to be performed under the compromise agreement are mutual and dependent, as where there is to be mutual conveyances, a failure of the plaintiff to carry out his part of the agreement is no ground for re- fusing to enforce the contract: Mitchell v. Long, 5 Litt. 71. § 98] NECESSITY FOB A TENDEB 209 plaint.* The court can in its decree fully protect the rights of the defendant. In such cases the failure to make a tender affects merely the costs. There is a line of authorities supporting the contrary rule; that a plaintiff must make an actual tender before bringing his suit,* or show that the making of a formal tender was waived by some act or declaration of the other party, which would render a tender — as long as the position taken by the latter is maintained — a vain and idle ceremony.'^ Where the contract is such that upon a default by one party the other party may declare a forfeiture, or rescind; and, where a tender is necessary in order to work a forfeiture, a tender must be made in order to defeat the right of the other party to a specific performance. In absence of a tender, the right to specific performance continues until barred by the statute of limitation.' 8 Vaught V. Cain, 31 W. Va. 424 ; Brooks v. Hewit, 3 Ves. 253 ; Coolbough V. Roemer, 32 Minn. 447. See Freeson v. Bissell, B3 N. T. 168, and Stevens V. Maxwell, 2 N. X. 169. * Hunt on Tender, Sec. 29, citing Askew v. Carr, 81 Ga. 685 ; Sanford v. Bartholomew, 33 Kan. 38; Boyce v. Frances, 56 Miss. 573; Klyce v. Broyles, 37 Id. 524; Mhoon v. Wilkinson, 47 Id. 633; Robinson v. Harboar, 42 Id. 800; Kimbrough v. Curtis, 50 Id. 117; Greenup v. Strong, 1 Bibb, 590; Bearden t. Wood, 1 A. K. Marsh. 450; Young v. Daniels, 2 Iowa, 126. See foot note to Sec. 1407, Pomeroy's Eq. Jur. for a collection of cases upon this subject. The plaintifif must not himself be in default: Brooklyn Co. v. Miller, 108 Pac. (Ariz.) 471 ; and if he relies upon part performance it must appear clearly that what was done was done upon the compromised agree- ment sought to be enforced: Senior v. Anderson, 115 Cal. 496, 41 Pac. 454. B White V. Dobson, 17 Gratt. (Va.) 262; Dulin v. Prince, 124 lU. 76; Mc- Pherson t. Fargo, 74 N. W. Rep. (N. D.) 1057 ; Trenton St. R. Co. v. Lawlor, 73 N. J. Eq. 203, 75 Atl. 996 ; Brace v. Doble, 52 N. W. Rep. 586 ; McEleroy V. Tulane, 34 Ala. 78; Lyman v. Gedney, 114 111. 388, 29 N. B. 282; Smith V. Gibson, 41 N. W. Rep. (Neb.) 360. 8 See Leaird v. Smith, 44 N. X. 688. Hunt Acc.& S. — 14 210' COMPROMISE [§ 99 Sec. 99. Offer of compromise inadmissible in evidence. — Par- ties between whom a controversy exist have a right to buy their peace/ and may with impunity attempt to buy their peace,^ and the rule is almost, if not universal, that an unaccepted offer of compromise is not evidence against the party making it,' either of a general liability, or for the amount offered, or of any other fact connected with the subject of the negotiation.* The rule is found- 1 Ward V. Munson, 105 Mich. 657, 63 N. W. 498. 2 Tennant v. Dudley, 144 N. Y. 505 ; Murray v. Coster, 4 Cowen, 635. 3 Melby v. Osborn, 35 Minn. 387, 29 N. W. 58 ; Cleveland, etc., R. Co. v. Maguire, 137 111. App. 31 ; Callen v. Rose, 47 Neb. 634, 66 N. W. 639 ; Edwin S. Hartwell Co. v. Bork, 138 111. App. 506; Hudson v. Williams, 72 Atl. (Del.) 985. * Chesire v. Des Moines, 133 N. W. (la.) 324. "A distinction is taken be- tween the admission of particular facts and an ofCer of a sum of money to buy peace. Fbr, as Lord Mansfield observed, it must be permitted to men to buy their peace without prejudice to them, if the offer should not succeed; and such offers are made to stop litigation, without regard to the question whether anything is due or not. If, therefore, the defendant being sued for 100 pounds, should offer the plaintiff 20 pounds, this is not admissible in evi- dence, for it is irrelevant to the issue, it neither admits nor ascertains any debt ; and is no more than saying, he would give 20 pounds to be rid of the action." 1 Greenleaf on Ev. 192. See Bull. N. P. 286. An offer of compro- mise is not admissible to show that the claim is or is not well founded: Tay- lor V. Tigerton Lumber Co., 114 N. W. 122 ; or that a mortgage is an exist- ing lien : Ward v. Munson, 63 N. W. (Mich.) 418. A few of the cases on this question follow. Tennant v. Dudley, 144 N. T. 504, 39 N. E. 644 ; Smith V. Satterler, 130 N. Y. 677, 29 N. E. 225; , Williams v. Thorp, 8 Cow. 201; Boyce v. Palmer, 55 Neb. 389, 75 N. W. 849; Hanover Ins. Co. v. Stoddard, 52 Neb. 745, 73 N. W. 291 ; Bauer v. Weber, 129 S. W. (Mo. App.) 59 ; Moore V. Graus, 113 Mo. 98, 20 S. W. 975; Pelton v. Schmidt, 104 Mich. 345, 62 N. W. 552, 53 Am. St. Rep. 462; Donley v. Bailey, 110 Pac. (Colo.) 65; Par- son V. Bowe, 79 Minn. 238, 82 N. W. 480; Houdeck v. Merchants' Ins. Co., 102 Iowa, 303, 71 N. W. 354; City of San Antonio v. Stevens, 126 S. W. (Tex. Civ. App.) 666; Home Ins. Co. v. Baltimore W. Co., 93 U. S. 527; East Tenn. R. Co. v. Davis, 91 Ala. 615, 8 So. 349; Sandlin v. Kennedy, 51 So. (Ala.) 622; Chicago R. Co. v. Roberts, 26 Colo. 329, 57 Pac. 1076; Davis V. Catlettsburg Water Co., 127 S. W. (Ky.) 479; Illinois Cent. R. Co. v. Nelson, 127 S. W. (Ky.) 520 ; Gulf R. Co. v. Bagby, 127 S. W. (Tex. Civ. App.) 254; Denver, etc., R. Co. v. B'rennaman, 100 Pac. (Colo.) 414; New York L. Ins. Co. V. Rankin, 162 Fed; 103; Alabama S. Co. v. Dewy, 47 So. (Ala.) 55; § 99] OFFEB OF COMPROMISE INADMISSIBLE IN EVIDENCE 211 ed upon public policy, and "with a view of encouraging and facilitating tlie settlement of legal controversies by compromise, which object is supposed to be obstructed by the fear entertain- ed by litigants that such a negotiation may be converted into a trap to inveigle the unwary into hazardous admissions." ' "With- out this protective rule," said Mr. Greenleaf, "it would often be difficult to take any steps towards an amicable compromise or adjustment." ' The rule excludes evidence of admissions of dis- tinct facts made expressly without prejudice, and for the sole pur-i- pose of reaching an amicable settlement, and to admissions of distinct facts which appear to have been made tentatively or hypothetically under an implied agreement that the admissions are not thereafter to be used against the party making them.' The rule excluding an offer of compromise as evidence, is applica- ble to an attempted settlement of a demand based on fraud,' crim- inal conversation," damages for trespass,'" or any wrong creating a liability, whether tortious or otherwise. The rule includes offers of compromise made by attorneys and agents.^' Sebree v. Smith, 2 Idaho, 329, 16 Pac. 915 ; Jenness v. Jones, 68 N. H. 475, 44 Atl. 607 ; Scheurle v. Husbands, 65 N. J. L. 40, 46 Atl. 759 ; Cochran v. Baker, 34 Or. 555, 56 Pac. 641 ; Reagan v. McKibblen, 11 S. D. 270, 76 N. W. 943; San Antonio R. Co. v. Stone, 60 S. W. (Tex. Civ. App.) 461; Groff v. Hansel, 33 Md. 161; State Bank v. Button, 11 Wis. 371 (389). An attempt to compromise a claim in suit does not forfeit the right of the debtor to have a default judgment against him set aside for excusable mistake, oversight or other ground preventing him defending: Farmers' Bank v. Tr ester, 124 N. W. (la.) 793. White V. Old Dominion S. S. Co., 102 N. T. 660. 8 1 Greenl. Ev. Sec. 192. 7 See White v. Old Dominion S. S. Co., 102 N. Y. 660 ; Mead v. Degolyer, 16 Wend. 632. 8 Flnlay v. Prost, 11 Mich. 625, 70 N. W. 137. » Smith V. Meyers, 54 Neb. 1, 74 N. W. 277. 10 Herr v. Stough, 2 Brov^n's Rep. 111. 11 Roberts v. Minneapolis Thresh. Mach. Co., 8 S. D. 579, 68 N. W. 607; Mundhenk v. Central lovca By. Co., 57 Iowa, 78, 11 N. W. 656. 212 , COMPROMISE / [§ 9^ In regard to the necessity for an offer of compromise being made with the express caution that it is confidential, or that it is without prejudice, the authorities are not entirely in harmony. Cases are to be found holding that the offer is prima facie proof of a liability unless when made it is expressly said to be without prejudice." But without doubt the great weight of the author- ities, as well as good sense, support the rule that an offer, when made in faith of a pending negotiation resulting in a settlement, is, when unaccepted, inadmissible for any purpose for or against either party,^^ whether it is expressly declared that the offer is without prejudice or not. Parties entering into a negotiation for a settlement of their differences, tacitly, if not expressly, invite mutual confidences; and good faith and fair dealing dictate the rule that neither party shall be permitted to retire and use to his advantage any offer or concession made, on the ground that the other party had neglected to say the offer, if unaccepted, shall mean nothing. No different rule applies in those cases where an offer of compromise is rejected without any mutual advances or discussion ; otherwise no one would open the negotiation.^* Sec. 100. Same subject. — Aside from the policy of the law en- couraging and inviting amicable adjustments of disputed claims and demands, by protecting the parties from the effect of con- fidential overtures upon the mind of jurymen;^ most offers of compromise are inadmissible for another very obvious reason, and that is they are not admissions of any existing fact but merely a proposition to do something, made to avoid litigation, without 12 Wallace v. Small, 1 M. & M. 446; Watt v. Lawson, Id. 447, note. See Hllbum V. Phoenix Ins. Co., 124 S. W. (Mo. App.) 63. 18 Louisville R. Co. v. Wright, 115 Ind. 378; Binford v. Young, 115 Ind. 174. 14 See Hllbum v. Phoenix Ins. Co., 124 S. W. (Mo. App.) 63. 1 The error in admitting evidence of an offer of a compromise is aggravated by the fact that argument is made to the jury predicated upon the supposed eflfort to compromise : Edwin S. Hartwell Co. v. Boris, 138 111. App. 506. § 100] OFFEB OF OOMPBOMI8B INADMISSIBLE IN BVIDENOB 213 regard to whether or not anything is due, and they do not, to the unbiased and trained mind, prove anything, except possibly that there is a dispute; and are, therefore, fallacious with respect to the purpose offered, irrelevant to the issue and immaterial.* In an English case it is said, "If A. sue B. for 100 pounds, and B. offer to pay him 20 pounds, it shall not be received in evidence, for this neither admits nor ascertains any debt, and is no more than saying he would get rid of the action." * It is the effect of such evidence that the law guards against. The effect is prejudicial to the investigation of the truth, for, the in- experienced and untrained mind is very apt to reach the con- clusion that an offer of compromise is evidence of weakness in the claims of the party making it, otherwise an offer would not have been made. When such evidence is before a jury, it is re- versible error for the court to refuse to instruct them that the offer cannot be considered as evidence of any liability.* But there must be an offer upon condition, either expressed or implied, for it is the condition that no advantage shall be taken of the ad- mission made in furtherance of an amicable settlement, upon which the rule rests excluding the admission as evidence. In ab- sence of an express condition, the court will look into the nature of the negotiation, and if the offer be made plainly by way of a compromise, and with a view to buy peace, it will be presumed that the offer was made without prejudice, and, if unaccepted, it will be excluded as evidence." Where a party is cast in suit, and he makes an offer of a certain sum in settlement, the presumption 2 Hartford Bridge Co. v. Granger, 4 Conn. 142. 8 Bull. N. P. 236 ; Chesire v. Des Moines, 133 N. W. (la.) 324. * Pelton V. Schmidt, 62 N. W. (Mich.) 552. B West V. Smith, 101 U. S. 263 ; Lofts v. Hudson, 2 M. & R. 481 ; Richards V. Noyes, 44 Wis. 609 ; Kassing v. Walter, 65 N. W. 832 ; Callen v. Rose, 47 Neb. 634, 66 N. W. 639. Upon the subject generally, see 1 Phillips Ev. 5th Am. Ed. p. 427 and Note 124 ; Greenleaf Bv. Sec. 192 and Note; and Tennant V. Dudley, 144 N. Y. 504 and Note to L. Ed. 214 COMPROMISE [§ 10^ seems to be stronger that it is an offer of compromise and settle- ment of the litigation, and made without prejudice.* , Sec. 101. Same subject. — An offer of compromise, however, is admissible in evidence when it is offered for the purpose of show- ing that a compromise was actually made of the disputed demand.^ So, an offer may be admissible for the purpose of showing that an attempt has been made to compromise, which may be some- times necessary in order to account for the lapse of time.^ An offer must be made with a view to a compromise and to buy peace, otherwise the offer will be admissible for what it is worth against the party making it. Thus, in an action to recover for injuries to a horse, evidence that defendant admitted it was an accident, that he would do what was right about it, would pay the veterinary's bill and let the plaintiff have the use of another horse while the injured one was laid up, was admitted as an ad- mission against defendant, it not appearing that it was made as an offer of compromise.' Upon like principle an offer by the de- fendant in bastardy, to the father of the prosecutrix, to contribute money to send the latter away was admitted in evidence, as it was not an offer of compromise.* An offer to pay a then undis- puted account if the creditor will make a certain discount is not within the rule excluding an offer of compromise." A letter writ- ten by plaintiff demanding a less amount than that claimed in the action, is admissible upon the question of the amount due.* e Richards v. Noyes, 44 Wis. 609, citing Jones v. Foxall, 13 Bng. Law and Eq. 140, 145; Cory v. Betton, 4 C. & P. 462; Reynold's Adm'r v. Manning, 15 Md. 510; Gerrish v. Sweetser, 4 Pick. 374. 1 Stuht V. Sweesy, 67 N. W. (Neb.) 748 ; Collier v. Nokes, 2 C. & K. 1012 ; Frognell v. Lewelyn, 8 Pr. 122. 2 See dictum, Jones v. Foxall, 13 Bng. Law Eq. 140, 15 Beav. 388. 8 Bassett v. Shares, 63 Conn. 39. 4 Robb V. Hewitt, 29 Neb. 217. Person v. Bowe, 79 Minn. 238, 82 N. W. 480, C. Aultman & Co. v. Martin, 68 Neb. 340. § 102] ADMISSION OF INDEPENDENT 215 Where the question arises as to the admissibility of the evi- dence, it is for the court to determine whether the admissions offered are within the rule excluding them.' In a case where a sum was tendered "as the sum due" it was held that the question whether it was intended by the offer to concede that something was due on the demand and not merely to buy peace, was a ques- tion for the jury to determine from all the circumstances.* So, it has been held that if there is a dispute as to whether or not the offer was made by way of a compromise, the court may prop- erly leave it to the jury with the instruction to disregard the ad- mission, if they find it was made by way of a compromise." But, where there is no dispute as to what was said, we believe the correct rule to be that where the admissibility of an admission comes before the court upon an objection to it as evidence, on the ground that it was made by way of a compromise, it is for the court to construe the language, in connection with the other facts and circumstances. Sec. 102. Admission of independent facts admissible in evi- dence. — The doctrine stated in the preceding sections is confined to the implied admission to be drawn from the mere offer of com- promise, and to such admissions of distinct and independent facts as are made expressly without prejudice, and for the sole pur- pose of effecting a compromise, or such as appear to have been made tentatively, or hypothetically.^ It does not exclude evi- dence of an unqualified admission of any independent fact made during a treaty of compromise, or in the conversation or discus- T Greenfield v. Kennett, 69 N. H. 419, 45 Atl. 233; Batchelder v. Batchel- der, 2 Allen, 105. 8 Nye V. Chase, 50 Vt. 306. 9 Greenfield v. Kennett, 69 N. H. 419, 45 Atl. 233 ; Webber t. Dumm, 71 Me. 330. 1 White V. Old Dominion S. S. Co., 102 N. Y. 660. 216 COMPEOMISH [§ 102 sion leading up to an offer." It is not, however, necessary that the fact admitted should be independent of the subject-matter embraced in the negotiation for a compromise, but it must be an admission of a fact relevant to the issue involved in the action, as distinguished from an offer to buy peace, or to compromise the controversy.' If the admission cannot be separated from the offer and still convey the intended idea it is inadmissible.* Mere loose expressions indicating an opinion as to a liability, or an exemption therefrom, or an assumption made as a basis of the proposed set- tlement, are not sufficient; the admission to be admissible in evi- dence must concede the existence of a fact." It is admissible upon the ground. Common to all admissions against interest; which pre- supposes the improbability of a party admitting a fact to his prej- udice, unless the fact really exists. In an early case in Connecti- cut, the Court observed: "The law on this subject has been often misconceived; * * * It is never the intendment of the law to shut out the truth ; but to repel any inference which may arise from a proposition made, not with a design to admit the existence of a fact, but merely to buy one's peace." ' Thus, if a party at 2 Kutcher v. Liove, 19 Colo. 542 ; Bascom v. Danville Stove Co., 182 Pa. 427; Austin v. Long, 63 S. E. (Ga. App.) 640; Binford v. Young, 115 Ind. 174 (The defendant admitted uttering certain slanderous words) ; Bartlett V. Tarbox, 1 Abb. App. Div. 120; White v. Old Dominion S. S. Co., 102 N. Y. 660; Amour v. Gaffey, 30 App. Div. 121; Cumbey v. Lovett, 76 Minn. 227. A letter admitting that a certain amount is in the treasury of a railroad company subject t6 claim is not Inadmissible as an offer of compromise : Mos- ley V. Missouri Pac. R. Co., 112 S. W. (Mo. App.) 1010. An unqualified ac- knowledgment of an indebtedness was held admissible in evidence, though made during negotiations for a settlement: Hudson v. Williams, 72 Atl. (Del.) 985. 8 Eastman v. Amoskeag Manfg. Co., 44 N. H. 143, 82 Am. Dec. 201. * Home Ins. Co. v. Baltimore W. Co., 93 U. S. 527, 23 L. Ed. 868. 6 In Hartford v. Granger, 4 Conn. 142, the Court said: "The question to be considered is what was the view and intention of the party in making the admission, whether it was to concede a fact hypothetically in order to effect a settlement or declare a fact really to exist." 6 Hartford Bridge Co. v. Granger, 4 Conn. 142. § 102] ADMISSION OF INDEPENDENT 217 the time of making an offer of compromise admits that he justly owes a certain sum, or admits a certain item of an account to be correct,' or any other fact as being true, it is good evidence,* whatever may have been the motive that prompted the admis- sion. It has been held that an offer to compromise made iti writing, wherein certain property is described as community property, was admissible on the question whether or not the property was com- munity property.* So, a statement made during negotiations for a settlement, inconsistent with the position afterwards taken by the party, is admissible to contradict him, as where he stated he would not settle if a certain street car track was removed so as to divert travel from his property, and afterwards claimed dam- ages on account of the track being there. '^'' In criminal conversa- tion, an admission made by the defendant, pending negotiations for a compromise of the intimacy alleged, and offering to bring up one of the children, was held to be an admission of an inde- pendent fact.^^ So, in a bastardy proceeding, it was permitted to be shown that when the defendant was charged by the mother with being the father, he offered to pay her money if she would not sue him and keep it quiet.^" Where a transaction was had with a party through an agent, an admission of the agency made by the defendant, pending a settlement was held admissible." Ad- missions made pending a treaty of compromise are admissible I Bull. N. P. 236. 8 Murray v Coster, 4 Cow. 635. See Marvin v. Richmond, 3 Denio, 58, overruling Williams v. Thorp, 8 Cow. 201. » Rose V. Rose, 112 Cal. 341. 10 Taylor v. B!ay City St. Ry. Co., 101 Mich. 140, 59 N. W. 447. s. p. Bascom v. Danville Stove Co., 182 Pa. 427. II Sanborn v. Neilson, 3 N. H. 501. 12 Fuller V. The Town, 5 Conn. 416. 18 Church V. Steele's Heirs, 1 A. K. Marsh. (Ky.) 328. 218 coMPKOMisB [§ 102 to prove the handwriting of the party." The rule excluding offers and admissions, extends to those made by both parties, thus a reply to a letter written "without prejudice" though not similarly guarded was excluded.^" The reply must of course be of the same character as the counter proposition. On the other hand facts unqualifiedly admitted in a reply to an offer of compromise are admissible. If, upon a party being applied to for a settle- ment, he at once rejects the overture and gives as his reason any facts, they are admissible for they are not induced under the ex- pectation of the protection accorded communications made pend- ing negotiations for a settlement.^" The admission of a distinct fact to be inadmissible must in reality be made tentatively or hy- pothetically, either expressly or by implication; clogging the ad- mission with the statement that it is to be confidential is not enough.'^' If, in admitting evidence of admission of facts it be necessary to submit the whole transaction, the jury should be in- structed that the offer of compromise is not to be considered as evidence.^' If the alleged admissions are denied the question may be submitted to the jury with the instruction that if they find they were not made the testimony concerning the attempted com- promise should not be permitted to influence them.^° The admission, to be admissible, must be of a fact,^" and not one of law, for a party may easily be mistaken as to his legal rights.''^ Obviously, if an admission that the law imposed a lia- 1* Waldrldge v. Kennison, 1 Esp. 143 ; Furner v. Railton, 2 Bsp. 474. See Dooley v. McEwing, 8 Tex. 306. IB Paddock v. Forrester, 3 Scott, N. R. 734. 18 See Marvin v. Richmond, 3 Denlo, 58. IT Gerrlsh v. Sweetser, 4 Pick. 374. 18 Eastman v. Amoskeag Mfg. Co., 44 N. H. 143, 82 Am. Dec. 201, citing Bartlett v. Hoyt, 33 N. H. 151. 10 Jenness v. Jones, 68 N. H. 475. 20 Folk V. Schaeffer, 180 Pa. St. 613, 37 Atl. 104. 21 See Moore v. Hitchcock, 4 Wend. 292. See, also, Rice v. Ruddinean, 10 Mich. 145. And see as to mixed law and fact Lewis v. Harris, 31 Ala. 689. i§ 103] ADMISSION BT WHOM MADB 219 bility, or a certain contract binds a party, was admissible, when, whether he is bound or not, is a question of construction merely, it would often result in saddling a defendant with a liability where there is none in truth. I'he object of rules of evidence is to facili- tate ascertaining the truth, not to establish something as true which is not. Admissions against interest are not conclusive; and when they are verbal, they should be received with caution. But when it is clearly proved that they were deliberately made, with full knowledge of the facts, they are considered to be strong evidence. Sec. 103. Admission by whom made — Partner — ^Joint obligor — Joint and several obligor — ^Joint tort feasor. — Admissions, to be admissible, must be made by the party in interest, or one duly authorized by him to make them. According to Mr. Phillips, "Ad- missions must, in all cases, be brought home to the party in a suit, against whom they are used, or to some person who is identi- fied in interest with him." ^ The authorities are uniform in hold- ing that the admissions of one partner made during the continu- ance of the partnership, concerning a matter of partnership busi- ness, are admissible in evidence against all the partners." But the existence of the partnership at the time of declarations must first be proven, and the question whether the proof of the exist- ence of the partnership is sufficient to warrant the declarations of one partner being received in evidence against the other part- ners is for the court. The proof must show that the party against whom the declaration is sought to be used, as well as the party making the declaration, were, at the time, members of the co- partnership.' Such declarations are admissible because of the uni- 1 1 PMl. Ev. 480. 2 Walden v. Sherburne, 15 Johns. 409 ; Bound v. Lathrop, 4 Conn. 338 ; 1 Greenl. EV. 112. * Catt V. Howard, 3 Stark, 5. 220 COMPROMISE [§ 103 ty of interest,* each being bound for the whole ; * and, because of the agency of each partner for all to transact any business of the co-partnership.* It does not follow, however, that this agency continues for all purposes until all the partnership business is settled up. During the existence of a partnership, as to partner- ship contracts, the partners are more than mere joint contractors; but after a dissolution they are upon the same footing as other joint contractors, in respect to promises and admissions thereafter made by the individual partners.'' The dissolution does not re- voke the authority of one partner as agent for the other, to ar- range, liquidate, settle and pay the debts of the firm.* Whether a partner can go further than this and make admissions affecting the interest of his former partner, is not uniformly settled. The rule in various jurisdictions conflict. The rule now recognized in New York, and some other jurisdictions, seems to be grounded upon the better reasoning. There, the rule is, that the adinissions of one partner, as to the existence of an account, or any fact,y made after a dissolution of the firm, is not admissible as evidence to affect other members of the firm." As between the firm and * See Boyce v. Watson, 3 J. J. Marsh. 498. B See Corps v. Robinson, 2 Wash. C. C. 390. • "By the very act of association, each one is constituted the agent of all." 1 Greenl. Ev. 112. 7 Clement v. Clement, 69 Wis. 599, 35 N. W. 17. As to classification of partnership contracts, after dissolution, see Gates v. Fisk, 45 Mich. 522, 8 N. W. 558, and Pierce v. Toby, 5 Met. 168. 8 Clement v. Clement, 69 Wis. 599, 35 N. W. 17, citing Pars. Partn. Sec. 390. Baker v. Stackpoole, 9 Cow. 421; Walden v. Sherburne, 15 Johns. 409; Hopkins v. Banks, 7 Cow. 650; Brisban v. B'oyd, 4 Paige, 17; Gleason v. Clark, 9 Cow. 57. See, also, Conery v. Hayes, 19 La. Ann. 325; Brady v. Hill, 1 Mo. 315; Yandes v. Lefavour, 2 Blackf. 371; Shelton v. Cocke, 3 Munf. 191. This question as to whether an admission made by one partner after a dissolution of the firm, is admissible in evidence as proof of a liability against a co-partner, has been before the courts most frequently with reference to whether such admission prevents the bar of the Statute of Limitations. In. Van Keuven v. Parmelee, 2 N. Y. 523, where a partner, nine years after dis- § 103] ADMISSION BY WHOM MADE 221 ) those having previous dealings with it, there is no dissolution until notice of that fact is brought home to them.^" Hence, prom- ises and admissions, made after dissolution but before notice is brought home to a creditor, may be used against all the partners to the same extent as those made before the dissolution. Such, in general, are the general rules governing the admis- sibility of admissions by a member of a firm, made before and after the dissolution, from which the rule is to be drawn, though it may not obtain in all jurisdictions, that after a dissolution and notice to the person having previous dealings with the firm, an admission of an independent fact, made by a partner upon a com- promise of any unsettled business of the firm, is not admissible in evidence against his co-partner, either for the purpose of fixing any old liability upon him, or creating a new one. In a case solution and four years after action was barred, gave a new promise ; Bron- son, J., in a very able opinion, reviewed the English and American authori- ties, and held that one partner could not after dissolution, by a new prom- ise, bind his co-partner so that the latter could not avail himself of the Statute. That after dissolution it made no difference whether the new prom- ise or admission was made before or after the statute had run. In com- menting on a certain decision which made the distinction that one partner cannot after dissolution niake a new contract, but could by an acknowledg- ment of the debt, charge his co-partner, the court said: "No one who does not go upon the ground that the statute of limitation ought not to be en- forced, can assign a solid reason for the distinction between a new contract creating a new debt against a former partner and making an acknowledgment which will charge him with that though once a debt has ceased to be so by operation of law. The court refused to inquire whether the Statute operated upon the debt or the remedy. The case overrules the former New York decision on the question. The reader Is also referred to 1 Phil. Ev. 412, Cowan & Hill's Notes and 1 Greenl. Ev. 112, n. 14th ed., for extensive notes upon the question. Bronson. J., In Van Keuven v. Parmelee, ante, said that the contrary doctrine in whole or In part, was followed In Massachusetts, Connecticut, Maine, Vermont, North Carolina and Georgia. 10 A partial payment of a partnership debt, made by one partner after dissolution of the firm, to a creditor who has had previous dealings with the firm and has had no notice of its dissolution, will prevent the bar of the statute of limitations as to the other partner: Davison v. Sherburne, 57 Minn. 355. Touching the same point, see Clement v. Clement, 69 Wis. 599, 222 COMPEOMISB [§ lOa where the notice of dissolution requested "all persons having any. unsettled business with them * * * to call on the subscrib- er," one of the partners, "for an adjustment of the same," and the partner thus authorized, upon a settlement, gave a written acknowledgment that the firm owed to the other party $744.37, the court said: "This is a clear case. After a dissolution of a co- partnership, the power of one party to bind the other wholly ceases. There is no reason why his acknowledgment of an ac- count should bind his copartner any more than his giving a promissory note in the name of the firm, or any other act." ^^ He may bind himself by his admissions, but as to his former partners, his agency, except for special purposes, is terminated, and his admissions are like those of strangers, and they are not bound by them.^^ One joint debtor, or joint and several debtor, holding that relation simply, has no implied power as agent or otherwise, which will enable him by any act or promise to continue or renew a debt as to his co-debtor, either before or after the statute of limitation has run as to him.^' And by analogy, they cannot, upon a treaty of compromise of a joint debt, make any admission of 35 N. W. 17 ; Gates v. Fisk, 45 Mich. 522, 8 N. W. 588 ; Pratt v. Page, 32 Vt. 15 ; Buxton v. Edwards, 134 Mass. 567. As to who is entitled to notice of dissolution; the necessity for notice and what notice is suflBcient, see Lansing V. Gaine, 2 Johns. 300, and note, L. Ed. 11 Hackley v. Patrick, 3 Johns. 536. s. p. Waldon v. Sherburne, 15 Johns. 409 ; Baker v. Stackpoole, 9 Cow. 421 ; Ward v. Howell, 5 Harr. & J. 60. "The reason why one partner, after the dissolution, cannot charge his co- partner by his confessions, is, that it would be highly unjust that one man should confess away the rights of another ; and if ill will should happen to exist between partners at their dissolution, one might ruin the other by his confessions; whether true or false." Gleason v. Clark, 9 Con. 57. 12 Nichols V. White, 85 N. Y. 531, citing Walden v. Sherburne, 15 Johns. 409. In an action against one partner, the plaintiff may not prove the dec- larations made by the other partner after dissolution, for the purpose of showing that it is in conflict with his testimony for the defense: Nichols v. White, ante. 18 Willoughby v. Irish, 35 Minn. 63, 27 N. W. 379; Rfenninger v. Kokesch,, 70 N. W. (Minn.) 867; Shoemaker v. Benedict, 11 N. Y. 181; In Lewis v^ § 104] ADMISSION BY WHOM MADE 223 an independent fact, which will be admissible against their co- debtor. By a like analogy the rule extends to admissions of in- dependent facts, made upon a treaty of compromise, by a joint tort feasor.^* Sec. 104. Admissions by infants — Guardians and personal rep- resentatives. — Admission by infants stand upon the same footing as those made by adults, except with reference to those contracts where they are entitled to the common law exemption from liabil- ity.^ The admissions made by an adult after he is placed un- Woodworth, 2 Comst. 512, it was held that one of two joint contractors could not be deprived of a defense by the admission of the other; that one had not power to increase or extend the liability of the other beyond the terms of the contract. Contra. In Whitcomb v. Whitney, Doug. 652, Lord Mansfield held that part payment, within six years, by one of four joint and several makers of a promissory note, took the case out of the statute. In Wyatt v. Hudson, 8 Bing. 309, Tindal, C. J.,, said — that the payment of principal and interest stands on a different footing from the making of promises, which are often rash or ill interpreted, while money is not usually paid without deliberation. But Lord Mansfield made no such distinction in Douglass, 652, but saiJ: "Payment by one is payment for all, the one acting, virtually, as agent for the rest ; and, in the same manner, an admission by one, is an admission by all ; and the law raises the presumption to pay, when the debt is admitted to be due." Bronson, J., in Van Keuven v. Parmelee, 2 N. T. 523, said nothing but the great name of Lord Mansfield could have given currency to this reasoning. The doctrine of Douglass, 652, has been followed in several Amer- ican decisions, but, as to joint debtors and joint and several debtors, the seemingly weight of the authorities is the other way. 1* The declarations of one co-trespasser, whenever made, Is admissible in evidence against himself. But in absence of proof of a common object or mo- tive, as in cases of negligence, it is not admissible against any one but him- self. If the declaration is a part of the res gestce and the party desiring to offer it, first proves a conspiracy or common design, it is admissible against all. If the admission, took place at a subsequent period, it is merely a nar- rative of past events and is inadmissible. 1 Greenl. Ev. Ill, n. See upon this subject in general, notes 135 and 136, 1 Phil. Ev. Cowen and Hill's and Edwards' notes. , 1 See McCoon v. Smith, 3 Hill, 147; Haile v. Lillle, 3 Hill, 149, 38 Am. Dec. 623. 224 COMPROMISE [§ 104 ■der guardianship respecting transactions previous to the guardianship are admissible against him; and such admissions are competent to prove a debt for necessaries contracted during the period of guardianship.^ A prochein ami, or a guardian ad litem, have no power to compromise a demand; and therefore any admissions they make are inadmissible.' They are merely officers of the court specially appointed to look after the interest of the in- fant pending the litigation.* But a general guardian of a minor's property is clothed with power necessary to manage his ward's estate and he stands upon a different footing, and admissions made by him after his appointment, with reference to any business of his ward's estate transacted by him, are admissible against him when sued as guardian. ° The admission however would not be admissible against the infant." It has been held that the admissions of a co-executor or co-ad- ministrator, cannot be received in evidence against his co-executor or co-administrator,' or as against the heirs and devisees, particu- larly so as to affect the real estate in the hands of the heirs.^ So, it has been held that an administrator's admission is not receivable against the estate to charge it de bonis testatoris.^ Where the 2 Holt V. Underhlll, 10 N. H. 220, 34 Am. Dec. 148; McNight v. McNiglit, 20 Wis. 446. s Cowling V. Ely, 2 Stark. 366. 4 A guardian ad litem cannot admit or waive the proof of facts necessary to a recovery against an Infant defendant. Litchfield v. BurweU, 5 How. Pr. 341. 6 Mr. Greenleaf was of the opinion that it would bind the guardian per- sonally, when he is afterwards a party suo jure, in another action. 1 Greenl. Ev. Sec. 179. « 1 Greenl. Ev. See. 179. 7 Elwood V. Deiferdorf, 5 Barb. 898 ; Wilmer v. Harris, 5 Harr. & John. 1. 8 Mooers v. White, 6 John. Ch. 360, and Note L. Ed. ; Osgood v. Manhattan Co., 3 Cow. 612, 15 Am. Dec. 307. Ciples V. Alexander's Adm'r., 2 Comst. Rep. 767 ; Grece v. Helm, 51 N. W. (Mich.) 106; White v. Eedgard, 48 Mich. 264, 12 N. W. 216; Fish v. § 104] ADMISSION BY WHOM MADB 225 question was as to the running of the Statute of Limitations, the executor's admission of his testator's death was rejected.^" But in another case the contrary doctrine was recognized.^^ But in so far as the admission affects the assets in the hands of the heirs, the great weight of the authorities, is that the admissions of an executor are inadmissible.^" It must be admitted that the decisions are not uniform. Where an executor was plaintiff his admission was received against him.^' Again where he was de- fendant his admission was received.^* Inasmuch as the real prop- erty in the hands of the heirs may be sold to pay debts in case the personal estate proves to be insufficient, no good reason is ap- parent why an admission of a liability by an executor, which may render the personal estate insufficient, is admissible and an admis- sion directly affecting the realty is not. Personal representatives are but trustees and officers of the court; and are not presumed to know whether a demand against decedent is just or unjust, and ought not to be allowed to confess away the personal estate. And, the rule ought to be, if it is not, that no admission however made by a personal representative, is admissible to affect the es- tate of the decedent. Morse, 8 Mich. 34; Durfee v. Abbott, 50 Mich. 283, 15 N. W. 454. But, in Mooers v. White, 6 John. Ch. 360, by way of dicta, the court said: "The ex- ecutor may, no doubt, charge the personal estate by confession." 10 Peck V. Botsford, 7 Conn. 172; Thompson v. Peters, 12 Wheat. 565. In Mooers v. White, 6 John. Ch. 372, it was held that an admission made by an executor, did not affect the right of the heir to plead the Statute of Limi- tation so as to protect the real estate. See Cases in Note L. Ed. 11 Emerson v. Thompson, 16 Mass. 429. 12 See eases in Note to Mooers v. White, 6 John. Ch. 372, L. Ed. IS Hill V- Buckminster, 5 Pick. 391. 14 Cobb V. Lunt, 4 Greenl. 503. Hunt Acc.& S.— 15 226 COMPBOMISB [§ 105 Sec. 105. Admission by agent or attorney — By attorney after action brought. — It is a settled rule of evidence that the admis- sions of agents are admissible when the declarations are part of the res gestcB and made when the agent is acting within the scope of his authority, but that when they are merely narratives of past events, they are not admissible.^ Admissions by an agent of dis- tinct and independent facts made during a treaty of compromise cannot be other than narratives of past events whether the agent has personal knowledge of the original transaction or not. Where he has no personal knowledge, his statements are further objec- tionable for the reason that he is declaring that a fact which he would not be permitted to testify to if called as a witness; and, where he received information from his principal, his testimony, if he could be called as a witness, would not prove the fact but only an admission made by another. Hence, the obvious and sim- ple rule seems to be that no admission by an agent made upon a compromise are admissible unless he is authorized to make them ; ^ and, further, that authority to make unqualified admis- sions of distinct and independent facts, is not to be implied from the authority to settle and compromise a demand, for unqualified admission of distinct facts is not absolutely necessary to a com- promise. In view of the vast number of compromises attempted to be negotiated by attorneys and agents, surprisingly little is to be found in the books upon this question. In an action to recover damages to two horses, done by one of defendant's trains, the plaintiff, for the obvious purpose of showing that the defendant deemed itself liable, proved that the road master of defendant 1 It appears that a distinction has been made between the power of gen- eral and special agents to make admissions affecting the principal; some decisions holding that the power of general agents, while the agency con- tinues, are upon the same footing as the power of the principal, while others hold that the power of general agents as to admissions are like those of a special agent. See Note 141, Cowan & Hill's notes, 1 Phil. Ev. 420. 2 See Roberts v. Minneapolis Thresh. Mach. Co., 8 S. Dak. 579, 68 N. W. 607. § 105] ADMISSION BY WHOM MADE 227 agreed with plaintiff upon an arbitration. On appeal the court, by way of argument, said : If the agent made any admissions they could not be deemed the admissions of the company; that the agent was not connected with the train which caused the accident, but what he said and did about it was at an entirely different time and place, and that the tort of a principal cannot be proved by evidence of the statements of an agent of such a character. Whether, a liability being conceded and the agent had been au- thorized to settle for the injury, his admissions as to the amount of damages sustained could have been shown as admissions of the company, was left undetermined by the court.' Where an agent with whom all the transactions under consider- ation were had, was authorized to effect a settlement, and in doing so admitted that certain items of the account were correct, and settled upon that basis, the admission was held admissible against the assignee claiming under an assignment subsequent to the set- tlement. The holding was upon the ground that it was not an admission of a past transaction, but a part of the res gestce, while the agent was transacting the business of the principal.* Here, the court, in reality, gave effect to an authorized settlement by leaving the defendant in possession of certain property which the assignor's agent, who transacted the original business, admitted, upon the settlement, belonged to the defendant. Such a transac- tion being executed and the admission being an inducement to the contract, it has the implied if not the express ratification of the principal to uphold it as made; ° which, in absence of fraud upon creditors, is binding upon his assignee and others claiming under him subsequent to the settlement. Where the principal repudiates a compromise, or the negotiation in which the agent made ad- s Mundhenk v. Central Iowa Ry. Co., 57 Iowa, 78, 11 N. W. 656. * Cumbey v. Lovett, 76 Minn. 227. B The general rule is that where a principal with a knowledge of what has been done by an agent, consents to be bound by it, the act becomes that of the principal. Keeler v. Salisbury, 33 N. Y. 648. 228 COMPROMISE [§ 105 missions of distinct facts, was fruitless, we believe the rule is as before stated that the admissions are inadmissible unless the au; thority of the agent to make them be first proven.^ Officers of corporation are merely agents of the corporation aiid their dec- larations and admissions fall within the foregoing rules/ Where an interpreter was the accredited agent of the parties, and the witness understood neither the questions put nor the answers, the statement of the answers by the interpreter was held admis- sible as being made within the scope of his authority, and in the execution of his agency.* If a party be present; during the 6 See Roberts v. Minneapolis Thresh. Mach. Co., 8 S. Dak. 579, 67 N. W. 607; found since writing the foregoing section. In this case the agent, in negotiations in the nature of a compromise, admitted that certain commis- sion belonged to the plaintiff, and this was held clearly incompetent because not shown to be within the scope of his authority. The settled rule is that there must be first a prima facie showing of the agent's authority by evidence other than his own statements, before admissions, if otherwise competent, can be admitted : See Mechem on Agency, citing Smith v. Kron, 96 N. C. 392. 7 See Stewart v. Blank, 11 S. & R. 267 : The admission excluded, however, was not made upon a treaty of compromise. A declaration or admission made by a stock-holder or member of a corporation as to what took place at a meeting of the association is not admissible In evidence. Magill v. Kauff- man, 4 S. & R. 311. In Bank of Monroe v. Field, 2 Hill, 445, the president of the bank, who was its financial bead, empowered to take charge of the settlement and col- lection of its demands, and to compound or discharge them in the usual course of business, called upon the defendant to settle the note in question. The defendant claimed the note was paid. The books of the bank were re- ferred to and the president admitted payment. This admission was held admissible as made while acting in the business of his agency in respect to the very matter that had been committed to his charge. This decision is not In harmony with the general rule, that authority to make admissions is not to be implied from the authority to settle and compromise a demand; nor, with the rule that an agent's admissions are inadmissible when they are merely narratives of past events. The payment in this case was clearly a past event, although the decision went upon the point that the admission was a part of the res gestce. The admission was really of a fact as to what the books of the bank then disclosed. 8 1 Phil. Ev. 519, citing Fabrigas v. Mostyn, 20 How. St. Tr. 122. s. v. Mc- Cornick v. Fuller, 57 Iowa, 43, 8 N. W. 800; Blazinsky v. Perkins, 77 Wis. § 106J PLEADING 229 negotiation of a treaty of compromise and his attorney or agent make admissions of distinct facts, and the principal does not dis- sent, they will be deemed to be admissions of the principal and admissible. In general, attorneys, after action brought, are considered as having implied authority to make admissions for the purpose of obviating the necessity of proving any fact, yet if the client is not present when the admission is made, such admission cannot be used against him out of the particular case.' But with respect to the admission of distinct facts made by an attorney upon an attempted compromise of the action, we apprehend the rule is the same after action brought as before, and that the authority of the attorney to make the admission must first be proven before such admission is receivable in evidence. A general retainer in an action, gives an attorney power only to do such things as in his judgment are necessary in conducting the litigation. A com- promise of the action and making admissions are no part of his duties.^" Sec. 106. Pleading — Accord and satisfaction, and a compro- mise, must be pleaded — Kind of plea — Effect. — A plea of accord and satisfaction, or a compromise, is a plea in bar.^ Like the plea of payment, it confesses and avoids the cause of action set up in the complaint, by admitting it and showing that it has been satisfied. It falls within the division, pleas in discharge, of pleas in confession and avoidance.'' The eflfect of the plea standing 9, 45 N. W. 947; Nadan v. WMte R. L. Co., 76 Wis. 120, 43 N. W. 1135, 20 Am. St. Rep. 290. Where two persons agree to converse through an inter- preter, he becomes the agent of both parties: Miller v. Lathrop, 50 Minn. 91, 52 N. W. 274. 8 See Harrison's Devisees v. B'aker, 5 Litt. 250. 10 Sec. 43. 1 3 Chltty PI. 924. For forms of pleading accord and satisfaction at com- mon law, see Chitty PI. 920, 925, 931, 1002, 1031, 1062. 2 Steph. PI. 199. 230 COMPEOMISH [§ 106 alone, is to admit the cause of action which it meets so that the defendant will not be permitted to show that the cause of action is different, as by showing that an instrument sued upon was executed to joint creditors instead of to the plaintiff alone.' But when the plea of accord and satisfaction is pleaded with' the gen- eral issue it is no admission of the cause of action.* An accord and satisfaction, or a compromise, is new matter ' constituting a defense to the action, and now, most everywhere, is required to be afifirmatively pleaded. According to Mr. Chitty; anciently, matters in discharge, which admitted that once there was a cause of action, must uniformly have been pleaded specially; that after- wards a distinction was made between express and implied as- sumpsit; in the former these matters were required to be plead- ed, but not in the latter ; that at length, however, they were allow- ed to be given in evidence under the general issue.' To this day, in those jurisdictions adhering to the common law practice, in assumpsit, accord and satisfaction (or compromise) may be given in evidence under the plea of non assumpsit,'' and under other pleas falling within the class termed the general issue, as nil debit in debt on a simple contract,* and in debt for rent where the spe- cialty is matter of inducement only," and in action on the case.^" 3 Dickinson v. Burr, 7 Ark. 24. The plea is a waiver of all other defenses : Taylor v. Hogan, Hempst. 16, 23 Fed. Gas. No. 13,794, a. 4 Prince v. Puckett, 12 Ala. 832. B Coles V. Soulsby, 21 Cal. 47. 6 1 Chitty PI. 477, citing 1 Lord Raym. 217, 566, 12 Mod. 376. 7 1 Chitt. PI. 478; Chappell v. Phillips, Wright (Oh.) 372; Stewart v. Saybrook, Wright (Oh.) 374; Blirge v. Dishman, 5 Blackf. 272. 8 1 Chit. PI. 482'; Bailey v. Cowles, 86 111. 333 ; Page v. Pentice, 7 Blackf. 322. Bailey v. Cowles, 86 111. 333. 10 1 Chit. PI. 490 ; Lane v. Applegate, 1 Stark, 97 ; Chicago v. Babcock, 143 111. 358, 32 N. E. 271 ; Stockton v. Frey, 4 GUI, 406, 45 Am. Dec. 138 : This was an action for damages for negligence occasioning a personal injury. Citing 1 Chit. PI. 432. See Bird v. Randall, 3 Burr. 1353. See Ellis v. MUIsi, § 106] PLEADING 231 This rule permitting a party under the general issue to deny a breach, or a promise, as the case may be, and avail himself of a defense which admitted the breach, or promise alleged, and prove that the cause of action had been discharged is criticised by Mr. Chitty, as being at variance with the true object of pleading, which is to apprise the adverse party of the ground of defense, in order that he might be prepared to contest it, and might not be taken by surprise ; and, also with the rule that a matter of defense which admits the facts alleged but avoids them, should be specially pleaded.^^ But under that law, in debt on a specialty,^^ on a record, but not a foreign judgment,^* and in actions of trespass, either to the person or property,^* and in covenant, an accord and satisfaction must be specially pleaded. Although at common law, in certain cases, as we have seen, new matter, as accord and sat- isfaction ; payment and a release may be given in evidence under the general issue, there is, nevertheless, a special plea in which the matter may be set out affirmatively.^" In England, rules enacted in 1834,^" put "an end to the misappli- cation and abuse of the general issue," (according to Mr. Chitty) and compelled a defendant in terms to deny particular parts of the declaration, and to plead specially every matter of defense, no matter what the form of the action was.^^ So that there, since 28 Tex. 584, which was an action of trespass to try title. See, also, Schwartz V. Southerland, 51 111. App. 175. Ill Chitty PI. 479. 12 1 Chitty PI. 485. 15 1 Chitty PI. 486, citing 4 B. & C. 411; 6 D. & R. 471. 1*1 Chit. PI. 506 ; Phillips v. Kelly, 29 Ala. 628 ; Longstreet v. Ketchem, i N. J. L. 170 ; Kenyon v. Southerland, 8 111. 99. 16 1 Chitty PI. 478; Bird v. Caritat, 2 Johns. 342, 3 Am. Dec. 433; GIU- flUan V. Farrlngton, 12 111. App. 101 ; Dunham v. Ridgel, 2 Stew. & P. (Ala.) 402 ; Kearslake v. Morgan, 5 T. B. 513. 16 HiUary T. 4 "W. IV. 17 1 Chit. PI. 513. 232 COMPEOMISB [§ 106 and now,^* and, in some of the United States under rules of court,^* or by statute,"" and in those states which have adopted the code system of pleading,"^ an accord and satisfaction, or a compromise,'"' when relied upon, must in all cases be pleaded.''^ In some states it may be proven under the general issue, if the defendant gives notice in writing that he will rely upon it as a defense."* An accord and satisfaction cannot be proven under an allegation setting up a set-oflf,"° or under a plea of payment."" 18 Alexander v. Strong, 9 M. & W. 733; Horsley v. Cox, 15 L. T. N. S. 391 ; See 15 & 16 Vict. Ch. 76, S. 84, accord and satisfaction may be pleaded with other pleas raentioned in the section without the leave of court. 10 Atchinson v. Atchinson, 67 Conn. 35, 34 Atl. 76. See Cleveland T. Roth- schild, 132 Mich. 625, 94 N. W. 184, where, under rules of court, it must be plainly set forth in a notice attached to the plea (general issue). Rule 7 (C). 2 G. S. Mass., c. 129, Sec. 20; Grinnell v. Spink, 128 Mass. 25; Ga. Code, Sec. 5051; Ingram v. Hilton, 108 Ga. 194, 33 S. E. 961; Grand Lodge v. Grand Lodge, 76 Atl. (Conn.) 533 ; Conn. Prac. Book, p. 250, Sec. 160. 21 Sweet V. Burdett, 40 Cal. 97; Coles v. Soulsby, 21 Cal. 47; Ingram v. Hilton, 108 Ga. 194, 33 S. E. 961 ; Covell v. Carpenter, 51 Atl. (R. I.) 425 ; Randell v. Brodhead, 60 App. Div. 567, 70 N. Y. Supp. 43 ; Parker v. Lowell, 11 Gray, 353; Barnum v. Green, 15 Colo. App. 254, 57 Pac. 757. It is an affirmative defense within the rule requiring "affirmative defenses" to be pleaded : Jacobs v. Day, 5 Misc. 40, 25 N. Y. Supp. 763 ; Horton v. Horton, 83 Hun, 213, 31 N. Y. Supp. 588 (which was a case of a release). 22 Barker v. Riag, 97 Wis. 53, 72 N. W. 222. 23 People's Bank v. Stewart, 117 S. W. (Mo. App.) 99. See Gavin v. An- nan, 2 Cal. 494, where it is held that where defendant's answer is a general denial, it has the same effect as a plea of the general issue at common law, and that accord and satisfaction may be given in evidence. In Bailey v. Cowles, 86 111. 333, it is held that an accord and satisfaction cannot be given in evidence under a plea of non est factum. 24 Seaver v. Wilder, 68 Vt. 423, 35 Atl. 351 ; Cleveland v. Rothschild, 132 Mich. 625, 94 N. W. 184. See early cases in New York: Strange v. Holmes, 7 Cow. 224 ; Harrison v. Close, 2 Johns. 448, 3 Am. Dec. 444. asMcCreary v. McCreary, 5 Gill & J. 147. 28Crilly V. Ruyle, 127 N. W. (Neb.) 251; Welch v. Lynch, 7 Barb. 384; Smith V. Elrod, 122 Ala. 269, 24 So. 994 ; Owens v. Chandler, 16 Ark. 651 ; Hamilton v. Coons, 5 Dana, 317; Friermuth v. McKee, 86 Mo. App. 64; Barnum v. Green, 13 Colo. App. 254, 57 Pac. 757. See Howe v. Mackay, 5 § 106] PLBADINQ 233 A plea interposed to a declaration upon a liquidated demand, to the effect that the demand is paid and settled, is nothing more than a plea of payment, as the term "settle" means to pay, to liquidate. Such a plea opposed to an unliquidated demand really means the same thing, unless the pleader goes farther and sets out an agreement constituting a compromise. Where an accord and satisfaction or a compromise is not pleaded, a failure to object to evidence of it, is a waiver of the objection to a failure to spe- cially plead if' In such case the defendant may move to amend his answer to conform to the evidence; but, even without such amendment it would be considered as having been litigated by consent.^* A defendant may rely upon an accord and satisfac- tion disclosed by the plaintiff's evidence.^* A plea of accord and satisfaction may be pleaded with the general issue.'" And, with a denial of the cause of action, in those states where a defendant by statute is permitted to set up as many defenses as he may have.'^ Even where inconsistent defenses are prohibited, a plea Pick. 44, where It is held that under a plea of payment, the debtor may show that property was accepted, if the property was taken at a value equal to the debt under an agreement to that efCect. In Hardy v. Coe, 5 Gill, 189, the court said that accord and satisfaction should not be pleaded as a payment. 27BerdeU v. BisseU, 6 Colo. 162; Niggli v. Foehry, 64 N. Y. St. 658, 31 N. Y. Supp. 931; Btett v. Universalist Soc, 63 Barb. 610; Rivers v. Blom, 163 Mo. 442. See Smith v. Owens, 21 Cal. 11, to the contrary. 28 In Donaldson v. Carmichael, 102 Ga. 40, 29 S. B. 135, it was held error to reject an offer of evidence to prove an accord and satisfaction which was not objected to, although the court ruled the plea could not be amended by setting up the defense. Where evidence of a release not pleaded, is admitted without objection, -it is too late to raise the objection on appeal: Rivers v. Blom, 163 Mo. 442. 28 Looby V. West Troy, 24 Hun, 78. 80 See Wellsburg Bank v. Kimberlands, 16 W. Va. 555 ; Kershaw v. Robin- son, 1 Brev. (S. C.) 380 (Payment, and accord and satisfaction, may both be pleaded together with nul fiel record, to debt on judgment) ; Prince v. Puck- ett, 12 Ala. 832. See, also, 3 Chitty PI. (forms) 1062. 81 Tucker v. Edwards, 7 Colo. 209, 3 Pac. 233. See Sec. 15 & 16 Vict. C. 76, S. 84. 234 COMPROMISE [§ 107 of nul tiel record; nil debit; or a denial of the execution of an instrument,*'' an accord and satisfaction may be joined, as they are not necessarily inconsistent. There may in fact be no valid and binding record, no enforceable debt; or the defendant may not have executed the instrument, and yet he may have thought best to compromise the alleged liability. Where a plea of ac- cord and satisfaction and the general issue were joined, going to trial upon one plea was held to be no waiver of an objection to a ruling upon a demurrer to the other." Sec, 107. Allegations necessary. — It is said in Peytoe's Case, that "the best and most secure form of pleading of an accord, is to plead it by way of satisfaction, and not by way of accord; for if he pleads it by way of accord, he ought to plead the specific execution thereof in the whole, and if he fails of any part thereof, his plea is insufficient; but by way of satisfaction he shall plead no more, than that the defendant paid the plaintiff 6 1. 10 s. in full satisfaction of the same actipn, which the plaintiff received.^ And this case has been cited with approval in later books.'' This rule, no doubt, is well enough to follow in cases like the one given in illustration in Peytoe's case, which was that, the defendant, being sued for forgery of deeds, gave a gallon of wine in satisfaction of the action, which gallon of wine the defendant accepted in sat- isfaction; for, in such cases, the plea taken in connection with the declaration discloses a settlement and compromise of an unliqui- dated demand by the delivery and acceptance in satisfaction of something of value. But in the case of an action to recover a liquidated sum, a plea which set out no more of the' transaction, 8 2 Pavey v. Pavey, 30 Oh. St. 600; Nelson v. Brodhack, 44 Mo. 496; Kel- logg V. Baker, 15 Abb. Pr. 286. 88 Tucker v. Edwards, 7 Colo. 209, 3 Pac. 233. 1 Peytoe's Case, 9 Coke, 79. 2 Bacon's Abr. tit. Accord and Satisfaction G ; Daniels v. Hallenbeck, 19 Wend. 408. § 107] PLEADING 235 than, that the defendant paid and the plaintiff accepted a less sum in satisfaction, would be fatally defective as disclosing an agree- ment without a consideration to uphold it. More modern author- ities, as well as the statutes in some states,' require that the ac- cord and satisfaction or compromise, as the case may be, be set forth in all its essentials.* Accordingly, the pleader must first set forth an accord, whereby the defendant promised to pay or ■deliver, and plaintiff agreed to accept, something of value dif- ferent from that to which the latter was entitled to receive. The plea must show a valid consideration to support the accord, oth- erwise it is bad. Thus, if the plaintiff seeks to recover, upon a liquidated demand, a plea of payment and acceptance of a less sum in satisfaction is insufficient because it fails to show a con- sideration for the agreement to accept a less sum.° But, if the xlefendant alleges that there was a bona fide dispute as to the amount due, or as to the liability, and that the less sum was upon a settlement and compromise paid and accepted in satisfaction, a sufficient consideration will appear by the plea.' So, also, in other actions to recover a liquidated demand, a consideration sufficiently appears to sustain the plea of accord and satisfaction, if it be al- leged that security was given for the payment of a less sum, or that notes of third persons or property was delivered, or services were performed, and accepted in satisfaction.'' In all such cases 3 Barnum v. Green, 13 Colo. App. 254, 5T Pac. 757 ; Code S. D. Sees. 3483- 3485 ; Carpenter v. Chicago, etc., B. Co., 64 N. W. (S. D.) 1120. * Smith V. Bank, 108 Ga. 211, 33 S. E. 857 ; Young v. Jones, 64 Me. 563 ; Burnsides v. Smith, 5 T. B. Men. 464; Simon v. Kendig, 4 Kulp (Pa.) 493; Jaques v. Denehie, 7 Blackf. 40. Dederick v. Leman, 9 Johns. 332. s. p. T. J. Scott & Sons v. Rawls, 48 So. Rep. (Ala.) 710. A plea of payment of a smaller sum of money in bar of a claim for a larger sum in indeMtatus assumpsit, is not cured by verdict; and the plaintiff is entitled to a judgment non obstante veredicto: Down v. Hatcher, 2 P. & D. 292, 3 Jur. 651, 10 A. & E. 121. « See Farmers', etc., Ins. Ass'n v. Caine, 224 111. 599, 79 N. E. 954, affirming 123 111. App. 419. T See Sees. 54 et seq. on the question of consideration. 236 COMPROMISE [§ lOT the plea must show that some new and additional consideration/ passed from the debtor to the creditor,* and that it was something of value.' In cases of unliquidated demands, the consideration ap- pears from the very fact that the demand is alleged to have been settled and compromised by the delivery and acceptance in satis- faction of something of value.^" The pleader must not stop with alleging the essentials of the accord : ^^ "it is not enough that there be a clear agreement or accord and a sufficient consideration, but the accord must be ex- ecuted." ^^ A plea of accord and satisfaction is bad when the- performance necessary to constitute the satisfaction is not alleg- ed.^* An allegation of readiness to perform the accord,^* or a 8 Torry v. United States, 42 Fed. 207 ; Evans v. Powis, 1 Exch. 601 ; Downs; V. Hatcher, 10 A. & E. 121 ; Williams v. Langfor'd, 15 B. Mon. 566. 8 Davis V. Noaks, 3 J. J. Marsh. 494 ; Bayley v. Holman, 3 Blng. N. C. 915.. 10 See Sec. 83. Wilson v. Northwestern Ins. Co., 103 Minn. 35, 114 N. W. 251, was an action to recover the reasonable value of services. The parties- having stipulated as to the amount due, the real question left for considera- tion was the sufficiency of the allegations, that on a certain day "the plain- tiff fully compromised and settled their said claims for services * * * ;. that on said date said plaintiff received from the hands of Crowell & Smith the premium notes [describing them] ; and that said premium notes were- accepted and received by plaintiff in full settlement, satisfaction and dis- charge for all services rendered by them." This was held to properly allege a settlement of the cause of action. An allegation that the defendant had a dispute and counterclaim to the demand against him, is insufficient to show a botia fide dispute or counterclaim as will constitute a consideration for an accord and satisfaction: Foster v. Lammers, 134 N. W. (Minn.) 105. 11 A plea of an accord simply, is bad: Coit v. Houston, 3 Johns. Cos. 243> 12 Hearn v. Kiehle, 38 Pa. St. 147, 80 Am. Dec. 472. isGoble V. Bank, 46 Neb. 891, 65 N. W. 1062; Perdew v. TUlma, 62 Neb- SOS, 88 N. W. 123 ; Rogers v.' Spokane, 9 Wash. 168, 37 Pac. 300 ; 2 Pars. Cont. (6th Ed.) p. 836 ; Fitch v. Haight, 5 111. 51 ; Eichholtz v. Taylor, 88- .Ind. 38; Holton v. Noble, 83 Cal. 7, 23 Pac. 58; West v. Carolina Ins. Co., 31. Ark. 476 ; Graham v. Gibson, 4 Ex. 768, 19 L. J. Ex. 204. 14 Hearn v. Kiehl, 38 Pa. St. 147, 80 Am. Dec. 472. § 107] PLEADING 237 tender of performance,^" or even a part performance and a readi- ness to perform ^» or tender of performance of the rest," will not do. If performance of a new agreement, and not the new agree- ment, is to constitute the satisfaction, performance according to the terms of new agreement must be alleged. Where the new agreement was to pay installment upon certain days, a plea was held bad which failed to show that the payments were made on the precise days agreed.^* If the terms of the new agreement are departed from upon a performance, facts showing a change in the agreement, or a waiver of strict performance should be alleged. According to Pinnel's Case, it must be alleged that the money or other thing was paid or delivered in full satisfaction, for "the manner of the tender and of the payment shall be directed by him who made the tender or payment, and not by him who accepts it." ^* So, it must also be alleged that the performance of the accord was accepted in satisfaction ; "" or such facts as raise an implied acceptance in satisfaction, as may often arise upon the acceptance of a tender offered in settlement of an unliquidated or disputed demand.^^ If performance of the accord consists in en- 16 Hearn v. Klehl, 38 Pa. St. 147, 80 Am. Dec. 472. See Heirn v. Carron, 11 S. & M. 361, 49 Am. Dec. 65, and Tucker v. EMwards, 7 Colo. 209, 3 Pac. 233, to the contrary. But the weight of the adjudicated cases (not necessarily on pleading) from Peytoe's Case, 9 Co. 80, to the present day is as stated in the text. 16 Hearn v. Kiehl, 38 Pa. St. 147, 80 Am. Dec. 472. 17 See Kromer v. Heim, 75 N. Y. 574, 31 Am. Rep. 491 ; Noe v. Christie, 51 N. Y. 270; Gabriel v. Dresser, 15 C. B. 622, 80 E. C. L. 622. 18 Evans v. Powis, 1 Ex. 601. Here, however, the new agreement, was to be performed in satisfaction of a composition. 19 Pinnel's Case, 5 Co. 117. 20 Vanhousen v. Broehl, 58 Neb. 348, 78 N. W. 624; Id., 59 Neb. 48, 80 N. W. 260; Hearn v. Kiehl, 38 Pa. St. 147, 80 Am. £>ec. 472; State Bank v. Littlejohn, 18 N. C. 563 ; Diller v. Brukaker, 52 Pa. St. 498, 91 Am. Dec. 177 ; Carpenter v. Chicago, etc., R. Co., 7 S. D. 584, 64 N. W. 1120 ; aty Council T. Shirley, 48 So. (Ala.) 679. See Bailey v. Cowles, 86 111. 333. 21 See Lindsay v. Gager, 11 N. T. App. Div. 93, 42 N. Y. Supp. 85. 238 COMPROMISE [§ 107 tering into a new executory agreement it must be alleged that the agreement was executed and accepted in satisfaction."^ No different rules obtain with respect to pleading where the accord and satisfaction is set out in the replication or reply." ^ The plea must go to the entire demand it is opposed to or it is bad."* In England it has been held that if accord and satisfaction is ef- fected after action brought, it must be alleged and proved, that it was also a satisfaction of the costs and damages arising from the breach of contract."" But such a plea which did not allege that the costs were settled also, was held good after verdict."' These cases are opposed to the general rule in the United States, that if a creditor accepts the principal without reserving a right to damages and costs, which are but incident to the debt, he waives his right to recover the damages and costs."'' According to American authorities, where after the commencement of the action, the cause of action is discharged by an accord and satis- faction, payment "* or release,"' the presumption is, unless the contrary appears, that the costs have been adjusted between the parties. 2 2 Brunswick, etc., R. Co. v. Clem, 80 Ga. 534, 7 S. E. 84; Clough v. Mur- ray, 3 Rob. (N. Y.) 7. 2» Heath v. Doyle, 18 R. I. 252, 27 Atl. 333. 24 Thomas v. Heathorn, 2 B. & G. 477; Hopkmson v. Tahourdin, 2 Chitt. 303. 2s Goodwin v. Cremer, 17 Jur. 2, 22 L. J. Q. B. 30, 18 Q. B. 757; Francis V. Crywell, 5 B. & Aid. 886, 1 D. & R. 546 ; Ash v. Pruppeville, L. R. 3 Q. B. 86, 37 L. J. Q. B. 55, 16 W. R. 191, 8 B. & S. 825. 26 Corbett v. Swinburn, 3 N. & P. 558, 8 A. & E. 673, 1 W., W. & H. 511. 27 Tillotson V. Preston, 3 Johns. 229 and Note, L. Ed. 28 Johnson v. Brannon, 5 Johns. 267; Tillotson v. Preston, 3 Johns. 229. 2» Kimball v. Wilson, 3 N. H. 96, 14 Am. Dec. 342. § 108] PLEADING 239 Sec. 108. Same subject. — ^As the acceptance of performance upon an accord works the satisfaction of the original demand, it is not apparent wherein the time of executing the accord is ma- terial, if acceptance be alleged, except, possibly, as identifying the accord upon which the payment was made.^ In one case it was held that the time of an accord and satisfaction, as stated in the notice of special matter, was not material and may be departed from in the evidence.^ In another, that payment at a later date than the date of the accord and satisfaction alleged, may be shown.* Bitt in another case, it was decided that a failure to allege the time of the performance i^enders the plea bad on special demurrer.* If the defendant relies upon an accord and satisfac- tion of an agreement or other instrument under seal, he must al- lege that the accord and satisfaction was by an instrument of as high a nature.^ And, the circumstance that a bond has become single by a forfeiture does not change the rule." But a distinction is to be observed, however, between an accord and satisfaction in discharge of a sealed instrurnent itself, and one in discharge of the money due by the condition therein or of the damages for a breach. In the latter case an accord and satisfaction without deed may be pleaded in satisfaction,^ either before or after a de- fault. An accord is executed by payment or delivery of the thing agreed to be accepted, to a third person appointed to receive it; " 1 See Sonnenberg v. Riedel, 16 Minn. 83. 2 Strange v. Holmes, 7 Cow. 224. 8 Sonnenberg v. Riedel, 16 Minn. 83. * Pence v. Smock, 2 Blackf. 315 ; Evans v. Fowls, 1 Ex. 601, 11 Jur. 1043, is a case of a failure to allege performance upon the precise day upon a composition agreement. See Composition, post. 6 Blake's Case, 6 Coke, 43; Neal v. Sheffield, Cro. Jac. 254; Preston v. Christmas, 2 Wils. 86; Ligon v. Dunn, 28 N. C. 133; State Bank v. Little- john, 18 N. C. 563 ; Kaye v. Waghorne, 1 Taunt. 428. 8 Anonymous, Cro. Elllz. 46. 7 Preston v. Christmas, 2 Wils. 86 ; Peytoe's Case, 9 Co. 79. 8 Anderson v. Highland, 16 Johns. 86. 240 COMPROMISH [§ 108 but, a plea which does not allege that the third party was the plaintiff's agent for that purpose, is bad.* Where an accord and satisfaction was made by a stranger, ratification sufficiently ap- pears from the fact that the defendant pleads it.^" In England, a plea was held bad in substance, which did not show that the agreement and payments under it were intended to be made for the benefit of the defendant, and that he had adopted the acts of the stranger.^^ So, such a plea was held insufficient where it was not alleged that the payment made by a stranger were made for and on account of the debt and had been ratified by the de- fendant.^" If the accord and satisfaction was made with one joint creditor, it is not necessary to allege that he had authority to act for all.^' A plea must show that the defendant was discharged by the ac- cord and satisfaction, for, if an accord and satisfaction between two other parties to a transaction, does not, as a matter of law, enure to the defendant's benefit, the plea is bad.^* 8 Bird V. Caritat, 2 Johns. 345. 10 Snyder v. Pharo, 25 Fed. 398. 11 James v. Isaacs, 12 a B. 791, 17 Jur. 69, 22 L. J. 0. P. 73. 12 Kemp V. BaUs, 10 Bxch. 607, 3 C. L. R. 195, 24 L. J. Ex. 47. "Wallace v. Kelsall, 7 M. & A. 264, 8 D. P. C. 841, 4 Jur. 1064; Smith T. Lovell, 10 0. B. 6, 15 Jur. 250, 20 L. J. C. P. 37. See, also, Osborn y. Rail- way Co., 140 Mass. 549 ; State v. Story, 57 Miss. 738 ; 1 Pars. Cent. 26. 1* In Jones v. Broadhurst, 9 C. B. 173, the action was by an Indorsee against the acceptor. The latter pleaded an accord and satisfaction between the plaintiff and drawer in satisfaction of the bill. The plea was held bad for the reason that a satisfaction of a bill as between the drawer or indorser and an indorsee, whether before or after the bill falls due, does not neces- sarily enure as a satisfaction on behalf of the acceptor, or operate to dis- charge him from liability to the indorsee. § 109] PLEADING 241 Sec. 109. When pleaded — Practice. — ^An accord and satisfac- tion or a compromise, before action brought, or after action brought, but before the time to answer expires, should be set up in the answer in bar of the action,^ and not in bar of the fur- ther continuance of the action. If the agreement is effected after answer, and the terms are not embodied in a stipulation to be filed in the case, it should be set out by way of supplemental an- swer or cross bill.^ At common law if an accord and satisfaction would have been a good defense before the plea, it may be plead- ed puis darrein continuance.^ In equity, new matter arising after answering, is set up by way of a cross-bill in the nature of a plea puis darrein continuance* The plea should be pleaded as soon as the accord and satisfaction or compromise has been effected, and it has been held discretionary with the court to refuse or allow such plea after the next continuance." The proper course, if the plaintiff desires to take advantage of the objection that the plea was not pleaded in season, is by motion to set it aside, and not by demurrer.* New matter, such as payment, accord and satisfaction, or release, when pleaded puis darrein continuance, is in bar of the further continuance of the action, and, the conclusion of the plea is, that the plaintiff ought not further to maintain his action.^ And, the reason of the rule is said to be, that the pre- 1 Kimball v. Wilson, 3 N. H. 96, 14 Am. Dec. 342 ; Southwick v. Ward, 7 Jones, L. (N. Car.) 64, 75 Am. Dee. 453, (Release). 2 Strowbridge v. Randall, 78 Mich. 195, 44 N. W. 134 ; Coburn v. Cedar VaUey Land Co., 138 U. S. 196; Kelsey v. Hobby, 16 Pet. 269; Southwick V. Ward, 7 Jones, L. (N. Car.) 64, 75 Am. Dec. 453, (Release). 8 Helm V. Carron, 11 S. & M. 361, 49 Am. Dec. 65 ; Watkinson v. Inglesby, 5 Johns. 386. 4 Miller v. Fenton, 11 Paige Ch. 18, (Release). 5 Tilton V. Morgaridge, 12 Ohio St. 98 ; Morgan v. Dyer, 10 Johns. 161. » Morgan v. Dyer, 10 Johns. 161. 7 1 Chitty PI. 660 ; Kenyon v. Southerland, 8 111. 99. See Kimball v. Wil- son, 3 N. H. 96, 14 Am. Dec. 342, where a general release, pleaded before the regular plea had been entered, was held to be properly pleaded in bar of the action. Httnt ACC.& S.— 16 242 COMPEOMISH [§ 109 sumption is that the action was rightfully commenced, and such matter can, in its nature, be an answer only to the further prose- cution of the action.^ In those states having the code system of pleading, and perhaps some other states, the matter of bringing forward new matter arising after answering, is regulated by stat- ute, and it may be set out by way of a supplemental answer at any time before trial, and in some of the states, if not all of them, even after judgment, an appeal and a remand, upon a new trial being granted.' The practice prescribed is to apply upon motion for leave to file the supplemental answer. And, granting the mo- tion is a matter of discretion, even after the cause reaches the calendar for trial,^" or after the trial has commenced.^^ It has been held that where the matter of a compromise is brought be- fore the trial court upon motion, and it is claimed the agreement was obtained by fraud, or was not executed, the court will de- termine the matter and give judgment according to the terms of the agreement.^" But where a compromise after action brought is denied and the other party relies upon it, the proper practice is to plead it and not present it by way of a motion to dismiss.^^ 8 The reason for this distinction between a strict plea in bar and one in bar of the further maintenance of the action is well grounded, but the necessity for observing the distinction is no longer apparent in those jurisdictions where a general release after action brought, or an accord and satisfaction of the cause of action without reserving a right to costs and damages, dis- charges the costs atod damages. In England where the plaintifC is permitted to continue the action to recover iiis cost and damages, after he discharges the principal, it may be important, for there the plea must be broad enough to cover the costs and damages, and should be pleaded to the' further main- tenance of the action, for If pleaded in bar of the cause of action, the plain- tiff may proceed for his costs and damages. State V. District Court, 91 Minn. 161, 97 N. W. 581 ; Hennings v. Conner, 4 Bibb (Ky.) 298, (Release). 10 Guliano v. Whitenack, 3 Misc. 54, 22 N. Y. Supp. 560, (Release). 11 Seehorn v. Big Meadow, 60 Cal. 240, (Release). 12 Washhigton v. liOuisville, etc., R. Co., 136 111. 49, 26 N. E. 653. 13 George v. Chicago, etc., R. Co., 85 Iowa, 590, 52 N. W. 512; Miller y. Fenton, 11 Paige, 18, (Release). § 109] PLEADING 243 By taking issue without objection, upon a compromise irregularly set out, as when it is brought forward by a petition to dismiss,^* or upon a release filed and rnotion,^" the party waives the irregu- larity in the practice. On an appeal from a justice court, where the trial is de novo, an accord and satisfaction, or compromise, or other new matter which furnishes a defense, and which unless pleaded, would be unavailable, may be set out by plea puis dar- rein continuance.^^ But, when, after judgment and before an ap- peal, the action was compromised, but the defendant nevertheless prosecuted an appeal, it was held that an accord and satisfaction could not be set up by way of a plea puis darrein continuance; that the proper course was to apply to the appellate court by motion to dismiss the appeal.^' A plea of accord and satisfac- tion to assignments of error on a certiorari has been held good on demurrer.^* The same court, however, doubted whether such a plea could be pleaded in bar of a writ of error, notwithstanding the decision of another court holding such a plea good.^* The authorities are not agreed on whether an appellate court, which tries an action upon the record brought up from the lower court, will inquire into whether or not a valid compromise of the cause of action, not appearing by the return, has been made. In some jurisdictions the authority is denied,"" while in others, evi- 1* Coburn v. Cedar Valley Land Co., 138 U. S. 196. 10 Kelsy v. Hobby, 16 Pet. 269. 16 People V. Ontario, 1 Wend. 180. IT Schenck v. Lincoln, 17 Wend. 506. 18 Potter V. Smith, 14 Johns. 444. 19 Plxler V. Salmon, 2 Day, 242. In Austin v. Balnter, 40 111. 82, It is held that acts w pais, occurring either before or after the rendition of the decree, which would make it fraudulent in either party to seek a reversal of the decree, may be pleaded in bar of the writ. 20 Parks v. Doty, 13 Bush, 727 ; Neal v. Cowles, 71 N. C. 266 : In this case the court said, if the record of the court below is false, it cannot be corrected in this court 244 COMPROMISE [§ 109 dence dehors the record has been admitted to prove a compro- mise.^^ The question is one of practice. In consonance with the principle that the law favors compromises, and, that, to examine errors and reverse a judgment that has been discharged by satis- faction, is a useless proceeding, an appellate court will afford a litigant an opportunity, in some way, to present a question of a compromise of the judgment appealed from. In a case where the matter was brought before the court upon a motion to dis- miss, based upon affidavits, and the fact of the compromise was not disputed, Mr. Justice Miller, answering the argument that to recognize the compromise and grant the motion was to assume original instead of appellate jurisdiction, said: "But this court is compelled, as all courts are, to receive evidence dehors the rec- ord affecting their proceedings in a case before them on error or appeal," and by way of illustration, among several, said : A release of errors may be filed in bar to the writ; a settlement of the controversy with an agreement to disr-iiss the appeal or writ of error will be enforced.^" In another case before the same court upon a motion to dismiss, where the authority of certain city of- ficials to compromise the judgment appealed from was denied and the compromise alleged to be fraudulent, the court, consider- ing that the question of the authority of the mayor and council to make the compromise and the alleged fraud in making it, was too important to be settled summarily upon motion, and required the power of a court of original jurisdiction to investigate and de- cide thereon, continued the appeal to a subsequent term, with the condition that the appeal would be dismissed unless the party op- posing should begin and prosecute without unnecessary delay, in some court of competent jurisdiction, an appropriate suit to set 21 Dakota County v. Glidden, 113 U. S. 222, 5 S. Ct. 423, 28 L. Ed. 981 ; Atlantic v. Blanton, 80 Ga. 563; New Orleans v. Bank, 44 La. Ann. 698, 11 So. 146. 22 Dakota County v. Glidden, 113 U. S. 222, 5 S. Ct. 428, 28 L. Ed. 981. 8. P. Burns v. National Co., 108 Pac. (Colo.) 330. § 110] PLEADING 245 aside the compromise. Afterwards, the compromise being upheld by the trial court, the appellate court dismissed the appeal."^ Sec. 110. Joining issue — Demurrer — Motions — Amendment. — A plea of accord and satisfaction must be met by a replication or reply traversing it or it will stand admitted,^ except in those states where by statute it is denied by operation of law.^ If met by a general denial or denied by operation of law, the defendant may give in evidence any fact done or omitted that tends to show that the alleged agreement is insufficient in law to constitute an accord and satisfaction, or a compromise, as that the thing was not accepted in satisfaction ; ° or that the alleged agreement was not in fact consummated, as where the plaintiff at the time of the alleged compromise was unconscious and delirious.* Here the fact of the compromise only is in issue. ° At common law "The replication to a plea of accord and satisfaction may either deny the delivery of the chattel in satisfaction," or protesting against that fact, may deny the acceptance,^ or the plaintiff may deny both the delivery and acceptance in satisfaction." ' If the accord 23 Board v. Louisville, etc., E. Co., 109 U. S. 221. This case was an appeal from the decree of the Circuit Court upholding the compromise set forth in the motion to dismiss the appeal in the main action. See Sec. 89. 1 Reichel v. Jeffrey, 9 Wash. 250, 37 Pac. 296. 2 Stomme v. Hanford, 108 Iowa, 1.37, 78 N. W. 841 ; Higley v. Burlington Ry., 99 Iowa, 503, 68 N. W. 829 ; Leslie v. Keepers, 68 Wis. 123 ; Continental Bank v. McGeoch, 92 Wis. 286. 8 Pottlitzer v. Wesson, 8 Ind. App. 427, 35 N. E. 1030. *Moulton V. Aldrich, 28 Kan. 300. » Stommer v. Hanford, 108 Iowa, 137, 78 N. W. 841. 6 State Bank v. Littlejohn, 18 N. C. 563. 7 O'Riley v. Wilson, 4 Or. 96; Berdell v. Bissell, 6 Colo. 162. A plaintiff may deny acceptance, although under the statute he may show that fact un- der a general denial: Pottlitzer v. Wesson, 8 Ind. App. 472, 35 N. B. 1030. 8 1 Chitty PI. 582 ; Webb v. Weatherby, 1 Bing. N. C. 502, 1 Hodges, 39 ; Dent V. Coleman, 10 S. & M. 83. See Baldwin v. Bank, 1 Oh. St. 141. 246 COMPROMISE [& 110 and satisfaction, or compromise be not pleaded by way of satisfac- tion, but is set out, it is material, and it is sufficient if the agree- ment be denied or otherwise traversed without specially answering the allegations of delivery and acceptance in satisfaction.' The plea of accord and satisfaction or compromise is demurrable for defects in form and substance. The objection that the agreement set out does not constitute an accord and satisfaction, or a com- promise, may be made on an objection to the introduction of evi- dence, or after trial. A plea of payment of a smaller sum of money in bar of a claim for a larger sum in indebitatus assumpsit, is not cured by verdict.^" A plea setting out an unexecuted ac- cord will be stricken out on motion as not constituting a de- fen se.^^ So, a plea alleging that the plaintiff agreed to take a third person as paymaster for the debt is frivolous and will be stricken out.^^ A sham plea of accord and satisfaction will be stricken out as in other cases. ^' Objections based on defects in form must be urged upon special demurrer,^* and usually at the first term after the plea is filed, otherwise they will be disregard- ed.^" If a plea is sufficient in substance but the allegations are indefinite and uncertain, or wanting in completeness, it should » Bainbridge v. Lax, 9 Q. B. 819, 58 E. C. L. 819. 10 Down V. Hatcher, 2 P. & D. 292, 3 Jur. 651, 10 A. & E. 121. Where, to a. declaration upon two counts for 101. each, non assumpsit and payment of 101. in satisfaction were pleaded, and the plaintiff before trial entered a ■nolle prosequi to one count, and verdict went for the defendant on the plea of payment, It was held the plaintifiC was not entitled to a verdict non ob- stante veredicto, for the reason that the record will be looked at at the time of the trial and not when the plea was pleaded: Wright v. Acres, 1 N. & P. 761, 6 A. & B. 726, W. W. & D. 328. 11 Cannon River Ass'n. v. Rogers, 46 Minn. 376, 49 N. W. 128; Daniels v. Hallenbeck, 19 Wend. 410. 12 Daniels v. Hallenbeck, 19 Wend. 410. 18 Rlchley V. Proone, 1 B. & C. 286. 1* Wood V. Harris, 5 Blackf. 585. 16 Brantley v. Lee, 106 Ga. 313, 32 S. E. 101. § 111] PLEADING 247 be assailed by motion for a more definite and specific statement of the matters constituting the accord and satisfaction or com- promise; for when tested by an objection in the nature of a de- murrer the plea will be held good.^" A plea of accord and satis- faction may be amended in the same manner and upon like show- ing as other pleas.^^ Sec. 111. Reply to avoid the agreement — Pleading a tender. — If the alleged agreement was made but the defendant denies that it is valid and effective by reason of fraud, duress or mistake, a replication or reply setting up such new matter is required.^ In all or most of the code states new matter is by statute required to be set out affirmatively in the reply ; ^ which is but declaratory of the common law. The facts and cifcumstances constituting the •duress or fraud should be set out specifically,* and the plaintiff must allege that he was misled or that he believed in the truth of the false representations and was induced thereby to enter into 18 In Forbes v. Petty, 37 Neb. 899, 56 N. W. 730, the answer—"* • • the defendant had a full and complete settlement, and a full and complete arbitration and settlement, of all matters * » * and more especially the matter referred to In the petition," was held sufficient upon the question of a settlement, but the court observed : "Had it been assailed by a motion for a more specific statement of the matters alleged therein, such objection would have been well taken. Schwartz v. Evans, 75 Tex. 198, 12 S. W. 863. In Stead V. Pryor, 1 O. B, 782, 50 B. O. L. 782, upon a special demurrer for ambiguity, the plea was held bad, inasmuch as it might be construed either that the agreement to accept the delivery of the goods in satisfaction took place at the same time as the delivery, or at a subsequent period. 17 See Webster v. Wyser, 1 Stew. 184. Field v. Cappers, 81 Me. 36, 16 Atl. 328, 10 Am. St. Rep. 237, (Release). 1 Stbmme v. Hanford, 108 Iowa, 137, 78 N. W. 841 ; O'Brien v. Railway Co., 89 Iowa, 644, 57 N. W. 425; Hartford Ins. Co. v. Klrkpatrick, 111 Ala. 456, 20 So. 651 (where the party is in prison when the threats are made, there must be an allegation of threats to continue the imprisonment) ; Btaln- ard v. Van Dyke, 71 Vt. 359, 45 Atl. 758. 2 See Minn. Code 1905, Sec. 4134 ; Iowa Code, Sec. 2695. « Brainard v. Van Dyke, 71 Vt. 359, 45 Atl. 758. 248 COMPROMISE [§ 111 the agreement, and that the false representations or whatever constituted the fraudulent acts, were made or done with the intent to defraud. In Wisconsin, however, and perhaps in some other states, where by statute everything in a reply excepting a counter- claim is deemed controverted, matters in avoidance may be shown without a reply of any kind.* Formerly under the old equity practice, a bill in a suit for a rescission, which did not contain a formal offer to return what had been received on the contract was demurrable, but this rule does not now obtain everywhere under that practice." It has been said that under the code system, which merely requires a complaint to contain only a statement of the facts constituting the cause of action and the prayer for relief, no such averment is nec- essary. A willingness is sufficiently shown by a plaintiff by sub- mitting his cause to the court which has the power to impose the proper terms of granting the relief.