Wood v. Young , 5 Wend. 620 ( 1830 )

The following opinion was delivered s

By Mr. Justice Sutherland.

The first and most material inquiry in this ease is, as to the nature and effect of the Instrument mutually executed by the appellant and Mrs. Lasher, as executrix of her husband, on the 23d day of July, 1814. It was i?i the form of articles of agreement between (Sarah Lasher, executrix, &c. of John B. Lasher, deceased, and the appellant, William Wood. It purports to be a final and absolute settlement and release of ail accounts, claims or demands whatever, existing at or prior to that time between Wood and the estate of Lasher, with the single exception of the claim involved in the suit which had been commenced by Wood against the Commercial Insurance Company, and a covenant, on the part of Wood, in relation to that, claim, that lie would pay over to Mrs. Lasher one half of whatever should be recovered deducting costs and charges. On what ground, then, is it that the appellant seeks to avoid the effect of these solemn releases, and to go into a general examination and statement of the previous accounts and transactions between him and the respondent’s testator 1 He contends, 1. That it appears from the bill and answer that the agreement was executed under a misapprehension by both parties, and that they both complain that, it does not settle the differences between them, according to their respective rights; and that such an agreement ought not to be enforced, nor preclude an investigation of all the accounts and transactions between the parties; and 2. That at all events, such an investigation should have been permitted for the purpose of showing (as he contends it would have shown) that there was a large balance at that time due from the testator’s estate to him, and that the covenant or agreement on his part to pay the executrix one half of what might be recovered from the Commercial Insurance Company was consequently a voluntary and gratuitous promise; that the respondent therefore ought to be held strictly to the terms of the agreement, and was not entitled, upon any equitable conslruction of it, to any money which the appellant might have received from any other source than the insurance company, although it might have resulted from the same original transaction. These are the prominent grounds on which this part of the case was put by the,counsel for the appellant.

I will first look at this case in reference to the pleadings. The bill is not framed with a view to set aside the releases, either on the ground of fraud or mistake. It does not ask to have them set aside, but on the contrary states that the complainant is advised that it would be difficult, if not impracticable, successfully to impeach them on either of those grounds ; and the prayer of the bill is confined to the relief to which the complainant may be entitled under the covenant of the appellant, thereby expressly affirming the binding force and obligation of the whole instrument. It is (rue there are allegations in the bill, that when the proposition for this general settlement was originally made by Wood to Lasher in December, 1812, there was a large balance due to Lasher, and that lite proposition was insidiously made by Wood for the purpose of extinguishing that balance; and that after the death of Lasher, Wood renewed the same proposition to the complainant, and that she being unacquainted with business, and ignorant of the dealings and accounts between Wood and her testator, under the advice of her friends, finally acceded to it and executed the release; and she charges that she was beguiled into the execution thereof, under the representation and impression that one half of the cargo of the last voyage in which Wood and her husband were concerned, did in fact belong to her husband, and in ignorance of the important influence which that fact, when once established, must have on the result of the suit instituted by the appellant against the Commercial Insurance Company. In answer to these charges, the defendant says he was induced to make the application to Lasher, to come to some settlement and adjustment of their accounts, by the knowledge of the precarious slate of his health at that time, and from a desire to have eveiy thing between them settled, befor his, Lasher’s, then expected death; and that he proposed those terms without a knowledge of the exact state of their accounts, as it appears from his books that Lasher was at that time considerably indebted to him ; and he denies that he ever made any proposition for a settlement to the complainant after the death of her husband, but that on the contrary, the application was made by the complainant or some one on her behalf to him; that such application was repeatedly made, and mutual releases proposed; and that believing their accounts were nearly balanced, he finally consented to such release, and suggested the stipulation in relation to the proceeds of the suit against the insurance company, and denies that the proposition to Lasher was insidiously made, or that the complainant was beguiled by him into the execution of the releases by any representation made by him as to the interest of Lasher in the cargo. There is no evidence in the case which impeaches the answer upon the point of fraud or misrepresentation. Indeed there is no foundation for imputing either to any of the parlies concerned in the arrangement. I am persuaded that it was not only entirely fair, but highly judicious, under all the circumstances of the case.

