Curlee Clothing Co. v. Uberman , 273 S.W. 899 ( 1925 )

This suit was instituted by appellant to recover about $1,650 which it claimed appellee owed it on an open account. Appellee was a merchant at Cleburne, and in December, 1921, he notified his creditors, including appellant, that he was in a failing condition and, unless he could make some adjustment with his creditors, he would take the benefit of the Bankruptcy Law (U.S. Comp. St. §§ 9585-9656). Efforts were made by appellee and his creditors to sell the stock of merchandise, but no sale was perfected. In February, 1922, appellee, at the request of some of his creditors, transferred all his stock of merchandise, fixtures, and accounts to a trustee, to be disposed of for the benefit of all of his creditors. The conveyance to the trustee provided that the trustee should sell said property and pay, first, the taxes, debts due employees, and expenses. The instrument then provides that, after payment of the preferred claims above, "the balance shall be distributed among the accepting creditors of the vendor, and the acceptance by any creditor of the vendor of his or their pro rata share of said proceeds shall be a full satisfaction, settlement, and discharge of the entire debts and obligation of every character of said creditor or creditors so accepting against the vendor, and such acceptance shall be a full release and satisfaction of said obligation."

The trust conveyance was filed for record in Johnson county, and the trustee took charge of the property, converted same into cash, and paid same pro rata, to the creditors of appellee. Appellant was one of the creditors who was in the conference with appellee when he was discussing his financial troubles, and agreed that it would be best for the creditors if appellee would not file a petition in bankruptcy. Appellant acquiesced in the assignment made by appellee to the trustee and accepted its pro rata part of the proceeds, which was 16 per cent. of its claim, under the terms and provisions of said trust conveyance above quoted.

The cause was tried to the court and the court found the above facts, and concluded as a matter of law that plaintiff, by having accepted under the deed of trust, was bound thereby, and that the agreement on the part of appellee not to take advantage of the bankruptcy law was a sufficient consideration to release the balance of the debt, and that appellant, by its actions, was estopped from claiming any balance due on its account against appellee, and entered judgment denying appellant any recovery.

Appellant presents only two propositions or points. It contends the judgment is erroneous because appellee did not plead or prove that all of his other creditors agreed to and did accept a like pro rata sum in full payment of their respective debts, and that, before appellee is entitled to be discharged from his debts, he must plead and prove that each of his creditors, in consideration that he would not file a petition in bankruptcy, both agreed to and did accept a like pro rata sum in full discharge of their several debts. We overrule these propositions. The general rule is that the payment of a lesser sum than is due on a liquidated demand, upon an agreement that such payment will satisfy the whole debt, will not discharge the entire debt, because of a want of consideration. 1 R.C.L. 184. "Where [however] the debtor is known to the creditor to be insolvent, and the creditor, in consideration of such fact, agrees to and does accept part payment of a liquidated demand in full satisfaction, the courts generally recognize this as an exception to the general rule and uphold the transaction as a good accord and satisfaction. The right of an insolvent debtor to take the benefit of the bankruptcy law is unquestionably a valuable right, and the giving up of this right at the time of a part payment upon a liquidated demand may well be deemed to be a sufficient consideration for the creditor's agreement to accept the payment in full satisfaction of the demand." 1 R.C.L. 187.

The appellant in this case having known of the insolvency of appellee and of his intention to take the benefit of the bankruptcy law, and having accepted its pro rata part of the entire property of appellee in full discharge of its claim, we think brings this case within the above exception to the rule. Each individual creditor has the right to make a settlement with his insolvent debtor, regardless of the action of any other creditor, and where, as in this case, the creditor agrees to and does accept less than the full amount due from an insolvent debtor who refrains from taking bankruptcy, with the agreement on its part to release the debtor from the balance of the claim, the contract is enforceable. This holding has been followed by our courts, as well as by courts of a number of other states. International Shoe Co. v. Stewart (Tex.Civ.App.) 245 S.W. 723; Rotan Grocery Co. v. Noble,36 Tex. Civ. App. 226, 81 S.W. 586; Ward-Murray Co. v. Young,40 Tex. Civ. App. 294, 89 S.W. 456; Rivers v. Campbell,51 Tex. Civ. App. 103, 111 S.W. 190; Mayfield Woolen Mills Co. v. Long (Tex.Civ.App.) 119 S.W. 908; Melroy v. Kemmerer, 218 Pa. 381, 67 A. 699,11 L.R.A. (N.S.) 1018, 120 Am. St. Rep. 888; Engbretson v. Seiberling,122 Iowa 522, 98 N.W. 319, 64 L.R.A. 75, 101 Am. St. Rep. 279; Rice v. London N.W. American Mort. Co., 70 Minn. 77, 72 N.W. 826; Herman v. Schlesinger, 114 Wis. 382, 90 N.W. 460, 91 Am. St. Rep. 922; 1 Corpus Juris, 550, 551.

The judgment of the trial court is affirmed.