* Where a party has rescind- ed by his own act by returning or tendering what he received, in any proceedings, either at law or in equity, where he relies upon the rescission, he must allege a tender of that which he re- ceived upon the contract, or if a technical tender was not made an excuse for not making one.'' Whether a formal tender in rescis- sion is necessary in all jurisdictions, before a party may take ad- vantage of fraud or duress in avoiding a compromise will be con- sidered in subsequent sections. * Continental Bank v. McGeoch, 92 Wis. 286 ; Leslie v. Keepers, 68 Wis. 183, 31 N. W. 486. B Jervis v. Berrldge, L. R. 8 Cli. App. 351, 21 W. R. 96. 8 Knappen v. Freeman, 47 Minn. 491, 50 N. W. Rep. 533. In Thompson v. Hardy, 102 N. W. Rep. (S. D.) 299, the objection was raised that it was not alleged in the complaint that plaintiff had rescinded. The court said that the action was for a rescission and that an offer of restoration in the com- plaint was suflBcient. The effect of a failure to allege a willingness to restore what was received was not commented upon. T Brainard v. Van Dylte, 71 Vt. 359, 45 Atl. 758. See Knoxville, etc., R. Co. V. Acuff, 92 Tenn. 26, 20 S. W. 348, holding that a tender is waived by joining issue on the matters set up in avoidance. § 112] PLEADING 249 Sec. 112. Pleading release. — ^As a release is so often given upon a settlement by way of compromise, its consideration is not inappropriate, although the subject of a distinct branch of the law. A plea of release is a plea in bar.^ It confesses and avoids the cause of action set out in the complaint. In general, what has been said in the foregoing sections about the time, manner and necessity for pleading an accord and satisfaction, or compromise, applies with equal force to pleading matter of release. At com- mon law, although there is a special plea by which a release may be set oiit affirmatively,^ it may be given in evidence under the general issue, in assumpsit,* case,* debt,° and sometimes in tro- ver,* although this has been doubted.^ But in trespass, whether to the person, personal or real property,* in covenant," and ac- tions on a specialty,^" or record,^^ but not on a foreign judgment, a release must be pleaded specially. It is an affirmative defense and now, in all jurisdictions excepting those adhering to the com- mon law practice, it must be pleaded specially,^^ either under the rules of court,^^ or special statute,^* or under the code system 1 3 (Jhitty PI. 931. 2 1 CMtty PI. 478. 3 1 Chitty PI. 478; Cleveland v. Rothsclilld, 132 Mich. 625, 94 N. W. 184; Fulton V. Bank, 2 Wend. 486. * 1 Chitty PI. 491. B 1 Chitty PI. 481. « 1 Chitty PI. 498. 7 Hawley v. Peacock, 2 Camp. 558. 8 1 Chitty PI. 491, 506. 8 1 Chitty PI. 487. 10 1 Chitty PI. 485. 11 1 Chitty PI. 486. 12 Horton v. Horton, 83 Hun, 213, 31 N. Y. Supp. 588. 13 See Cleveland v. Rothschild, 132 Mich. 625, 94 N. W. 184, where, under rules of court, it must be plainly set forth in a notice attached to the plea (general issue). Rule 7, (b). 1* In England since the enactment of the "Hillary Rules" Hil. T. 4 W. IV, accord and satisfaction, release, etc., must be specially pleaded. 250 COMPEOMiSB [§ 112 of pleading. In some states it may be proven under the general issue when the plea is accompanied with a notice that the party intends to rely upon it and plainly sets forth the release.^" With respect to pleading a release puis darrein continuance, and the time generally when a release may be pleaded, and the practice; the rules are the same as obtained in pleading accord and satis- faction, and compromise, and to avoid further repetition the read- er is referred to a prior section.^* A plea of release being a plea in confession and avoidance, it admits the existence at the time of the execution of the release, of the obligation which it professes to discharge.^^ A plea of a release pleaded puis darrein continu- ance after a demurrer and joinder in demurrer, operates as a re- traxit of the demurrer.^* The facts showing a valid binding release must be averred.^" 10 Cleveland v. KothscliUd, 132 Mich. 625, 94 N. W. 184; Wlsheart v. Legro, 33 N. H. 177. 18 See Sec. 109, where cases concerning release are also cited. 17 See Bement v. Ohio Valley B. Co., 99 Ky. 109, 59 Am. St. Rep. 445, 35 S. W. 139, 18 Ky. L. Rep. 37. 18 Solomon v. Graham, 1 Jur. N. S. 1070, 24 L. J. Q. B. 332. 19 Hosier v. Eliason, 14 Ind. 523. The terms should be set out so that the court can judge of its validity. We give here Mr. Chitty's form of a plea of release at common law, which shows what facts must be pleaded: "And the said defendant by B. F. his attorney, comes and defends the wrong and injury, when, etc., and says that said plaintiff ought not to have or maintain his aforesaid action thereof against the said defendant, because he says, that after the making of the said several promises and undertakings in said declarations mentioned, and before the exhibiting of the bill of the said plaintifC against the said defend- ant in this behalf, to wit; on the (date) and at (venue) aforesaid, the said platntifC, by his certain writing of release, sealed with his seal, and now shown to the said court here, the date whereof is a certain day and year therein mentioned, to wit, the day and year last aforesaid, did demise, release and forever quit claim unto the said defendant, his heirs, executors and ad- ministrators, the said several promises and undertakings in the said declara- tions mentioned, and each and every of them, and all sum and sums of money then due and owing, or thereafter to become due, together with all and all manner of action and actions, cause and causes of action, suits, bills. § 112] PLEADING 251 Alleging that the plaintiff releases the defendant is a conclusion of law.^" If the .consideration is executory and is to be paid before the release takes effect, the releasee must allege that he has performed." The pleader must allege that the particular de- mand sued upon was embraced in the release ; ** and, where the terms of a release set out, are broad and general, evidence is ad- missible to show that the particular demand in question was in- cluded in it.^' In pleading a release puis darrein continuance it bonds, writing obligatory, debts, dues, duties, reckonings, accounts, sum and sums of money, judgments, executions, extents, quarrels, controversies, tres- passes, damages and demands whatsoever, both at law and in equity, or otherwise howsoever, which he the said plaintifE then had, or which he should or might at any time or times thereafter have, claim, allege or demand against the said defendant for or by reason or means of any matter, cause or thing whatsoever, from the beginning of the world to the day of the date of said deed or writing of release ; as by the said deed or writing of release, reference being thereto had, will fully appear, and this the said defendant is ready to verify wherefore he prays judgment, if the said defendant ought to have or maintain his aforesaid action thereof against him." 3 Chitty PI. 930. Plea puis darrein continuance: "And now at this day, that is to say, on the day of — in this same Term, until which day the plea aforesaid was last continued, comes the said plaintiff by his at- torney, and the said defendant by his attorney aforesaid, and the said defend- ant saith, that the said plaintiff ought not further to have or maintain his aforesaid action thereof against him, because he saith that after the last continuance of this cause, that is to say, after the day of in this same Term, from which day this cause was last con- tinued, and before this day, to wit, on (date), at (venue) the said plaintiff (here state the release, as in the foregoing form) and t^iis the said defendant is ready to verify, wherefore he prays judgment, if the said plaintiff ought further to have or maintain his aforesaid action thereof, against him." 3 Chitty PI. 1238. 20 Benihan v. Wright, 125 Ind. 536, 25 N. E. 822, 21 Am. St. Rep. 249, 9 L. R. A. 514 ; Marshall v. Mathers; 103 Ind. 458, 3 N. B. 120; Gasscock v. Ham- ilton, 62 Tex. 143 ; Maness v. Henry, 11 So. 410. 21 Scott V. Scott, 105 Ind. 584, 5 N. E. 39T. 2 2 Mandt Wagon Co. v. Fuller, 125 Wis. 258, 97 N. W. 958; Voiles v. Beard, 58 Ind. 510. See Hale v. Grogan, 99 Ky. 170, 35 S. W. 282, 18 Ky. L. Rep. 46. 28 Mandt Wagon Co. v. Fuller, 120 Wis. 258, 97 N. W. 958. 252 COMPROMISE, [§112 should be alleged when the release was made and the date of the last continuance.^* So, the time and place of executing a re- lease should be alleged where it is set out in the regular plea." It has been decided in Illinois that when the defendant pleads a release, it need not be alleged to be under seal, because a release ex vi termini imports a seal.'"' In Indiana the reverse has been held to be the rule,^^ and, according to Mr. Chitty's forms, a re- lease must be alleged to be sealed.^' The rule announced in Ill- inois seems to be more reasonable, in view of the well known legal definition of a technical release. Whether the release plead- ed has a seal or not is matter of evidence,^' and when a seal is necessary, the want of it is a matter of defense. A seal is not essential to a written discharge of a demand, "If it be founded upon a sufficient consideration." '" In such cases if there be in fact no technical release, the demand would be discharged by way of an accord and satisfaction, or compromise and not by release. At common law a seal imports a consideration; in fact it ob- viates the necessity for any consideration whatever, and pleading a technical release at common law,'^ and in some states where, by statute written releases, unsealed, are declared of equal dignity with seal releases,'" it is not necessary to allege a consideration. Alleging a consideration is unnecessary even when by statute the 2* Field V. Coppers, 81 Me. 36, 16 Atl. 328, 10 Am. St. Rep. 237. 2B3 Chitty PI. 930. 28 Bailey v. Cowles, 86 111. 333 ; Illinois Cent. R. Co. v. Read, 37 lU. 484, 87 Am. Dec. 260. 2' Griggs V. Voorhies, 7 Blackf. 561 28 3 Chitt. PI. 930. 29 Illinois Cent. Ry. Co. v. Read, 37 111. 484, 87 Am. Dee. 260. 3 Illinois Cent. Ry. Co. v. Read, 37 111. 484, 87 Am. Dec. 260. 81 3 Chitty PI. 930. 82 Miller v. Fox, 111 Tenn. 336, 76 S. W. 893; Williams v. Hitchings, 10 Lea (Tenn.) 326; Warren v. Gentry, 21 Tex. Civ. App. 151, 50 S. W. 1025. See Rogers v. KimbaU, 49 Pac. (Cal.) 719. § 113] PLHADINQ 253 seal is only presumptive evidence of a consideration.'* In such cases want of consideration is matter of defense.'* In those states where seals have been abolished by statute, and where unsealed releases have not been given the force and effect of sealed instru- ments at common law, it would seem to be necessary, in plead- ing a release to allege an adequate legal consideration.'" Sec 113. Same subject — Reply. — Release being new matter in confession and avoidance, the plea must be met by a reply, or de- murrer; otherwise it will stand admitted as alleged.^ At common law, to a plea of release, particularly in assumpsit, debt and trespass, the plaintiff may reply non est factum ; ^ which denies that the deed (or release) mentioned in the plea is the deed of the plaintiff. Un- der this allegation, the plaintiff may show at the trial that the deed was never executed in point of fact.' When a release is pleaded according to its supposed legal effect, non est factum not only puts in issue the fact of its execution, but the construction as alleged; thus, where a note was alleged to have been made by two persons, 33 Winter v. Kansas City, etc., Co., 73 Mo. App. 173, afe'rm'd in 160 Mo. 150, 61 S. W. 606 ; Green v. Langdon, 28 Mich. 221. See Osborn v. Hubbard, 20 Or. 318, 25 Pac. 1021, 11 L. R. A. 833. 34 Wabash R. Co. v. Boon, 65 Fed. 941, 13 C. C. A. 222 ; Winter v. Kansas City, etc., Co., 73 Mo. App. 173. 35 Hale V. Gragan, 99 Ky. 170, 35 S. W. 282; 18 Ky. L. Rep. 46; Bank V. Severin, 124 Ind. 317, 24 N. E. 977; Cameron v. Warbritton, 9 Ind. 351 ; Maness v. Henry, 96 Ala. 454, 11 So. 410 ; Swan v. Benson, 31 Ark. 728. • 1 Cordner v. Roberts, 58 Mo. App. 440 ; Hoeger v. Ohio Valley, etc., Co., 36 Ind. App. 662, 76 N. E. 328. This rule Is changed somewhat by statute in some of the states and local statutes should be examined. See St. Louis, etc., R. Co. V. Smith, 82 Ark. 105, 100 S. W. 884; Petersen v Taylor, 34 Pac. (Cal.) 724. 2 1 Chitty's PI. 582, 584, 597 ; Dennison v. Mudge, 4 Barb. 243. 3 Stephen on PI. 159 ; North v. Wakefield, 13 C. B. 536, 13 Jur. 731, 18 U J. Q. B. 214 ; (1908) Hammond v. Antonia, 83 N. E. (Ind. App.) 766. See Indiana U. T. Co. V. McKinney, 39 Ind. App. 86, 78 N. E. 203, for a reply denying the execution of a release. 254 COMPROMISE [§ 11^ and the defendant pleaded that the plaintiff had released his co- debtor which released hjm; a replication non est factum, put the defendant to his proof of the execution of a release susceptible of the construction alleged.* Under a plea non est factum the plaintiff cannot deny the validity of a release in point of law.° Any circum- stance out of which the alleged illegality arises must be brought for- ward by a special allegation.* A reply denying that the effect of the release is to discharge the defendant is demurrable.^ A general denial under the code system of pleading, takes the place of the general issue at common law in this respect; and under it, any evidence is admissible that will tend to show that the plain- tiff never released the demand; as, that he did not execute the re- lease ; that the alleged release was never delivered ; ' that the minds of the parties never met, as where the release signed was represent- ed by the debtor to be a receipt. In such a case, the court said : "It requires something more than the mechanical act of signing one's name to a paper or writing to constitute a making or execution of a written instrument. The assent of the parties must go with the act of signing." ° Such evidence is not brought forward for the purpose of avoiding a release which the plaintiff made and deliv- ered, but to disprove the alleged fact that he had settled and releas- ed his demand, and that he did not make the contract or release which he apparently did make.^" If the release is voidable and the releasor means to take advantage of that fact, he must reply ad- mitting its execution. A hypothetical admission, as when the plain- tiff alleges that if the release was executed it was obtained by fraud, * North V. Wakefield, 13 C. B. 536, 13 Jur. 731, 18 L. J. Q. B. 214. B Stephen PI. 159. 8 Stephen PI. (6th Ed.) 147. t Dennison v. Mudge, 4 Barb. 243. A reply alleging that the words do not mean what they say is bad on demurrer: Fuller v. Burrel, 2 Root, 296. 8 Christiansen v. Chicago, etc., Ry. Co., 61 Minn. 249, 63 N. W. 639. » Christianson v. Chicago, etc., Ry. Co., 61 Minn. 249, 63 N. W. 639. 10 Christianson v. Chicago, etc., Ry. Co., 61 Minn. 249, 63 N. W. 639. § 114] EVIDBNCH 255 is bad.^^ The facts and circumstances constituting the fraud, du- ress or whatever is relied upon for an avoidance of the release should be specially pleaded,^* although cases are to be found holding good a reply alleging merely that the release was obtained by fraud." There is a line of cases holding that where a plaintiff by fraud is induced to sign a release when he intended to sign something else, the fraud may be shown under the replication non est factum,^* or general denial.^' In such cases, however, the fraud is admissible to prove want of assent and that their minds never met upon the same thing. Where a general release is pleaded, which, unless lim- ited, is a discharge of the cause of action sued upon, the plaintiff cannot reply that the particular cause of action sued on was not in- cluded, but must allege and prove mutual mistake, or fraud up- on the part of the defendant and mistake on his part.^* Sec. 114. Evidence — Burden of proof — ^Weight. — The burden of proving an accord and satisfaction is upon the party alleging it.^ The satisfaction as well as the accord must be proven ; * and if the accord is that there is to be no satisfaction until certain notes taken 11 Heck V. Missouri Pac. R. Co., 147 Fed. 775. 12 Harris v. Bottum, 81 Vt 346, 70 Atl. 560 ; Friedburg v. Knight, 14 R. I. 585. See Bean v. Western, etc., R. Co., 107 N. C. 731, 12 S. E. 600 ; Brus- sian T. Tlie MUwaukee, etc., R. Co., 56 Wis. 333; 1 CMtty on PI. 582. 18 See Hoitt v. Holcomb, 23 N. H. 535. 1* Shampeau v. Lumber Co., 42 Fed. 760. IB Christiansen v. Chicago, etc., Ry. Co., 61 Minn. 249, 63 N. W. 639. 18 Walbourn v. Kingstom, 86 Hun, 63, 33 N. Y. Supp. 117. 1 Simmons v. Oullahan, 75 Cal. 508, 17 Pac. 543 ; McKinnon v. Holden, 123 N. W. (Neb.) 439 ; Noe v. Christie, 51 N. Y. 270 ; Bahrenburg v. Conrad, 107 S. W. (Mo. App.) 440 ; Oil Well Co. v. Wolf, 127 Mo. 616, 30 S. W. 145 ; Board V. Dumell, 66 Pac. (Colo.) 1073; Dickinson v. Barr, 7 Ark. 34; Johnson v. Collins, 20 Ala. 435. 2 Arnett v. Smith, 88 N. W. (N. D.) 1037 ; Hoxsie v. Lumber Co., 41 Minn. 548, 43 N. W. 476: Burgess v. Denison, 79 Me. 266, 9 Atl. 726. An accord executory is no bar: Mitchell v. Hawley, 4 Denio, 414, 47 Am. Dec. 260; Bank v. De Grauw, 23 Wend. 342, 35 Am. Dec. 369; Bradley v. Palen, 78 Iowa, 256 COMPROMISE [§ 11^ upon the settlement are paid, payment of the notes must be shown.' It must be made to appear that the performance was accepted by the creditor as satisfaction.* If any thing other than money was given in payment the burden of showing that it was received by way of a compromise, as satisfaction, is upon the debtor." But the thing received, as a note or new contract, need not be produced or accounted for." The evidence must show a complete perform- ance according to the terms of the accord. Proof of a readiness, '^ or attempted performance,' or of a tender of performance of the accord," or even part performance and readiness to perform the rest,^° is not sufficient. The rule is the same in equity as at law." A party must prove the accord and satisfaction alleged; proof of another will be a fatal variance.^'' If, in an action upon the orig- inal cause of action, the plaintiff'? evidence discloses an accord, he must go further and prove there was no satisfaction of the new agreement.^* 126, 42 N. W. 623; Ogllvie v. Hallam, 58 Iowa, 714, 12 N. W. 730; Smith V. Elrod, 122 Ala. 269, 24 So. 994; Jacobs v. Marks, 183 111. 533, 56 N. E. 154; Anderson v. Scholey, 114 Ind. 553, 17 N. E. 125; Hermann v. Orcutt, 152 Mass. 405, 25 N. E. 735; Rogers v. Spokane, 9 Wash. 168, 37 Pac. 300; Whitney v. Richards, 17 Utah, 226, 53 Pac. 1122. 8 Berden v. Tillma, 88 N. W. (Neb.) 123 ; Dickinson v. Barr, 7 Ark. 34. * Perin v. Cathcart, 89 N. W. (Iowa) 12, citing Jones v. Fennimore, 1 G. Greene, 134; Wedigen v. Fabric Co., 100 Mass. 422. B Eckf ord v. De Kay, 26 Wend. 29. 8 A. P. Brantley v. Lee, 106 Ga. 313, 32 S. E. 101. T Burgess v. Denison, 79 Me. 266, 9 Atl. 726. 8 Francis v. Darning, 59 (3onn. 108, 21 Atl. 1006. 9 Day V. Roth, 18 N. Y. 448 ; Brooklyn Bank v. De Grauw, 23 Wend. 342, 35 Am. Dec. 369 ; Carpenter v. Chicago, etc., Ry. Co., 7 S. D. 584, 64 N. W. 1120 ; Bank v. Curtis, 36 S. W. (Tex.) 911. See Btadshaw v. Davis, 12 Tex. 336. loHeam v. Kiehl, 38 Pa. St. 147; Blackburn v. Ormsby, 41 Pa. St. 97. 11 Francis v. Denning, 59 Conn. 108, 21 Atl. 1006. 12 Smith V. Elrod, 122 Ala. 269, 24 So. 994. IS Browning v. Grouse, 43 Mich. 489, 5 N. W. 664: In this case an agree- ment of compromise at fifty cents on the dollar was indorsed on the notes sued upon. § 114] BVIDBNOB 257 As to the burden of proof with respect to a compromise, the rule is the same as that applicable to an accord and satisfaction, and he who relies upon a compromise must prove it. The term compromise implies an executed agreement, which means of course that the terms of the compromise agreement must be shown to have been carried out.^* To establish a settlement and compromise of a claim for a very large sum by the payment of a very small sum, the evidence should be clear and satisfactory.^" Like most other matters required to be proved affirmatively, a clear preponderance of evidence is necessary to support a plea of an accord and satisfaction or a compromise.^" A compromise and settlement between two parties is prima facie evidence of a settlement of all existing demands between the parties then due, but it is not conclusive.^' If an accord and sat- isfaction or compromise is admitted, or proven, nothing short of clear and satisfactory evidence of fraud or mistake will avoid it.^* 11 If the evidence justifies a finding that a compromise has been executed, the judgment of the trial court will not be reversed: Slade v. Swedeburg, 39 Neb. 600, 58 N. W. 191. As elsewhere stated a compromise is very often carried out by the acceptance of a new executory agreement in satisfaction of the old demand, and this new agreement is, more often than otherwise, re- ferred to as a compromise agreement, and the latter being unexecuted, some confusion may arise in mind as to the doctrine requiring an agreement of compromise to be executed. But by keeping in mind that the acceptance of a new executory agreement in satisfaction is but the execution of a prior agreement to accept the new one the perplexity if any will be resolved. 16 Home Ins. Co. v. Western Transp. Co., 51 N. Y. 93. 16 Grove v. Bush, 86 Iowa, 94, 53 N. W. 88 ; Bruce v. Bruce, 4 Dana, 530 ; Cheeves v. Donielly, 74 Ga. 712. 17 Nichols V. Scott, 12 Vt. 47. As to what demands are included, see Sec. 31-35, 92, 93. 18 Kohn V. Metz, 114 S. W. (Ark.) 91. A compromise will be presumed to have been made In good faith and with full knowledge of the facts, in ab- sence of a finding that it had been obtained by fraud, mistake, or undue in- fluence: Craigo v. Craigo, 118 N. W. (S. D.) 712. Huw T ACC.& S. — 17 258 COMPROMISH [§ 115 Sec. lis. Same subject— Admissibility. — ^To attempt to give in detail the evidence necessary to prbve an accord and satisfaction, or a conipromise, would result in much repetition, as the agree- ment must be proven as made, and each case depends largely on its peculiar facts. As to what transactions constitute a valid ac- cord and satisfaction or a compromise, the reader is referred to prior sections. The same rules of evidence as to admissibility obtain in sustaining a plea of this kind as apply to other contracts requiring affirmative proof. Where an accord and satisfaction, or a compromise is denied, whether the one alleged is expressed or implied, all the facts and circumstances surrounding the trans- action, in any way tending to disclose the intent of the parties, are admissible; as the delivery of a receipt in full,^ or the acceptance of a check containing the words "in full settlement of account to date," " or a promissory note "for a less sum with surety, or other security,' or the note of a third person,* or the delivery of prop- erty ; " payment of a less sum at a different place,' or at an earlier date ; ' the dismissal of a former action for the same cause on the payment of costs ; * entry of judgment by agreement and the like. So the admissions * and conduct of the creditor with respect 1 Thompson v. Maxwell, 38 N. W. (lo.) 125 ; Wierley v. Rowe, 106 Minn. 494, 119 N. W. 222 ; Jordan v. Great N. Ry. Co., 80 Minn. 405, 83 N. W. 391 ; Robinson v. Detroit, etc., R. Co., 84 Mich. 658, 48 N. W. 205; Crumley T. Webb, 48 Mo. 562. 2 Pike V. Buzzell, 76 Atl. (N. H.) 642. 8 See Sees. 63, 64, 65. ■iFrisble v. Larned, 21 Wend. 450: In this case it was shown that the note was received as payment. 5 Sec. 66. 8 Sec. 60. 7 Sec. 60. 8 Dana v. Taylor, 150 Mass. 25, 22 N. E. 65. A discontinuance and pay- ment of costs by defendant is not sufficient, standing alone, to prove an ac- cord and satisfaction. Carter v. Wilson, 19 N. 0. 276, » Smith V. Atwood, 14 Ga. 402. § 115] EVIDENCE 259 to the subject matter since the alleged settlement, are admissible in support of the allegation of an accord and satisfaction, or a com- promise. The delivery of the debtor's own note,^° or due bill," to his creditor, is prima facie evidence of a settlement of all de- mands between the parties up to date, and that the payor is in- debted to the payee upon such settlement to the amount of the note or due bill,^* whether under the law a negotiable promissory note is presumed to constitute payment or not. But in Illinois, it has been held that the giving of a note is not evidence of a settlement of all demands, but that it is an admissible circum- stance, to be considered in connection with the other surrounding facts and circumstances. ^° The papers used by the parties upon the negotiation of the treaty of compromise are admissible ; ^* and where a statement or abstract of an account and not the books is used as a basis of a settlement, the creditor's testimony that the statement is cor- rect is admissible.^" A refusal to sign a receipt is admissible on the question whether an accord and satisfaction, or compromise was made.^' The lapse of twenty years after suffering damages 10 Lake v. Tysen, 6 N. Y. 461 ; De Freest v. Bloomlngdale, 5 Denio, 304 ; Maynard v. Johnson, 4 Ala. 116; Gaskin v. Wells, 15 Ind. 253; Rowe v. Collier, 25 Tex. Supp. 252; Smith v. Bissell, 2 Greene (lo.) 379; Grimmell V. Warner, 21 Iowa, 12. Giving a bill of sale or mortgage to secure an in- debtedness raises a presumption of payment. Allen v. Bryson, 67 Iowa, 591, 25 N. W. 820. iiGue V. Kline, 13 Pa. St. 60; Spencer v. Chrisman, 15 Ind. 215; Bof- fandick v. Raleigh, 11 Ind. 136. 12 Lake v. Tysen, 6 N. Y. 461. 13 Rosencrantz v. Mason, 85 111. 262; Crabtree v. Rowand, 33 111. 423; HefCron v. Chapin, 35 111. App. 565. 1* Jefferson v. Burham, 85 Fed. 924. Letters previous to the date of set- tlement tending to show that there was a dispute are relevant upon the question whether a check for a part of the claim was an accord and satis- faction: Barham v. Bank, 126 S. W. (Ark.) 394. 15 McLendon v. Wilson, 57 Ga. 438. 16 Sicotte V. Barber, 83 Wis. 431, 53 N. W. 677. 260 COMPEOMISH [§ 115 from the breach of a covenant against encumbrances, has been said to raise a presumption, which, if not rebutted, will sustain a plea of accord and satisfaction.^^ But, that the lapse of twenty years from the time of making a contract to be performed in futuro was held insufficient to establish an accord and satisfac- tion of the original agreement.^^ We apprehend the correct rule is, that lapse of time is a mere circumstance in corroboration of a party's evidence of an accord and satisfaction, or compromise.^' A judgment entered for a particular amount, or for certain relief, is admissible in evidence as tending to prove the alleged settle- ment.'" So, a party may show the satisfaction of a judgment in support of his allegation that it was satisfied upon a compro- mise in a particular way.'^ Evidence of a good faith dispute be- tween the parties as to their respective rights in the subject mat- ter, is admissible as tending to prove that a settlement of the par- ticular matter was made as alleged. '^ So, on the other hand, evi- dence tending to prove that there was no reasonable ground of controversy is admissible.^' A subsequent and different agree- ment covering the same subject matter is admissible in support of an allegation of the compromise and settlement of the original contract.'* If a compromise, or an accord and satisfaction, be re- duced to writing, the writing is the best evidence, and if not pro- 17 Jenkins v. Hopkins, 9 Pick. 343. 18 Siboni v. Klrkman, 1 M. & W. 418. See Abb. Tr. Bief. 51. 18 Abbott V. Wilnjot, 22 Vt. 437; Ketchem v. Gulick, 20 Atl. (N. J) 487; Austin V. Moore, 7 Met. 116. 20 Orr V. Hamilton, 36 La. Ann. 750. 21 Boswell V. Willimas, 86 Ind. 375. 22 City Ry. Co. v. Floyd, 115 Ga. 655, 42 S. E. 45. 23 Allen V. Procter, 35 Ala. 169. Overstreet v. Dunlap, 56 111. App. 486: A person charged with stealing hogs who Is compelled to sign a note under fear of imprisonment, may give evidence tending to show the falsity of the charge, as bearing on the question whether the payee had a claim. 24 McAllester v. Sexton, 4 B. D. Smith, 41 ; Hunt v. Ogden, 125 S. W. (Tex. Civ. App.) 386; Murphy v. Lever, 147 111. App. 460. § 116] EVIDENCE 261 duced its absence must be sufficiently accounted for to let in secondary evidence.''^ If an instrument importing a settlement of all differences "of whatever nature," is complete in itself, oral evidence is not admissible to show only a partial settlement.'" So, where the instrument is complete, oral evidence is not ad- missible to show the intention of a party, or the legal effect of the instrument.^'' But, if it appears on the face of the written in- strument that it is manifestly incomplete as an agreement set- tlmg the demand, and was not intended by the parties to be a complete statement of the terms of the compromise, oral evi- dence is admissible to show the basis of the settlement,^' but not to vary or contradict the terms expressed in the instrument. A receipt in full is admissible as tending to show an alleged settle- ment and compromise alleged. As to what claims and demands are included in a settlement and compromise more is said else- where.^' If the time of executing an accord and satisfaction is not of the essence of the contract ; it is immaterial and may be proved to have been executed at a different time than that al- leged.'" Payment at a later day than the date of the accord is an immaterial variance."^ Sec. 116. Same subject — Implied agreement — When question is for the court or jury. — It is not essential to an accord and satisfac- tion, or a compromise, more than in other contracts, that the agree- ment be expressed. It may be implied from facts and circumstances 2 s American v. Elmpert, 75 111. 228. 26 Freeman v. Freeman, 68 Mich. 28, 35 N. W. 897. s. P. Pratt v. Castle, 91 Mich. 484, 52 N. W. 52. 27 Puge V. Akins, 112 Cal. 401, 44 Pac. 666. 2 8 Southwick V. Herring, 82 Minn. 302, 84 N. W. 1013; Selser's Est., T Pa. Co. Ct. 417. 2 9 Sees. 26 to 34. 8 Strange t. Holmes, 7 Cow. 224. »i Sonnenberg v. Eiedel, 16 Minn. 83. 262 COMPROMISE [§ 116 clearly indicating the intention of the parties ; as where a person hav- ing a cause of action for an unliquidated amount for personal injuries, demands and receives from the wrong-doer a stated sum of money on account of the injury,^ or accepts a conditional tender or other conditional offer." Where the facts in respect to the accord and satisfaction, or compromise alleged, have been ascertained, and the only question is as to their effect, or, in other words whether or not a valid binding contract has been entered into, the question is one of law, and is not one of fact for the jury.' In a case where all the negotiations were in writing, it was held that whether or not what passed between the parties constituted an accord and satisfaction, was for the court to determine.* In absence of evidence of an explicit agreement that the thing de- livered is received and accepted in full satisfaction, the question whether a settlement, otherwise sufficient, constitutes an accord and satisfaction or a compromise, as the case may be, depends on the in- tent of the parties with reference to whether or not the thing deliv- ered and accepted was in satisfaction of the old demand, and is to be drawn from the facts and circumstances of the case.' And the rule in this respect is the same whether the argument be oral or writ- ten.' In such cases, to make it a question of law for the court, the presumption of giving and receiving the thing in satisfaction of the old demand, must be so absolute that it cannot be rebutted: "pra- sumptiones juris et de jure." ^ Not all undisputed facts make a case 1 Hinkle v. Minneapolis, etc., Ry. Co., 31 Minn. 434, 18 N. W. 275. 2 Sees. 15, 19. s Washburn v. Wlnslow, 16 Minn. 33 ; Hinkle v. Minneapolis, etc., Ry. Co., 31 Minn. 434, 18 N. W. 275; Vedder v. Vedder, 1 Denlo, 257; Logan v. Davidson, 18 N. Y. App. Dlv. 353, 45 N. Y. Supp. 961; Gibbs v. Wall, 10 Cal. 153, 14 Pac. 216. * Sanford v. Abrams, 24 Fla. 181, 2 So. 373. s Hinkle v. Minneapolis, etc., Ry. Co., 31 Minn. 434. 6 (1907) Southerlln v. Bloomer, 93 P. (Or.) 139. 1 See Jones v. Johnson, 3 Watts & S. 276, 38 Am. Dec. 760, where the question was as to whether . there was a merger of an account into a note § 116] HVIDENOH 263 for the court. If they are undisputed, but are such as reasonable men might draw different conclusions from them as to the intent of the parties, the question whether an accord and satisfaction, or a com- promise, as the case may be, was entered into, is for the jury.* When the evidence conflicts as to any material fact necessary to constitute a settlement by way of an accord and satisfaction, or a compromise, the question is properly one of fact for the jury " A party alleging a settlement and compromise should take a special finding upon that question, otherwise a failure to find for him is equivalent to a finding against him upon that question.^" given by a stranger and some of the original debtors, or the original debt was extinguished. The court left it to the jury to determine as a matter of fact, the Intent of the parties. In an action to recover damages for a personal injury, where the uncon- tradicted evidence of the plaintiff was: "The company agreed to pay me my doctor's bill, $16, and one half tim^, $76.25, I made no claim against the company on account of said accident, at or before the time my wife re- ceived the said $91.25 ; than for said doctor's bill and one half time." The court held that these facts being undisputed, unexplained and unqualified and susceptible of but one reasonable construction, the presumption was that the payment was Intended as a full recompence for the injury, and that it was a question for the court." Hinkle v. Minneapolis, etc., Ry. Co., 31 Minn. 434, 18 N. W. 275. « Perin v. Cathcart, 89 N. W. (lo.) 12. sPerin v. Cathcart, 89 N. W. (lo.) 12; Armstrong v. Lonon, 63 S. B. (N. O.) 101 ; SchuUer v. Robinson, 123 N. Y. Supp. 881 ; (1907) Wilson v. Insur- ance Co., 114 N. W. (Minn.) 251 ; (1908) Carlston v. Ryan, 114 N. W. (Mich.) 852, 14 Det Leg. N. 844 ; Murdock v. Williams, 76 Mich. 568, 43 N. W. 592 ; Oil Well Co. V. Wolf, 127 Mo. 616, 30 S. W. 145; Madden v. Blain, 66 Ga. 49 ; Robinson v. Detroit, etc., R. Co., 84 Mich. 658, 48 N. W. 205 ; Schulz v. Schulz, 113 Mich. 502, 71 N. W. 854. On a plea puis darrein continuance, of settlement after action brought, it Is a question for the jury whether the sum received was accepted in satisfaction of the debt and costs: Hen- derson V. Hayter, 2 F. & F. 128. 10 Eeddlck v. Keesllng, 128 Ind. 128, 28 N. E. 316. 264 COMPEOMISH [§ 117 Sec. 117. Rescission — Election of remedies, on discovery of grounds for rescission — Mode — Measure of damages. — ^As before often observed the law encourages and favors settlements and com- promises of disputed and doubtful claims, and when parties enter into a compromise of such matters, the law will approve of it by presum- ing that the parties consulted their own interests in making the ar- rangement, and a settlement by way of a compromise will not be in- terfered with in absence of a showing of fraud, mistake, or other ground warranting a rescission.^ Whenever a party to a compromise discovers fraud warranting a rescission, he is immediately put to an election. He may affirm the contract by keeping what he received under it, and bring an action for the damages he has sustained by reason of the fraud. ^ He cannot bring assumpsit for the balance of the demand, for if he retains what he received he thereby affirms the compromise ' and the original obligation is extinguished. The remedy, at common law, is an action on the case for damages for fraud.* This is the practicable remedy to persue where time, or cir- cumstances, has made impossible a restoration of the parties to their original position; as where the defrauded party has disposed of the property received upon the compromise,^ or the other party has so mixed up the matter that a complete restoration is impossible, or highly improbable. The measure of damages which he is entitled to recover, is the amount he would have received had no fraud been practiced upon him, less the amount received upon the compromise.' iHanley v. Noyes, 28 N. W. (Mich.) 831; Booth v. Alpena, 135 N. W. (Mich.) 1063. 2 Corse V. Minnesota Grain Co., 94 Minn. 331, 102 N. W. 728 ; Gould v. Caynga Bank, 99 N. Y. 333. 8 Hanley v. Noyes, 28 N. W. (Mich.) 831. * Walsh V. Slsson, 13 N. W. (Mich.) 802 ; Jewett v. Pettltt, 4 Mich. 508. B Gould v. Cayuga Bank, 99 N. Y. 333. 6 Walsh V. Slsson, 13 N. W. (Mich.) 802, citing Page v. Wells, 37 Mich. 421; Warren v. Cole, 15 Mich. 274; Bowman v. Parker, 40 Vt. 413; Foster V. Kennedy's Adm'r., 38 Ala. 359 ; Moberly v. Alexander, 19 Iowa, 164 ; Reyn- olds v. Cox, 11 Ind. 266. § 117] RESCISSION 265 This is the extent of the fraud practiced upon him. The fact that the demand was doubtful or disputed, and that to settle the dispute by litigation would have required an expenditure of an uncertain amount ; or that the success of collecting depended upon the solvency of the debtor, which ordinarily rates a claim of this character less than its face value, is not to be taken into consideration further than as fixing the character of the claim. The rule is stated by Finch, J., with singular clearness; he said: "There is a compromise, and it must stand as a compromise, and the problem is only to make it an honest compromise. How much additional money will it take to do that? Assuming that the parties meant to avoid litigation and com- promise their dispute, and that nothing but facts were disclosed, how much more would the creditor have demanded and the debtor rea- sonably allowed as a final compromise above and beyond the sum paid?" Answering the questions, he said: "It is the excess of that value upon the true state of facts as known or honestly believed over the value fixed upon a false state of facts, fraudulently asserted, which constitutes the plaintiff's actual loss from the fraud." ' If a party performs an executory agreement received in satisfaction upon a compromise, after he has discovered fraud warranting a rescission, he thereby waives the fraud and he cannot recover damages suffered on account of the fraud.' But if there has been a part performance before the discovery of the fraud, and the balance is performed un- der protest and upon the promise of the other party to make good any damages on account of any misrepresentation, and the amount or ex- tent of the damage on account of the fraud cannot be determined in 7 Gould V. Cayuga Bank, 99 N. Y. 333. Evidence.— Where the demand compromised was for negligently causing death the plaintiff need only prove that an accident occurred, that the death resulted, and that the claim for liability was made. He need not show that it was a valid claim : Urtz v. New York Cent. R. Co., 121 N. T. Supp. 879. 8 This is the rule applicable to contracts in general. See Thompson v. Llbby, 36 Minn. 287; Bartleson v. Vanderhoff, 96 Minn. 184. 266 COMPROMISE [§ 117 advance of the completion of the contract, there is no waiver of the damages.' If a judgment for damages would be of doubtful value, or for other reasons damages would not suit his purpose or convenience, or complications have arisen requiring an equitable adjustment of the matters between the parties, the defrauded party may sue in equity for a rescission of the contract by the court, and. recover what he parted with, upon such conditions as the court may deem to be equita- ble.^" When the aggrieved party sues in equity to rescind, it is not necessary, as we shall presently see, that he should have previously attempted a rescission. If the defrauded party does not choose to adopt either of the foregoing courses, he may rescind by his own act, and bring an action at law to recover what he parted with by reason of the fraud.^^ At common law, if a release or a compromise was obtained by fraud the injured party can sue upon the original cause of action and if met with a plea of release or compromise, he may reply that the release or compromise was obtained by fraud. ^^ In proceedings at law rescission is recognized as an accomplished fact. The right to bring replevin, or other action at law to recover what was parted with under a fraudulent contract, only exists while the situation of the parties remains such that they can be placed substan- tially in statu quo.^^ If this cannot be done some other remedy must be resorted to. It has been held that in the Federal Courts, the only fraud that can be availed of in an action at law, to avoid a formally executed release of the claim sued on (whether the release is under » See Haven v. Neal, 43 Minn. 315. loOorse v. Minnesota Grain Co., 94 Minn. 331, 102 N. W. 728; Gould v. Cayuga Bank, 99 N. Y. 333. 11 Corse V. Minnesota Grain Co., 94 Minn. 331, 102 N. W. 728; Gould v. Cayuga Bank, 99 N. Y. 333. i2Busslan V. The Milwaukee, etc., R. Co., 56 Wis. 333; 1 Chitty PI. 582; Hanley v. Noyes, 28 N. W. (Mich.) 831 ; Nelson v. Nelson, 126 N. W. (Minn.) 731, citing Christianson t. Railway Co., 61 Minn. 249, 63 N. W. 640; Peter- son V. Railway Co., 36 Minn. 399, 31 N. W. 515. 18 Home Ins. Co. v. Howard, 111 Ind. 546, 1 L. R-. A. 202. § 117] EHSCISSION 267 seal or not), is misrepresentation, deceit or trickery practiced to induce the execution of a release upon which the minds of the parties never met, and does not include misrepresentations of fact which may have induced the claimant to agree to the release as actually made." But in such cases the law of rescission has no application, the defense being that the contract is void, it not being the contract containing the terms agreed upon.^^ A party who seeks to rescind a contract be- cause of fraud committed by the other party, must return or tender what he received under it. He cannot enjoy the fruits of the agree- ment and repudiate it. Nor will he be permitted to affirm a com- promise in part and repudiate it in part.^* "He cannot hold on to such part of the contract as may be desirable on his part, and avoid the residue, but must rescind in toto if at all." ^' Electing to affirm a compromise and sue for damages, or to be re- instated in the position he was before the contract was made, are not concurrent remedies but inconsistent. The adoption of one neces- sarily excludes the other, and when a party has made an election he must abide by it.^* If the fraud is not discovered until after an ac- tion is brought by the other party to enforce a new agreement ex- ecuted upon the compromise, the defrauded party may rescind then,*' 14 Pacific Mut. Li. I. Co. v. Webb, 157 Fed. 155. In Jessup v. Chicago, etc., Ry. Co., 68 N. W. (lo.) 673, the action was to recover for a breach of an oral contract to furnish permanent employment made in settlement of a claim for personal Injuries. The oral contract was denied and a written release was set out. Plaintiff set up fraudulent representations in obtain- ing the release. It was held that a recovery could not be had on the oral agreement until the written agreement was set aside or reformed In a proper proceeding for that purpose. 15 See Aultman v. Olson, 34 Minn. 450. 18 Keid V. Hibbard, 6 Wis. 175 ; Van Trott v. Wiese, 36 Wis. 439. IT Masson v. Bovet, 1 Denio, 74, 43 Am. Dec. 651; s. p. Nichols v. Pin- ner, 18 N. Y. 312 ; Wood v. Kansas City Tel. Co., 123 S. W. (Mo.) 6. A re- lease cannot be aflBrmed in part and repudiated In part: Skilbeck v. Hilton, L. R. 2 Eq. 387; Prltt v. Clay, 6 Beav. 503. 18 Strong V. Strong, 102 N. Y. 69; Schiffer v. Deitz, 83 N. Y. 311. IB See Pawnee Coal Co. v. Royce, 184 111. 402, 56 N. E. 621. 268 COMPBOMISH [§ 11^ and plead the rescission and defeat the action altogether; or plead the rescission and seek a recovery upon the original demand; or, in those states where law and equity are administered in the same ac- tion, he may set out the fraud and ask for a rescission by the court ; or, when the old equity practice prevails, he may bring a separate suit for a rescission, and have the action upon the new agreement enjoined. The party perpetrating the fraud has no choice in the mat- ter. All he is entitled to, whatever course the other party may adopt, is substantial justice. Sec. 118. Ratification — Laches — ^Time when residssion should be made. — Fraud vitiates all contracts, but the contract is not ab- solutely void but voidable, at the election of the injured party. And, it is everywhere held, that, if, after learning of fraud warranting a rescission of a compromise, the party keeps what he has received upon the agreement,^ or accepts benefits under it, it is an election to abide by the contract.^ Whether a plaintiff knew of the fraud at the time of accepting the money paid upon a settlement, and thus rati- fied the contract, is, when disputed, a question for the jury.* The right to rescind must be exercised immediately, and a continued em- ployment, use and occupation of the property received under the contract, will be deemed an election to affirm it.* The right may be lost by laches; as when the party waits an unnecessary length of time after discovering the fraud before moving in the matter.^ The 1 Hanley v. Noyes, 28 N. W. (Mich.) 831. 2 Peterson v. Chicago etc. Ry. Co., 36 Minn. 399, 31 N. W. 515 : The false representation was that no action had been commenced to recover on the contract. After learning that this was false, plaintiff accepted the balance agreed to be paid. See upon same subject, Ham v. Potter, 101 Minn. 437; 112 N. W. 1015. 3 Marple v. Minneapolis & St. L. B. Co., 132 N. W. (Minn.) 333. 4 Strong V. Strong, 102 N. Y. 69 ; Schiffer v. Deltz, 83 N. Y. 300. In Burton v. Stewart, 3 Wend. 236, 20 Am. Dec. 692, where the ques- tion of fraud in the sale of chattels was under consideration, the court said it was the defendant's duty, when he discovered the fraud, to have returned the property. "When prosecuted on the note, and the case brought to trial, § 118] RESCISSION 269 right to elect to rescind a fraudulent compromise may be lost by the intervention of rights of a third party," or by other change in the position of the parties making a restoration in specie an impos- sibility; as where the property received has been sold/ consumed, or otherwise destroyed. But the rule that any act in affirmance, or laches, after discovery of the fraud, defeats the right of rescission, has no application to an action for damages founded upon the fraud ; * and, an action to recover damages may be brought at any time before the action is barred by the statute of limitation.* When must the rescission and repudiation of a fraudulent com- promise be made to enable the defrauded party to recover what he has parted with? Obviously justice demands that it be made prompt- ly upon the discovery of the fraud. The policy of the law requires that one party to a fraudulent contract shall not by delay, or other- wise, unnecessarily increase the burden of the other, although the latter be guilty of fraud. This principle is fundamental to all con- tracts and transactions. In many cases necessity requires immedi- ate action, for so long as the contract remains unrescinded it binds both parties and the party guilty of the fraud is at liberty to, and may change his position with respect to the property; thus making the placing of the parties in statu quo an impossibility. The deci- sions uniformly hold that the rescission must be made with rea- sonable diligence after the discovery of the fraud or other ground for rescission.^" This is true whether the act of rescission requires it was too late to repudiate the contract." Whether an election to rescind is within a reasonable time has been said to be a question for the jury: Marple v. Minneapolis & St. L. R. Co., 132 N. W. (Minn.) 333. A party who delays two years before seeking to avoid an agreement on the ground of duress will be denied relief: Wood v. Kansas City Tel. Co., 123 S. W. (Mo.) 6. 6 Boota V. Alpena, 135 N. W. (Mich.) 1063. 7 See SchifCer v. Deitz, 83 N. Y. 300. 8 New York Land Co. v. Chapman, 118 N. Y. 295. » Neibuhr v. Gage, 99 Minn. 149, 108 N. W. 884. 10 Masson v. Bovet, 1 Denio, 69, 43 Am. Dec. 651 ; Sweetman v. Prince, 26 K. Y. 227; Getty v. Devlin, 54 N. Y. 533; Morris v. Great Nor. R. Co., 67 270 COMPROMISE [§ 118 a tender or offer, or a mere notice of the intent to rescind and a demand. The rescission may be made after an action is brought to enforce a new agreement entered into upon a compromise, where the fraud is not discovered until after the action is commenced; ^^ but, where the fraud is discovered before the commencement of an action, and the party delays unnecessarily until after the action is brought upon the new agreement, before taking any steps to re- scind, it will be too late.^'' But lapse of time alone, unaffected by other circumstances, will not bar the right to rescind a voidable transaction, since it is not for the wrong doer to impose extreme vigilance and promptitude as conditions to the exercise of the rights of the injured party.^* Obviously time is only important when one or the other parties must be placed in statu quo.\* And when by un- necessary delay after discovery of the fraud this cannot be done, the party is said to be guilty of laches. If there is nothing to do but bring an action to recover money paid on account of the fraud or damages, the party only has to look out for the statute of limita- tions. Minn. 74, 69 N. W. 628; Pawnee Coal Co. v. Royce, 184 111. 402, 56 N. E. 621; Kelly v. Louisville, etc. K. Co., 154 Ala. 573, 45 So. 906; Roberts v. Central Lead Co., 95 Mo. App. 581, 69 S. W. 630 ; St. Louis etc. R. Co. v. Smith, 82 Ark. 105, 100 S. W. 884. 11 See Pawnee Coal Co. v. Royce, 184 111. 402, 56 N. E. 621. 12 GoiiM y. Cayuga Bank, 86 N. T. 75 ; Burton v. Stewart, 3 Wend. 236, 20 Am. Dec. 692. IS Fitzgerald v. Fitzgerald, 62 N. W. (Neb.) 899, citing Pol. Cont. 546; Pence v. Langdon, 99 U. S. 581; Montgomery v. Pickering, 116 Mass. 227; Tarkington v. Purvis, 128 Ind. 187, 25 N. E. 879; Moxon v. Payne, 8 Ch. App. 881 ; Foley v. Holtry, 41 Neb. 563, 59 N. W. 781. 14 In Galveston etc., R. R. Co. v. Cade, 93 S. W. (Tex. Civ. App.) 124, the court said: Where there is no question of rights of third parties, or the defendant being prejudiced, it Is not necessary that the defendant signify his repudiation immediately or at any time short of the period fixed by the statute of limitation. The action was to recover for personal injuries where no tender of the amount received upon a compromise induced by fraud had been made. § 119] TENDBB REQUIRED XTPON A RESCISSION 271 Sec. 119. Tender required upon a rescission— Exceptions. — In order to rescind a compromise or other contract on the ground of fraud, duress, or mistake, the aggrieved party, as soon as he dis- covers the ground therefor, should return or tender back what he received under the contract so as to place the other party as near as possible in statu quo.^ This rule is elementary where the party seeks to rescind by his own act, and where, but for the fraud, du- i Strong V. Strong, 102 N. T. 69, 5 N. E. 799 ; Burton v. Stewart, 3 Wend. 236, 20 Am. Dec. 692 (which was a sale); Nlederhauser v. Detroit St Ry., 91 N. W. (Mich.) 1028 ; Valley v. Boston etc. R. Co., 68 Atl. (Me.) 635 ; Gal- vin V. O'Brien, 56 N. W. (Mich.) 85 ; Hanley v. Noyes, 28 N. W. (Mich.) 831 ; T. B. Redmond v. Atlanta etc. R. Co., 58 S. E. (Ga.) 874 ; Alleson v. Abend- roth, 108 N. Y. 470 ; Graham v. Meyer, 99 N. Y. 611 ; Del Campo v. Cam- arillo, 98 Pac. (Cal.) 1049 ; Cook v. Fidelity & Co., 167 Fed. 95 ; Western & S. li. Ins. Co. V. Quinn, 113 S. W. (Ky.) 456; Booth v. Alpena, 135 N. W. (Mich.) 1063; HUl v. Nor. Pacific R. Co., 113 Fed. 914, 51 C. C. A. 544, af- firming 104 Fed. 754; Grymes v. Sanders, 95 U. S. 55; Louisville etc. R. Co. V. McElroy, 37 S. W. 844, 18 Ky. L. Rep. 730 ; Austin v. Piedmont Mfg. Co., (S. Car.) 45 S. E. 135 (In this case a nonsuit was granted on the ground that the money received upon the settlement was not repaid or tendered. Konsuit was held not the appropriate remedy) ; Bstabrook v. Sweet, 116 Mass. 303 ; Drohan v. Lake Shore etc. R. Co., 102 Mass. 435, 38 N. E. 1116 ; Kelly V. Louisville etc. R. Co., 154 Ala. 573, 45 So. 906; Och v. Missouri etc. R. Co., 130 Mo. 27, 31 S. W. 962, 36 L. R. A. 442 (A void contract may be disregarded, but it is otherwise as to contracts merely voidable) ; Brain- ard V. Van Dyke, 71 Vt. 359, 45 Atl. 758; Lane v. Dayton Coal Co., 101 Tenn. 581, 48 S. W. 1094; Fritz v. Fritz, 118 N. W. (lo.) 769; Rose v. Eg- . gers, 127 N. W. (lo.) 196 ; Fitzgerald v. Paisley, 119 N. W. (lo.) 166 ; Doohan V. Lake Shore etc. R. Co., 162 Mass. 435, 88 N. E. 1116; Chicago etc. R. Co. V. Doyle, 18 Kan. 58; Missouri Pac. R. Co. v. Goodholm, 61 Kan. 758. Insanity.— In Morris v. Great Nor. R. Co., 67 Minn. 74, 69 N. W. 628, the releasee claimed that at the time of the compromise he was insane. His failure on regaining his normal condition to elect promptly to rescind and return or tender back what he had received was held fatal to his right to recover, s. p. Kelly v. Louisville etc. R. Co., 154 Ala. 573, 45 So. 906; Contra, St. Louis etc. R. Co. v. Brown, 73 Ark. 42, 83 S. W. 332 ; In Illinois, the courts hold that a release procured by intended fraud and circumvention is void and that It is unnecessary to return or tender back what has been received: Indiana etc. R. Co. v. Fowler, 201 111. 152, 66 N. E. 394, 94 Am. St. Rep. 158, afC'g 103 111. App. 565, and earlier cases. Pawnee Coal Co. v. Royce, 184 111. 402, 56 N. E. 621, citing Chicago etc. Ry. Co. v. Lewis, 109 lU. 120, 272 COMPEOMISH [§ 119 ress, mistake, or insanity, the compromise is admittedly valid and effects a discharge of the demand. Where the action was to recover certain items alleged to have been fraudulently concealed or suppress- ed upon a compromise, the court said; if a sum be paid expressly as a compromise and not because so much is conceded to be due, the party receiving the payment cannot maintain an action to recover the balance claimed to be due and retain what he has received. The parties should first be placed in statu quo.'' So, in assumpsit upon a contract of insurance, where a compromise of the liability was al- leged to have been brought about by deceit and fraudulent practices, but the plaintiff before bringing the action, did not tender back or pay to the defendant the money received of the company upon the compromise, it was held the plaintiff could not recover.' The same rule was applied by the same court in an action to recover damages for personal injuries, where a compromise was alleged to have been obtained by false representations and concealments.* One very ob- vious and sufficient reason for the rule is that a defrauded party has no cause of action for the consideration parted with or releas- ed upon the compromise until the contract is rescinded; and, as re- payment or tender is a part of the act of rescission, unless that be done he has no cause of action when his action is commenced." Again, in all cases where the liability of the party is a disputed, or doubtful question, to permit the plaintiff to repudiate the settle- ment and compromise, and maintain his action upon the original demand without returning or tendering what he has received, would zMcMiehael v. Kilmer, 76 N. Y. 30; Gould v. Cayuga Bank, 86 N. X, 75; Blsbee v. Ham, 47 Me. 543. 8 Pangborn v. Continental Ins. Co., 67 Mich. 683, 35 N. W. 814 ; Brown V. Insurance Co., 117 Mass. 479. 4 Nelderhauser v. Detroit S. By. Co., 91 N. W. (Mich.) 1028; s. p. Bail- way Co. V. Hayes, 83 Ga. 558, 10 S. E. 350; Harley v. Eiverside Mills, 129 Ga. 214, 58 S. E. 711. s See Gould v. Cayuga Bank, 86 N. Y. 75. Plaintiff's right of action must be perfect at the time of commencing his action: Rose v. Eggers, 127 N. W. (lo.) 196. § 119] TENDER EEQUIRED UPON A RESCISSION 273 be to allow him to take his chances of recovery without running the risk of losing what he has received, in case he is defeated.^ While the rule is elementary that a defrauded party must place the other party in statu quo as near as practicable, by a return or tender of what he received under the contract, where he seeks by his own act to rescind the contract upon the ground of fraud, yet there is an apparent lack of harmony in the decisions as to whether, in all cases, a strict and rigid tender should be made. It has been said: "Some of the earlier cases answer the question in the affirma- tive, and enforced the rule with much strictness, which resulted in many cases in shielding the party guilty of the fraud. The trend of later cases is in favor of a more reasonable and equitable appli- cation of the rule. The party guilty of the fraud is not entitled to anything more than substantial justice, and a fair opportunity to receive what he parted with. Nor is he in a position to defeat 'the ends of justice by insisting upon a strict, but useless tender, as a condition precedent to the exercise by the defrauded party of his right to rescind." ' And, following this reasoning, it has been held that it is only necessary for the defrauded party to make a fair offer to return what he parted with, and, if his offer is refused, it is suffi- cient if he makes proof thereof at the trial, and restoration in such practicable way as the court may direct.* Upon principle, however, 8 Morris v. Great Nor. R. Co., 67 Minn. 74, 69 N. W. 426, citing Vander- relden v. Chicago, etc., R. Co., 61 Red. 54. Upon the same point, see Gould V. Cayuga Bank, 86 N. Y. 75. 1 Corse V. Minnesota Grain Co., 102 N. W. (Minn.) 728. 8 Corse V. Minnesota Grain Co., 102 N. W. (Minn.) 728, citing Potter v. Taggart, 54 Wis. 395, 11 N. W. 678 ; Bell v. Anderson, 74 Wis. 638, 43 N. W. 666; Bostwick v. Insurance Co., 116 Wis. 392, 89 N. W. 538, 92 N. W. 246; Sisson V. Hill, 18 R. I. 212, 23 Atl. 196, 21 L. R. A. 206. s. v. Maple v. Min- neapolis, etc., R. Co., 132 N. W. (Minn.) 333. In Rase v. M. & St. P. & S. S. M. Ry. Co., 137 N. W. 176, the Supreme Court of Minnesota, in a case in- TOlving the settlement of a claim for personal injuries, held that where a party had spent a large part of the money received upon the settlement before he discovered the fraud, it was error ,to require him to restore more than he had the ability to do before the trial of the action. The court on account Hunt Acc.& S.— 18 274 COMPROMISE [§ 119 these cases do not modify the rule requiring a tender, but merely adopt a more liberal rule as to the facts necessary to establish a waiver of a formal tender. The general rule is that the law does not require the performance of a vain and idle ceremony. Any conduct or declaration on the part of the tenderee which goes to show that if a strict tender had been made it would have been rejected, will be deemed a waiver of a formal tender.* Where a release given of the aggravating circumstances pushed the doctrine beyond all former deci- sions ; but it must be admitted that in the particular case justice was done. » In Corse v. Minnesota Grain Co., ante, the plaintiff alleged and proved an offer by letter to return the securities received and a demand for a re- turn of the money paid, which was ignored. The court said it would have been an idle ceremony to have followed the offer with any other or further tender. The plaintiff elected to proceed at law to recover the consideration, as upon rescission. In Potter v. Taggart (cited in the Corse case), where the plaintiff went to the respondent for the purpose of rescinding, but the de- fendant refused to return the money, the court said "The right of the vendor to have the property formally tendered is waived by his refusal to accept in advance." The action was to recover the money paid on the contract on the ground of fraud. Bell v. Anderson, is the same kind of a case. In Kose v, Eggers, 127 N. W. (lo.) 196, it is held that a formal tender in rescission is waived by forbidding the party to return the property, on his being informed of an election to rescind. In Knoxville, etc., R. Co. v. Acnff, 92 Tenn. 26, 20 S. W. 348, taking issue on the alleged fraud set up as a de- fense to a plea of release, was held a waiver of the objection that a tender was not made. In Hendrickson v. Hendrickson, 51 Iowa, 68, 50 N. W. 287, the court recognized the general rule that a tender in rescission must be made, but said that where the thing was obtained by fraud it constituted an exception to the rule. Citing 2 Pars. Cont. 780. But Mr. Parsons does not lay down any such rule. There he refers generally to the rule that a party exercising the right of rescission must restore the other party to the same condition that he would have been in if the contract had not been made ; and says — "But when the right to rescind springs from discovered fraud, there, is an exception to the rule : the defrauded party does not lose his right to rescind because the contract has been partly executed, and the parties cannot be fully restored to their former position; but he must rescind as soon as circumstances permit and must not go on with the contract after discovery of the fraud." It will be seen that the exception stated is to the rule requiring a complete restoration, not that there should be no placing in statu quo as far as practicable. This case was later explained as not deelar- § 119] TENDEB KEQUIKED UPON A BESCISSION 275 was made to cover matters not contemplated by the parties a ten- der was held to be unnecessary,^" and, in like cases, where a re- lease is obtained under false or fraudulent representations that it is something else; as, for example, a receipt for money paid as a gratuity. There is nothing to rescind and the party may retain the ing any such rule but as merely referring to the rule stated in Parsons on Contracts, without approving or disproving it, as the defendant was satisfied with the rule, and was entitled thereto. Citizen's Bank v. Barnes, 70 Iowa, 412, 30 N. W. 859. The case was again referred to as establishing an excep- tion to the rule without noticing Citizen's Bank v. Barnes. National Imp. Co. V. Maken, 103 Iowa, 118, 72 N. W. 431. In Rose v. Eggers, 127 N. W. (lo.) 196, the Iowa Court review the former cases and adhere to the rule announced in the text. It is not to be denied but that there are cases that disturb the rule with reference to the necessity for a tender. See O'Brien v. Chicago, etc., Ry. Co., 57 N. W. (Iowa) 425 ; Railway Co. v. Lewis, 109 111. 120; Mullen v. Railway Co., 127 Mass. 86; Malmstrom v. Railway Co., 55 Fed. 38; Jones v. Gulf C. & S. P. R. Co., 32 Tex. Civ. App. 198. In Weiser v. Welch, 70 N. W. (Mich.) 438, where, pending an action, a set- tlement was obtained under duress and afterwards repudiated, it was held that the plaintiff acted with sufficient diligence in tendering back the money before a plea was put in in which the plea of no tender could have been made. See, also, Hedlun v. Holy Terrdr Mln. Co., 16 S. D. 261, 92 N. W. 31, citing Chicago, etc., Ry. Co. v. Doyle, 18 Kan. 58; Sanford v. Insur- ance Co., 40 Pac. (Wash.) 609 ; Bliss v. Railway Co., 160 Mass. 447, 36 N. E. 65, 39 Am. St. Rep. 504. And see Galveston, etc., R. Co. v. Cade, 93 S. W. (Tex. Civ. App.) 124 ; Missouri Pac. R. Co. v. Goodholm, 61 Kan. 758, 60 Pac. 1066; Hayes v. Atlanta, etc., R. Co., 143 N. C. 125, 55 S. E. 437 (where the defence is that by reason of fraud it is not his deed, a tender before ac- tion is not necessary) ; s. p. Jones v. Alabama, etc., R. Co., 72 Miss. 22, 16 So. 379. 10 Louisville, etc., R. Co. v. McBUory, 100 Ky. 153, 37 S. W. 844. See Crippen v. Hope, 38 Mich. 344. See, also, O'Donnell v. Clinton, 145 Mass. 461, 14 N. E. 747 ; Bliss v. New York Cent. R. Co., 160 Mass. 447, 36 N. E. 65, 39 Am. St. Rep. 504. In Lee v. Lancashire, etc., R. Co., L. R. 6 Ch. ^27, 25 L. T. Rep. N. S. 77, 19 Wkly. Rep. 729, a bill to restrain the defendant from relying upon a re- ceipt for a certain sum in full satisfaction, on the ground that it was not to bar a further recovery if the injury proves to be more serious, was dismissed; the court observing that the statement in the receipt could be rebutted and the whole matter could be tiried at law. 276 COMPEOMISH [§ 119 gift and sue for his damages.^^ A tender is unnecessary before bringing an action to recover on the original demand, where the al- leged fraudulent compromise was made and the money paid by a third person upon a distinct obligation, although the liability is based upon the same injury.^^ So, where the consideration moved to a third party and is not under the control of the party rescinding, a return or tender of the sum paid is unnecessary.^' An infant may disaffirm a compromise, or release of a claim,^* without returning or tendering ,any property received by him by virtue of the compro- mise or release, except that portion of the property remaining under his control after he has attained his majority.^" 11 See Morris v. Great Nor. R. Co., 67 Minn. 74, 69 N. W. 628. In Sobieski V. St. Paul, etc., B. Co., 41 Minn. 169, 42 N. W. 863, the release was repre- sented to be for wages only. The question of a return or tender was not raised. >• 12 In O'Neil v. Lake Superior Co., 30 N. W. (Mich.) 688, the money received by plaintiff was from the defendant as trustee of a fund collected for the benefit of injured employees. The action being against the defendant indi- vidually to recover damages for the injury suffered, and settlement not being binding on plaintiff by reason of fraud and mistake, the court said it could see no obligation resting upon plaintiff to repay the benefit fund be- fore bringing the action against defendant for the injury inflicted by its negligence. See Maine v. Chicago, etc., R. Co., 109 Iowa, 260, 70 N. W. 630, 80 N. W. 315 ; and see, also, Louisville, etc., Co. v. Clemonts, 109 S. W. 808, 33 Ky. L. Rep. 106. 13 Averill v. Wood, 78 Mich. 342, 44 N. W. 381. 14 Young V. West Va., etc., Co., 42 W. Va. 112, 24 S. E. 615 ; St. Louis, etc., R. Co. V. Higgins, 44 Ark. 293 ; Haws v. Burlington, etc., Ry. Co., 64 Iowa, 315, 20 N. W. 717 ; Jenkins v. Jenkins, 12 Iowa, 195. 15 See Kane v. Kane, 13 App. Div. 544, 43 N. Y. Supp. 662; St. Louis, etc., B. Co. v.. Higgins, 44 Ark. 293. In Iowa a statute requiring a return or tender of all money or property received by afi infant and remaining within his control on attaining his ma- jority, was held to mean the identical money or property: Haws v. Burling- ton, etc., Ry. Co., 64 Iowa, 315, 20 N. W. 717; Jenkins v. Jenkins, 12 Iowa, 195. In Price v. Freeman, 27 Vt. 268, 65 Am. Dec. 194, the court said— "If the property is not In his hand nor under his control, that obligation ceases." § 120] RESCISSION 277 Sec. 120. Same subject — Before suit to rescind. — A tender of the thing received upon a contract is not a prerequisite to the right to apply to a court of equity for relief, and a bill to rescind a compromise may be maintained without a previous offer to re- store what has been received.^ A suit in equity to rescind on the ground of fraud is founded upon the fraud, and does not pro- ceed upon a rescission, but for a rescission.^ It is the fraud that gives the right to relief in equity and all that is necessary to justi- fy a rescission by the court is, that the contract is one that a court of equity will cancel or rescind on the ground alleged; that such ground of rescission exists, and that the party seeking the relief has not lost the right by affirmance, laches, or otherwise.* What the party ought to do and must do, as a condition of the rescission, is a question which the court will determine.* Ordi- narily this rule is the only practicable one, as the fraud is not usually discovered until after the parties have changed their po- sition. In such cases the amount to be returned will depend upon s. p. Lane v. Dayton, 101 Tenn. 581, 48 S. W. 1094. A firm, one member of which is a minor, cannot rescind a settlement without first restoring or ten- dering what has been received upon the settlement, although the partner who made the settlement was a minor: Brown v. Hartford Ins. Co., 117 Mass. 479. 1 Berry v. American Cent. Ins. Co., 132 N. Y. 49. See as to contracts gen- erally, Knappen v. Freeman, 47 Minn. 491 ; Thompson v. Hardy, 102 N. W. (S. D.) 299 ; Kief er v. Rodgers, 19 Minn. 32. 2 See Thompson v. Hardy, 102 N. W. (S. D.) 299 ; Gould v. Cayuga Bank, 86 N. Y. 75. In the last case, the court said: "The difference between an action to rescind a contract and one brought, not to rescind it, but based upon the theory that it has already been rescinded, is as broad as a gulf. They depend upon different principles and require different judgments;" and, answering an argument that the distinction between legal and equitable ac- tions had been wiped out by the modern practice, it said: "The distinction between legal and equitable actions is as fundamental as between actions ex contractu and ex delicto, and no legislative flat can wipe it out." 3 Knappen v. Freeman, 47 Minn. 491, 50 N. W. 533. * Corse V. Minnesota Grain Co., 102 N. W. (Minn.) 728 ; Knappen v. Free- man, 47 Minn. 491, 50 N. W. 533. 278 COMPROMISH [§ 120 a variety of circumstances; whether there has been a loss or de- terioration of the property through the fault of one of the parties ; whether he should be charged with the value of the use and oc- cupation, etc." Whether a tender or ofiEer to make restitution should be alleged in the complaint, is considered under pleading." While, as we have seen, in equity a tender of what has been received upon a compromise is unnecessary before bringing an action to rescind; yet, if the plaintiff by the same action seeks also to recover upon the original demand, as he may do under the code system, he ought to be required, in cases of doubtful or dis- puted liability, upon motion therefor, to pay the sum received upon the compromise into court, for the defendant in case the compromise is rescinded and nothing is proven to be due upon the original demand. Otherwise, equity would entrench the plain- tiff in a very secure position ; and an offer to do equity would be of little significance, if the plaintiff should happen to be un- willing or unable to respond when called upon to make restitu- tion after a rescission and after being defeated with respect to the original demand.'' We are not unmindful of the line of de- cisions holding, in general terms, that it is sufficient to offer in the complaint to return what has been received, and that the court may decree a rescission on the condition that the plaintiff shall place the other party in statu quo ; * but such doctrine should be, B Saxton V. Felberling, 48 O. St. 554; Weltzel v. Leyson, 121 N. W. (S. D.) •«68. ' 8 Sec. 111. In Rose v. Eggers, 127 N. W. (lo.) 197, in replevin, where a lesclsslon of an exchange of personal property was under consideration, the court said ; had the suit been in equity a tender of the return of the prop- erty in the petition would have been timely; but, that at law, an offer to restore the property, unless waived, was essential as a condition precedent to the maintenance of the action. 7 In Duff V. Hutchinson, 57 Hun, 152, 10 N. Y. Suppl. 857 ; it was held that the action could not be maintained when the complaint made no offer to re- turn the money and the evidence disclosed an inability to do so. 8 See Jenkins v. Ins. Co., 79 Mo. App. 55. § 121] RESCISSION 279 if it is not, confined strictly to equitable actions, where a rescis- sion merely is sought. Sec. 121. Same subject — ^Where a party is entitled to retain what he received — When judgment will give a defendant all he is entitled to— Tender of release — Promissory note. — In rescinding a contract on the ground of fraud, the aggrieved party is not re- quired to restore that which in any event he would be entitled to retain, either by virtue of the contract sought to be set asidej or of the original liability.^ Thus, if a creditor is induced by fraudu- lent representations to accept in full satisfaction a per cent, on a claim, the amount of which is not in dispute, it is not necessary as preliminary to right to recover the balance due that he repay or tender the per cent, received.^ So, a tender of the amount re- ceived upon a compromise of a claim against an insurance com- pany is not a condition precedent to a suit in equity to rescind the compromise upon the ground of fraud, if a recovery upon the policy is also sought. In equity full and complete relief can be given in the one action and the amount received by plaintiff may be credited upon the amount due him under the policy.' A tender by a plaintiff of the amount received on a settlement with an agent or broker, is unnecessary to enable the plaintiff to re- cover the amount of an overcharge, or other item wrongfully in- cluded in the account.* 1 Kley V. Healy, 127 N. Y. 555 ; Garner v. Mangum, 93 N. Y. 642 ; Martin V. Ash, 20 Mich. 106 ; Kose v. Bggers, 127 N. W. (Iowa) 196 ; Howard v. Me- Millen, 101 Iowa, 453, 70 N. W. 623 ; Dillon t. Lee, 110 Iowa, 156, 81 N. W. 245. In O'Brien v. Railway Co., 89 Iowa, 644, 57 N. W. 425, which was an action to recover damages for personal injuries, the same rule was applied. 2 Pierce t. Wood, 23 N. H. (3 Foster) 519; Howard v. McMillan, 70 N. W. 623 ; Gould v. Cayuga Bank, 86 N. Y. 75. 3 Reynolds v. Westchester Fire Ins. Co., 8 App. Div. 193, s. c. 40 N. Y. Supp. 336. See Hartford Fire Ins. Co. v. Kirkpatrlck, 20 So. (Ala.) 651. 4 Henderson v. Brand, 31 S. E. Rep. 551 ; Ballard v. Beveridge, 171 N. Y. 194. 280 COMPEOMISH [§ 121 Where an accord and satisfaction pleaded as a defense, is shown to have been fraudulently obtained, the action is not de- feated because the plaintiff retains the money received under the accord, where the defendant admits that the sum paid is due.* If a compromise of all demands, or a general release, is sought to be confined to certain demands contrary to the express word- ing of the instrument, upon the ground of mutual mistake of the parties, or what is its equivalent, a mistake on the part of the aggrieved party and fraud on the part of his adversary, it is not necessary to return what has been received or to tender restora- tion, as the party is not seeking to disaffirm the agreement actu- ally made, but merely objecting to the application of the written evidence of it to a subject which the parties did not intend to include in it.° Where there is no binding accord and satisfaction of a liquidated claim, as where a debtor pays a part in satisfac- tion of the whole, the creditor may recover the balance due with- out returning or tendering the part received.'' So, when an ac- cord is only partially executed, the plaintiff may treat the sum received as a partial payment and sue for the balance.' It is a general rule that if what one has received upon a fraudulent con- tract is of no value whatever, he need not return it before rescind- ing." Thus, it is not necessary to tender a release received be- fore commencing a suit to set aside a settlement, for upon a re- scission the release becomes of no effect. '^^ A promissory note, as between the parties, is ' not property but a mere promise, and Leslie v. Keepers, 68 Wis. 183, 31 N. W. 486. e Kirchner v. New Home Sewing Macli. Co., 135 N. Y. 182 ; Welles v. Yates^ 44 N. T. 531. 1 Leeson v. Anderson, 58 N. W. (Mich.) 72. 8 Kinney v. American Yeomen, 15 S. D. 21, 106 N. W. 44 ; Henderson v. McRea, 148. Mich. 324, 111 N. W. 1057. » Perley v. Balch, 23 Pick. 283, 34 Am. Dec. 56; Rabitte v. Alabama R. Go.> 47 So. (Ala.) 573. See Gould v. Cayuga Bank, 86 N. Y. 75. 10 Morse v. Woodworth, 29 N. B. Rep. 525. § 122] MANNEB OF MAKING A TENDEE 281 Upon a rescission for fraud, of the contract upon which it was given, it becomes of no effect and a tender of the note in advance of an action to recover the thing delivered is unnecessary. It is sufficient if it be delivered up at the trial.^^ In such cases, if the plaintiff fails in his action for a rescission, the compromise stands and he is entitled to retain the note or draft,^^ or money received upon the settlement; and, if successful, the rights of the parties are then regulated and protected in the judgment.^' Sec. 122. Manner of making a tender — Actual offer — Aibility — Actual production — Waiver of formalities — Notice of intention to rescind — Unconditional tender. — Where a party seeks to rescind by his own act and the other party is entitled to receive what he part- ed with upon the contract, the party rescinding in making a tender, must make an actual offer to restore the property.^ A bare propo- sition to pay the money,^ or return the property, is not a tender. A mere announcement of an intention of making a tender is not suffi- cient.^ Sending a written communication demanding the cancellation of a contract, and expressing a willingness to return the money re- 11 Nichols V. Michael, 23 N. Y. 265, 80 Am. Dec. 259 ; Royce v. Watrous, 7 Daly, 87; Thurston v. Blanchard, 22 Pick. 18, 33 Am. Dec. 700; Foss v. Hildreth, 10 Allen, 76; Snow v. Alley, 144 Mass. 546; Berry v. Am. Ins. Co., 132 N. Y. 49; White v. Dodds, 42 Barb. 561 ; Gould v. Cayuga Bank, 86 N. Y. 75 ; Sheldon v. Scofield, 84 Mich. 177, 48 N. W. 511. See Manning v. Albee, 11 Allen, 520 ; Fraschieris v. Henriques, 36 Barb. 276. 12 Berry v. American Cent. Ins. Co., 132 N. Y. 49, 30 N. B. 254, 28 Am. St. Rep. 548. 13 In Iowa, the supreme court, in an action to recover damages for per- sonal injuries, where the defendant pleaded a compromise and the defendant sought to avoid it for fraud, followed the same line of reasoning; observing that even If plaintiff was defeated in the action he would be entitled to re- tain the $250 received, by virtue of what the defendant contends is a valid transaction. O'Brien v. Chicago, etc., R. Co., 89 Iowa, 664, 57 N. W. 425. 1 See Hunt on Tender, Ch. V., on the manner of making a tender. 2 Eastman v. District Township, 21 Iowa, 590. 8 Stone V. Billing, 167 111. 170 ; affirmed, 63 111. App. 37, s. o. 47 N. B. 372. 282 COMPROMISE [§ 122 ceived upon the contract, where an antecedent tender is necessary, is not a substitute for a tender, and when not actually declined, is not even an excuse for not making it.* It is essentially requisite to a valid tender, in addition to an actual offer, that the party re- scinding, have, at the time, the actual ability to restore the proper- ty and be actually ready to do so. The money or property must be in his immediate control ready for delivery." A refusal does "not dis- pense with the existing ability to make the payment, that is, the ac- tual possession of the money, or having it within convenient reach." ® At common law, in addition to the foregoing requisites, in order to make a valid tender of either money or chattels, the thing must be actually produced and offered to the party entitled thereto.'^ A per- son is not bound to say whether or not he will accept the money or thing till it is produced.* It is universally held that a mere verbal offer to pay is not a tender. ° But the formalities of a tender, or a formal tender, as it is often expressed, may be waived if the party is ready and willing to deliver the money or property, but is pre- vented by the party to whom it is due merely declaring he will not receive it.^° As before stated, any conduct or declaration on the part of the tenderee which goes to show that if a strict tender had been made it would have been rejected, will be deemed a waiver of * Adams v. Friedlander, 37 La. Ann. 350. B Nlederhauser v. Detroit, 91 N. W. (Mich.) 1028. 8 Wynkoop v. Cowing, 21 111. 570. 7 9 Bacon's Abr. Tit. Tender (B) ; Holt v. Brown, 63 Iowa, 319, 19 N. W. 235; Brown v. Gilmore, 8 Greenl. 107, 22 Am. Dec. 223; Deering Har. Co. V. Hamilton, 83 N. W. (Minn.) 44. 8 Bakeman v. Pooler, 15 Wend. 637. BBakeman v. Pooler, 15 Wend. 637; Llebbrandt v. Myron LodgS, 51 111. 81 ; Schrader v. Noeflin, 21 Ind. 338 ; Bacon v. Smith, 2 La. Ann. 441. loodum V. Rutledge, 94 Ala. 488; Thorn v. Mosher, 20 N. J. Bq. 257; Appleton V. Donalson, 3 Pa. St. 381; Farnsworth v. Howard, 1 Coldw. 215; Pinney v. Jorgenson, 27 Minn. 26 ; Stephenson v. Kirkpatrick, 65 S. W. (Mo.) 773 ; Champion Machine Co. v. Mann, 42 Kan. 372. § 123] TENDEB BY WHOM MADE 283 a formal tender.*^ A party in rescinding a contract must at the time of making a tender give notice of his intention to rescind. In case of an attempt to rescind a sale of a horse, it was held that merely leaving the horse in the vendor's yard without any notice of his intention to rescind, was no tender and did not amount to a rescission.^* The tender must be unconditional.^' Sec. 123. Tender by whom made — To whom — Amount. — A ten- der in rescission must be made by the party defrauded or his duly authorized agents. A fraudulent compromise may be avoided by an assignee in insolvency; a trustee or other person authorized to collect the assets of the defrauded party for the creditors, where such compromise, if allowed to stand, would be fraudulent as to the creditors. Parties and privies cannot set up their own fraud for the purpose of avoiding a contract and an administrator cannot avoid a settlement for fraud of the settler.^ A fraudulent compromise made with a testator may be avoided by the executor providing the testa- tor had no knowledge of the fraud and did not ratify the fraudulent contract. So, a fraudulent compromise made by a former adminis- trator or by any person assuming to act for the estate, may be avoid- ed by an administrator in favor of those persons entitled to the due administration of the estate.* Where a creditor stood by and with- out protest, or demanding the proceeds, allowed a claim upon a re- vivor of the action, to be settled by the special administrator and the proceeds paid to the widow, it was held he could not afterwards, on being appointed administrator, contend that the settlement was fraudulent.* A guardian of an infant or non compos may avoid a 11 Sec. 119. 12 Thayer v. Turner, 8 Met. 553. 18 Gould V. Cayuga Bank, 86 N. Y. 75; Hunt on Tender, See. 239. 1 Lewis V. Insurance Co., 7 Mo. App. 112. 2 Upton V. Dennis, 94 N. W. 728, 10 Detroit Leg. N. 132. See Grece v. Helin, 51 N. W. (Mich.) 1106. 8 Greene v. Helm, 51 N. W. (Mich.) 1106. 284 COMPROMISE [§ 125 fraudulent compromise made with the ward, and may make a tender of whatever is required to be restored by the infant or insane person. A tender of money or property in rescission of a compromise should be made to the other party personally. An ordinary agent, particularly when he did not negotiate the compromise, has no au- thority to agree to a rescission. Such authority is not implied from the authority to make contracts. But in the case of large corpora- tions, such as railway companies, insurance companies, and the like, whose business is carried on almost exclusively through agents, and whose officers may be at a great distance or in another state, a tender in rescission to a general agent or agent in charge of the company's principal office will be sufficient.* If the money is re- ceived from an insurance company, or relief society, upon the settle- ment of a liability of a third person for damages, the money should be tendered to the society paying the money.° It is a general rule that where a party receives money or property of another by mis- take, or comes into possession of it through the fraud of the other party, as upon a fraudulent compromise, he is not answerable for in- terest, or for the depreciation of the property, and may rescind by returning or tendering to the other party the same amount of mon- ey, or the same property, as the case may be. On the other hand, where a party guilty of fraud has received money or chattels upon a contract, upon a rescission by the other party he is chargeable with interest on the money from the time of obtaining it;' or in case of chattels, he is chargeable with their value at the date of the con- tract and interest thereon, or the property and the value of its use. 4 Louisville, etc., R. Co. v. Helm, 121 Ky. 645, 89 S. W. 709, 28 Ky. L. Rep. 603 ; Louisville Veneer Mills Co. v. Clements, 109 S. W. 308, 83 Ky. L. Rep. 106. B See Maine v. Chicago, etc., R. Co., 109 Iowa, 260, 70 N. W. 630. 6 Corse V. Minnesota Grain Co., 102 N. W. (Minn.) 728. See 3 Par. on Cont. 102 ; 1 Sutherland on Damages, 621. § 124] PLACE OF MAKING A TENDBB 285 Sec. 124. Place of making a tender. — If a person desires to re- scind a contract by returning money received thereon, or a deed, mort^ gage, note or other instrument, he should seek the other party and make a tender to him personally, if he can be found, otherwise the tender should be made at the latter's residence or place of business, and as soon as possible, give notice of such rescission. If the arti- cles to be returned are specific articles, it is sufficient to return them at the place where received,^ and if the manner or place of deliv- ery be not such as to apprise the other party of the rescission, no- tice of such rescission and of the return of the property should be given as soon as practicable.^ Leaving a horse in the yard of the vendor without any notice of an intent to rescind the contract has been held not a rescission." Where a person to whom it is desired to restore property, has since removed from the state, or is a transient, having no known place of abode within the state, and the articles are such as naturally belong to a warehouse, they may be left at a ware- house, subject to the other person's order, and the latter notified where they are,* or, they may be kept by the vendee ready for the vendor, whenever he may call for them; and notice given to him of the rescission, and a request made to take them away, or which is the same thing, that the goods are held subject to his order. The rule with respect to both money and specific articles is, that a party is not bound to go out of the state in which the contract was made to make a tender. Nor can a party be required to go out of the state to receive a tender upon a domestic contract, and if a party residing outside of the state where the money or property was re- ceived, desires to rescind a compromise, he must make a tender at 1 Paulson V. Osbom, 27 N. W. Rep. (Miim.) 203, s. c. 37 Minn. 19. See McCormick Har. Machine Co. v. Knoll, 78 N. W. Rep. (Neb.) 394, and cases cited. 2 See Buchanan v. Harvey, 12 111. 338. 8 Thayer v. Turner, 8 Met. 553. * Angell V. liomis, 55 N. W. Rep. (Mich.) 1008. 286 COMPROMISE , [§ 125 the place where it was received," except when the thing to be re- stored is money, in which case a personal tender to the party enti- tled to it, at any reasonable time and place, is good. Sec. 125. Rescission by agreement — Agreement implied — Abandonment by one party. — An accord and satisfaction, or a compromise, may be by mutual consent of the parties rescinded or abandoned, and such act restores the debt, or the cause of ac- tion to its original status, and restores the parties to the position they were in before the accord and satisfaction or compromise was entered into.^ The consent to a rescission will be inferred from the subsequent payment or satisfaction of the original de- mand, or from a failure to object to the enforcement of the orig- inal cause of action. If one party repudiates or abandons an ac- cord and satisfaction, or a compromise, as where he sues upon the original cause of action, or refuses or resists performance of the compromise agreement, the other party need not object but may acquiesce, and the effect upon the original cause of action will be the same as if the accord and satisfaction, or compromise, had been rescinded by mutual consent.^ More is said elsewhere upon the rights of the parties with respect to a repudiation or abandonment of a compromise agreement." s In National Imp. Co. v. Makin, 103 Iowa, 118, 72 N. W. 431, it was held that a tender of money in rescission of a compromise made in Iowa, could not be made by depositing the money at a place in Chicago, subject to the order of the other party. That the money must be returned or tendered at the place where received in Iowa, unless, possibly, some one authorized to receive the money was present in Chicago. 1 Heavenrich v. Steele, 57 Minn. 221, 58 N. W. 982 ; Flegel v. Hoover, 156 Pa. St. 276, 2T Atl. 161 ; Perry v. Railway Co., 44 Ark. 382. 