The first proposition for a settlement was made by the appellant to Capt. Lasher, in a letter written to him on the 21st December, 1812. This letter is an important document in several points of view. It shows in the first place, that the appellant then admitted the interest of Capt. Lash-er in the suit which had previously been commenced and was then pending against the insurance company; and that he was entitled to one half of whatever might be recovered] It appears to have been written in answer to a letter of the 11th of the same month from Capt. Lasher, in which it seems he had complained of the delay which had attended the prosecution of the suit. The appellant first vindicates himself from all blame in relation to it, and expresses his strong indignation against the company, and his willingness to sacrifice his half, to obtain the balance for Capt. Lasher. He then stales that the expenses of the suit, if they should fail, would be heavy, and therefore suggests the propriety of employing additional counsel, and then says, “Should it unfortunately happen that we should be defeated and fail to recover, it will be necessáry for us both, considering your precarious state of health and my situation, to come to some immediate arrangement, in order that persons unacquainted with our business and the attending circumstances, who may hereafter have the disposal of them, may be able to settle them without difficulty or error. I therefore now stale to you my ideas on the subject for your opinion and concurrence, which will probably satisfy you now and your family hereafter should any tiling happen to you. My opinion is, that in the event of recovery, your family should have my obligation to receive half the amount of suit and damages immediately on the receipt of the money, &c. This will put it out of the power of any controversy should you not be present. On the other hand, that you send me a counter obligation, that all the difference between us lies in the suit at law, that the one half is yours if recovered, and stating that if lost, you are bound for half the amount of costs. On this subject you may reflect, and if you think any other mode more eligible, please to suggest it; for it will be my greatest ambition, that you and your family shall be satisfied with my conduct, and my greatest pleasure will be, if recovered, to pay you or them the half.” The reasons for the appellant’s solicitude for a final set llement between him and Capt. Lash-er are disclosed on the face of this letter. He liad failed or was embarrassed, and Capt. Lasher was not expected to live long. He in fact died soon after. The settlement of their affairs, therefore, would soon devolve upon others, who would be ignorant of all the circumstances connected with them, and would be likely to fall into errors; and, at all events, would be less capable of amicably adjusting them upon proper principles, it appears that the appellant and Capt. Lasher had been jointly concerned in several commercial adventures of considerable importance and extent, and that their accounts had never been fully and finally settled. The solicitude of the appellant upon this subject was therefore not only natural but praiseworthy ; and the fact that the proposition for a settlement was originally made to Capt. Lasher upon substantially the same terms as were finally agreed upon between the appellant and his testatrix, would tend strongly to shew that he had no design to take advantage of her general ignorance of business, or her ignorance of those particular transactions. But this point is placed beyond all doubt by the fact that Mrs. Lasher herself renewed the proposition for a settlement, and that it was upon her application that the releases were finally given ; this is positively alleged in the answer, and is entirely uncontradicled.

Nor was there any mistake in the settlement which can afford any ground for setting it aside. The only pretence of mistake, consists in the assumption that the releases were executed, because both parties supposed that their accounts were exactly balanced ; whereas each now swears, that upon further investigation, he finds that his adversary was at that time largely indebted to him. So far from this assumption being well founded, the very fact of exchanging formal releases, shews that the parlies supposed that there might be a balance due, but that it was doubtful in whose favor it would be. The very object of the releases was to avoid the necessity of investigating their old accounts for the purpose of ascertaining the precise balance, which in all such cases is conceded to be uncertain and doubtful. The one release is the consideration for the other, and they ought never to be disturbed unless there has been fraud, or palpable and gross mistake. The principle laid down by Lord Macclesfield in Cann v. Cann, 1 P. Wms. 726, is applicable to this case.' He said that where two parties were contending about an estate, and one released his pretensions to the other, there could be no color to set this release aside, because the party that made it, as it turned out, had the right. If so, there could be no compromise of a suit, or any accommodation of a controversy. Every release supposed the party making it to have a right: but this could be no reason for setting it . c ° aside, for then every release might be avoided. The right must always be on one side or the other, and therefore the compromise of a doubtful right was a sufficient foundation of an agreement. That the right in this case was and is doubtful, is shewn by the conflicting allegations of the parties; and after so long an acquiescence, it would require a very strong case to justify a court in disturbing such a settlement, even where its interference for that purpose was directly invoked.