2 See Robinson v. O'Brien, 22 Ky. Law Rep. 769, 58 S. W. 820. « Sec. 94. § 126] RESCISSION 287 Sec. 126. Rescission upon the ground of mistake of law. — The general principle applicable to contracts in general is, that contracts entered into in good faith under ignorance and mistake of law, are valid and binding upon the parties. The ancient max- im tgnorantia juris non excusat has its foundation in the danger to the tranquillity of society, should men be permitted to repudi- ate their solemn contracts and create or prolong litigation merely upon their assertion that they did not know the law of the land. The difficulty of disapproving such an assertion is obvious,^ and every contract could be overthrown if ignorance of the law was ground for a rescission. Hence, the necessity for the rule that mistake and ignorance of the law excuses no man ; otherwise, as observed by Mr. Pomeroy, there would be no security in legal rights, no certainty in judicial investigation, no finality in liti- gation.^ And, it may be said that the rule is well settled that ignorance or mistake of law, pure and simple, with respect to one's legal rights is not ground for relief either at law or in eq- uity.^ The subject, however, is involved and there is an appar- ent, if not a real lack of harmony in the decisions. 1 It is said that ignorance of tlie law, unless we are permitted to dive into the secret recesses of the heart, is incapable of proof; but that mistake of law presumes to know when it does not, and supplies palpable evidence of its existence: Hall v. Reed, 2 Barb. Ch. 505; Champlin v. Laytin, 18 Wend. 425. While this distinction is clear from the standpoint of proof, yet a mis- take of law is ignorance of the law arising out of not knowing the true rule, which carries us again to the secret recesses of the heart. 2 The expression, of very common occurrence in the books, that every one is presumed to know the law, does not seem to fit the case. It is common knowledge that a great mass of men know only a very few of the plainest principles of law; some do not understand scarcely any, whUe it is safe to say no one knows all the law. The better expression, used less frequently, is, that every person must at his peril know the law. » A mistake in a matter of law Is no ground for rescinding an agreement of compromise, though the mistake has prevailed generally with respect to the law afiCecting whole classes of the community, and the compromise has 288 COMPROMISE [§ 127 Sec. 127. Same subject. — It has often been declared that where a compromise is effected of a doubtful claim, and the par- ties have knowledge of the facts, the courts will not, as a general rule, investigate the relative merits of the claims of the parties for the purpose of determining their legal rights, and overhauling or setting aside the compromise^ upon a plea of ignorance or mistake of law.^ It will be observed that in the foregoing state- ment there is implied a qualification or exception to the strict rule that any mistake based on a misconception of a clear rule of law, or a supposition of a legal duty where none exists, will not be relieved against. The uncertainty and perplexity in which we find the subject involved has arisen mainly out of the diffi- been made, founded on such mistake: Trigg v. Lavallee, 9 Jur. N. S. 261, 11 W. R. 404, 8 L. T., N. S. 154, 15 Moore P. C. 271. Mr. Pomeroy says, witli respect to contracts in general: "Tlie rule is well settled that a simple mistake by a party as to the legal effect of an agree-- ment which he executes, or as to the legal result of an act which he per- foi-ms, is no ground for either defensive or affirmative relief. If there were no elements of fraud, concealment, misrepresentation, undue influence, viola- tion of confidence reposed, or of other inequitable conduct in the transaction, the party who knew or had an opportunity to know, the contents of an agreement or other instrument, cannot defeat its performance, or obtain its cancellation or reformation, because he mistook the legal meaning and effect of the whole or of any of its provisions." 2 Pomeroy, Eq. 843. 1 See Fisher v. May, 2 Bibb, 448, 5 Am. Dec. 626. 2 Fidelity Co. v. Gillette, 92 Minn. 274, 99 N. W. 1123 ; Hall v. Wheeler, 37 Minn. 522, 35 N. W. 377 ; Perkins v. Frinks, 30 Minn. 241, 15 N. W. 115 ; State V. Reigart, 1 GIU, 1, 39 Am. Dec. 628; Fisher v. May, 2 Bibb, 448, 5 Am. Dec. 626. Money paid under a mistake of law cannot be recovered back where the transaction is unaffected by any fraud, trust, confidence or the like, and both parties knew all the facts. Erkens v. Nicolin, 39 Minn. 461. In Hall V. Wheeler, 37 Minn. 522, 35 N. W. 377, the mistake was as to the law regu- lating the right to redeem from a tax sale ; both parties believing the time to redeem had expired, when in fact it had not. There being no fraud, nor mistake of fact, the court refused to set aside a compromise by which each quitclaimed to the other party a portion of the land. The consideration moving to plaintiff was in securing part of the land without redeeming, whether he knew he had the right or not. § 127J RESCISSION 289 culty in determining whether the mistake or ignorance complain- ed of was of law or fact; and from the failure of the courts to qualify the strict rule by referring to the facts, other than simple mistake of law, controlling their decision. Mr. Story in his work on equity, in adverting to the guarded and qualified manner in which the rule was so often stated, said: "Whatever exceptions there may be to this rule, they are not only few in number, but they will be found to have something peculiar in their character, and to involve other elements of decision." ' And the same em- inent author, in considering the class of cases most generally re- lied upon as an exception to the rule ; that is, where a party, knowing all the facts, has acted upon a mistake of the law ap- plicable to his title to property respecting which some agreement has been made, said: Upon a close survey, many, though not all of the cases relied upon as exceptions to the rule, will be found to have turned, not upon the consideration of a mere mis- take of law, stripped of all other circumstances, but upon an ad- mixture of other ingredients, going to establish misrepresentation, imposition, undue confidence, undue influence, mental imbecility, or that sort of surprise, which equity uniformly regards as a just foundation for relief.* 8 story's Eq. Sec. 116. ■4 1 Story's Eq. Sec. 120. A compromise made under a mistake of law may be set aside if there is undue influence: Wlieeler v. Smltli, 9 How. 55. In Underwood v. -Bockman, 2 Dana, 309, 29 Am. Dec. 407, the court said: "But when it can be made perfectly evident, that the only consideration of a con- tract was a mistake as to the legal rights or obligations of the parties, and where there has been no fair compromise of hona fide and doubtful claims, we do not doubt that the agreement might be avoided on the ground of a clear mistake of law, and a total want, therefore, of consideration or mutu- ality." Numerous equitable reasons for setting aside the contract were pres- ent, aside from the question of a pure mistake of law. Hunt Aco.& S. — 19 290 COMPEOMISB [§ 128 Sec. 128. Same subject.— It is a settled rule that compromises effected by parties, about whose rights, doubts and uncertainties have arisen, will not be set aside for mistake either of law or of fact ; for the parties purposely enter into the agreement settling and compromising such doubts. Such contracts are made, pri- marily, for the very purpose of avoiding the hazards of a judicial investigation of doubtful and disputed questions; sometimes of law; sometimes of fact, or of both law and fact. Compromises are in their nature speculative contracts, and where parties in- stead of ascertaining and insisting upon their rights, enter into a compromise they are supposed to assume some risk, and any error in their calculation of their chances will not furnish any ground for relief in absence of want of consideration, or bad faith, concealment, breach of confidence, misrepresentation or oth- er like conduct, amounting to actual or constructive fraud.^ Where a party is ignorant in point of fact of any title or of a larger share in certain property, and is induced to surrender the same under the name of a compromise, a court of equity will afford him relief.' This is said to be a mistake or ignorance of fact. In England it has been held as unquestionable doctrine that if a party acting in ignorance of a plain and settled principle of law is induced to give up a portion of his property under the name of a compromise, equity will relieve him from the effect of his mistake." But in the United States the courts have, gen- 1 See 2 Pomeroy's Eq. Sec. 849, 855 ; 1 Story's Eq. Sec. 137 ; Miller v. Chippewa Co., 58 Wis. 630, 17 N. W. 535 ; Fidelity Co. v. Gillette, 92 Minn. 274, 99 N. W. 1123; Dalplne v. I/ume, 122 S. W. (Mo. App.) 776; Pickering V. Plckeripg, 2 Beav. 31. A settlement will not be set aside upon the ground that one of the parties did not understand it: Lauzon v. Belleheumer, 108 Mich. 444, 66 N. W. 345. 2 Trigg V. Eead, 5 Hump. (Tenn.) 529, 42 Am. Dec. 447. In this case the point of ignorance of title was emphasized, although the court seemed to lay some stress upon the fact that the other party concealed the fact of title from the owner. See 1 Story's Eq. Sec. 120, 121, 122. s Naylor v. Winch, 1 Sim. & Stu. 555. § 129] RESCISSION 291 erally, adhered to the principle that in contemplation of law, all its rules and principles are deemed certain, and the rule seems to be settled, that an ignorance of the law, however plain and set- tled the principles may be, and a consequent mistake as to title founded upon such ignorance, furnishes no ground to rescind agreements, or set aside solemn acts of the parties, when they have been made with a full knowledge of the facts.* Mr. Story, in summing up this doctrine, after examining numerous cases, said: "And hitherto the exceptions to it, (if any), will be found not to rest upon the mere foundation of a naked mistake of law, however plain and settled the principle may be, nor upon mere ignorance of title, founded upon such mistake."" Sec. 129. Same subject — Mistake as to existing legal rights. — It very often happens, particularly in family settlements and com- promises, that a party knowing all the facts, is ignorant or mistaken as to his existing legal rights in a portion or all of the property, and, knowing its import, executes an agreement on the assumption of a clear legal title in the other party. What kind of a mistake is it and will equity grant any relief? In an English case, where a person knowing his relationship to the deceased, upon an agreement for a division of the personal estate, released a mortgage to another per- son on the assumption that the latter was the heir at law, when in fact he, as heir, was entitled to the mortgage, the Lord Chancellor relieved the plaintiff.^ The case was reported without any state- ment of the grounds of the decision, and Mr. Story, in commenting * Trigg V. Read, 5 Hump. 529, 42 Am. Dec. 447 ; Hunt v. Rousmanier's Adm'r., 1 Pet. 15 ; The Bank of the United States t. Daniel, 12 Pet. 32 ; 1 Story's Eq. Sec. 126. 5 1 Story's Eq. Sec. 137. 1 Turner v. Turner, 2 Ch. R. 81. In Bradley v. Oliver, 1 D. P. C. 598, 1 C. & M. 219, it was held that where two parties come to an agreement and one Is ignorant of his rights, the agreement is not in general binding upon him. 292 COMPROMISE [§ 129 thereon, said: "There may have been surprise, or imposition, or undue influence, or a suppression of the knowledge of plaintiff's rights by the defendant. If it proceeded upon the naked ground* of a mistake of law, it is not easily reconcilable with other cases. But, if it proceeded upon the ground, that the plaintiff had no knowl- edge of his title to the mortgage, and therefore did not intend to release any title to it, the release might well be relieved against, as going beyond the intention of the parties, upon a mutual mistake of the law. It was certainly a plain mistake of the settled law ; and, if both parties acted under a mutual misconception of their actual rights, they could not justly be said to have intended what they did."^ Mr. Story, in other sections of his great work on Equity, expresses the same views as to such mistakes.' And, Mr. Pomeroy, writing about a half century later, formulated the rule that mis- takes as to one's existing legal rights are treated in equity as anal- ogous to, if not identical with a mistake of fact.* Both authors, 2 1 Story's Eq. Sec. 123. 3 Story's Eq. Sec. 122. "Indeed, when the party acts upon the misap- prehension, that he has no title at all in the property, it seems to involve in some measure a mistake of fact, that is, of the fact of ov^nership, aris- ing from a mistake of law. A party can hardly be said to intend to part with a right or title, of whose existence he is wholly ignorant; and if he does not so Intend, a court of equity will in ordinary cases relieve him from the legal effect of instruments, which surrender such unsuspected right or title." Sec. 130. — "There may be a solid ground for a distinction between cases, where a party acts or agrees in ignorance of any title in him, or upon the supposition of a clear title in another, and cases, where there is a doubt or controversy or litigation between the parties as to their respective rights. In the former cases (as has already been suggested) the party seems to labor in some sort under a mistake of fact, as well as of law." 4 "Wherever a person Is Ignorant or mistaken with respect to his own antecedent and existing legal rights, interests, estates, duties, liabilities or other relation, either of property, or contract, or personal status, and en- ters into some transaction the legal scope and operation of which he cor- rectly apprehends and understands, for the purpose of affecting such as; sumed rights, interests, or relations, or of carrying out such assumed du- ties or liabilities, equity will grant its relief, defensive or affirmative, treat- ing the mistake as analogous to, if not identical with, a mistake of fact." § 129] BBScissioN 293 however, jecognized that the rule would be inapplicable to an inten- tional settlement of controverted rights. It must be conceded that the question, whether a mistake is of law or of fact, is of no im- portance, where, as stated in a former paragraph, the facts are known but doubts have arisen, or the rights bona fide controverted, and the parties have compromised their matters." A compromise always involves some element of doubt and uncer- tainty as to the relative rights of the parties or as to the subject matter, otherwise with this element lacking, to call a contract a com- promise would be a misnomer. With this in mind it is not easy to conceive of a compromise where ignorance or mistake as to one's ex- isting legal rights would be ground for relief, except, perhaps, where, upon a compromise comprehending several matters, some one of them was included in the agreement upon the assumption of a clear legal title in the other party ; for if the compromise was of the rights to one piece of property, there must of necessity be doubts and disputes between the parties affecting to some extent their rights to the prop- erty in question. Upon an examination of this subject the conclu- sion is forced that the true rule is, that relief will not be granted upon a bare mistake or ignorance of the law, but only upon an ad- mixture with some other ground warranting equitable relief. Relief will not be granted to a party who makes a settlement of a pending action under a misapprehension as to the effect the settlement would have upon another suit pending.* 2 Pomeroy's Eq. Sec. 849. See Underwood v. Brockman, 4 Dana, .309, 29 Am. Dec. 407; Belt v. Insurance Co. (N. Y.) 43 N. E. 64; Eawen v. Pru- dential Ins. Co., 106 N. W. (lo.) 198. e In Conn v. Conn, 1 P. Wms. 726, It was decided by Lord Macclesfield, "That where two parties are contending, and one releases his pretentions to the other, there can be no color to set this release aside, because the man that made It had the right; for by the same reason there can be no such thing as compromising a suit nor room for any accommodation." "The whole doctrine of the validity of compromises of doubtful rights rests on this foundation." 1 Story's Eq. Sec. 131. 6 Booth V. Alpena, 135 N. W. (Mich.) 1063. 294 COMPROMISH [§ 130 Sec. 130. Rescission on the ground of mistake of fact — Mis- take of fact defined. — Mistake of fact and ignorance of fact, while not, strictly speaking, equivalent expressions, are in law, commonly used as convertible terms, their effect being identical.^ In law the term mistake is confined to those cases where the effect complained of is attributed to it alone. Where mistake co- incides with fraud, or is the result of negligence, the result is at- tributable to the whole transaction and it is not treated under the head of mistake. Mistake of fact which will furnish the ground fpr relief, either at law or in equity, is defined by Mr. Pomeroy as "an erroneous mental condition, conception or conviction, induced by ig- norance, misapprehension or misunderstanding of the truth, but with- out negligence, and resulting in some act or omission done or suffer- ed erroneously by one or both parties to a transaction, but without its erroneous character being intended or known at the time." ^ If it consists of an unconsciousness, an ignorance, or a forgetfulness of an existing or of a past fact, it is said to be a passive mental condition; if the mistake is the result of a belief that a certain thing exists which really does not, or that it did exist at a past time when it really did not, it is an active mental condition. Mistakes of fact may occur in numerous forms, but they all fall under the above con- ditions.' Mistake of fact, so far as it furnishes a ground for rescission, may occur with respect to the subject matter, as where the parties fully understand the agreement but there is error as to the identity, title, amount, value and the 'like; or it may relate to the terms of the agreement, "one or both parties misconceiving, misunderstand- ing, or even being entirely ignorant of some term or provision; so that although they appear to have made an agreement, yet in fact 1 IStory's Eq. 140, N. 2 ; Rapalje & I* Law Die. 2 2 Pomeroy's Eq. 839. 8 See Pomeroy's Eq. Sec. 839, 854, for an illuminating discussion of this subject. § 131] EESCISSION 295 their minds never met upon the same matter." * Mistake as to one's existing legal rights, or mistake of law, or of mixed law and fact, are adverted to in a former paragraph. An error or ignorance of the law of a foreign country or of another state is regarded as an error or ignorance of a fact," as no duty is laid upon a person to know the' law of a foreign country. Ignorance of facts, of which the party is aware, is not a mistake of facts, and an acceptance of a cer- tain sum in full settlement of a demand with full consciousness of the want of information as to the amount due is binding.* Sec 131. Same subject — Requisites to relief — Materiality of fact — Negligence. — The general rule is that a contract made under ignorance or mistake of a material fact, is voidable and equity will afford affirmative or defensive relief. The fact must be material to the contract, that is essential to its character, for if the ignorance or mistake is of an unimportant and immaterial fact, it cannot be said to have influenced the parties in making the contract, and relief will be denied.^ The burden is upon the party complaining to show that his conduct was determined by the mistake or ignorance. But this could be shown only in connection with proof of a mistake or ignor- ance of a material fact. While relief will be granted for ignorance as well as mistake of fact, yet the principles upon which relief is granted in these cases are different. This is due to the fundamental -differences in the two cases. Ignorance is not mistake; mistake of fact is an error of opinion. Where a party is ignorant of facts merely, relief will be denied where actual knowledge could have been obtained by the exercise of due diligence and enquiry.'' It has been *2 Pomeroy'8 Eq. 853. B 2 Pomeroy's Eq. 854, citing McCormlck v. Gamett, 5 De G. M. & G. 278 ; Leslie V. Baillle, 2 T. & C. 91 ; Haven v. Pester, 9 Pick. Ill ; Bank v. Dodge, 8 Barb. 233; Merchants' B'k. v. Spaulding, 12 Barb. 302; Patterson v. Bloomer, 35 Conn. 57. « McDanlels v. Bank, 29 Vt. 230, 70 Am. Dec. 406. 1 1 Story's Eq. Sec. 141 ; 2 Pomeroy's Eq. Sec. 856. a McDanlels v. Bank. 29 Vt. 230, 70 Am. Dec. 406. 296 COMPKOMISH [§ 131 said "no person can be presumed to be acquainted with all matters of fact; neither is it possible, by any degree of diligence, in all cases to acquire that knowledge; and, therefore an ignorance of facts does not import culpable negligence." * A person must not, however, close his eyes when means of aoquiring information are open to him, and in order to obtain relief, the fact of which the party claims to have been ignorant of, must be one which he could not by reasonable dili- gence have acquired knowledge of.* Mr. Pomeroy states the rule thus : "Where the mistake is wholly caused by the want of that care and diligence in the transaction which should be used by every per- son of reasonable prudence, and absence of which would be a vio- lation of legal duty, a court of equity will not interpose its relief;" and he observed further, that the conclusion from the best author- ities seemed to be, that the neglect must amount to the violation of a positive legal duty. The highest possible care is not demanded.' If means of information is open to a party it is his duty to inform himself, and the general rule applicable to all contracts is, that where the facts and the source of information are equally open to both, each party is bound to avail himself of such information; and 'where the fact is unknown to both, and the parties have had equal means of information, if they have acted in good faith, equity will not interfere." When an insurance company compromises a loss at a less sum than that claimed to be due by the insured, it cannot avail itself of an ignorance of a breach of warranty in the policy to defeat a re- covery upon the agreement to pay the loss, made after the company had had ample opportunity to investigate the facts and circumstances affecting the fairness of the loss, without any interference or fraud practiced by the insured at the time of the investigation.' If a party s 1 Story's Eq. 140 ; Jenks v. Fritz, 7 W. & S. 201. 4 HcDaniels v. Bank, 29 Vt. 230, 70 Am. Dec. 406. B2 Pomeroy's Eq. 856. e Belt V. Mehew, 2 Calf. 159, 56 Am. Dee. 329. 7 Stache v. Insurance Co., 49 Wis. 96 ; Smith v. Insurance Co., 62 N. Y. 85 ; National Life Ins. Co. v. Mlnch, 53 N. X. 144. § 131] RESCISSION 297 signs a release or a contract without reading jt, he is presumed to be guilty of gross negligence,* and relief will be denied him, unless he overcomes the presumption by showing that he was induced to sign it through false representations as to what it contains and signed it reposing confidence in the other party.^ The burden is upon the party complaining to show that he had been deceived, misled or over- reached.^* Inability to read English or understand the contents of a release is not sufficient to avoid the compromised^ Before signing the release the party should obtain the assistance of some one capa- ble of correctly informing him of its contents. Relief has been granted in cases when no actual fraud was shown, on the ground of excusable neglect, or mistake, as where a person, suffering from an injury which impairs his faculties, or is in that mental state which naturally accompanies a serious injury, signs a release, or other con- tract, which includes a claim not intended by him to be released,^ ^ or it is inequitable to him, as where he releases a valid claim for a large sum upon payment of a much smaller sum.^° Such decisions, however, upon a careful analysis, are found to be based upon the whole transaction, the chief element of which warranting relief is, that the releasor at the time was incapable of caring for his own in- terests. 8 Albrecht v. Milwaukee Ey., 58 N. W. (Wis.) 72 ; Upton v. Tribilcock, 91 U. S. 50. 9 McNamara v. Boston El. Ry. Co., 83 N. E. (Mass.) 878. loSheanon v. Insurance Co., 83 Wis. 527, 53 N. W. 878; Home Ins. Co. V. Bredehoft, 68 N. W. (Neb.) 400. 11 Home Ins. Co. v. Bredehoft, 68 N. W. (Neb.) 400; Albrecht v. Milwau- kee Ry., 58 N. W. (Wis.) 72. 12 In Lusted v. Chicago Ry. Co., 71 Wis. 391, 36 N. W. 857, where an in- jures person was sick in bed from an injury which affected his sight, signed a sealed release of his claim for loss of property and for personal injuries sustained ; it was held that this did not constitute such negligence as to prevent him from showing he was ignorant of the fact that he was releasing his claim for the personal injuries, although no actual fraud was shown. IS Sheanon v. Pacific Mut. Life Ins. Co., 83 Wis. 527, 53 N. W. 878. 298 COMPEOMISB [§ 132 Sec. 132. Same subject— Mutual mistake.— It is a general rule that if a party compromise a doubtful title, he will be bound, though ignorant of the extent of his rights.^ This brings us again to the fundamental doctrine of a compromise. Admitting a doubt is an ad- mission of ignorance of the extent of the right, and if the party chooses to compromise, rather than investigate his rights and reduce them to a certainty, he will not be heard to complain. But a compro- mise will be confined to the doubts raised between the parties which were the inducement to the contract. Where doubts have arisen re- specting the title or rights of the parties to property and a compromise effected, the doubt will be confined to the particular right or title in dispute; for if it turns out that the party has title through another source of which he was at the time ignorant, he will be relieved from the effect of the compromise. There must be mutual mistake to au- thorize the interference of the powers of the court.'' The rule is founded upon the principle that mutual error disappoints the inten- tion of the parties and that neither entered into the contract which he intended to. But equity does not always grant relief in case of mutual error. Usually it is denied in cases where both parties have acted in good faith and have had equal means of information, but have neg- lected to inform themselves. The fact that the other party was equally ignorant, does not excuse the negligence of the party complaining. A more strict rule applies to compromises in the nature of family set- tlement, and they will be upheld, if fairly and honestly made although all the parties may have been mistaken or ignorant as to what their rights actually were.* Where one party only was in error and the other party correctly understood the agreement and honestly believed that the other cor- 1 Hoge V. Hoge, 1 Watts, 163, 26 Am. Dec. 52. 2 Welles V. Yates, 44 N. Y. 529 ; Nabours v. Cooke, 24 Miss. 44 ; Alexander V. Owen County, 124 S. W. (Ky.) 386; Booth v. Alpena, 135 N. W. (Mich.) 1063. s Stockley v. Stockley, 1 V. & B. 23; Westby v. Westby, 2 Dr. & War. 502; Persse v. Persse, 7 CI. & Fin. 279. § 133] BBSCissiON 299 rectly understood it, relief as a general rule will be denied, but, if there is an admixture of mistake and fraud, as where one party is in error and the other party knowing this, and without correcting the error, takes advantage of it, intending to reap the benefits, or what is worse the error is induced by affirmative representations by the other party, relief will be granted to the innocent party.* In such cases, however, the unconscientious advantage taken is the principal ground upon which the relief is granted. Sec. 133. Rescission upon the ground of fraud — Definition of fraud. — The term fraud, according to the Civil law, is applied to every artifice made use of by one person for the purpose of deceiving another.^ This definition comprehends only those cases where there is an intention to commit a cheat or deceit." The rule at common law is much more comprehensive, and em- braces also implied or constructive fraud; cases where actual intent to deceive may be entirely lacking. Mr. Pomeroy, speak- ing with respect to equitable jurisdiction, after declaring that the ele- ments of fraud are so various, so different under different circum- stances, so destitute of any common bond of unity, that they cannot be brought within any general formula, gave what he considered as complete and accurate definition as could be given : He said : Fraud in equity includes all willful or intentional acts, omissions and con- cealments which involve a breach of either legal or equitable duty, trust or confidence and are injurious to another, or by which an undue or unconscientious advantage over another is obtained.^ At law this definition is, perhaps, too broad, for it is a general rule that courts of law will not give relief to one over whom an undue advantage is ob- tained, when the other party is within the strict rule of law and did not do anything contrary to conscience or good faith. So, in some 4 KIrchner v. New Home Co., 135 N. Y. 182. ilPothler's Ob. 28. 2 1 story's Eq. 187. « 2 Pomeroy's Eq. 873. 300 COMPEOMISB [§ 134 cases the law courts will not interfere, even though the other party commits some act of bad faith and has obtained an undue advantage, where the contract is within the law. In other words courts of eq- uity will afford relief in some cases where courts of law will not, where one party, though within the letter of the law, has obtained an advantage which is undue and inequitable. Sec. 134. Same subject — Fraud in general — ^Actual fraud. — Fraud with respect to vitiating a compromise is determined by the application of the rules applicable to contracts in general. Fraud in equity is classified under four general heads, only three of which have any bearing upon rescission of compromise. They are: (1) Frauds which are actual, arising from facts and cir- cumstances of imposition; (2) Frauds apparent from the intrinsic nature and subject of the bargain itself; (3) Frauds presumed from the circumstances and condition of the parties.^ The last two comprehend constructive frauds and the first actual fraud. Actual fraud may be reduced to two general forms, false repre- sentation and fraudulent concealment. Actual fraud is perpe- trated in as numerous ways as the ingenuity of shrewd and dis- honest men can devise, but whatever manner may be adopted, in order to constitute legal fraud, it must result in deceiving the other party and cause him a pecuniary loss; for in such cases a man cannot be defrauded without being in some manner deceived ; and, the courts will not take cognizance of any deviation from moral rectitude in business affairs unless some damage result.^ It is essential that the injured party believed and relied upon the false representation, or if material facts were concealed, that he was ignorant of those facts and relied wholly upon the statements as made; and that the misrepresentations made or facts concealed are such that if they had not been made or concealed, the party 1 Sec. 2 Pomeroy's Eq. 874. 2 See Ourrie v. Steele, 2 Sandf. 542, where It Is held that concealment will not invalidate a compromise unless a loss has been occasioned thereby. § 134] RESCISSION 301 would not, in all probability, have executed the agreement.' From the foregoing it is seen that not every misrepresentation or con- cealment will vitiate a contract. If a party knows the representa- tions to be false or that certain facts are being concealed, he is not deceived, and it cannot be said that the false statements or concealment influenced his action in making the contract.* So, if the misrepresentation or concealment are of trivial and unim- portant matters not affecting the value or character of the sub- ject matter, so that if the truth had been known the party would not, in all probability, have been deterred from executing the contract, they are not deemed material, and neither law nor equity will interfere. As before observed there must be some pecuniary loss shown to have resulted from the fraud, and for the purpose of affording relief by way of rescission the court will not enquire into the extent of the injury. If the amount is appreciable, the fraud furnishes the ground for relief. Where some of the representations made during the course of a treaty are true and some are false but all are of such character as naturally induce the contract, the court will not attempt to separate the different statements and say that the false statement was not the one that induced the contract, but will consider the whole contract as having been obtained by fraud. In actual fraud, the misrepresentation or concealment must be of a fact, and one material to the transaction and not of some independent and collateral matter. The representations or concealment of a fact must be made or done with the intent and purpose of inducing » Whether the fraudulent representations were relied upon and induced the settlement is, when disputed, a question for the jury: Marple v. Min- neapolis & St. L. R. Co., 132 N. W. (Minn.) 333. * Van Trott v. Wiese, 36 Wis. 447 ; Adams v. Sage, 28 N. Y. 103 ; Webb V. Harris, 1 Tex. App. Civ. Cas. Sec. 1289. If a party executes a contract knowing the representations to be false, or his suspicions are so aroused that he places no reliance in the statements of the other party, his action, if any, would be for a breach of warranty, If the representations were of that character, and not one for deceit or rescission. 302 COMPBOMisr [§ 134 the other party to enter into the contract, and in point of time, it of necessity precedes the conclusion of the agreement. In most cases it takes place during the negotiation of the treaty. The intent to induce the other party to enter into the agreement will be presumed from the result which naturally flows from the making of such statements, if they are of such character as would natural- ly induce an ordinary person to act thereon. A desire to injure need not necessarily be present. The term false means untrue and it necessarily follows that the Statements to constitute mis- representations must be untrue in fact. The most important fea- ture in actual fraud is the immoral element — the guilty knowledge 'of the falsity of the representations and the consequent intent to deceive. This knowledge is technically called the scienter. No mis- representation is fraudulent at law, unless it is made with knowl- edge of its falsity, or under such circumstances that the law must necessarily impute such knowledge." The rule is the same at law and in equity, except that in equity the actual intent to de- ceive is not always essential to relief. It appears from an examination of the authorities and text books that the law is settled that fraudulent misrepresentation may arise in three ways.' Without elaboration, they are — (1) By a statement of a fact the falsity of which the party at the time has positive knowledge. (2) By making an untrue statement, of the truth of which the party at the time has no knowledge and which he does not believe to be true. (3) By making an untrue statement, having at the time no knowledge as to its truth or falsity, and no reasonable grounds to believe it to be true. In the latter case by claiming that he believed it to be true does not change its fraudulent character. If a man makes an untrue repre- sentation of a material fact as of his own knowledge, not know- ing whether it is true or false, it is a fraud. An unqualified af- 6 2 Pomeroy's Eq. 884. 6 See Humphrey v. Merrlam, 82 Minn. 187, 20 N. W. 138 ; 2 Pomeroy's Eq. Sec. 886. § 135] RESCISSION 303 firmation amounts to an affirmation of one's own knowledge, and whether made innocently or knowingly it operates as a fraud.' Such, in brief, are the essential elements of actual fraud, sufficient- ly concise, we hope, for the purposes of a treatise of this char- acter. For a more extended discussion and elaboration of the general subject other treatises must be examined.* Sec 135. Same subject — Misrepresentation of the law — Of mat- ter of opinion — Future events. — ^A misrepresentation of the law is not generally considered as amounting to fraud, the reason being that all persons at their peril, are required to know the law. Where the misrepresentation is given as a matter of opin- ion merely and in good faith, it must be conceded that this rule applies, but such cannot be the rule where the party making the misrepresentation has superior knowledge of the subject, as a lawyer or even a layman, and makes the misrepresentation not as an opinion merely but as an affirmation of a fact, or give it out as an opinion knowing it to be false, or without any knowledge as to its truth or falsity, and it is made for the purpose of affecting the conduct of the other party and to secure a favorable compro- mise. Ignorance of the law is, of itself, no ground for relief, but if that ignorance is encouraged and made more dense by the will- ful misrepresentations of one party, so that the other is deceived and led into a mistaken conception of his legal rights, the party guilty of the deception will not be permitted to shield himself behind the general rule.^ 1 Bullett V. Farriar, 42 Mlrm. 8 ; Converse v. Blumrlch, 14 Mich. 109, 90 Am. Dec. 230; Mahler v. Corder, 73 Iowa, 582, 35 N. W. 647; Henderson V. San Antonio etc. R. R. Co., 17 Tex. 560, 67 Am. Dec. 675. 8 See 2 Pomeroy's Bq., Sec. 872, et seq. ; Story on Eq. Sec. 184, et seq. and Works on Fraud. : 1 Titus V. Insurance Co., 97 Ky. 567, 17 Ky. K Rep. 389, 31 S. W. 127, 53 Am. St. Rep. 426, 28 L. R. A. 478 ; Cook v. Nathan, 16 Barb. 342 ; Berry v. Insurance Co., 132 N. T. 49, 30 N. E. 254, 28 Am. St. Rep. 548. 304 COMPROMISE [§ 135 The general rule is that a fraudulent misrepresentation must be of a fact and cannot be the mere expression of an opinion. The reason is that one person is assumed to be equally able to form his own opinion and come to a correct judgment in respect to the matter under consideration, as the other party. ^ But it has been held, that the false assertion of an opinion will amount to fraud when given by one who has or assumes to have knowledge of a subject of which the other is ignorant, and it is given for the purpose of inducing the contract.' According to Mr. Pomeroy, "Whenever a party states a matter, which might otherwise be only an opinion, and does not state it as a mere expression of his own opinion, but affirms it as an existing fact material to the transaction, so that the other party may reasonably treat it as a fact, and rely upon it as such, then the statement clearly becomes an affirmation of a fact within the meaning of the general rule, and may be a fraudulent misrepresentation." * The decisions are in conflict with reference to statements concerning value being matter of opinion, or statement of fact, but Mr. Pomeroy classes them according to the rule above quoted. Statements of value are sometimes nothing more than an expression of opinion and on the other hand they may be an affirmation of a specific mate- rial fact. Thus where a person having full knowledge of the val- ue of certain property, represents to the owner that it is worth not more than a certain sum which is much less than the true value and thereby obtains the property at his valuation; the con- tract will be avoided for fraudulent misrepresentation.^ A family settlement obtained by misrepresentation as to the value of the property was held invalid." It has been held that false representa- 2 2 Pomeroy's Eq. 878. See Bowers v. Good, 100 Pac. (Wash.) 848. » Heden v. Minneapolis, etc. Inst., 62 Minn. 146, 64 N. W. 158. 4 2 Pomeroy's Eq. 878. B Haggarth v. Wearing, L. E. 12 Eq. 320. See Jordan v. Volkenning, 72 N. T. 300. a Hewett v. Crane, 6 N. J. Eq. 159. § 136] EEscissioN 305 tions as to a future event will vitiate a contract, where those events depend upon the acts of the party making the representa- tions and form the inducement for the contract.^ Sec. 136. Same subject — Misrepresentation by debtor as to his finances — Setting up sham claims. — It is a settled rule that an ac- cord and satisfaction or compromise, obtained through fraudulent misrepresentations of the debtor as to the. state of his financial affairs is voidable.^ A court of equity will set aside a discharge given under such circumstances, and revive a security procured to be given up or cancelled.^ And where promissory notes have been surrendered, courts of law will permit a recovery. In such a case, which was in assumpsit, the court observed that a recov- ery may be had upon a note after it has been voluntarily given up to the maker, "And it seems immaterial in such cases, whether the plaintiff count specially on the note, or generally in indebitatus assumpsit." ' If a claim set up by one of the parties is a mere sham, or without color of right, and asserted with the design of securing favorable terms upon a compromise, it constitutes such fraud as will prevent the compromise thus obtained from being a bar.* Where a person who has suffered a loss by a fire which accidentally originated on his neighbor's premises, obtained from 7 Henderson v. San Antonio etc. R. R. Co., 17 Tex. 560, 67 Am. Dec. 675. 1 Dolsen v. Arnold, 10 How. Pr., 351 ; Stafford v. Bacon, 1 Hill, -532, 37 Am. Dec. 366; Ross v. Seaver, 52 S. W. (Tenn.) 903. 2 Ricliards v. Hunt, 6 Vt. 251, 27 Am. Dec. 545 (which is a case of a com- position) ; Rhettiplace v. Sayles, 4 Mason, 312 ; Irving v. Humphry, 1 Hopk. 284. 3 Reynolds v. French, 8 Vt. 85, 30 Am. Dee. 456. In this case the debtor represented that after disposing of his property in payment of his debts he had left only a certain sum less than the notes of plaintiff, which plaintiff believed, and thereupon accepted the less sum and surrendered the notes ; whereas the defendant. In order to effectuate the settlement, had previously conveyed away property which afterwards was reconveyed to him. * Headley v. Hackley, 50 Mich. 43, 14 N. W. 693 ; Kereheval v. Doty, 31 Wis. 476. Hunt Acc.& S.— 20 306 COMPROMISE [§ 137 the neighbor a note in settlement of the loss, under the false rep- resentation that he had investigated the fire and that he, the neighbor, was the cause of the fire and liable for the loss, whereas he had made no such investigation, and had no ground for the claim; in an action on the note the plaintiff was not permitted to recover." Sec. 137. Same subject — Compromises effected by physician. — Compromises and releases obtained by physicians, acting in the dual capacity of physician and claim agent, are viewed by the courts with extreme suspicion." The law is well settled that from the time the relation of physician and patient is created until it ceases to exist, the physician is inhibited from taking any ad- vantage of the confidence growing out of the relation, reposed in him by his patient, and, if, by misrepresentation or other unfair means, or by the exercise of undue influence, he induces his pa- tient to convey, release or otherwise dispose of property to him- self, or to other parties whom he may represent, for an inade- quate consideration, the contract may be avoided.^ The relation of physician and patient must exist,^ and, that relation is created, whenever the physician undertakes to advise and treat an injured party, even though he is in the pay of the party liable for the in- jury and performs the services at his request. The authorities are numerous to the effect that a release of damages for personal in- juries procured by the physician in the employ of the one liable, from the injured party while he is treating and advising him pro- fessionally, will be no bar to an action for damages for the in- jury, where the statements of the physician are untrue and the 6 Knotts V. Preble, 50 111. 226, 99 Am. Dec. 514. Nelson v. Chicago & N. W. Ry. Co., Ill Minn. 193, 126 N. W. 902. 1 Vlallet V. Consolidated R. & P. Co., 30 Utah, 260, 5 L. R. A. (N. S.) 663, 84 Pac. 496, and see note to 5 L. R. A. 2 Eccles V. Union P. R. Co., 7 Utah, 335, 26 Pac. 924 ; Nelson v. Minneapo- lis St. R. Co., 61 Minn. 167, 63 N. W. 486 ; Houston v. McCarty, 94 Tex. 298, 53 L. R. A. 507, 86 Am. St. Rep. 854, 60 S. W. 429. § 137] EBScissioN 807 patient relied upon them.' If the statements are untrue in fact, it makes no difference if they be honestly made, if made for the purpose of inducing the party to make the contract. A physician's authority must be to effect a settlement or to assist in bringing it about, otherwise his misstatement will have no more effect on the transaction than that of any other person acting without au- thority. Where, pending negotiations for a settlement for per- sonal injuries, a physician is sent merely to ascertain the extent of the injury and report the result to the defendant, any misstate- ment by him as to the extent of the injury volunteered, or made in response to inquiries by the injured party, will not vitiate a compromise and release of the claim, made in reliance upon such statements ; such statements being wholly outside the scope of the physician's agency.* So, it has been held that statements of the extent and duration of an injury made by a physician of a railroad company, although untrue, do not constitute ground for a rescission of a release given upon a compromise, even though the physician's duties are to render professional services to its injured employees and to advise them concerning the nature and duration of their injuries and the probability of their recovery, and to give information on the subject to the claim department of the company, if the physician has no other connection with the claim department and had nothing to do with obtaining the re- lease or in conducting the negotiations therefor." Representations of an agent not shown to have any connec- tion with a compromise cannot be used to defeat it. If a physician or other person without authority to act, obtains a release upon a 3 Galveston etc. E. Co. v. Cade, 93 S. W. (Tex. Civ. App.) 124; Meyer v. Haas, 126 Cal. 560, 58 Pac. 1042; International etc. R. Co. v. Shuford, 36 Tex. Civ. App. 251, 81 S. W. 1189. 4 Nelson v. Minneapolis St. R. Co., 61 Minn. 168, 63 N. W. 486. See also Doty V. Chicago etc. R. Co., 52 N. W. (Minn.) 135. 5 Gulf, C. & S. F. R. Co. v. Huyett, 5 L. R. A. (N. S.) 669, 92 S. W. (Tex.) 454. See also Louisville R. Co. v. Carter, 66 S. W. 508, 23 Ky. L. Rep. 2017. 308 COMPEOMISB [§ 137 compromise and the party liable afterwards seeks to avail him- self of it as a defense, any fraud practiced by the agent in obtain- ing the contract would be imputed to the principal. In cases where a physician in the pay of a party liable for personal in- juries has nothing to do with negotiating for a settlement, but he knows that the negotiations will be based upon his opinion as to the extent of the injury, and that the injured party will rely upon his opinion, it is his duty to give an honest opinion, and if he gives a wrongful opinion as to the extent of the injury, or omits mentioning certain injuries, the compromise and release will be voidable." This, upon the ground that it does not make any difference who makes the misrepresentations as long as they are adopted and put forward as an inducement for the action of the other party. If it can be shown that a party liable for dam- ages for personal injuries or his claim agent used a physician as an instrument to deceive the injured party as to his condition in order that an advantageous settlement might be obtained, or that the claim agent and physician acted together in so procuring a release, as where the physician accompanies the claim agent and makes the fraudulent representations pending the negotiations,^ the contract would be affected by the physician's representations as fully as if he had been the only agent employed in the trans- action.* So, if it be shown that a claim agent, in effecting a set- tlement, knew and took advantage of the state of the injured party's mind caused by the deception practiced by the physician of the principal, the compromise will be avoided ° upon the well 6 Lumley V. Wabash R. Co., 22 C. C. A. 60, 43 U. S. App. 476, 76 Fed. 66. J Missouri P. B. Co. v. Goodolm, 61 Kan. 758, 60 Pac. 1066 ; Eagle Packet Co. V. Defries, 94 111. 598, 34 Am. Kep. 245; Jones v. Gulf, C. c& S. F. R. Co., 32 Tex. Civ. App. 198, 73 S. W. 1082; Bussian v. Milwaukee etc. R. Co., 56 Wis. 325, 14 N. W. 452. 8 Gulf, C. & S. F. R. Co. iv. Huyett, 5 L. R. A. 669, 92 S. W. (Tex.) 454, citing International etc. R. Co. v. Shuford, 36 Tex. Civ. App. 251, 81 S. W. 1189. » See Gulf, C. & S. F. R. Co. v. Huyett, 5 L. R. A. 669, 92 S. W. (Tex.) 454. § 137] EHSCISSION 309 known rule that if a party knows another to be in error, and with- out correcting the error takes advantage of it to effect a com- promise for an inadequate consideration, it is a fraud. The rule is that it is not necessary, in order to avoid a compromise or other contract negotiated by a physician with his patient, to show that the patient had an unquestionable and positive belief in the cor- rectness of the representation. It is sufficient if the party so far relied upon them that they were the inducing cause of the ex- ecution of the agreement.^" If a statement is made as a mere matter of opinion, or con- jecture, it is not actionable if given in good faith, but a false as- sertion of an opinion will amount to a fraud when given by one who has or assumes to have knowledge upon a subject of which the other is ignorant. In one case the court observed that where parties possess special learning or knowledge on a subject, their opinions are capable of approximating the truth. And for a false statement of them when deception is designed and injury has fol- lowed from a reliance upon the opinion, relief will be granted. If he cannot speak with certainty, let him express a doubt.^^ An opinion of a railroad surgeon given at or about the time of the making of a settlement of a claim for personal injuries, where given merely as an opinion, and in good faith, does not, when er- roneous, constitute ground for a rescission, even when the settle- ment is made in reliance upon the opinion.^'' Where an injured "Peterson v. Chicago etc. Ky. Co., 38 Minn. 511, 39 N. W. 485; Vlallet V. Consolidated R. & P. Co., 5 L. R. A. 663, 84 Pac. (Utali) 496. 11 Heden v. Minneapolis etc. Inst., 62 Minn. 146, 64 N. W. 158 (an action for deceit), citing Gordon v. Butler, 105 U. S. 553; Robbins v. Barton, 50 Kan. 120, 31 Pac. 686; Eaton v. Winnie, 20 Mich. 156; Hicks v. Stevens, 121 111. 186, 11 N. E. 241. 12 In Doty V. Chicago etc. R. Co., 49 Minn. 499, 52 N. W. 135, the plaintiff called at the defendant's oflHces and submitted to an examination by its physician, who stated that the injuries were slight and could easily be cured. A settlement was then agreed upon and a release given. A verdict for defendant was sustained on the ground that the statements were mere mat- ter of opinion given in good faith. In Kilmartin v. Chicago etc. R. Co., 114 310 COMPROMISE [§ 138 party has equal means of ascertaining the extent of the injury, as where he has his own physician and consults him, a release will not be set aside for a misstatement as to the character and extent of an injury, made by the physician of the one liable for the injury; particularly where the plaintiff's physician agrees with the physician of the defendant as to the duration and extent of the injury.^* Sec. 138. Same subject — Concealment and suppression of facts. — If either party to a compromise conceals some fact which is material, which is within his own knowledge and which it is his duty to disclose, such concealment will amount to actual fraud. A person may under some circumstances, by passive conduct or silence, knowingly deceive and mislead another and thus perpetrate a fraud.^ Where mere silence or passive conduct will be mis- leading, a duty to speak may arise. It is a general rule that the facts must be known to the party and by him intentionally con- cealed.^ If the suppression of facts consists in a denial of the existence of the facts, or a disclaimer of any knowledge of the existence of any such facts, when in fact he has knowledge, it will amount to fraudulent representation and, if they are material, N. W. (lo.) 522, the physician thought that certain burns would heal with- in ten days, and the fact that they were not healed in ten days was held to be no evidence that the statement was fraudulent. Quebe v. Gulf etc. K. Co., 98 Tex. 6, 66 L. K. A. 734, 81 S. W. 20; Atchison R. Co. v. Ben- nett, 63 Kan. 781, 66 Pae. 1018 ; Alabama R. Co. v. TurnbuU, 71 Miss. 1029, 16 So. 346; Chicago etc. R. Co. v. Wilcox, 54 C. 0. A. 147, 116 Fed. 913. >8 Homuth V. Metropolitan St. R. Co., 129 Mo. 629, 31 S. W. 903. 1 Howard v. McMillan, 101 Iowa, 453, 70 N. W. 623. 2 Wliere a beneficiary In negotiating a settlement, renounces all confidence in the trustee and acted exclusively upon the advice of her advisors, selected by her to make an Investigation, a failure of the trustee to disclose facts which he might have obtained knowledge of by diligent search, where he' acted in good faith during the investigation, was held insufficient to set aside the compromise entered into. Calton v. Stanford, 82 Cal. 351, 23 Pac. 316, 16 Am. St. Rep. 137. § 138] EESCISSION 311 will vitiate a compromise, where perhaps mere silence, where noth- ing is done to mislead the other party, would not be sufficient. A compromise is so favored at law that evidence of the fact that there is a valid defense to the claim is not admissible to set it aside, but where the facts out of which a defense arises are known to the party making the claim and fraudulently concealed by him, and such facts are unknown to the other party at the time of ef- fecting the compromise, such fraud may be shown in avoidance.^ It is the duty of a debtor who asks for a discharge on part pay- ment, not to willfully misrepresent or suppress any fact in the statement of his affairs, and if he does the accord and satisfaction, compropiise, or release will be set aside.* But, if a debtor, at the time of making a compromise, is not questioned in regard to his financial condition, and he does nothing to mislead his cred- itor, he is not bound to make any disclosures, and the compromise cannot be avoided on the ground of concealment." The misrep- resentation or suppression of facts in order to vitiate a compromise need not necessarily be made or done when the compromise is negotiated ; nor need it all be made direct to the creditor. Avoid- ing payment of a judgment by concealment of property; allowing an execution to be returned unsatisfied, and denying to the as- sessor and others that he has any property, and so conducting his affairs as to cause his creditor to believe him insolvent, was held, in connection with a failure to disclose to the creditor that he had concealed a large amount of property, to be sufficient to avoid a settlement of the judgment for less than the amount due." Whether suppression of facts by silence will amount to fraud depends upon whether there is a duty to speak. As a general rule no such duty exists where the parties occupy towards each other no position of trust or confidence, and are dealing with each » Feeber v. Weber, 78 N. T. 334. « Stafford v. Blacon, 1 Hill, 532, 37 Am. Dec. 366. B Graham v. Meyer, 99 N. T. 611. « Howard v. McMillan, 101 Iowa, 453, 70 N. W. 623. 312 COMPEOMISB [§ 138 other at arm's length. Where the compromise is in the nature of a family settlement, it is the duty of the several parties to disclose to the others every fact which might possibly have any influence on the decision of the othersJ But where the parties are at outs and are really dealing at arm's length, no such rule obtains.^ Con- cealment of facts which a party is not bound to disclose is not ground for avoiding a compromise. Where parties to a contro- versy concerning land are dealing with each other at arm's length, one party is not bound to disclose to his adversary weaknesses and defects in his own title." In effecting a settlement of an ac- tion a party is not bound to state the defect in his claim or de- fense.^" When a party is presented with an account and im- mediate suit is threatened unless settled, after a compromise and settlement, the debtor is not liable for fraud because he omitted to call attention to errors in the account. Upon such compromises a party is not bound to insist on swelling the account against himself. ^^ A party to an action is bound by the record and is charged with notice of the disposition of the action, and a failure of a party upon a compromise of the matters involved, to inform the other that the action had been terminated in his favor is not sufficient to avoid the compromised^ The general rule is that when there is no relation of trust or confidence existing, which imposes on one a duty to give full information, and no artifice is employed to lull the other to repose, the latter cannot omit all in- 7 Pickering v. Pickering, 2 Beav. 31, 3 Jur. 743. See Dunnage v. White, 1 La. 13T. s Irvine v. Kirkpatrick, T Bell's Sc. App. Cas. 186, 209. 8 Mills' Heirs v. Lee, 6 T. B. Min. 91, 17 Am. Dec. 118. See Livingston v. Penu Iron Co., 2 Paige Ch. 390. 10 In Shank v. Shoemaker, 18 N. Y. 489, a settlement was effected by the plaintiff remitting the penalty recovered, on defendant paying the costs. It was held no objection to the settlement that the plaintiff did not disclose that the statute awarding a penalty had been repealed. 11 McMlchael v. Kilmer, 76 N. T. 36. 12 Multnomah v. Dekum, 93 Pac. (Or.) 821. § 139] RESCISSION 313 vestigation and then complain that the other party did not volun- teer information, which, if disclosed would have prevented the settlement.^' If before entering into a compromise one party- asks his adversary for a full disclosure, or for information con- cerning a particular fact which he suspects exists, but is refused all information, and he makes no other investigation before execut- ing the contract, his ignorance of the facts or fact will be treated as willful ignorance and not improper concealment by his ad- versary.^* In such cases it is clear the party intended to waive all inquiry into the facts. Sec. 139. No rescis.sion for fraud after the fraud is compro- mised. — Where a party alleges^ certain fraudulent representations as ground for relief, a subsequent compromise of the action made with reference to the fraud alleged is binding unless some new element of fraud intervenes.^ That is fraud concerning a distinct matter sub- sequently discovered, and not merely that the loss occasioned by the fraud within the scope of the original allegations, is larger than an- ticipated. It has been held that, where, after an accounting or other settlement, fraud is discovered warranting a rescission, and the par- ties thereupon compromise the fraud, a subsequent discovery of a new incident in the fraud does not confer a new right to rescind as the latter discovery merely confirms the previous knowledge of fraud. ^ 18 Multnomah Co. v. Dekum, 93 Pac. (Or.) 821; Cleveland v. Richardson, 132 U. S. 318, 10 S. Ct. 100, 33 L. Ed. 384. 14 Balnbridge v. Moss, 3 Jur. N. S. 58. 1 Van Trott v. Wlese, 36 Wis. 439. 2 Woodford v. Marshall, 39 N. W. (To.) 376. In this case the defendant, in an action for the purchase price, counter-claimed for a shortage which was fraudulently concealed. He had before, on discovery of the fraud, com- promised the shortage, and it was held that a subsequent discovery that the shortage was greater than he at first supposed was no new element of fraud. This principle Is applicable to sales. See Grannis v. Hooker, 31 Wis. 474. 314 COMPROMISE [§ 140 Sec. 140. Rescission for fraud, etc. — Evidence in general — Bur- den of proof.— Whether a compromise will be avoided on the ground of mistake, fraud, undue influence or duress, depends on the facts of each particular case. The ways in which a mistake may occur, or fraud perpetrated or undue influence or duress exercised, are so va- rious that to detail the facts of all the published decisions would not exhaust the evidence.^ All the surrounding facts and circumstances, including the mental and educational condition of the parties, their relations to each other, the results of the contract and many other things are proper to be considered and weighed in determining whether a compromise will be avoided or impeached.^ Where the 1 Cases where the evidence was held sufficient to prove fraud. Kelly v. Chicago, etc., R. Co., 114 N. W. (lo.) 536; Bussian v. Milwaukee, etc., R. Co., 56 Wis. 325, 14 N. W. 452 ; Ross v. Seaver, 52 S. W. (Tenn.) 903 ; South- ern Ry. Co. v. Brewer, 105 S. W. (Ky.) 160. A statement by a claim agent of defendant that plaintiff's physician said plaintiff would be well and able to work in three weeks, where false was held sufficient for rescinding the com- promise: Marple v. Minneapolis, etc., R. Co., 132 N. W. (Minn.) 333. A settle- ment is not conclusive when the creditor misrepresents the amount of his claim and promises to make it right, if found incorrect : Groom v. Wray, 135 N. W. (lo.) 418. ~ In Rase v. M., St. P. & S. S. M. Ry. Co., 137 N. W. (Minn.) 176, the facts upon which the court set aside the settlement were as follows: A detective familiar with the Norwegian language, employed by defendant, ingratiated himself with plaintiff, a fellow countryman, by representing that he was employed by plaintiff's attorney, and induced plaintiff to take up his residence with him, and by plying him with liquor and representing that the plaintiff's lawyer was crooked and intended to settle and cheat him, ob- tained a settlement of the case behind the lawyer's back for a grossly Inade- quate sum. Evidence held insufficient: Boatright v. Eiieword, 49 Neb. 254, 68 N. W. 472 ; Gladish v. Pennsylvania R. Co., 107 Fed. 61 ; Bennett v. Walker, 100 111. 525; Johnson v. Chicago, etc., R. Co., 107 Iowa, 1, 77 N. W. 476; Pacific Mut. Ins. Co. v. Webb, 157 Fed. 155. Assurances that a party has no cause of action has been held not to vitiate a settlement: Valley v. Bos^ ton & M. R. Co., 68 Atl. (Me.) 635. Representations that others had signed the release, was held not a misrepresentation of a fact, when others had in fact signed a similar release: McNamara v. Boston El. R. Co., 83 N. E. (Mass.) 878. 2 See McAllister v. Engle, 52 Mich. 56, 17 N. W. 694. Proof of necessitous circumstances, as that the party was hard up and hungry, and that he § 140] RESCISSION 315 .evidence is conflicting the question is one of fact for the court" or jury* as the case may be. It is the duty of the court to explain to the jury what will constitute fraud warranting a rescission and what facts in the case under consideration they may consider." The burden is upon the party attacking an accord and satisfaction, or compromise for mistake, fraud, undue influence or duress, to show the fraud or other ground." A compromise being admitted or prov- en, it will be presumed to be fair.' And the ground alleged to avoid it must be established by clear and unequivocal evidence,* and by a clear preponderance of evidence. Slight evidence of fraud, howev- er, where the parties to a compromise occupy confidential relations is sufficient to warrant the submission of the issue of fraud to a jury.* The fraud must be proven by evidence consistent with proven cir- cumstances.^" While the court looks with favor upon compromises, thought he was signing a simple receipt, Is not evidence of fraud: WUllams v. Wilson,' 75 N. Y. St. 451, 40 N. Y. Supp. 1132. 8 In a decision by the court facts of fraud must be directly found and not a recital of facts relied upon as tending to prove fraud. Sheldon v. Dutcher, 35 Mich. 10. * Illinois Steel Co. v. Ferguson, 129 111. App. 396 ; Abrans v. Los Angeles Co., 124 Cal. 411, 57 Pac. 216. Lewless v. Detroit R. Co., 65 Mich. 392, 32 N. W. 70 ; In Stearns v. John- son, 17 Minn. 142, it was said that where the evidence was insufficient to sustain a verdict setting aside a compromise on the ground of fraud, but there was some evidence which might mislead the jury, the defendant, out of an abundance of caution, was entitled to have the court instruct the jury either that there was no fraud sufficient to avoid the compromise or explain to them what fraud is necessary to avoid a compromise. a BaU V. McGeoch, 81 Wis. 160, 51 N. W. 443 ; Helling v. United Order, 29 Mo. App. 309; Wood v. Kansas City Tel. Co., 123 S. W. (Mo.) 6; Kilmartin V. Chicago, etc., R. Co., 114 N. W. 522 ; Home Ins. Co. v. Bredehoft, 49 Neb. 152, 68 N. W. 400 ; Hale v. Owensby, 66 S. E. (Ga.) 781 ; Smith v. Ogilva, 127 N. Y. 143 ; Chubbuck v. Varnam, 42 N. Y. 432. 7 Br.ewster v. Gelston, 11 John. 390 ; Sewell v. Mead, 52 N. W. 227. 8 Chicago R. Co. v. Green, 114 Fed. 676. » Williamson v. Nor. Pac. L. Co., 70 Pac. 387. 10 Valley v. Boston & M. R. Co., 68 Atl. (Me.) 635. 316 COMPROMISE [§ 141 we do not find that any greater weight of evidence is required to es- tablish mistake, fraud or other grounds set up in avoidance of a compromise, than is necessary to prove such a defense to other con- tracts. When a compromise has been reduced to writing a greater weight of evidence is required to impeach it than a like oral agree- ment, owing to the deliberation attending its execution. "There is a strong presumption that the written instrument, which the parties have deliberately executed, express their intention, and if the written contract is to go for nothing, and one party may oppose his oath to that of the other as to fraud, written contracts would amount to very little." ^^ Where the cause of action or defense is based upon fraudulent representations, it is necessary to prove that the party be- lieved and relied upon them.^^ Intentional misrepresentation must be shown.^^ Actual intent to deceive must be proven or facts from which the intent will be presumed. An intent to deceive will be presumed from proof of a statement, made as of the party's own knowledge, which is false, provided it is susceptible of actual knowl- edge and is not merely a matter of opinion, estimate or judgment.^* A tender in rescission, when one is necessary, or an excuse for not making a strict tender, must be shown. ^* Sec. 141. Rescission on the ground of surprise. — It has been said that "A man is surprised in every rash and indiscrete action, or whatsoever is not done with so much judgment as it ought to be. But I suppose the gentlemen, who use the word in this case, mean such surprise, as is attended and accompanied with fraud and cir- cumvention." ^ This is the sense in which the term surprise is used 11 Cummlngs v. Baars, 31 N. W. (Minn.) 449, citing Sloan v. Becker, 26 N. W. T30. 12 Humphry v. Merrlam, 32 Minn. 197, 20 N. W. 138. 18 Kelly V. Pioneer Press Co., 94 Minn. 448, 103 N. W. 3.30. 14 BuUett V. Farrar, 42 Minn. 8; Heden v. Minneapolis, M. & S. Institute, 62 Minn. 146, 64 N. W. 158. 10 See Ante, Sees. 119-124. 1 Earl of Bath & Montague's Case, 3 Ch. Cas. 56. I 142] RESCISSION 317 in equity. And it is applied to cases where a person by importunity and apparent necessity for quick action, is suddenly drawn into an inequitable agreement without opportunity for due deliberation. No clearer statement of the law of surprise can be found than that given by Mr. Story. He said: "The surprise * * * must be accom- panied with fraud and circumvention; or at least by such circum- stances, as demonstrate, that the party had no opportunity to use suitable deliberation; or that there was some influence or manage- ment to mislead him. If proper time is not allowed to a party, and he acts improvidently ; if he is importunately pressed; if those in whom he places confidence, make use of strong persuasions; if he is not fully aware of the consequences, but is suddenly drawn in to act ; if he is not permitted to consult disinterested friends, or counsel, before he is called upon to act, in circumstances of sudden emergency, or unexpected right or acquisition; in these and many like cases, if there has been great inequality in the bargain, courts of equity will assist the party, upon the ground of fraud, -imposition or unconscionable advantage." ^ This rule applies to compromises as well as to contracts in general. Sec. 142. Rescission upon the groiuid of duress^ — Duress in gen- eral. — It is a cardinal principal of contracts that, in order to make a valid agreement, there must be a free exercise of the will of both parties in assenting to the agreement, and it is everywhere held that a contract entered into under duress may be avoided by the party thus imposed upon. Such a contract is founded upon a wrong and is voidable for that reason. It is extortion and a fraud upon the injured party of the most reprehensible kind. The law abhors force and fraud, and the tendency of the courts now, more than formerly, is to overthrow everything which is built on violence and fraud. ^ In nearly all the states, if a party to a contract was not, at the time of its execution, a free agent and not equal to protecting himself, and assents to the contract under compulsion, he will be afforded re- 2 1 Story's Eq. 251. 1 Foshay v. Ferguson, 5 Hill, 154. 318 COMPROMISE [§ 142 lief at law as well as in equity.^ According to the principles of the Roman law, the violence which vitiates a contract ought to be such as is capable of making an impression upon a person of courage. Pothier regards this rule as too rigid and not to be literally followed, and says that, "upon this subject, regard should be had to the age, sex and condition of the parties; and a fear which would not be deemed sufficient to have influenced the mind of a man in the prime of life and of military character, nor consequently to rescind his contract, might be judged sufficient in respect of a woman, or a man in the decline of life." * The old common law rule while not going to the extent of the Roman law was more harsh than the principles promulgated by the great majority of the courts in the modern decisions. These are in accord with the principles of the civil law. And the doctrine which now prevails most everywhere is, that "Whenever from natural weak- ness of intellect or from fear — whether reasonably entertained or not, — either party is actually in a state of mental incompetence to resist pressure improperly brought to bear, there is no more con- sent than in the case of a person of a stronger intellect and more robust courage yielding to a more serious danger." * It is said du- 2 Fitzgerald v. Fitzgerald, 62 N. W. (Neb.) 899; Farmer v. Walter, 2 Edw. Oh. 600; Thompson v. Lockwood, 15 Johns. 259; Bussian v. Milwaukee R. Co., 56 Wis. 325, 14 N. W. 452; Dyer v. TymeweU, 2 Vern. 122. In New Jersey, undue influence and like grounds for relief seem to be matter of purely equitable cognizance ; Wright v. Remington, 41 N. J. L. 48 ; Reming- ton V. Wright, 43 N. J. L. 451. Perhaps In some of the other states main- taining separate equity courts, or courts with an equity side, the rule is the same. By the civil law "the person whose consent is extorted, or his heirs, may procure its annulment by letters of rescission." 1 PotMer's Ob. 21. In Ehg- land, according to a note to the above, it is not necessary for the person whose consent Is obtained by violence to initiate any process analogous to the letter of rescission above mentioned; the force may be used as a defense in any suit founded upon the contract. 8 1 Pothier's Ob. [26] 118. i Parmentier v. Pater, 13 Or. 121 ; Scott v. Sebright, 12 P. D. 21 ; Jordan V. Elliott, 12 W. N. C. 56, 15 Cent. L. J. 232. In Cribbs v. Sowle, 87 Mich. § 143] RESCISSION 319 ress exists when one by the unlawful act of another is induced to make a contract or perform some act under circumstances which deprive him of the exercise of free will." Duress which will vitiate a contract may consist of actual or threatened violence or restraint, either to and concerning the person of the other contracting party, or to such person concerning a near relative; and it must be un- lawful and such as actually compels his assent to the contract or other matter between them. A person's assent to a contract may be compelled by unlawful duress of goods." Sec. 143. Same subject — Effect of performance of contract on right to rescind — ^Right affected by time — ^Mzuiner of rescission — Pleading — By whom rescinded — Duress to stranger — Defence by surety — Duress of master, of servant. — A contract made under duress, although often termed void, really subsists. It is only voidable, and it may be ratified or affirmed. If the party performs the contract within so short a time that it would be presumed he is still under the unlawful influence by which the contract was obtained, such performance will not be deemed an affirmance of the contract. But if the party performs the contract after a con- siderable length of time the burden is on him, in an action to recover the money paid thereon, to show that he paid the money 348, 49 N. W. 587, the court, after reviewing a few American cases which seemed not to have any regard for the condition of the mind of the person acted upon by the threats, or .to take Into consideration the age, disposition or Intellect of the person so threatened [Buchanan v. Sahlein, 9 Mo. App. 533 ; Hlgglns v. Boom, 78 Me. 473, 5 Atl. 269 ; Town Council v. Burnett, 34 Ala. 400; Knapp v. Hyde, 60 Barb. 80; Preston v. Boston, 12 Pick. 12] said, , that it was not the true policy of the law to make an arbitrary and unyield- ing rule In such cases to apply to all alike, without regard to age, sex or condition of mind. Weak and cowardly people and old and ignorant per- sons are the ones that need the protection of the courts. B Hackley v. Headley, 45 Mich. 569, 8 N. W. 511 ; First Nat. Bank v. Sar- gent, 65 Neb. 594, 91 N. W. 595. « Fuller V. Roberts, 17 So. (Fla.) 359. 320 COMPROMISE [§ 143 under duress,^ or under pressure of the original transaction, or the original necessity, or of the delusive opinion that the contract is valid and binding upon him.^ But time alone, unaffected by other circumstances will not bar the right to rescind a voidable transaction, since it is not for the wrong doer to impose extreme vigilance and promptitude as conditions to the exercise of the rights of the injured party.* The injured party if he desires to annul the contract must, as in rescission upon other grounds, give timely notice of his intention; and, if the othei; party is entitled to restitution, return or tender the thing received by him. But if nothing is to be returned, as where a note is given in settle- ment, the party may set up the duress as a defense when sued upon the note.* If property is obtained upon a settlement and compromise pro- cured under duress, it may be recovered back without any pre- vious demand. ° A party who executes a deed under duress, cannot plead non est factum^ for it is his deed; he must plead the special 1 In Schultz V. Culbertson, 46 Wis. 313, 1 N. W. 19, it was held that a plain- tiff of whom a note due in one year was obtained under duress, must show, in an action to recover the money paid on the note at maturity, that he paid the note under duress. Where a note for a less sum was given upon threats to enforce an order for merchandise for a larger sum fraudulently obtained, and it was proven that securing the note was. a part of the fraudulent scheme, it was held that ex- ecuting the note in compromise of the sum claimed under the order, was not a waiver of the right to set up fraud as a defense against the obligation rep- resented by the note : Klrby v. Bergum, 15 S. D. 444, 90 N. W. 856. 2 In Meech v. Lee, 46 N. W. (Mich.) 883, where a woman gave a second mortgage, it was held that she gave it under the same influence by which the first mortgage was obtained. "If the party is still acting under pressure of the original transaction or the original necessity, or if he is still under Influence of the original transac- tion and of the delusive opinion that it is valid and binding upon him, then, and under such circumstances, courts of equity will hold him not barred from relief by any such conflrmation." 1 Story's Eq. 345. sAnte, Sec. 118. < See Klrby v. Berguln, 15 g. D. 444, 90 N. W. 856. B Foshay v. Fergeson, 5 Hill, 154. § 143] RESCISSION 321 manner of the duress; by imprisonment, threats of imprisonment, or menace to the person, or in whatever manner it was accom- plished." The contract may be avoided by the person whose con- sent was extorted or by his personal representatives or heirs. In England a person may not avoid his obligation by reason of duress to a stranger.^ And this rule has been recognized in this country.* The authorities are not agreed whether duress of the principal alone is a defense available to the surety. Some hold that it is no defense," others hold, and it seems with better reason, that it is a complete defense,^" otherwise, the surety on payment could recover over, and the principal thereby deprived of his defense.^^ But the rule is well settled that when the surety signs under duress, as where a note is extorted from a father and son in settle- ment of a claim made against the son, and to obtain the son's liberty, the defense of duress is available to the father as well as the son.^^ So, upon like principle, the husband may avoid a deed made by duress to his wife.^' But, under the old common 8 3 Bac. Abr. Duress, D. ' In England under the old law, If A. and B. enter into an obligation, by reason of duress done to A., B. shall not avoid the obligation, though A. may, because he shall not avoid it by duress to a stranger. In Huscombe v. Standing, Cro. Jac. 187, it was adjudged that the bond should stand as to one and be avoided as to the other, where it was joint and several: 3 Bac. Ab. Duress, B. 8 Thompsoh v. Lockwood, 15 Johns. 256. 9 Oak V. Dustin, 79 Me. 23 ; Thompson v. Blackhannon, 2 J. J. Marsh. 416 ; Simms v. Barefoot, 2 Haywood (N. C.) 606. 10 Haws V. Marchant, 1 Curtis, 136 ; Fisher v. Shattuck, 17 Pick. 252. 11 Owen y. Mynatt, 1 Heisk. (Tenn.) 675. 12 Osborn v. Bobbins, 36 N. T. 365; McClintick v. Cummins, 3 McLean, 158; Ingersoll v. Roe, 65 Barb. 346. "But a son shall avoid his deed by duress to his father; so shall the father his deed, by reason of duress to his son." 3 Bac. Obr. Duress, B. 18 3 Bac. Ab. Duress, B. The rule that the duress of a near relative Is ground for avoiding a payment by the relative for another does not Include a brother-in-law: Sollnger v. Earl, 82 N. T. 360, 60 How. Pr. 116. Hunt Acc.& S.— 21 322 COMPROMISE [§ 144 ■ law, a servant could not avoid a deed made by duress to his master and Tnce versa. But if the servant or master stands in the relation of a surety, according to some of the modern decisions, as we have seen, either one could avoid a contract made under duress to the other. Sec. 144. Same subject — Duress by whom exercised — Strjinger — Rule by the civil law — At common law — Burden of showing want of knowledge of duress or fraud shifts when. — ^According to Pothier, "When the violence is exercised against me by a third person, without the participation of him with whom the contract is made, the civil law does not on that account withhold that assistance from me; it rescinds all obligations contracted by violence, from whomsoever ' the violence may proceed." ^ Under the old common law duress by a stranger, by procurement of the party that shall have the benefit is a good cause to avoid a contract ; ' and this is the rule at this day. But, by that law, duress by a stranger without making the obligee a party thereto is no cause to avoid the agreement ; ' which also ap- pears to be the rule at the present time.* The same rule is applied to analogous cases, where a husband by duress of the wife obtains her note and transfers it to a third person, if the latter is ignorant of the duress." Some slight consideration, however, though very 1 1 Pothier's Ob. 23. 2 43 E. 3, 6 ; Ro. Abr. 688 ; 3 Bac. Abr. Duress B. 8 3 Bac. Abr. Duress, B. * In Michigan, in a case where a woman claimed she compromised under duress, her cause of action against a saloon keeper for Illegally selling liq- uor to her husband, evidence that third persons came to her and told her that the defendant had threatened to have her arrested as a common pros- titute unless she made the settlement, was held inadmissible to prove du- ress, without proof that defendant authorized or ratified such statement. Boydan v. Haberstumpf, 129 Mich. 137, 88 N. W. 386. 6 Fairbanks v. Snow, 145 Mass. 153. See Wright v. Remington, 41 N. J. 48, when the husband was induced by one of the payees to make threats to the wife that if she did not sign the note he would poison himself, it was held to be no defence. § 145] RESCISSION 323 slight, is shown an obligor of a contract obtained by fraud and duress, in the hands of a third party, by the rule shifting the burden of proof. Thus, when the maker of a negotiable note shows that it was obtained from him by fraud or duress, the burden is upon a subsequent trans- feree to show that he is a bona Me holder." It has been held that the bona fide purchaser of a chose in action (non negotiable) obtained from the owner by undue influence and coercion, acquires no title.' Sec. 145. Same subject — Duress of imprisonment — Lawful and unlawful arrest — In settlement of just claim. — Contracts made by persons while under imprisonment, are watched by the courts with extreme jealousy, and if a party is illegally imprisoned or restrained of his liberty, and he enters into a compromise or other contract with the party causing the restraint, by reason of such restraint, or to ob- tain his liberty, the contract is voidable.^ So, if a man is arrested by due process of law and a wrong use is made of the arrest, such as requiring him to do an act foreign to the purpose for which he was arrested, as where the arrest is upon a criminal charge and he is re- quired to settle and compromise a civil demand, upon condition of receiving his discharge ; ^ or, if, while in custody, he is put under unlawful deprivation or restraint, or subjected to unnecessary pain or danger, and he is thereby induced to assent to a contract, the orig- inal arrest will be construed to be unlawful, and the contract will be voidable for fraud and duress.' Where an arrest is for a just cause and under lawful authority, but for an unlawful purpose,* or an ar- 8 Vosburg V. Dlefendorg, 119 N. Y. 357, 23 N. E. 801, 16 Am. St. Rep. 836; ICIrby V. Berguin, 15 S. D. 444, 90 N. W. 856; Knowlton v. Schultz, 6 N. D. 417, 71 N. W. 550. T Barry v. Equitable Life, 59 N. Y. 587. 1 Farmer v. Walter, 2 Edw. Ch. 600 ; Thompson v. Lockwood, 15 Johns, 256 ; 1 Story's Eq. Sec. 23 ; 1 Pars. Cont. 392. 2 Such a contract Is also void as against public policy and may amount to compounding a felony. s Farmer v. Walter, 2 Edw. Ch. 600 ; 1 Pars. Cont. 392. * Severance v. Kimball, 8 N. H. 386 ; Richardson v. Duncan, 3 N. H. 508. 324 COMPROMISE [§ l^O rest is for a just cause but without lawful authority, as well as when an arrest is for an improper purpose without just cause; and, the party pays money or enters into a compromise or other agreement to obtain his liberty, the contract thus obtained will be considered as having been obtained by duress of imprisonment.' But if a party is iarrested by due process of law for a debt or demand claimed to be due, or is arrested in proceedings supplementary to judgment and held pending his examination in such proceedings, and he chooses to com- promise by giving a note or bond or other security, or surrenders property under an agreement that it shall be in satisfaction of the demand, there is no duress but such as the law allows, and the com- promise cannot be avoided.' So, if a party is under lawful arrest in bastardy proceedings, and give his note in compromise of the pro- ceedings in order to obtain his discharge, the note is enforceable.' But it is otherwise if the warrant and other proceedings are not ac- cording to the statute.' If a party is assaulted and pounded and put in fear and terror for his further safety, and thereby is coerced into assenting to a com- promise or other contract, it is voidable for duress. Any restraint of the person such as in law amounts to an unlawful arrest or false imprisonment, if it coerces the party into assenting to a contract, will constitute duress of imprisonment, and avoid the contract. While a person is under arrest charged with a -crime, the occasion is inappro- priate for the settlement of a private claim between the accused and 5 Kichardson v. Duncan, 3 N. H. 508 ; Rollins v. Lashus, 74 Me. 218. Where a party causes tbe arrest of another or attaches his property, know- ing he has no just claim against him, money paid or a contract entered into by the latter to release himself or his goods, Is done under duress, and the money may be recovered back or the contract avoided: Chandler v. Sanger, 114 Mass. 364. 6 Farmer v. Walter, 2 Edw. Ch. 600. In Clark v. Turnhall, 47 N. J. L. 265, where the party was held under legal process, a note executed In order to obtain the maker's discharge, was held good, although there was in fact no cause of action. 1 See Heaps v. Dunham, 95 111. 583. 8 Fisher v. Shattuck, 17 Pick. 252. § 14:6] RESCISSION 325 the prosecuting witness. The party who exacts a contract or security from one whom he wrongfully restrains of his liberty, can derive no aid from the fact that the claim which he enforced by illegal means was just. In all such cases the court will condemn the contract; and the parties are thus remitted to their antecedent rights." A statement by the attorney for the prosecutor, or by the latter, to the party un- der arrest that in compromising and settling the civil demand, he is not to consider there is any agreement not to press the prosecution, does not alter the character of the transaction, if the party benefited by the settlement really meant to forego the prosecution and the other ex- ecuted the agreement under that belief and expectation.^" Sec. 146. Same subject — Duress of goods — Personal and real property — Refusal to pay a debt. — ^A payment or concession exacted upon a compromise is compulsory when made or allowed through ne- cessity in order to obtain possession of property illegally withheld, when the detention is fraught with great immediate hardship or irrep- arable injury.^ As where an owner has effected the sale of certain property, and in order to give possession and to save himself from great loss, is compelled to compromise and settle a claim with one who wrongfully withholds the property and who refuses to surrender it until such settlement is made. So, where a broker without a lien, threatens to sell certain stock belonging to his client unless a certain claim is settled up, a settlement under such circumstances is made un- » Osborn v. Robbins, 36 N. Y. 365. 10 Osborn v. Bobbins, 36 N. T. 365. 1 Fitzgerald v. Fitzgerald, 62 N. W. (Neb.) 899. In Ashley v. Reynolds, 2 Strange, 915, referred to as a leading case upon this question, the court said : "This is a payment by compulsion, the plaintiff might have such ian im- mediate want of his goods that an action of trover would not do his busi- ness ; where the rule volenti non fit injuria is applied, it must be when the party had his freedom of exer(;ising his wUl, which this man had not; we take it he paid his money relying on his legal remedy to get It back again." 326 COMPROMISB [§ 146 der duress of goods.* In such a case the court said, a party has a right to rescue his property from the perils that seemed impending, even by the payment of a sum wrongfully exacted. So, where a party in financial difficulties, is compelled to settle and compromise a claim in order to obtain his goods unlawfully held under an attachment, or otherwise wrongfully withheld, and relieve his distress, the settlement may be avoided for duress of goods. There may be duress with re- spect to real property, as well as personal, so as to render a payment on account of it involuntary. Where a person in necessitous circum- stances, who had arranged to borrow money on a mortgage to relieve his distress, was prevented from obtaining the money by the filing of an unfounded lien claim, which the claimant would not discharge until paid ; and he settled the claim in order to clear the title, it was held that the money paid on the settlement could be recovered back.* The same rule was applied where the owner of certain real estate, who was in embarrassed circumstances and who had arranged a sale of the premises to relieve his embarrassment, was prevented from consum- mating the sale by a bank assuming to be the real owner under a deed absolute in form, but in reality a mortgage, and refusing to consent to the sale or release of their interest until the mortgagor paid a large sum in excess of the sum actually due.* In all such cases a man's necessities may be so great that the ordinary process of law will not afford him relief, or "do his business" as it is sometimes expressed. In most cases it would plunge him deeper into his difficulties. While the courts, in declaring the general rule, have generally laid consid- 2 Stenton v. Jerome, 54 N. Y. 480. See Scholey v. Munford, 60 N. T. 498, where certain bonds were withheld until certain commissions were paid, the claim being unfounded, the payment was held not voluntary and could be recovered back. 8 Joannln v. Ogilvie, 49 Minn. 546, 52 N. W. 217, 16 L. R. A. 376, 32 Am. St. Rep. 581. In this case the court said: "He was so situated that he could neither go backward nor forward." He had no choice but to submit. That the legal remedies available in such cases would not do defendant's business. * First Nat. Bank v. Sargent, 65 Neb. 594, 91 N. W. 595. § 14:6] EEScissioN 327 erable stress upon the immediate hardship or irreparable injury occa- sioned, yet upon a review of the cases holding money paid under duress of goods may be recovered back, it appears that granting relief has not been made to depend upon the extent or degree of the hard- ship or injury; and further that the necessitous condition of the owner, in cases of hardship, is not the controlling circumstance upon which the right to rescind depends, but is the unlawful interference with his property. It is well settled that the mere refusal of a party to pay a debt or perform a contract is not duress, so as to avoid a contract procured by means of such refusal, although the other party was influenced in entering into it by his financial necessities." In a case where a de- fendant, being indebted to the plaintiff in a large sum and taking ad- vantage of the latter's financial embarrassment, refused to pay him unless he would receive in full settlement a sum less than he claimed; and the creditor being in pressing need of money, accepted the sum offered and gave his receipt, the court said that it would be a most dangerous, as well as unequal doctrine, if a contract which would be valid if made with a man easy in his circumstances, becomes invalid when the contracting party is pressed with the necessity of immedi- ately meeting his bank paper. That no one could well know when he would be safe in dealing on ordinary terms of negotiation with a party who professed to be in great need." But, if a debtor, in order to force a favorable compromise with a creditor in financial straits, withholds moneys lawfully due him, and goes further and induces other debtors to withhold payments due from them, or in any other way wrongfully stop such payments, and the creditor consents to a settlement only in order to get the money and save himself from finan- cial ruin or distress, the compromise may be avoided for duress of goods.'' 5 Joannin V. OgUvle, 49 Minn. 564, 16 L. R. A. 3T6, 32 Am. St. Eep. 5gl, 52 N. W. 217; StiUmann v. U. S., 101 U. S. 465. 6 Hackley v. Headley, 45 Mich. 569, 8 N. W. 511. 1 Vyne v, Glenn, 41 Mich. 112, 328 COMPROMISE [§ 147 Sec. 147. Same subject — Duress per minas — Threats of lawful and xinlawful arrest — Of battery — Of injury to father or son — Du- ress a question of fact when. — ^A person may be deprived of the free exercise of his will by threats merely without any direct restraint. To constitute duress by threats "it is sufficient to in fact compel the person threatened to do an act which otherwise he would not have done." ^ It is recognized as duress where a mother is induced by threats to settle and compromise a claim in order to save her son from criminal prosecution." So terrifying a woman by threats of prosecuting her husband for an alleged embezzlement will avoid a transfer of her separate property.^ If a note, mortgage or other security is obtained from a father by a threat that if not given, his son who is charged with embezzlement,* or with forgery," or other crime," will be arrested and sent to states prison, he may avoid the transaction. It makes no difference whether the threats are of law- ful or unlawful prosecution, if resorted to for the purpose of in- timidating or terrifying the party and to compel his assent, it amounts to duress by threats and will avoid a contract thereby ob- tained.' The question whether a father who claims to have executed a contract under duress by threats of imprisonment of his son, did or did not believe his son guilty of the crime charged is to be con- sidered only upon the question of whether there was duress.* A person charged with a crime and threatened with arrest, though in- 1 Parmentier v. Pater, 13 Or. 121 ; Oribbs v. Sowle, 87 Mich. 340, 49 N. W. 587. 2 Weiser v. Welch, 70 N. W. 438 ; Meech v. Lee, 82 Mich. 274, 46 N. W. 383; McCormick v. Hamilton, 73 Wis. 486, 41 N. W. 727. a Eadie v. Slimmon, 26 N. Y. 9. * Schoener v. Lissaner, 36 Hun, 102. B Harris v. Carmody, 131 Mass. 51, 41 Am. Rep. 188. » Schultz V. Culbertson, 46 Wis. 313, 1 N. W. 19. T Adams, v. Irving Bank, 116 N. Y. 606, 15 Am. St. Rep. 447. 8 See Schultz v. Culbertson, 46 Wis. 313, 1 N. W. 19 ; Osborn v. Robblns, 36 N. Y. 365. §147] RESCISSION 329 nocent, may yield to threats and execute an agreement to avoid the disgrace and scandal attending a criminal prosecution; and likewise a parent, husband or wife, may do so firmly believing in the inno- cence of person charged. According to the old common law menacing to commit a battery, or to burn his house, or spoil his goods, is not sufficient to avoid a contract; for if he should suffer what he is threatened, he may sue and recover damages in proportion to the injury done him.* Lord Coke says, that for menace, in four instances, a man may avoid his own act. 1st— For fear of loss of life. 2dly— Of loss of member. 3dly — Of mayhem. 4thly — Of imprisonment." But since the days of that great commentator, the law has progressed, and now, to con- stitute duress per rmnas, it is not essential that the party be threat- ened with loss of life or limb, or with mayhem. In an early case in New York, the court said: "I entertain no doubt that a contract procured by threats and the fear of battery, or the destruction of property, may be avoided on the ground of duress." ^^ When threat- ened with bodily injury if a party will not pay moneys, execute an agreement, furnish security, or surrender property, he is not bound to incur any danger, and if the danger is real or apparent, he may yield. It has been said: "Any threats even of slight injury will invalidate the contract. Persons of a weak or cowardly nature are the very ones that need protection. The courageous can usually pro- tect themselves. Capricious and timid persons are generally the ones that are influenced by threats, and it would be great injustice to permit them to be robbed by the unscrupulous, because they are so unfortunately constituted." ^^ So, "if a man menace me that he will imprison or hurt in body my father or my child, except I make unto him an obligation, I shall avoid this duress as well as if the duress 8 3 Bac. Abr. Duress A. 10 2 Inst. 483, 3 Bac. Abr. Duress, A. 11 Foshay V. Ferguson, 5 Hill, 154. 12 Parmentier v. Pater, 13 Ore. 121. 330 COMPBOMISH [§ 14:7 had been to mine own person." ^* Menace, under the statute of some of the states, may consist of threats of injury to the character of a person; ^* and we see no reason why, in absence of a statute, such threats would not constitute duress, if they induced the contract, for a man's character is often more easily destroyed by slander, than by a criminal prosecution, where his sides of the case receive equal publicity. Where there is no arrest, no imprisonment, no actual force used and it is claimed that the compromise was obtained by du- ress per minas, the question whether the contract was obtained by duress is usually one of fact, and not one of law ; ^^ unless the evidence is all one way and so conclusive that no other reasonable ground for the action of the party is apparent; in which case the court should decide it as a matter of law.^* It is not enough to show merely that the threats were uttered, but it must also be shown that they constrained the will and induced the promise.^^ It is not always necessary in order to constitute duress that direct threats be made.^' A pressure may be brought to bear by other means fully as efficacious. Thjis, where three men, who were accom- panied by a fourth who played the part of a mysterious stranger, went to the home of a mother and informed her that her son had committed a serious offense and was liable to a criminal prosecu- tion, and presented to her the prospect of her son's disgrace, and the danger of his being taken from home, and at the same time urging her to settle up the loss occasioned by the son's wrongful act, and by thus working upon her fears she was induced to set- tle and compromise the loss, the agreement was held to have been 18 Bac. Max. 18. See McCormiek v. Hamilton, 73 Wis. 486, 41 N. W. 727. 1* N. T. Civil Code Sec. 755 ; Cal. Civil Code Sec. 1570 ; See 2 Pomeroy's Eg. See. 951, Note. 15 Dunham v. Griswold, 100 N. Y. 224; Barrett v. Weber, 125 N. Y, 18, 24 Am. St. Kep. 172. . 18 See McCormiek v. Hamilton, 73 Wis. 486, 41 N. W. 727. "Dunham v. Griswold, 100 N. T. 224; Barrett v. Weber, 125 N. ,T. 18. 18 See Foley v. Green, 14 R. I. 618. § 148] RESCISSION 331 obtained by duress." So, in a case where the holder of forged bills worked on the fears of a father for the safety of his son, who had forged them, but without any distinct threats, obtained from him a security for the amount of the bills, the transaction was avoided.^" It would be impossible or at least impracticable, if possible, in a work of this character to attempt to detail the evidence required to es- tablish duress. From the nature of the subject the courts have not gone beyond the statement of the general principles and attempted to lay down any definite and exact rules. The conditions under which threats are made are so diverse that each case must necessarily stand on its own peculiar facts. The age, sex, mental and physical, and perhaps moral condition of the party menaced, must be consid- ered, together with the character of the threats, in determining the ultimate fact whether the party had his freedom of exercising his will. Sec, 148. Same subject — Threats to enforce demand by legal means — Good faith of claimant — Unfounded claim. — Threats to use towards a debtor or his property only such means as the law allows in the enforcement of a claim, however harsh they may be, do not constitute duress so as to avoid a compromise induced by such threats. Where, therefore, a creditor threatens to sue the debtor, or to arrest him in such suit, if an arrest may lawfully be made, or to attach his property, or levy upon it by virtue of an execution which could be issued upon a judgment obtained in the action,^ there is no duress, as the threats are to do only what the creditor has a legal right to do." In all such cases the party IB Meech v. Lee, 46 N. W. (Mlcb.) 383. 20 Williams v. Bagley, 4 GlfE. 638, s. c. L. R. 1 App. Cas. 200. See also Kerr on Fr. 184. 1 Dunham v. Griswold, 105 N. T. 224; WUcox v. Howland, 23 Pick. 167. 2 Day V. Studebacker, 13 Misc. R. 320 ; Skeate v. Beal, 11 Ad. & El. 983 ; Kiler v. Wohletz, 101 Pac. (Kan.) 474 ; Walla Walla F. Ins. Co. v. Spencer, 100 Pac. (Wash.) 741; Preston v. Boston, 12 Pick. 14. 332 COMPROMISE [§ 14:9 I may defend himself against such action or proceedings. Dilating upon the inconvenience, trouble and loss such proceedings will occasion the debtor, does not change the rule. Threats to enforce at law a right claimed in good faith will not constitute duress even though the party in fact has no right.' But where a party as- ' sented to a compromise and gave his note for a smaller sum, through threats to enforce a fraudulent claim for a larger sum, it was held he was not estopped to set up fraud in defense in an action on the note.* Threats to employ legal authority to com- pel payment of a wholly unfounded claim known to be such, is such duress as will support an action to recover back what, is paid under it.° Sec. 149. Same subject — Undue influence. — ^Undue influence, as distinguished from duress, does not occur between the parties to a compromise where they are actually dealing with each other at arms length and upon terms of equality. Here, the situation of the parties indicate an alertness of mind and freedom of the will. But where the parties are on terms of intimate and close rela- tion, ag father and son, guardian and his ward just arrived of age, and the like, or are not on an equal footing by reason of mental or physical weakness, or necessitous circumstances, or by reason of ignorance or lack of advice, such an influence may be exerted by one party to a compromise to the detriment of the other. Where antecedent fiduciary relation exists, a court of equity will 8 Wilson V. Curry, 126 Ind. 161 ; State v. Harvey, 57 Miss. 863 ; Heysham V. Dettre, 89 Pa. 506. i Kirby v. Berguin, 15 S. D. 444, 90 N. W. 856. In this case the threat was to transfer to an innocent purchaser, an order for a lightning rod, claimed to be negotiable, and thus compel the signer to pay the whole de- mand, if he did not settle by giving his note for a less sum. B Adams V. Eeeves, 68 N. 0. 134 ; Briggs v. Lewiston, 29 Me. 472 ; Grim V. School District, 57 Pa. St. 433; First Nat. Bank v. Watkins, 21 Mich. 4S3 ; Hackley v. Headley, (Mich.) 8 N. W. 511 ; Beckwith v. Frisbie, 32 Vt. 559. §149] EESCISSION 333 presume confidence placed and influence exerted. In such cases no mental weakness, old age, ignorance, pecuniary distress and the like is assumed as an element of the transaction, and is not es- sential.^ On the other hand if no fiduciary relation exists the con- fidence placed and the undue influence must be proved by satis- factory evidence, and when established as a fact, a contract will be set aside without indulging in any presumption.^ In either case the contract must be inequitable and an undue advantage obtained. The question of undue influence, with respect to compromises, arises very frequently in settlements by guardians with their wards just arrived of age ; between trustees and benficiaries. But the principles are applied to every possible case "in which there is confidence reposed on one side, and the resulting superiority and influence on the other. The relation and the duties involved in it need not be legal; it may be moral, social, domestic or merely personal." ^ It has been said that no general rule can be laid down as to what shall constitute undue influence and that the question is one which must in each case stand on its own peculiar circumstances.* Persuasion and other such conduct by the one benefited is al- ways looked upon with suspicion. Pressure of whatever char- acter, whether acting on the fears or the hopes, if so exerted as 1 2 Pomeroy's Eq. Sec. 951. The burden is upon the party against whom the presumption is raised to show that no undue influence was exerted and that the contract was fair and equitable. 2 2 Pomeroy's Eq. Sec. 955. 3 2 Pomeroy's Eq. 956. See Kerr on Fr. 193, for a long list of persons whose associations gave an opportunity to exercise undue influence; such as a medical man and patient ; minister and parishioner under his Influence ; spiritualist and an old lady ; husband and wife ; person engaged to be married ; brother and sister ; elder and younger brother ; two sisters ; uncle and nephew ; a young man just come of age and a person who had acquired an influence over him during his minority ; a man and a woman with whom he lived ; unmarried woman and brother-in-law ; old lady and woman living with her, and other cases. * Kerr on Fr. 183. 334 COMPROMISE [§ 150 to over-power the volition without convincing the judgment; im- portunity such as the party has not the courage to resist; moral command asserted and yielded for the sake of peace and quiet, or of escaping from distress of mind or social discomfort, if car- ried to a degree in which the free play of the party's judgment, dis- cretion or wishes are overborne, will constitute undue influence, though no force is either used or threatened." The fear of dis- pleasing a father, or mother, or other person to whom we owe re- gard, is not such a fear as vitiates a contract made under the pressure of it.« Sec. 150. Same subject — On the ground of infancy. — ^An in- fant may disaffirm a release of a claim, ^ or rescind a contract,* or an illegal sale of his real estate without making a tender of any property received by him by virtue of the contract or pro- ceeding, except that portion of the property remaining under his control after he has attained his majority,* or that portion under his control at the time he seeks to rescind, if the contract be such as he may disaffirm before his majority.* In Vermont, in B I'arrent v. Blanchford, 1 D. J. & S. 121, cited In Kerr on Pr.- 185. 8 1 Pothier's Ob. 26. 1 Young V. West Virginia etc. Co., 42 W. Va. 112, s. c. 24 S. B. 615. 2 Haws V. Burlington etc. Ry., 64 Iowa, 315, s. c. 20 N. W. Rep. 717; Jenkins v. Jenkins, 12 Iowa, 195. 3 See Kane y. Kane, 13 App. Dlv. 544, s. c. 43 N. Y. Supp. 662. * See Schouler's Domestic Relations, 446. Making a tender is not a con- dition precedent to the institution of a suit against a tutor or guardian to annul an account or settlement, made In error and while the Infant was Ignorant of his rights under undisclosed and concealed facts, or to set aside purchases of his property by an administrator or guardian. In such case there exists no contractual relations between the parties: Rist v. I-Iartner, 44 La. Ann. 430; Wood v. Nlcholis, 33 La. Ann. 744; Heirs of Burney v. Ludeling, 41 La. Ann. 632. In annulling a final account it is sufficient for him to account for the property received which he would be entitled to have in any event, or to ofCer to return the property if it is not something in specie belonging to the estate. I 150] RESCISSION 335 some of the early cases, it was stated in general terms that an infant would not be permitted to rescind his contract and re- cover the articles parted with without first restoring the property or consideration received." The same rule has been stated in the same general terms in New Hampshire." But in Vermont in a later case it was held that the general rule was subject to an im- portant qualification. The court in that case said: "A distinction is to be observed between the cases of an infant in possession of such property after age, and when he has lost, sold or destroyed the property during his minority, * * * * ^.jig property is to be restored if it be in his possession and control. If the property is not in his hand nor under his control, that obligation ceases." ^ This is undoubtedly the prevailing rule almost, if not every- where, and it is certainly supported by the policy of the law in protecting infants in their property rights until they have arrived at that age when the law declares them to be of sufficient discre- tion to manage their prudential affairs. No better reason for the rule exists than that given by the Vermont court. It said: "To say that an infant cannot recover back his property, which he has parted with under such circumstances, because by his indis- cretion he has spent, consumed or injured that which he received, would be making his want of discretion the means of binding him to all his improvident contracts, and deprive him of that protec- tion which the law designed to secure to him." ' As to the time when a contract may be disaffirmed on the ground of infancy, the rule generally accepted, in case of transfers B Farr v. Sumner, 12 Vt. 28, s. c. 36 Am. Dec. 327 ; Taf t v. Pike, 14 Vt. 405, s. c. 39 Am. Dec. 228. 8 Carr v. Clough, 26 N. H. 280, s. c. 59 Am. Dec. 345. r Price v. Furman, 27 Vt. 268, s. c. 65 Am. Dec. 194 ; citing Fltts v. Hall, 9 N. H. 441; Bobbins v. Eaton, 10 N. H. 562; Boody v. McKenny, 28 Me. 517, 525, 526; Tucker v. Moreland, 1 Am. Lead. Cas. 260. s. p. Chandler V. Simmons, 97 Mass. 508. 8 Price V. Furman, 27 Vt. 268. 336 COMPROMISE [§ 150 of land, is that it cannot be conclusively avoided till he is of age." Compromises or other contracts which relate to personal proper- ty or to the person may be avoided at any time during the minori- ty of the infant, or within a reasonable time after attaining his majority. After arriving of age he may ratify the contract.^" The right to avoid a compromise or other contract is a privilege per- sonal to the infant, which no one while he is living can exercise for him excepting his guardian.^^ After his death, it may be ex- ercised by his personal representatives,^^ or, with due limitations of time and circumstances, by privies in blood entitled to his es- tate.^* The other contracting party remains bound. » To protect an infant from loss that might occur by reason of the oc- cupancy of the land by the purchaser during such minority, if the pur- chaser has not gone into possession, the minor or his guardian may resist an entry, or if the possession has been taken by the purchaser, the minor may enter and take and hold the profits. Bool v. Mix, 17 Wend. 119, s. c. 31 Am. Dec. 285 ; Carr v. Clough, 26 N. H. 280, s. c. 59 Am. Dec. 345 ; Staf- ford V. Roof, 9 Cow. 626; Price v. Furman, 27 Vt 268, s. c. 65 Am. Dec. 194; Zouch v. Parson, 3 Burr, 1794; Lynde v. Budd, 2 Paige's Ch. 191, s. c. 21 Am. Dec. 84. See Schouler's Domestic Relations, Sec. 409. But where personal property, chattels or money has passed to the possession of an- other under a contract of sale with an infant, and the contract Is not for necessaries, the Infant may disaffirm the contract before arriving of age; and, that the infant may not be exposed to loss by the consumption or other disposition of the chattels by the purchaser, or loss of the money by reason of the subsequent Insolvency of the seller, the infant, or his guardian for him, may bring the appropriate action at once to recover that which the infant parted with under the contract: Carr v. Clough, 26 N. H. 280, s. o. 65 Am. Dec. 345 ; Bool v. Mix, 17 Wend. 119, s. c. 31 Am. Dec. 285 ; Price V. Furman, 27 Vt. 268, s. c. 65 Am. Dec. 194. 10 Upon the question of ratification, see 2 Parsons on Cont. 323 and exten- sive note. 11 See Schouler's Dom. R. Sec. 402; 2 Parsons on Cont. 330. 12 Parsons v. Hill, 8 Mo. 135; Turpin v. Turpin, 16 Oh. St. 270, was a case where the infant would not have been permitted to rescind an arrang- ment made by his guardian and relatives, being beneficial to him, and it was held his administrator could not. 13 Schouler's Dom. R. Sec. 402, citing Domlnick v. Michael, 4 Sandf. 374; Illinois Land Co. v. Bonner, 75 111. 315, and other cases. § 151] RESCISSION 337 Sec. 151. Same subject — On the ground of insanity — Mental or physical weakness. — Insane persons, with regard to the voidable character of their contracts, receive substantially the same con- sideration under the law as do infants, with the exception, how- ever, that if a person deals fairly with a person of unsound mind, though apparently of sound mind, without knowledge of such unsoundness, he is entitled to be placed in statu quo upon the avoidance of the contract.^ The supreme court of Indiana in con- sidering such a contract, said: "It has not, to our knowledge, been decided in this state or any other state that, where the con- tract has been entered into with knowledge of the insanity, and an unconscionable advantage has been taken of the insane person, it is a necessary prerequisite to avoidance that a tender of that which has been received by such insane person shall be made. If the rule requiring the parties to be placed in statu quo includes, as a necessary element, the requirement that the party dealing with the non compos shall be ignorant of the incapacity, and shall not deal unfairly, it would seem to follow as an indispensable re- sult that the presence of such knowledge and of an unfair advan- tage would discharge the rule; otherwise such elements of the rule are mere empty phrases. * * * * If he may so deal with the possibility of retaining that so illy gotten, and with no possibility of losing that with which he parted, he is not restrained from at- tempting the advantage as opportunity offers." ' As in the case of the avoidance of contracts by infants, whatever remains in the possession of the insane person in specie at the time of the rescis- sion must be restored,* but with the distinction that it need not 1 Boyer v. Berryman, 123 Ind. 451 ; Fay v. Burditt, 81 Ind. 433 ; Copen- rath r. Kienly, 83 Ind. 18; Musselman v. Cravens, 47 Ind. 1. 2 Thrash v. Starbuck, 44 N. E. Rep. (Ind.) 543, citing Gibson v. Soper, 6 Gray, 288; Eaton v. Eaton, 37 N. J. L. 109; Crawford v. Scovelle, 94 Pa. St. 48; Halley v. Troester, 72 Mo. 73. See Meyer v. Fishburn, 91 N. W. Hep. (Neb.) 534. 3 Jefferson v. Rust, 128 N. W. (lo.) 954; Hale v. Kobbert, 109 Iowa, 128, 80 N. W. 308. See N. W. Co. v. Blankership, 94 Ind. 535, 48 Am. Rep. 185. Hunt Acc.& S.— 22 338 COMPROMISE [§ 151 be tendered as a prerequisite to a suit to rescind. If the con- sideration passed to another no tender is necessary.* The de- gree of unsoundness of mind or mental weakness which incapaci- tates a person from ihaking a contract, is a question of no little difficulty. There must be insanity, idiocy or mental weakness which disables the party from understanding the nature and ef- fect of the contract, and which renders him incompetent to trans- act business.^ Insane persons will be afforded protection at law as well as in equity.* A contract entered into with an insane person may be avoided by him on regaining his reason, or by his heirs or personal representatives if he dies while non compos.'' If insanity is established and a guardian appointed the latter may avoid a contract made with the ward while he was insane.' The other contracting party cannot avoid the agreement. A contract made with a person temporarily insane, as by intoxication, may be avoided by him, notwithstanding -the condition was produced by his own act. If he does not repudiate the contract as soon as he learns of it, when sober, he will be held to have ratified it. A contract made by an insane person may be ratified on regaining his right mind, and it is binding even if made during a lucid in- terval.* A contract made during a lucid interval is binding,^" but if the person alleges insanity to defeat the contract, the bur- den of proving a restoration to reason is upon the plaintiff. ^^ A contract made with a monomaniac is good when his monamania does not have anything to do with the transaction, and it has * Jefferson v. Rust, 128 N. W. (lo.) 954. B2 Pars. Cont. 383. , 6 2 Pars. Cont. 387. T See LazeU v. Pinnlck, 1 Tyler, 247. 8 See Jefferson v. Rust, 128 N. W. (lo.) 954. » See Blakeley v. Blockley, 6 Stew. 502. 10 McCormlck v. Littler, 85 111. 62. 11 Blston V. Jasper, 45 Tex. 409. § 151] RESCISSION 339 not affected his business judgment.^'' No degree of mental or physical weakness, or inferiority of intellect, as long as it leaves the party legally competent to act, is of itself sufficient to avoid a compromise with him.^' tin health and depression of spirits of a party to a compromise, is no ground for avoiding the agreement." Nor is ignorance alone sufficient to avoid an agreement.^" But if a compromise or re- lease is obtained from one, who, by reason of ignorance, inex- perience, lack of independent counsel and advice, or weakness of body or mind, is not in a condition to deal on equal terms with the other party, it will be scrutinized with jealous care, and if by misrepresentation, imposition, undue influence, or circumven- tion or cunning, advantage is taken of the weakness, the compro- mise or release thus obtained will be avoided.^" 12 See Burgess v. Pollock, 53 lo. 273. 13 Comyn on Cont. 50; Mitchell v. Long, 5 Litt. (Ky.) 71; Farnam v. Brooks, 9 Pick. 212; Paris v. Dexter, 15 Vt. 379. iiBlllingslea v. Ware, 32 Ala. 415. 15 Mitchell V. Long, 5 Litt. (Ky.) 71 ; Manby v. Bewick, 3 Kay & J. 342. 18 Where a release was obtained from a very ignorant man, whose mind was affected by injuries and while he was still confined to his bed, where he had been for over a month under the care of agents and servants of the defendant, without opportunity of seeing any one else ; upon payment of a grossly inadequate sum, a finding that it was not voluntarily given was not disturbed. Christianson v. Chicago etc. R. Co., 67 Minn. 94, 69 N. W. 640. A woman living on a farm and inexperienced in traveling, is not in- competent to settle a claim for injuries received by her, or incapable of understanding her rights : Kilmartin v. Railroad Co., 114 N. W. (Iowa) 522. McNamara v. Boston El. R. Co., 83 N. E. (Mass.) 878; Texas R. Co. v. Crow, 3 Tex. Civ. App. 260, 22 S. W. 928; Shurte v. Fletcher, 69 N. W. (Mich.) 233; Kelly v. Chicago etc. R. Co., 114 N. W. (Iowa) 536, citing the following cases as emphasizing the rule that a compromise or release of a right of action obtained by misrepresentation, undue influence, fraud, or by taking advantage of weakness of body or mind, will be set aside, which we give without any attempt to classify. Coles v. Railroad Co., 124 Iowa, 48, 99 N. W. 108; Rauen v. Insurance Co., 129 Iowa, 725, 106 N. W. 198; Bassian V. Railway Co., 56 Wis. 325, 14 N. W. 452; Bliss v. Railroad Co., 160 Mass. 447, 36 N. E. 65, 39 Am. St. Rep. 504; Railroad Co. v. Lewis, 109 340 COMPHOMISH [§ 152 Sec. 152. Same subject — Persons in vinculis. — Mr. Pomeroy gives as an illustration the condition of the mind brought about by pecuniary or other necessity and distress, as analogous to the condition of mental weakness, for which contracts will be avoided. He says: "Whenever one person is in the power of another, so that a free exercise of his judgment and will would be impossible, or even difficult, and whenever a person is in pecuniary necessity and distress, so that he would be likely to make any undue sacri- fice; and advantage is taken of such condition to obtain from him a conveyance or contract which is unfair, made upon an inade- quate consideration, and the like, even though there be no actual duress or threats, equity may relieve defensively or affirmative- ly." ^ In such cases the party does not exercise a free will, but stands in vinculis.' With respect to compromises the discussion 111. 120; Mullen v. Railroad Co., 127 Mass. 86, 34 Am. Kep. 349; Eagle Packet Co. v. De Friez, 94 111. 598, 34 Am. Rep. 245 ; Peterson v. RaUroad Co., 38 Minn. 511, 39 N. W. 485; Stone v. Railroad Co., 66 Mich. 76, 33 N. W. 24; McLean v. Insurance Co., 100 Ind. 127, 50 Am. Rep. 779; Lusted V. Railroad Co., 71 Wis. 391, 36 N. W. 857 ; Schultz v. Railroad Co., 44 Wis. 638; Watkins v. Brant, 46 Wis. 419, 1 N. W. 82; Railroad Co. v. Doyle, 18 Kan. 58; Sheanon v. Insurance Co., 83 Wis. 507, 53 N. W. 878; Flum- merfelt v. Flummerfelt, 51 N. J. Eq. 432, 26 Atl. 857; Troxall v. Silver- thorn, 45 N. J. Eq. 320, 12 Atl. 614 ; Lord V. Association, 89 Wis. 19, 61 N. W. 293, 26 L. R. A. 741, 46 Am. St. Rep. 815; Railroad Co. v. Fowler, 201 111. 152, 66 N. E. 394, 94 Am. St. Rep. 158; Girard v. Car Wheel Co., 123 Mo. 358, 27 S. W. 648, 25 L. R. A. 515, 45 Am. St. Rep. 556; RaUroad Co. V. Harris, 65 S. W. (Tex. Civ. App.) 885; Railroad Co. v. Brown, 69 S. W. (Tex. Civ. App.) 651; Light Co. v. Rombold, 68 Neb. 54, 93 N. W. 966; Railroad v. Green, 114 Fed. (C. C.) 676; Davenport v. Lumber Co., 112 La. 943, 36 S. 812 ; Clayton v. Traction CO., 204 Pa. 536, 54 Atl. 322 ; Railroad Co. V. Harris, 12 C. C. A. 598, 63 Fed. 800; Railroad Co. v. Phillips, 13 C. C. A. 315, 66 Fed. 35 ; Butler v. Railroad Co., 88 Ga. 504, 15 S. E. 668 ; Al- brecht v. Railroad Co., 94 Wis. 403, 69 N. W. 63; Railroad Co. v. Harris, 158 U. S. 326, 15 Sup. Ct. 843, 39 L. Ed. 1003; Vantrain v. Railroad Co., 8 Mo. App. 538 ; Railroad Co. v. Uhter, 212 111. 174, 72 N. E. 195 ; Coal Co. V. Buzis, 213 111. 341, 72 N. E. 1060. 12 Pomeroy's Bq. 948. 2 See 1 Story's Eq. 239. "Circumstances of extreme necessity and distress of the party, although not accompanied by any direct restraint or duress, §153] RESCISSION 341 is necessarily narrowed to transactions between persons in the relation of debtor and creditor. The bare refusal to pay a debt due a person known to be in financial embarrassment, as we have seen, is insufficient to avoid a compromise ; but cases have arisen and will arise where a person's finances are so involved and he is wholly in the power and at the mercy of his debtor, that he will sacrifice most any thing to extricate himself. So, cases arise where a debtor is driven in desperation to sacrifice every thing to obtain the bare necessaries of life for himself and those dependent on him. In such cases, while the court will proceed with caution, if it be shown that the debtor took advantage of the distress of the creditor, or vice versa, and drove a harsh and inequitable bar- gain, using any undue pressure, equity will interpose its relief. Sec. 153. Same subject — For illegality — Compounding a felony — Parties in pari delicto — Relief in equity, at law — Unequal guilt. — A compromise or other contract obtained from a person charged with a crime, or from another person for him, upon the agree- ment not to prosecute such person for such crime, is illegal and void on the ground that it interferes with the course of public justice, therefore against public policy.^ You shall not make a trade of felony, is the principle of the law, and it is dictated by the highest consideration.^ The contract is illegal whether the party is guilty or not, or whether a third party making the con- tract believed him innocent or guilty. At law money voluntarily paid in consideration of such an agreement cannot be recovered may In like manner, so entirely overcome his free agency, as to justify the court in setting aside a contract, made by him on account of some oppres- sion, or fraudulent advantage or imposition, attending it." 1 Schultz V. Culberson, 46 Wis. 313, 1 N. W. 19. See Barrett v. Weber, 125 N. Y. 18. 2 "If men were permitted to trade upon the knowledge of a crime, and to convert their privity to that crime into an action of advantage, no doubt a great legal and a great moral offense would be committed." Williams v. Bayley, L,. K. 1 H. L. p. 200, per Lord Westbury; Heap v. Dunham, 95 111. 583. 342 COMPEOMISB [§ 153 back.' And a party may resist the enforcement of an agreement so made. The parties being "in pari delicto" the court leaves them- where it finds them.* According to Mr. Story, in cases "where the agreements or other transactions are repudiated on ac- count of their being against public policy, the circumstance, that the relief is asked by a party, who is particeps criminis, is not in equity material. The reason is that the public interest requires, that relief should be given, and is given to the public through the party." " And relief will be granted not only by setting aside the agreement or other transaction or cancelling security thus ob- tained ; ° but also, in many cases, by ordering a repayment of any money paid under it. The controlling motives for the interference of equity are those of public policy. Upon the same principle, if the contract is executory, it cannot be enforced by any kind of an action. The foregoing rule is applicable where both parties are equally guilty. Mr. Story in a subsequent section says: "Where both parties are in delicto, concerning an illegal act, it does not always follow, that they stand in pari delicto, for there may be, and often are, very different degrees in their guilt. One party may act under circumstances of oppression, imposition, hardship, un- due influence or great inequality of condition or age; so that his "guilt may be far less in degree than that of his associates in the offense." '' For illustrations of cases falling under this rule, ref- erence is made to a former section treating of rescission for du- ress — cases where a party under arrest and charged with a crime, or threatened with arrest, settles and compromises a civil demand in order to obtain his liberty or to avoid the shame and disgrace 8 Schultz V. Culberson, 46 Wis. 313, 1 N. W. 19. 4 See 2 Pomeroy's Eq. 939. Bl Story Eq. 298. See also 2 Pomeroy's Eq. 941; Meech v. Lee, 46 N. W. (Mich.) 383. 8 Meech v. Lee, 46 N. W. (Mich.) 383. 7 1 Story's Eq. 300. See also 2 Pomeroy's Eq. 942. § 154r] RESCISSION 343 of an arrest and criminal trial; and, like cases where a father is coerced into paying money or otherwise settling a civil demand in order to save his son from a threatened prosecution upon an al- leged criminal charge.^ In such cases by reason of the duress the parties to the contract do not stand upon an equal footing; the party coerced is not a willing wrongdoer, but is wrongfully op- pressed, a sufferer rather than a wrongdoer, and he may have his appropriate relief both in equity and at law ; and whether the contract is executed or executory. To avoid a contract on the ground that it was given to compound a felony, it is necessary to show that there was an agreement or promise to forebear, or stifle the prosecution, or to suppress evidence necessary to prove it.° Accepting the costs and discontinuing a qui tarn action, with- out any agreement not to bring a fresh action, is not unlawful. The voluntary discontinuance of a popular action is no oifense.'^° Sec. 154. Same subject — Gaming contract — Immoral consider- ation — Compromise when liability is both civil and criminal — Con- tracts violating the statute — By municipalities — In violation of revenue laws — Sunday contracts — Usury. — A compromise agree- ment of a betting or gaming contract cannot be enforced.^ Con- tracts entered into with a view to future cohabitation and prosti- tution are illegal and void, but a settlement by way of reparation for past seduction and cohabitation is valid; for this is no more than a man ought, in honor and conscience, to do.'' Past cohabita- tion alone is not sufficient to sustain a contract. It must be shown s Ante Sec. 145, 147. See Barrett v. Weber, 125 N. Y. 18 ; Meech v. Lee, 46 N. W. (Mich.) 383. 9 Barrett v. Weber, 125 N. Y. 18. 10 Haskins v. Newcomb, 2 John's. 405. 1 Everlngham v. Meighan, 55 Wis. 354 (Grain gaming contract). 2 Comyn, on Cont. 60, citing Armandale v. Harris, 2 P. Wms. 432 ; Cray v. Rooke, Forrest, 153 ; Turner v. Vaughan, 2 Wils. 339 ; Gibson v. Dickie, 3 M. & S. 463. 344 COMPEOMISH [§ 154 that the promisor was the seducer." Otherwise the parties are in pari delicto.* Prostitution being against morals and decency, an action cannot be maintained to enforce a contract leasing prem- ises for that purpose; or for the board and lodging of a woman of the town, where the keeper of the house received part of the gains of the women in the house," nor can any compromise of such claims be enforced. Where an offense is of such nature that the person injured may obtain either a civil or a criminal remedy, there is nothing unlawful in a compromise of criminal proceedings taken against the offender.' A compromise of an action for crim- inal conversation,' is not founded on an immoral consideration. A settlement of the damages arising from criminal libel is not ob- jectionable, even though the complainant agrees not to ' prosecute, or to drop the prosecution. Courts will not enforce contracts prohibited by statute, or de- clared illegal and void, or made contrary to a power expressly denied by law, and when the public interest demands it such con- tracts may be set aside, or the money paid thereon recovered. Thus where the officers of a municipality or other political subdi- vision, use public money in settling and compromising a supposed liability arising out of a contract or transaction expressly prohibit- 8 Comyn on Cont. 60, citing 4 B. & A. 650. i It has been held that equity would not enforce a verbal promise of a single man to settle an annuity on a married woman, with whom he had co- habited while she was separated from her husband. Comyn on Cont. 60, cit- ing 1 Mod. E. 558. Comyn on Cont. 61. 8 Where a party who Is prosecuted criminally for an offense for which damages may be recovered, signs a letter of apology and authorizes the complainant to make such use of it as he might think necessary and the latter then allows a verdict of not guilty to be entered, it was held that the agreement giving the apology was not void as made under duress ; that the compromise of the criminal proceedings was not unlawful, and that the complainant would not be restrained from publishing the apology. Fisher v. AppoUinaris Co., 32 L. T., N. S. 628, 23 W. R. 460, 44 L. J. Ch. 500, 10 L. R. Ch. 297. 7 Phillips v. Pullen, 50 N. J. L. 439, 14 Atl. 222. § 154:] RESCISSION 346 ed, the money may be recovered back by the municipality.* A party dealing with a municipality is charged with notice of the extent of its powers, or that of its officers, and a payment to a person with knowledge in such cases does not amount to a volun- tary payment; nor is there any ground for a compromise, or im- plied power to compromise, springing from necessity.' Such a contract is also void for the reason that a promise to pay for a past consideration, for which there is not and never has been any legal liability on the part of the promisor, does not make a binding contract at law.^* A recovery cannot be had upon a com- promise, or on an account stated, for liquor sold without a li- cense.^^ The contract cannot be validated either by an express or implied promise. But where goods are sold on a Sunday in violation of a statute, a subsequent promise to pay for the goods, made on any day other than Sunday, is valid. ^^ A compromise agreement together with any note or security given thereon, in settlement of a contract tainted with usury, is also infected with usury and is voidable or absolutely void according to the lex loci contracti,^^ and the debtor may resist performance of the agree- ment either at law or in equity. If only the interest or the illegal interest is forfeited, the defense will only go to that extent. In equity, as at law, if the usurer comes seeking to enforce the con- tract, the court will refuse any assistance and repudiate the con- tract, and, on the other hand, whether the contract is void or voidable, the general rule in equity is that relief will be afforded the debtor only upon payment of the sum bona fide due, deducting 8 See Wadsworth v. B'oard, 115 N. Y. Supp. 8. » VUlage V. Fish, 156 N. Y. 363, 86 Hun, 548. 10 Frey v. Fond du Lac, 24 Wis. 204; Hooker v. Knab, 26 Wis. 511. 11 Melchoir v. McCarthy, 31 Wis. 252. 12 Melchoir v. McCarthy, 31 Wis. 252. 13 See Jordan v. Humphrey, 31 Minn. 495, 18 N. W. 450; Osbom v. Frld- rich, 114 S. W. (Mo. App.) 1014; Exley v. Berryhill, 31 Minn. 182, 33 N. W. 567 ; Cobe v. Gyer, 237 111. 568, 86 N. E. 1088. 346 COMPEOMISB [§ 155 the usurious interest.^* But where the statute, as in New York, Minnesota and perhaps other states, requires courts of chancery to give affirmative relief, by a cancellation of the note or security and the like, it is not necessary for the debtor, either as plaintiff or as a defendant, as a condition of obtaining relief to pay any part of the loan.^= Where the law declares a contract tainted with usury, or any contract based on the usurious contract, to be void, a mortgage given to secure a sum of money, consisting of one loan made prior thereto, which is usurious, and another which is free from usury, is void,^" and under such circumstances for the same reason a compromise would be void. But that part of the debt not usurious would not be destroyed,^^ and a law requiring relief to be granted the debtor without paying any part of an usu- rious loan, will not prevent a court of equity from decreeing the payment of the loan not usurious as a condition of obtaining a cancellation of the security.^ ^ As a general rule after an usurious contract is executed, the transaction will not be opened up by a court of equity.'^" All other compromises or other contracts, whether the subject matter or the cause inducing the contract is mala prohibita or mala in se, are resolved by foregoing principles. Sec. 155. Rescission for want of consideration — Failure — In- adequacy. — Want of consideration is a ground for avoiding a com- promise. According to Pothier,^ if upon the false supposition that I owe you a thousand pounds, left you by the will of my father which has been revoked by a codicil, whereof I am not apprised, I engage to give you a certain estate in discharge of the legacy, 14 1 Story's Eq. 301 ; 2 Pomeroy's Bq. 937. IB Williams v. Fitzhugh, 37 N. T. 445; Scott v. Austin, 36 Minn. 460, 32 N. W. 864. i« Jackson v. Packard, 6 Wend. 415. 17 Hammond v. Hopping, 13 Wend. 505. 18 Williams v. Fitzhugh, 37 N. Y. 444. i» Adams v. MeKenzie, 18 Ala. 698. 1 Pothier's Ob. 42. § 155] RESCISSION 347 the contract is null, because the cause of the engagement, which was the acquittance of the debt, -is false. The rule at common law is the same.'' So a note or other contract given in compro- mise of the damages claimed for a breach of a contract void by the Statute of Frauds," or void as against the law, or morality, or public policy, cannot be enforced. If the contract sought to be compromised is in law a mere nullity it can furnish no consid- eration for a new one. A compromise or release may be avoided for a failure of consideration.* Mere inadequacy of consideration is no ground for a rescission." By the civil law an inequality amounting to more than a moiety of a just price in ordinary contracts, and more than one fourth, in partition between co-heirs or co-proprietors, is sufficient gi-ound for restitution, but at common law there are no fixed rules gov- erning this. With respect to compromises the principles of the civil law are the same as at common law. Pothier says: "There are certain agreements, in which persons of full age are not en- titled to restitution, be the inadequacy ever so considerable. Such are compromises according to the edict of Francis II, April 1560. These are agreements respecting pretensions upon which there are impending or expected litigation."" While at common law mere inadequacy of consideration is not admitted as a primary 2 1 Story's Eq. 245. See Knotts v. Preble, 50 111. 226, 99 Am. Dec. 514. s Hooker v. Knob, 26 Wis. 511. The surrender, forbearance or assignment of a claim having no legal validity is not a sufficient consideration for a promise: Kidder v. Blake, 45 N. H. 530. * In Peterson v. Reeves, 132 N. W. (Minn.) 204, upon a promise to fix a machine if the purchaser would release the seller from his liability for a breach of warranty, a release was executed reciting a consideration of one dollar; the machine was never fixed. It was held that the consideration failed. A debtor who assumes the payment of an insurance premium in settlement of his debt, is liable for the unearned premium returned to him upon a cancellation. To that extent he fails to pay : Stepheson v. Allison, 51 So. (Ala.) 622. 5 2 Pomeroy's Eq. Sec. 926 ; Lewis v. Donohue, 58 N. Y. S. 319, 27 Misc. R. 514 ; Schnell v. Nell, 17 Ind. 29, 79 Am. Dec. 453. 6 1 Pothier's Ob. 33. 348 COMPEOMISH [§ 156 objection to a contract, yet inadequacy may be very material evi- dence to taint a contract with fraud or oppression.' It has been said with respect to contracts' in general that where the inade- quacy is so gross that, it shocks the conscience, and furnishes sat- isfactory and decisive evidence of fraud, it will be sufficient ground for canceling a contract whether executed or executory, but in such cases fraud, and not inadequacy of the consideration, is the true and only cause for granting equitable relief.* Sec. 156. Avoidance of compromise by a creditor. — ^At common law a debtor may lawfully prefer one creditor over another, and a bona Ude payment or compromise of a debt due one creditor is not a fraud upon other creditors, for tlie reason that it is not un- lawful to pay debts. If not a bona Me transaction a creditor after he has obtained a judgment on his claim may ignore the payment by a levy on the property, or bring a bill in equity for relief, as the facts may warrant. If the debtor is a bankrupt and such set- tlement amounts to an unlawful preference and voidable under some bankrupt system, then the payment or compromise may be avoided in proceedings in bankruptcy or insolvency for the benefit of all the creditors. T See Christiansen v. Railway Co., 67 Minn. 94, 63 N. W. 640. 8 2 Pomeroy's Eq. 927. Lord Thurlow observed, that to set aside a con- veyance there must be an inequality so strong, gross, and manifest that it must be impossible to state it to a man of common sense without producing an exclamation at the inequality of It: Cwynne v. Heaton, 1 Bro. Ch. 9. "But though courts of equity will not relieve against agreements merely on the ground of the consideration being inadequate, yet if there be such inadequacy as to show that the person did not understand the bargain he made, or was so oppressed that he was glad to make it, knowing its inade- quacy, it will show a command over him which may amount to fraud: Heathcote v. Paignow, 2 Bro. Ch. 175, A." Where a woman who was sick, and her children were sick and her husband absent, and who needed money to buy medicine, was induced to settle a claim for personal Injuries for a" grossly inadequate sum, upon the misrepresentation that she would be brought "into disgrace and would get nothing in the end," it was held no bar to an action for the injury where she repudiated the agreement next day and returned the consideration: Stone v. Chicago, etc., Ry. Co., 33 N. W. (Mich.) 24. BOOK THREE COMPOSITION AT COMMON LAW Sec. 157. Definition — Distinguished from payment, accord and satisfaction and compromise. Sec. 158. Kinds of composition agreements — Assignments — ^Agreement for payment of pro rata — Letter of license — ^Deed of inspectorstiip. Sec. 159. Form of ttie agreement — Writing under seal — ^By parole — Oral — Agreements affected by statute of frauds — Form of letter of license. Sec. 160. Consideration — Mutual promises of creditors — Surrender of prop- erty. Sec. 161. Other essentials to validity of agreement— Equality among cred- itors. Sec. 162. Fraud and estoppel as ground for sustaining the contract. Sec. 163. The agreement — Mutuality between debtor and creditors. Sec. 164. Same subject — Mutuality between creditors. Sec. 165. Same subject — Agreement, how executed — What amounts to an ac- ceptance. Sec. 166. Same subject — Stipulations. Sec. 167. Same subject — The release. Sec. 16S. Same subject — Construction. Sec. 169. Withdrawal from agreement by creditor. Sec. 170. Parties — ^Necessary parties — Debtor — Stranger In debtor's behalf. Sec. 171. Same subject — Creditors — Preferring a creditor — Failure to come in as a party within the time limited — Relief in equity. Sec. 172. Same subject — Stipulation requiring certain creditors to join- Oral evidence inadmissible to vary stipulation — Effect of a fail- ure to sign — Surety not bound If all do not sign. Sec. 173. Same subject — ^Time when creditors may come in — Objection that some have not joined available to whom — Compelling lagging creditors to elect to come in or renounce. See. 174. Same subject — Construction of stipulation as to who shall sign- Waiver of condition. Sec. 175. Same subject— Partners as debtors, as creditors — Joint and sev- eral debtors — Joint creditors. Sec. 176. Same subject — Negotiating composition through agent or attor- ney — Guardian — Personal representatives. (349) 350 COMPOSITION AT COMMON LAW See. 177. Performance— Agreement must be strictly complied with. Sec. 178. Same subject — Immaterial and unimportant variations — Mistake. Sec. 179. Same subject — Tender of performance. Sec. 180. Same subject — Formal tender excused — Waiver of formalities. Sec. 181. Same subject — Strict performance excused — ^Waiver. Sec. 182. Breach by debtor — Effect— Rights of the parties — ^Retaining par- tial payments — Remedies — Statute of limitation. Sec. 183. Breach by creditor — ^Right of debtor— Of other creditors. Sec. 184. Specific performance — Restraming threatened violation. Sec. 185. Subsequent promise to pay residue of debt discharged by a com- position. Sec. 186. Composition effected by assignment. Sec. 187. Duties of assignee — Rights of creditors. Sec. 188. Same subject. Sec. 189. Title to what property vests In assignee — Exempt property— Part- nership property — After acquired property — Salary of public official — Title of assignee subject to equities. Sec. 190. When non-assenting creditors may avoid the assignment. Sec. 191. Same subject. Sec. 192. Operation and effect of a composition — ^Binds parties and privies — EfCect of composition with surety or indorser — Mistake as to liability — Recovery of overpayment — Effect on the rights of non-assenting creditors. Sec. 193. Effect upon the liability of joint debtor. Sec. 194. . Effect upon the creditor's security ; upon liability of a surety, indorser, drawer, guarantor. Sec. 195. Same subject — Reserving right to hold security — Right of surety not affected — When discharged notwithstanding reservation by creditor. Sec. 196. Effect upon debts. Sec. 197. Debts included — Ctonstructlon of agreement — Bill in equity to de- termine what claims are included — Parol evidence as to claims Included or excluded inadmissible when. Sec. 198. Same subject — Demands not due — Secured and unsecured claims — Judgment debts — Existing debts — Contingent liability — De- mand of partner against firm — Debts subsequently contracted — Counter-claims. Sec. 199. Same subject — Splitting demands — Withholding demands — ^Trans- ferring demands after signing agreement. Sec. 200. Surety for composition — Rights and liabilities. Sec. 201. Fraudulent representations by debtor as to his affairs avoids the composition — Creditor as a decoy — Mistake of fact as ground for rescission — Equitable relief' — Release vacated — Security re- instated. § 157] DEFINITION 351 Sec. 202. Secret preference fraudulent — Agreement unenforceable — An af- firmative defence — When res adjudicata. Sec. 203. Recovery of fraudulent preference by debtor, near relative, stranger — Recovery when agreement is not executed — ^When debtor is in default — When not recoverable — Relief in equity. Sec. 204. Fraudulent preference— Illustrations — Evidence — Question for the jury. Sec. 205. Effect of fraudulent preference upon liability of surety — Remedy at law, in equity. Sec. 206. Fraudulent preference — Avoidance of composition by innocent creditor — Preference paid by stranger — Waiver of the fraud — Avoidance optional — Remedies — Rescission. Sec. 207. Fraudulent preference— Creditor particeps fraudis. cannot avoid the composition for fraud — Cannot enforce composition agree- ment nor recovery on original demand. Sec. 208. Pleading a composition. Sec. 209. Evidence. Sec. 157. Definition — Distinguished from payment, accord and satisfaction, and compromise. — ^A composition at common law is an agreement between a debtor who is either insolvent and unable to pay all his debts in full, or is embarrassed so that he cannot meet his obligations according to agreement,^ and two or more creditors, whereby the debtor agrees to pay or deliver to each contracting creditor, and they agree with him and among themselves, to ac- cept in full satisfaction of their respective demands, a less sum determined upon a percentage basis or specified arbitrarily, or other thing different in quality or terms of performance from that required to be paid or delivered upon the original contract or by law. The definitions given in many of the books are inac- curate as applied to a composition at common law with creditors. To compound a debt is to abate a part, on receiving the residue,^ or to discharge it upon different terms from those which were 1 Jolly V. Wallis (1801) 3 Esp. 228. Lord Kenyon: "It was not an assign- ment of all the parties' effects, which was an act of bankruptcy, it (the com- position) was an arrangement which a man might enter into from the tem- porary pressure of his affairs, but would not make him a bankrupt." 2Hasklns v. Newcomb, 2 Johns. 405. 352 COMPOSITION AT COMMON LAW [§ 157 stipulated." And a composition in its broadest sense, is a mutual agreement to terms or conditions for the settlement of a difference, or controversy; the adjustment of a debt, or avoidance of an obli- gation, by some form of compensation agreed on between the parties.* Hence, in this broad sense, it is a generic term, as it in- cludes also an accord and satisfaction, and a compromise. The vice of the older definitions, as applied to the modern common law composition, lay in adopting the comprehensive meaning ap- plicable strictly to the words "compound" and "composition." " The term composition with creditors is understood by the profes- sion, in brief, to mean solely an agreement between an embar- rassed debtor and two or more of his creditors, made for the pur- pose of securing to the creditors a part or all of the debtor's prop- erty or property furnished by another, and applying it pro rata, or otherwise as agreed, in discharge of their entire demands. Com- positions have been termed private bankruptcies. They are en- tered into to avoid the necessity of resorting to the bankruptcy and insolvency laws for a discharge, and to effect a speedy and less expensive distribution of the failing debtor's property.* The discharge arises from the execution of a- new agreement, or its performance as may be agreed, and. is distinguishable from s Webster Die. * Webster Die. Thus the definition : "A composition Is an agreement between a creditor and debtor, that the creditor shall accept part of his debt in satisfaction of the whole debt," given by Mr. Montague, (Montague on Comp.) is not any- thing more than a definition of an accord. Mr. Bump's definition, "A strict composition agreement is an agreement whereby the creditors agree to ac- cept a certain sum of money, or some other thing, at a certain time or times in full satisfaction and discharge of their respective debts" (Bump on Comp.) is much better ; but it leaves some essentials to be supplied mentally. For other definitions, see Bouvier Li. Die. ; Rapalje & L. D. Die. ; Continental Bank v. McGouch, 92 Wis. 286, 66 N. W. 60T (quoting from Black L. Die); Bayley v. Boyd, 75 Ind. 125; Wilson v. Samuels, 100 Cal. 514, 35 Pae. 148; Shlnkle v. Sherman, 7 Ind. App. 399, 34 N. E. 838. See 2 Kent's Com. 390, N. § 157] DEFINITION 353 payment, in that the latter is a discharge under an original agree- ment, in whole' or in part according to the amount paid. A com- position is distinguishable from both an accord and satisfaction and a compromise, in this, that in the latter modes of discharging a demand, only one creditor or claimant is necessary, and in both, some new and additional consideration must pass and both must be executed in order to be binding; and with respect to a compromise, the demand must be unliquidated, doubtful or dis- puted, while a composition must have at least two contracting creditors between whom a separate express or implied agreement exists to accept what is offered and forego the pursuit of the debtor; and, as between the debtor and the creditors, no new con- sideration is essential, nor need the agreement be fully performed to be binding; and, unlike a compromise, the demand or demands are always for money due upon contract, or upon other demands liquidated or to be liquidated by some process. L,ike an accord and satisfaction a composition is a new agreement. It is a nova- tion of the old contracts either when fully executed, or when per- formed as may be agreed.' A composition is sometimes referred to as an accord and sat- isfaction, but a strict composition is never an accord and satisfac- tion for the reason among others that such an agreement always requires three parties. The validity of such an agreement does uot depend upon the technical and strict rules which govern an accord and satisfaction, but upon principles of equity, which treat the violation of, or failure to execute such an agreement as a fraud, not only upon the debtor, but more especially upon the other creditors who have been lured into the agreement to relin- quish their further demands, upon the supposition that the debtor 'Good V. Cheesman, 2 B. & A. 328: Lord Tenderden, O. J., said: "This Is, tn fact, a new agreement substituted In place of the original contract with the debtor, the consideration to each creditor being the engagement of the others not to press their individual claims." Brown v. Famham, 48 Minn. 317, 51 N. W. 377 ; Chemical Bank v. Kohner, 85 N. Y. 189 ; Baxter v. Bell, 86 N. Y. 195. HuntAcc.&S.— 23 354 COMPOSITION AT COMMON LAW [§ 158 would thereby be discharged of the remainder of his debts.' But, aside from the number of parties necessary to the validity of a composition agreement, as between the debtor and each creditor, it may have all the elements necessary to an accord and satisfac- tion, as where a debtor assigns his property to a trustee,* or gives security for a part of his debts, under an agreement with his cred- itors that it shall be received in full satisfaction of the entire de- mands. When performed, its effect upon the debts and the lia- bility of the debtor, is equivalent to that of an accord and sat- isfaction.^" A general or common agreement with several credi- tors whereby they agree to accept the proceeds of certain prop- erty in satisfaction of their demands is not necessarily a composi- tion ; if it has the elements of a compromise, as where it is made to avoid litigation and in settlement and adjustment of disputed or doubtful claims and provides for the liquidation of them, it is a compromised^ The common agreement is nothing more than an individual agreement with each creditor. If the agreeftient as to one creditor, has all the elements of a compromise, it will be as to him, upheld as a compromise.^'' Sec. 158. Kinds of composition agreements — Assignments — Agreement for payment of a pro rata — Letter of license — Deed of inspectorship. — There are several methods by which a composi- tion or amicable arrangement between an embarrassed debtor and his creditors is arrived at and the debtor released without resort- ing to the bankruptcy or insolvency statutes.^ The two meth- 8 Mellen v. Goldsmith, 47 Wis. 573. » Watkinson v. Ingoldsby, 5 Johns. 386. »o Therasson v. Peterson, 2 Keyes, 636, 4 Abb. Dec. 396. 11 Continental Bank v. McGeoch, 92 Wis. 286, 66 N. W. 606. 12 Graham v. Mayer, 99 N. Y. 611. 1 For form of composition agreements see: Appendix: also Melhop v. Tathwell, 74 Iowa, 571, 38 N. W. 420; Boothby v. Sowden, 3 Camp. 175; Stelnman v. Magnus, 11 East, 390. § 168] KINDS OF COMPOSITION AGKEEMENT8 355 ods most commonly used are: First: By an assignment by a debtor of his property and effects to an assignee, usually one of the creditors, or other person selected by the creditors, or agree- able to them, in trust to be disposed of and the proceeds, after deducting the expenses of the trusteeship, distributed pro rata among all the creditors who originally agreed to the arrange- ment or who afterwards agreed or accepted the benefits.'' The agreement may provide for the payment of a certain per cent, on the dollar and the residue returned to the debtor." In such cases the debtor is usually immediately discharged from his lia- bility from the residue of the debts. Second: By an agreement whereby the creditors agree to receive from the debtor, or froni another person in his behalf,, in discharge of their demands, a cer- tain equal percentage of all their demands, or an unequal per- centage,* or sums otherwise mutually determined upon, payable either at once or at a future time, in a lump sum or by install- ments, and with or without security. If the payments are post- poned, the agreement may provide for an immediate discharge of the debtor, or defer it until performance.' Another and less fre- 2 Whitmore v. Turquard, 3 De G., F. & J. 107, 30 L. J., Ch. 335, 7 Jur., N. S. 377, 9 W. R. 488, 4 L. T., N. S. 38 ; Lanes v. Squyres, 45 Tex. 382 ; Dauchy V. Goodrich, 20 Vt. 127. 8 (1788) Cockshott v. Bennett, 2 T. R. 763 ; (1794) Frlze v. RandaU, 1 Esp. 224 ; (1794) Btitler v. Rhodes, 1 Esp. 236 ; Grundy v. Johnston, 28 Ont. 147. * See Eastabrook v. Scott, 3 Ves. 456. 6 Stock V. Mawson, 1798, 1 Bos. & Pull. (o. s.) 286 ; Jolly v. Wallis, 1801, 3 Esp. 228 ; I^eicester v. Rose, 1803, 4 East, 372 ; Ex parte Sadler, 1808, 15 Ves. 52. In Steimnan v. Magnus, 1809, 11 East, 390, the discharge was postponed until performance. The agreement Is as follows: "We the undersigned, be- ing respectively creditors of Moses Magnus, do hereby agree for ourselves respectively to take and accept 20 1. per cent, in full payment and satisfaction for our several and respective debts due at the date hereof; and upon pay- ment of the said 20 1. per cent, we hereby release and forever discharge the said M. Magnus forever as to the remaining 801. And it Is hereby agreed to receive the said 201. per cent. In manner following; viz. 101. per cent within one month after the execution of these presents; 51. per cent, secured 356 COMPOSITION AT COMMON LAW [§ 158 quently used method to avoid bankruptcy proceedings, is by let- ter of license; which is an agreement between creditors and their debtor, whereby the creditors agree to suspend or not press their claims for a specified time and during which he may carry on his business at his own discretion." The agreement itself post- pones payment until the expiration of the term by taking away the remedy on the original cause of action. It is a new agree- ment based upon a valuable consideration and may be pleaded in bar.'^ In some cases the agreement provides ft)r partial pay- ments, with a proviso that a default in payment of any install- ment shall work an avoidance. It has been held that a mere agree- ment between creditors and with their debtor to forbear enforcing their respective demands for a limited time, whereby they are to be paid the whole of their demands at the end of the period is but a covenant not to sue for a limited time and unenforceable.' The distinction between a letter of license standing alone and an ordinary covenant not to sue for a limited time, entered into jointly by creditors by the acceptance of Mr. Garland, payable in five months; and the remain- ing 5 1. per cent, on the like acceptance, payable in nine months. Dated this 11th of November, 1806." " Bump on Comp. 1 ; Bouvier I/. Diet. ; Rapalje & L. L. Diet. ; Mooney v. Bossom, 2 Nova Scotia, 254; Field v. Donoughmore, 1 Dr. & War. 227; Gib- bons V. Vouillion, 8 0. B. 48T, 7 D. & L. 266, 14 Jur. 66. Agreements to forbear, see Pitts v. Commercial Bank, 121 111. 582, 13 N. E. 156; Henry v. Patterson, 57 Pa. St. 346. 7 (1812) Boothby v. Sowden, 3 Camp. 175 ; Good v. Cheesman, 2 Barn. & Ad. 328. 8 See Pitts v. Commercial Bank, 121 111. 582, 13 N. B. 156 ; Henry v. Patterson, 57 Pa. St. 346. See Gamier v. Papin, 30 Mo. 243, when it is held that such an agreement was but a covenant not to sue for a time and was not a bar to an action on the original demand. In O'Brien v. Osborn, 10 Hare, 92, 16 Jur. 960, it was held that such an agreement did not discharge the original debt nor release the debtor's estate. In this case the license was granted in consideration of certain property being assigned for the bene- fit of creditors. See Pitts v. Commercial Bank, 121 111. 582, 13 N. E. 156. In Montgomery Bank v. Buggy Co., 100 Ala. 626, such an agreement was held binding. § 158] KINDS OF COMPOSITION AGREEMENTS 357 with their debtor, is not clear, if, indeed, there is any. However, a letter of license ought to be under seal and contain a clause that if a creditor during the continuance of the license, molest or interfere with debtor or his property the deed may be pleaded in bar.* Still another method of effecting a composition, apparently no more frequently used than a letter of license, is by deed of inspector- ship. It is nothing more, in effect, than a letter of license with a proviso that the business shall be carried on under the inspection and control of persons nominated by the creditors, who are called "in- spectors,"^" and whose duty is to see that the business is managed and the property disposed of to the best interest of the creditors. This method differs from an assignment for the benefit of creditors, in that the debtor continues his business, but under a supervisory control by the inspector or inspectors, who usually though not neces- sarily, receives and pays out the funds, but has no power to take the management of the business out of the debtor's hands. ^^ This agreement is usually resorted to where the debtor has ample prop- erty and is merely temporarily embarrassed. Payment in full is con- templated, though the creditors may agree to accept less.^^ It is a new agreement and may be pleaded in bar of an action on the old demand brought in violation of the agreement.^' A provision is 9 Gibbous V. Vouillion, 8 C. B. 483, 7 D. & L. 266, 14 Jur. 66, 19 li. J., C. P. 74 ; Walker v. Nevill, 3 H. & C. 403 ; Henry v. Patterson, 57 Pa. St. 346. An agreement for an extension of time based upon a new consideration, as where tbe debtor abandons bankruptcy proceedings in consideration of being granted an indulgence as to time, is not a composition, but merely the substitution of a new contract based in part on a new consideration passing from the debtor to the creditors: See Loomls v. Wainwright, 21 Vt. 520; Town V. Rublee, 51 Vt. 62. 10 Kapalje D. Diet. 11 See Redpath v. Wigg, 35 L. J., Exch. 211, 1 L. R., Exch. 335, 14 W. R. 866, 14 L. T., N. S. 764 ; Steel v. Low, 2 P. & F. 772. 12 For a form of a deed of inspectorship, see Appendix. 13 Gibbons v. Vouillion, 8 C. B. 483, 7 D. & L. 266, 14 Jr. 66, 19 L. J., C. P. 74. 358 COMPOSITION AT COMMON LAW [§ 159 .sometimes inserted that creditors violating the license by suing on their . claims, or levying on the property shall forfeit their debts. But a mere agreement not to sue on their debts, and that, if they do, the agreement may be pleaded in bar of the action or other pro- ceedings, does not work a forfeiture of the debt of a creditor who sues, nor affect their right to the dividends.^* Sec, 159. Form of agreement — Writing under seal — By parol -—Oral — Agreement affected by statute of frauds — Form of let- ter of license. — Formerly a composition was by deed and valid only in equity ; ^ that is the residue of the debt was still recover- able at law, and the debtor was compelled to resort to the chan- cery court to restrain a creditor from proceeding at law to col- lect it contrary to his agreement. But as early as 1788, or per- haps earlier, the debtor was permitted to have the benefit of a composition as a defence in an action at law ; ^ but it was still required to be by deed or other writing under seal. The old doc- trine was gradually changed so that now it is firmly established that no particular form is essential, and when otherwise valid, ,it need not necessarily be in writing under seal, but may be by parol, or oral.^ All that is required to make it binding is the mutuality of contract between the creditors, and the debtor and 14 Ellis V. McHenry, 6 L. R., C. P. 228, 40 L. J., C. P. 109, 19 W. R. 203,. 23 L. T., N. S. 861. 1 See 2 Kent's Com. 380, N. 2 Cockshott V. Bennett, 2 T. R. 763. Lord Kenyon, C. J., said : "In deter- mining this case, I wish to disclaim founding my. opinion upon the grounds of equity as distinguished from grounds at law." 3 Fellows V. Stevens, 24 Wend. 294; Steinman v. Magnus, 11 East, 390, 2 Camp. 124 ; Boothby v. Sowden, 3 Camp. 175 ; Bradley v. Gregory, 2 Camp. 383 ; Norman v. Thompson, 4 Bxeh. 755 (oral) ; Anstey v. Harden, 1 Bos. & Pul. 124 (oral); Gardner v. Lewis, 7 Gill, 377 (oral); Wittkowsky v. Baruch, 126 N. C. 747, 36 S. B. 156; Mullen v. Goldsmith, 47 Wis. 573, 3 N. W. 592; 32 Am. Rep 781 (oral) ; Continental Bank v. McGeoch, 92 Wis. 286, 66 N. W. 606; Johnson v. Parker, 34 Wis. 598; Pierce v. Jones, 8 S. C. 273, 28 Am. Rep. 288; Tutt v. Price, 7 Mo. App. 194; Paddleford v. Thatcher, 48 Vt. 574; Contra — ^Acker v. Phoenix, 4 Paige, 305. § 159] FOBM OF THE AGBEEMENT 359 creditors, and a concession he made to an embarrassed debtor.* The agreement is sometimes based upon a simple meeting and resolution of the creditors/ Cowen, J., although not deciding it, said that to aflfect debts due by specialty, the composition agree- ment would perhaps require a seal, on the principle eodem modo quo oritur, eodem modo dissolvitur.^ But in a later case it was observed by the court, though not necessary to the decision, that a composition in such case was operative without a seal.'' And we think the latter, upon principle, is the better and the true rule, as a composition is founded upon a valuable consideration. It would be upheld on the ground of estoppel, for a creditor who had agreed orally with several other creditors to accept a compo- sition, would not be permitted to ignore the agreement and ob- tain an advantage, solely on the ground that his demand was evi- denced by a sealed instrument. If by the composition agreement an interest in land is to pass to a trustee,* or a surety undertakes to guarantee the payment of the composition money, the agree- ment must be in writing ; ' for such contracts are within the stat- ute of frauds. So, if the agreement concerns the doing of any other thing which by the statute of frauds must be in writing, it must be in writing 'and signed by the party to be bound.^" A verbal agreement by a third party with creditors, to pay them a certain per cent., in satisfaction of their debts and take an as- signment of them, is not within the statute, not being a collateral * Crawford v. Kru^ger, 201 Pa. St. 348, 50 Atl. 391. Boothby v. Sowden, 3 Camp. 175 ; Cranley v. Hillary, 2 Maule & S. 120 ; Fellows V. Stevens, 24 Wend. 294. 6 (1840) Fellows v. Stevens, 24 Wend. 294. 1 Van Bokkelen v. Taylor, 62 N. Y. 105. See Lowe v. Eginton, 7 Price, 604. 8 Alchln V. Hopkins, 1 Bing. N- S. 99, 4 M. & S. 615. sBump on Comp. 14, citing Emmet v. Dewhlrst, 3 Mac. & G. 587, 15 Jur. 1115, 21 L. J. Ch. 497 ; Williams v. Mostyn, 33 L. J. Cli. 54. 10 See Brunskill v, Metcalf, 2 W. C. P. 431. 360 COMPOSITION AT COMMON LAW [§ 159 promise to pay the debt of another, but an original contract to purchase the debts. ^* The authorities do not seem to be entirely in harmony as to the form of a letter of license to make it binding, on account of the analogy to a gratuitous promise of a single creditor to his debtor to extend the time of payment. When they first came in vogue and before the courts established the doctrine that the mutual promises of the creditors was a sufficient consideration to uphold a composition they were required to be by deed or other writing under seal. And it has been held by a few comparative- ly modern authorities that a letter of license not under seal nor supported by any new consideration was nothing more than an extension of time and not binding on the creditors.^'' These au- thorities cannot be reconciled with the rule as to the mutiial agree- ments of the creditors constituting a valid consideration. Such an agreement lying in parol has been upheld. ^^ In a case where negotiations were set on foot for a composition by a debtor call- ing a meeting of his creditors, and when they were assembled they mutually agreed orally that no legal proceedings should be instituted against the debtor for five days, and one creditor forth- with violated the agreement by a seizure of p'roperty, it was held to be a fraud upon both the debtor and creditors.^* Whatever 11 Anstey v. Marden, 1 Bos. & P. N. R. 124, 2 Smith, 426. 12 See Henry v. Patterson, 57 Pa. St. 346 ; Pitts v. Commercial Bank, 121 111. 582, 13 N. E. 156. In this ease the question arose upon a demurrer to the plea. The agreement set out, in terms and object sought, cannot be dis- tinguished from an ordinary letter of license, except that it does not appear to have been under seal. See, also. Gamier v. Papin, 30 Mo. 243. 13 Boothby v. Sowden, 3 Campb. 175: "We, the undersigned creditors of Robert Sowden of Exeter, do hereby agree to grant him three, six, nine, and twelve months on the amount of our respective demands, and to take his notes payable in London for the said amounts, provided the rest of the cred- itors will do the same, 14 Feb. 1811." Lord Ellenborough said: "There was a sufficient consideration for each of -the creditors entering into this agree- ment, that it was subscribed by all the others." 1* Gardner v. Lewis, 7 Gill, 377. § 160] CONSIDEEATION 361 method is adopted in effecting a composition, it ought to be in writing. Owing to the numerous conditions and reservations usual to such agreements, prudence and sound business principles dic- tate that everything be set down in certainty. To do the whole by parol, as has been observed, would be exceedingly loose, and often unavailing for want of adequate proof. Sec. 160. Consideration — Mutual promises of creditors — Sur- render of property. — It is a settled rule that a payment of a part of a liquidated and ascertained debt is no satisfaction of the whole debt, for the reason that as respects the part not paid, the agree- ment of the creditor to receive the partial 'payment in satisfac- tion of the whole debt is without consideration and therefore a nudum pactum. It has been often stated in general terms that there is an exception to this rule, where the partial payment is made in compliance with an agreement between the debtor and his creditors for a composition.^ ,This would be true only if the contractual relations of the debtor and creditors be considered. But to stop there is to base an exception on the same facts up- holding the rule. A debtor being already under obligation to each creditor to discharge his debt in full, a new promise to all to pay to each a part in full satisfaction of their debts respective- ly, and its performance and acceptance as satisfaction, standing alone confers no new benefits on the creditors either severally or collectively. The mutual promise, therefore, between the debt- or and each creditor or creditors, though essential to a composi- tion furnishes no consideration. Nor does the payment of a part of the debt. Aside from the advantage to each creditor in stop- ping the pursuit by all the other creditors of the debtor, and the abandonment by the debtor of his right to prefer one creditor over another, there must be an actual pecuniary benefit pass to 1 Sage V. Valentine, 23 Minn. 102 ; Newell v. Higgins, 55 Minn. 82, 56 N. W. 577 ; Baxter v. Bell, 86 N. Y. 195 ; White v. Kuntz, 107 N. T. 518, 1 Am. St. Rep. 886, 14 N. E. 423. See Wheeler v. Wheeler, 11 Vt. 60. 362 COMPOSITION AT COMMON LAW [§ 160 the creditors. Although a payment of a part of a debt, like the mutual promise referred to, furnishes no consideration to uphold a composition, yet it is absolutely essential that something be paid, for to abandon the whole cannot, in any grammatical or common use of the word, be said or considered to be a compo- sition with a debtor.'' The benefit may consist in a distributive share of the debtor's entire estate, or of certain specified proper- ty, or a definite sum in money, or a new promise to pay a certain sum, secured or unsecured.' It is not essential to a composition agreement that the creditors receive less than their full debts. A concession may be made in other ways, as where they consent to an assignment of the debtor's property for their benefit. In such cases the creditors assume a risk. They may receive all that is due them and they may realize considerably less.* So, a composition is valid if it provides for payment in full, as where it is made payable in installments." A composition agreement is upheld by a consideration peculiar to itself. On principle and authority, even of the cases in which it is declared that a composition is an exception to the rule that a part payment will not discharge the whole debt, the real consid- eration for the relinquishment of the residue of their debts is a new and additional consideration, and is to be found in the mu- tual agreement between the creditors, whereby each in considera- tion of the promise of the others binds himself not to molest the debtor, and the benefits or possibility of benefits thereunder. Such an agreement, and the question of the consideration necessary to support it, seems first to have engaged the attention of the courts 2 Hasklns v. Newcomb, 2 Johns. 405. See Wilson v. Samuels, 100 Cal. 514, 35 Pac. 148. 8 See Henry v. Patterson, 57 Pa. St. 346. * Union Bank v. Rogan, 13 New South Wales, 285. See The Queen v. Cooban, 18 Q. B. D. 269. 6 Boothby v. Sowden, 3 Camp. 175 ; Abel v. AUemannia B'auk, 79 Minn. 419, 82 N. W. 680. § 160] CONSIDERATION 363 in England, in 1787; and it arose in an action on the original de- mand, on a demurrer to a plea setting out a composition by parol ; the demurrer was sustained mainly on the ground that the plea did not show that a fUnd had been provided for the payment, and that the creditors had agreed to forbear." So the doctrine was left unsettled. Before this period, compositions, as appears from an examination of Blackstone's Commentories and the works of other early writers, seems to have been a matter regulated ex- clusively under the bankruptcy acts. After 1787 conventional compositions by deed were recognized as binding agreements,^ but the consideration for the release of the residue of the debts was that implied from the deed being under seal and containing 6 Heathcote v. Crookshanks, 2 T. R. 24 (1787) is said by Bump to be the first case In which the question arose. It is the first case, and oldest cited by Montague in his small volume on this subject, published in London in 1823. The question arose upon a demurrer to a plea setting up a composi- tion agreement, in an action on the original claim. BuUer, J., said: "The question in this case is, whether there is any consideration for the promise as stated in the plea. It has been said by defendant's counsel, that in effect by this agreement the debt was ascertained, a fund was provided for the payment of it, and all the creditors were, bound to forbear. If the fact ha* been so, that might have been a good plea ; but the reverse appears by de- fendant's plea. For first the debt is not ascertained by the agreement ; it is only averred that it amounts to so much, nor is any time specified for the payment of it. Secondly, no fund is appropriated for the payment of the debt. Thirdly, it was said, that all the creditors were boimd by this agree- ment to forbear: but that is not stated by the plea. It is only alleged that they agreed to take a certain proportion; but that is a nudum pactum un- less they had afterwards accepted it." Judgment went for plaintiff. 7 (1788) Cockshott v. Bennett, 2 T. R. 763 ; (1794) Butler v. Rhodes, 1 Esp. 236. In Cooling v. Noyes (1795) 6 T. R. 263, such an agreement was before the court, but Lord Kenyon refused to discuss the case of Heathcote v. Crookshanks, because the case under consideration was distinguishable, as the payment had been made under the agreement. The agreement was held not binding on the plaintiff on the ground that he was induced to sign the agree- ment by representations that all the creditors would sign, which was untrue. The court said: "It was his intention to make the defendant a free man by the composition: that was his inducement to agree to accept a part instead of the whole of his debt; but his purpose is not answered, if other demands still remain unsatisfied." This was an executed agreement. The court made 364 COMPOSITION AT COMMON LAW [§ 160 a relinquishment or technical release.' In New York as late as 1834, it was held that a composition to be valid must be in writ- ing, and also under seal which imports a consideration.* In Eng- land, it appears that as early as 1812, parol compositions were up- held.^" But the law has progressed, so that now, everywhere, it is held that the mutual engagement of the creditors to accept a composition on their debts, is the consideration for the giving up, by each, of his claim for the residue.^^ It is a valuable consider- no mention of the fact that the composition was by deed. See Easterbrook V. Scott (1797) 3 Ves. 456, where the question was whether a party who had withheld a part of his claim could afterwards recover the part withheld. The trust not being fully executed the defendant was restrained temporarily from enforcing the judgment obtained at law for the balance. The court reserved the question, whether, after it was shown there was sufficient to pay the composition, the creditor could recover. (1801) Jolly v. Wallis, 3 Esp. 228 ; (a party accepting the payment without signing the deed, held bound) ; (1002) Ex parte Gifford, 6 Ves. 805 ; (1803) Leicester v. Rose, 4 East, 372. 8 (1798) Stock V. Mawson, 1 Bos. & Pull. (O. S.) 286. Eyre Ch. J., said: "The creditor has thought fit to accept 8s. in the pound in lieu of 20s., and though this could not be pleaded on a parol agreement, yet on a deed it may, and the discharge Is as effectual as if 20s. In money had been paid." BuUer, J., in the same case said he did not know if such an agreement by parol could be pleaded or not, but admitted that there may be circumstances under which such an agreement might not only be fair but advantageous. See, also, Fitch v. Sutton, (1804) 5 East, 230. Co. Litt. 212. But if the obligee or feoffee doe at the day receive part, and thereof make an acquittance under his seal. In full satisfaction of the whole, it is sufficient, by reason the deed amounteth to an acquittance of the whole. 9 Acker v. Phoenix, 4 Paige Ch. 305. 10 Boothby v. Sowdan, (1812) 3 Camp. 175. See Steinman v. Magnus, (1809) 11 East, 390, when the agreement was upheld on the ground that by the agreement a surety was lured in. 11 Sage V. Valentine, 23 Minn. 102; Brown v. Farnham, 48 Minn. 317, 51 N. W. 377; Murchie v. Mclntyre, 40 Minn. 331, 42 N. W. 348; Newell v. Hlg- gins, 55 Minn. 82, 56 N. W. 577 ; Hearn v. Kiehl, 38 Pa. St. 147, 80 Am. Dec. 472 ; Laird v. Campbell, 92 Pa. St. 470 ; Montgomery Bank v. BUggy Co., 100 Ala. 626, 13 So. 621 ; National T. E. Co. v. Feypel, 93 111. App. 170 ; Robert v. Barnum, 80 Ky. 28; Stewart v. Langston, 103 Ga. 290, 30 S. E. 35; MuUin V. Martin, 23 Mo. App. 537; White v. Kuntz, 107 N. X. 518, 12 N. Y. St § 160] CONSIDERATION 365 ation ; "Each creditor has a right to be paid in full when his debt matures, and a chance of being paid more than the others if he presses the debtor." ^'^ The mutual agreement not to press their individual claims and to accept a pro rata distribution of their debtor's property, or such a division as may be agreed upon, saves the expense and trouble incident to a race of diligence by them to gain advantages ; places each creditor on an equality by extinguishing their cause of ac- tion on the original claim, and deprives the debtor of the right to prefer one creditor over another. Each exchanges a right to pursue their individual remedies for the recovery of an uncertain amount from the failing debtor's property, for the certainty of receiving a definite amount or at least an equal amount pro raid with other creditors. Where a less sum in money, merely, is paid by the debtor to each of his creditors, it cannot be said that the debtor furnishes any consideration whatever, unless possibly the surrender of a right to prefer one creditor over another is a sur- render of a valuable right ; but, however, it is said that the debtor is entitled to avail himself of the consideration passing between the creditors,^' and enforce the agreement. If this were not so, there would be a lack of mutuality and the creditors' arrangement between themselves would be of no benefit. If there is a cessio bonorum, "a surrender of effects," as where a debtor under an 297, 1 Am. St. Rep. 886, 14 N. E. 423 ; Baxter v. Bell, 86 N. T. 195 ; Farring- ton V. Hodgdon, 119 Mass. 453; Perkins v. Lockwood, 100 Mass. 249, 1 Am. Rep. 103; Pierson v. McCahill, 21 Cal. 122; WUson v. Samuels, 100 Cal. 514, 35 Pac. 148 ; Schroeder v. Pissis, 128 Oal. 209, 60 Pac. 758 ; Devon v. Ham, 17 Ind. 472; Bartlett v. Woodworth Co., 69 N. H. 316, 41 Atl. 264; Daniels V. Hatch, 21 N. J. L. 391, 47 Am. Dec. 169; Paddeford v. Thatcher, 48 Vt. 574; Zell Co. v. Emry, 13 N. C. 85, 18 S. E. 89; Continental Bank v. Mc- Geoch, 92 Wis. 286, 66 N. W. 606 ; Hawley v. Beverly, 6 M. & G. 221, 46 B. 0. L. 221 ; Good v. Cheesman, 2 B. & Ad. 328, 22 B. 0. L. 142, 4 C. & P. 513 ; Boothbey v. Sowden, 3 Campb. 175; Norman v. Thompson, 4 Exch. 755; Bump on Comp. 2. Montague on Comp. 8. Bishop on Insol. 591. 12 Bump on Comp. 2. IS Brovm v. Farnham, 48 Minn. 317. 