If the accounts prior to the releases cannot bé overhauled for the purpose of charging either parly with a balance, it seems to me necessarily to follow that they cannot be gone into in order to show that a part of the same agreement in relation to the same subject matter was without consideration and therefore void. The argument is shortly this: the covenant of Wood to pay Mrs. Lasher one half of the sum which he might recover from the insurance company was without consideration, unless he was at that time indebted to the estate of Captain Lasher. When Mrs. Lasher, therefore, comes into a court of equity to enforce that covenant, he ought to be permitted to show that he was not indebted to the estate, and that the covenant was therefore void ; and that, he can do only by overhauling all their antecedent accounts. This view of the case is susceptible of several answers. In the first place, it is a mere assumption that this was a voluntary or gratuitous promise on the part of the appellant, in any sense, that is not equally applicable to (he whole arrangement. The parties agreed to settle all matters in difference between them, and to exchange releases, embracing every thing except the matter involved in the suit against the Commercial Insurance Company; that uTas excepted in terms in the releases of the respondent, and the appellant expressly covenanted to pay to her one half of whatever should be recovered. Upon the face of the instrument there certainly is nothing to show that the demand against the insurance company belonged exclusively to the appellant. The form of the transaction with the company had been such as to make it necessary or proper to bring the suit in his name; but the legal and natural inference from the instrument itself would be, that it was a debt due to them both beneficially; and that the amount which would be realized being uncertain, and the parties being desirous to make a final and complete settlement of the partnership transactions, the appellant covenanted to pay the respondent one half of whatever should be realized from the suit, for the express purpose of giving the respondent a legal remedy, and avoiding the necessity of any subsequent examination of the partnership accounts. All that the appellant says upon this subject in his answer is, that he himself suggested this part of the agreement, and that it was not exacted or required by the agent of the respondent ; and although he admits that the complainant, by virtue of the exception in the release, was legally and equitably interested in the one equal half part of whatever might have been recovered in the suit, yet he denies that she is legally and equitably entitled to any part of the sum awarded by the commissioners, inasmuch as the stipulation in the release was a mere gratuity on the part of the appellant to the complainant, and the complainant ought therefore to be held strictly to the terms of the stipulation. This is not a positive averment that it was a gratuity, but an inference from the fact that the covenant was originally inserted at his suggestion, and that all the complainant’s rights and equities in relation to this fund sprung from that suggestion, and had no previous existence. This part of the answer appears to me to be completely disposed of by the appellant’s letter to Capt. Lasher of the 21st December, 1812, between one and two years prior to the date of the agreement with the complainant. I have already adverted to the fact that in that letter the appellant speaks of the suit against the Commercial Insurance Company as one in which he and Captain Lasher were equally interested, and consults him as a party in interest in relation to the costs and employing additional counsel. He says, “Should it unfortunately happen that we should be defeated, or the suit should go against us, it will be necessary,” &c. and then proposes a settlement upon precisely the same terms as were finally adopted by him and the respondent, with the single exception of a stipulation in relation to the costs. This letter was undoubtedly the basis of the final agreement; and it shews conclusively, that if the appellant did suggest that provision in the contract, it was not for the purpose of conferring a bounty upon the complainant, but to give her a legal right to that which he had long before acknowledged her husband xvas equitably entitled to, and which he had offered to secure to him in the same manner.

But admitting that the estate of Capt. Lasher had no interest in that fund previously to the settlement in 1814, the result, in my opinion, would still be the same. The agreement is to be taken altogether, and the release and stipulation or covenant, on the part of the appellant, is to be considered the consideration for the release of the complainant. I do not perceive upon what principle that part of the contract is to be separated from the rest, and to be treated as a distinct and independent covenant, requiring to be supported by a distinct and independent consideration. The appellant was willing to give that covenant and a release for a general release from the complainant. It was all one transaction, founded upon one and the same consideration—a general and final adjustment of all claims and controversies between the parties. The appellant was therefore properly precluded from going into an investigation of the antecedent accounts for the purpose of shewing that there was no consideration for this part of his agreement.

But it was said that by the terms of the decree of the 23d1 April, 1827, all the acts between the parties were opened, and a general account was directed to be taken. The language of the decree is not free from ambiguity ; but it will admit of the restricted construction which Chancellor Jones subsequently put upon it, when the point was distinctly presented to him, upon the exceptions to the master’s report. His construction of his own decree ought, under such circumstances, to be deemed conclusive.