366 COMPOSITION AT COMMON LAW [§ 161 agreement with his creditors assigns his goods and chattels, or any property other than money, there is an extrinsic considera- tion, passing from the debtor, for he does something which he was not under obligation to do.^* The mutual promises of the creditors furnish the consideration to uphold a letter of license or agreements among creditors and their debtor to give him ad- ditional time,^° and deeds of inspectorship. Sec. 161. Other essentials to the validity of the agreement — Equality among creditors. — To constitute a binding composition agreement, the debtor must be either insolvent or in embarrassed circumstances.^ A debtor is embarrassed when his debts are due and he has not the money with which to pay them as agreed, although his property upon a forced sale might be sufficient to liquidate them in full. So, if his debts be not due, but it is rea- sonably certain that he cannot meet them as they mature without forcing a sale of his property at a sacrifice or winding up his busi- ness, he has a right to ease his financial condition and save what he can by compounding with his creditors. The business affairs of men are so various and intricate that each case must of neces- sity be governed by the surrounding facts and circumstances. No hard and fast rule can be formulated that would be applicable to all the cases. The embarrassment need not be real. It is suffi- cient if it be threatened and the debtor honestly believes he can- not extricate himself, and he does not conceal his true condition from his creditors. Any concealment or misrepresentation by the debtor of his resources or condition, by means of which the cred- 14 Where a composition deed contained no release, or stipulation that the dividend was to-be taken in full satisfaction, the court held that the satis- faction ought to be inferred, for the deed constituted a cessio bonorum ["a surrender of effects"]. Whitmore v. Turquand, 3 De G. F. & J. 107, 30 L. J., Ch. 335, 7 Jur., N. S.'377, 9 W. R. 488, 4 L. T., N. S. 38. 16 Boothby v. Sowden, (1812) 3 Comp. 175. 1 Crawford v. Krueger, 201 Pa. St. 348, 50 Atl. 931 ; Cutter v. Reynolds, 8 B. Mon. 596: Such embarrassment must be pleaded. § 161] OTHEB ESSENTIALS TO VALIDITY OF AGKBEMENT 367 itors are induced to accept a composition, is a fraud upon the creditors and will avoid the agreement." A composition agree- ment will be binding if the creditors, fearing a greater loss, ne- gotiate an agreement for the payment of a specific sum less than their whole debt, even though their fears prove to have been groundless.* One of the essentials to a valid composition agreement, is, that there shall be a rigid and strict equality among the creditors; not only with respect to a pro rata distribution of the composi- tion fund, but with respect to security given, or any other ad- vantage offered. Any deviation from the equality implied by the agreement vitiates the contract.* But a debtor may bring any or all of his creditors into the agreement upon different terms, so long as he negotiates the terms openly and all consent to abide the agreement The questions of the necessity of an actual bene- • fit passing to the creditors ; ' of the mutuality between the debtor and the creditors,'' and between the creditors,' and that of the good faith of the debtor,* are considered elsewhere. 2 Sec. 201, post. 8 Castleton v. Fanshaw, Free. Ch. 99, 24 Eng. Rep. 48. i Higgins V. Newell, 55 Minn. 82, 56 N. W. 577 ; Solinger v. Earl, 82 N. T. 393, 60 Hon. Pr. 116 ; Babcock v. Dill, 43 Barb. 577 ; Danglish v. Tennent, 8 B. & S. 1, 36 L. J., Q. B. 10, 2 L. R., Q. B. 49, 15 W. R. 196 ; Knight v. Hunt, 5 Bing. 432; O'Shea v. Collier, 42 Mo. 397, 97 Am. Dec. 332; Hefter V. Cahn, 73 111. 296. 6 Le Changeur v. Gravler, 2 Mart. N. S. (La.) 545. 8 Sec. 160, Ante. 7 Sec. 163. 8 Sec. 164. » Sec. 201. 368 COMPOSITION AT COMMON LAW [§ 162 Sec. 162. Fraud and estoppel as ground for sustaining con- tract. — Composition agreements are sustained on the ground of fraud and estoppel.^ Each creditor enters into the arrangement, relying somewhat upon the judgment of the others, and forbears to institute suit relying upon the promise of the others to accept the composition and release their unfortunate debtor, otherwise a creditor with an advantage could be lured into the arrangement and shorn of the fruits of his diligence by an unscrupulous cred- itor. When they canvass the situation and a^ree to place them- selves upon an equality- and thus abandon their individual rights for the benefit of all, and relinquish their further demands, each has a right to expect and to demand good faith and fair dealing from all. Manifestly the balance of the creditors would sustain an injury if one was afterwards permitted to absorb the debtor's •property by executions, or by independent negotiations with the debtor, and thus, perhaps, take away the means for the payment of any portion of the remaining debts. Such conduct is a fraud upon the common arrangement and for that reason each creditor to a composition agreement is estopped from asserting his in- dividual claims.^ The validity of such an agreement does not de- pend upon the technical and strict rules which govern accord and satisfaction, release and discharge, but upon principles of equity.^ 1 Daniels v. Hatch, 1 Zabriskie, 394, 47 Am. Dec. 169, citing Greenwood v. Lldbetter, 12 Price, 183; Wood v. Roberts, 2 Stark. 41T; Cocksliott v. Ben- nett, 2 T. R. 763 ; Steinman v. Magnus, 11 Bast, 390. In Wood V. Roberts, 2 Stark. 417, wliere one creditor agreed to accept half of his debt in satisfaction of the whole if the plaintiff would accept the residue of the debtor's property and discharge him. The court said: "If the plaintiff had, by his undertaking to discharge the defendant. Induced any other creditor to accept a composition and discharge the defendant from further liability, he could not afterwards enforce his claim, since it would be a fraud upon that creditor." 2 Fellows V. Stevens, 24 Wend. 294 ; Wood v. Roberts, 2 Starkie R. 417 ; Bump on Comp. 6. 3Mellen v. Goldsmith, 47 Wis. 573, 3 N. W. 592. § 163] THE AGKEEMENT 369 The estoppel may be invoked by any creditor, a party to the ar- rangement, or by the debtor who is in privity with each.* The doctrine of fraud and estoppel applies with greater force, in those cases where a debtor on faith of the agreement has sur- rendered his property, as it places him in a very awkward posi- tion ; ° and cases where a third person has been lured in to be- come a surety for any part of the debt, on the ground that the debtor will be thereby discharged of the residue of his debts." Sec. 163. The agreement — Mutuality between debtor and cred- itors. — There must . be mutuality of agreement and of remedies between the debtor and the creditors, in order to constitute a binding composition. If the agreement be unilateral, purporting to bind only the debtor, it is not binding on either the debtor or the creditors, for the reason that to compound a debt upon a com- position there must be a binding promise on the part of each cred- itor to forgive the residue of his debt on receiving a part, or to accept something different in satisfaction of the whole debt. Thus it has been held that a deed of assignment of property in trust, to sell for the payment of creditors, no creditors being parties, was not a composition deed, even though some creditors were paid under it.^ There must be a proposition by the debtor which when accepted or acted upon by the creditors binds them and releases their debts, either in prcBsenti or presently upon performance. On the other hand an agreement among the creditors alone, to accept * Bump on Comp. 6. See Btown v. Farnham, 48 Minn. 317, when it is said tlie debtor has a right to avail himself of the consideration passing between the creditors. B Butler V. Rhodes, 1 Esp. 236, Peake, 238 ; Butleman v. Douglas, 1 Cranch O. Ct. 450. e Steinman v. Magnus, 11 East, 390, 2 Camp. 124 ; Anstey v. Marden, 1 Bos. & P. N. K. 124; Clark v. Upton, 3 Man. & R. 89; Brown v. Stackpole, 9 N. H. 478. 1 In re Waley, 3 Drew. 16S, 3 Eq. R. 380, 1 Jur., N. S. 388, 24 L. J. Ch. 499; Gerrai-d v. Lauderdale, 2 Russ. & Mylne, 451. Hunt Acc.& S.— 24 370 COMPOSITION AT COMMON LAW [§ 163 something different or a less sum in satisfaction of their respec- tive demands is not enforceable by the debtor.'' Such an arrangement, in order to become a composition, must be made with the intent that the debtor will accept it and he must actually become a party to it, otherwise it will lack the mutuality necessary to a composition. Where parties are dealing with a fresh subject matter, one may, for a consideration, bind himself by a unilateral contract, but owing to the existing obligations with respect to pre-existing debts, no arrangement by a debtor, or cred- itor, short. of a full reciprocal agreement will constitute a compo- sition. An agreement in the nature of a letter of license, which does not contain a covenant on the part of creditors that it may be pleaded in bar of an action brought by a creditor contrary to its terms, lacks mutuality of remedies, and cannot be pleaded in bar by the debtor, but the creditors among themselves, upon eq- uitable grounds, are estopped from denying its validity, and mAy restrain one of their number from violating its terms. Sec. 164. Same subject — ^MutUeility between creditors. — In ad- dition to the reciprocal agreement between the debtor and his creditors, there must be a concert of action among the creditors.^ The engagement of the other creditors to accept a composition on their debts is the consideration for the giving up, by each of his claim for the residue." "Mutuality between the creditors, as respects the consideration, is, therefore, essential to the validity of an agreement for a composition. The creditors must 'join together.' They must stipulate one with another." ^ A promise 2 Such agreements are sometimes expressed in terms "We the undersigned" creditors agree to accept fifty per cent, (or whatever may be agreed upon) in satisfaction of the amount due us : Webb v. Stewart, 59 Me. 356 ; Gilford v. Ware, 95 Me. 388, 50 Atl. 24. 1 Bump on Comp. 9. 2 Sec. 160. 8 Sage V. Valentine, 23 Minn. 102 ; s. p. Newell v. Higglns, 55 Minn. 82, 56 N. W. 577; Brown v. Farnham, 55 Minn. 27, 56 N. W. 852; Perkins v. § 164] MUTUALITY BETWEEN OKEDITOE8 371 to the debtor, alone, which is not acted upon by other creditors is without any valuable consideration and not binding.* The ar- rangement may be for the benefit of a certain class of creditors, or a certain number in names or amount," and the burden is upon the one asserting it to prove that all the creditors for whose benefit the agreement was made, have mutually agreed one with the other." It does not necessarily follow from the fact that the debt- or has compounded his debts with all his creditors, that the ar- rangement is a binding composition. The debtor may think he can obtain better terms by negotiating separately and each cred- itor may prefer to rely upon his own judgment and efforts to secure favorable terms. If the debtor settles with each creditor separately there is a want of mutuality between the creditors, and to obtain his discharge from the residue of each of his debts the debtor must obtain a release, or furnish a consideration neces- sary to a valid accord and satisfaction.' Lockwood, 100 Mass. 249, 1 Am. Rep. 103; Argall v. Cook, 43 Conn. 100; Gulford V. Ware, 95 Me. 888. 50 Atl. 24. i Bump on Comp. 11, citing Lowe v. Eginton, 7 Price, 604. The question arose upon a demurrer to tlie plea — "He proposed to plaintiff and the rest of his creditors to execute a deed of composition, which was afterwards prepared and executed by the other creditors of the defendant; that It was under- stood, wrranged and agreed between the defendant and the plaintiff that the plaintiff, as one of the creditors of the defendant, should, and would, execute the deed in common with the other creditors, and that defendant, confiding in such agreement, executed the deed, as did all the other creditors." The demurrer was sustained. s See Fellows v. Stevens, 24 Wend. 294. 6 Sage V. Valentine, 23 Minn. 102. In Fitch v. Sutton, 5 East, 280, the debtor had compounded with all the creditors, but merely took a receipt from each for the composition In full for the debt. There was no evidence in the ^case that they acted in concert. The receipt was held to be no defense to an action for the origia^-l debt. 7 BUmp on Comp. 9, citing Perkins v. Lockwood, 100 Mass. 249; Williams V. Carrington, 1 Hilt. 515; Cutter v. Reynolds, 8 B, Mon. 596; Daniels v. Hatch, 21 N. J. 391 ; Greenwood v. Lidbetter, 12 Price, 183 ; Sage v. Valentine, 23 Minn. 102. In Lanes v. Squires, 45 Texas, 382, the debtor effected a composition at fifty per cent. The court said that It was not alleged the plaintiff agreed to accept 372 COMPOSITION AT COMMON LAW [§ 165 Sec. 165. Same subject — ^Agreement, how executed — ^What aiJiounts to an acceptance. — The debtor sometimes calls a meeting of his creditors for the purpose of effecting a composition, but it is not essential that there be a meeting of the creditors or any number of them, or that a formal promise should be made by each to all to abide by the settlement.^ A creditor,^ or any one com- missioned by any of them or by the debtor, or the debtor him- self, may communicate the proposition to each creditor through the mail,' or go from one creditor to another and make an oral proposition for a compromise, and secure the promise of each to come into the arrangement ; * or an agreement may be taken around to each for their signature." In either case the creditors the settlement offered, with the understanding that all the other creditors were to accept a like sum in discharge of their debts ; that this is not proved by the allegation and proof that a like settlement was made with all the other creditors. In Bliss V. Schwartz, 65 N. T. 444, the plaintiff refused to join in the com- position agreement and negotiated independently (and openly) for a settle- ment. The defendant was held liable for the balance of the original debt on the ground that there was no consideration to support the agreement to re- linquish the residue. See Fitch v. Sutton, 5 East, 230. 1 Johnson v. Parker, 34 Wis. 596 ; CuUingworth v. Lloyd, 2 Beavan, 885. 2 Chemical Bank v. Kohner, 85 N. T. 189. Where, after a debtor had con- veyed his stock to a creditor on condition that the transferee pay other cred- itors their pro rata share of the property, a creditor's subsequent agreement made with the transferee, that after all other creditors had been paid fifty per cent., he would accept a similar amount, was held to be based upon the composition, and was, therefore, sustained by a suflBcient consideration: Wil- liams V. Gotzian, 130 Iowa, 710, lOT N. W. 807. 8 Chemical Bank v. Kohner, 85 N. Y. 189. 4 Where a creditor indorsed the amount of the composition on the debtor's note held by him, having stated to the debtor that he could exhibit the note to the other creditors, and thus induce them to believe it had been settled, and the debtor did represent that all were ready to accept the composition and Induced other creditors to give up their notes, it was held that the creditor was bound by the agreement. Fawcett v. Gee, 3 Anst. 910. Johnson v. Parker. 34 Wis. 596 ; Leicester v. Rose, 4 East, 372 ; Bean V. Amsinck, 10 Blatchf. 361; CuUingworth v. Lloyd, 2 Beav. 385; Fawcett V. Gee, 3 Anst. 910. § 165] AGREEMENT, HOW EXECUTED 373 act through the debtor ' or the one commissioned to interview the creditors, as a sort of middle-man. From the nature of the transaction and the custom of dealing in such matters, each cred- itor from the first one to the last, who joins in such an agreement, is presumed to make the debtor, or other go-between, their agent and intend that he will communicate the terms of the arrangement and their promise to the others. A concert of action and common purpose among the creditors who are to become parties is all that is essential and it does not matter in what way it is brought about, so long as the same proposition is communicated to all and there is no fraud.'' Some one of the creditors must of necessity be the first to give his assent to the arrangement and he does so on the faith that the others will join with him in the agreement. It is often said that he is bound because others act upon the faith of his agreement or signature. This, in a measure, is true as to each creditor excepting the last one to come in. But under the law the binding force of the obligation arises from the fact that each creditor, at the time he signs the agreement or otherwise gives his assent, enters into a contract with all those who have previous- ly joined, and holds himself out as willing to enter into the same contract with those who may thereafter come in.* A creditor who is the last to sign cannot, therefore, escape from the obliga- tion on the ground that no other creditor signed the agreement on the faith of his signature. The legal effect of separate and successive signing is the same as if all the parties were convened and the execution contemporaneous.' Excepting when the Statute of Frauds requires it, it is not nec- essary that the agreement be in writing. If in writing it need not be in one instrument. Each creditor may execute a separate in- strument. If by parol, each creditor may make a separate parol 8 Johnson v. Parker, 34 Wis. 596. 7 Leicester v. Rose, 4 East, 372. 8 Bump on Comp. 12. »Hall V. Merrill, 5 Bosw. 266, 9 Abb. 116. 374 COMPOSITION AT COMMON LAW [§ 165 agreement for the purpose of carrying into effect the compro- mise.^" Where the instrument is in writing and it is intended that it shall be signed by all or a certain number of creditors, it is not binding on any until all those intended have signed. But this is true only where those holding out have not by a previous promise agreed to come in, or in any way lured other creditors into the agreement under the belief that they will accept of the com- position; and then those signing are only bound by a sort of estoppel until it is demonstrated that the required number cannot be induced to sign. A subsequent promise by a creditor to sign a deed of as- signment is without consideration, when the deed was executed for the benefit of all those creditors who should sign it within a cer- tain time, although the promise was made within the time.^^ But if a creditor, among others, consents to accept a composition and as- signment, and in consequence thereof the debtor and other credi- tors execute the deed, the creditor is bound by his agreement, al- though he refuses to execute the deed.^^ So, where the agreement 10 Chemical Bank v. Kohner, 85 N. T. 189. 11 Battle V. Fobes, 2 Mete. 93, (21 Pick. 239). In Daniels v. Hatch, 1 Za- briskie, 391, 47 Am. Dec. 169, the court said It was not shown that the plaintiff became a party to the arrangement, but, if anything, only a promise to do so; that there was no pretense that any other creditor was induced to accept the compromise in consequence of the plaintiff's promise and that It was highly probable that both composition deed and the assignment were fully executed before the alleged promise. 12 Butler V. Rhodes, 1 Esp. 236; Mellen v. Goldsmith, 4T Wis. 573, 3 N. W. 592, 32 Am. Rep. 781 ; Mansfield v. Rutland, 52 Vt. 444 ; Anstey v. Harden, 1 Bos. & Pul. 124 ; Norman v. Thompson, 4 Bxch. 775. In Bradley v. Gregory, 2 Campb. 383, the plaintiff attended a meeting of creditors where it wds agreed by all present that If the debtor's statement was correct, they would accept of a composition and give him a release. A committee was appointed to inspect the debtor's books, and the meeting ad- journed until next day. The plaintiff did not assist at the following meet- ing; but from the report then made by the committee, all creditors present consented to take a. certain composition. Before the deed was drawn de- fendant's attorney waited upon the plaintiff to know if he would come in un- der arrangement. He promised to accept of the composition and execute the deed, but he afterwards refused a tender of the composition and to execute § 165] AGBEEMENT, HOW EXECUTED 375 expressly provides that it shall be void if not signed by certain cred- itors within a specified time, it will, nevertheless, be binding if those who were to sign it acted under it by accepting the composition mon- ey or notes. ^* A deed of assignment by a debtor of his effects to a trustee or trustees, even when it is to be executed by the creditors and trustees within a specified time, is binding on all assenting cred- itors although executed by only a part of the trustees within the time.^* If a creditor approves of a trustee or trustees acting under the deed, as where the trustees take possession of the debtor's prop- erty with his approbation, he is bound by the agreement even though he, or any of the trustees, have executed the deed.^° An agent or attorney cannot compound the debts of his principal without his au- thority,^* but the assent of the principal may be duly given to a com.- • position through an agent or attorney duly authorized. One part- ner may give the assent of the firm to a composition.^^ If the debtor is released in prwsenti, without any obligation to be per- formed by him at some future time, he need not sign the agree- ment,^* unless an interest in land is sought to be transferred.'" If it contains a stipulation to be performed at some subsequent time, the debtor should sign it.^" But this is not necessary unless required by the statute of frauds. the deed. The action was on the original demand and the plaintiff was non- suited. 13 Jolly V. Wallis, 3 Esp. 228; Fellows v. Stevens, 24 Wend. 294; Spotts- wood V. Stockdale, Geo. Coop. 102 ; Back v. Gooeh, 4 Campb. 232. "As to the allegation, that some creditors had not signed the agreement, if a creditor acts upon the agreement, he is bound as much as if he had signed it." Ex parte Sadler, 15 Ves. 52. i< Small V. Marwood, 4 M. & R. 181, 9 B. & C. 300. 15 Back V. Gooeh, 4 Campb. 232. 16 Perrot v. Wells, 2 Vern. 127. IT Sec. 175. 18 Townsend v. Newell, 22 How. Pr. 164 ; Eaton v. Lincoln, 13 Mass. 424. 19 Alchin V. Hopkins, 1 Bing. N. C. 99. 2 Le Page v. McCrea, 1 Wend. 164. An assignment for the benefit of cred- itors by a firm consisting of two partners, contained a proviso that it shall 376 COMPOSITION AT COMMON LAW [§ 166 Sec. 166. Same subject — Stipulations. — ^A creditor as a condi- tion of his executing a composition agreement may insert therein any stipulation he may deem proper for his protection and if as- sented to by the debtor and the other creditors it becomes a part of the contract and performance must be according to its terms or the creditor will not be bound.^ A creditor may reserve a right to retain any security he may have ; ^ or his remedy against a surety, indorser/ or any joint debtor.* The fact that a stipula- tion with one creditor destroys the .equality among the creditors does not affect the validity of the agreement, if the special terms are negotiated openly, and knowledge of the preference is brought home to the other creditors.^ A proposed agreement may contain a requirement that it shall not take effect until all the creditors sign the agreement; or two thirds of the total business creditors,® or any number, or any particular class of creditors, or that each creditor must give his written assent, or that the creditors shall sign the agreement within a specified time, and the like, and the inure to the benefit of such creditors as shall agree to look to each of the partners for only a moiety of such balance as shall remain unpaid after re- ceiving the dividend, followed by a covenant to that effect by the creditors, was held not to have the effect of a severance of the partnership debt without the instrument being executed by the partners. 1 Richardson v. Pierce, 119 Mass. 165 ; Garnier v. Papin, 30 Mo. 243 ; Magee v. Kast, 49 Cal. 141; Lewis v. Jones, 4 Barn. & Cress. 506, 6 D. & R. 567. 2 Powles V. Hargreaves, 3 De G., M. & G. 430, 17 Jur. 1083, 23 L. J. Ch. 1 ; Stevens v. Stevens, 5 Exch. 366 ; CuUingworth v. Lloyd, 2 Beav. 385 ; North V. Wakefield, 13 Q. B. 536, 13 Jur. 731, 18 L. J. Q. B. 214. 3 Close V. Close, 4 De G., M. & G. 176 ; Kearseley v. Cole, 16 M. & W. 128, 16 L. J. Exch. 115 ; Nichols v. Norris, 3 B. & Ad. 41 ; Richardson v. Pierce, 119 Mass. 165; Rockville Bank v. Holt, 58 Conn. 526, 20 Atl. 669, 18 Am. St. Rep. 293; Boatman's Bank v. Johnson, 24 Mo. App. 316; Wakefield V. Georgetown Bank, 19 Ky. L. Rep. 426, 40 S. W. 921. 4 North V. Wakefield, 13 Q. B. 536, 13 Jur. 731, 18 L. J., Q. B. 214. 5 CuUingworth v. Lloyd, 2 Beav. 385. 6 Fellows V. Stevens, 24 Wend. 294. § 166] STIPULATIONS 377 agreement will not become effective until the stipulation is com- plied with/ But where the stipulation that all the creditors or all of a certain class of creditors shall sign the composition deed is solely a part of the debtor's covenant and not the creditors, it will be binding on all those creditors who sign.* A condition requiring certain creditors, or all the creditors to sign the agreement before it shall become effective, should be expressly declared, or clearly deducible from the terms used." If a creditor signs a composition agreement which does not con- tain a stipulation that it will be void if all the creditors do not sign, he will be bound by it, although at the time he is told that it will be void unless all sign it; for such a statement is merely a representation of the legal effect of the instrument.^" The agree- ment may contain a stipulation that it shall be void unless the debtor continues to deal with the creditors for a limited time.^^ Any requirement of this nature is of course modified by the im- plied qualification that the goods furnished shall be marketable, and that the debtor shall receive the same treatment with respect to the price as is accorded other customers. The amount of the debts may be set out in the composition agreement or in an at- tached schedule, and leaving blank spaces for the amounts due will not affect the validity of the agreement.^'' The agreement I See Sec. 172 as to what creditors shall sign and when. 8 Chittenden v. Woodbury, 52 Vt. 562. 9 In Renard v. TuUer, 4 Bosw. 107, the words "the undersigned, creditors of A. B." were held not to imply that all the creditors were to sign. Where the agreement contained the proviso "the whole of the creditors receiving not exceeding a lilse sum in discharge of their debts," it was held to apply to creditors who became parties and not to require all creditors to join : Carey v. Barrett, 4 C. P. D. 379. The words "the creditors of" were held to mean all creditors: Chase v. Bailey, 49 Vt. 71. 10 Lewis V. Jones, 4 Barn. & Cress. 506. II Thornton v. Scheratt, 8 Taunt. 523. In this case the time limited was twelve years. 12 Wilson V. Samue)|p, 100 Cal. 514, 35 Pac. 148; Daniel v. Saunders, 2 Chit. 564 ; Hudson v. Revell, 5 Bing. 368, 2 M. & P. 663. 378 COMPOSITION AT COMMON LAW [§ 167 may provide for an investigation and, allowance of the claims by a committee, of creditors, or that the creditors present them in writing. It may also provide for a place of payment, or that all the money be paid to one creditor or any person for the others, or, where notes are to be given, that the creditors shall apply to the debtor for them.^* Sec. 167. Same subject — The release. — An agreement to con- stitute a composition with creditors must of necessity release and discharge the debtor from his liability to pay the residue, or, from the whole of the original claim, if something other than a part in money be paid. An acceptance by the creditors of a less sum than the original debt without an agreement to discharge the debtor, merely constitutes a payment pro tanto. A composi- tion is one mode of discharging debts. The agreement, therefore, whether oral or in writing, must be conditioned that the money or other thing shall be received in satisfaction of the debts. It has been held that when the agreement was in writing, in absence of a provision for a discharge parol evidence is not admissible to vary its legal effect.^ But a stipulation for a discharge need not nec- essarily be set out in express terms; it may be implied from the nature of the arrangement. Thus, where the creditors agreed to accept a certain per cent, of their debts, to be paid in a specified manner, it was held that the amount specified was to be received in full discharge of their debts.^ A composition agreement need not contain a technical release, for the agreement itself, when its terms are complied with, operates to discharge the debts.' Since a creditor is bound by a verbal agreement to accept a composition 13 Solomon v. Laverick, 17 L. T., N. S. 545. 1 Plerson v. Cahll, 21 Cal. 122 : If the release is omitted by mistake, there must be distinct allegations of the- mistake for the purpose of a reformation ; or separate proceedings for that purpose. 2 Farrington v. Hodgdon, 119 Mass. 453. s In Fellows v. Stevens, 24 Wend. 295, the court said : "The effect as a discharge is based not so much upon the sort of instruments or other acts § 167] THE KBLEASB 379 and discharge the debtor, although he may afterwards refuse to execute the deed ; * a provision for the subsequent execution of a release is surplusage. The composition agreement will discharge the debts presently upon its performance, whether the perform- ance is to be immediately or at a future time. Where the debtor pays over the amount agreed, or where there is "a surrender of effects," " under an agreement merely that the debtor will assign his effects to a trustee, the proceeds of which are to be distributed among the creditors,* or when the debtor furnishes the note of a third party, or security, where the note or security is to be taken as payment there is an immediate discharge of the debts. If the discharge is not to take place until the composition notes are paid, or the debtor or his trustee accounts for his estate,' or performs a certain act,' or until a certain per cent, is realized from the property assigned," there is not, of course, complete perform- ance until the notes are paid or other thing done or the per cent, realized, and the release is conditional upon performance.^" What is to operate as a satisfaction of the debts, depends upon by which they are effected, as upon there being an agreement upon suf- ficient consideration among the several parties, the debtor on the one side, his creditors on the other, and these latter among themselves." * Butler V. Rhodes, 1 Bsp. 236, Peak. 238. 5 Whitmore v. Turquand, 3 De G., F. & J. 107, 30 L. J., Ch. 335, 7 Jur., N. S. 377, 9 W. R. 488, 4 L. T., N. S. 38. « An agreement that the creditors will receive the dividends in satisfac- tion of their demands, and "will forever release" the debtor from all further claims, was construed as a present release : Tuckerman v. Newhall, 17 Mass. 581. 7 Kesterton v. Sabery, 2 Chit. 541. 8 Deacon t. Stodhart, 9 Car. & P. 685. In this case a deed was to be ex- ecuted. 9 wiglesworth v. White, 1 Stark. 218. 10 Ex parte Vere, 1 Rose, 281; Ex parte Richardson, 14 Ves. 86. An agreement to accept installments "in full satisfaction and payment of the several debts" was held not a present release: I«ak v. Waller, 5 El. & Bl. 955. 380 COMPOSITION AT COMMON LAW [§ 168 the terms of the composition agreement.^^ The distinction be- tween the execution of the composition agreement and its perform- ance must be kept in mind. It is competent for the parties to discharge a debt presently by the mere execution of the agree- ment. The rule is that "an acceptance, in discharge of a debt, of an agreement, with mutual promises on which the creditor has a legal remedy for its non-performance, is a satisfaction of the debt, although such promises are not performed." ^^ If, by the agreement, the debtor covenants to pay the composition money by installments, and the creditors release without any proviso that it shall be void if the installments are not paid, the original debts are discharged upon the execution of the agreement and the cred- itor's remedy in case of a breach is upon the new agreement.^' Sec. 168. Same subject — Construction. — Creditors have a sev- eral right to enforce their claims to the full amount, by any of the remedies provided by law. They have the sole right, on an appeal being made to them, to modify the original contract; and a composition, therefore, is purely an act of favor on their part and its provisions are strictly construed.^ But every reasonable 11 Stafford v. Bacon, 1 HUl, 533, 25 Wend. 584. 12 Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. In this case the debtors were to execute an assignment of certain property at a future time. The parties treated It as a discharge m prwsenti. The court said it was com- petent for the parties to make such an agreement, s. p. Goodrich v. Stanley, 24 Conn. 613 ; BUlings v. Vanderbeck, 23 Barb. 546 ; Good v. Chessman, 2 Bam. & Ad. 328 ; Evans v. Powis, 1 Ex. 601. 13 Ex parte Clark, 19 L. T., N. S. 327; Solomon v. Laverick, 17 U T., N. S. 545 ; Lay v. Mottram, 19 0. B., N. S. 479. Ex parte Goodair, 1 Mon- tagu's B. L,. 222 : A deed for the payment of a composition of 15 s. in the pound in three installments, contained a release. Before all the installments were paid a commission in bankruptcy was issued against the debtor. The creditor was not permitted to prove the balance due on the original debt, on the ground that the original debt was extinguished. In Ex parte Vere, Rose, 281, the release was contingent upon payment, and the creditors were allowed to prove the balance of their original debts, in insolvency proceedings. 1 Smythe v. Graydon, 29 How. Pr. 11 ; Hill v. Wertheimer, 150 Mo. 483, 51 S. W. 702. § 168] OONSTBUOTION 381 intendment will be indulged in by a court to carry out the inten- tion of the parties^ Conditions and terms will not be implied for the purpose of defeating the agreement where the agreement is valid without the conditions, and they cannot reasonably be in- ferred from the language used or object sought to be accom- plished. The difficulty of effecting a composition agreement if all the creditors are to join in it, is so obvious that the agreement will not be construed as requiring all the creditors to become parties to it, unless it is expressly stipulated or clearly deducible from its terms ; a composition with any number more than two being good. The words "the undersigned, creditors of A. B." were held not to imply that all the creditors were to sign the agreement.^ A deed of composition made between the debtor and the persons who subscribed the schedule thereto, "on behalf of themselves and all and every other the creditors" of the debtor, shows that all the creditors are parties.^ The term "creditors" in absence of any provision in a composition agreement indicating that only certain creditors are meant is generally construed to mean all creditors whether secured or unsecured.* A condition "in consideration of other creditors accepting a like percentage" was construed to mean all other creditors." Where all the joining creditors were designated as "general creditors," and those having secured claims put down only their unsecured claims, it was held that "general creditors" meant "un- secured creditors" and that by joining in the agreement the parties did not release their secured claims.* And where the agreement was merely signed by creditors, each setting down the amount 2 Renard v. TuUer, 4 Bosw. 107 : The court said the words "all the cred- itors," nor "the creditors" were not used. s M'Laven v. Baxter, 36 L. J., C. P. 247, 15 "W. R. 1017. * Cobleigh r. Pierce, 32 Vt. 788 ; Artman v. Truby, 130 Pa. St. 619, 18 Atl. 1065. B M. A. Seed v. Wunderllch, 69 Minn. 288, 72 N. W. 122. 6 Noyes v. Chapman, 60 Minn. 88, 61 N. W. 901. 382 COMPOSITION AT COMMON LAW [§ 169 due him, oral evidence was held admissible to show that the amount set down by a creditor was his unsecured claim and. that the agreement was not to apply to a secured claim held by him/ Business creditors, are creditors whose claims arose out of trans- actions with the debtor in his particular calling,' and does not in- clude those persons who have furnished board, clothing or other necessaries to the debtor or his family. The term "All his prin- , cipal creditors" is vague and indefinite and ought not to be used, but if creditors accept composition money under such an agree- ment they are concluded from saying that all the principal cred- , itors have not signed.' Sec. 169. Withdrawal from agreement by creditor. — A creditor who has signified his assent to a composition agreement cannot withdraw therefrom. The authorites are unanimous in holding that when a creditor has by his assent lured others into the agree- ment,^ or in consequence thereof the debtor has assigned his prop- erty,^ he cannot recede from his undertaking and evade the effect of the composition by afterwards refusing to execute the deed or other agreement.* One creditor is not the only person concerned in such agreements, and if a dissatisfied creditor was permitted to withdraw and recover upon the original cause of action, it 7 Hartford v. Hartford, 46 Conn. 569. 8 See Fellows v. Stevens, 24 Wend. 294. A stipulation requiring all "mer- chandise indebtedness" to Join means creditors who sold the debtor mer- chandise: Farrlngton v. Hodgdon, 119 Mass. 453. A provision respecting the amount to be paid each creditor, as follows : "The whole of the creditors receiving not exceeding a like sum in discharge of the debts" was held not to require all creditors to join but to apply to creditors who became parties : Carey v. Barrett, 4 C. P. D. 379. fl In re Decker, 8 Ben. (U. S.) 81. 1 Wood V. Roberts, 2 Starkle, 417 ; Norman v. Thompson, 4 Exch. 755. 2 Butler V. Rhodes, 1 Esp. 236, Peake 238 ; Brady v. SheU, 1 Camp. 147 ; Chemical National Bank v. Kohmer, 85 N. X. 187. 8 Bradley v. Gregory, 2 Campb. 383 ; Anstey v. Harden, 1 Bos. & Pul. 124 ; Mellen v. Goldsmith, 47 Wis. 573. § 169] WITHDBAWAL FKOM AGREEMENT BY CEEDITOS 383 would be a gross fraud on the other creditors.* Where the agree- ment is fully executed, the debtor cannot as against the protest of any creditor, release a creditor, nor can all the creditors re- lease one of their number without the consent of the debtor. In a case arising in New York, where a creditor before all the cred- itorsi had executed the agreement, became dissatisfied and with the consent of the debtor withdrew from the agreement. Cowan, J., observed that he had met with no case which denies to a cred- itor an open withdrawal of his name with the consent of the debt- or, as was practiced here." In cases where a specified number of creditors must become parties to make a composition binding and those signing first were the means of inducing other creditors to sign and abandon their pursuit of the debtor, or the deed of assignment is to be void if not signed before a given day by all the creditors, or by all those designated, those signing first may be held to the agreement by the other creditors, or by the debtor, until it is demonstrated that the required number will not execute the agreement or otherwise come into the arrangement.' It would be inequitable to say the least for those creditors who were the means of inducing others to join, to recede from their agreement and perhaps gain an ad- vantage which was not theirs when the proposal for a settlement was made. A promise to sign a composition deed already exe- cuted by the debtor and some of the creditors, will not bind the party making the promise where the promise is not made to a creditor who subsequently signed; nor will a refusal to sign until a certain other creditor signs, or even a promise to sign the deed if his signature is obtained, bind the creditor even though the sig- nature mentioned is obtained, unless it be shown that he author- *Anstey V. Harden, 1 Bos. & Pul. 124; Wood v. Roberts, 2 Starkie, 417. 5 Fellows V. Stevens, 24 Wend. 294. In this case the agreement was not to be binding until creditors to the amount of two thirds of his business debts accepted the proposal. 8 Tatiock V. Smith, 6 Bing. 339, 3 M. & P. 676. 384 COMPOSITION AT COMMON LAW [§ 170 ized the debtor or whoever is taking the instrument around, to represent to the other creditor that if he signs it he (the first creditor) will also sign.' If a debtor and the trustee dispute a creditor's demand and refuse to allow him to come in under the .deed, he may sue the debtor for the original debt, although he at- tended the creditors' meeting, and concurred in a resolution for the execution of a release to the debtor on his executing a deed of assignment of his property.* Sec. 170. Parties — Necessary parties — Debtor — Stranger in debtor's behalf. — Unlike other contracts a composition agreement must have at least three parties to make it binding; a debtor, or some one in his behalf, and at least two creditors. To constitute a valid composition something of value must either pass to the creditors in prcesenti, or agreed to be paid, in satisfaction of their respective demands, and to insure its retention or recovery, there must be mutuality of remedies. Hence, when dealing direct with his creditors, the debtor is a necessary party. An agreement which binds only the creditors cannot be enforced by the debtor, unless he in some way becomes a party to it and creates a mutuality of remedies. Thus, the agreement — "We the undersigned," or "We the undersigned creditors," agree to accept fifty per cent, in full of our claims, without more, is unenforceable ^ by the debtor or against him, although the creditors as between themselves where there is a specific fund in which they are to share, may hold each other to the agreement.' It is competent for a third person in behalf of the debtor to ef- fect a composition agreement with the creditors.' And the pay- 7 Boyd V. Hind, 1 H. & N. 938, 3 Jur., N. S. 566, 26 L. J., Exeh. 164. 8 Garrard v. Woolner, 1 M. & S. 327, 8 Bing. 258. 1 Webb V. Stewart, 59 Me. 356 ; Gilford Bank v. Ware, 95 Me. 888, 50 Atl. 24. 2 See Henry v. Patterson, 57 Pa. St. 346, where this question Is left open. 3 Williams v. Mostyn, 33 L. J., Ch. 54, 12 W. R. 69, 9 L. T., N. S. 476 ; Emmet v. Dewhirst, 3 Mac. & G. 587, 15 Jur. 1115, 21 L. J. Ch. 407; Cobb V. Fogg, 166 Mass. 466, 44 N. B. 534. § 171] PEEFEBBING A OBEDITOB 385 ment of the composition-money and its acceptance by a creditor discharges the debtor from the entire demand.* In such cases the debtor is not a party to the agreement. The debt of each creditor who joined in the agreement is discharged whether the stranger effected the composition at the request of the debtor or did so as a mere volunteer; unless the debtor repudiates the pay- ment. Whether the third party can recover from the debtor the amount paid by him depends upon whether he effected the com- position at the request of the debtor, or was a mere volunteer. If the latter, he cannot recover over if the payment was intended as a gratuity ; and, if he expected to be reimbursed, he cannot re- cover without proving a subsequent promise by the debtor to re- pay him. Whether pleading the payment as a defense in an ac- tion on the original demand, is sufficient to raise an implied prom- ise on the part of the debtor to reimburse the stranger, is a ques- tion not free from doubt." Sec. 171. Same subject — Creditors — Preferring a creditor — Failure to come in as a party within the time limited — Relief in equity. — The consideration necessary to support a composition being the mutual promises of the creditors (a part payment of the debt without more is not enough), there of necessity must be two or more creditors mutually agreeing each with the other and with the debtor. One creditor cannot make a composition.^ If one creditor negotiates independently with his debtor and compound his demand on his own terms, the agreement must stand upon the rules governing an accord and satisfaction." With * Babcock v. DUI, 43 Barb. 577. B See upon this question Sees. 50-53 Accord and Satisfaction. 1 Minneapolis Bank v. Steele, 58 Minn. 126, 59 N. W. 959. (In this case the question whether the agreement was a composition or an agreement between the debtor and one creditor was left to the jury); Pierson v. Mc- CahUl, 21 Cal. 122; Continental Bank v. McGeoeh, 92 Wis. 286, 66 N. W. 606; Reay v. Richardson, 2 C, M. & B. 422, 1 Gale, 219, 59 Tyr. 931. 2 Bliss V. Stewart, 65 N. T. 444. Hunt Acc.& S.— 25 386 COMPOSITION AT COMMON LAW [§ 171 this limitation, any number of creditors may enter into an agree- ment with their debtor and with each other to accept a compo- sition of their demands and release the debtor, and it will be binding upon those who enter into the agreement." Where the evidence is conflicting, the question whether the agreement is between creditors and their debtor so as to make it a composition, or is between the debtor and one creditor alone, is one of fact for the court or jury.* A debtor has a common law right to pre- fer one creditor to another, and a composition being a convention- al arrangement, he may insert a stipulation that only unsecured creditors may come in," or any particular creditors, as business creditors,* or those signing the deed,^ or those signing within a specified time,* and only those designated can take benefits im- der the composition agreement.* 8 Hurchle v. Mclntire, 40 Minn. 331, 42 N. W. 348 ; Johnson v. Parker, 34 Wis. 576; Continental Bank v. McGeocli, 92 Wis. 286, 66 N. W. 606; Crawford v. Krueger, 201 Pa. St. 348, 50 Atl. 931; Lard v. Campbell, 92 Pa. St. 4T0; Devon v. Ham, 17 Ind. 472; Eenard v. Fuller, 4 Bosw. 107; Van Bokkelen v. Taylor, 62 N. T. 105 ; Beard v. Boylan, 59 Conn. 181, 22 Atl. 152; Pierson v. McCahill, 21 Cal. 122; Schroeder v. Pissis, 128 Cal. 209, 60 Pac. 758; Gilfillan v. Farrington, 12 111. App. 101; Goodrich v. Lincoln, 93 111. 359; Condict v. Flower, 106 111. 105; Hill v. Werthelmer, 150 Mo. 483, 51 S. W. 702; Cheveront v. Textor, 53 Md. 295; Chittenden v. Woodbury, 52 Vt. 562; Norman v. Thompson, 4 Exch. 755, 19 L. J., Exch. 193; Field V. Donoughmore, 1 Dr. & War. 227; Good v. Cheesman, 2 B. & A. 324; Constantein v. Blache, 1 Cox, 287 ; Reay v. Richardson, 2 C, M. & R. 422. 4 First Nat. Bank v. Steele, 58 Minn. 126, 59 N. W. 959. Zeobisch v. Van Minden, 120 N. T. 406, 24 N. B. 795, 31 N. Y. St. 499 ; Phoenix Bank v. Sullivan, 9 Pick. 410 ; Battles v. Forbes, 2 Mete. 93 ; Carey V. Barrett, 4 C. P. D. 379; Field v. Donoughmore, 1 Dr. & War. 227. Fellows V. Stevens, 24 Wend. 294. 7 Rayworth v. Parker, 2 Kay & J. 163, 25 L. J., Ch. 117. 8 Williams v. Mostyn, 33 L. J., Ch. 54, 12 W. R. 69, 9 L. T., N. S. 476 ; Gould V. Robertson, 4 De G. & S. 509. B Phoenix Bank v. Sullivan, 9 Pick. 410 ; Battles v. Forbes, 2 Mete. 93, 38 Mass. 239; Field v. Donoughmore, 1 Dr. & War. 227. If the retention of security by a creditor is Inconsistent with the terms of the composition § 171] PKEFEERING A OEEDITOB 387 But where a. creditor is prevented by accident from signing a composition deed within the time specified and becoming a party thereto, equity will afford him relief, but not when he delayed coming in and set up title adversely to the deed.*" Where a trustee under a composition deed had the power to extend the time in which creditors may join, and a creditor was absent from the country, it was held that upon application within the time for which the trustee might have extended the time, the creditor was entitled to come in, as, under the circumstances, it was the duty of the trustee to enlarge the time and allow the creditor to come in.** If a creditor acts under the agreement, but is igno- rant of the provision that he must sign within a specified time, he will be allowed to come in,** even though the debtor is dead and cannot derive any benefits from its execution. But equity will not aid a creditor who actually refused to come in, and who did not actually retract such refusal within the time;*' nor will eq- uity aid a creditor, who, during the time he may come in, merely stands by and takes no part in the matter.** A creditor will not be afterwards allowed to come in as a party on the ground of mistake and misapprehension, where he stood out relying upon his judgment as being paramount to the composition deed, where the judgment afterwards turned out to be invalid.*' It has been held, where a creditor successfully contested the validity of the composition deed, that he was not afterwards precluded from com- deed, the creditor cannot come In without surrendering the security: Bush V. Shipman, 14 Sim. 239. 10 Watson v. Knight, 19 Beav. 369. 11 Bay worth v. Parker, 2 Kay & J. 163, 25 L. J., Ch. 117. 12 In re Barber, 40 L. J. Ch. 144, 18 W. R. 1131. i» Johnson v. Kershaw, 1 De G. & S. 260, 11 Jur. 553, 795. Taking steps Inconsistent with a deed bars a creditor from coming in : Field v. Donough- more, 1 Dr. & War. 227. 14 BIron V. Mount, 24 Beav. 642, 4 Jur., N. S. 43, 27 L. J., Ch. 191. 15 Brandling v. Plummer, 27 L. J., Ch. 188; In re Meredith, 29 Ch. D. 745 (Lien). 388 COMPOSITION AT COMMON LAW [§ 172 ing in under the deed, and taking the benefits under it." An agreement by a third party to guarantee a composition to all cred- itors who sign before a certain day, is a contract only with those who actually sign the agreement, and will not be enforced in favor of a creditor, who, through mistake and misapprehension of his rights, failed to sign.^^ Where by a voluntary covenant, a third party is to raise by mortgage the money sufficient to dis- charge the composition money due those who should execute the agreement within a specified time; time is of the essence of the contract, and those who have failed to execute the agreement with- in the time limited will not be relleved.^^' Sec. 172. Same subject — Stipulation requiring certain creditors to join — Oral evidence inadmissible to vary stipulation — Effect of failure to sign — Surety not bound if all do not sign. — Where it is provided in a composition agreement that all the creditors are to sign it, or all unsecured creditors," or all creditors having demands exceeding one hundred dollars,^ and like cases, ^ it is not binding upon any creditor signing, unless all of the creditors, or all of the class designated, as the case may be, join in the agreement.' If 18 Latter v. White, 5 L. R., H. L. Cas. 578, L. J., Q. B. 342, afE'm'g 6 U K., Q. B. 474, 40 L. J., Q. B. 162, 25 L. T., N. S. 158, 19 W. R. 1149 ; and reversing 5 L. R., Q. B. 622, 40 L. J., Q. B. 9, 23 L. T., N. S. 242, 19 W. R. 63. 17 Emmet v. Dewhlrst, 3 Mae. & G. 587, 15 Jur. 1115, 21 L. J., Ch. 497. 18 Williams v. Mostyn, 33 L. J. Ch. 54, 12 W. R. 69, 9 L. T., N. S. 476. « Walker v. Mayo, 143 Mass. 42, 8 N. B. 873. iRaudenbush v. Bushopg, 43 Leg. Int. (Pa.) 366. -2Artman v. Truby, 130 Pa. St. 619, 18 Atl. 1065 (all creditors were to sign except certain lien holders. It was held that other lien holders must sign). sTrunkey v. Crosby, 33 Minn. 464, 23 N. W. 846; Abel v. AUemannia Bank, 79 Minn. 419, 82 N. W. 680; Turner v. Comer, 72 Mass. 530; Day v. Jones, 150 Mass. 231, 22 N. E. 898; Bissenger v. Guiterman, 6 Heisk. 277; Magee v. Kast, 49 Cal. 141; Falconbury v. Kendall, 76 Ind. 260; Evans v. Gallantine, 57 Ind. 367 ; Paulin v. Kaigh, 27 N. J. L. 503 ; Greer v. Shiver, 53 Pa. St. 259; LairB v. Campbell, 100 Pa. St. 159; Kinsing v. Bartholew', 1 § 172] STIPULATION BEQUmiNG OBBTAIN 0BEDITOE8 TO JOIN 389 such an agreement is set up as a defense in an action on the orig- inal claim, it is necessary to allege and prove that all the creditors have signed,* or have come in and acted under it.° If the con- dition requires all creditors to sign before it is binding, all cred- itors whether secured or unsecured,' or whether their claims are large or small, must sign. But it has been held that the creditors could not take advantage of the failure to join in the agreement, of a creditor whose debt was only two dollars and fifty cents.' So, in an action to recover a fraudulent preference, where ninety eight per cent, in value signed, the agreement was not allowed to be avoided on the ground that the remaining creditors had not joined.* The provision that all must sign is not complied with by settling with those not joining, on the best terms possible,* or by paying them in full.^° If a composition deed contains a provision that certain demands are to be paid in full, and also a proviso that it shall be void if all creditors having claims over a certain amount should not exe- cute the deed, the agreement is not void by reason of a failure to sign the deed, by the creditors who are to be paid in full, though their claims respectively exceed the . amount specified.^^ Where Dill. 155; Spooner v. Whiston, 8 Moore, 850; Chase v. BaUey, 49 Vt. 71; Ctoblelgh V. Pierce, 32 Vt 788; Reay v. Richardson, 2 C, M. & R. 422, 1 Gale, 219, 4 L. J., Ex. 236, 5 Tyr. 931 ; Cooling v. Noyes, 6 T. R. 263 ; Brown V. Dakeyne, 11 Jur. 39 ; Doughty v. Savage, 28 Conn. 146 ; Durgin v. Ireland, 14 N. Y. 322. « Reay v. Richardson, 2 C, M. & R. 422, 1 Gale, 219, 5 Tyr. 931. B In Mathews v. Taylor, 2 M. & G. 667, 3 Scott, N. R. 52, 5 Jur. 321, it was heia not necessary to aver the following proviso : "The agreement was to be void, unless the creditors, whose names and descriptions were stated on the other side of the agreement, should concur In the arrangement." 6 Cobleigh v. Pierce, 32 Vt. 788; Rinsing v. Bartholew, 1 Dill, 155. ^ Fahey v. Clarke, 80 Ky. 613. 8 Bean v. Brookmore, 2 Dill. (U. S.) 108. » Spooner v. Whiston, 8 Moore, 850 ; Turner v. Comer, 72 Mass. 530. 10 See M. A. Seed v. Wunderlich, 69 Minn. 288, 72 N. W. 122. 11 Wells V. Greenhill, 1 D. & R. 493, 5 B. & A. 869. 390 COMPOSITION AT COMMON LAW [§ 172 the composition agreement contained a proviso that if any of the creditors should refuse to sign or otherwise consent to the deed within six months, it was held that mere non-execution by some within the time did not avoid the deed.'" A refusal to sign or consent to the agreement must be shown. If it is stated in a composition deed that it shall not be binding on any of the cred- itors signing it, unless all the creditors of the debtor sign it, oral evidence is not admissible to show that a certain class of creditors were not to sign it.'* Where it is not stated in terms in a com- position deed, or necessarily implied therefrom, that all the cred- itors must join in the agreement, it will be binding on all who assent to it.'* In such cases parol evidence is not admissible to show that it was in fact agreed that all the creditors should join before it would be binding.'" A third party standing in the rela- tion of a surety, is not bound unless the required number join in the agreement.'" Thus, where it was agreed in the presence of a surety for the payment of the composition money, that the agree- ment should be void unless all the creditors executed it and sub- sequently the composition deed was signed by the creditors pres- 12 Holmes v. Love, 5 D. & R. 56, 3 B. & C. 242, Russ. & M. 38. 18 Acker v. Phoenix, 4 Paige, 305. 1* Murchie v. Mclntire, 40 Minn. 331, 42 N. W. 348 ; Johnson v. Parker, 34 Wis. 596; Van B'okkelen v. Taylor, 62 N. T. 108; Grosser v. Radford, 1 De G., J. & S. 858, 66 Eng. Ch. 454. Where the agreement specified "We the midersigned creditors of William Laird," etc., it was held that the agreement ■was binding although all the creditors were not included, and that it should be specified in express terms, if it was not to be binding unless all the cred- itors came in: Laird v. Campbell, 92 Pa. 470. Where all are not required to sign, the debtor may settle with those not required to sign without re- leasing those signing: Renard v. TuUer, 4 Bosw. 107. 15 Van Bakkelen v. Taylor, 62 N. Y. 105, 9 N. Y. Super. Ct 158; Beard v. Boylan, 59 Conn. 181, 22 Ati. 152 ; Strickland v, Harger, 81 N. Y. 623, afTing 16 Hun, 465 (see 16 Hun, for opinion). 16 Emmet v. Dewhlrst, 3 Mac. & G. 587, 15 Jur. 1115, 21 L. J., Ch. 497; Bnderby v. Corder, 2 C. & P. 203, 12 E. C. L. 520 ; Dougherty v. Savage, 28 Conn. 146 ; Falconbury v. Kendall, 76 Ind. 260 ; Williams v. Mostyn, 33 L. J., Ch. 64, 9 L. T. R. N. S. 476, 12 W. R. 69. § 173] TIME WHEN CKEDITOBS MAT COMB IN 391 ent, and delivered to one of them who was to get it executed by the rest, it was held to be nothing more than a delivery in escrow, and not having been executed by all it was not binding on the surety.^^ Sec. 173. Same subject — Time when creditors may come in— Objection that some have not joined available to whom — Compel- ling lagging creditors to elect to come in or renounce. — ^Where the time in which the creditors may join in a composition deed is limited by the deed, a creditor who does not join in the agree- ment within the time, as we have seen, cannot take any benefits thereunder,^ unless, for good cause shown, a court of equity re- lieves him from his default.^ Such a limitation is valid,' but a clause in a. composition deed, providing that creditors who do not join, or who do any thing contrary to the deed, shall forfeit their debts is void.* The objection that other creditors have not signed within the time limited by the agreement, is available to any creditor who has signed." So, it seems that a surety for the payment of the composition money may object,* if for any reason his burden or risk might be increased. Where no time is limited for creditors to come in and become parties to the agreement, they may come in at any time before the fund provided for payment is distributed. If a creditor" comes in after a partial payment has been made under the agree- ment, or a dividend has been distributed under a deed of assign- ment,' he cannot disturb the payment, but must take his pro rata IT Johnson v. Barker, 4 B. & A. 440. 1 Phoenix Bank v. Sullivan, 9 Pick. 410. 2 See In re Baker, L. K. 10 Eq. 554, 40 L. J. Ch. 144. 8 Raworth v. Parker, 2 Kay & J. 163, 25 L. J., Ch. 117; Battles v. Fobes, 2 Mete. 93 (21 Pick. 239) ; Magee v. Kast, 49 Cal. 141 ; Evans v. Gallantine, 57 Ind. 367 ; Johnson v. Kershaw, 1 De G. & S. 260, 11 Jur. 553, 795. * Thompson v. Gunthorp, 11 L. T. R. N. S. 708. B Williams v. Mostyn, 33 L. J., Ch. 54, 12 W. E. 69, 9 L. T., N. S. 476. 8 Faleonbury v. Kendall, 76 Ind. 260. 7 Field v. Cook, 23 Beav. 600 ; Broadbent v. Thornton, 4 De G. & Em. 65. 392 ■ COMPOSITION AT COMMON LAW [§ 174 of the residue of the fund. Even where the time for joining was limited, a creditor who forbore to sue, was, after fifteen years, allowed to come in and enforce the trust, where the fund provided for payment was still in the hands of the trustee.' But where the debtor can derive no benefit from the creditor joining, as when he delays moving in the matter until long after the debtor's death, he will not be permitted to join in the agreement.* If no time be specified within which the creditors must join in a composition agreement, those who have joined may bring a suit to compel the remaining creditors to come in or renounce, or what is the same thing, be debarred from participating in the composition-fund.^" Sec. 174. Same subject — Construction of stipulation as to who shall sign — Waiver of condition. — ^Where the agreement is in con- sideration of other creditors accepting a like percentage; "other creditors" means all other creditors.^ So if one creditor agrees to accept a composition if "the creditors" of the debtor will re- lease their claim,^ or accept their pro rata^ of a certain fund in full satisfaction of their claims, all the creditors must become a party to the arrangement. The words "The creditors" cannot by any effort at construction be interpreted to mean a part or practi- cally anything less than the whole.* So, where the object of the composition cannot be accomplished or could be defeated if all the creditors do not join, and it is not expressly restricted to any class of creditors, all the creditors must become parties to the 8 -See Nicholson v. Tutin, 2 Kay & J. 18, 1 Jur., N. S. 1201. 8 Lane v. Husband, 9 Jur. 1001, 14 Sim. 656, 37 Eng. Ch. 656 (here was a delay of seven years). 10 Dunch V. Kent, 1 Vern. 260. 1 M. A. Seed v. Wunderlich, 69 Minn. 288, 72 N. W. 122. 2 M. B. Church T. Robbing, 81 Pa. St. 361, 592 ; Falconbury v. Kendall, 76 Ind. 260. 3 Chase v. Bailey, 49 Vt. 71. * Abel V. Allemannia Bank, 79 Minn. 419, 82 N. W. 680. § 174] CONSTBUCTION OF STIPULATION 393 arrangement to make it binding. Thus, where the purpose is to eifect a reorganization of an insolvent bank, an agreement stating "We, the undersigned depositors and creditors" agree to accept in payment, certain certificates of deposit (describing them), it was held that it was to be a joint action of all the creditors, otherwise it would leave a number of creditors to obtain preference as to terms of settlement, or sue for their whole claim." But in absence of an express stipulation that all the creditors shall join, or it can- not be clearly inferred from the object of the agreement and its terms, it will be construed to be binding on all who join in the agreement, without the concurrence of the remaining creditors. The terms used in a composition agreement will be given their true meaning. Thus, "We, the subscribers, creditors," etc.,' "We who have hereto subscribed our names," ' the undersigned "their several creditors," * and similar expressions,' are construed as meaning that it is an agreement between all who sign, or other- wise join in the agreement, and it is limited to those creditors. A creditor or the remaining creditors who are parties may waive the condition that all of the creditors, or all of a certain class, must join as parties.^" But an acceptance of payment under the agreement, without more, is not a waiver,^^ particularly, if some of the creditors did not join and were paid in full.'^ 6 Abel V. AUemannia Bank, 79 Minn. 419, 82 N. W. 680. 6 Lambert v. Shetler, 71 Iowa, 463, 32 N. W. 424; Carey v. Barrett, 4 C. P. D. 379. I Continental Bank v. Koebler, 4 N. T. St. 482. 8 Strickland v. Harger, 16 Hun, 465. » Laird v. Campbell, 92 Pa. 470. loKinsing v. Barholew, 1 Dill. (U: S.) 155; Condict v. Flower, 106 111. 105 ; Dauchy v. Goodrich, 20 Vt. 127. II Greer v. Shriver, 53 Pa. St. 259. 12 See M. A. Seed v. Wunderlich, 69 Minn. 288, 72 N. W. 122. 394 COMPOSITION AT COMMON LAW [§ I'S Sec. 175. Same subject — Partners as debtors, as creditors- Joint and several debtors — ^Joint creditors. — Partners, being agreed, may join in a composition deed as a creditor or as a debtor, to the same extent as an individual.^ The partnership liability may be severed by such an agreement ; " each to pay a moiety, or one released and the other remain bound." One member of a firm may sign in the firm name a composition deed and release a debt due the firm and bind all the partners, although the deed is under seal.* And one partner may authorize a third person by an in- strument under seal to discharge a debt due the firm." If a mem- ber of a firm executes a composition deed in his own name it will not release a debt due the firm if the partner has an individual claim against the debtor." In absence of authority we are in- clined to the opinion that if the signing partner held no individual claim, such signing would release the partnership debt. One part- ner may, in his own name, make a composition with the creditors of the firm, by paying a pro rata in cash, or by giving his individu- 1 Bowen v. Marquand, 17 Johns. 58. 2 Le Page v. McCrea, 1 Wend. 164, 17 Am. Dec. 469. 8 Hosack V. Rogers, 25 Wend. 313. * Bowen v. Marquand, 17 Johns. 58 ; Beach v. Allendorf , 1 Hilt. 41 ; Har- heck V. Pupin, 123 N. Y. 115, 25 N. E. 311, 33 N. Y. St. 220 (release under the statute considered) ; Smith v. Stone, 4 Gill & J. 310; Halsey v. Whitney, 4 Mason (U. S.) 206; Allen v. Cheever, 61 N. H. 32; Teede v. Johnson, 11 Ex. 840. When one partner signed the deed of composition In the firm name and set his seal thereto, it was held that only the one signing could maintain an action of the covenant to recover an installment due on the firm debt, the other partner not being a party to the deed could not Join: Metcalf v. By- <;roft, 6 M. & S. 75. It has been held in an action for a partnership debt, that a covenant not to sue entered into by only one of the partners cannot be set up as a release : Walmesley v. Cooper, 3 P. & D. 149, 11 A. & E. 216. In Hawkshaw v. Parkins, (1818) 2 Swan. 540, It was doubted that a deed amounting to a mere acceptance of terms of a composition, executed by one partner, would be binding on the rest, although a release so executed binds all. s Wells V. Evans, 20 Wend. 251. 6 Bain v. Cooper, 9 M. & W. 701, 11 L. J. Ex. 325. § 175] PAKTNBES AS DEBTOBSj AS 0BBDITOB8 395 al notes or other thing agreed upon, in full satisfaction of the debts owing by the firm, and such agreement, at common law, will release all the partners.' The paying partner may recover of the other members of the firm their proportion of the amount paid, for the reason that the law permits a partner to appropriate his individual property, as well as that of the firm, in payment of partnership debts.' Under the statute in many states, one partner (or other joint debtor) may compound his individual liability for the firm debts, and the creditors may recover from the remaining partners, their equitable portion of the debt.° But in absence of statutory authority one partner cannot compound or otherwise ob- tain his release from his liability for the whole debt, or for the part he would equitably be bound to pay as between himself and his co-partner, and leave the remaining partner bound.^" Payment by one partner of a part of the partnership debt, in consideration pf a covenant on the part of the creditors never to sue him for the residue does not constitute a composition, for the reason that a composition like an accord and satisfaction discharges the whole of the debts. ^^ A composition of firm debts will not release the partners from their individual debts, even though the individual debt was originally the firm debt.^'' Nor will a partner be re- leased from a debt he owes the firm.** A partner who has retired T See Sec. 62 Accord and Satisfaction. 8 See Baxter v. Bell, 86 N. Y. 195 ; Klrby v. Schoonmaker, 3 Barb. Ch. 46 ; co-partners may assign their individual property, as well as their partner- ' ship property, to pay the joint debts of the firm, thereby giving the creditors of the firm a preference over the separate creditors, s. p. Cook v. Reinds- kopf, 105 N. Y. 482. » See Sec. 38 Accord and Satisfaction. 10 In Ex parte Slater, 6 Ves. 146, it is held that a composition with one partner released both. See, also, Clement v. Brush, 3 Johns. Cas. 180. 11 See Sec. 9, 39 Accord and Satisfaction. See, also, Bates on Part. Sec. 385. 12 Clement v. Brush, 3 Johns. Cas. 180. 13 MacLean v. Stewart, Judicial Committee P. 0. Rev'g 25 Can. Sup. Ct. 225. 396 COMPOSITION AT COMMON LAW [§ 1^6 cannot upon a composition of the firm debts for which he is liable, join as a party creditor for the amount agreed to be paid him upon retiring, and a composition note given him for such amount will be void.^* But, if, after retiring, the successor of the old firm becomes involved and compounds its debts with its creditors, the old member is a proper party to the composition agreement, as a creditor, for any sum due him from the new firm for the pur- chase price of his interest in the old firm's assets.^" During the continuance of a co-partnership one partner, in the name of the firm and without the consent of his co-partner, may enter into a composition agreement with the firm creditors, and for that purpose may make an assignment of all the partnership effects or so much thereof as may be necessary, direct to one or more of its creditors, although the effect of such an agreement is to give a preference to those creditors with whom the agreement is made.^* But in order to transfer firm real estate, all the partners must either join in the deed of assignment,^^ or consent to it.^'' The distinction between a deed of assignment for the benefit of creditor, made by one partner without the consent of the other, and a composition deed executed in like manner, which includes or is accompanied by a deed of assignment, though apparently technical, is well founded. A general assignment in insolvency amounts to a dissolution of the firm, and cannot be said to be within the scope of the partnership agency; while a composition deed which includes a deed of assignment to convey the considera- 1* Stephen V. Gavaza, 16 Nova Scotia. 514. IB Baxter v. Bell, 86 N. Y. 195. 16 Mabbett v. White, 12 N. Y. 442. See Egberts v. Wood, 3 Paige Ch. 517, I/. Ed. and extensive note, and also Havens v. Hassey, 5 Paige Oh. 30 L. Ed. and note. 17 See Anderson v. Tompkins, 1 Btock. 463; Wilson v. Soper, 13 B. Mon. 411. 18 See Rumsey v. McCulloch, 54 Wis. 565, where it is held that with the consent of his partner, one partner may by an assignment under seal transfer the real estate of the firm. § 175] PAKTNEBS AS DBBTOB8, AS OBBDITOBS 897 tion, is clearly within the scope of the authority of one partner to settle the partnership debts. A composition, deed does not necessarily dissolve the partnership, and the fact that one partner in paying or otherwise discharging the partnership debts may exhaust all the partnership assets so that the business cannot go on, is merely incidental and does not affect the principle; nor will the fact that the partner compounding gives a preference, by settling with a part of the creditors only, affect the rule, for a debtor may lawfully prefer one creditor over another.^" The agency of a partner to collect the assets and liquidate and settle the debts of the firm continues after the death of a member,^" as to all debts created before the death of his copartner, and this power to settle and wind up the partnership affairs necessarily includes the power to enter into a composition agreement as debtor ^^ or as a creditor. If the executor of the deceased partner joins with the surviving partner in the agreement, he is bound personal- ly and not in a representative capacity, although he signs the agreement as executor.'"' The right of a joint creditor and a creditor jointly and severally liable, to join in a composition agree- ment and the effect of a satisfaction by one upon the rights of the 10 The question whether one partner, without the consent of his co-partner, can make an assignment of all the property of the firm to a trustee to pay the partnership debts, Is not by any means settled. Some authorities hold that such power exists. Anderson v. Tompkins, 1 Brock. 456. See 1 Pars. Cont. 178, (8th Ed.), and extensive note for cases vro and con. Others are against the power. Stein v. La Dow, 13 Minn. -412; Wells v. March, 30 N. Y. 344 ; Hunter v. Waynick, 67 Iowa, 555 ; Havens v. Hassey, 5 Paige Ch. 30. Other authorities, while recognizing the rule that the scope of the part- nership agency does not include such power, yet recognize as binding an assignment free from fraud, made while the other partner is absent from the County and cannot be consulted, as where he absconds or abandons the business and moves away. See Rumery v. McCulloch, 54 Wis. 565, for a review of the cases. 20 See Egberts v. Wood, 3 Paige Ch. 517. 21 See Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. 22 Brown v. Farnham, 55 Minn. 27, 66 N. W. 352. 398 COMPOSITION AT COMMON LAW [§ 176 remaining co-debtor, is the same as in cases of an accord and satisfaction."* Sec. 176. Same subject — Negotiating composition through agent or attorney — Guardians — Personal representatives. — ^A debt- or may authorize his agent to negotiate a composition agreement, and when made according to instructions he will be bound by it.* Where the agreement is not required to be under seal, an agent may bind his principal, even when the instrument is under seal and the agent is not empowered to act by a sealed instrument." A principal ratifies an unauthorized composition by his agent by accepting from him the proceeds received thereon with knowledge of the agreement.' A principal is bound by the statements and acts of his agent in negotiating a composition agreement, and any false representations by an agent, of facts of which the debtor was aware, although innocently made by the agent and without the knowledge of the debtor;* or any false representations inten- ' tionally made, with or without the knowledge of the debtor, upon which the other parties relied; or any secret preference given by the agent to induce a creditor to join in the composition," will avoid the agreement. An unauthorized representation by an agent to a creditor, that the agreement is not to be binding un- less all the creditors sign, renders the composition void as to the creditor who signed relying upon that statement.' Agents are held to a strict fidelity, and if an agent employed to effect a com- position at fifty cents on the dollar, purchases notes of the debtor 28 See See. 9 Accord and Satisfaction. 1 Crawford v. Kreeger, 201 Pa. St. 348, 50 Atl. 931. 2 Hawley v. Beverly, 6 Scott, N. R. 837, 6 M. & G. 221, 46 E. O. I*. 221. 8 Warshawsky v. Bonewur, 114 N. Y. S. 665. * Elfelt V. Snow, 2 Sawy. (U. S.) 94, 6 Nat. Bank'y Reg. 57 ; Hef ter v. Cahn, 73 111. 296. B Bank of Commerce v. Hoeber, 88 Mo. 37, 57 Am. Rep. 359. 6 Laird v. Campbell, 100 Pa. St 159. § 176] NEGOTIATING COMPOSITION THBOUGH AGENT 399 at a discount and sells them after their maturity, the purchaser will not be permitted to recover any more than fifty per cent, upon the amount of such notes.' If the agent sells the notes before maturity he is liable in damages to the extent of the amount which his principal is compelled to pay over the fifty per cent. In ne- gotiating a composition agreement the agent of the debtor can- not also be the agent of a creditor ; ' although after the agreement is made a creditor may authorize the agent who negotiated the agreement for the debtor, to receive the money due thereon. A creditor may be represented by an agent in effecting a composi- tion with his debtor.' But the agent must keep within the limits of his authority. An agent authorized by a creditor to join in a voluntary composition upon certain terms, is not authorized, upon the arrangement falling through, to enter into a statutory composition.^* It has been held that an agent authorized to ne- gotiate a composition may bind his principal to answer for liqui- dated damages, or a penalty, in case of a breach. ^^ An agent or attorney has no authority to waive a default in the payment of the composition money, without the consent of the principal, but if the creditor accepts the money from the agent with knowledge of the default, he ratifies the act of the agent.^" The law of agency governs the conduct of officers of corporations, and the power to compound debts due to the corporation must be derived from the articles of incorporation,^' by-laws, or resolution of the board of directors. The authority of a cashier or other active manager of a bank, to join in a composition agreement, where it is shown that conlpositions and compromises were of common occurrence T Reed V. Warner, 5 Paige Ch. 650. 8 Hinckley v. Arey, 27 Me. 362. » Gardner v. Lewis, 7 Gill (Md.) 377. 10 Abel V. AUemannia Bank, 79 Minn. 419, 82 N. W. 680. 11 Hill V. Wertheimer, 150 Mo. 483, 51 S. W. 702. 12 Penniman v. Elliott, 27 Barb. 315. 18 In re Melbourn Locomotive Works, 21 Vict. L. E. 442, 400 COMPOSITION AT COMMON LAW [§ 1^6 in the bank, will be presumed until the contrary appears.^* A corporation, like an individual, may ratify the acts of an officer by accepting and attempting to collect composition-notes received by its president or other officer.^' At common law, executors and administrators have power to compromise or compound debts due the estate, and, in absence of collusion or fraud, an acceptance of composition-money by an executor or administrator will bind the estate, but they do not have power to bind the estate by a composition agreement giving a long time of payment.^* So personal representatives have power to compound debts owing by the decedent and may as such enter into a composition with all of the creditors of the decedent,^' but as the law gives each creditor a ratable proportion of the estate, a personal representative cannot enter into a composition with only a few of the creditors which would give those few more than their share of the estate. An administrator or an executor, as a general rule, has no general power to make any new contract that will bind the estate and cannot enter into a composition agree- ment that would render the estate liable in damages,^* and any composition made by them must be no more than an agreement merdy to pay to each creditor a portion of his debt out of the assets of the estate.^" A devisee may enter into a composition with a creditor of his testator.^" The authority to settle partner- ship affairs, after the dissolution of the firm by the death of one 14 Chemical Nat. Bank v. Kohner, 85 N. Y. 189. 15 Continental Blank v. Koehler, 4 N. T. St. 482. 16 Matter of Loper, 2 Redf. Surr. 545. 17 Brady v. SheU, 1 Campb. 147. 18 See Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. 19 In Brady v. SlieU, 1 Campb. 147, it appears that there was only enough property for a ratable distribution to the creditors, a composition agreement whereby the executor assigned all the assets that came into his hands for the benefit of the creditors was held binding on the creditors. 20 Only v. Walker, 3 Atk. 407, 26 Eng. Repr. 1035. § 177] PEEFOBMANOE 401 partner, is vested in the surviving partner, and an executor of a deceased partner cannot join with the surviving partner in a com- position agreement with the firm creditors, so as to bind the de- ceased partner's estate. If he joins in the agreement he binds himself personally."^ Sec. 177. Performance — Agreement must be strictly complied with. — ^Where by a composition agreement the release of the debt- or is conditional upon performance, to enable the debtor to avail himself of it, he must pay or tender the composition money,^ or deliver the notes, if notes are to be taken,'' or other thing (as when he is to make an assignment of certain property to a trus- tee), punctually at the time agreed,*" or the creditor will be remit- ted to his original rights.* The very thing agreed upon must be delivered, and the death of a proposed surety before the execution of the note agreed to be delivered, avoids the agreement for a composition." If security by way of an insurance policy for a certain amount is to be given, a policy for that amount must be taken out, although it exceeds the sum agreed to be paid.' An 21 Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. iZoebisch v. Von Mlnden, 120 N. Y. 412, 24 N. E. 795, 31 N. Y. St. 499; HacUey Falls Bank v. May, 99 N. T. 671, 29 Hun, 404 ; Penniman v. BlUott, 27 Barb. 315; Dalson t. Arnold, 10 How. Pr. 528; Melhop v. Tathwell, 74 Iowa, 571, 38 N. W. 420; Brown v. Famham, 55 Minn. 27, 56 N.* W. 352; Harrison v. Gamble, 69 Mich. 96, 36 N. W. 682; Flack v. Garland, 8 Md. 188; Clark v. White, 12 Pet. 178. aWarbury v. Wilcox, 2 Hilt. 121; Cranley v. Hillary, 2 Moo. & S. 120; Oughton v. Trotter, 2 Nev. & M. 71, 2 L. J., K. B. 185; Zoebisch v. Von Minden, 120 N. X. 412, 24 N. B. 795. See Boothby v. Sowden, 3 Campb. 175. See Matthewson v. Henderson, 13 U. C. C. P. 96. 8 Where payment was to be made within a specified time after date, but only the month was mentioned, it was held that the time began to run from the last day of the month. Vogt v. Fasola, 41 N. Y. App. Div. 467, 58 N. Y. Supp. 982. * Harrison v. Gamble, 36 N. W. (Mich.) 682. B Danzig v. Gumersell, 27 Fed. 185. • Hyde v. Watts, 12 Mee. & W. 254, 1 Dow. & L. 479. Hunt Acc.& S.— 26 402 COMPOSITION AT COMMON LAW [§ l'^« agreement to deliver notes with approved security is complied with if the security offered is such as ought to be approved.'' If accepted bills are to be given, the debtor is not bound to deliver blank acceptances, but njay draw the bills for the proper amount, accept them and require the creditor to affix his signature as drawer at the time of their delivery.^ Default in the payment of any installment, where the composition money is to be paid in that manner, has the same effect as a default in the payment of the whole." The original debt upon a default is revived even though the payments are secured by the indorsement of an- other,^" or by the bill or note of a third person.^^ If under the agreement, payment of a note and not its delivery is to constitute performance, the note must be paid when due,^'' or promptly upon a demand,^* where they are not drawn payable at a bank or some specific place. It has been held that notice by the debtor that a note will not be paid, will not excuse the creditor from demanding payment at the place specified for payment, and if the debtor has the money there on the day, there is no default notwithstanding the notice.^* If a creditor, upon the maturity of a composition note received as conditional payment, accepts a fresh note upon an ex- press or implied condition that its payment shall constitute satis- faction, and the second note is dishonored, the creditor is remitted to his original course of action.^" Where a note for a part or all I Lower v. Clement, 25 Perm. 63. 8 Ex parte Sullivan, 15 L. T., N. S. 434. » Evans v. Powis, 1 Exch. 601 ; Walker v. Seaborn, 1 Taunt. 526. 10 Leake v. Young, 5 El. & Bl. 955. II Constable v. Andrews, 2 C. & W. 298, 4 Tyrw. 206. 12 Dolsen v. Arnold, 10 How. Pr. 528; Constable v. Andrews, 2 C. & W. 298, 4 Tyrw. 206. 13 Seward v. Palmer, 2 Moore, 274; Salomonson v. Blyth, 3 L. J., Cb. O. S. 169. 1* Green v. McArthur, 34 Barb. 450. 15 NevUl V. Boyle, 2 D., N. S. 749, 11 M. & W. 26, 7 Jur. 132, 12 L. J., Exch. 220. § 177] PEBFOBMANOB 403 of the sum due upon a composition is taken as payment, a failure to pay the note does not revive the debt.^° Whether the note of the debtor, or of a third party, is taken as payment, depends upon the wording of the composition agreement,^' or in absence of an express stipulation, upon the lex contractu}'' If the debtor, in part payment of the composition money, gives to a creditor a note or bill of exchange, on which he is indorser, he is liable as an indorser unless there is an express agreement that he shall not be bound by his indorsement.^" If a note or bill of a third person is to be taken as payment of the composition money and it is indorsed by the debtor merely to transfer, the title, as between him and the creditor, oral evidence is admissible to show the terms of the antecedent agreement, and the indorser cannot be held.^" If the thing to be accepted in satisfaction is to be delivered upon demand, as when the creditors are to apply to the debtor for what is coming to them, there can be no de- fault until after a demand is made.''^ Where a creditor joins in the agreement after the time stipulated for payment is passed, the money is payable instantly on demand, or within a reasonable time.^^ If no time is specified for the payment of the composition 16 Swartz V. Brown, 119 N. T. S. 1024. 17 See Lewis v. Jones, 6 D. & R. 567, 4 B. & C. 506, where the agreement was to accept a certain percentage in full of his demand, on having a joint note from the debtor and his father,, the receipt of the note was held a sat- isfaction of the original debt. See, also. Constable v. Andrews, 2 C. & W. 298, 4 Tyrw. 206, where the agreement was to pay 15 s. to the pound, and certain bills indorsed by defendant were to be considered in part payment of the 15 s., a default in the payment of one of the bills was held not to release the debtor from a liability upon his indorsement. 18 See Pupke v. Churchill, 16 Mo. App. 334, affirmed In 91 Mo. 83, 3 S. W. 829, where it is held that the delivery of composition notes does not constitute payment. 19 Constable v. Andrews, 2 C. & M. 298, 4 Tyr. 206. 20 See First Nat. Bank v. National Biank, 20 Minn. 63. 21 Solomon v. Laverick, 18 L. T. R., N. S. 545. 2 2Bowen v. Holly, 38 Vt. 574; Milllgan v. Salmon, 18 L. T., N. S. 887 See Harvey v. Hunt, 119 Mass. 279. 404 COMPOSITION AT COMMON LAW [§ 178 money, or the delivery of the notes, the law allows a reasonable tinie.^' Where the debtor is to perform forthwith, or within a specified time after the execution of the agreement, time does not commence to run until the agreement is fully executed, and where the law requires the composition deed to be recorded, it has been held that the time for performance ran from the recording of the deed.^* Where the discharge of the debtor is conditional upon performance, the risk of default is upon the debtor and his surety, or any one assisting him. Holding the debtor to a strict compli- ance with a composition agreement, and remitting the creditors upon default to their original cause of action, either under an agreement which provides for a discharge upon performance, or under an express proviso that the original debts shall be revived, is not a proviso in the nature of a penalty,^^ and a court of equity will not restrain a creditor from enforcing immediate payment of the whole sum remaining due.^° The debtor's default gives the creditor nothing in addition to his original claim, nor does it sub- ject the debtor to the payment of anything beyond the debt he justly owes. It remains to be observed that where a new execu- tory agreement is to constitute satisfaction, performance is com- plete upon the execution of the new agreement. Sec. 178. Same subject^Immaterial and unimportant varia- tions — Mistake. — Although a debtor is held to a strict performance, yet immaterial and unimportant variations will be disregarded. As the date of maturity of notes to be given upon a composition is the material thing, notes tendered a month in advance of the day fixed for delivery of the notes, but for the right amount and payable at 28 Hall V. Merrill, 5 Bosw. 266; Bowen v. Holly, 38 Vt 574; Chapman v. Dennlson, 77 Me. 205. 2* In re Sullivan, 36 L. J., B. 1, 15 L. T., N. g. 434. 2 6 Thompson v. Hudson, 4 L. R., H. I/. Cas. 1, 38 h. J., Ch. 431. 26 Sterne v. Beck, 1 De G., J. & S. 595; Leigh v. Berry, 3 Atk. 583; Magee V. Kast, 49 Cal. 141. § 179] TENDER OF PEBFOBMANOB 405 the proper time, was held sufficient.^ Payment by an assignee in- stead of by the assignor, if out of the funds intended, has been held sufficient.^ Where notes agreed to be accepted were not delivered, but the full amount due under the composition was tendered in cash before an action was commenced for a breach of the agreement, the tender was held good.' Here, however, the composition was treated as still subsisting, though broken. Where a default arose through the mistake of the debtor as to the amount due and the creditor accepted the sum paid without objection at the time, a tender of the right amount after a discovery of the mistake and before any change in the situation of the parties had taken place, was held to be suffi- cient.* So, the same rule was applied when the debtor made a mis- take as to the day on which the payment was to be made.° A failure to pay composition notes promptly when due is sometimes held not to avoid the agreement when an avoidance would be inequitable to other creditors.* Sec. 179. Same subject — Tender of performance. — ^A tender up- on an accord and its refusal is no bar, for the reason that there is no consideration to support the new agreement until performance, and the agreement being without consideration before performance the tender may be rightfully refused; but with respect to a com- position a new and independent consideration arises out of the agreement itself, and is to be found in the mutual promises of the creditors. The executory agreement being valid, a tender of per- formance may be made, and if refused, the debtor has done all iRenard v. Tuller, 4 Bosw. 107. 2 Hatter of Leslie, 10 Daly, 76. 8 Thurston v. Vian, 32 L. C. Jur. 244. * Clark v. White, 12 Pet. 178 : A mistake of one dollar and forty cents on seventy per cent, of a ten thousand dollar claim, was held a mistake too trivial to deserve notice. B Newington v. Levy, L. B. 6 C. P. C. 180. • Mackenzie v. Mackenzie, 16 Ves. Jr. 372, 406 COMPOSITION AT COMMON LAW [§ 179 that lay within his power, and his rights are, preserved.* The rule is the same whether the composition agreement or performance con- stitute satisfaction. The tender must be in accordance with the terms of the agreement.^ But it seems, if notes or bills payable at a future time are to be delivered, cash may be tendered.' The exact amount agreed upon must be tendered at the stipulated time.* A tender after the time is not good.^ The tender must be at the place specified or at the place fixed by law.' The general rule is that in absence of a stipulated place for payment, the debtor must seek the creditor if within the realm and tender the money to him.' By this is meant that the debtor is bound to seek his creditor at his res- idence or place of business. The debtor is not bound to go out of the realm to find the creditor. In the United States he is not bound to go out of the state in which the contract was made.' But where the composition is of a debt due on a foreign contract and the cred- itor resided abroad when the composition agreement was made, the debtor must seek him and tender the composition money notwith- standing he resides abroad." The debtor must be ready and able at 1 Fellows V. Stevens, 24 Wend. 294; Chemical Bank v. Kohner, 85 N. Y. 189; Warbury v. Wilcox, 2 Hilt. 121; Schroeder v. Pissis, 128 Oal. 209, 60 Pac. 758 ; Wilson v. Samuels, 100 Cal. 514, 35 Pac. 148 ; Melhop v. Tathwell, 74 Iowa, 571, 38 N. W. 420; Harrison v. Gamble, 69 Mich. 96, 36 N. W. 682; Stewart v. Langston, 103 Ga. 209, 30 S. B. 35 ; Bradley v. Gregory, 2 Oomp. 385 ; Evans v. Powes, 1 Bxch. 601 ; Sullivan, In re, 36 L. J., B. 1, 15 L. T. N. S. 434. 2 Evans v. Powes, 1 Exch. 601. 8 See Thurston v. Vian, 32 L. 0. Jur. 244. * Hunt on Tender, Sec. 281. Sewell V. Musson, 1 Vern. 210. See Thurston v. Vian, 22 L. C. Jur. 244, where the debtor failed to tender certain bUls within the time, but tendered money instead, but before suit. 8 Hunt on Tender, Sec. 310 et seq. 7 Co. Litt. Sec. 340. 8 Houbie V. Volkening, 49 How. Pr. 169 ; Gill v. Bradley, 21 Minn. 15. 9 Fessard v. Muynier, 18 C. B., N. S. 286, 11 Jur., N. S. 283, 34 L. J., C. P. 125, 11 L. T., N. S.. 635. § 179] TENDER OF PEEFOBMANOB 407 the time and place to make the payment; a mere willingness is not sufficient.^" He must make an actual tender of payment ^^ by a production of the money and offer of it to the creditor ; ^^ unless the actual production is dispensed with ^' by some act or declaration showing that the money or thing will not be received if produced.^* Depositing the composition money in a bank and notifying the cred- itor or his attorney that it will be paid over on a receipt being de- posited with the bank, is no tender.^" If a note/* deed or other in- strument is to be delivered, it riiust be drawn up and ready for de- livery at the time of the offer of performance.^^ The money ten- dered must be legal tender. However, a tender of other forms of money passing current, will be good if not objected to on the ground that it is not a legal tender.^* A tender of a bank check for the proper amount, if not objected to, is good. H the debtor intends to give a bank check for the amount due, he must have it drawn at the time of offering to pay, and that fact made known to the cred- itor. An offer to draw a check is not a tender,^" and the creditor will waive nothing if the check be not actually drawn. The tender must be made to the creditor personally, if he can be found at the place specified for payment, or at the place fixed by law, if no place be specified; or it may be made at the place, to an agent or other person authorized to receive it. If no one be at the 10 Myers v. Byington, 34 Iowa, 205 ; Hunt on Tender, Sec. 223. 11 Kosllng V. Muggerldge, 16 Mee. & W. 181, 4 Dow. & L. 298, 16 L. J., Kxch. 38; Hazard v. Mare, 6 H. & N. 435; Fessard v. Mugnler, 18 C. B., N. S. 286. 12 Hunt on Tender, Sec. 234. 13 Bowen v. Holly, 38 Vt. 574. 14 Hunt on Tender, Sec. 236. 15 Melhop V. TathweU, 74 Iowa, 571, 38 N. W. 420. 16 Warbury v. Wilcox, 2 Hilt. 118. 17 Hunt on Tender, Sec. 224. 18 See Hunt on Tender, Ch. 11. "Medium." 19 Durham v. Jackson, 6 Wend. 22. 408 COMPOSITION AT COMMON LAW [§ 180 place of payment to receive the money, being there with the money or other thing to be delivered at the uttermost hour of the day be- fore sunset, or if a place of business, as a bank, be specified for payment, at the hour of closing, if it be the custom to close at an earlier hour before sunset, will be sufficient. A tender to a mere workman or a servant will not suffice.^" A tender to the agent or attorney who negotiated the composition on the part of a cred- itor will be good in absence of notice that the attorney's or agent's authority has been withdrawn.^ ^ The tender must not be condition- al on receiving a receipt,^'' nor clogged with any other condition not specified in the agreement. The general rule is that a failure to keep a tender good is an abandonment of the tender, but it has been held that where a creditor repudiated a compromise and refused a tender of certain notes agreed to be delivered, a destruction of the notes by the debtor did not destroy the composition agreement. That the debtor could only be put in default by a subsequent demand for the notes.^* Sec. 180. Formal tender excused — Waiver of formalities. — Where an installment of the composition money has been refused, the debtor is excused from making an actual tender of subsequent installments ^ until such time as the creditor gives notice that he will accept the payments. So a formal tender is not necessary if the person to whom the money is due be out of the state and has no place of residence therein.^ The actual production of the mon- ey at the time of making the verbal offer of it may be dispensed with by some positive act or declaration of the party to whom the money is due, as by refusing to remain until the money is counted, 20 Hoadley v. Jenkins, 16 L. T. N. S. 389. 21 See Melhop v. Tathwell, 74 Iowa, 571, 38 N. W. 420. 22 Melhop V. Tathwell, 74 Iowa, 571, 38 N. W. 420. 2S Chemical Nat. Bank v. Kohner, 85 N. Y. 189. 1 In re Sullivan, 36 L. J., B. 1, 15 L. T., N. S. 434. 2 Uo. Litt. Sec. 340 ; Emlen v. Lehigh, 47 Pa. St. 76, 86 Am. Dec. 518. § 181] STBIOT PEEFOBMANCB EXCUSED 409 or until it is produced.' It is dispensed with if the creditor orders the debtor away or repulses him when he announces that he has come to pay.* So, if one to whom the offer is made denies the ex- istence of the contract, or repudiates it,° as where he refuses the amount of the composition and demands his whole debt," claiming that the debtor came too late,' the creditor cannot claim a default for a failure to make a formal tender. The exception to the rule requiring the actual production of the money, is founded upon the well-known rule that the law does not require that to be done which manifestly would be a vain and idle ceremony. The party relying upon a waiver must himself have been ready and able at the time to perform.* The actual production of the money is not dispensed with by a bare refusal to receive the sum proposed, and demanding more.* Sec. 181. Same subject — Strict performance excused — ^Waiver. — ^A creditor may waive a default in the performance of a compo- sition.'^ But a waiver will not be implied from acts of the creditor if it be shown that at the time he did not have knowledge of the facts upon which the default rests. ^ If, knowing of the default, he recognizes the agreement as subsisting by carrying it out in whole or in part, as by accepting the composition money or other thing to be delivered, he waives his right to avoid the agreement s Sands v. Lyons, 18 Conn. 18. * Mesorole v. Archer, 3 Bosw. 376. BAbrams v. Suttle, Bush L. 99; Cooper v. Phillips, 1 C, M. & R. 649; Ilderton v. Castrique, 13 L. T., N. S. 506 ; Bamford v. Clews, L. K. 3 Q. B. 729. 6 Eeay v. White, 1 C. & M. 748, 3 Tyr. 597. 7 Ex parte Danks, 2 DeG., M. & G. 936, 22 L. J., B. 73. 8 Hunt on Tender, Sec. 236. 9 KInkinfore v. Shee, 4 Esp. N. P. 68 ; Krause v. Arnold, 7 Moors, 59 ; Dunham v. Jackson, 6 Wend. 22. 1 Penniman v. Elliott, 27 Barb. 315. 2 Cobleigh V. Pierce, 32 Vt. 788. 410 COMPOSITION AT COMMON LAW [§ 181 on account of the default.* The most common act held to be a waiver of a default, is where the creditor received the money after the day of payment is past.* Allowing the debtor to go on after a default and comply with other terms of the agreement;" or continue to negotiate with him on the basis that there has been no default," is a waiver of the default. Mere silence or neglect to answer the debtor's letter asking to be allowed to substitute another indorser in place of the one agreed upon (who died with- out signing), is not a waiver of a default arising from a failure to tender notes indorsed as agreed.'' A creditor before the time for performance may dispense with a condition. If he gives the debt- or additional time, he cannot claim a default until he expressly withdraws his consent.* If a creditor joins in a composition agreement after the day for performance is past, he cannot ob- ject to it upon that ground. By coming in he adopts all other provisions. ° In such case the money is payable instanter, and it has been held that a delay of several weeks rendered inoperative, a release with a proviso that if the money be not paid when due the release should be absolutely void.^" A secret agreement with a creditor giving him a preference is fraudulent, and if the failure to pay the composition money is in pursuance of such agreement, the creditor will not be permitted 3 Browning v. Grouse, 43 Mich. 489, 5 N. W. 664 ; Bissener v. Gultman, 6 Heisk. (Tenn.) 277; Dauchy v. Goodrich, 20 Vt. 127; Mackenzie v. Mac- kenzie, 16 Ves. 372. 4 Shipton V. Casson, 5 Barn. & Cress. 378 ; Harvey v. Hunt, 119 Mass. ■279; Penniman v. Elliott, 27 Barb. 315. 6 Watts V. Hyde, 17 L. J., Ch. 409, 10 Jur. 127. 8 Ex parte John B. Cross, 4 DeG. & Sm. 364. 7 Danzig v. Gummersell, 27 Fed. 185. 8 Ex parte King, L,. K. 17 Eq. 332. » Harvey v. Hunt, 19 Mass. 279 ; MlUlgan v. Salmon, 18 L. T., N. S. 887 ; Bowen V. Holly, 38 Vt. 574. 10 Milligan v. Salmon, 18 L. T., N. S. 887. § 182] BKEACH BY DEBTOR 411 to take any advantage of the default.^^ After a waiver, the de- fault is not available to the creditor for any purpose.^^ Where a creditor with two or more notes joins in a composition and afterwards parts with some of the notes, he cannot require a tender of the composition-money upon those remaining in his possession, as the agreement is entire and he cannot apportion his claim by his own act so as to require performance when he himself is un- able to perform.^^ Where a certain fund is to be assigned to a trustee of the creditor's nomination, for the payment of a compo- sition, and they neglect to nominate, the debtor being willing to perform, a creditor, a party to the agreement, cannot maintain an action on his original demand.^* A creditor after waiving one default may take advantage of any subsequent default.^" An ob- jection to a tender of the composition money upon one ground has been held to be no waiver of any existing default.^' An agent or attorney without the consent of the principal cannot waive a de- fault in the payment of the money due on a composition agree- ment, but if the principal receives the payment with knowledge of the default, he ratifies the act of the agent or attorney and waives the default.^^ Sec. 182. Breach by debtor — Effect — ^Rights of the parties — Retaining partial payments — Remedies — Statute of limitations. — Where the performance of a composition agreement is to consti- tute the satisfaction of the original claims, whether it contains an express stipulation that a failure to perform shall avoid the 11 See Townsend v. Newell, 22 How. Pr. 164; Bean v. Amsinck, 10 Blatchf. 361. 12 Dauchy v. Goodrich, 20 Vt. 127 ; Cobleigh v. Pierce, 32 Vt. 788. IS Farrington v. Hodgdon, 119 Mass. 453. 14 Good V. Cheesman, 2 B. & Ad. 328, 4 C. & P. 513. 15 Hyde v. Watts, 12 Mee. & W. 254, 1 Dow. & L. 479, 13 I* J., Ex:. 41. 18 Lower v. Clement, 25 Pa. St. 63. IT Penniman v. Elliott, 27 Barb. 315. 412 COMPOSITION AT COMMON LAW t§ 1^2 agreement or not, a failure to pay or tender the money or other thing according to the agreement remits the creditor to his original rights," and he may prove his claim in bankruptcy,^ or come in under an assignment for the benefit of creditors, or bring an ac- tion on the original demand, to recover whatever remains unpaid,* without giving any notice of an election to treat it as void. Bring- ing an action on the original agreement is an election.' It is not necessary to return any partial payments received upon the com- promise. The effect of such payments is to discharge the original debt pro tcmto.* The fact that the money was paid by a surety does not require it to be returned, as the surety assumes the risk of a default by the debtor and is charged with knowledge that the law applies the payment, as a discharge pro tanto, in case the creditor elects to be remitted to his original cause of action. ° However, if the money is paid by a third party on condition that Melhop V. Tathwell, 74 Iowa, 571, 38 N. W. 420 ; WMtmore v. Stephens, 48 Mlcli. 578, 12 N. W. 858; Harrison v. Gamble, 69 Mich. 96, 36 N. W. 682; McMannomy v. Railway Co., 167 111. 497, 47 N. E. 712. 1 Ex parte Wood, 2 Deac. & C. 508 ; Ex parte Bennet, 2 Atk. 527 ; Ex parte Gilbey, 8 Ch. D. 248, 47 L. J. B. 49, 38 L. T. K., N. S. 728; In re Decker, 8 Ben. (U. S.) 81 ; Ex parte Reay, 4 Deac. & 0. 525, 2 Mont. & A. 38. See Ex parte Mlnton, 3 Deac. & Ohlt. 688, where a debtor to Induce a cred- itor to sign a composition deed pa;id him in full, and then contracted a fresh debt with the creditor, upon the debtor becoming bankrupt the creditor was not permitted to prove the fresh debt without first deducting the un- lawful preference. 2 Pupke V. Cmurchill, 91 Mo. 81, 3 S. W. 829 ; Zeobisch v. Van Minden, 120 N. Y. 412, 24 N. B. 795, 31 N. Y. St. 499 ; Penniman v. Elliott, 27 Barb. 315; Hadley Bank v. May, 99 N. Y. 671, 29 Hun, 404; National Bank v. Porter, 122 Mass. 308; Bailey v. Boyd, 75 Ind. 125; Zell v. Emry, 113 N. C. 85, 18 S. E. 89 ; Montgomery Bank v. Ohio Co., 110 Ala. 360, 18 So. 273 ; Taylor v. Farmer, 81 Ky. 458; Danzig v. Gumersell, 27 Fed. 185; Cranley V. Hilliary, 2 M. & S. 120; Leigh v. Barry, 3 Atk. 583, 26 Eng, Reprint, 1136 ; Constable v. Andrews, 2 C. & M. 298, 4 Tyr. 206. 8 Hyde v. Walls, 12 Mee. & W. 254, 1 Dow. & L. 479. 4Durgin v. Ireland, 14 N. Y. 322; Greer v. Shriver, 53 Penn. 259; Ex parte Wood, 2 D. & C. 508 ; Ex parte Reay, 4 D. & C. 525, 2 M. & A. 33. 5 Ex parte Gilbey, L. R. 8 Ch. Div. 248. § 182] BREACH BY DEBTOB 413 all the creditors become parties to the agreement. The stipula- tion is for the protection of the surety or third party, and cannot be avoided without returning to the surety the money received.' By electing to avoid a composition, the debtor, as between him and the creditor so electing, except as to the money paid by him, and possibly as to the running of the Statute of Limitations, is remitted to his original rights, and an action cannot be maintain- ed against him, or a surety on the composition notes.' It has been said that a creditor, who, as between himself and the debtor has successfully contested a composition agreement on the ground that it is void, is not precluded from coming in under the agree- ment and obtaining the benefit which he would only be entitled to on the footing that the agreement was valid. ^ But by doing so, he would be bound by the agreement. The agreement, upon a breach, is not absolutely void, but voidable at the election of the creditors,® otherwise the debtor could defeat the composition against the wishes of the creditors and absolve himself and his sureties, if any, from all liability.^" A creditor may elect to stand on the agreement and bring an action to recover his damages oc- casioned by the breach,^^ or to recover the money due thereon,^" 6 Babcock t. Dill, 43 Barb. 577. See also Crandall v. Cochran, 3 T. & C. (N. Y.) 203. ■> See Latter v. White, L. R. 5 Q. B. 622, L. R. 6 Q. B. 474, L. R. 5 H. L. 578, where notes were deposited with a trustee. After obtaining judg- ment against the defendant on the original claim on the ground that the composition deed was void, he sought to recover on the composition notes, and in detinue against the surety. He was not allowed to recover but the case went off on technicalities. But see Ex parte Reay, 4 D. & C. 525, 2 M. & A. 33, where a composition was to fall to the ground upon default in the payment of any Installment, It was held that the creditor could prove in the Insolvency proceedings against the debtor, the balance of his original debt, and also retain a bond given to secure the composition notes. 8 Latter v. White, L. R. 5 H. L. 578, p&r Lord Cairns. » Hyde v. Watts, 12 Mee. & W. 254, 1 Dow. & L. 479. 10 Bump on Oomp. 53. 11 Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. 12 Bailey T. Boyd, 75 Ind. 125. 414 COMPOSITION AT COMMON LAW [§ 182 or for Specific performance, if the facts will warrant such an ac- tion. A breach may be as to one creditor, as where the debtor fails to pay one, or it may be a breach as to all the creditors, as where the debtor fails to assign his property to a trustee agreed upon." The right to avoid a composition for a breach thereof is several, and available to any creditor who has suffered by the breach.^* If avoided by one creditor for a breach of performance it may be avoided by all the creditors, although the composition money is paid to the others, for when void as to one it is void as to all,^° unless the deed releases the claim of all creditors who receive their pro rata and restores those as to whom default is made, to their original cause of action. If the agreement was not ■ voidable by all upon a default in the payment of the composition- money to one and an avoidance by him, a dfebtor could easily ar- range with one creditor, as- an inducement to him to come into the agreement, to make a default as to him and pay him in full. The other creditors may elect to stand by the agreement. A. sure- ty cannot compel a creditor to elect.^° If a debtor after executing a composition agreement permits his property to be taken upon execution, or writ of attachment by a creditor not a party to the agreement,^' or by a party to the agreement before the time for performance is past, and he fails to take any steps to set aside the execution or arrest the sale and 18 Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. 1* See Brown v. Farnham, 55 Minn. 2T, 56 N. W. 352, where the action was for damages for a breach. A default in payment to one creditor is not available to another who has been paid, although the agreement provides that it shall be void as to the creditors respectively, if the money be not paid at the day named: Hart v. Smith, L. R. 4 Q. B. 61. isBvans v. Gallatlne, 59 Ind. 367: The agreement provided a time limit and concluded with the words "otherwise void." 16 Ex parte Gilbey, 8 Oh. D. 248, 46 L. J. B. 49, 38 L. T. R., N. S. 728, 26 W. R. 768. 17 See Hill v. Wertheimer, 150 Mo. 483, 51 S. W. 702. § 182] BREACH BY DEBTOB 415 allows the execution creditor to acquire title to the property/* the creditors will be released from the agreement. But where it is not within the power of the debtor to stop legal proceedings against him, the agreement is not avoided by a seizure of property by a creditor not a party to the agreement; nor is it avoided by a voluntary payment of the hostile debtor's claim without waiting for the issuance of an execution.^* The seizure of property, how- ever, which the debtor was to assign to the creditors, would put an end to the agreement. Any transfer of his property in fraud of the signing creditor,^" or committing an act of bankruptcy, as by making a general assignment of his property for the benefit of creditors not signing as well as those signing ;^^ will constitute a breach of the agreement, particularly if the property is the source from which the composition money was to be realized.^* Where the agreement provides that it is in consideration of other creditors accepting a like percentage, a voluntary payment to some of them of their claims in full is a breach of the agreement."' ■ If the creditors are to release their claim in the event that a certain sum is realized out of the property assigned, the creditors may sue for their original debt if the sum realized falls short of the 18 See Henry v. Patterson, 57 Penn. 346. 18 Carey v. Barrett, 4 C. P. D. 379. 20 HUl V. Wertheimer, 150 Mo. 483, 51 S. W. 702. 21 Ex parte Bennet, 2 Atk. 527, 26 Eng. Reprint, 716. 22 Under an English Statute (24 & 25 Vict. C. 134, s. 151) providing for proving debts payable In Installments, it was held, where the composition deed contained a release with a proviso, that in case the composition should not be paid, the release should be null and void; that becoming a bankrupt before. a default in the payment of the composition money did not remit the creditors to their original claims, but the creditors must prove only the amount remaining unpaid on the composition: Ex parte Peele, 1 Rose, 435 ; Ex parte Vere, 1 Rose, 281. 23 Seed V. Wunderlich, 69 Minn. 288; Montgomery Bank v. Ohio Buggy Co., 110 Ala. 360, 18 So. 273. In re Sturges, 8 Biss. (U. S.) 79: This case lays down the same general rule, but the facts disclosed a voluntary payment after the discharge. 416 COMPOSITION AT COMMON LAW [§ 182 sum specified.''* So a stipulation for a release if the trustee fair- ly accounts for the property, will not become operative if the trustee refuses to account.^" A refusal by a trustee to allow a creditor to sign a composition deed on the ground that he had discovered after the assignment was agreed on, that his claim was usurious, was held to remit the creditor to his original cause of action. ^° The burden of proof is upon a defendant when sued upon the original contract, to establish a composition and its per- formance, or a sufficient excuse for non-performance. If time re- mains in which to perform, he need only prove the agreement.^^ Where a plaintiff's proof shows a compromise, as when the agree- ment is indorsed on the note sued upon, the burden is upon him to get rid of it by showing the particulars of the default."* If the composition agreement constitutes satisfaction, as where it contains an absolute discharge or unconditional release, there is a novation immediately upon the execution of the agreement, and- the remedy of the creditor is upon the new agreement."* If any independent contract, as a note or other evidence of the com- position debt is accepted upon such an agreement, the remedy of the creditors is to enforce collection of the notes.^" If the agree- ment provides for the assignment of certain property,^"^ or con- tains a covenant to do any other thing, the action is for damages for non-performances. The measure of damages is the amount 24 Wigglesworth v. White, 1 Stark. 218, 2 E. G. L. 89. 25 Kesterson v. Sabery, 2 Chit. 581, 18 E. C. L. 777. 28 Garrard v. Woolner, 4 C. & P. 471, 1 M. & Scott, 327, 8 Bing. 258. 27 Harrison v. Gamble, 69 Mich. 96, 36 N. W. 682. 28 Browning v. Grouse, 43 Mich. 489, 5 N. W. 664. 2 8 Chapman v. Dennlson, 77 Me. 205; Evans v. Powis, 1 Ex. R. 601; Solo- man V. Laverick, 18 L. T., N. S. 545. soBartlett v. Woodworth, 69 N. H. 316, 41 Atl. 264; Mullin t. Martin, 23 Mo. App. 537 ; Lanes v. Squgres, 45 Tex. 382. SI Brown v. Farnham, 55 Minn. 27, 56 N. W. 352. § 183] BBBACH BY OEEDITOB 417 of the composition debt less what has been paid; or if property- was to be assigned the proceeds of which was to be pro rated among the signing creditors, then the value of the property which the debtor failed to turn over.'^ If an action is brought either upon the original claim, or upon the composition agreement before a default, it will be abated as premature.'* The statute of limita- tions begins to run on a cause of action upon the composition agreement, from the time of a default, and if upon a default, the creditor is remitted to his original cause of action, the law implies a new promise, and the statute of limitations begins to run from the time of the default.'* Where one partner authorized another to make a separate composition with their creditors in his own be- half, agreeing to settle the residue of the debts himself, it was held that payments upon the composition agreement by the con- tracting partner, did not prevent the statute from running on the original demand in favor of the remaining partner.'' Sec. 183. Breach by creditor — Right of debtor — Of other cred- itors. — If a creditor repudiates the agreement, all the debtor need do is to make the proper tender of performance, unless a formal tender is waived ; and, if he desires to save interest and cost, keep the tender good by keeping the money, notes or other thing ready 82 See BTown v. Farnham, 55 Minn. 27, 56 N. W. 352. 8 3 Smythe v. Graydon, 29 How. Pr. 224; Mansfield v. Rutland, 52 Vt. 444. 34 In re Stock, 66 L. J., Q. B. 146, 75 Xj. T. Rep., N. S. 422, 3 Monson, 324, 45 W. R. 480; Irving v. Vitch, 3 M. & W. 90; Ex parte Bateson, 1 Mont., D. & D. 289 : In this case there was a default upon the composition agree- ment. A subsequent payment was held to have been made upon the original debt. A receipt was given, which by its terms was held to be an acknowledg- ment of the debt. Including a debt in the schedule attached to a deed of inspectorship was held not such an acknowledgment of the debt as to take it out of the statute of limitations, it being an acknowledgment only that the debt was due modo et forma as therein stated. See Ex parte Topping, 34 L. J. Bank. 44, 13 W. R. 1025, 12 L. T., N. S. 787. 36 Sigler v. Piatt, 16 Mich. 206. Hunt Aoc.& S.— 27 418 COMPOSITION AT COMMON LAW [§ 183 for the creditor.* A breach of a stipulation requiring the debtor to continue to deal with a creditor will not avoid the agreement, if they do not furnish him with good and marketable articles.^ If the facts permit he may bring a suit for specific performance.* Where the debtor is to assign certain property to a trustee to be nominated by the creditors, but no nomination is made, it is suf- ficient if he be ready and willing to make the assignment as agreed.* If a debtor is compelled to pay to a bona fide holder, the amount of a negotiable instrument included by the payee in a composition agreement, he may recover of the payee the amount he was required to pay the holder and interest, if he has paid over the composition money,° if not then the difference between the amount paid and the amount due upon the composition agreement. Creditors to a composition agreement, as between themselves, are held to the exercise of the utmost good faith, and a creditor will not be permitted to gain any advantage while the contract is sub- sisting. If he attaches property before the expiration of the time for performance by the debtor, and compels the debtor to trans- fer property to him in settlement of his claim, the transfer is fraud- ulent and void, and the property or its value may be recovered by a trustee in insolvency.® So, the other creditors may recover of the creditor guilty of the breach such damages as they may have sustained thereby.' The rights and remedies of creditors against their co-creditors, in cases of fraudulent preferences, is considered elsewhere. 1 A creditor who repudiates a composition and refuses to accept a tender, cannot plead non-performance for the purpose of depriving the debtor of his defence : Chemical Bank v. Kohner, 85 N. Y. 189. 2 Thornton t. Sheratt, 8 Taunt. 523. 8 Only V. Walker, 3 Atk. 407. * Good V. Cheeseman, 2 B. & Ad. 328, 4 0. & P. 513. B Hawley v. Beverly, 6 Scott, N. R. 837. 8 Gardner v. Lewis, 7 Gill, 377. ^ HiU v. Wertheimer, 150 Mo. 483, 51 S. W. 702. § 184] SPECIFIC PEEFOBMANCB 419 Sec. 184. Specific performance — Restraining threatened viola- tion. — A composition agreement may be specifically enforced in eq- uity, at the instance of the debtor,^ or a creditor,'' or one in privity of contract with the debtor, as where property which is subject to a lien for the payment of the composition money, is transferred to a third party who assumes the debt,* or one in privity of contract with a creditor, as an assignee of the particular debt or a general assignee of the creditor's property, or an heir, or devisee, or a per- sonal representative of either the debtor * or a creditor. A composi- tion agreement must contain all the elements necessary in equity to the enforcement of any contract. It will not be enforced if it contains any element of fraud on the part of the one applying, as where the debtor has given a secret preference to any creditor," or the agreement is void under the statute of frauds,* or where the agreement is not fully executed, as where its validity is made to depend upon certain creditors signing it, and a part of them have not executed it.' So, ordinarily, there must be no adequate remedy at law. If a creditor, a party to the agreement, issues an execution on his judgment and threatens to or does levy upon the property of the debtor, or in any other manner seeks to gain an advantage contrary to his agreement, the debtor or any creditor may bring an action to enjoin him.* Likewise a debtor will be restrained from 1 Only V. Walket, 3 Atk. 407. 2 Synnot v. Simpson, 5 H. L. Cas. 121; Lobdell v. Nauvoo Bank, 180 III. 56, 54 N. B. 157 ; Bartleman v. Douglas, 1 Craneh C. C. 450. 8 See Clark v. White, 12 Pet. 178, 9 L. Ed. 1046. * Pollen V. Huband, 1 P. Wms. 751, 24 Eng. Repr. 598 ; In Matter of Leslie, 10 Daly, 76. s ChUd V. Dandridge, 2 Vern. 71. • Emmet v. Dewhirst, 15 Jur. 1115, 21 L. J. Ci. 497, 49 Eng. Ch. 453. T Acker v. Phoenix, 4 Paige, 305. 8 Blodget V. Hogan, 10 La. Ann. 18 ; MacKenzie v. MacKenzie, 16 Ves. Jr. 372 • Gibbon v. Bellas, 2 Phila. 890 (a tona fide assignee of a judgment note was restrained by injunction from collecting it); Fawcett v. Gee, 3 Anstr. 420 COMPOSITION AT COMMON LAW [§ 185 any interference contrary to his agreement, with the property set apart for the payment of the composition money, whereby the same might be diminished in value, or totally lost to the creditors. Sec. 185. Subsequent promise to pay residue of a debt dis- charged by a composition. — After a debt is discharged by an ac- cord and satisfaction or composition, a subsequent agreement not Under seal,^ to pay the residue of the original debt is without con- sideration and void." Such a discharge is conventional and being freely given upon the part of the creditor for a consideration, all obligation, legal and moral is discharged.* The rule is different when the discharge is by act of law; and, an unconditional promise by a person to pay a debt from which he has been discharged in bankruptcy, or proceedings in insolvency, is binding, and an action may be maintained thereon.* The debt of an insolvent though dis- 910 ; Spurret v. Spiller, 1 Atk. 105, 26 Eng. Pepr. 69 ; Jackman v. MitcheU, 13 Ves. Jr. 581. 1 A bond given for the residue of a debt discbarged by a composition may be enforced: Tuck v. Tooke, 9 Barn. & Cress. 437. 2 Watts V. Hyde, 10 Jur. 127, 17 L. J., Ch. 409 ; Higgins v. Dale, 28 Minn. 127, 9 N. W. 583 ; Warren v. Whitney, 24 Me. 561, 41 Am. Dec. 406; StafCord V. Bacon, 1 Hill, 532, 37 Am. Dee. 366 (Accord and Satisfaction). A nominal consideration of one dollar is not sufficient to support a contract not under seal : Shepard v. Rhodes, 7 R. I. 470, 84 Am. Dec. 573 ; Way v. Langley, 15 Oh. St. 392 ; Zoebisch v. Von Minden, 120 N. Y. 406, 24 N. B. 795, 31 N. Y. St. 499; Rasmussen v. State Bank, 11 Colo. 301, 18 Pac. 28; Callahan v. Ackley, 9 Phila. (Pa.) 99; Evans v. Bell, 15 Lea (Tenn.) 569; Montgomery V. Lampton, 3 Mete. (Ky.) 519. A subsequent promise to all the creditors to pay them more than the amount received in the composition is equally without consideration: Coon v. Stoker, 2 N. Y. St. 626. The surrender of a security which has been released by a discharge of the debt by a composi- tion, furnishes no consideration for a promise to pay the residue of the debt beyond the amount of the composition: Cowper v. Green, 7 M. & M. 638, 10 D. J. Exch. 343. See See. 10 Accord and Satisfaction. 8 See Stafford v. Bacon, 1 Hill, 532, 37 Am. Dec. 366. 4 Earnest v. Parks, 4 Rawl. 452, 27 Am. Dec. 288 ; Thomas v. Hodgson, 4 Whart. 498. § 186] COMPOSITION EFFECTED BY ASSIGNMENT 421 charged, is in conscience due and the debtor may, therefore, renew the old debt by a new promise, and the old debt will constitute a sufficient consideration." Sec. 186. Composition effected by assignment. — ^An assignment for the benefit of creditors made voluntarily to a trustee of the debt- or's own choosing, is not a composition, and does not bar an action for the residue of a debt remaining after deducting a dividend re- ceived from the trustee, although the deed of assignment contains a proviso that no creditor shall receive anything unless he should fully acquit and discharge the debtor from all demands up to the date of the assignment. The agreement to accept a part of a debt in satisfaction of the whole is a nudum pactum, and the intervention of a trustee, who manages the property and pays out the proceeds un- der conditions prescribed by the debtor, does not change the rule from that applied to such payment by the debtor in person.^ In England, a voluntary assignment when not assented to by creditors amounts to no more than a license or as a power to the trustee, which is revocable by the debtor.^ But it has been said that if the trustee communicate the fact of the trust to the creditors the power to revoke is lost.' So, it has been held that where the trustee takes a beneficial interest, as where the assignee is a creditor and assents to act as trustee, the deed is not revocable by the debtor.* 5 Scouton V. Eislord, 7 Johns. 76. The promises to pay a debt discharged in bankruptcy, is the substantive cause of action, the old debt, is merely the consideration : Dusenberry v. Hoyt, 14 Abb. N. S. 134, 45 Hun, 148, 36 N. Y. Sup. Ct. 97. In some states the new promise to he valid must be in writing. 1 Allen V. Roosevelt, 14 Wend. 100 ; Garrard v. Lauderdale, 2 Russ. & M. 451, 11 Eng. Ch. 451 ; In re Waley, 3 Drew. 165, 3 Eq. R. 380, 1 Jur., N. S. 338, 24 L. J. Ch. 499. A cessio bonorum in favor of creditors without condi- tion Is not a composition : The Queen v._ Cooban, 18 Q. B. D. 269. See Loney v. BaUey, 43 Md. 19. 2 Smith V. Keating, 6 C. B. 136; Acton v. Woodgate, 2 Mylne & K. 492. 8 Acton V. Woodgate, 2 Mylne & K. 492. * Siggers v. Evans, 1 Jur. N. S. 851, 24 L. J. Q. B. 305, 5 El. & Bl. 367, 3 O. L. R. 1209. 422 COMPOSITION AT COMMON LAW [§ 186 In the United States the rule in almost all, if not all the states, is that an assignment, not fraudulent, to a stranger for the benefit of creditors transfers, the title to the trustee without the consent of cred- itors.^ But such a transfer will not become effective without the knowledge and privity of the trustee ; " and until the trust is ac- cepted, the property is subject to levy.' If the assignment is made direct to the creditors their assent is necessary to give it validity for the reason that it requires the agreement of two parties to make a contract.* After the title to the property has vested the debtor cannot revoke the assignment. But, in any such case, to constitute a composition, the assent of two or more of the creditors to the as- signment for the purpose of compounding their debts must be had; 5 Cunningham v. Freeborn, H Wend. 240 ; Weston v. Barker, 12 Jolins. 281 ; Nicoll v. Mumford, 4 Jolins. Oh. 522 ; Rankin v. Duryer, 21 Ala. 392 ; Smith V. Leavitt, 10 Ala. 93; Brooks v. Marbury, 11 Wheat. 78; Gray v. Hill, 10 Serg. & E. 436 ; New England Bank v. Lewis, 8 Pick. 113: Creditors are entitled to benefits under an assignment for their benefit without becoming parties to it or assenting, where the Instrument does not require any signa- ture or assent. 8 Cunningham v. Freeborn, 11 Wend. 240. If he takes possession of the property he will be bound to execute the trust although he does not sign the deed. T If a trustee does not accept immediately but takes the matter under con- sideration, a levy upon the property covered by the deed bf assignment be- fore be accepts, will give the judgment creditor a lien upon the property: Crosby v. Hillyer, 24 Wend. 280. Before the time limited for creditors to come in and execute a deed of as- signment, a creditor who had refused to become a party, may take the prop- erty in the possession of the assignee by execution and sell the same in sat- isfaction of his debt: Austin v. Bell, 20 Johns. 442. Where an assignment is made to a trustee for the benefit of creditors who execute the deed or assent to it and the trustee takes possession of the prop- erty and notified three creditors who assented to the arrangement, the title was held to pass to the trustee as against an execution creditor who did not know of the deed although no creditor signed the deed: Harland v. Binks, 15 Q. B. 713, 14 Jur. 979, 20 L. J., Q. B. 126, s. p. Evans v. Jones, 3 H. & C. 423, 11 L. J. N. S. 636. 8 Nicoll V. Mumford, 4 John. Ch. 522 ; Cunningham T. Freeborn, 11 Wend. 240. § 187] DUTIES OF ASSIQNEB 423 and the title to the property must pass absolutely to the trustee and the property must be placed beyond the control of the debtor. If an assignment is made in pursuance of an agreement with creditors that the property assigned, or the proceeds realized therefrom, will be accepted in satisfaction of their demands, such assignment is a good accord and satisfaction or composition.' Previous assent of the creditors is not necessary; if they afterwards consent to the arrangement the composition will be binding.^" The distinction be- tween the two cases of assignment is, that the first is a mere volun- tary trust for the payment of debts, to which the creditors are not parties, nor assenting; while the latter is a deed to a trustee as the second party, in favor of such creditors as may become the third parties thereto by signing or otherwise assenting.^^ Sec. 187. Duties of assignee — Rights of creditors. — The assignee . of a fund transferred for the purpose of carrying out a composition is governed by the same rules with respect to the performance of his trust as other trustees. As soon as the assignee accepts the deed he becomes a trustee for the creditors and they may compel the exe- cution of the trust, even when the trust was created without their knowledge.^ The acceptance of the trust may be in express terms, or by implication as where the trustee takes possession of the prop- erty assigned. In such cases a failure to sign the trust deed does not affect the validity of the assignment. If a trustee who is a creditor, executes a trust deed containing a release, his debt is ex- tinguished and he will not be heard to say that he signed the deed » Watkinson v. Inglesby, 5 Johns. 386 ; Bartlett v. Kogers, 3 Sawy. (U. S.) 62. 10 Robblns V. Magee, 76 Ind. 381. 11 See Tennant v. Stoney, 1 Rich. Eq. 222, 44 Am. Dec. 213, where the court reviews the decisions and clears up an apparent conflict between some of them. See, also, Robbins v. Magee, 76 Ind. 381. 1 Shepherd V. McEvers, 4 Johns. Ch. 136 ; New England Bank v. Lewis, 8 Pick. 113. 424 COMPOSITION AT COMMON LAW [§ 187 only as trustee.* The trustee cannot divest himself of the trust without the consent of the cestui que trust, or an order of a court of chancery.* A court of equity has power to remove a trustee for misfeasance or nonfeasance ; * or it may enjoin him, or any of the parties from making any threatened misapplication of the funds. All the creditors may join in a suit against the trustee to remove him, or to enforce the trust; or the suit may be maintained by one in behalf of all others who may come in and join him. A failure of the trustee to act does not give creditors a right to enforce their claims against the debtor. Thus, where a deed provided that upon default in any payment by the debtor the trustee may declare the deed void, it was held that the creditor's course was to institute proceedings to compel the trustee to give the notice. ° The trustee is not the agent of the debtor, and any instruction given by him to the trustee before the assignment, or at any time, will not affect the terms of the deed.' The trustee cannot complete a building contract, or other contract ordinarily entered into in reliance upon the skill or judgment of the debtor, unless the contract provides that the debtor's assigns may carry it out.' A trustee cannot buy in any of the trust property, but he may afterwards buy from a purchaser any property bona Me sold by him.* A trustee is responsible to the creditors for the manage- ment of the trust property; he is bound to manage the property with the care and diligence of a provident owner, — with the same care that an ordinarily prudent and diligent person would use for himself, — and is liable for a loss resulting from his negligence, mistake, or 2Teede v. Johnson, 11 Ex. 840. 8 Shepherd v. McEvers, 4 Johns. Oh. 136, n. Ly. ed. * Clark V. Wilson, 77 Ind. 176. B In re Clement, 3 Morr. Bankruptcy Cas. 153. eRobbins v. Magee, 76 Ind. 381. 7 Knight V. Burgess, DO Jur., N. S. 166, 33 L. J. Ch. 727, 10 L. T., N. S. 90. 8 Dover v. Buck, 5 GifC. 57. § 188] DUTIES OF ASSIGNEE 425 want of caution." He must inform the creditors upon every reason- able application of the condition of the trust estate; and if he re- fuses or fails to do so, he must pay the costs of any proceeding taken to obtain such information.^" A refusal to account for the trust property will render inoperative as a release, a covenant not to sue if the trustee fairly account.^^ Sec. 188. Same subject. — ^A trustee must observe the condi- tions of the deed. The owner of property may give such direc- tions as to its disposition as he may see fit, or enter into any agree- ment with his creditors with respect to its distribution among them as he may be able to negotiate; and, so long as no one in- terferes and avoids it by law, the assignee must be governed by the powers given by the deed. If all creditors are to share equal- ly,^ or preferences are made,^ or a certain class of debts, or certain specified debts are to be paid,^ the trustee must pay them in the manner directed. In absence of any specific directions, the inten- tion must be drawn from the object and the scppe of the entire deed. An assignment to pay debts generally without any specific directions, implies a power to sell * the property conveyed by the deed; but a deed conveying land in trust to pay debts out of the income, conveys no power to sell the land. An assignee must collect the assets transferred by the deed, and for that purpose may bring an action against the debtor or anyone detaining any portion of it. If the conveyance be direct to the trustee under a purely conventional arrangement, he may sue in any court having jurisdiction over the parties or subject matter. A trustee under 9 Litchfield v. White, 3 Sandf . 545, 7 N. Y. 438. 10 Ex parte White, 13 L. T. Rep., N. S. 24. 11 Kesterton t. Sabery, 2 Chit. 541. See Small v. Marwood, 4 M. & R. 181. 1 Child V. Stevens, 1 Vem. 102. 2 Douglass V. Allen, 2 Dr. & War. 213. s Pratt V. Adams, 7 Paige, 615. * Goodrich v. Proctor, 1 Gray, 567 ; Williams v. Otey, 8 Humph. 563. 426 COMPOSITION AT COMMON LAW [§ 188 a common law assignment need not, as in case of bankruptcy, ob- tain the sanction of a court to justify them in commencing an action against a debtor to the estate. A trustee cannot allow a creditor who has repudiated the deed and sued the debtor, to come in and sign the deed, and if he does, the creditors may cause it to be set aside." If a trustee allows a creditor to sign a deed for a specified sum, he cannot afterwards contest the debt, unless there is gross fraud.* If the deed provides that the trustee shall examine the claims, a creditor to obtain the benefits under the deed, must submit his claim to the trustee.^ If the debts to be paid are not scheduled but the assignment is for the benefit of all creditors who may come in and join in the deed, it is the duty of the trustee to examine and pass upon the claims presented, to the end that bona fide creditors may receive as large a per cent, as is possible. A trustee is not authorized by a general power to pay a fictitious debt ; * or one barred at the time of the assign- ment by the statute of limitation;" or a debt ex turpi c(Msa;'-'' or a debt founded upon an usurious consideration ; ^^ but where an usurious claim is directed by the deed to be paid, the trustee, nor a creditor who is claiming benefits under the deed, cannot ob- ject to the payment of the ratable portion of the actual money loaned with legal interest.^^ B Field V. Donoughmore, 1 Dr. & War. 227. 6 Lancaster v. Elce, 31 Beav. 335; 2 Perry on Trust, Sec. 600. T WalQ V. Egmont, 3 Myl. & K. 445 ; Nunn v. Wilsniore, 8 T. R. 52L 8 Irwin V. Keen, 3 Wliart. 347 ; Hardcastle v. Fisher, 24 Mo. 70. Pickett V. King, 34 Barb." 193 ; Pratt v. Adams, 7 Paige, 615. 10 Pratt V. Adams, 7 Paige, 615. 11 In Beach v. Fulton Bank (1829) 3 Wend. 584, the court said that perhaps the trustee would not be bound to set up the defense of usury but that he would be justified in doing so. In Pratt v. Adams, (1839) 7 Paige, 615, it was said that a general asslfenment to pay debts does not include debts founded upon an usurious consideration. 12 Pratt V. Adams, 7 Paige, 615; Murray v. Judson, 9 N. Y. 73; Green v. Morris, 4 Barb. 332. § 188] DUTIES OF ASSIGNEB 427 Good faith is all that is required of the trustee and in absence of suspicious circumstances he may accept the statement of the ■debtor and creditor as to the indebtedness. The recital of a debt in a trust deed, or in an attached schedule, raises a presumption of its existence but it may be rebutted.^' If a creditor disputes the debt of another, or if the debtor denies the debt, the trustee would be bound to withhold payment until the parties interested had in some way settled the controversy; which may be by a bill in equity by the creditor whose claim is contested, asking to be allowed to share in the composition fund ; or by an action against the debtor to determine the amount due; or by a bill in equity "by the objecting creditors, or by one for all to set aside such debt as illegal or fraudulent.^* It would seem from the foregoing, that when a dispute arises over the existence of a debt, or its le- gality, a trustee under a composition deed, in absence of express authority contained in the deed, cannot, without the consent of all parties interested, compromise a claim against the trust fund,*" although he may compromise claims due the estate. If there is any surplus after paying all the debts as directed, the trustee must account for it to the assignor.^" If the compensation of the trus- tee be not agreed upon, he is entitled to a reasonable amount for his time and trouble and for the risk assumed, together with all reasonable and necessary expenses -paid by him in the manage- ment of the fund, including necessary attorney fees paid by him ; ^'' and these are first paid before the creditors receive any- thing.^^ The subject of the duties and liabilities of trustees and 13 Graham v. Anderson, 42 111. 514. 14 Morse v. Crofoot, 4 Comst. 114. IB Ireland v. Potter, 16 Abb. Pr. 218, 25 Hon. Pr. 175. 16 Stevens v. Earles, 25 Mich. 41; Rahn v. McBlrath, 6 Watts, 151. 17 Rouse V. Hughes, 1 Ky. L. Rep. 320. 18 Where the debtor's business is to be carried oq by a trustee for the bene- fit of creditors, the expenses incurred in the business are paid first. Kam V. Blackford, 20 S. E. (Va.) 149. 428 COMPOSITION AT COMMON LAW [§ 189 the rights of cestui que trusts, is one upon which several volumes may be written, and the reader is referred to works upon that sub- ject for any further information desired.^' Sec. 189. Title to what property vests in the assignee — Exempt property — Partnership property — After acquired property — Salary of public office — Title of assignee subject to equities. — ^An assign- ment for the purpose of paying a composition is not unlike other assignments at common law with respect to the property conveyed by the deed.* According to Mr. Perry, every kind of valuable property, both real and personal, and every kind of vested right which the law recognizes as valuable may be transferred in trust, as a receipt for a medicine," the copyright of a book,* a patent right,* a trade secret," or growing crops.' Where a composition agreed upon is to be carried out by an assignment of the debtor's property, all his property should be assigned unless the agreement designates particular property.'' An assignment by a trader and farmer of his effects, stock, books, and book debts, conveys the cattle on the farm.* All personal estate and effects whatsoever, includes mortgages.' So the same general terms in a deed of as- 18 See Perry on Trusts. 1 A trustee under such a deed will acquire no right to avoid a transfer by the debtor, which is only declared fraudulent as to creditors under some bankrupt system. 2 Green v. Folgham, 1 Sim. & St. 39S. 8 Sims V. Marryal, 17 Q. B. 281. i Russell's Patent, 2 De G. & J. 130. B Morrison v. Moat, 6 Eng. L. & Eq. 14, 9 Hare, 241. 6 Robinson v. Maulden, 11 Ala. 908 ; McCarty v. Belvln, 5 Yerg. 195 ; Fetch V. Tutin, 15 M. & W. 110 ; Grantham v. Hawley, Hob. 132. 1 Perry on Trusts, Sec. 67, citing the foregoing cases. 7 See Gordon v. Cannon, 18 Gratt. 387. 8 Lewis V. Rogers, 1 C, M. & R. 48, 4 Tyr. 872. 9 West V. Steward, 14 M. & W. 47. § 189] TITLE TO WHAT PBOPERTT VESTS IN ASSIGNEE 429 signment have been held to transfer a life insurance policy.^" Where a deed of assignment conveyed all the debtor's stock in trade, books, and other debts, goods, securities, chattels and ef- fects whatsoever, except the wearing apparel of himself and fam- ily, it was held that a contingent interest in a residuary estate of a testator held by the debtor passed.^^ Where a debtor at common law assigns all his property for the benefit of creditors generally, or to pay a composition, all the personal property which the debtor might have claimed as exempt passes to the assignee, unless the deed expressly reserves the exempt property. But with respect to the homestead, the general rule is that the homestead can only be conveyed by the joint deed of the husband and wife.^^ A conveyance purporting to convey the homestead must comply with the statute,^* and a conveyance by the husband alone is a nullity.^* A trust deed purporting to convey all the debtor's prop- erty both real and personal, vest only the interest of the husband in the land, unless the wife joins in the deed. An unsealed in- strument purporting to convey land, or one not executed accord- ing to the law governing the conveyance of real estate can only be enforced by the trustee in equity. A composition by one partner of his individual debts and an assignment by him of his property to pay the composition, will not give the trustee a right to interfere with the partnership prop- erty. In such case if the individual property is not sufficient to 10 Watson v. McLean, El., Bl. & Bl. 75. In this case the debtor having died, it was held in an action against the executor, that the proper measure of damages under the circumstances was the amount obtained by him on the policy. 11 Irison v. Steward, 3 De G., Mac. & G. 958. 12 Halt T. Haule, 19 Wis. 472; Riehl T. Blngenheimer, 28 Wis. 84; Lawver V. Slingerland, 11 Minn. 447 ; Bumside v. Terry, 45 Ga. 621 ; Horn v. Tuft, 39 N. H. 478 ; Greenough v. Turner, 11 Gray, 332. 13 Young v. Benthuysen, 30 Tex. 763. " The statutes with respect to alienation of homesteads vary somewhat and local statutes should be examined. 430 COMPOSITION AT COMMON LAW [§ 189 pay the composition agreed upon, or the proceeds of all the debtor's property is to be accepted in satisfaction, the trustee might, per- haps, become a tenant in common with the solvent partner in the joint property, as in cases where one partner is adjudicated a bank- rupt;^' but he will be entitled to receive only the residue of the assignor's interest after the partnership debts are paid. Not a few cases hold that an assignment by one partner, of all his interest in a partnership is ipso facto a dissolution.^' An assignment by a firm of its assets to carry out a composition agreement conveys only the partnership property, unless the individual property of the members is specifically included. Property acquired after the execution of the deed of assignment will not pass by the deed; as a gift, a pension, or salary earned, or property acquired by any new venture.^'' Some rights^ although expressly mentioned, will not pass by the deed because it is against publjc policy, such as the right to the unearned salary of a public official.^" If a public official could by a general assignment for the benefit of creditors, deprive himself of the right to draw his salary from time to time as it is earned, the service due the state might be greatly impaired. An assignee stands in no better position than the assignor and takes all property subject to equities, and any matter may be set off in an action brought by the assignee which might have been isWilkins v. Davis, 15 N. B. R. 60; McNutt v. King, 59 Ala. 597; Hasley V. Norton, 45 Miss. 703. 18 Marquard v. New York Mfg. Co., 17 Johns. 525; Ketcham v. Clark, 6 Johns. 144; Bdens v, WUliams, 36 111. 252 (a sale was by one partner to another) ; Horton's Appeal, 13 Pa. St. 67 ; Cochran v. Perry, 8 Watts & S. 262. IT See Price v. Murray, 10 Bosw. 243. 18 Arbuthnot v. Norton, 5 Moore, P. C. C. 219. In this case the assignment was of a vested contingent interest and was held good. The rule laid down in the text was recognized. In State Bank v. Hastings, 15 Wis. 83, it was held that a judge could assign his salary, but the question of public policy was not raised or discussed; nor was it a case of an assignment to pay creditors. We believe it is the policy of the government not to recognize an assignment of a soldier's pension. § 190] AVOIDANCE BY NON-ASSENTING CREDITORS • 43I set off had the action been brought by the assignor.^* An as- signee of debts secured by collateral acquires the right to hold the coUateraL^"" Sec. 190. When non-assenting creditors may avoid an assign- ment. — At common law an embarrassed of insolvent debtor has a right to transfer any or all of his property to a creditor,^ or any number of his creditors, in satisfaction of debts due them to the exclusion of the remaining creditors,^ for the reason that it is not unlawful for a debtor to pay his debts. A creditor may lawfully obtain a preference by resorting to the remedies provided by law for the collection of debts and a debtor may do what the law permits his creditors to do. He may therefore make an assignment of his property giving a preference to one creditor, or a number of credi- tors, or a certain class of creditors,' or all who execute the deed or assent to it,* and the assignment is valid and cannot be set aside by any creditor left out of the arrangement, or by one who refuses to accept the deed." But to have this effect the debtor must place the property beyond his control by conveying the absolute title to the property to the trustee for the use and benefit of the creditors in- tended.* Except when in violation of a statute,' an assignment is i» Chance v. Isaacs, 5 Paige, 592; Moss v. Goodman, 2 Hilt. 275; F. P. Gluck Co. V. Therme, 134 N. W. (lo.) 438. 20 Parmelee v. Dunn, 23 Barb. 461. 1 Foster v. Latham, 21 111. App. 165 ; Cooper v. Whitney, 5 Hill, 95. 2 See Cunningham v. Freeborn, 11 Wend. 241. 8 Murray v. Riggs, 15 Johns. 571 ; Marbury v. Brooks, 7 Wheat. 556, 11 Wheat. 78; Tompkins v. Wheeler, 16 Pet. 103; Kunn v. Wilsmore, 8 T. R. 528; Estwick v. CaiUand, 5 T. R. 452. * Hatch V. Smith, 5 Mass. 42. 6 Evans v. Jones, 3 H. & C. 423, 11 L. J., N. S. 636. 6 Riches V. Evans, 9 C. & P. 640. T Beard v. Kimball, 11 N. H. 471. 432 COMPOSITION AT COMMON LAW [§ 190 valid whether it be a general assignment of all the debtor's property, or a partial assignment for a particular purpose,* and whether the deed directs the debts to be paid in full, or pro rata, without dis- tinction, leaving the residue of the debts unpaid, or directs that a certain composition be paid.° At common law, and even under those statutes which do not prohibit preferences, the assignment is good even though it is made with the intent to defeat the claim of a par- ticular creditor, if there be an adequate consideration.^" A deed which the debtor may revoke, or under which he or any one ap- pointed by him may direct the future disposition of the property, is fraudulent and void as to creditors, as it is merely a pretext or shield to delay and defraud the creditors; and any dissatisfied cred- itor may by levy or attachment of the property inquire into the validity of the assignment, although the deed on its face purports to be for the benefit of all the creditors.^^ 8 Henshaw v. Sumner, 23 Pick. 446 ; Baker v. Hall, 13 N. H. 298 ; Mc- Whorter v. Wright, 5 Ga. 555. » See Wells v. Greenhill, 1 D. & R. 493, 5 B. & A. 869. 10 Pickstock V. Lyster, 3 M. & S. 371; Holblrd v. Anderson, 5 T. R. 235. A voluntary assignment for the benefit of creditors does not depend upon any statute; Beck v. Parker, 65 Pa. St. 262. 11 Riches v. Evans, 9 C. & P. 640. In this case whether the deed was hrnia flcle meant to convey the goods to the trustee, or a pretext only, and the goods were really to belong to the assignor, was held to be a question of fact and not one of law. It has been held that a trust deed which attempts to coerce the creditors by requiring them to release, and which provides that the share of the non- releasing creditors shall be distributed among the creditors whom the as- signor should appoint: Hyslop v. Clark, 14 Johns. 458; or the shares of the non-releasing creditors shall revert to the assignor : Austin v. Bell, 20 Johns. 442 ; is a legal fraud and void, being an attempt on the part of the debtor to place his property beyond the reach of creditors and at the same time to direct the future disposition of it. § 191] AVOIDANCE BT NON-ASSENTING OKBDITOBS 433 Sec. 191. Same subject. — The principle, therefore, is well set- tled, both in England and America, that a debtor in failing circum- stances may prefer one creditor, or one set of creditors to another; and, except when fraudulent in its inception, as where a transfer is not bona fide, but is made to hinder and delay creditors, an assign- ment cannot be assailed, unless it is made in violation of some bank- rupt system. 1 In many of the states preferences are prohibited, and all parties to the assignment must share equally, and a clause giving a preference is void, while in other states an assignment giving a preference is fraudulent and voidable. The question of the validity of an assignment will not often arise under a state statute while the Federal bankrupt law is in force, but when it does the local stat- ute must be examined.^ Under the bankrupt law of the United States a transfer by a debtor, while insolvent, of any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors ; ^ or a general assignment for the benefit of creditors,* is an act of bankruptcy, and when made within four months prior to the filing of a petition in bankruptcy on such grounds;' it may be avoided. A debtor is deemed insolvent under this law when his property exclusive of the property transferred, with intent to defraud, hinder or delay his creditors, at a fair cash valuation at the time of the transfer, is insufficient in amount to pay his debts ; " but an assignment for the benefit of creditors is an act 1 Murray v. Riggs, 15 Johns. 571. 2 The state laws are superseded by the Federal law, only when they con- stitute bankruptcy or insolvency laws within the purview of the Federal Act, and only as to persons named in the act who have been adjudicated bankrupt thereunder (State Nat. Bank v. Syndicate Co., 173 Fed. 359) ; and transactions covered thereby (In re Standard Oak Veneer Co., 173 Fed. 103) ; as to which the proper proceeding in the Federal Court are instituted within the time limited (Louisville Dry Goods Co. v. Lanman, 121 S. W. [Ky.] 1042). 8 Act July 1st, 1898, Sec. 3 (2). 4 Id. Sec. 3 (4). B United Surety Co. v. Iowa Mfg. Co., 179 Fed. 55. 8 Id. Sec. 1 (15). Hunt Acc.& S.— 28 434 COMPOSITION AT COMMON LAW [§ 191 of bankruptcy though the assignor is solvent/ A preference given firm creditors by a transfer of firm assets when the firm is insolvent, is not an act of bankruptcy as to the individual partners, as there is no surplus in which individual creditors can share.' In determin- ing what is a fraudulent conveyance within the Federal bankruptcy law, the same principles are applied as are applicable to fraudulent conveyances in general, and a transfer fraudulent at common law is fraudulent within the meaning of that act.* Under the Federal Law, a composition deed made by a debtor who was merely temporarily embarrassed but not insolvent, can not be set aside unless it amounts to a general assignment for the bene- fit of creditors; and then, only by the trustee in bankruptcy pro- ceedings instituted within four months after the transfer. If an assignment is fraudulent and void at common law, as where it is not a bona fide transfer, or is absolutely void under a statute, a dis- senting creditor may disregard it and by execution or other pro- cess seize the property in the hands of the assignee, and when his action is questioned he may assail the assignment.^" But this meth- od of attacking transfers of property does not apply where the as- signment is only considered fraudulent by construction of law, as being against the policy or provision of some particular statute. Such deeds are capable of confirmation,^^ and a general assignment or a partial assignment, either with or without a composition agree- ment therewith, is good as between the parties who have become parties thereto ; ^^ or even as to a creditor who merely stands by and T In re Farrell, 176 Fed. 505. 8 In re Perlhefter, 177 Fed. 299. » Belding v. Mercer, 175 Fed. 335. 10 At common law "A deed founded In actual and positive fraud, as being made under tlie influence of corrupt motives, and with the Intention to cheat creditors, may be considered void ai initio, and never to have had any law- ful existence." Murray v. Riggs, 15 Johns. 571. 11 Murray v. Riggs, 15 Johns. 571. 12 Small V. Marwood, 9 B. & C. 300, § 192] OPEEATION AND EFFECT OP A COMPOSITION 435 without objection allows the trustee to act under the trust.^' Such an assignment can only be assailed after proceedings are instituted in bankruptcy or insolvency, and then only by the trustee, if in the Federal Courts; or by a receiver or other officer under the appro- priate proceedings in a state court; or by a creditor in equity only after he has obtained a judgment on his claim.^* Non-assenting creditors may reach any surplus in the hands of an assignee by gar- nishment, or like process.^" Sec. 192. Operation and effect of a composition — Binds parties and privies — Effect of a composition with surety or indorser — Mistake as to liability — Recovery of over-pajmient — Effect upon the rights of non-assenting creditors. — When a composition agree- ment 13 executed or assented to by a sufficient niimber of creditors it cannot be revoked by the debtor; nor can the assenting creditors withdraw therefrom.^ As stated elsewhere it is not necessary, in order that the agreement be binding on a creditor, that he sign the composition deed." If he promises to join his assent will be pre- sumed, if, in reliance thereon the debtor and other creditors are induced to make the agreement.' Ordinarily accepting benefits un- der a composition agreement at common law, is an assent to its terms.* But where an assignment for the benefit of creditors is not made pursuant to a composition agreement, either previously made or the agreement is not a part of the deed of assignment, an accept- ance of a dividend under the assignment does not preclude the 18 Condict V. Flower, 106 111. 105. "Neustadt v. Joel, 2 Duer, 532. 15 Hastings v. Baldwin, 17 Mass. 558 ; Vernon v. Morton, 8 Dana, 247. 1 Town V. Kublee, 51 Vt. 62. Sec. 169, ante. A creditor cannot repay the composition money and claim the benefit of a security : Pfleger v. Brown, 28 Beav. 391. 2 Sec. 165, ante. 8 Sec. 165, ante. * Sec. 165, ante. , 436 COMPOSITION AT COMMON LAW [§ 192 creditor from recovering the residue of his demand, although there is a condition in the deed that it is for the benefit of those cred- itors only who will accept their pro rata of the fund in full satisfac- tion of their respective debts." A surety, indorser and other per- sons secondarily liable for the payment of a debt may always pur- chase their release upon such terms as they may make with the hold- er of the demand, and a composition with a creditor of their lia- bility will not discharge the debtor ; ° nor will a composition with one co-surety discharge the other surety where the right against the latter is reserved/ But a co-surety not released cannot be held for any more than the sum he would have been compelled to con- tribute had his co-surety discharged the entire debt.* The debtor cannot recover any part of the composition money on the ground that he was mistaken as to his liability," but if a cred- itor by reason of an overcharge has been paid more than is his due, a court of equity will entertain a bill to open the account, although the debtor entered the creditor for the amount settled.^" If by mis- take he pays more than the proper percentage of any debt he may re- Sec. 186, ante. It has been held that if an assignment is made for the purpose of paying a certain per cent, to each creditor, with a proviso that such payment shall be In full discharge of the debts, it binds only those who accept the terms of the agreement ; and not those who accept the per centage and not the terms: Chadwick v. Barrows, 42 Hun, 39. In such cases the assenting creditors can only claim title through the trustee to their per cent.; and since a dissenting creditor may garnishee or otherwise levy upon the surplus and still recover any balance from the debtor, there is no reason why he should be held to relinquish the balance of his demand merely because his pro rata of the fund is handed over to him in face of his refusal to be bound. 8 Commercial Bank v. Cunningham, 24 Pick. (Mass.) 270, 25 Am. Dec. 322 ; Auburn Bank v. Marshall, 73 Me. 79. ^ Thompson v. Lack, 3 C. B. 540, 16 L. J., C. P. 75. 8 EJx parte GifCord, 6 Ves. Jr. 805. 9 Jones V. Wright, 71 111. 61. 10 Pike V. Dickinson, 41 L. J., Ch. 171, 7 L. R., Ch. 61, 25 L. T., N. S. 579, 20 W. R. 81. § 192] OPEKATION AND EFFECT OF A COMPOSITION 437 cover the excess." All parties in privity with either the debtor or a creditor whose rights attached subsequent to the execution of the agreement, excepting bona fide holders of negotiable instruments,^" are bound by the agreement." All rights of a creditor under the agreement pass to his personal representatives.^* Where a composi- tion is effected by an assignment of property to pay a certain per cent, the personal representatives of the debtor will take only the res- idue, if any, after paying the composition. A creditor who does not sign or otherwise assent to a composition agreement is not bound by it, for the reason there is no mutuality of agreement be- tween a dissenting creditor and the debtor, and he may sue the debtor for the whole debt or proceed in bankruptcy. But a stranger to a composition agreement may be estopped from enforcing a de- mand against a debtor. Thus, if a party who has a right of ac- tion against a debtor states that he will not sue on the demand and permits a composition to be negotiated upon the basis of such waiv- er, he is bound by the composition in so far as it bars an action on that particular claim although he does not join in the composition.^" 11 Tracy v. Jefts, 149 Mass. 211, 21 N. E. 360. 12 Margetson v. Aitken, 3 0. & P. 338. 13 A composition between a drawee and payee of a check will not release the drawer, where before making the composition it had passed by indorse- ment to an innocent holder for value: Robertson v. Flower.v 136 111. App. 320. An indorsee, of a note included in a composition agreement, who ac- quired it after maturity, cannot enforce it against the debtor : Karn v. Blackford, 20 S. E. (Va.) 149; Bartlett v. Rogers, 3 Sawy. (U. S.) 62. 14 Matter of Leslie, 10 Daly, 76. IE Where a person, having a right of action for a breach of contract, pend- ing negotiation for a composition of the debts of the party liable upon the contract, refused to return the deposit money, stating that he would never take any steps to enforce the contract; and the composition proceeded upon that footing, it was held that the debtor could not recover the de- posit for the reason that it would be a fraud upon the creditors ; and, a fraud upon the debtor to permit the other person to enforce the contract: Clark V. Upton, 3 M. & P. 89. If a creditor represents his debt as belonging to or due to a third person and the debtor compounds with the latter the debt is discharged although the statement is untrue: Blair v. Wait, 6 Hun, 477. 438 COMPOSITION AT COMMON LAW [§ 193 Sec. 193. Effect upon the liability of joint debtors.— At com- mon law a composition with a joint or joint and several debtor of the debt, discharges the remaining joint debtors.^ But where one member of a firm joined in a composition whereby the two remain- ing members, naming them, were released, and the one not named covenanted to pay the residue out of a specified fund, it was held, though by a divided court, that only the two partners named were released.'' Where a creditor in a composition agreement reserves his right against others jointly liable for the debt they are not re- leased." The rights of joint debtors as between themselves are not affected. More upon this subject will be found in previous sec- tions.* Sec. 194. Effect upon the creditor's security; upon the liability of a surety, indorser, drawer, guarantor. — A creditor can have but one satisfaction, and if he enters into a composition agreement which operates as a release of the debtor, in absence of a reserva- tion, he cannot retain any security held for the payment of the debt,^ and a surety," drawer," indorser,* accommodation maker, or 1 Hosack V. Rodgers, 25 Wend. 313 ; Merritt v. Bucknam, 90 Me. 146, 37 Atl. 885; Tuckerman v. Newhall, 17 Mass. 581; Molson v. Connelly, 17 L. O. Jur. 189 ; Nicholson v. Kevell, 6 N. & M. 192,. 4 A. & B. 675, 1 H. & W. 756. A creditor cannot keep a partnership debt alive so as to authorize a part- ner who had paid It by compromise to enforce it by an action against the other partner : Le Page v. McCrea, 1 Wend. 164. 2 Hosack V. Rodgers, 25 Wend. 313. 8 Merritt v. Bucknam, 90 Me. 146, 37 Atl. 885 ; North v. Wakefield, 13 Q. B. 536, 13 Jur. 781, 66 E. C. L. 536. , * Sec. 40, 41. See Sec. 42. Effect of a covenant not to sue one joint debtor. 1 Cowper V. Green, 7 M. & W. 638 ; Baxter v. Bell, 86 N. Y. 195 ; Perry V. Armstrong, 39 N. H. 583; Paddleford v. Thatcher, 48 Vt. 574. A judg- ment creditor cannot enforce his judgment: Crawford v. Kruger, 201 Pa. 2 See note 2 on following page. « See note 3 on following page. * See note 4 on following page. § 194] , EFFECT UPON THE OBEDITOK'S SEOUEITT 439 guarantor," as the case may be, is released. The reason upon which the rule is founded is that if a surety or other person en- titled to be reimbursed upon payment of the debt by him be not released by the composition, the intent of the parties to discharge the debtor would be defeated, for if the creditor could collect the residue from the surety, the latter would have his remedy over against the debtor and he would thus have the whole to pay not- withstanding the composition. No other effect can be given to a composition and carry out the intent of the parties. The same rule applies to collateral or other security furnished by a third per- son which stands in the relation of a surety. With respect to security furnished by the debtor himself out of his own means, the same is discharged for the reason that to permit a creditor to retain his security, is to give him a preference and thereby de- feat another object of the composition, which is to place all cred- itors upon an equality. A release by an indorsee of a prior in- dorser, operates as a release of a subsequent indorser,' unless the St. 348, 50 Atl. 931. A creditor who accepts the composition money cannot claim the proceeds of the debtor's life insurance policy under an agreement that the debtor was to keep up the premiums for the ultimate payment of the remainder of the debt: Pfleger v. Browne, 28 B'eav. 391. A creditor cannot hold collateral security against his former debtor after the debt is discharged by a composition: Swartz v. Brown, 119 N. X. Supp. 1024. 2 J. M. Robinson v. Meyers, 105 S. W. (Ky.) 428 ; McLendon Bros. v. Finch, 58 S. B. (Ga. App.) 690. 8 Ex parte Webster, 1 De Gex. 414, 11 Jur. 175 ; Lysaght v. Phillips, 5 Duer, 106 ; Ex parte Wilson, 11 Ves. 410. A composition between a drawee and payee of a cheek will not release the drawer, where before the making of the composition it had been passed by Indorsement to a bona fide holder for value: Robertson v. Flower, 136 111. App. 320. 4 Lewis V. Jones, 6 D. & R. 567, 4 B. & C. 506 ; Commercial Bank v. Cun- ningham, 24 Pick. 270, 35 Am. Dec. 322 ; Pontious v. Durflinger, 59 Ind. 27. B Nicolai y. Lyon, 6 Or. 457, 8 Or. 56. 8 Where several partners were indorsees, and one partner by a composition discharged a prior indorser, it was held to operate as a release of a subse- quent indorser : Ellison v. Dezell, 1 Selw. N. P. -272. 440 COMPOSITION AT COMMON LAW [§ 194 holder secures the latter's consent.'' A party secondarily liable is released by a composition although the agreement is executed through mistake.* A release of the maker of a note is a release of the surety or indorser by construction only, and if it can be gathered from the instrument that the indorser's liability is to remain unimpaired, he will not be discharged, as where he joins with the holder of a note in a composition releasing the principal debtor and designates his claim as that of an indorser." A reservation of a security must clearly appear to be a part of the agreement,^" and it cannot be by parol if the composition be by deed. If the reservation of a security is alleged to have been omitted from the composition agreement by mistake, the burden is upon the creditor to show by convincing evidence that the sure- ty was not to be released,^^ and that it was so understood by all the creditors. In an action against a surety, where the composi- tion deed released the debts, it was held no answer to the plea setting out the release, that the plaintiff signed the deed only as trustee and not with the intent of releasing the debt guaranteed; and that if the deed operated to release the debt, it was executed by mistake and in ignorance that such would be the legal effect.*^^ A composition agreement which has not become effective because the required number of creditors have not signed it, does not dis- 7 In re Smith, 3 Bro. C. C. 1. If a guarantor consents to the composition he will not be released : Davidson v. McGregor, 11 L. J., Exch. 164, 8 M. & W. 755; Union Bank v. Kogan, 13 N. S. Wales, 285. 8 Lewis V. Jones, 4 B. & C. 506, 8 D. & R. 567. Bruen v. Marquand, 17 Johns. 58. Becoming a party to the composi- tion or assenting to It has been held sufficient to hold a party secondarily liable: Cooper v. Smith, , 4 M. & W. 519 ; Gloucester Bank v. Worcester, 10 Pick. 528 ; Union Bank v. Eogan, 13 N. S. Wales, 285. In the last case the contract of guaranty provided for a composition without afCecting the guarantor's liability. lOBoultbee v. Stuhbs, 18 Ves. Jr. 20. 11 J. M. Robinson v. Meyers, 105 S. W. (Ky.) 428. 12 Teede v. Johnson, 25 L. J., Exch. 110. § 195] BESEKVING EIGHT TO HOLD SECURITY 441 charge a surety although the deed was signed by the principal." If a surety prior to the release of the debtor has paid the debt, or has paid a part and secured the balance, he will not be releas- ed ^* for the reason that his liability as surety is extinguished by payment. It has been held that where a composition agreement does not have the effect of extinguishing the original debt in prcesenti, and the agreement does not contain any stipulation for giving up se- curities, a creditor joining in the agreement may retain his security.^"^ Sec. 195, Same subject — Reserving right to hold security — Right of surety not affected — When surety discharged notwith- standing reservation by creditor. — ^A creditor as a condition of his joining in a composition agreement may insist on a stipulation being inserted reserving his security, or remedy against a surety or indorser, and such a stipulation will prevent the composition from Operating as a release of the security or surety.^ It is a rule of law that a creditor may suspend his right forever against a debtor and yet preserve his right against the surety.* A debtor IS Day V. Jones, 150 Mass. 231, 22 N. E. 898. 1* HaU V. Hutchons, 3 L. J., Oh. 45, 3 Myl. & K. 426. 15 Thomas v. Courtney, 1 B. & A. 1. In this case the agreement was not under seal. This rule would not conflict with the rule requiring all the creditors to be placed upon an equality, if the security was to be held only until the composition agreement was performed. 1 Stevens v. Stevens, 5 Bxch. 306 ; Bruen v. Marquand, 17 Johns. 58 ; Boatman Bank v. Johnson, 20 Mo. App. 316 ; Auburn Bank v. Marshall, 73 Me. 79 ; Nichols v. Norris, 3 B. & A. 41 ; North v. Wakefield, 13 Q. B. 535, 13 Jur. 731 ; Gloucester Bank v. Worcester, 10 Pick. 528 ; Toby v. Ellis, 114 Mass. 120. Granting an indulgence to a debtor under a comiwsition deed whereby the creditors agree to accept their debts by installments, was held not to release an accommodation maker of a note indorsed to the creditor as security for the payment of the debt, where the agreement provided that the creditor should not be prevented by the arrangment from suing on any security which he holds, and that on default in paying the installments the deed should be void: Nichols v. Norris, 3 B. & Ad. 41. 2 In Green v. Wynn, 17 W. R. 385, 4 L. E., Ch. 204, 38 L. J., Ch. 220, 20 L. T., N. S. 131, a release of the principal with a reservation of the right 442 COMPOSITION AT COMMON LAW [§ 195 by executing an agreement wherein a creditor reserves a right against the surety, consents to remain liable to the surety or other person secondarily liable for the payment of the debt. There must be a distinct and unqualified expression of an intent to re- serve a right against a surety,' and the reservation must be part of the common agreement; a creditor who desires to retain his se- curity must either hold himself entirely aloof from the other cred- itors, or communicate with them on the subject if he acts in common with them.* In case of a controversy the burden of prov- ing that at the time of executing the agreement the other cred- itors knew of the preference, is upon the party receiving it." The security reserved is only available as security for the payment of the residue, where the creditor has received his pro rata out of the composition fund," or has accepted composition notes as pay- ment, or has joined in an assignment of property and released the debtor. If a creditor realizes his debt out of the security or is paid by the surety or other person secondarily liable thereon before the composition money is paid, he cannot take any thing tinder the agreement, and if he is paid by a person secondarily liable the latter is entitled to receive the pro rata due the creditor under the agreement without any diminution of his rights. against the surety was held merely a covenant not to sue the debtor and that the surety was not discharged. s See Overend v. Oriental Financial Co., 7 L. R., H. L. Cas. 348, 31 U T., N. S. 322. * CuUlngworth v. Lloyd, 2 Beav. 385. s. p. Jackman v. Mitchell, 13 Ves. 681; Pfleger v. Browne, 28 Beav. 391; O'Shea v. Collier, 42 Mo. 397, 97 Am. Dec. 332. The words "without prejudice to any securities whatever that I hold," after the signature of the first signer is a reservation of Ws security: Duffy v. Orr, 5 Bligh, N. S. 620. A composition agreement which stated that it shall not destroy any mortgage, pledge, lien, or other specific security which any creditor has, was held, upon a construction of the whole instruaent, not to release a judgment lien of a party Signing, although the releasibg clause mentioned judgments, actions, suits, etc. : Squire v. Ford, 9 Hare, 47, 15 Jur. 619, 20 L. J., Oh. 308. Ex parte Sadler, 15 Ves. 52 ; Mawson v. Stock, 6 Ves. 301. 6 Sohler v. Loring, 6 Gush. 537, 60 Mass. 537. § 195] BESEBVING EIGHT TO HOLD SEOUKITT 443 If a creditor in a composition agreement reserves his remedy against a surety, it necessarily follows that the right of the surety is not impaired/ and he may pay the residue of the debt and com- pel the debtor to indemnify him.' A contract to abandon the right to be indemnified must be proven." A reservation by a cred- itor of his rights against a surety may not always be effective in holding the surety, and since the surety's rights are not impaired by a composition with the principal, he may defend on the ground that he is discharged notwithstanding the reservation.^" It is a general rule that if the time of payment is extended for a definite time by a binding agreement between the creditor and principal, the surety is discharged. Therefore, if a composition agreement gives additional time to the debtor to pay the composition money without giving him an immediate discharge, the surety is released although the deed contains a reservation of all rights against the surety.^^ In order to discharge a surety it is not necessary that there be an express agreement to extend the time. It is suffi- cient if that is the necessary effect of an agreement entered into. Thus, where, by a composition agreement a creditor in common with other creditors agrees to accept a composition and upon its payment to release the debtor and all securities, and to rebate the interest for nine months unless the money is sooner paid, and property is assigned out of which the composition money is to be made, the creditor thereby ties his hands so he cannot avail him- self of the ordinary processes for the collection of the debt for at least nine months.^^ In all cases the surety is discharged unless t Price V. Baker, 4 El. & BI. 760, 1 Jur., N. S. 775, 24 L. J., Q. B. 130 ; Thompson v. Lack, 3 C. B. 540, 16 L. J., C. P. 75; Lysaght v. Phillips, 5 Duer, 166; Kearsley v. Cole, 16 M. & W. 128, 16 L. J. Exch. 115. s Price V. Baker, 4 El. & Bl. 760, 1 Jur., N. S. 775, 24 L. J., Q. R 130. » Close V. Close, 4 DeG., Mac. & G. 176. 10 Lambert v. Shitter, 62 Iowa, 463, 17 N. W. 187. 11 The drawer Is discharged if the holder gives time to the acceptor: Ex parte Wilson, 11 Ves. 410. 12 Lambert v. Shitter, 62 Iowa, 463, 17 N. W. 187. 444 COMPOSITION AT COMMON LAW [§ 196 he consents to the extension, and proof of mere knowledge of such extension without more, will not overcome the defence by the surety.^* Sec. 196. Effect upon debts. — A composition agreement will discharge the debts presently upon performance whether the per- formance is to be immediately or at a future time.^ If the agree- ment provides for performance at some future time and that per- formance and not the execution of the composition agreement shall satisfy the debts, the remedy on the debts is merely sus- pended and performance on the day discharges the debts and a breach revives them.^ If the parties agree to accept in satisfac- tion of the debts a new and substituted executory agreement, the composition agreement is in reality performed by the execution of the new agreement, and this latter agreement is a final and valid settlement of the claims of the creditors, and suspends the cause of action thereon. Thereafter the rights and remedies of the parties are determined by the new agreement' and a breach of the new agreement does not revive the old debts. Sec. 197. Debts included — Construction of agreement — Bill in equity to determine what claims are included — Parol evidence as to what claims included or excluded inadmissible when. — ^A com- position agreement is usually drawn without taking into consider- ation the situation of the several debts but rather with the object of carrying out the intent of the parties to discharge the debtor from his liability for all his debts; but it may be drawn covering IB Lambert v. Shetler, 71 Iowa 463, 32 N. W. 422. 1 See Sec. 167, ante. 2 See Sec. 182, ante. 3 Brown v. Farnham, 48 Minn. 317, 51 N. W. 377 ; Goodrich v. Stanley, 24 Conn. 618; Billings v. Vanderbeck, 23 Barb. 546; Good T. Cheesman, 2 B. & A. 828, 22 E. C. L. 142. See Sec. 167, ante. § 197] DEBTS INCLUDED 445 particular debts or class of debts.^ The agreement may be drawn so as to discharge the debtor from his contingent liability as in- dorser.^' Whether a debt is included or excluded is a matter of construction to be ascertained from the agreement itself, or the schedule accompanying it, and the intent of the parties as gathered from the entire instrument governs. General words, though broad and comprehensive, are limited to a particular demand where it manifestly appears from the recital, the consideration, and the nature and circumstances of the several demands, that the agree- ment was limited by the parties to those demands.^ General words will be held to include a particular demand when a reasonable construction of the whole agreement shows that it was intended to be included.* The law forbidding secret preferences and placing all the cred- itors upon an equality in absence of a plain stipulation to the con- trary, has an influence in construing composition agreements, and a creditor who exacts special terms for himself must see to it that they are expressed in unambiguous terms and made known to all the creditors who join. A creditor may bring a bill in equity to determine what debts are entitled to participate in the composition fund, and whether any particular debt is entitled to a preferential 1 A composition deed may provide for the payment in full of the costs, charges and expenses of a previous Inspectorship, as well as the costs In- curred by an execution creditor, in consideration of the execution being with- drawn: Fitzpatrick v. Bourne, 9 B. & S. 157, 3 L. R., Q. B. 233, 37 L. J., Q. B. 265, 16 W. R. 766 ; aff'm'd 8 L. R., Q. B. 44. A creditor may sign for the judgment and reserve the costs: Robblns v. Alexander, 11 How. Pr. 100. 2 In Bowns v. Stewart, 59 N. X. Supp. 721, the creditor, after setting down debts due, added "contingent as indorser A. D. Coe note, 367.50." 3 Bump on Comp. p. 29, citing Gloucester v. Worcester, 35 Mass. 322 ; Lip- man V. Lowitz, 78 111. 252. Where the composition was only of the several debts and sums of money set opposite the respective names in the annexed schedule, it was held that no debts other than those scheduled were dis- charged:' Rice V. Wood, 21 Pick. 30; Averill v. Lyman, 35 Mass. 346. But this could be true only In absence of concealment. * See Sec. 36. Construction of release. 446 COMPOSITION AT COMMON LAW [§ 198 payment on account of an equitable lien upon any property falling into the trustee's hands."- Parol evidence is not competent to prove that the parties intended to include,' or exclude^ a particu- lar debt contrary to the plain letter of the composition deed. But parol evidence of the nature of the demands is competent, as the instrument must be construed with reference to the subject on which the agreement is intended to operate." Sec. 198. Same subject — Demands not due — Secured and un- secured claims — ^Judgment debts — Contingent liability — Demand of partner against firm — Debts subsequently contracted — Counter- claim. — A claim scheduled will be discharged although at the time it is not due,^ but where a debt not due is not scheduled, or men- tioned in the composition agreement, it will not be discharged.^ A general composition in absence of any reservations discharges all debts whether secured or unsecured. Where a party, having both a secured and an unsecured claim, joined with other creditors in a composition agreement, in which all the creditors were desig- nated as "general creditors" and he set down only his unsecured claim, it was held that "general creditors" meant unsecured cred- itors, and that as to the secured claim he was a secured creditor.' 6 Powles V. Hargreaves, 3 DeG., Mac. & G. 430, 17 Jur. 1083. 6 Rice V. Wood, 38 Mass. 30. 7 Van Brunt v. Van Brunt, 3 Edw. Ch. 14 ; Perry v. Armstrong, 39 N. H. 583. 8 Bump on Comp. 29, citing Rice v. Wood, 38 Mass. 30. 1 Brown v. Stewart, 59 N. Y. Supp. 721. 2 Lipman v. Lowitz, 78 111. 