The covenant or agreement of the appellant being established as having been given upon a valid and sufficient consideration, its construction can admit of no serious doubt. The object of the agreement was to secure to the respondent one half of the indemnity which might be recovered or received by the appellant for the capture and subsequent loss of the cargo, which had been insured by the Commercial Insurance Company; and although the indemnity was then expected to be received through the suit against the insurance company only, yet a court of equity will look at the substance of the transaction, and presuming the parties to have dealt fairly and honestly with each other, will enforce the agreement according to its spirit and substance. Upon this principle there can be no question that the respondent was entitled to participate in whatever might be recovered or received by the appellant on this account, whether received from the insurers, the captors, or our own government. It is correct^ said, in one of the respondent’s points, that the insurance company were entitled to credit on their policy for the amount so received by the appellant from the captors, and a recovery could be had against the insurers only for the balance; and that the receiving the money from the captors was therefore attended with the same legal effects and consequences as though it had been received directly of the insurers. The point appears to me too clear to require or even to be susceptible of illustration.

The only remaining question is whether the decree should be modified or reversed so far as it gives to the respondent any part of the money received by the appellant, under the award of the commissioners, for freight or loss of profits in lieu of freight. What amount was awarded for freight does not appear. All that does appear in the case upon that subject is contained in the bill. It is there stated that the appellant, in the memorial presented by him to the commissioners, claimed $4500 as probable profits in lieu of freight; and that the commissioners, in their award, allowed the claims of the appellant and the insurance'company as valid for the value of the vessel, for the freight, and for the value of the cargo; and liquidated the aggregate amount to be allowed, at $31,961,84, to be divided as follows: To the insurers $13,-747,75, and to the appellant $8314,09. Whether the freight allowed was given to the appellant or to the insurers is not distinctly stated, although it is probable it was given to the appellant; but how much was allowed on that account, the case affords no means of determining. The answer simply admits the allegations of the bill upon this point to be correct, and that the net amount received by the appellant under the award was $6369,63. There was no suggestion in the answer, nor upon any of the hearings before the chancellor or the master, (so far as the case discloses,) that any particular portion of this fund was exempt from the complainant’s claim on the ground that it was given for the loss of freight, and not the loss of the cargo; and it is therefore objected preliminarily, by the respondent, that the appellant cannot now, for the first time, raise that question in this court. I am inclined to think the objection is well taken. The first decree of Chancellor Jones, ordering a reference to a master to state an account between the parties, directed the master, in taking and stating the account, to credit the complainant and debit the defendant with the one half of the net amount of the said monies so received under the said award, as so much money received by him for the use of the complainant; and that in stating the account, he should make to the defendant all just allowances. If under this decree the master had no authority to go into the items composing the sum awarded to the defendant, and to exclude from the account all that had been allowed for freight, then it was a positive decree in favor of the complainant for one half of the net sum received hy the defendant under the award, whether for freight or cargo; and the defendant should have taken the necessary measures to correct the decree in that respect, if he deemed it erroneous, before he entered upon the hearing before the master. If the master had the authority to discriminate under the decree, then the defendant was bound to have raised the question before the master, and to have excepted to the master’s decision if erroneous. He did neb ther; nor did he make a suggestion upon the point, on the final hearing upon the equity reserved. The point is first raised upon the argument in this -court. The attention of the court below has certainly never been directed to this question, nor can it be said ever to have been passed upon by, or distinctly presented to it; and it is the established general practice of this court not to reverse a judgment of the supreme court, or a decree of the court of chancery, upon a point not raised or urged in those courts. This practice is founded not only upon the nature of the jurisdiction of this court, which is exclusively appellate, but upon other considerations also of great importance to the due administration of justice, and which are recognized to a greater or less extent in the practice of all courts. Parties must be held to the exercise of diligence in the assertion of their rights; they must assert them at the proper time, or they will be deemed to have waived them. Suits would have no end, if this principle were not adhered to; but it is applied with peculiar rigor in this court, for reasons which have been frequently stated in the cases in which the question has arisen ; 12 Johns. R. 493; 13 id. 361 ; 17 id. 469; 2 Cowen, 31 ; 2 Wendell, 146; 4 id. 179.

I am of opinion, therefore, that the decree of the chancellor ought to be affirmed throughout.

This being the unanimous opinion of the court, the decree of the chancellor was thereupon affirmed, with costs.