252 ; Preston v. Etter, 140 Mass. 465, 5 N. E. 168. A release of all actions and causes of action, given to the acceptor of a bill, on a composition with creditors, does not embrace money after- wards paid as indorser, when the bUl had been negotiated before due, and, at the date of the release, was T)ona fide held by a third party: Crawford V. Swearingen,. 15 Oh. 264. It has been held that an acceptor's liability on a bill not due is a subsisting demand and a release of all demands dis- charges the acceptor of his liability on the bill : Holmer v. Vlner, 1 Esp. 131. 8 Noyes v. Chapman, 60 Minn. 88, 61 N. W. 901. See M. A. Seed v. Wund- erlich, 92 N. W. 122 ; Jo'ebisch v. Von Minden, 120 N. Y. 406, 24 N. E. 795. § 198] DEMANDS NOT DUB 447 Judgment debts are discharged by a general composition.* If a party signs a composition deed and leaves the amount of his debt in blank he binds himself as to all his existing debts." A composi- tion agreement which releases "all claims, demands, action, or ac- tions, cause or causes of actions whatsoever" discharges only the demands then in existence, and a creditor may recover of the debt- or the amount of a bill or note which he was compelled to take up as an indorser but which at the time lay undishonored in the hands of the indorsee." But as elsewhere stated the agreement and release may by apt terms discharge a contingent liability.^ A partner who has retired cannot come in as a creditor for the amount agreed to be paid him for his interest on retiring, under a composition of the firm debts for which he was liable.' But if a new firm is formed which obligates itself to pay him for his interest in the old firm, he may come in as a creditor for the sum due him, under a composition by the new firm of its debts." A partner who has advanced money to a partnership may, as a creditor, join in a composition agreement of the firm debts.*" The claim of a party for money advanced to pay the composition money will not be discharged.** Inserting the amount of a debt in a blank left for that purpose in a deed of assignment, after its execution does not invalidate the deed.*'' But the right to fill in 4 Evans v. Jones, 3 H. & C. 423, 11 Jur., N. S. 784, 34 L. J., Bxch. 25; Crawford v. Kiuger, 201 Pa. St. 348, 50 Atl. 931 ; Chicago Land Co. v. Peck, 112 lU. 408. B Harrhy v. Wall, 1 B. & A. 101, 2 Stark. 195. » Margetson v. Aitken, 3 C. & P. 338 ; Crawford v. Swearlngen, 15 Oh. 264. If a note is passed to a Bono Ude holder before the payee releases the payor of all demands, the payee may recover of the payor if he is compelled to take up the note: Lipman v. Lowitz, 78 111. 252. I Coe v. Button, 1 Serg. & R. 398 ; Mallalien v. Hodgson, 16 Q. B. 689. 8 Stephen v. Gavaza, 16 Nova Scotia, 514. 9 Baxter v. Bell, 86 N. X. 195. 10 DufCy V. Orr, 1 C. & F. 253, 5 Bllgh, N. S. 620. II Holton V. Bent, 122 Mass. 278. 12 Hudson V. Revet, 5 Bing. 368, 2 M. & P. 663. 448 COMPOSITION AT COMMON LAW [§ 199 the amount of the debt does not authorize inserting the total of a debt due at the time of the execution of the deed and a debt subsequently contracted; and if inserted without the creditor's consent he may sue for the new debt/' and if inserted with the creditor's consent the new debt may be excluded by the other creditors as its inclusion is a fraud upon them. According to Mr. Bump, if a debt is discharged by a composition, a counter-claim (or recoupment) held by the debtor is also discharged, for the debt, in common parlance, is the sum that is due upon a settle- ment of the accounts. "Any other construction would compel the creditor to pay the whole of his debt, while he only receives a portion of his claim against the debtor." ^* Sec. 199. Same subject — Splitting demands — ^Withholding de- mands — Trsinsferrlng demands after signing agreement. — ^A cred- itor cannot split up his demand, and if he signs a composition agree- ment and sets down his demand at a certain sum it will be discharged although the claim is much larger.^ Nor can a creditor withhold any of his claims, and if he signs a composition deed containing a gen- eral release wherein he states the amount of his demand in the sched- ule, the release discharges all the claims he may have that are due ^ 13 Fazakerly v. McKnlght, 6 El. & Bl. T95, 2 Jur., N. S. 1020. 1* Bump on Comp. 33. 1 Margetson v. Aitken, 3 0. & P. 338, 14 E. C. L. 597 ; Cecil v. Plalstow, I Anst. 202 ; Estabrook v. Scott, 3 Ves. 456. A lien creditor who joins in an agreement cannot realize on his lien and come in under the composition for any unpaid balance: Buck v. Shippam, 10 Jur. 581, 15 L. J., Ch. 356; Baxter v. Bell, 86 N. Y. 195. 2 Bissett V. Burgess, 23 Beav. 2T8, 2 Jur., N. S. 1221 ; Teede v. Johnson, II Exch. 840; Britten v. Hughes, 15 C. L. R. 488, 5 Bing. 460; Knight v. Hunt, 3 C. L. R. 310 ; Graham v. Askroyd, 10 Hare, 192, 17 Jur. 657 ; Evans V. Cross, 15 L. C. Rep. 86 ; Holmer v. Viner, 1 Esp. 131 ; Noyes v. Chapman, 60 Minn. 88, 61 N. W. 901 ; Almon v. Hamilton, 100 N. T. 527, 3 N. E. 580 ; Meyers v. McKee, 19 111. App. 109. If a creditor joins in a composition deed containing a clause of release and designates himself as a creditor for a certain sum, bills for a larger sum § 199] SPLITTING DEMANDS — WITHHOLDING DEMANDS 449 whether scheduled or not. The ground is, that upon the face of the composition deed, the creditor assumes to compound for the whole of his demand, or all of them, and the other creditors, there- fore, have a right to believe that the sum set opposite his name is all of the demand, or all that he has, and to take this fact, with others, into consideration in forming their judgment as to the advisability of entering into the arrangement; and, to allow him subsequently to set up a debt concealed, and in contradiction to the face of the deed, would be a violation of good faith and a fraud upon the other creditors,^ and an oppression upon the debtor who had given up his property to constitute a fund for their benefit, as well as defeat the object of the composition which was to discharge the unfortu- nate debtor from his debts.* However the rule does not apply, if a creditor, by a proper reservation in the deed made known to and assented to by the other creditors, compounds only a part of his demand or a specific demand excluding others." If a creditor at the time of executing the agreement does not have knowledge of the fraud on which a demand is founded, it will not be discharged by accepting composition money on another demand included.® A com- position is no defence tO a bill which has been transferred subse- quent to the agreement and in the hands of an innocent third party.' When a creditor signs for a debt which he had transferred to an- upon which the debtor Is indorser, which then lay dishonored in his hands are also discharged: Margetson v. Aitken, 3 0. & P. 338, 14 B. C. L. 59Y. A note payable on demand is discharged: Bartlett v. Rogers, 3 Sawy. (U. S.) 62. An agreement releasing all demands discharges a cause of action for a breach of a covenant in discharging a judgment which the debtor had assigned to the creditor, where the cause of action accrued previous to the release: Russell v. Rogers, 10 Wend. 473, 25 Am. Dec. 574, 3 RusseU V. Rogers, 10 Wend. 473, 25 Am. Dec. 578. * Holmes v. Viner, 1 Esp. 131. B Coddington v. Davis, 3 Denio, 16, afTm'd 1 N. T. 186 ; Lanyon v. Davey, 12 L. J., Exch. 200, 11 M. & W. 218; Gamier v. Papin, 30 Mo. 243. 6 Quwre, Russell v. Rogers, 10 Wend. 473, 25 Am. Dec. 574, 15 Wend. 351. 7 Margetson v. Aitken, 3 C. & P. 338. Hunt Acc.& S.— 29 450 COMPOSITION AT COMMON LAW [§ 200 Other, he impliedly undertakes to protect the debtor against such de- mand,* and in this case, as well as where a negotiable note or bill is transferred .subsequently, the creditor is liable to the debtor for the amount he is required to pay over the amount of the composi- tion.' It is immaterial in such cases whether the creditor releases the debt upon a merely nominal consideration, or receives the pro rata payment upon the composition;^" for the object of the law is to prevent a creditor from secretly transferring negotiable paper just before signing but after agreeing to the composition.^^ Sec. 200. Surety for a com,position — Rights and liabilities. — If a third party, either alone, or merely as a surety, undertakes to pay or guarantee the payment of the composition money for a debt- or, the agreement must be in writing for such a contract is clear- ly within the statute of frauds.^ If, however, property of a third person is delivered to the creditors or to a trustee, as security for the performance of the composition agreement, such pledging need not be in writing, although the property stands in the relation of a surety. A condition in a composition agreement, that it shall be void unless signed by all the creditors within a certain time, may be waived by the creditors accepting performance after the time, but such a waiver will not bind the surety, for under the statute of frauds the whole contract in order to be binding must be in writing.^ A surety, as such, is not a creditor under the composition,' and his claim for money paid on account thereof is not discharged by 8 Harloe v. Foster, 53 N. X. 385, citing Hawley t. Beverly, 6 Scott, 837, 6 Man. & Gr. 221. » See Farrington v. Hodgdon, 119 Mass. 453. 10 Harloe v. Foster, 53 N. Y. 385. 11 Bump on Comp. 39. 1 Emmett v. Dewhurst, 3 Mac. & G. 587 ; WlUiams v. Mostyn, 33 I/. J., Ch. 54. 2 Bump on Comp. 44, citing Emmett v. Dewhurst, 3 Mac. & G. 587 ; Wil- liaUQS V. Mostyn, 33 L. J., Ch. 54. sHolton V. Bent, 122 Mass. 278. § 200] SURETY FOB COMPOSITION 451 the agreement and he may recover of the debtor the amount he has paid, or in case the debtor is thrown into bankruptcy he may prove his claim there.* A debtor may give security upon any or all of his property to a person who guarantees the payment of the composition money, and if not disclosed to the creditors it will not vitiate the agreement." A surety is not bound until the com- position agreement is executed by all those who were to become parties to it in order to make it binding, and a creditor who receives a composition note with knowledge that the necessary parties have not joined, cannot enforce it against a surety who has not waived the benefit of the provision.* But a surety may waive the condi- tion that all should sign; and it is his duty to ascertain whether or not all the creditors have signed the agreement, and a creditor without knowledge that all have not signed, upon the composition note being presented to him by the surety or his agent may assume that th^ agreement has been duly signed and may hold the surety upon his con- tract.' If a surety is induced to indorse composition notes upon the false statement of the debtor that all the creditors have joined in the agreement, he is liable to all creditors who did not know of the fraud prior to receiving their note.* This is but a case of misplaced con- fidence between a surety and the principal. * Ex parte Gilbey, 8 Ch. D. 248. B Leake v. Young, 5 El. & Bl. 955. 8 Enderber v. Corder, 2 Oar. & P. 203 ; Johnson v. Baker, 4 Bam. & Aid, 440. Where a composition agreement contains a condition that it shall not be binding unless signed by all the creditors, and notes signed by a surety were delivered to a creditor when the agreement had not been signed by all the creditors, which fact was unknown to the surety, it was held that the composition agreement and contract of suretyship were a part of one transaction and the surety was not liable upon the note : Doughty v. Savage, 28 Conn. 146. 1 Whittemore v. Obear, 58 Mo. 280 : This case goes further and holds that even if the creditor was aware of such failure or fraud and chose to waive the objection, it did not lie In the mouth of the surety to set it up as a defense. 8 See Whittemore v. Ohear, 58 Mo. 280. 452 COMPOSITION AT COMMON LAW [§ 200 There must be an actual delivery of the instrument. A surety- may prove by parol that at the time he signed the agreement and authorized it to be taken around for the signatures of the other creditors, it was agreed that the deed should be void unless signed by all the creditors.* A stipulation in a composition agreement to which a surety is a party, that it shall be void unless all the cred- itors sign it, is for the protection of the surety, and an acceptance and retention of the money by one creditor, discharges his entire demand although the agreement is voidable on the ground that oth- er creditors had received a larger proportion, or had received a compensation to induce them to sign. If a creditor elects to avoid the agreement he must return to the surety the money received.^' A surety assumes the risk of a default by the debtor, and is charged with knowledge that in case of a default, the law applies a partial payment upon a composition as a discharge pro tanto of the orig- inal cause of action, and the surety cannot have his money back.^^ In case of a breach which only a creditor can take advantage of, the surety cannot compel the creditor to elect to accept or reject the com- position.^'' Where a creditor induces a third person to guarantee a certain amount, on the representation that he is accepting a compo- sition from his debtor when in fact he is paid in full, the guarantor cannot be held.^° If a person having a demand assures a third par- ty that he will never sue the debtor on it, and the third party there- upon becomes a surety for the payment of a composition, the cred- itor cannot afterwards maintain an action on the demand as it would be a fraud upon the surety.^* The effect of a secret preference up- on the liability of the surety is considered elsewhere.^' Johnson v. Baker, 4 Barn. & Aid. 440 : It was held that the delivery of the deed to be taken around for signatures amounted merely to a delivery In escrow. 10 Babcock v. Dill, 43 Barb. 577; Crandall v. Cochran, 3 T. & C. 203. 11 Ex parte Gllbey, L. R. 8 Oh. Div. 248. 12 Ex parte Gilbey, 2 Q. B. Div. 6, 26 W. R. 768. 18 Clark V. Ritchie, 11 Grant's Ch. B. 499: Pendleberg v. Walker, 4 Young & Coll. (Ex.) 224. 14 Clark V. Upton, 3 Man. & R. 89. 15 See. 205. § 201] FRAUDULENT REPRESENTATION BY DEBTOR 453 Sec. 201. Fraudulent representations by the debtor as to his affairs avoids the composition — A creditor as a decoy — Mistake of fact as a ground for rescission — Equitable relief — Release vacated — Security reinstated. — Where a debtor in embarrassed circumstances appeals to his creditors for a composition of his debts the law holds him to the utmost good faith in effecting the composition, and any misrepresentation as to the condition of his affairs/ or as to the amount of his debts, or misrepresentation or concealment as to the kind, condition or amount of his property,^ or as to the number of creditors who will join,' will enable an injured creditor, at his op- tion, to avoid the agreement.* If avoided by one it may be avoided by all; otherwise the one withdrawing from the agreement might recover on his claim and exhaust the very funds out of which the composition money was to be paid. The rescinding creditor could not, however, against the wishes of the remaining creditors, interfere with their pro rata of the composition funds in the hands of a trustee under a valid assignment. If one partner misrepresents the affairs of the firm," or of his individual debts or resources, it will invalidate a composition with the firm. The debtor is bound by the misrepresentations of his agent," even though the agent believed the statements to be true and made them without the principal's knowl- edge.'^ If the creditors do not interrogate the debtor as to his finan- 1 Stafford v. Bacon, 1 Hill, 532, 3T Am. Dec. 363. 2 Armstrong v. Mechanics' Bank, 6 Bliss (U. S.) 520. « Cooling V. Noyes, 6 T. R. 263. 4 Ball V. McGeoch, 81 Wis. 160, 51 N. W. 443 ; Enneking v. Stahl, 9 Mo. App. 390 ; Hefter v. Cohn, 73 111. 296 ; Seving v. Gale, 28 Ind. 486 ; Graben- heimer v. Blum, 63 Tex. 369 ; Woodruff v. Saul, 70 Ga. 271 ; Almon v. Ham- ilton, 100 N. W. 527, 3 N. E. 580: In this case the debtor stated that he was only a special partner, whereas he was a general partner and liable for all the debts of the firm. B Smith V. Salomon, 7 Daly (N. Y.) 216. « Cobb ▼. Fogg, 166 Mass. 466, 44 N. B. 534 ; Laird v. Campbell, 100 Pa. St. 159. 7 Elfelt V. Snow, 2 Sawyer (U. S.) 94. 454 COMPOSITION AT COMMON LAW [§ 201 cial condition, he need not generally make any disclosure; but he must of necessity make some representations as to his embarrass- ment on making the appeal to them, and if it be in general terms and they do not choose to enquire of him as to his affairs, they can- not avoid the agreement on the ground that he failed to make a dis- closure,' but only on the ground that the debtor knew at the time he was not embarrassed. If the debtor by words or acts leaves a creditor under a false impression as to his assets, the creditor may avoid the agreement and sue for the residue." If he is called upon for a statement of his affairs, or the circumstances cast the duty to make one upon him, he must make a full and true statement in or- der to bind the creditors.^" The creditors are not bound to look to any other source for information. If the creditors do not call for a statement, but accept the mere opinion of the debtor as to his finan- cial condition, they cannot avoid the agreement on the ground that the opinion was not in accordance with the true situation,^* unless they show the opinion was fraudulently given, or so far from the truth that knowledge of its falsity would be imputed -to the debtor as a matter of law.^^ Fraudulent representations made to one cred- itor is no ground for an avoidance of the agreement by other cred- itors not affected by the fraud. ^° 8 (Jraham v. Mayer, 99 N. Y. 611, 1 N. E. 143 ; Cleveland v. Richardson, 132 U. S. 318, 10 S. Ct. 100, 33 L. Ed. 384. 8 Vine V. MitcheU, 1 M. & Rob. 337. 10 Irving V. Humphry, 1 Hopk. Ch. (N. Y.) 284; Hefter v. Cohn, 73 lU. 296. 11 National Bank v. McGeoch, 92 Wis. 286, 66 N. W. 606: In this case the receiver of the defendant gave his opinion as to the condition of the debtor's affairs. Denny v. Oilman, 26 Me. 149. 12 An opinion or representation that, after paying forty five cents on the dollar, he would have "some means" left, was held not to be understood by the creditors as meaning that he would have more by half left than he was paying them: Elfelt v. Snow, 2 Sawyer (U. S.) 94, 6, Nat. Bankr. Reg. 57. 18 Cheveront v. Textor, 53 Md. 295 ; Clark v. White, 12 Pet (U. S.) 178, 9 L. Bd 1046. § 201] FBAUDULENT BEPBESENTATION BT DEBTOB 455 A composition agreement being an entirety among all the creditors and made with the understanding that all shall share alike, if a credi- tor who was induced to come in by the fraud of the debtor, repudiates it, the remaining creditors may elect to consider the agreement at an end.^* A creditor cannot avoid a composition agreement on the ground of fraud unless it be made to appear that he believed the false statements to be true and relied upon them, and was deceived and misled thereby.^" If he has full knowledge of the facts and acts upon his own judgment he will be held to the agreement.^' A creditor receiving or reserving a benefit not common to all, must not act as a decoy to bring others into a composition agreement. If a creditor induces others to join in such an agreement by false repre- sentations as to the amount or number of his claims, he cannot re- cover of the debtor the amount not included in the composition.^^ The creditor who was deceived cannot avoid the composition unless the debtor was a party to the fraud. If a creditor by a promise of a secret preference induces others to join with him in the agree- ment, he cannot recover the composition money ; ^* but the agree- ment may be avoided by the other creditors. The rule that a contract may be avoided or rescinded on the ground of a mistake of fact material thereto, has no application to cases where several creditors have agreed with their debtor to accept a composition of their debts, where each agrees to compromise upon consideration of a like agree- ment of the others, and no one of them can avoid or rescind the agreement upon his part on the ground that it was made through 14 It has been held that a recovery by the defrauded debtor of his entire claim -will not invalidate the composition as to the other creditors: Chev- eront v. Textor, 53 Md. 295. But this doctrine would tie the other creditor's hands, while the one to whom the fraudulent representations were made, exhausted the debtor's estate. iBNieolai v. Lyon, 8 Oreg. 56; Irving v. Humphry, 1 Hopk. Oh. (N. T.) 284. 16 Clark V. White, 12 Pet. (U. S.) 178, 9 U Ed. 1046. 17 Blackstone v. Wilson, 26 L. J., Bxch. 229. 18 Ji'rost V. Gage, 85 Mass. 560. 456 COMPOSITION AT COMMON LAW [§ 202 mistake, forgetfulness or ignorance as to the amount of his claim, or that it was secured. The right to rescind for mistake of fact applies only where the rights of innocent third parties will not be prejudiced.^' A creditor who has been induced to join in a compo- sition by the misrepresentations of the debtor; or where an unlaw- ful preference has been given to another creditor, may bring an ac- tion in equity to set aside the composition agreement, or a release,^" or for a redelivery of the original note or other evidence of the debt surrendered by him."^ A court of equity may reinstate any security surrendered by the creditor. Sec. 202. Secret preference fraudulent — Agreement unenforce- able — An affirmative defence — When res adjudicata. — ^The cardinal principle upholding a composition agreement is equality among the creditors. Where creditors prompted by compassion for their un- fortunate debtor agree among themselves to forego any advantage to be derived from individual efforts at collecting their several debts, and to suffer an equal loss by accepting a pro rata distribution of the property offered by the debtor in satisfaction, the parties of neces- sity must repose special trust and confidence in each other; and, the nature of the transaction and the previous situation of the parties call for the utmost good faith upon the part of all the parties. This the law demands and exacts. A debtor must not, therefore, pretend to deal with all alike when the facts are otherwise, and a creditor must not hold himself out as acting conjointly when he is acting in- i» Johnson v. Parker, 34 Wis. 596. 20 Martin v. Adams, 81 Hun, 9, 31 N. T. Supp. 523, 62 N. T. St. 404; Smith V. Salomon, 7 Daly (N. ¥.) 216; Richards v Hunt, 6 Vt. 251, 27 Am. Dee. 545; Phlttiplace v. Sayles, 4 Mason (U. S.) 312; Jackson v. Hodges, 24 Md. 468; StafCord v. Bacon, 1 Hill, 532, 37 Am. Dec. 263 (Accord and satisfaction). In Irving v. Humphry, 1 Hopk. Ch. 284, it was held that the court was not bound to vacate the release, but may hold the defendant to a liability to the extent that his property had not been applied to that pur- pose. 21 Cobb V. Fogg, 166 Mass. 466, 44 N. B. 434 § 202] SBOBET PKEFERBNOB FKAUDULBNT 457 dependently. Therefore, if a creditor, without the knowledge of the other creditors or any one of them, bargains for and receives from the debtor, as a condition for his joining in the composition agree- ment, any present advantage, or promise, which gives him a pref- erence or the possibility of a preference over the other creditors, he violates the confidence reposed in him by the other creditors and per- petrates a fraud upon them, and his entire agreement with the debt- or, not only for the secret preference but for the composition as well, is fraudulent and void.^ And any independent contract, note, security, or any obligation, obtained upon such fraudulent agree- ment, is absolutely void and unenforceable, whether executed before, at or after the time of executing the composition agreement.^ So, if the contract for the payment of the secret preference is a part of the contract for the payment of the composition money, as where he takes a note for the entire sum agreed to be paid, he can- not enforce it.^ The rule applies alike to contracts made by the debtor in person and those made by third persons for his benefit,* whether made with or without the debtor's knowledge." If a ne- 1 Bowers v. Mety, 54 Iowa, 394, 6 N. W. 551. 2 RamsdeU v. Edgarton, 8 Met. 22T, 41 Am. Dec. 503 ; Doughty v. Savage, 28 Conn. 166; NeweU v. Higgins, 55 Minn. 82, 56 N. W. 577; Powers v. Harlln, 62 Minn. 193, 71 N. W. 16; Yeomans v. Chatterton, 9 Johns. 29.^, 6 Am. Dec. 277 ; Bradley v. Lally, 51 N. Y. St. Rep. 1152 ; Cockshott v. Ben- nett, 2 T. K. 763 ; Spurret v. Spiller, 1 Atk. 105, 26 Eng. Reprint, 69 ; Lewis V. Jones, 4 Barn. & C. 506, 8 Dowl. & R. 567; Fay v. Fay, 121 Mass. 561; Lathrop V. King, 8 Cush. 382; Harvey v. Hunt, 119 Mass. 279; O'Shea v. Collier, 42 Mo. 397, 97 Am. Dec. 332 ; Goodwin v. Blake, 3 T. B. Mon. 106, 16 Am. Dec. 87; Townsend v. Newell, 22 How. Pr. 164; Bliss v. Mattson, 45 N. Y. 22; Lawrence v. Clark, 36 N. Y. 128; Wheelwright r. Jackson, 3 Taunt. 109; Fawcett v. Gee, 3 Anst. 910; Oulllngworth. v. Lloyd, 2 Beav. 165; Jackson v. Mitchell, 18 Ves. Jr. 581. 3 Townsend t. Newell, 22 How. Pr. 164 ; . Eldridge v. Strong, 34 N. Y. Super. Ct. 491;. Sternburg v. Bowman, 103 Mass. 325. 4Solinger v. Earl, 82 N. Y. 393, 60 How. Pr. 116; White v. Kuntz, 107 N: Y. 518, 1 Am. St. Rep. 886. sPulsford V. Richards, 17 Beav. 87, 17 Jur. 865, 22 L. J., Ch. 559; Brad- shaw V. B'radshaw, 9 M. & W. 29 ; Bank v. Hoeber, 11 Mo. App. 475, aff'ing 458 COMPOSITION AT COMMON LAW [§ 203 gotiable note, given as a fraudulent preference, falls into the hands of a bona fide holder, the debtor is liable thereon; but an indorsee who takes such note for a pre-existing debt without surrendering any security or right in respect to it, is not a bona fide holder of the same.* A non-negotiable security in the hands of an innocent third party for value, is subject to the defence that it is a fraudulent pref- erence. If sued on a note given for a fraudulent preference, the debtor or whoever is liable thereon, must set up the fraud as a de- fence or it will be waived.'' But if there are two notes, a failure to plead the fraud as a defence to one note will not prevent the debtor from interposing the defence of fraud when sued on the other note.' On the other hand, if two notes were given as a secret pref- erence, and a judgment goes in favor of the debtor in an action upon one note, upon the question of- fraud, it amounts to a res ad- judicata upon that question in an action between the same parties upon the other note.* Sec. 203. Recovery of secret preference by debtor — By near relative — Stranger — When 'composition agreement is not execut- ed — ^When debtor is in default — When not recoverable — Relief in equity. — While both the debtor who gives a secret preference, and the creditor who receives it are guilty of fraud upon the creditors, yet they are not in pari delictu, for they are not upon an equal foot- ing. Lord Ellenborough said : "This is not a case of pa/r delictum; it is oppression on the one side arid submission on the other ; it nev- er can be predicated as par delictum where one holds the rod and the 88 Mo. 37, 67 Am. Rep. 359 ; Luehrmann v. St. Louis Fur. Co., 21 Mo. App. 4^. Oontra Martin v. Adams, 81 Hun, 9, 30 N. X. Supp. 523, 62 N. Y. St. 404. See also Babcoek v. DUl, 43 Barb. 577. 6 Lawrence v. Clark, 36 N. Y. 128, T Wilson V. Ray, 10 Ad. & B. 82 ; Smith v. Evans, 21 Cal. 11. The burden of proving a fraudulent preference is upon the party alleging it : National Bank v. McGeoch, 92 Wis. 286. » Uugbes V. Alexander, 5 Duer, 488. » Higgins v. Mayer, 10 How. Pr. 363. § 203] EECOVKRY OF FBAtrDTTLENT PEEFEEENOB 459 Other bows to it." ^ The law assumes this from the situation of the parties and does not stop to enquire into it; but even if it should appear that there were no threats or pressure used by the creditor, and that the preference was merely volunteered to be given by the debtor, the creditor in receiving it would nevertheless be guilty of duplicity towards the other creditors, and relief would be granted the debtor, not so much for his sake but upon the ground of public policy, in order to punish the dishonest creditor and thereby sup- press fraud. Therefore the money paid by a debtor to a cred- itor at the time he signs a composition agreement, as a secret pref- erence, to induce him to join in the agreement, is considered as hav- ing been paid under duress and may be recovered by the debtor,^ or by his assignee,' or personal representatives.* So, if a note was given for such preference and the debtor afterwards was compelled to pay it to a bona fide holder, he may recover the amount paid from the creditor." If a near relative out of compassion for the debtor pays the money he may recover it from the creditor.* But the rule 1 Smith V. CufC, 6 M. & S. 160. 2 RamsdeU v. Edgarton, 8 Met. 227, 41 Am. Dec. 503 ; Gllmore v. Thomp- son, 49 How. Pr. 198 ; Bean v. Arnsinck, 10 Blatchf. 361 ; Atkinson v. Denby, 6 H. & N. 778, 7 H. & M. 934; Bean v. Brookmlre, 2 DUl. 108; Turner v. Hoole, Dow. & Ry. N. P. 27 ; Alsager v. Spalding, 4 Bing. N. C. 407, 6 Scott, 204, 1 Am. 181; Bradshaw V. Bradshaw, 9 Mees. & W. 29; Bsterbrook v. Scott, 3 Ves. Jr. 456 ; Mare v. Warner, 3 Glff. 190, 7 Jur. N. S. 1228 ; Jack- man V. MitcheU, 13 Ves. Jr. 581 ; (Dictum) Newell v. Higgins, 55 Minn. 82, 56 N. W. 577. See Crossley v. Moore, 40 N. J. E. 27. 3 Bean v. Amslnck, 10 Blatchf. 361; Bean v Brookmire, 2 Dill. 108; Al- sager V. Spalding, 6 Soott, 204, 4 Bing. N. O. 407. * See Pfleger v. Brown, 28 Beav. 391. 6 Smith V. Cuff, 6 Man. & Sel. 160 ; Bradshaw v. Bradshaw, 9 Mee. & W. 29; Horton v. Riley, 11 Mee. & W. 499; Gilmore v. Thompson, 49 How. Pr. 198. 6 Smith V. Bromley, 6 Douglas, 696: "If any near relative is induced to pay money for the bankrupt, it is taking an unfair advantage and torturing the compassion of his family." Per Lord Mansfield. 460 COMPOSITION AT COMMON LAW [§ 203 does not extend to a stranger,^ such as a brother-in-law.* The se- cret preference may be recovered although all the creditors do not sign, where that is necessary; or the debtor is in default in not pay- ing the composition money,* for as to the guilty creditor, the compo- sition extinguishes his debt and the fraud gives him no right to re- cover the composition money, therefore as to him there can be no default.^" If, however, the debtor gives his note for the preference and afterwards pays it to the creditor, he cannot recover, for the payment is voluntary.^^ Nor can such a payment be set up as a coun- terclaim.^^ A surety or a guarantor, who knowingly pays a cred- itor an unlawful preference to induce him to join in the composi- tion agreement, cannot recover it from the debtor although the lat- ter has given his note or accepted a bill drawn on him for the money. ^* If the composition money, with or without an additional sum as a preference, is paid in advance of signing the agreement, when the payment of the money to the creditors under the agreement is defer- red, the prior payment is itself a fraudulent preference and may be recovered back; or the creditors, if they do not choose to avoid the agreement, may compel it to be returned to the debtor, or they may recover it for his benefit under the agreement. But if the compo- I See Bradshaw v. Bradshaw, 9 Mee. & W. 29. 8 Solinger r. Earle, 82 N. Y. 393, 60 How. Pr. 116. » Bean t. Arnsinck, 10 Blatchf. 361 ; Bean v. Brookmlre, 2 Dill. 108. See Wheelwright v. Jackson, 5 Taunt. 1093, where the composition agreement was not signed by all the parties and the arrangement fell through; Lord Mansfield, with great reluctance held that the assignee of the debtor could not recover the illegal preference. See Ward v. Bird, 2 Chitty, 582, where it was held he could not recover the difference between the composition and the full payment without showing the composition notes had been paid. 10 Ex parte Oliver, 4 De G. & F. 354. See Townsend v. Newell, 22 How. Pr. 363. II Wilson V. Ray, 10 Ad. & B. 82 ; Bradshaw v. Bradshaw, 9 Mee. & W. 29. 12 Smith V. Zeigler, 17 N. Y. Supp. 338. 18 Bryant v. Christie, 1 Stark. 329, 2 E. O. L. 129, § 204] FBAUDULENT PBEFEBENOB 461 sition money was to be paid down on the execution of the agree- ment, and a fraudulent preference was also exacted, while the whole agreement is tainted with fraud and unenforceable if executory, only the fraudulent preference can be recovered as it is the preference that affects the creditors. In order to defeat a note given for a fraudulent preference, it is not necessary to prove the signature of all the creditors to the composition agreement when the agreement is offered in evidence, for the reason that a fraud on any one cred- itor, renders the note void.^* It appears that if the debtor has been guilty of any independent fraud, as where he obtained the composi- tion by concealing a part of his assets," the law will not lend its assistance to recover a secret preference. Although a debtor is guilty of fraud in giving a secret preference, and his hands are not clean, yet a court of equity, on the ground of public policy, will afford him relief by requiring a note or other security given as a secret prefer- ence to be surrendered ^° or cancelled, or will restrain the creditor from transferring a negotiable note of security, or enjoin him from enforcing the note or security.^^ Sec. 204. Secret preference — Illustrations — Evidence — Question for the jury. — Any agreement secretly made by a debtor, or by some one for him, with one or more of his creditors less than all, before making a composition agreement or at the time of its execution, as an inducement to join in the agreement, giving him or them presently or upon performance at a future time, something different from that which the other creditors are to receive under the composition agree- ment, constitutes a secret preference and is a fraud upon the inno- cent creditors. It is the policy of the law, particularly with respect to composition agreements where the temptation is great for a cred- it Beach V. OUendorf, 1 Hilt. 41. IB Armstrong v. Mechanics' Bank, 6 Biss. 520. le Jackman v. Mitchell, 13 Ves. Jr. 581. 1' A judgment entered by confession for the secret preference will be vacated, or its enforcement enjoined: Blodget v. Hagan, 10 La. Ann. 18. 462 COMPOSITION AT COMMON LAW [§ 204 iter to save himself from loss by circumventing the other creditors, to discourage fraudulent practices and bad business morals, and in doing this, the law never stops to enquire whether the benefit sought to be obtained is great or small, or is of any benefit whatever; nor, in this case, whether the secret benefit bargained for is detrimental to the other creditors or not.^ With respect to enforcing a rule of public policy that is merely a collateral issue and immaterial. If, by the agreement, creditors are to be paid at a future time, and one creditor secretly bargains for an immediate payment, even though he dis- counts the amount to be paid under the composition,* or for a note due before the time fixed,' or for the payment of the balance of the original debt,* it is a fraudulent preference. Requiring a debt- or to assume a debt for which he is not liable, and including it with a demand due the creditor from the debtor in the composition agreement, amounts to a fraudulent preference." Any secret security given for the payment of the composition money or any part of it, is such a preference as will avoid the composition agreement.' A se- 1 A secret preference Is void altbough no one is deceived by the fraud : Fawcett v. Gee, 3 Anst. 910. 2 Bean v. Amslnck, 10 Blatchf. (U. S.) 361. s. P. Zell Co. v. Emry, 18 S. B. 89. « Smith V. Owen, 21 Gal. 11. * Cockshott V. Bennett, 2 T. R. 763 : A note was given for the balance. B Doughty V. Savage, 28 Gonn. 146. 6 Leicester v. Rose, 4 East, 372, 1 Smith, 41 ; PInneo v. Higgins, 12 Abb. Pr. 334. Where a creditor obtained a guaranty for the payment of a debt in full pending negotiations for a composition, and then signed the deed, and some of the creditors signing did not know of the guaranty, it was held that the guaranty was a fraud upon the creditors, and void: Coleman v. Waller, 3 lounge & Jer. 212. Demanding and receiving any additional se- curity not held by the other creditors, is a fraudulent preference ; Leicester V. Rose, 4 East, 280. Agreeing with a creditor that he may retain his orig- inal claim until the composition notes are paid, is a preference: Zell Co. v. Emry, 18 S. B. 89. Secretly assigning an Insurance policy to one creditor (Alsager v. Spalding, 1 Arn. 181, 4 Bing. N. C. 407); or agreeing to keep up the premiums on a life policy for the creditor's benefit. Is a fraudulent preference: Pfleger v. Brown, 20 Beav. 391. § 204] FBATJDULENT PBEFBEENOB 463 cret agreement by a third party with a creditor, to pay $10,000 for composition notes for $6,000,^ made to induce him to join in the composition agreement, is a fraudulent preference. A promise by a debtor, or a third party interested in securing property subject to the lien of certain debts, to one of the lien holders, to pay his lien in full or to give him any other advantage over the other creditors, made as an inducement to him to use his influence to induce the other creditors to accept the composition offered, is a secret pref- erence.* A note given to a third party to induce a creditor to sign,* or to refrain from interfering with a composition,^" is void, if not on the ground that it is a fraudulent preference, at least on the ground that it is a premium on the use of undue influence or perhaps false rep- resentations ; or as imposirig silence when a person ought to speak, as the case may be. Where a creditor holding a claim against an individual member of a firm and one against the firm, took collateral from the partner to secure the individual claim, it was held not to invalidate a composition entered into by the firm with its creditors.*^ Any property taken in exchange for the composition notes or se- curity obtained therefor after the composition, will not affect it un- less the agreement therefor was prior to or a part of the composition agreement.^^ A promise to pay the residue of a debt discharged by a composition, made after the discharge is not fraudulent, if uncon- 7 White V. Kuntz, 107 N. X. 518, 1 Am. St. Rep. 886. 8 Where a corporation Is compounding its debts by way of a composition, a secret agreement by the person seeking to reorganize the company, with a director, that if he will use his influence to get certain bondholders to come into the proposed arrangement, the new company will pay the director the amount of certain bonds held by him, which was more than other bond- holders were to receive, was held a fraudulent preference: Bliss t. Matt- son, 45 N. X. 22. » Winn V. Thomas, 55 N. H. 294. loBuUene v. Blaln, 6 Biss. 22. 11 Continental Bank v. McGeoch, 92 Wis. 286, 66 N. W. 606. izflagen's App. 11 W. N. C. 86. 464 COMPOSITION AT COMMON LAW [§ 205 nected with the previous agreement, but in order to be enforceable it must be founded upon a new consideration or under seal. Parol evidence is admissible to prove a fraudulent preference.^* A secret preference being alleged, evidence that the creditor's claim was paid in full, is admissible as tending to establish such allegation.** If the evidence is conflicting as to whether a note was given as a secret preference or for some other purpose, it is a question for the jury.*' Sec. 205. Effect of a fraudulent preference upon the liability of surety — Remedy at law, in equity. — The object of a surety guar- anteeing the payment of a composition is to relieve the debtor from his entire liability for the debts compounded by the payment of a part, and a secret preference by a payment to a creditor of any sum beyond the composition agreed upon, or a secret promise which leaves the debtor bound for any further sum, or a secret security given, not only defeats the object of the composition and the intent of the surety, but impairs the ability of the debtor to reimburse the surety and therefore is a fraud upon him. It is also a fraud upon the creditors. What then is the effect upon the liability of the sure- ty? Where the surety at the time of entering into the agreement is ignorant of the fraudulent preference and is afterwards sued by the party receiving such unlawful preference, the decisions are uniform in holding that the surety, indorser, or guarantor, is not bound by his agreement.* But if the surety is a party to the fraud, as where 18 Eamsdell v. Edgarton, 8 Mete. 227, 41 Am. Dec. 503. 1* Musgat V. Wybro, 33 Wis. 515. See Frleberg v. Treitschke, 55 N. W. (Neb.) 273, where a note was given for the residue. 16 First National Bank v. Steel, 58 Minn. 126, 59 N. W. 959. 1 Newell V. Hlggins, 55 Minn. 82 (indorser) ; Powers v. Harlin, 68 Minn. 193, 71 N. W. 16; Clark v. Richey, 11 Grant Ch. (U. C.) 499; Eldrldge v. Strong, 34 N. Y. Super. 491; Pendleburg v. Walker, 4 You. & Col. 424; Pinneo v. Higglns, 12 Abb. Pr. 334 ; Doughty v. Savage, 28 Conn. 146 ; Bailey V. Boyd, 75 Ind. 125. Requiring a debtor to assume a debt due a creditor from another person for which the debtor is not liable, and including it with another claim In the composition agreement without the knowledge of the surety, is a fraud upon the surety and releases him: Doughty 205] EFFECT OF FRAUDULENT PBEFEBENOH 465 he, with knowledge of the terms of the composition agreement, in- dorses a note given for the fraudulent preference as well as the com- position notes, he might well be held on his indorsement of the com- position notes by the innocent creditors, upon the same principle that a creditor guilty of taking a fraudulent preference is not permitted to avoid the composition. In a New York case, where an indorser upon a composition note, when sued upon the note defended on the ground that the plaintiff without the knowledge of the creditors had received a fraudulent preference in obtaining her indorsement upon two other composition notes; the court, after an exhaustive analysis of the decisions, while holding that the agreement for and the giving of the illegal security was unlawful and void, held the plaintiff en- titled to recover on the ground that such agreement falls within the rule which permits a severance of the illegal from the legal part of the agreement.^ The point whether the surety had knowledge of the terms of the composition agreement and was a party to the fraud was not adverted to. The decision was based squarely upon the rule announced that a fraudulent preference did not avoid the com- position agreement, but only the agreement giving the fraudulent preference was void; a principle which finds little support outside the decisions of the New York courts.^ V. Savage, 28 Conn. 146. This was an action by the party receiving the preference. 2 Hanover v. Blake, 142 N. Y. 404, 27 L. K. • A. 33. See note to L. E. A. for a collection of authorities. See Clark v. Kichey, 11 Grant Ch. (U. 0.) 499. 3 The decision in Hanover v. Blake, 142 N. Y. 404, 27 L. R. A. 33, was given by a divided court ; and Gray, J., in commenting upon White v. Kuntz, 107 N. Y. 518, 1 Am. St. Kep. 886, silently ignored the utterances of Earl, J., in the latter case, to the effect that the composition agreement was ab- solutely void as to innocent creditors on account of the fraudulent prefer- ence. See Page v. Carter, 16 N. H. 254, 41 Am. Dec. 726. And see Bartlett v. Blain, 83 111. 25, where the court overlooked its previous declaration in Hefter v. Cahn, 73 111. 246, that it could not consider an innocent creditor bound by a composition where there was a secret preference given to an- other. HuntAcc&S.— 30 466 COMPOSITION AT COMMON LAW [§ 205 The rule that an innocent creditor may avoid the composition agreement on the ground of a fraudulent preference is supported by the decided weight of authorities,* and an innocent surety, whose in- terests are more carefully guarded, may do likewise,^ even when sued by a creditor not a party to the fraud. A surety who has paid the composition money, may, on discovering that a fraudulent prefer- ence had been given, recover the payment made by him; but if paid after having knowledge of the fraud, it amounts to a voluntary pay- ment and cannot be recovered, unless paid upon a negotiable instru- ment in the hands of a bona fide holder for value. So, a surety or guarantor, may sue in equity to have any security given by him de- livered up, set aside or canceled,' or to enjoin the creditor from en- forcing the same.^ Sec 206. Fraudulent preferences — Avoidance of composition by innocent creditors — Preference paid by stranger — Waiver of the fraud — Avoidance optional — Remedies — Rescission. — While there are decisions to the contrary, it is clear that the weight of au- thority is, that where one creditor has secretly obtained an undue advantage by a fraudulent preference, the composition agreement is absolutely void as to all the innocent creditors, and they are left with the right to enforce their original claims as if they had never signed the agreement.^ If an innocent creditor has received the com- 4 Sec. 206. 5 See Powers v. Harlln, 68 Minn. 193, 71 N. W. 16, where the court re- views the authorities and analyzes the subject. Jackman v. Mitchell, 13 Ves. Jr. 581 ; Pendleberg v. Walker, 4 Y. & 0. Bxch. 424; Wood v. Barker, 11 Jur. N. S. 905; Cobb v. Fogg, 166 Mass. 466, 44 N. E. 534. 7 Almon V. Hamilton, 100 N. Y. 527, 3 N. E. 580 (Affirming 30 Hun, 88) ; Jackman v. Mitchell, 13 Ves. Jr. 581 ; Spurret v. Spiller, 1 Atk. 105, 26 Bng. Reprint, 69. 1 Powers V. Harlin, 62 Minn. 193, 71 N. W. 16 ; White v. Kuntz, 107 N. Y. 518, 1 Am. St. Rep. 886; Cobb v. Tirrell, 137 Mass. 143; Partridge v. Messer, 14 Gray, 180 ; Ramsdell v. Edgarton, 8 Met. 227, 41 Am. Dec. 503 ; Kahn v. Gumberts, 9 Ind. 430; Hefter v. Cahn, 73 111. 296; Saul v. Buck, § 206] AVOIDANCE OF COMPOSITION 467 position money he may recover the balance due on the original claim.^ The fact that the preference was paid by the debtor's agent or attorney/ or by a third party, does not affect the rule.* Nor will the payment of a preference by a third party without the connivance of the debtor affect the rule." The question seems to turn on the fraud of the creditor." A creditor by his conduct may waive the fraud ; thus, where a creditor, after learning of the secret preference, accepted the composition notes indorsed by a surety, which the latter afterwards paid, it was held that the creditor could not recover the balance due on the original demand. Good faith towards the surety required that the creditor repudiate the agreement at once.' So, it is waived as to those creditors who knew of the preference at the time they signed the agreement ; * although it might be more proper to 70 Ga. 254; Woodruff v. Saul, 70 Ga. 271; Crossley v. Moore, 40 N. J. L. 27 ; KuUman v. Greenbaum, 92 Cal. 403 ; Zell v. Emry, 113 N. C. 85, 18 S. E. 89; Danglish v. Tennant, L. R. 2 Q. B. 49; Crandall v. Cochran, 3 Thomp. & C. 203; Spooner v. Whiston, 8 J. B. Moore, 580; Bank v. Hoeber, 8 Mo. 37; Musgut v. Wybro, 33 Wis. 516. Contra Page v. Carter, 16 N. H. 254, 41 Am. Dec. 726; Hanover v. Blake, 142 N. T. 404, 27 L. R. A. 33. See Bartlett v. Blain, 83 111. 25, 25 Am. St Rep. 346, where the court overlooked its previous declaration in Hefter v. Cahn, 73 111. 296, to the contrary. 2 Cobleigh v. Pierce, 32 Vt. 788 ; Brownville v. Lockwood, 3 McCrary, 608 ; Greer v. Shriver, 53 Pa. 257. 3 Bank v. Hoeber, 11 Mo. App. 475, 88 Mo. 37, 57 Am. Rep. 359. 4 Knight V. Hunt, 5 Bing. 432 ; Ex parte Milner, L. R. 15 Q. B. Div. 605, 54 L. J., Q. B. 425, 33 W. R. 867 ; Solinger v. Earle, 82 N. Y. 393, 60 How. Pr. 116. 5 liUehrmann v. St. Louis F. Co., 21 Mo. App. 499 ; Bradshaw v. Brad- shaw, 9 Mee. & W. 29. Contra Martin v. Adams, 81 Hun, 9. See Babcock V. Dill, 43 Barb. 577. 6 See Kullman v. Greenbaum, 92 Cal. 403, 28 Pac. 674, 27 Am. St. Rep. 150. 7 Bower v. May, 54 Iowa, 394, 6 N. W. 551 ; Continental Bank v. Mc- Geoch, 92 Wis. 286, 66 N. W. 606 ; Cobleigh v. Pierce, 32 Vt. 788. sjackman v. Mitchell, 13 Ves. 581; O'Shea v. Collier, 42 Mo. 397, 97 Am. Dec. 332. 468 COMPOSITION AT COMMON LAW [§ 206 say that, as to them, it was a part of the composition agreement at the time they executed it. While an innocent creditor may recover on his original cause of action where a fraudulent preference has been given, he is not obliged to do so but may elect to hold the debtor to the composition agreement and the debtor cannot set up his own fraud to defeat it. But the agreement may be avoided by any one of the innocent cred- itors ; and where the composition money is to be made out of the sale of property and a willing creditor cannot have his pro rata at once in money, an avoidance by one necessarily works an avoidance as to all. Where a composition agreement is voidable on the ground of fraud, and there has been no performance, or if the agreement has been performed by paying money only, the creditor need do no more than sue for the amount of the original claim, or the balance due after deducting the amount received upon the composition agree- ment. No formal rescission is necessary.' If he has surrendered notes representing the indebtedness he may nevertheless sue upon thera.^" If, however, the money paid iipon a composition was ad- vanced by a surety it must be restored to him, if the creditor desires to avoid the agreement.^'- So, if there has been an assignment of the debtor's property out of which the composition money was to be made, or something other than money was received in satisfac- tion and the property has not been disposed of, the creditors should rescind by returning the property to the debtor. If the property has been disposed of pursuant to the composition agreement and the proceeds distributed among the creditors, their remedy is for 9 Smith V. Salomon, 7 Daly (N. T.) 216 ; Bnnekln v. Stahl, 9 Mo. App. 390; Pierce v. Wood, 23 N, H. 519. If the debtor has committed an act of bankruptcy the creditor may proceed in bankruptcy: Ex parte Cowen, L. R. 2 Oh. 563. A judgment creditor may issue an execution: EJx parte Milner, 15 Q. B. Div. 605, 83 W. R. 867. loBlodgett V. Webster, 24 N. H. 91; Bank v. Hoeber, 8 Mo. App. 191; Stewart v. Blum, 28 Pa. St. 225. 11 r«wi8 V. Jones, 4 B. & C. 506, 10 E. 0. L. 679. See See. 200. See also Bower v. Metz, 54 Iowa, 394, 6 N. W. 551. § 207] FBAUDULENT PBEFEEENOB 469 damages suflFered on account of the fraud.^" In such cases the amount of the recovery will be limited to the difference between what had been received and what the debtor could have paid/' tak- ing all his property into consideration. Losses of the debtor subse- quent to the date of the agreement cannot be deducted." Sec. 207. Fraudulent preference — Creditor particeps fraudis cannot avoid the composition for fraud — Cannot enforce compo- sition agreement, nor recover on original demand. — ^The author- ities are not in accord on the question whether a creditor who is guilty of fraud in receiving a secret preference, can avoid the com- position on the ground of the fraud of the debtor, whether the fraud consists in giving a secret preference to another, or concealing his assets, or false representations. Where a creditor in his reply al- leged that the composition agreement had been obtained by covin and fraud, and the proof disclosed that the debtor had obtained his signature to the agreement by falsely representing that he had not given a secret preference to any other creditor, judgment went against him on- the ground that he was ^particeps fraudis.'^ On the contrary, in at least two cases, a creditor who had received a secret preference was allowed to recover on the original cause of action, on the ground that the debtor had misrepresented the condition of his affairs." The former is the better doctrine, and is upheld by the greater number of decisions. We agree with Mr. Bump, that, in such cases, the creditor's hands are not clean. That "when he 12 Grabenlieimer y. Blum, 63 Tex. 369. 13 Whiteside v. Hyman, 10 Hun, 218 ; Page v. Wells, 37 Mich. 421. 1* Grabenheimer v. Blum, 63 Tex. 369. 1 MallaUeu v. Hodgson, 16 A. & E. (N. S.) 690, 16 Q. B. 689. s. P. Wliite V. Kuntz, 107 N. Y. 518, 1 Am. St. Rep. 886; Baldwin v. Eosenman, 49 Conn. 105; O'Brien v. Greenbaum, 92 Cal. 104; Watts v. Hyde, 10 Jur. 127, 17 li. J., Ch. 409. A creditor for tlie purpose of escaping from the- agreement, cannot complain that he received an unlawful preference through his agent: Blair v. Wait, 69 N. Y. 113. 2 Stewart v. Blum, 28 Penn. 225 ; Elfet v. Snow, 2 Sawyer, 94. In one Of 470 COMPOSITION AT COMMON LAW [§ 207 seeks to overreach others, he has no cause to complain if he himself is overreached." ' However, if a creditor puts his debt down for a less sum with the intent to forgive the residue, it is not such a fraud as will prevent the creditor from avoiding the composition on the ground that the debtor had concealed a portion of his assets.* It is a general rule of law as well as equity, that no part of a con- tract tainted with fraud will be permitted to stand for the benefit of the party responsible for the fraud. Therefore, where a creditor exacts from his unfortunate debtor, a secret preference as a condi- tion of his joining in the composition agreement, he makes one entire contract, and a part being fraudulent, the whole is fraudulent and he cannot recover the composition nioney.^ While there are a number of decisions holding that the fraudulent transaction may be severed, and the creditor guilty of the fraud may recover the composition money," they are decidedly in the minority, and are contrary to all principles of law and equity, and a sound public policy. If such a doctrine be indorsed, a creditor could, by bearing down on his help- less debtor, secure an undue advantage, and if successful, thus shame- lessly trick and defraud the other creditors with impunity, for if de- tected he would still share equally with the honest creditors. The these cases (Stewart v. Blum) the question of the fraud of the creditor -vvas not raised; in the other, the decisions holding the creditor could not recover were not brought to the attention of the court. This doctrine has ibeen recognized by way of obiter dicta in other cases : Huntington v. Clark, " 39 Conn. 540 ; Armstrong v. Mechanics' Bank, 6 Hiss. 520. s Bump on Comp. 63. « Huntington v. Clark, 39 Conn. 540. sHowden v. Haigh, 11 Ad. & B. 1033, 3 Per. & Dav. 661; Mallalieu v. Hodgson, 16 Q. B. 689, 15 Jur. 817, 71 B. C. L. 689; Higgins v. Pitts, 4 Bxch. 312, 18 L. J., Bxch. 488; Huckins v. Hunt, 138 Mass. 366; Frost V. Gage, 3 Allen, 560, 85 Mass. 560; Doughty v. Savage, 28 Conn. 146; Huntington v. Clark, 39 Conn. 540; Powers v. Harlin, 68 Minn. 193, 71 N. •W. 16; Bannantine v. Cantwell, 27 Mo. App. 658; Clark v. Kitchey, 11 Grant Ch. (U. C.) 499. 8 Hanover v. Blake, 142 N. Y. 404, 27 L. R. A. 33, 37 N. E. 519, 40 Am. St. Rep. 607 ; Wblte v. Kuntz, 107 N. Y. 518, 1 Am. St. Rep. 886 ; Page v. § 207] FBAUDULENT PEEFEKENOB 471 policy of the law is to suppress fraud; which would be of no force in this instance if there be no penalty. Moreover, a creditor guilty of taking a fraudulent preference not only loses the benefit of the composition agreement but he loses his entire demand: He cannot either go forward or backward, but is enmeshed in his own dishonest scheme, where the law leaves him. He cannot recover upon the orig- inal demand,^ for that would be to remit him to his original cause of action and enable him thus to harass the debtor, and gain an advantage over the other creditors which the law denies him under his fraudulent agreement. Especially would this be so should the remaining creditors elect to abide their agreement with the debtor; and, if they avoid the agreement on account of his fraud, he would be reinstated to his original cause of action and thus by fraud de- prive the willing creditors of a beneficial contract. Such bad busi- ness morals are discouraged. Therefore, the composition agreement is operative against the creditor guilty of the fraud and extinguishes his original debt, and not being operative for him, he is left with- out a remedy. If a composition never becomes effective, as where it is not to be binding unless all the creditors sign it, the remedy of the creditor who secretly bargains for a preference, on the original cause of action is not affected if all the creditors did not sign.* He is not, however, when the agreement is executed, in a position to claim that a default in the payment of the composition money revives the remedy on the original cause of action ; » for as to him there can be no default. Carter, 16 N. H. 524, 41 Am. Dec. 726; Lobdell v. Nauvoo, 180 111. 56, 54 N. E. 157. 7 Clark V. Kitchey, 11 Grant, Ch. (U. O.) 499. A creditor who has re- ceived a secret preference cannot take advantage of a default by the debtor In paying the composition money : Ex parte Oliver, 4 De G. & S. 354. sBookmire v. Bean, 3 DUl. 136; Mooney v. Bassom, 2 Nova ScoUa, 254. » Ex parte 011» er, 4 De G. & S. 354. 472 COMPOSITION AT COMMON LAW [§ 208 Sec. 208. Pleading a composition. — A composition, like an ac- cord and satisfaction, is an affirmative defence, and excepting when it may be given in evidence under the general issue or general de- nial, it must be specially pleaded. A composition at common law need not be pleaded in assumpsit,^ but may be given in evidence under the general issue. Under the code system of pleading and under special statutes in some states, it cannot be given in evidence as a defence in an action on the original demand, unless pleaded." A common law composition with creditors is not admissible under a plea of an ac- cord and satisfaction,' compromise, or payment; nor under a plea of release, unless the instrument itself contains a technical and ab- solute release.* With respect to the time when a composition should be pleaded; joining issue thereon; and pleading in avoidance, the rules are the same as apply to pleading an accord and satisfaction, and compromise, and to avoid repetition the reader is referred to prior sections." The agreement may be set out verbatim in the plea, or its terms set out according to its legal construction. If the correct construction be not set forth, the plaintiff may reply that he never executed the agreement, which puts in issue the execution of the agreement as well as the construction ; ° or the plaintiff may crave oyer of the deed and when that is set out, raise the objection by demurrer that the plea is inconsistent in itself.^ The execution of the composition agreement according to its terms should be set out. iBartleman v. Douglas, 1 Cranch O. Ct 450; Brown v. Stackpole, 9 N. H. 480. 2 Smith V. Owen, 21 Cal. 11. After judgment has gone for the plaintiff In an action on the original cause of action, where the composition consti- tutes satisfaction, it cannot afterwards be availed of for any purpose : Whit- more V. Wakerley, 3 H. & C. 538, 11 Jur. N. S. 182, 13 W. R. 350; Ellis V. McHenry, L. R. 6 C. P., 228, 19 W. R. 503. 3 Smith V. Owen, 21 Cal. 11. *Hart V. Smith, L. R. 4 Q. B. 61, 17 W. R. 158. » Sees. 109, 110, 111. 8 Bump on Comp. 73, citing North v. Wakefield, 13 Q. B. 535. 1 Bump on Ctomp. 73, citing North v. Wakefield, 13 Q. B. 535. 2^8] PLEADING A COMPOSITION 473 If all the creditors were to sign it,« or only certain creditors,* or that it was to be executed within a certain time " and the like, before it was to become effective; those conditions must be alleged to have been complied with." So, it must be alleged that the creditors agreed mutually each with the other and with the debtor, to accept the composition," for a several agreement between the debtor and each creditor is insufficient. If the composition agreement does not of itself discharge the debt, as in case of a letter of license, it cannot be pleaded in bar to an action on the debt unless a covenant IS inserted that if the debtor is molested by a creditor the agreement may be pleaded in bar.^^ If the agreement itself, was accepted in satisfaction, it is suffi- cient to plead the agreement and its acceptance as satisfaction;^* but if performance alone is to constitute satisfaction, not only the agreement but performance according to its terms must be alleged,^^ as where the debtor was to transfer property to a trustee.^" How- ever, if the time for performance has not run, it may nevertheless be pleaded in bar of the action as prematurely brought.^' But, if a 8 Lower v. Clement, 25 Pa. St. 63. 9 Brown v. Dakeyne, 11 Jur. 39 ; Norman v. Thompson, 4 Exch. 455 ; Reay V. Richardson, 2 C. M. & R. 422. 10 Evans V. Gallantlne, 57 Ind. 367. 11 If the agreement was to be binding only in case other creditors ac- cepted It, it must be alleged that the other creditors accepted : Cutter v. Reynolds, 8 B. Mon. 596. 12 Cooper V. Phillips, 1 C. M. & R. 647; Tuck v. Took, 9 B. & C. 437, 17 E. C. L. 200; Cutter v. Reynolds, 8 B. Mon. 596; Lanes v. Squires, 45 Tex. 382. 13 Gibbons v. Voullion, 8 C. B. 483, 7 D. & L. 266, 14 Jur. 66, 19 L. J., C. P. 74. See Sec. 158, ante. 1* Evan V. Powis, 1 Exch. 601. IB In re Hatton, L. R. 7 Ch. 723; Evan r. Fowls, 1 Exch. 601; Dolson V. Arnold, 10 How. Pr. 528. 18 Tuckerman v. Newhall, 17 Mass. 581 ; Watkinson v. Inglesby, 5 Johns. 386. IT Slater v. Jones, 8 Exch. 186 ; Smith v. Graydon, 29 How. Pr. 224. 474 COMPOSITION AT COMMON LAW [§ 208 default has occurred subsequent to the filing or serving the plea, the plaintiff may set out the default in his reply.^* And this should be done, for if judgment goes for the plaintiff upon a plea of compo- sition, it precludes the creditor from afterwards setting up in a sub- sequent action, a default which should have been brought forward in the replication, or by plea puis darrein continuance, or by motion in arrest of judgment.^' But a default occurring subsequent to the judgment may be set up in a subsequent suit.''*' If the agreement contains an absolute release, with a conditiom that it shall be void if the covenants are not performed by the debtor, it is sufficient to plead the release leaving a creditor to plead a breach of the cove- nants.^^ If there has been a default in performance and a waiver of the default, facts showing a waiver must be alleged,''^ and per- formance or tender of performance. Unlike an accord and satis- faction acceptance of performance is not necessary to a binding com- position, and it is not therefore necessary to allege that the perform- ance was accepted by the creditor.'" But if the debtor alleges an agreement to accept a composition, the pleader must go further and allege that performance was afterwards accepted, and that the ac- ceptance was in satisfaction of the debt.''* So, unlike an accord and satisfaction, a composition with tender of performance is sufficient, and a tender of performance must be alleged.^" In pleading a tender 18 Newlngton v. Levy, L. R. 5 O. P. 607, L. K. 6 C. P. 180. 10 See Newlngton v. Levy, L. R. 5 C. P. 60T, L. R. 6 C. P. 180. 20 Hall V. Levy, L. R. 10 C P. 154 ; Bump on Comp. 74. 21 Hart V. Smith, L. R. 4 Q. B. 61, 17 W. R. 158. 22 NevUl V. Boyle, 11 Mee. & W. 26. 23Therasson v. Peterson, 4 Abb. Pr. 396. See Eaton v. Lincoln, 13 Mass. 424; Bartlett v. Rogers, 3 Sawyer, 62; Bartleman v. Douglas, 1 Oranch O. C. 450. 24 Hall V. Floekton, 16 Q. B. 1039, 71 E. 0. L. 1039. 2BGarrord v. Simpson, 3 H. & G. 395, 43 W. R. 858; Bradley v. Gregory, 2 Gamp. 385; Fellows v. Stevens, 24 Wend. 294; Whittemore v. Stephens, 48 Mich. 573, 12 N. W. 858; Lowe v. Eginton, 7 Price, 604. § 209] BVIDBNOB 475 all the rules with respect to pleading such a defence in other cases must be observed.''^ If a strict tender was waived, facts showing such waiver must be alleged." A plea of readiness and willingness to perform is not sufficient,^' as there must be actual performance, or a tender of performance, or a waiver of a strict tender shown. The money or notes should be brought into court under a plea of profert in curia.^" Sec. 209. Evidence. — If the composition agreement is in writ- ing, the instrument is the best evidence, and must be produced in sup- port of the plea, or its absence accounted for by showing its loss or destruction; in which case oral evidence of its contents is admis- sible. If the agreement be oral and it is denied or its terms as al- leged are disputed, all the facts relied upon as constituting the com- position must be proved, and all the surrounding facts and circum- stances tending to prove the agreement are admissible. Where the agreement is denied, the mutuality of the promises between the creditors and between the creditors and the debtor, must be es- tablished by proof. Performance, or a tender of performance, or a waiver of a strict tender, must be shown, unless performance is by the agreement deferred beyond the date of the plea, in which case it is sufficient to prove the agreement. If the agree- ment proven is a complete and valid composition, acceptance in satisfaction need not be shown if performance is proven; but if the defendant relies upon a preliminary agreement for a composi- tion and subsequent performance, performance and acceptance in satisfaction must be proven. All the issuable facts relied upon to prove the defence, or to avoid the agreement, must be proven. 26 See Hunt on Tender, Ch. Pleading. 2 7 ilderton v. Castrique, 13 L. T., N. S. 506. See Bamford v. Cleves, L. R. 3 Q. B. 729. 2 8iiosUng V Muggeridge, 16 Mee. & W. 181; Fessard v. Mvignier, 18 C. B., N. S. 286; Hazard v. Mare, 6 H. & N. 434. 29 Hunt on Tender, Ch. Pleading; Cooper v. Phillips, 1 C. M. & R. 649. 476 COMPOSITION AT COMMON LAW [§ 209 The defence of a composition does not differ in this respect from other affirmative defences. The evidence must establish the compo- ■ sition alleged or the defence will fail; ^ proof of a different agree- ment will not do.^ 1 Brown v. Dakeyne, 11 Jur. 39. 2 Whiteside v. Hyman, 10 Hun, 218. APPENDIX FORMS FOR USE IN COMPOSITION PROCEEDINGS Note.— The foUowinK forms are taken from the late Orlando F. Bump's treatise on Composition at Common Law Used by permission of Saiah E. Bump. <1) [COMPOSITION WITH CEEDITOES.] To all to whwn these presents shall come, we, who have hereunto subscribed our names and affixed our seals, creditors of Y. Z., of , in the State of , send greeting : Whereas, the said Y. Z. does justly owe and is indebted unto us, his said several creditors, in divers sums of money, but by reason of losses, disap- pointments, and other damages happened unto the said Y. Z., he is become unable to pay and satisfy us for our full debts and just claims and demands ; and therefore we, the said creditors, have resolved and agreed to undergo a certain loss, and to accept of cents for every dollar owing by the said Y. Z. to us, the several and respective creditors aforesaid, to be paid In full satisfaction and discharge of our several and respective debts. Kow KNOW TE, that we, the said creditors of the said Y. Z., do, for our- selves, severally and respectively, and for our several and respective execu- tors and administrators, partners and assigns, covenant, promise, compound, and agree, to and with the said Y. Z., his [heirs] executors and adminis- trators, by these presents, that we, the said several and respective creditors, our executors, administrators, partners, and assigns, shall and will accept, receive, and take of and from the said Y. Z., his [heirs] executors and ad- ministrators, for each and every dollar that the said Y. Z. does owe and is Indebted to us, the several and respective creditors, the sum of cents, in full discharge and satisfaction of the several debts and sums of money that the said Y. Z. owes and is indebted unto us; to be paid unto us, the sev- eral and respective creditors, our several and respective executors, admin- HuntAcc&S.' (477) 478 COMPOSITION AT COMMON LAW istrators, partners, and assigns, wifhin montlis next after the date of these presents. And we, the said several and respective creditors, do severally and re- spectively, for ourselves, our several and respective executors, administra- tors, partners, and assigns, and not jointly for each other, or the repre- sentatives, etc., of each other, covenant, promise, and agree to and with the said Y. Z., his executors and administrators, that the said Y. Z., his execu- tors, administrators, and assigns, shall and may, from time to time, at all times within the said term of months next ensuing the date hereof, assign, sell, or otherwise dispose of his property, at his and their own free will and pleasure, for and towards the payment and satisfaction of the said cents for every dollar the said Y. Z. owes and is indebted as aforesaid unto us, the said respective creditors; and that neither we, the said several and respective creditors, or any of us, nor the executors, ad- ministrators, partners, or assigns of us, or any of us, shall or will at any time or times hereafter, sue, arrest, attach, or prosecute the said Y. Z., or his property and chattels, for any debt or other thing now due and owing to us, or any of us, his respective creditors aforesaid, so as the said Y. Z., his executors or administrators, do well and truly pay, or cause to be paid, unto us, his said several and respective creditors, the said sum of cents for every dollar he owes and is Indebted unto us, respectively, within the said space of months next ensuing the date hereof. In witness wHEBEor, we have hereunto set our hands and seals, the day first above written. In presence of (2) [bbief roEM OP composition.] To all to whom these presents shall come: We, whose names a/re hereun- der suhscribed and seals afflwed, creditors of A. B. & Com/pany, composed of A. B. and C. D., send greeting: Whekeas, the said A. B. & Company are Justly indebted unto us, their several creditors, in divers sums of money, which by losses and misfortune they are unable to pay in full; and therefore we, the said creditors, have resolved to undergo a certain loss, and to accept of forty cents for every dollar by them owing to us, to be paid, the one-half in one, and the other half In two years; or thirty cents for every dollar by them owing to us, to be paid in six months, to be in full satisfaction and discharge of our several and respective debts : Now KNOW YE, that we, the said several and respective creditors of the said A. B. & Company, for ourselves and our respective legal representatives, do hereby covenant, promise, compound, and agree to and with the said A. APPENDIX 479 B. and C. D., by these presents, that we will, severally and respectively, accept, receive, and take of and from the said A. B. and C. D., for each and every dollar they owe us, the sum of forty cents, to be paid, one-half in one year and the other half in two years, without interest, in full discharge and satisfaction of our respective debts; we to designate opposite our names which sum we elect to take. In witness wheeeof, we have hereunto set our hands and seals, this day of 18 (3) [another form of composition.] Know all men Jj/ these presents, that we, the subscribers, creditors of A. B., of in the County of and State of finding that the said A. B. is, by losses and otherwise, disabled to pay us our full debts, do severally and respectively agree and bind ourselves, our heirs, executors, and administrators, to the said A. B., his heirs, executors, and administrators, to accept and receive of him, or them, for each and every dollar that he, the said A. B., doth owe and stand indebted to us, the sum of ten cents, in full discharge and satisfaction of all such debts and sums of money as the said A. B. doth owe and stand indebted to us, respectively, so that the said sum of ten cents, to be paid for each and every dollar that the said A. B. doth owe and stand indebted to us, the said creditors, re- spectively, be paid unto us, our several and respective executors, adminis- trators, or assigns, within the space of twelve months next after the date of these presents. In witness whereof, we have hereunto set our hands and seals, this day of 18 Signed, sealed, and delivered in presence of -i (4) [COMPOSITION WITH INDOBSER.] We, the undersigned, creditors of of do hereby agree to accept fifty cents (50) per dollar In full satisfaction and settle- ment of our respective claims against them, such settlement to be made in two notes, of twenty-five (25) per cent, each, dated , 18 , and due, respectively, three and sis months from date, and to be signed by isaid and indorsed by 18 480 COMPOSITION AT COMMON LAW (5) [COMPOSITION WITH SUKETT.] Agreement made this day of 18...., between A. B., of in the County of ..., and State of , of the one part, and others, the undersigned, of the other part, wltnesseth: That the said A. B. agrees to and with the undersigned parties of the sec- ond part, severally and respectively, that he will, within six months from the date hereof, pay to the undersigned, respectively, forty cents on a dollar of the indebtedness of X. Z., of , aforesaid, to them, that is, the in- debtedness of the said T. Z. individually, or jointly with another or others, or as a partner with another or others ; such payments to be made to parties of the second part, respectively, or by deposit in the Bank, at , at the election of the said A. B. The said party of the second part severally agree to and with the said A. B., that, on receiving such payment as aforesaid from the said A. B., they will cancel and discharge such indebtedness of the said Y. Z. to them, re- spectively, to the full amount of such indebtedness. (6) [eesbevation op bights against indorsees.] Provided always, and It is hereby expressly agreed and declared, that it shall be lawful for the said bill-holders, parties hereto of the second part, to execute these presents without prejudice to their rights and remedies upon the said bills mentioned in the second schedule hereunder written, respec- tively, or upon collateral or other securities for the same, respectively, against any person or persons whomsoever, other than the said , and or either of them, their, or either of their heirs, execu- tors, and administrators; and that, notwithstanding these presents, or any- thing herein contained, they, the said bill-holders, respectively, and their respective executors, administrators, and assigns, shall be at liberty to en- force and adopt all and any of such rights or remedies against any such other person or persons, In the same manner as if these presents had not been ex- ecuted. (7) [release moM notes held by others.] We, and each of us, do hereby absolutely release the said T. Z. from all, and all manner of action and actions, suit and suits, cause and causes of ac- tion, and suit, controversies, damages, claims, and demands whatsoever, which we, or any, or either of us, either alone or jointly, with our respective APPENDIX 481 partner or partners, now have, or at any time or times hereafter can, shall, or may have or be entiUed to from, upon, or against the said T. Z., his heirs, executors, or administrators, by reason or on account of any debts, sums of money, bills, notes, securities for money, contracts, promises, agreements, reckonings, accounts, dealings, or transactions of what nature or kind soever, owing from, or made, given, or entered into by the said Y. Z., to or with us, respectively, or any of us, from the beginning of the world to the day of the date hereof. (8) [CONDITION MAKING EELKASE VOID.] Peovided, that in case default shall be made, contrary to the covenant In that behalf hereinbefore contained, in payment of the said composition, or any instalment thereof, to the undersigned creditors, respectively, then the release herein contained shall be thenceforth at an end, and the creditors shall thenceforth be at liberty to sue for, or prove for, the full amount of their respective debts, less the amount which may have been received by them on account thereof, under these presents or otherwise. (9) [lettbb of license.] To all to whom these presents shall come, the several persons whose names and seals are hereunto subscribed and afflwed, by themselves or their re- spective partners, agents, or attorneys, being, respectively, creditors of A. B., late of, etc., but now of, etc., severally send greeting: Whebeas, the said A. B. is indebted to the several persons aforesaid, re- spectively, In several sums of money, which he is not at present able to pay, but which he expects he may be able to pay at the end of two years from the date of these presents : Now THESE presents WITNESS, that in consideration of the premises, they, the several persons whose names and seals are hereunto subscribed and af- fixed, as aforesaid, do, and each of them doth, by these presents, give and grant unto the said A. B. full, free, and perfect license and liberty to come and go, pass and repass, from place to place within the United States, where and as his business and occasion shall serve and require, for the term of two years from the day of the date of these presents, without being sued, molest- ed, arrested, charged, or troubled, in his person or otherwise, for or con- cerning, or on account of any debt, sum or sums of money, or other matter or thing whatsoever, whereby or wherewith he Is or may be in anywise charged or chargeable, or indebted to them, the said several persons afore- said, or any of them, or their, or any of their respective partners. Hunt Acc.& S. — 31 482 COMPOSITION AT COMMON LAW And each of them, the said several persons, whose names and seals are hereunto subscribed and afllxed, so far as relates to the acts and deeds of himself and his copartners, and his and their heirs, executors, and adminis- trators, doth hereby, for himself, his heirs, executors, and administrators, covenant with the said A. B., his executors and administrators, that they, the said several persons whose names and seals are hereunto subscribed and aflSxed, as aforesaid, or their respective executors or administrators, partner or partners, or the executors or administrators of any such partner or part- ners, or any other person or persons whosoever, by, with, or through their, or any of their order, consent, direction, privity, or contrivance, shall not, nor will at any time hereafter, during the said term of two years from the date of these presents, sue, arrest, attach, extend, molest, implead, or trouble the said A. B., his heirs, executors, or administrators, or his or their bodies, goods, or estates, for or on account of any debts, dues, or sums of money which he now owes or is indebted to the several persons aforesaid, respec- tively, or their respective partners, either solely by himself, or Jointly with or for any other person or persons whomsoever, by bond, bill, or covenant, simple contract, or otherwise howsoever, or for or on account of any other cause, matter, or thing whatsoever, wherewith he or they now is, or shall, or may be charged or chargeable. And that these presents shall and may be pleaded and allowed In any court of law or equity as a bar and in discharge of all and every action or actions, suit or suits, or other proceedings, judgments, and executions which shall or may be brought, commenced, sued, prosecuted, or taken against him, the said A. B., his heirs, executors, or administrators, or his or their goods or estates, by the said several persons whose names and seals are hereto sub- scribed and affixed, as aforesaid, or any of them, their, or any of their heirs, executors, or administrators, partner or partners, or the executors or admin- istrators of any such partner or partners, or any other person or persons whomsoever, by, through, or with their, or any of their acts, means, privity, order, consent, or procurement, contrary to the true intent and meaning of these presents. In witness whereof, the several persons, parties to these presents, have hereunto set their hands and seals, this day of in the year, etc. (10) [PROVISO BENDEEINQ VOID UNLESS ALL SIGN.] Provided always, nevertheless, and it Is the true intent and meaning of these presents, and of the said parties hereunto, that if all the said parties above named as creditors [or, if two-thirds in amount of the said parties above named as creditors, or otherwise, as may be agreed] shall not sub- scribe and seal these presents, then, and in such case, the liberty and license APPENDIX 483 hereby given and granted, and every clause, covenant, matter, and thing herein contained shall cease and be utterly void, to all Intents and purposes ; anything hereinbefore contained to the contrary thereof, in anywise, not- withstanding. (11) [condition that debtoe pat the instaxments.] Peovided always, and under this condition, that if the said T. Z., his executors, administrators, or assigns, do not well and truly pay imto us, the said creditors hereunto subscribed, our respective executors, administrators, and assigns, the sums of money to us by him owing. In manner followmg, that Is to say: on the day of next ensuing the date hereof, one just ....... part of our said debts, between us to be divided according to the proportions of our several debts by him owing, and on the day of which will be in the year 18 one other part of the present amount of our said debts, to be divided as aforesaid, and on the day of which will be In the year 18 the residue of our said several debts, to be divided as aforesaid; that then, and from and after any default in any of such payments, this our present letter of license shall be utterly void and of none effect towards him and them of us to whom any such default of payment shall happen to be made ; anything above writ- ten to the contrary notwithstanding. (12) [composition deed, allowing dbbtob to caret on business ttn- DEE inspection or a committee of the ceeditobs.] This Indenture, made this day of 18. . . ., between the several creditors of Y. Z., whose names and seals are hereunto sub- scribed and affixed, parties of the first part [or, if it is intended that all shall sign in order to make the composition effectual, name them, thus: between A. B., of C. D. and B. F., composing the firm of C. D. & Co., of and G. H., of creditors of Y. Z., parties of the first part], and the said Y. Z., merchant, party of the second part, WITNESSETH: whereas, the said Y. Z. is indebted to the several persons of the first part In the several sums of money placed opposite to their respective names in the schedule hereunto affixed; and whereas, at a meeting of the creditors of the said Y. Z., held on the day of , 18 , at it was made to appear to them that by reason of losses and obstacles in trade he was unable to pay the several demands upon him imme- diately, but that his stocli in trade and his other estate and effects were 484 COMPOSITION AT COMMON LAW suflacient for that purpose, whereupon it was mutually agreed by and be- tween the parties hereto that the term of ...... years should be given to the said X. Z. to collect in and dispose of his said estate and effects, and that in the meantime he should be permitted to manage and improve the same, under the inspection of the parties of the first part, by a committee of their number, to be by them chosen, and by them, their executors, administrators, and assigns, renewed from time to time for that purpose, under and subject, nevertheless, to the conditions, stipulations, and agreements hereinafter con- tained respecting the same: Now, in consideration thereof, and of the cove- nants and agreements hereinafter contained, on the part of the said X. Z. to be performed, the said parties hereto of the first part, and each of them, for themselves, respectively, and their respective partners, and his and their several and respective executors, administrators, and assigns, but not any one of them for any other of them, nor for the executors, administrators, partners, or assigns of any other or others of them, do: I. Give and grant unto the said Y. Z. free liberty and license to carry on, conduct, and manage his said trade or business of and all other affairs and concerns, and collect, get in, and sell and dispose of, con- vey and assign all or any part of his estate, debts, and effects, under the inspection and subject to the approbation and control of the said parties of the first part, by their committee as aforesaid, from henceforth until the day of 18. . . ., if he, the said debtor, shall so long-live, and continue to observe and perform the several covenants and agreements hereinafter contained, on his part or behalf to be observed or performed; and they agree with him and with each other that they, the said parties of the first part, creditors as aforesaid, or any or either of them, shall not, nor will, during the time or period and observance and performance aforesaid [for any cause or consideration now existing], sue, arrest, attach, or prosecute him, the said Y. Z., or his property, or in any way impede or molest him in the carrying on or management of his said business or concerns, or the sale or disposition of his estate or effects, under such control and inspection as afore- said, nor seize or possess themselves of, or in anywise attach or intermeddle with his goods, estates, property, or effects in anywise whatsoever. [If de- sired to add a clause that creditors violating the license shall forfeit their deMs, then: and that if any hurt, damage, or hindrance be done unto the said Y. Z., either in body or property, within the aforesaid term of , next ensuing the date hereof, by us, or any of us, the said creditors, or by any person or persons, by or through the procurement or consent of us, or any of us, contrary to the true intent and meaning of these presents, then the said Y. Z., his heirs, executors, and administrators, by virtue hereof, shall be dis- charged and acquitted forever against such of us, the said creditors, his and their executors, administrators, partners, or assigns, by whose will, means, or procurement he shall be arrested, attached, prosecuted, grieved, or damaged of all actions, suits, damages, debts, charges, claims, and demands whatso- ever.] APPENDIX 485 II. And for the purpose aforesaid, the said party of the second part hereby covenants and agrees with the parties of the first part to make or deliver to them, or their committee, within a reasonable time, a full and true account of all the creditors of the said Y. Z., showing the place of residence of each creditor, if known ; and if not known, the fact to be stated ; the sum owing to each creditor, and the nature of each debt or demand, whether on written security, account, or otherwise; the true cause and consideration of indebt- edness in each case, and the place where it accrued ; and a full and true in- ventory of all the estate, both real and personal, in law and equity, of the said T. Z. ; of the encumbrances existing thereon, and of all the books, vouch- ers, and securities, relating thereto. III. And he further covenants and agrees, as aforesaid, to manage and collect his assets, and to carry on his said business faithfully and diligently for the purpose of these presents, under the direction and control of the par- ties of the first part, as they may by their said committee, or otherwise, di- rect, according to the true Intent and purpose of these presents. IV. And he further covenants and agrees, as aforesaid, that after payment of just and necessary legal expenses, and the expenses of conducting said business [including a commission of per cent, upon the net proceeds, as a compensation for the committee, as hereinafter provided for], and also after reserving to said T. Z. so much as may be necessary for his reasonable support, which is not to exceed the rate of dollars per month, nor to exceed the sum of dollars in any one month, he will, subject as aforesaid, pay over and distribute the proceeds of said assets and business for and towards payment and satisfaction of the sums the said Y. Z. owes; as aforesaid, unto us, the said respective creditors, pro rata [specific liens, how- ever, already secured by any creditors, to be first discharged out of the prop- erty which is bound by such liens]. V. And the party of the second part hereby further covenants and agrees, as aforesaid, that he will not, during such time, make any assignment or transfer of any of his property, with any preference for any creditor; that he wUl keep just and true accounts of all his transactions, subject at all times to the inspection of the parties of the first part and their said com- mittee, and will render to the said committee, once in each , a state- ment of his accounts, showing [here specify tchat is desired], which accounts, as well as the one hereinbefore provided for, shall be verified by him on oath. If so required. VI. And he further covenants and agrees, as aforesaid, that he will not, during the period contemplated by these presents, indorse, or accept for accommodation, or become surety in anywise, for any person, or voluntarily incur any liability, except in the course of his said business, and will not enter upon or undertake any other business or other enterprise whatever. VII. And the said party of the second part further covenants and agrees, as aforesaid, that he, the said Y. Z., his heirs, executors, and administrators, shall and will well and truly pay, or cause to be paid, unto all and every, 486 COMPOSITION AT COMMON LAW the said creditors, parties hereto, their respective executors, administrators, partners, or assigns, or other person or persons by them, respectively, author- ized to receive the same, their full and whole debts and demands, at or be- fore the expiration of the said term of years, In the manner herein- before appointed for the payment thereof, according to the true Intent and meaning of these presents. VIII. And, for the purposes aforesaid, the said parties of the first part have appointed, and do hereby appoint, A. B. and C. D. their committee, as their agents and attorneys, to act until otherwise ordered, or until others are appointed in their place, by the parties of the first part, and with full power and authority to do, direct, and assent to all and any acts, matters, and things whatsoever, relative to the matters or things aforesaid, as they, in their discretion, shall at any time, and from time to time, hereafter think fit and expedient as fully as the parties of the first part might do If personally present. IX. And such committee are also empowered to nominate and appoint one or more clerks, or other persons, to assist the said Y. Z. m the management of his said trade or business, at such salary or wages as they shall think fit ; and are also empowered to give ball, or cause it to be given, if the said Y. Z., or his property, shall be arrested, attached, or taken under process of law by any of his creditors, or persons claiming so to be; and the said committee may contest, or otherwise act, concerning the debt or debts of any such cred- itor or claimants, at the expense of the estate and effects of the said Y. Z., as they shall think fit and necessary for the purposes aforesaid. X. And it Is hereby further covenanted and agreed, by and between the parties hereto, that if, by reason of any unforeseen cause, not willfully occa- sioned by the said Y. Z., any delay shall take place in the final settlement of his afCairs, during his lifetime, so as to prevent the several creditors, parties hereto, from receiving the full amount of their respective debts at or before the expiration of the said term of years, hereby limited for winding up the concerns of the said Y. Z., and for the payment of his creditors in manner aforesaid, then, and in such case, it shall be lawful for the said com- mittee, and they are hereby fully authorized and empowered, if they shall think proper, without any further consent of the said creditors than is hereby given, to prolong or extend the said term for a period not exceeding months, to be computed from the expiration of the said term, by an indorse- ment under the hands of the said committee being made upon these presents to that effect ; and that thereupon all and every, the said creditors, parties hereto, their executors, administrators, partners, and assigns, and the said party of the second part, and his heirs, executors, and administrators, shall continue to be bound by the covenants and agreements herein contained in the same manner, for such further period, to all Intents and purposes, as if the whole term had been originally limited for that purpose. XI. Pbovided always, nevertheless, and these presents are upon this ex- press condition, that If the said Y. Z. shall die within the period aforesaid. APPENDIX 487 or If he shall make default In performance of either of the covenants or agreements hereinbefore contained, on his part to be performed, or in case any of the creditors of the said Y. Z., whose debts, respectively, exceed the sum o* dollars (except only such of them as, having other securities, shall choose to rely thereon), shall not duly execute, or otherwise accede to these presents [or, if all the intended parties are named in the caption, say: or in case any of the hereinbefore named parties of the first part shall fail to execute these presents] within months next after the date hereof, then, and in either of the said cases, this indenture, and everything herein contained, so far as the same, respectively, tends to restrain the said cred- itors from suing for and recovering his, her, or their respective debts within the time aforesaid, shall be absolutely void. In witness whebeof, the said parties to these presents have hereunto set their hands and seals on this day of in the year one thousand eight hundred and (13) [clauses in composition deed.] Peovided AiwATS, and it Is hereby agreed and declared, that these pres- ents, or any clause, matter, or thing herein contained, shall not extend, or be construed to extend, to invalidate, prejudice, or in any manner aflCect any mortgages, charges, or other specific securities or liens which any of the creditors, parties hereto, of the said [deMors], may have upon any of the real or personal estates of or belonging to them, or any of them, or any security for or in respect of all or any of the debts due and owing to such last-men- tioned creditors, respectively, or any bonds, notes, or other securities given or payable by any other persons, by way of security, for the same debts, or any of them. But that all such several mortgages, charges, securities, liens, and also all such bonds, bills, notes, and other securities from third persons, as aforesaid, shall be and continue as available, both at law and in equity, in the hands of the several creditors, parties hereto, holding the same, to all Intents and purposfes as if these presents had never been made or executed ; so, nevertheless, that the same creditors do, respectively, deliver true and particular accounts, in writing, signed by themselves, to the trustees, or trus- tee for the time being, of or under these presents, or to their or his solicitor, some time before the first dividend to be made of the said money and funds shall become distributable between all the creditors, parties hereto, under the trusts aforesaid, of all and singular mortgages, charges, liens, bonds, bills, notes, or other securities, or by them, respectively, holden for the several debts last-mentioned. Peovided, also, and it is hereby further agreed and declared, that upon every distribution of the moneys and funds which shall from time to time become divisible, as aforesaid, the creditors, parties hereto, of the said 488 COMPOSITION AT COMMON LAW [c[6t>tors\, holding any such mortgages, charges, liens, bonds, bills, notes, or other securities as last mentioned, shall receive a dividend upon, or in re- spect of, so much only of their several debts as shall not be conveyed or se- cured thereby, respectively, imless such creditors, or any of them, shall so relinquish such of . their respective mortgages, charges, liens, bonds, bills, notes, and other securities, for the general benefit of the creditors, parties hereto, of the said [debtors'i, in which case the same mortgages, or other se- curities before specified, shall be actually delivered up or assigned, as afore- said, to the trustees, or trustee for the time being, of or under these pres- ents, to be by them or him holden and applied upon the same trusts as here- inbefore declared, of and concerning the trust moneys and funds herein com- prised, and the creditors so delivering up or assigning the same shall be en- titled to dividends upon the whole of their respective debts. Provided a,lways, and it is hereby further agreed and declared, that it shall be lawful for the said trustees, or trustee for the time being, if they or he shall so think proper, by and out of the aforesaid trust-moneys and funds, at any time hereafter, to pay ofC or discharge the whole of the debt or debts due or owing from the said [del/tors] to any of their creditors, parties hereto, holding any such mortgages, charges, liens, bonds, bills, notes, or other securi- ties, or any of them, as lastly hereinbefore are mentioned, and that either with or without interest, and thereupon to cause the same mortgages, charges, liens, bonds, bills, notes, or other securities, or any of them, to be delivered up or assigned to the same trustees or trustee, to be by them or him holden and applied upon the same trusts as are hereinbefore declared of and con- cerning the trust-moneys and funds herein comprised. Provided always, and it is hereby further agreed and declared, that no debt owing by the said [deMors], or any of them, respectively (except any mortgage debt or debts), to any of the several creditors, parties hereto, shall carry interest, nor shall any creditor whose debt carries interest (except any mortgage creditor or creditors) demand or be entitled to any interest for the same, or to any allowance in respect of interest accrued after the date of these presents. Provided, also, and it is hereby further agreed and declared, that in case these presents shall not be executed on or before the day of 18. . . ., next ensuing, by all and every the creditors of the said [deitors], and of every of them, either by themselves, or some person or persons duly au- thorized by them, respectively, in that behalf, whose debts shall amount to the sum of apiece, or upwards, then, and in such case, these presents, and every clause, matter, and thing herein contained shall cease, determine, and be void, and the said [trustee], or the survivor of them, his heirs, executors, or administrators, respectively, shall reconvey, resurrender, reassure, or otherwise assure, all and singular, the real and personal estates herein comprised, or intended so to be, unto and to the use of the said [dehtors], respectively, their respective heirs, executors, administrators, and assigns, respectively, according to the aforesaid several tenures or legal quail- APPENDIX 489 ties thereof, and to their several rights and interests therein at the time of the execution of these presents, in as full and ample a manner as if these presents had not been made and executed; and that freed and discharged of and from all encumbrances whatsoever to be made, done, committed, or suffered by the said [trustees], or any of them, their, or any of their execu- tors, administrators, or assigns, respectively, in the meantime; and there- upon, all and every, the said several creditors who shall have executed these presents shall be in the same state and condition with respect to their several debts, and have the like liberty and same remedies to sue for and recover their respective debts, as they would have been in, or had, in case these presents had never been made, anything herein contained to the contrary thereof notwithstanding. Provided, also, that in the meantime, and until the day of ' next, it shall be lawful for the said [trustees], and the survivor of them, his heirs, executors, or administrators, from and after the execution of these presents, to proceed to act in the trusts hereby reposed in them, as aforesaid, for the benefit of all the said creditors of the said [deitors] (except as afore- said), in case the said several creditors shall execute these presents on or before the said day of next. Btit if all the said creditors (except as aforesaid) shall not execute these presents within the time herein- before limited for that purpose, whereby the same shall become void, then in trust (after deduction and allowance of all costs, charges, and expenses on account thereof) for the said [debtors], their executors, administrators, and assigns, respectively, according to their several rights and interests therein at the time of the execution of these presents. Pbovided, also, and it is hereby further agreed and declared, that the said [debtors], and each of them, shall, within days next after the execution of these presents, by them deliver in to the said trustees, or the survivor of them, or to the heirs, executors, or administrators of such survivor, their or his assigns, a full and true schedule or inventory, signed by each of them, the said [debtors], of all and singular their, and each of their, real and personal estates and effects, rights and credits whatsoever, both present and expectant, or contingent, and shall verify the same by a solemn declaration before a magistrate, or master in chancery; and that if any such estates, effects, rights, or credits to the amount or value of dollars, or upwards, shall be suppressed or concealed by them, or either of them-, then, and in such case, such suppression or concealment shall, as to the party making the same, forthwith, and of itself, revoke and make void the letter of license hereinafter given to the said [debtors], and also the covenant herein contained on the parts of the said several creditors, parties hereto of the second and third parts, respectively, to acquit and release them, in the events hereinafter ex- pressed, of and from the several debts due and owing to them from the said [debtors], or either of them ; but without prejudice to the trusts hereinbefore contained for the benefit of such creditors. And the same creditors, in the event of any such suppression or concealment as aforesaid, after the full per- 490 COMPOSITION AT COMMON LAW formance and execution of such trusts, shall have and be entitled, respec- tively, to such and the like rights of action and other powers and remedies against them, the said [dehtors], or such of them as shall so suppress or con- ceal such estates, efCects, rights, or credits, as aforesaid, for the payment of so much and such parts of their several debts as shall not be satisfied by means of such trusts, as they would have had if these presents had not been made or executed. And it is hebebt fuethbe ageeed and declared that a meeting shall take place of the several creditors of the said [debtors], parties hereto as afore- said, either in person or by their respective agents, on the day of now next ensuing, at the hour of in the morning, at , where this present indenture, and a separate schedule contain- ing an account or list in writing of the several debts, claims, and demands owing from and made upon the said [debtors'], to and by such creditors, re- spectively, shall be produced and shown for inspection. And thereupon all such of the same debts, claims, or demands as shall not be objected to at such meeting shall be entered opposite the respective names of the creditors, par- ties hereto, of the said [debtors], who shall severally claim the same in the said schedule to these presents ; and if at such meeting, or within twenty- one days then next ensuing any debt, claim, or demand contained in such previous schedule shall be objected to, either in the whole or iir part, by any one or more of the creditors of the said [debtors] then present, or their or his agent or agents, or by the said [trustees], or any of them, or by the said [debtors], or any of them, the parties or party making such objection shall, at or within twenty-one days next after such meeting, deliver In writing unto the solicitor for the time being to the present trust, a memorandum or note of the objection to such debt, claim, or demand, and also the name of some person whom he shall approve as an arbitrator or referee of and con- cerning the validity of such debt, claim, or demand, or any part thereof so objected to ; and the party or parties whose debt, claim, or demand shall be so objected to, if then present, shall forthwith, -respectively, have received notice from the said [solicitor of the trust], or other, the solicitor for the time being, as aforesaid, name some person as an arbitrator on his, her, or their part, or respective parts, for the purposes aforesaid ; and whatever award or determination such arbitrators, to be chosen as aforesaid, or in case of difference between them, then the umpire to be by them appointed, in writing, shall make respecting the matters referred to' them, or him, shall be binding, final, and conclusive upon all parties making such reference (so that such award or umpirage be made within fourteen days next after such reference shall be as aforesaid by the parties in difference, or their arbitra- tors, as the case may be); and the party, or respective parties, whose debts or demands shall be objected to shall, in case the whole thereof shall not be thereby awarded, be entitled to receive only such part or parts of such disputed debts or demands as the said arbitrators, or their iimpire, shall adjudge or award to be due and owing to the said party or parties. APPENDIX 491 And it is hereby also agreed and declared that If any creditor or cred- itors of the said [debtors^, whose debts or demands, or respective debts and demands, shall be objected to at the time and place aforesaid, and being present when such objection Is made, shall refuse or neglect, for the space of four days, to be computed from the said day of , 18..., on which the said meeting is to be held, or, if absent, shall refuse or neglect for the space of seven days after he, she, or they shall have, respectively, received notice of such objection to his, her, or their demand or debt, or respective debts or demands, to submit or refer the same to arbitration in the manner aforesaid, such creditor or creditors so refusing or neglecting shall, from thenceforth, be wholly excluded from all benefits and advantages whatsoever which he, she, or they might otherwise have had and claimed, under and by virtue of these presents.' And it is heeebt fuethee agebed and declared that after the said day of next, no objection shall be admitted or allowed to be made to any of the debts contained in such previous schedule, as aforesaid, but the same several debts, and every of them, shall from thenceforth be adjudged to be fair and just debts and demands, and shall accordingly be satisfied, either wholly or in part, by and out of the moneys arising under the several trusts of these presents. And this indenttjee also witnesseth, that In consideration of the premises, and upon condition that, and during such time only as the said [debtors] shall and do in all things well and truly perform, observe, and keep all and every the articles, covenants, and agreements in these presents con- tained, on their part and behalf to be performed, observed, and kept, each of them, the several persons, parties hereto of the parts, respec- tively, creditors as hereinbefore mentioned, doth hereby, for himself and her- self, respectively, and for his and her several and respective heirs, executors, and administrators, so far as relates to his and her own acts, debts, and demands, covenant with the said [debtors], their executors, and administra- tors, in manner following (that is to say), that they, the said several creditors, parties hereto, or any of them, their, or any of their, several copartners, ex- ecutors, or administrators, shall not, nor wUl, at any time or times hereafter, unless and untU default shall be made in performance of the covenants here- inbefore on their, or some .of their, part contained, or some of such covenants, sue, arrest, prosecute, or molest, or do or cause to be done any act, matter, or thing whereby, or by means whereof the said [debtors], or any of them, their, or any of the heirs, executors, or administrators, their, or any of their goods, chattels, lands, or tenements, shall or may be any way seized, arrested, prosecuted, detained, or molested at law, or in eauity, or otherwise however, for or in respect of any debt or debts whatsoever, now due or owing unto them, or any of them, from the said [debtors]. And also that they, the said [debtors], and every of them, shall, and may from time to time, and at all times hereafter, unless and until they shall make such default as aforesaid, have and be entitled to full and free liberty, Ucense, 492 COMPOSITION AT COMMON LAW power, and authority to go, pass, and repass to and from such place and places, and in such manner as they shall think proper, for any purpose what- soever, without any control, or interruption of or by them, the said creditors, parties hereto, of the parts, respectively, or any of them, their, or any of their copartners, executors, or administrators, or any person or per- sons, by or with their, or any of their order, direction, or consent. And fuetheb, that in case the said creditors, parties hereto of the parts, respectively, or any of them, their, or any of their partners, executors, or administrators, shall sue or prosecute, at law or in equity, or do or cause to be done any act, matter, or thing whatsoever, whereby, or by means whereof, the said [deMors^, or any of them, their, or any of their heirs, ex- ecutors, or administrators, shall or may be sued, prosecuted, or molested for any such debt or debts, now due as aforesaid, contrary to the foregoing cove- nant and the true intent of these presents, then, and in every such case, he or they shall or may plead these presents in bar of any action or actions, suits or suit, that shall or may be commenced or prosecuted against him or them, and these presents shall operate as, and are hereby declared and agreed to be, an effectual and absolute discharge of the same. And, mobeover, that they, the said creditors, parties hereto, their partners, executors, and administrators, respectively, shall and will, upon full payment of their respective debts, at the requests, costs, and charges of the said [debtors], or any of them, their, or any of their heirs, executors, or adminis- trators, make, give, sign, and execute unto them or him good and sufficient releases, acquittances, and discharges for the several debts now due and owing to them, the said several creditors, respectively, from the said [debtors], as aforesaid, and of and from all actions, claims, and demands whatsoever, in respect thereof. Pbovided always, and it is hereby agreed and declared, that in case any one or more of them, the said [debtors], shall have failed in the due observ- ance and performance of, all and singular, the covenants and agreements hereinbefore on his or their part or parts contained, then, and in such case, the release and acquittance to which the other or others of them, their or his executors, or administrators, shall be entitled by virtue of the covenants hereinbefore for that purpose contained, shall in nowise operate to exonerate and discharge such one or more of them, the said [debtors], as shall make default, as aforesaid, of or from the several debts or sums of money set forth in the schedule hereto annexed, or any of them, due and owing from such one or more of them, either alone or jointly with the other or others of them, to the several creditors, parties hereto of the second and third parts, or any of them, respectively. But they, or he, shall thenceforth be wholly subject and liable to the same debts, or sums of money, or such parts thereof, re- spectively, as shall then remain unsatisfied, in such and the same manner as If the same had been solely controlled by him or them. And it is hereby agreed and declabed that all and every, the creditors of the said [debtors], who shall agree to take the benefit of these presents. APPENDIX 493 shall subscribe a declaration that they, and every of them, will accept their proportion of the moneys to arise by the means aforesaid in full of their re- spective debts, and the interest thereof when the same may carry interest, to be prepared and left at the office of , in on or before the day of next ; and that such creditors so signing such declara- tion shall grant and execute to the said [debtors] a letter of license, enabling them, respectively, to go, pass, and repass to and from such place or places, and iQ such manner as they or he shall think proper, for any purpose what- soever, without any control or Interruption of or by them, the said several creditors, or any of them, pending the execution of the trusts of these pres- ents. And this indentuee also witnesseth, that in consideration of the prem- ises, they, the several persons, parties hereto of the and parts, respectively, creditors as hereinbefore is mentioned, in respect of their several debts, claims, and demands, do, and each of them doth, by these presents, remise, release, and forever quitclaim unto the said [debtors], their heirs, executors, and administrators, and every of them, all actions, suits, bills, bonds, and writings obligatory, debts, dues, duties, accounts, sums of money, extents, executions, claims, and demands whatsoever, both at law and in equity, or otherwise howsoever, which they, respectively, or their respective executors or administrators, now have, or hereafter shall or may have, or otherwise could or might have, challenge, claim, or demand against the said [debtors], or any of them, their or any of their heirs, executors, or adminis- trators, or their or any of their estates or effects, for or by reason, or on account of the debts, claims, and demands of them, the said creditors, re- spectively, due or owing from the said [debtors], and set forth in the schedule hereto annexed, and all interest and arrears of interest for and in respect of the same several debts, sums of money, and premises, or any of them, or for or by reason of any other matter, cause, or thing whatsoever relating thereto, other than and except the security affected, or intended to be affected, by means of these presents, and the trust thereby declared as aforesaid. Pkovided always, and it is hereby further agreed, that it shall not be incumbent on the said [trustees], or the survivor of them, his executors or administrators, to sue for or take any steps for the recovery of the said premises hereinbefore assigned, or expressed, or intended so to be, unless he or they shall think proper so to do, and that it shall be lawful for him or them to discontinue any proceedings which shall have been undertaken, when- ever he or they shall think fit. And that no laches or responsibility shall be imputable to, or shall attach upon him, or them, for any act or deed whatso- ever which shall be done, executed, or directed by him or them in the exer- cise and execution of the trusts, powers, and authorities of these presents, or for omitting to exercise and carry into execution the same trusts, powers, and authorities, or any of them. Provided always, and it is always agreed and declared, that if at any time or times hereafter, during the continuance of the trusts of these pres- 494 COMPOSITION AT COMMON LAW ents, and while the said Indenture, or letter of license, of even date herewith, shall remain In force, the said [debtors'], o^ any of them, shall be arrested, or taken In execution, or other process shall be put in force against their, or any of their bodies, lands, or goods, by any one or more of them, or any of their present creditors, who shall refuse to come in and execute these presents, and the said indenture of even date herewith; then, and In every such case, it shall be lawful for the said trustees hereby appointed, or the survivor of them, his executors or administrators, or other the trustees or trustee for the time being of these presents, and they and he are and is hereby directed to put in special or common bail, or enter an appearance for them, the said [debtors], or any of them. In every or any such action or suit, or actions or suits, at their or his discretion, or else to submit to the same. And further, to defray and satisfy out of the trust-moneys arising by virtue of these pres- ents all costs, damages, and expenses attending the defending any actions or suits now pending, or to be instituted as aforesaid. And likewise, all mon- eys for which the bodies, lands, or goods of the said [debtors], or any of them, may be taken in execution as aforesaid, and all other costs, damages, or expenses incurred or to be awarded in any action or suit, or actions or suits, at law or in equity, either pending, or for which any cause subsists, or may be alleged against them, the said [debtors], or any of them, at the time of the execution of these presents. (14) [PLEA THAT PLAINTIFF AND DEFENDANT'S OTHER CEEDITOES AGEEED TO TAKE A COMPOSITION ON DEFENDANT'S DEBTS.] That the defendant was indebted to the plaintifC as in the declaration al- leged, and to divers other persons, respectively, and was in embarrassed circumstances, and unable to pay or satisfy the plaintiff and the said other creditors of the defendant, respectively, their debts in full ; and thereupon the defendant then offered and agreed to and with the plaintiff and his, the defendant's, other creditors, to pay, and the plaintiff and the said other cred- itors of the defendant then mutually agreed with each> other, and with the defendant, to accept of him a certain composition, to wit, at the rate of cents in the dollar, upon and in full satisfaction and discharge of their re- spective debts ;* and the defendant further says that he afterwards paid to the plaintiff, and the plaintiff then accepted and received from him the amount of such composition upon the said debt of the plaintiff, in pursuance of said agreement AFFBNDIZ 496 (15) [flea, a composition payable by instalments, that plaintiff dis- chabqed defendant from tendebing it at the stipulated times, and tender thereof before action.] [As in last form to the asterisk, and then, proceed:} such composition of cents in the dollar to be paid by the defendant to the plalntifE, and the said other creditors of the defendant, respectively, as foUows, to wit: half thereof down, and the remainder in six months then following; and the plaintiff and the said other creditors of the defendant then mutually agree with the defendant, and with each other, not to proceed against the defend- ant for the recovery of the residue of the said respective debts and demands, unless default should be made in the payment of such composition; and the defendant further says that the composition, or sum of cents in the dollar, on the said debt amounts to the sum of dollars and cents, and that he, the defendant, at the time of making the said agreement in this plea mentioned, was, and always from thence hitherto hath been, and still is, ready and VTllling to pay the plaintifiC the said composition on the said debt, but to receive the same, or any part thereof, from the defendant, he, the plaintiff, hath always wholly refused, and the plaintiff then discharged the defendant from tendering or paying to him, the plaintiff, the said com- position at the times for payment thereof; and the defendant further says that after the making of the said agreement, and before the commencement of this suit, he, the defendant, was willing and ready, and then tendered and offered to pay to the plaintiff the said sum of dollars and cents, to receive which of the defendant the plaintiff then wholly refused ; and the defendant now brings here Into court the said sum of dollars and cents, ready to be paid to the plaintiff. (16) [Plea of fbaudtjlent peefebence in an action on composition NOTES.] And the defendants, by A. B., their attorney, as to the said three first counts of the said declaration, say that before the making of the said prom- issory notes therein mentioned, to wit, on the day of A. D. 18. .., the defendants were indebted to the plaintiff, and to divers other per- sons, in divers sums of money, which they were then unable to pay without making sale of their estate and effects, to the great prejudice of the trade of them, the defendants ; and thereupon, for the satisfaction of the plaintiffs, and the said other creditors of the said defendants, they, the defendants, then pro- posed to the plaintiffs and the said other creditors, in manner and at the times hereinafter mentioned, provided they would permit the defendants to pursue 496 COMPOSITION AT COMMON LAW their said trade or business without molestation, that is to say: the sum of cents in the dol|lar to be paid on the execution of the proper articles of agreement between the defendants and the plaintiffs and the said other credi- tors, to be prepared for the purpose of carrying out the said proposition into effect, by promissory notes, at two months, with a satisfactory security for the due payment thereof, and the further remaining sum of cents in the dollar, to be paid by the defendants' own notes, by three equal instalments, at six, nine, and twelve months from the date thereof ; which said proposition of the defendants the plaintiffs and the said other creditors of the defendants then agreed to, and then the plaintiffs and the said other creditors, mutually and at each other's request, agreed with each other and with the defendants, in consideration of the premises and of such mutual agreement as aforesaid, and te execute proper articles of agreement between the defendants and the plain- tiffs and the said other creditors, to be prepared within a reasonable time, for the purpose of carrying the said proposition Into effect. And the defend- ants further say, that afterwards, and within a reasonable time, to wit, on the same day and year, in pursuance of the said proposition and agreement, and in order to carry the said proposition into effect, certain articles of agree- ment between the defendants and the plaintiffs and the said other creditors were duly prepared, bearing date, to wit, on the day of in the year aforesaid, and were duly sealed, delivered, and executed by the plaintiffs and the said other creditors, then relying on the said mutual agree- ment, which said articles, sealed with the seals of the plaintiffs and the said other persons, the defendants now bring into court; whereby, after reciting the proposition, the plaintiffs and the said other creditors did agree to accept of their respective debts, to be paid in manner aforesaid, and in consideration thereof, and severally and respectively gave and granted to the defendants full liberty and license to attend to and manage the said trade or business, and to transact any affairs, matters, or things whatsoever, at any place or places within the United States, at their free will and pleasure, and without any let, suit, action, arrest, imprisonment, or other impediment or molestation to be offered or done unto them, their goods, chattels, moneys, or other effects whatsoever, by the plaintiffs or the said other creditors, or any of them, for and during the space of twelve calendar months next after the day of the date thereof, if the defendants should so long live as by the said articles, reference being thereunto had, will, amongst other things, more fully and at large appear; and the defendants further say, that before and at the time of making the said proposal and agreement to and with and between the plaintiffs and the said other creditors, it was unlawfully and fraudulently agreed, to wit, on the said day and year in the first count mentioned, between the plaintiffs and the defendants, without the knowledge or consent of the said other creditors, or any of them, and in fraud thereof, that the defendants should indorse a certain bill of exchange to the plaintiffs, to wit, a bill drawn by the defendants upon and accepted by certain persons carrying on trade APPENDIX 497 under the name or firm of 0. and D., for the payment of dollars, in fraud of the said other creditors, in order to give the plaintiffs a fraudulent preference beyond the said other creditors, and to Induce them to execute the said articles of agreement, and become a party to the same and to the agree- ment. And the defendants further say, that afterwards, to wit, on the same day and year aforesaid, the defendants did, in pursuance of the said fraudu- lent agreement between the plaintiffs and the defendants, and in fraud of the said other creditors, and for the purpose last aforesaid, indorse the said last-mentioned bill of exchange, and deliver the same, and also make and deliver the said three promissory notes in the said three first counts men- tioned, the sum mentioned in the said notes amounting together to the amount of the sum in which the defendants were indebted to the plaintiffs as afore- said, in the proportion thereof of cents in the dollar ; and this the defendants are ready to verify, etc. (17) [eeplication alleging feaudulent peefebences.] That the plaintiffs executed the deed of composition in the defendant's plea mentioned, on the faith of the several -provisions therein contained, but that it was never executed by any of the other plaintifCs, and that the defendant agreed with certain of the creditors of the defendant referred to in the plea, being other than the plaintiffs, or any of them, to pay, give, or secure to such creditors, in consideration of their executing the deed, certain pecuniary and valuable benefits and preferences over the others of the creditors, and thereby induced such preferred creditors to execute the deed, which agreement was so made, and such execution by such preferred creditors procured, in manner aforesaid, without the knowledge, consent, or authority of the plaintifCs or of the creditors of- the defendant, other than the preferred creditors, and con- trary to and in fraud of the deed and the plaintiffs and the other unpreferred creditors ; and the defendant procured the deed to be executed by such ma- jority as is in the plea mentioned, by and through the fraudulent agreement and premises aforesaid, whereby the deed never released or discharged the defendant from the claim sued for in this action. Hunt Aco.& S.— 32 INDEX A ACCEPTANCE. Section upon accord necessary to constitute accord and satisfaction... 8 of part no consideration for relinquishing residue 8 of condition by retaining check 22 in satisfaction a question for the jury .^. 8 must be shown in action on original demand 8 bar rest on agreement to accept and not on 8 agreement to accept may be implied 8 ACCORD. defined 1 unenforceable, mutuality absent 3 either party may repudiate 3, 95 a contract without a consideration ; . . .■ 3 tow executed. 6 part performance 4 tender of performance no bar 5 executory until entirely performed 3 executory when satisfaction depends upon performance 3 performance and acceptance good 3, 95 cannot be specifically enforced 7 remedy upon original demand. 7 ACCORD AND SATISFACTION. defined 1 distinguished from payment, release 1 from a compromise 157 when not a compromise 72 when accounting an account stated and not an 78 agreement may be Implied 15, 116 acceptance of conditional tender 16 arising from acceptance of check In full 21 accepting part of cla^m allowed by county , . . 81 need not be in writing 13 certainty required 52, 13 requisites — new agreement naust differ from old 2 must be two debts or debt and non-contract demand 2 mutuality necessary 2 HuntAcc&S. (499) 500 INDEX ACCORD AND SATISFACTION— Continued Section legal consideration necessary 2, 14 must be executed 3, 26 readiness to perform accord not enough 3 consideration not present until performance 3 unenforceable when executory 3 acceptance of performance in satisfaction required 8 acceptance of less sum by mistake no 14 settlement of joint liability no ^ accepting wages after injury 13 making arbitrary deduction from wages 13 resale of property to seller when an 34 accepting part of prsltlon 161 secret preference a fraud upon 205 accepting composition notes after knowledge of preference a waiver of fraud 206 accepting secret preference loses all 203 Hunt Acc.& S.— 33 514 INDEX CREDITOR— CREDITORS— Continued. Section may reserve security upon joining. 166 debtor mutual agent of 165 may require debtor to continue to deal with tbem 166 CRIMINAL CONVERSATION. compromise of action for, binding 154 D DAMAGES. may be settled at any time 11 for breach of accord 5 a. & s. discharges only accrued 34 future and consequential, discharged by a. & s 34 occasioned by nuisance discharged by a. & s 34 unknown, not discharged by a. & s., when 34 for undiscovered injury discharged by a. & s., when 34 DEBTOR. See Joint Debtors. not necessary to composition agreement, when 170 at common law may give a preference 171 may avail himself of consideration passing between creditors 160 when required to sign composition agreement and when not 165 cannot release a creditor from composition 169 concealment of resources or condition a fraud 161 must be involved or embarrassed 161 when embarrassed 161 embarrassment need not be real 161 good faith as to embarrassment required 161 cannot avoid composition for own breach 182 need make no disclosure of condition unless requested 201 giving secret preference not in pari delicto 203 must persist in his conditional tender 16 DEBTS AND DEMANDS. effect of composition on igg parol evidence inadmissible to prove exclusion or inclusion of, when. . 196 included in composition 197 what debts included a matter of construction I97 when general words held to include particular demand 197 existing demands. igg demands not due n)^ secured and unsecured claims lOS Judgment debts 198 counter-claim discharged when 198 Inserting amount in blank in composition agreement 198 when creditor signs and leaves amount blank 19S splitting demands 199 INDEX 515 DEBTS AND DEMANDS— Continued. Section withholding demands 199 transferring demand after signing composition 199 bills dishonored upon which creditor is indorser 190 bills included, ,but in hands of iona fide holder 199 creditor liable to debtor for transferring claim 199 claim when fraud was unknown at time of signing 199 partnership debts 198 held by partner against firm 198 for money advanced to pay composition not discharged 198 demands in prcesenti discharged by a. & s., when 31 DEED. must be executed at time of tender 17D required to transfer interest In land 27 DEED OF INSPECTORSHIP. one method of effecting a composition 15S when resorted to 158 may be pleaded in bar 158 provision for forfeiture of debt of creditor suing 158 DEFAULT. effect of, in composition 17T in payment of note received upon composition 177 authority of agent or attorney to waive 176. no default until demand 177 DEFINITION. accord 1 accord and satisfaction 1 payment 1 compromise 76 compromise agreement ^ 76 settlement '^8 composition • • • 15'^ DEVISEE. may compound claims against estate, when 45, 17S DRAFT. for a less sum accepted by third party a consideration for an a. & s. 65 DRAWEE. released by composition, when 194 DURESS, defini distinction between the Roman, Civil and Common law 142 definition ^^^ 516 INDBX DURESS— Continued. Section by whom exercised 1^4 rule at civil law 144 rule at common law 144 renders compromise voidable 142 subsequent performance of compromise obtained by 143 a question of fact, wben 147 of surety 143 Per minas 147 direct threats unnecessary 147 threats of lawful or unlawful arrest immaterial 147 threats to parent to arrest child 147 to wife to arrest husband 147 belief In guilt or innocence immaterial 147 threats to enforce demand by legal means 148 threats to enforce fraudulent claim . . ; 148 to enforce wholly unfounded claim 149 threats to spoil goods 147 threats must have constrained the will 147 menace may be to character or person 147 menace to commit a battery 147 of goods, what constitutes 146 refusal to pay debt no 146 Inducing others to withhold payment 146 of personal property, real property 146 just claim enforced by unlawful means 145 by imprisonment 145 by lawful or unlawful arrest 145 E EFFECT. See Accord and Satisfaction, Compromise and Composition. EMBEZZLEMENT. criminal liability not discharged by compromise of claim 93 EQUALITY. among creditors cardinal principal of composition 202 object of composition 194 not necessary if preference is openly given 166 EQUITY. classification of fraud in 132 rule as to acceptance of conditional tender same as at law 17 rule as to a. & s. of sealed Instrument 25 composition upheld by principles of 157, i62 INDEX 517 EQUITY-Contlnued. Section formally enforceable only In 159 will enforce composition agreement 184 aid refused creditor who refused to join. 171 may relieve default of creditor in not joining, when 173 will determine what debts are included 197 relief afforded creditor whose debt is denied 188 will afford relief where creditor has been paid more than is due 192 may relieve debtor who gave secret preference though hands un- clean 203 relief granted where fraudulent preference has been given 201 may reinstate security 201 cancellation of security given by surety or enjoin enforcement of It 205 ESTOPPEL. none where municipality pays a less sum than salary fixed by law. . 67 unaccepted offer no ground for 80 when creditor accepts less sum with surety 64 account stated creates no 78 supports composition 159, 162 invoked by debtor, by creditor, upon a composition 162 invoked with greater force when debtor has made an assignment or procured a surety upon a composition 162 EVIDENCE. must be clear that condition of tender was insisted upon 17 silence after notice that conditional tender will not be accepted.... 17 the a. & s. alleged must be proved 114 satisfaction as well as accord must be shown 114 of complete performance of a. & s. or compromise 114 part performance, readiness or tender insufficient 114 of payment of note accepted on compromise necessary, when 114 compromise presumed to be fair 140 burden of proof upon party alleging a. & s 114 composition agreement 182 of mutuality of agreement between all creditors on whom. . 164 of knowledge by other creditors of preference on recipient. . 195 where plaintiff's evidence shows a compromise he must get rid of it 182 weight of evidence required to establish an a. & s. or compromise. . 114 when case made is for the court or jury 116 not all cases of undisputed facts for the court 116 of number of parties to composition, when for the court or jury 171 admissibility of, in proof of an a. & s. or compromise 115 518 INDEX EVIDENCE— Continued. Section written instrument the best 115 receipt in full 115 satisfaction of judgment 115 proof of bona fide dispute 115 proof of no dispute 115 entry of judgment for a particular amount 115 lapse of time 115 dismissal and payment of costs 115 due bill prima facie evidence of settlement 115 facts showing implied agreement.... 116 admissions: offer of compromise Inadmissible 99 admissibility of offer is for the court, when ; . 101 offer to pay complainant in bastardy to keep quiet ad- missible 102 when statement made during negotiation of compromise ad- missible 102 loose expressions not admissions of independent facts 102 of law inadmissible 102 of independent facts by whom made 103, 104 by agent, when admissible 102, 105 by attorney 104 by attorney after action brought 104 by infant 104 by executor 104 by co-admlnlstrator 104 by partner 103 by partner after dissolution 103 parol evidence admissible to show compromise 91 oral evidence admissible to. explain Indorsement 177 oral evidence inadmissible to vary written compromise 115 cannot show by parol that the agreement required all creditors to join In composition ' 172 oral evidence when admissible to show what claims are Included In composition Igg When intent to include or exclude claim In composition cannot be proven by parol I97 claim discharged by an a. & s 42 of composition 209 of composition inadmissible under plea of payment, compromise or release ons to defeat an a. & s * ' jjq of fraud warranting a rescission j^q burden of proof on party attacking a compromise for fraud 140 INDEX 519 EVIDENCE}— Continued. Section greater weight required to impeach written compromises 140 to impeach compromise must be clear and unequivocal 140 clear preponderance required i 140 payment in fuU admissible under plea of secret preference 204 EXECUTION OP COMPOSITION AGREEMENT. by calling meeting of creditors 165 a debtor or creditor may obtain consent through the mail 165 may carry instrument around to each creditor 165 need not be in writing 165 may be in separate instruments 165 all creditors required to sign, when 165 creditors not signing bound when 165 accepting benefits binds creditor without signing 165 creditor bound by promise, though not signing 165 must show refusal to execute, when 172 EXECUTORS AND ADMINISTRATORS. compromises by 45 for wrongful death 45 for life insurance 45 power of, at common law 45 power of, as residuary legatee ^ 46 statutes authorizing compromises by 45 statutes vesting the power direct in administrator 45 statutes not restrictive of common law power 45 order of court for protection of 45 no order of court required 45 good faith required upon compromise 45, 46 must show necessity for compromise 45 burden on, to show that it was prudent 45 liable for fraudulent compromise 46 order of court no protection 46 who may complain of compromise by 46 co-executor answerable for act of other, when 45 cannot compromise claims against estate, when 46 of deceased partner cannot join with survivor in composition and bind the estate I'^S bound individually, when 176 cannot compound debts by giving a few more than their share. . 176 power to compound debts owing to and by decedent 176 assignment of aU assets to creditors 176 n. admissions by 520 INDDZ F FALSE IMPKISONMBNT. Section dismissal of mutual actions an a. & s 26, 28 compromise after arrest bars action for 88, 93 FAMILY SETTLEMENTS. a consideration for a compromise 90 FEDERAL BANKRUPT ACT. when composition may be avoided under 191 FEES. acceptance of less no a. & s 57 agreement before services rendered to accept less 57 FORMS Appendix (1)-(17) composition with creditors 158 n. (1) composition with creditors, brief form (2) composition with creditors, another form (3) composition with creditors, with tndorser (4) composition with creditors, with surety (5) composition with creditors, reserving rights against Indorsers (6) composition with creditors, protecting against note (7) making release void for default (8) letter of license (9) proviso rendering void unless all sign (10) condition that debtor pay in installments (11) deed of inspectorship (12) clauses of composition deed (13) plea of composition (14) plea of discharge by tender • (15) plea of fraudulent preference (16) replication of fraudulent preference (17) plea of release ; 112 n. puis darrein continuance 112 n. FRAUD. • composition supported by doctrine of 162 oral letter of license upheld by doctrine of 159 creditor may avoid composition for 201 debtor cannot avoid composition for his own 206 by partner avoids firm composition 201 of agent or attorney binds principal 176 by creditor where debtor is Innocent 201 fraudulent conveyance 190 secret preference a 201, 202 INDEX 621 FRAUI^-Contliiued. g,,t,„„ violation of agreement by creditor a 159 misrepresentation by one creditor to another "... 201 Independent fraud by debtor precludes recovery of preference. '. 20S signing agreement after knowledge a waiver of 206 accepting notes after knowledge, a waiver of 206 creditor must have believed false statement to be true 201 remedies available where compromise was obtalued by IIT election of remedy irrevocable 117 action for damages may be brought when 118 right barred only by statute of limitation 118 measure of damages for fraudulent compromise. 117 waived by performance of executory contract 117 settlement includes all incidents of 32 Inadequate consideration as evidence of , 155 must be pleaded to avoid a. & s. or compromise Ill intent to defraud must be alleged Ill equity will not enforce agreements tainted with 97 demands based on, Indivisible 35 defined at civil law, at common law 133 FRAUDUIiENT CONVEYANCE. under Federal Bankrupt Act 191 principles applied In determining what is a 191 FKAUDULENT PREFERENCE. See Secret Preference. rule in New York as to avoiding composition for 205 G GARNISHMENT. non-assenting creditor may reach surplus In hand of assignee by... 191 GEORGIA, statute regulating effect of part performance 70 GIFT execution necessary to discharge demand 14 of residue of debt good, when 67 GOOD FAITH. unenforceable demand asserted in 23 required of administrator in effecting compromise 45 trustee in passing upon claim held to 188 GUARANTOR. statutory provision governing release of 41 n. effect upon liability of, by composition with principal 194 creditor cannot afterwards Join in composition where money is to be paid by I'^l 522 INDEX GUARANTY. Section contract of, not discharged by release of all demands. 32 guardia:n. power to compromise at common law 47 has burden of showing compromise was fair 47 court may' authorize compromise by 47 by nature, compromise by , 47 ad litem has no power to compromise 47 cannot make binding admissions 104 admissions by, binds him. 104 may avoid compromise made with ward 123, 150 I INDORSER. discharged by an a. & s. with principal 9 reserving right against 9 contingent liability of, released by express contract 32 when covenant not to sue discharges 32 agreement by, before maturity, to pay a less sum a consideration for a. & s 74 oral evidence admissible to explain liability of, when 177 debtor liable as, upon note given upon composition, when 177 released by composition agreement, when 191 released by construction only 194 held by becoming a party or assenting to composition 194 n. effect of release of prior upon liability of subsequent 194 may compound his liability 192 fraudulent preference releases 205 INFANT. cannot make an a. & s 42 admissions by 104 rescission on ground of infancy ^ 150 guardian of, may rescind 150 privies in blood may rescind 150 may avoid composition 150 time when he may rescind 90, 150 tender required by, upon a rescission .119, 150 notice to, of application by guardian to compromise 47 compromise must promote their interest , 90 adult contracting with, remains bound, when 90 INJUNCTION. will lie to restrain threatened violation of composition 184 INDEX 523 INSANE PERSON. Section compromise by, may be rescinded 151 compromise with monomaniac good, when , 151 INSOXVENOX. of debtor no consideration to uphold an a. & s. or compromise 59 proving balance of claim in, upon breach of composition 182 n. INSPECTOR. appointed by deed of inspectorship 158 duties of 158 INSURANCE. receiving part of, from vreong-doer no bar to recovery from insurer 38 insurer's right against wrong-doer not barred by release given by in- sured 38 J JOINT CREDITORS. as parties to composition agreement 175 JOINT DEBTORS. may make an accord and satisfaction 40 accord and satisfaction of joint debt by one 9 note for less sum by one, no a. & s 62 payment of share of one by the other no a. & s 61 covenant never to sue one no discharge of the other 9 covenant treated as a release, when 9, 40 statutes regulating effect of a. & s. or compromise with one 9, 41 right of contribution not affected by a. & s. with one 40 as parties to a composition ITo effect of composition upon liability of one 193 reservation by creditor of remedy against one 193 admissions by one not binding on co-debtor 103 payment of part by one, no consideration for releasing residue 55 n. JOINT TORT FEASOR. a. & s. and compromise by one 42 payment by one a part payment, when 42 payment by one discharges all, when 42 part payment by one and covenant never to sue 42 all discharged notwithstanding reservation against one 42 surrender of benefits received from one does not affect right of other 42 when one may contradict release by parol 42 gratuity paid by one no a. & s 42 a. & s. by one with infant 42 damages not apportioned between 42 no right of contribution 42 524 INDEX JUDGMENT. Section as subject matter of a. & a 26 not discharged by a. & s. at common law 26 JUKI. whether offer Is by way of compromise a question for 101 whether tender was accepted subject to condition for 17 L LEASE. when surrender cannot be by a. & s 25 acts constituting surrender 25 n. LETTER OF LICENSE. one method of effecting a composition 158 distinction between agreement to forbear and 158 should contain clause that it may be pleaded in bar 158 formerly by deed 159 by parol have been upheld 159 violation of oral agreement a fraud 159 mutual promises of creditors a consideration for 160 LIEN. ignoring holder of, in a. & s 38 LIBEL. plea of a. & s. good in action for 28 publication of mutual apologies an a. & s 28 LIMITATION. See Statute of. LOUISIANA. discharge under code of obligation by stranger 52 M MAINE. statute regulating effect of part performance 70 MAYHEM. damages arising from, discharged by a. & s 28 MINOR. See Infant. MUNICIPAL CORPORATION. presumption arising from receiving part of claim from 34 may effect a compromise through the proper board , 48 right to compromise, confined to what claim 48 when a. & s. or compromise of salary Is binding 67 acceptance of part of claim allowed by, a compromise, when 81 INDEX 625 MUNICIPAL CORPORATION— Continued. Section no estoppel In favor of, upon acceptance of a less sum as salary or fees 57 compromise by, in violation of statute void 154 MUTUALITY. necessary to validity of a. & s 2, 13 absent in an accord 3 of agreement 80 of remedies 77 arising from acceptance 80 acceptance of conditional tender 81 between creditors necessary to a composition 159 between creditors and debtor 159 MUTUAL ACCOUNTS. See Accounts. N NEXT FRIEND. See Prochein Ami. NEXT OV KIN. Settlement may be made with, when 45 NEW YORK. statute authorizing compromises does not include composition, when 45 release necessary to discharge joint debtor 41 rule in, as to fraudulent preference avoidlag a composition 205 NORTH CAROLINA. statute regulating effect of part performance 70 NORTH DAKOTA. statute regulating effect of part performance 70 delining accord 1 n., 70 n. NOTK. when taken as payment 177 demand for payment of, required when 177 demand after notice of intent not to pay 177 must be paid before original debt discharged when 177 effect of failure to pay new note given before maturity of old 177 debtor liable on indorsement on note given for composition, when... 177 must be executed at time of tender 179 given for secret preference void 202 in hands of hona fide holder good 202 non-negotiable, subject to defense of fraud 202 failure to plead fraud to one of two notes 202 526 INDEX NOTE— Continued. Section judgment upon plea of fraud to one note res adjudicata In action on the other 202 creditor may sue on though surrendered 206 constitutes satisfaction of accord, when 3 creditor may return before payment ^ 3 given for residue of debt after a. & s. void 10 In settlement of unfounded claim unenforceable 14 of debtor of less sum no consideration for an a. & s 62 of third person for less sum a consideration 65 NOVATION. an a. & s. a 1 composition agreement when a 157, 182 NUISANCE. damages arising from, after an a. & s. when not discharged 34 o OFFER OF COMPROMISE. inadmissible in evidence 99 to be inadmissible in evidence must be upon condition expressed or implied 100 what ofCer is not a 101 when competent evidence 101 admission of independent facts admissible when 102 mere loose expressions not independent facts 102 by whom the admission of facts must be made 103 OFFICER. public, not authorized to compromise 48 of private corporation governed by rules of agency 43 as to admissions 105 OFF-SET. of less against a greater demand no a. & s. when 72 P PARENT. compromise of claim for damage to child 47 PARTIES. to an a. & s 38-53 what person may make an a. & s 38 to a compromise 79 naming the parties 91 INDEX 527 PARTIES— Continued. Section to a composition 170-176 number necessary I57, 170 evidence as of number wlien for court or jury 171 stipulation requiring certain creditors to join 172 not bound until all intended have signed 165 condition requiring all creditors to join includes who 172 what creditors required determined by object of composition. . 174 stipulation as to who shall join, how construed 168 "the creditors" includes who 174 "other creditors" includes who 174 creditors to be paid in full not necessary 172 all assenting creditors bound, when 172 non-execution of composition within the time limited not fatal, when . . . ._ 172 when necessary to show refusal to become a party 172 objection that some creditors have not joined available to whom 173 PARTNERS. power to compromise as debtor, as creditor 39 cannot make an a. & s. of individual liability 39 a. & s. of joint debt by one 9 a. & s. between 88 may give individual note upon compromise 39 can only receive money on an a. & s 39 cannot off-set individual debt against firm debt 39 accepting half of debt from one no consideration for a. & s 55 power to compromise after dissolution 39 effect of covenant not to sue one 39 statutes regulating discharge of one 41 note by one for- a less sum a consideration for an a. & s 74 admissions by one, when binding on firm 103 by one after dissolution 103 as parties to a composition, as debtors, as creditors 175 composition of firm debts does not affect Individual debts 175 payment by one and covenant not to sue no composition 175 one cannot compound individual liability 175 statutes authorizing compounding of individual liability 175 firm not dissolved by composition and assignment by one 175 assignment of all assets by one 175 transfer of firm real estate by one 175 effect of composition of firm debts upon debts due from partner to. . 175 composition by survivor 175 executor of deceased partner joining in composition personally bound 175 after retiring from firm cannot join as creditor, when 175 528 INDBX PARTNERS— Continued. Section execution of composition In Individual name no release of firm debts, when ■'•'^5 may enforce contribution on paying firm debts 175 one may authorize third party to discharge firm debts - . . . . 175 assent to composition given by one 165 liability not severed unless they sign the composition deed 165 n. assignment to pay firm debts does not Include individual property. . 189 status of firm property where one partner compounds Individual debts 189 transfer of firm property not an act of bankruptcy as to individual partner 191 PAYMENT. defined 1 distinguished from a. & s 1 distinguished from compromise 78 of part no a. & s. without agreement to release residue 13 of less sum when merely a payment pro tanto 167 of part upon a compromise, a payment pro tanto upon original de- mand, when 182 PAYMENT INTO COURT. See Bringing Money into Court PENALTY. revival of debt upon default of compromise agreement not a 177 when stipulation for the recovery of residue upon default Is a stip- ulation for a 96 PERFORMANCE. of a. & s. must be full and complete 6 of part Insufficient 4 entire debt must be satisfied by 4 of part and readiness to perform balance 4 of part and promise to pay balance in future 4 tender of, upon an accord of no effect 5 of accord good when accepted 3 creditor may repudiate an accord before 6 of an uncertain accord 13 of accord by executing new agreement. 6 remedy upon breach of substituted agreement 74 by expending money for creditor's benefit. 6 order on third person insufficient 6, 26 by relinquishing right to goods in creditor's hands 6 by symbolical delivery 6 by delivery of precise thing g by delivery to third person 6 by delivery at place designated q creditor may waive condition as to 6 INDEX 529 PERFORMANCE— Continued. Section Of compositions by accepting new agreement 167, 182, 190 by accepting new note 177 creditor's remedy Is upon new agreement 182 by delivery of accepted bills 177 by delivery of note with approved security 177 tender of 177, 170 strict performance required 177 immaterial variations 178 mistake in '. 178 time for 177 where creditor joins after day fixed for 181 strict performance waived 181 breach by debtor, effect of 182 creditor may prove claim in bankruptcy 182 notice by creditor of election unnecessary 182 avoidance of composition bars action against surety....... 182 composition avoidable at election of creditors 182 right to avoidance upon a breach is several 182 may be as to one creditor 182 when default as to one creditor not available to another 182 n. other creditors may elect to stand on agreement notwith- standing a breach as to one 182 In what a breach may consist 182 arising from death of proposed surety 177 by transfer by debtor 182 by allowing property to be levied upon 182 arising from a failure to realize a certain sum from the property assigned 182 by a refusal of trustee to account 182 by falling to pay installment 177 return of partial payment upon a breach 182 remedy upon a breach 182 effect of a default 177 breach by creditor 181. 183 remedy of debtor where creditor transfers note after signing 183 by failure to designate a trustee 183 debtor need only make a tender where breach is by creditor 183 remedy of creditors on breach by one 183 what amounts to a waiver of breach 181 giving additional time 181 by objecting to tender upon another ground 181 no waiver without knowledge of facts 181 after a waiver, creditor may take advantage of subsequent default ^^^ Hunt Aco.& S. — 34 530 INDEX PERFORMANCE— Continued. Section rights based upon breacli after waiver of default 181 creditor in default cannot require a tender, when 181 of compromise necessary to be valid 77 by executing new agreement 77 of compromise agreement 94, 95 time for 95 condition as to time waived, when 95 where partial performance is sufficient 94 by one party deprives the other of right to withdraw 94 effect of breach of compromise agreement 94 upon breach remedy is upon the new agreement 94 the willing party upon a refusal to perform may rescind 94 partial performance deprives the other of right to withdraw, when 94 remedy upon default by faUure to deliver a part of property. . . 96 when part payment a payment pro tanto on original demand... 96 upon default the original cause is revived, when 96 remedy upon default when original rights are to remain unim- paired .- .■ 96 reserving a right upon default to recover residue of demand .... 95 stipulation for recovery of residue upon default a stipulation for a penalty, when 96 breach of, by refusal of third person to accept draft 65 must be alleged and proven 94 effect of performance after discovery of fraud 117 of part performance before discovery of fraud 117 PERSONAIi INJURIES. damages from, discharged by a. & s 2S PERSONAL REPRESENTATIVES. See Executors and Administrators. of debtor takes residue after paying composition 192 rights of creditors pass to 192 concluded by compromise, when 93 a. & s. with injured person binding on his 28, 34 of infant may rescind 150 may avoid contract for duress 143 may avoid contract for fraud on decedent, when 123 PHYSICIANS. compromise effected by 137 PLACE. payment at a different place, when a consideration 60 PLEADING. a compromise agreement , 107 waiver of performance of compromise agreement 107 INDEX 531 PLEADING — Continued. Section accord and satisfaction and a compromise 106-113 a. & s. or compromise must be pleaded 1 91,. 106 a. & s. or compromise a plea in bar 106 an affirmative plea 106 allegations necessary 107 allegation of performance necessary ^...9i, 107 a. & s. by way of satisfaction 107 acceptance in satisfaction 107 must allege tiat money was paid in satisfaction 25 n. that third party was authorized to accept payment 108 when payment was by joint debtor 108 when payment was by stranger 108 time of performance of an a. & s 108 tender of performance 107 time when pleaded 107 after action brought .107, 109 plea puis darrein continuance , 107 by supplemental answer 109 compromise of action 89 a. & s. of instrument under seal 108 a. & s. with general issue 106 when given in evidence under the general issue 106 when given in evidence under plea of non assumpsit 106 cannot be given in evidence under a plea of payment 106 effect of a plea of a. & s. or compromise 106 demurrer lies as in other cases 110 motion to strike out plea of accord 110 plea of a. & s. must be met by reply, when 110 a rescission of a compromise Ill reply to avoid an a. & s. or compromise Ill facts constituting fraud must be alleged Ill intent to defraud HI belief in truth of fraudulent statements Ill ofCer or tender in pleading 120 allegations to avoid contract for duress 143 cannot plead non est factum to avoid deed obtained by duress 143 a release ■^^^ a plea In bar 112 a plea In confession and avoidance 112 facts alleged 112 that release is under seal unnecessary 71,112 terms should be set out • 112 In assumpsit, case, debt 112 pleaded specially, when 112 532 INDEX PLEADING — Continued. Section wUere limited to a particular claim 113 consideration for 11^2 that plaintiff released defendant a conclusion 112 puis darrein continuance 112 form of plea of release 112 n. reply to plea of release necessary 113 what evidence admissible under general denial of 113 facts in avoidance of, must be pleaded 113 failure to plead, when waived 106 n. a composition must be pleaded 208 suthciency of plea 164 n. where agreement contains an absolute release 208 acceptance of performance unnecessary 208 when performance must be alleged 208 alleging tender of performance 208 allegation of mutuality between creditors 208 allegation of acceptance of performance 164 n. compliance with conditions 208 waiver of default must be alleged 208 setting out agreement merely 208 time, same as applies to a. & s 208 profert in curia necessary when 208 PLEDGEE. no power to compromise note pledged 38 not bound to accept an a. & s 38 not bound to notify pledgor of offer 38 accepting part in money and note for balance 38 surrendering note and accepting another, payment presumed 38 liability for unauthorized settlement 38 PRINCIPAL. acceptance of proceeds of unauthorized settlement by agent 44 tender upon a repudiation of settlement 44 when entitled to retain proceeds of settlement 44 PROBATE COURT. statutory authority to authorize compromise 45 without previous agreement 45 when debtor is insolvent 45 PBOGBEIN AMI. no power to compromise 47 PROMISSORY NOTE. See Note. PROOF. See Evidence. INDEX 533 PUBLIC POLICY. Seollon contract against, no consideration for an a. & s 14, 23 compromise of claims against, not binding 86 compounding a felony against 153 secret preference void on ground of 203 assignment of future salary of public official against 189 rule excluding offer of compromise as evidence founded on 99 Q QUARRELS. when discharged by a. & s 30 includes what 30 synonymous with what 30 077/ TAM ACTIONS. accepting costs and discontinuing not unlawful 153 R REAL PROPERTY. transfer by one partner of firm 175 RECOUPMENT. discharged by composition 198 RECEIPT. defined 37 in full, effect of 37, 69 statutes regulating effect of, in Alabama, Tennessee, Texas 70 when not conclusive 37 prim^a facie evidence of demand settled 37 in full of all demands restricted to what 37 giving, a receipt in full and protesting 16 construction of ,. 36, 37 including contracts, how construed -37 parol evidence admissible to identify demand 37 when not varied by parol 29 RECEIVER. cannot effect a compromise when 49 RELEASE. one method of discharging a debt 71 distinguished from a. & s 1. 71 consideration not necessary to validity 1 Imports a consideration 14 effect of accepting a less sum and giving a 71 534 INDIIX RELEASE— Continued. Section when transaction may be an a. & s 71 imports a seal 71 surrender of security operates as a 67 of joint debtor, efCect 40 n. necessary to discharge joint debtor in New ' York il by composition, when in prcesenti 167 n. construction of 36 wlien general 30 general words following a particular recital 36 rule of construction same as applies to agreements of com- promise 36 operation determined by construction 29 taken most strongly against releasor 29 when construed as covenant not to sue 42 demands discharged by 29-35 general, discharge? what 34 unknown demands- 30 subject previously considered does not limit 30 effect on future liability 32 demands in^ prwsenti 31 rents not due, money not due 31 rights which are to take effect m futuro discharged 31 wrft of error not included when 30 of suits includes what 30 of demands more beneficial than what 30 extrinsic evidence to show particular demand not discharged 29 equity may set aside 201 avoided for fraud or duress 30 when una voided is only competent evidence of agreement 29 pleading a 112 failure to plead waived, when .106 n. need not be alleged to be under seal 112 when proven under general issue 112 form of plea of , 112 n. BENT. not due not discharged by release 31 RES JUDICATA. judgment on question of fraud on one of two notes conclusive as to the other 202 RESCISSION. of accord and satisfaction 12 restores debt -. 12 of an a. & s. on a Sunday ]2 INDEX 535 RESCISSION-Contlnued. Section by parol of contract under seal when not within statute of frauds. . . 25 recovery of residue upon default under an agreement no 95 by agreement 125 when implied * 125 election of remedies upon discovery of ground for 117 election cannot be retracted 117 ignorance no ground for 151 on ground of surprise '. 141 of compromise for fraud 133-140 defined at civil law, at common law 133 fraud classified in equity 134 unnecessary at common law, when 117 rule in Federal courts 117 of physician 137 setting up sham claim 136 misrepresentation by debtor of his finances 136 misrepresentation of the law 135 concealment and suppression of facts 138 matters of opinion 135 misrepresentation as to value 135 suppression of facts where no duty exists to speak 138 compromise of fraud bars action to, for same fraud 139 party defrauded not liable for interest 123 after action brought to enforce new agreement 117, 118 when to be made 118 right to, how lost 118 by laches. 118 by rights of third parties intervening 118 evidence 140 of composition for fraud 201 for giving secret preference 201 misrepresentation of debtor as to his affairs 201 by agent 201 belief of agent immaterial 201 misrepresentation by partner 201 when one creditor makes misrepresentations to another 201 by one creditor, all may consider contract at an end 201 creditor must have believed statement to be true 201 for failure of consideration.*. 155 for want of consideration 155 for mistake of law 126, 127, 128 mistake as to title 128 mistake of legal rights 129 for mistake of fact 130 536 INDEX RESCISSION— Continued. Section mistake of fact defined 130 Ignorance of foreign law an ignorance of fact 130 for mutual mistake 132 must be of a material fact 131 diligence required to discover facts 131 relief denied when party is negligent. . . , 131 mere inability to read insufficient to avoid compromise 131 signing release without reading is negligence 131 of composition for mistake of fact where third party is affected. .. 201 upon ground of insanity 119 n., 151 by guardian of insane person 151 by personal representatives 151 upon regaining reason 151 tender required upon 151 for undue influence 149 distinguished from duress 149 by persons in vinculis , 152 on ground of infancy 150 tender required 119 for duress 142-148 duress defined 142 distinction between the Roman, civil and common law 142 of master or servant 143 of brother-in-law 143 n. of father or son 143 to a stranger 143 by whom exercised 144 by stranger 143 by surety 143 by surety when duress is to principal 143 per nUnas 147 for duress of goods 146 effect of performance of contract obtained by 143 when tender unnecessary 143 recovery of property without previous demand 143 when creditor to a composition may recover residue without 206 notice of, required 124 tender required upon a rescission of compromise 119 before suit to rescind « 120 when unnecessary 12 where release was represented to be something else 119 where release covers matters not intended 119 when party is entitled to retain the thing received 121 where the judgment will give the party all he is entitled to 12] INDEX 537 RESCISSION— Continued. Section where thing received Is of no value 121 when thing received is a release, note 121 where consideration moved to third party Ill pleading a tender Ill ROLES OF COURT. requiring stipulations respecting proceedings does not apply to com- promises 91 s SALARY. acceptance of less than amount fixed by law no a. & s 28 where law fixing amount is of doubtful construction 57 SECRET PREFERENCE. fraudulent 202-207 amount or kind immaterial 204 what is a 203 bargain for earlier payment of composition money 201 agreement by third party to take composition notes at a larger sum 204 forcing debtor to assume debt of another 204 any secret security a 204 partner securing individ\ial debt when firm compounds 204 putting debt down for less and forgiving the balance no 207 paid by agent or attorney 206 furnished by third person 202 by third person without debtor's knowledge 202 releases surety 205 guilty creditor loges all 207 composition must be fully executed to affect right of creditor... 207 creditor giving, cannot recover original debt or composition money.. 20.t non-negotiable security subject to defense of 202 ground for avoiding composition 202 avoidance by innocent creditor 20B guilty creditor cannot 207 creditor receiving cannot claim a default 181 contract given for, void ,. 202 may be recovered by debtor 203 by personal representative 203 by assignee 203 by near relative paying 203 no recovery by stranger 203 no recovery after subsequent voluntary payment of 203 after paying to iona fide holder of note 203 538 INDBX SECEBT PREFERENCE— Continued. Section surety paying, cannot recover of debtor 203 composition money cannot be recovered back 203 SECURITY. discharged by a composition^ 194 reserving right to hold 195 reservation of, must clearly appear 194 burden upon favored creditor to show reservation 194 given for a secret preference void 202 SEDUCTION. damages arising from, discharged by a. & s 28 SET-OFF. extinguished by composition, when 92 by settlement, when 32 controversy over, renders claim unliquidated 87 of mutual demands an a. & s 72 SETTLEMENT. defined 78 includes compromise 78 SLANDER. a. & s. a good plea in action for 28 writing letter of exculpation an a. & s. or compromise of 88 SOUTH DAKOTA. statute regulating effect of part performance 70 SPECIFIC PERFORMANCE. accord cannot be 7 of compromise agreement 97 made by executors or administrator 46 agreement must be final and complete 97 of family agreements 97 where a minor is a party to 97 denied where contract is against parental authority 97 in case of fraud or mistake 97 necessity for a tender fiefore suit for, 98 tender necessary to bar right to 93 of composition agreement 184 by debtor 183 by creditor 182 agreement must be fully executed 184 must be free from fraud 184 not enforced when void under statute of frauds 184 INDEX 539 SPLITTING CAUSES. S,,t,„„ In general 35 demands based on fraud cannot be divided 35 STATED ACCOUNT. distinguished from compromise 78 wben recovery may be had as upon 17 STATUTE OF FRAUDS. substitute oral agreement must not be vylthln, when. 25 parol modiflcation of contract under seal not within, when 25 a. & a. concerning realty must not be within 27 meaning of word surrender "by operation of law" 27 compromise within, must be in writing 91 when parol agreement enforceable notwithstanding 97 compromise valid when dispute is as to whether contract is within 86 when composition must be in writing 159 undertaking by surety must be In writing 159 verbal agreement by third party to take assignment of claims not within 159 STATUTE OF LIMITATIONS. debt barred by, cannot be paid by assignee 188 bars right to sue for damages for fraud, when. 118 commences to run upon composition agreement, when 182 upon default of, law implies a new promise to pay old cause. . . . 182 offer of compromise will not stop the running of 80 STIPULATIONS. settling on action, how enforced 89 inserted in composition agreements 166 providing for Investigation of claims by committee 166 for examination by trustee 188 as to who shall sign 166, 168 must be clear 166 requiring certain creditors to join 172 not complied with by separate settlement 172 limiting time when creditors may join 173 providing for forfeiture of debts of creditors not joining 173 requiring debtor to deal with creditors 166 reserving right to retain security 166 regulating when deed shall take effect 166 for discharge of debtor need not be in express terms 167 for execution of release subsequently, surplusage 167 construction of 1'^'* meaning of term "the creditors" 174 "we who have subscribed" 174 540 INDEX STIPULATIONS— Continued. Section "their several creditors" 174 "other creditors" 174 STRANGER. compromise made by 50 ratification by debtor .■ 50, 51 effect of debtor pleading compromise 51 intent of, to discharge the obligation 52 burden upon debtor to show intent 52 repudiation by creditor of payment by 52 acceptance in satisfaction necessary 52 cannot reclaim payment 52 discharge by, available to whom 52 •acting under belief that be is bound 53 liability of debtor to 53 agreement to reimburse implied, when 53 reimbursement depends on express or implied contract 53 subsequent promise to pay 53 consideration for subsequent promise 53 paying, entitled to subrogation, when 53 cannot recover as assignee 53 discharge of debt by, under La. Code 52 administrator or guardian, not considered 53 brother-in-law a '. 203 as a party to composition 170 may recover composition money from debtor when 170 paying secret preference cannot recover 203 effect of paying secret preference by, without debtor's knowledge . . . 206 SUBJECT MATTER. accord and satisfaction of damages 24 breach of covenant to repair house 24 right of action ex contractu 24 simple contracts 24 contracts under seal 24 claims without foundation .- 23 unenforceable demands 23 must not be illegal ' 23 must be existing demands 23 right of action ex delicto 28 deed discharged only by instrument under seal 24 a. & s. of right of action concerning realty 27 of leasehold estates for more than one year 25 actions discharged by a. & s 26 30 INDBX 641 SUBJECT MATTER— Continued. Section action of debt for breach of covenant discharged by a. & s 24 bond with penalty discharged by a. & s. before or after default 24, 25 sealed instrument without certain advantages discharged by parol a. & s. before default 25 may be modified by parol a. & s. after breach 25 must not violate statute of frauds 25 writ of error may be, of a. & s 26 action of debt on guardian's bond discharged by a. & s 24 of compromise 79 must be uncertain 79 of composition must be liquidated demands 157 SUBSEQUENT PROMISE. to pay residue of debt discharged by a. & s 10 without consideration, reason of rule 10 under seal 10 to pay residue of debt discharged by composition 185 agreement under seal 185 relinquishing a security no consideration 185 n. consideration necessary to uphold promise 204 not fraudulent 204 to pay residue where discharge is not conventional 10 SUNDAY. contracts made on 11 illegal not void 11 statutes regulating contracts made on 11 rescission on. 12 SURETY. discharge of principal by a. & s. discharges 9 reserving right against 9 abandonment of appeal by, consideration for release of 88 acceptance of dividends no defense to liability of 56 amount of contribution from co-surety 38 liability of, released by express contract 32, 192 defense by, of duress of principal 143 for composition 200 composition must be in writing to bind 159, 200 not bound when all creditors do not sign 172, 173, 200 condition as to signing cannot be waived by creditors and hold. . 200 surety may waive condition 200 not a creditor under the composition 200 may take security on all of debtor's property 200 entitled to return of money on avoidance of composition by creditor 200 542 INDEX SURETT— Contlmiea. Section cannot compel creditor to take advantage of default 200 not bound where guaranty Is obtained by fraud of creditor 200 released by avoidance of composition 182 risk of default of debtor upon 177 not entitled to return of partial payment upon a breach of com- position 1S2 where surety signs conditional upon all joining 182 fraudulent preference releases 205 may recover composition money for fraudulent preference 205 paying unlawful preference cannot recover of debtor 203 estoppel invoked in favor of surety 162 effect of composition with principal on liability of 194 released by construction only 194 not released untU required number sign 194 right against, reserved 195 reservation must be part of common agreement 195 reservation of right against, not always effective 195 Intent to reserve right against, must be clear 195 debtor consents to remain bound to, where creditor reserves right against 195 effect of compounding with co-surety 192 debtor not released" by surety compounding his liability 192 SURPRISE. defined 141 as ground for rescission 141 T TENDER. upon an accord no bar 5 rule in Mississippi 5 may be made upon composition 179 necessary to bar right to specific performance 98 upon rescission necessary when 117, 119 when unnecessary 12 where the thing is of no value 121 where thing received is a release or note 121 where party is entitled to retain the thing received 121 when the judgment will give the party all he is entitled to 121 formal tender excused, when 180 manner of making 122 actual offer necessary 122 actual production required .122, 179 INDEX 543 TENDER— Continued. Section strict tender upon a rescission waived, when 119 waiver of formalities 122, 180 of production of the money 179 acts amounting to a waiver of formalities 180 must be unconditional 122, 179 condition must be clear 18 condition may be implied 18 what does not amount to a condition 18 what amounts to a condition 19 excluding Inference that more is due no 18 tender and condition cannot be dissevered 17 whether conditional not necessarily a question of law 20 efCect of acceptance of conditional tender of check 22 protest unavailing upon acceptance of conditional tender, when 16 whether acceptance was subject to condition a question for the jury 17 acceptance of condition may be Implied 17 acceptance without words of assent 17 rule as to acceptance of condition same at law and equity. . 17 a willingness to make a tender insufficient 179 depositing money in bank no tender 179 debtor must be ready and able 179 amount to be tendered upon a rescission 123 exact amount must be tendered, when 179 time when made 179 before suit to rescind 120 before suit for specific performance 98 place' of making a 124, 179 upon domestic contract, by party residing abroad 124 where creditor resides abroad 179 to whom made 123, 179 agent or attorney, when good 179 workman or servant, not good 179 by whom made 123 principal upon repudiation of unauthorized settlement 44 money must be legal tender 179 cash instead of note 179 demands discharged by acceptance of conditional tender 16 acceptance of, an a. & s., when 16 compromise arising from acceptance of conditional tender 81 TENNESSEE. statute regulating effect of receipts and agreements 70 544 INDEX TIMW. Section when an a. & s. may be made 11 when of the essence of the contract 95 n. 1 unnecessary to prove execution of a. & s. at time alleged 115 when creditors may join in composition 173 creditors may join in composition before distribution of assets, when 173 creditors coming in after passing of a dividend takes what 173 strict performance of composition at, required 177 for performance commences to run, when 177 when payment is to be made within a reasonable time 177 TEXAS. statute regulating effect of receipts and agreements 70 TORT. damages arising from, may be settled at any time 11 TRESPASS. damages arising from, discharged by a. & s 28 TRUSTEE. See Assignee. trust must be accepted by 187 taking possession of property without executing deed 165 failing to account a breach of composition agreement 182 may compromise a debt due the estate 49 may avoid compromise when 123 required to pass upon claim, when 188 u UNILATERAL CONTRACTS. with creditor unenforceable 163 with debtor unenforceable 163 USURY. compromise of contracts tainted with 154 assignee cannot pay debt tainted with 188 debtor by deed may direct assignee to pay debt tainted with 188 abatement of part of claim for, no a. & s .55 n. w WASTE. damages from, discharged by an a. & s 28 WILL. to uphold settlement, reasonable ground for contest required 86 n. mere threat to contest not enough 90 INDEX 545 WILL — Continued. Section payment of extra sum to forbear contest 90 compromise by devisee no bar to claim as heir 90 WISCONSIN. unnecessary to plead matter In avoidance of compromise in Ill WRIT OF ERROR. not discharged by general release 30 discharged by release under name of action, when 30 may be subject matter of a. & s 26 when joint tort feasor cannot release 40 pleading a. & s. In bar of 109 WROXGFUL DEATH. damages arising from, discharged by a. & s 28 Hunt Acc.& S.— 35 [End or VoltimeJ