Debt Settlement: Paying Off with Installments and Accord, Slides of Law

Download Debt Settlement: Paying Off with Installments and Accord and more Slides Law in PDF only on Docsity! HOUSE OF LORDS Date: 16 May 1884 Between: JOHN WESTON FOAKES APPELLANT - v - JULIA BEER RESPONDENT The House took time for consideration. May 16. EARL OF SELBORNE L.C.:- My Lords, upon the construction of the agreement of the 21st of December 1876, I cannot differ from the conclusion in which both the Courts below were agreed. If the operative part could properly be controlled by the recitals, I think there would be much reason to say that the only thing contemplated by the recitals was giving time for payment, without any relinquishment, on the part of the judgment creditor, of any portion of the amount recoverable (whether for principal or for interest) under the judgment. But the agreement of the judgment creditor, which follows the recitals, is that she "will not take any proceedings whatever on the judgment," if a certain condition is fulfilled. What is that condition? Payment of the sum of £150 in every half year, "until the whole of the said sum of £2090 19 s. " (the aggregate amount of the principal debt and costs, for which judgment had been entered) "shall have been fully paid and satisfied." A particular "sum" is here mentioned, which does not include the interest then due, or future interest. Whatever was meant to be payable at all, under this agreement, was clearly to be payable by half-yearly instalments of £150 each; any other construction must necessarily make the conditional promise nugatory. But to say that the half-yearly payments were to continue till the whole sum of £2090 19 s. , "and interest thereon," should have been fully paid and satisfied, would be to introduce very important words into the agreement, which are not there, and of which I cannot say that they are necessarily implied. Although, therefore, I may (as indeed I do) very much doubt whether the effect of the agreement, as a conditional waiver of the interest to which she was by law entitled under the judgment, was really present to the mind of the judgment creditor, still I cannot deny that it might have that effect, if capable of being legally enforced. But the question remains, whether the agreement is capable of being legally enforced. Not being under seal, it cannot be legally enforced against the respondent, unless she received consideration for it from the appellant, or unless, though without consideration, it operates by way of accord and satisfaction, so as to extinguish the claim for interest. What is the consideration? On the face of the agreement none is expressed, except a present payment of £500, on account and in part of the larger debt then due and payable by law under the judgment. The appellant did not contract to pay the future instalments of £150 each, at the times therein mentioned; much less did he give any new security, in the shape of negotiable paper, or in any other form. The promise de futuro was only that of the respondent, that if the half-yearly payments of £150 each were regularly paid, she would "take no proceedings whatever on the judgment." No doubt if the appellant had been under no antecedent obligation to pay the whole debt, his fulfilment of the condition might have imported some consideration on his part for that promise. But he was under that antecedent obligation; and payment at those deferred dates, by the forbearance and indulgence of the creditor, of the residue of the principal debt and costs, could not (in my opinion) be a consideration for the relinquishment of interest and discharge of the judgment, unless the payment of the £500, at the time of signing the agreement, was such a consideration. As to accord and satisfaction, in point of fact there could be no complete satisfaction, so long as any future instalment remained payable; and I do not see how any mere payments on account could operate in law as a satisfaction ad interim, conditionally upon other payments being afterwards duly made, unless there was a consideration sufficient to support the agreement while still unexecuted. Nor was anything, in fact, done by the respondent in this case, on the receipt of the last payment, which could be tantamount to an acquittance, if the agreement did not previously bind her. The question, therefore, is nakedly raised by this appeal, whether your Lordships are now prepared, not only to overrule, as contrary to law, the doctrine stated by Sir Edward Coke to have been laid down by all the judges of the Common Pleas in Pinnel's Case(1) in 1602, and repeated in his note to Littleton, sect. 344(2), but to treat a prospective agreement, not under seal, for satisfaction of a debt, by a series of payments on account to a total amount less than the whole debt, as binding in law, provided those payments are regularly made; the case not being one of a composition with a common debtor, agreed to, inter se, by several creditors. I prefer so to state the question instead of treating it (as it was put at the Bar) as depending on the authority of the case of Cumber v. Wane(3), decided in 1718. It may well be that distinctions, which in later cases have been held sufficient to exclude the application of that doctrine, existed and were improperly disregarded in Cumber v. Wane(3); and yet that the doctrine itself may be law, rightly recognised in Cumber v. Wane(3), and not really contradicted by any later authorities. And this appears to me to be the true state of the case. The doctrine itself, as laid down by Sir Edward Coke, may have been criticised, as questionable in principle, by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary I think it has always, since the sixteenth century, been accepted as law. If so, I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years. The doctrine, as stated in Pinnel's Case(1), is "that payment of a lesser sum on the day" (it would of course be the same after the day), "in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears to the Judges, that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum." As stated in Coke Littleton, 212 (b), it is, "where the condition is for payment of £20, the obligor or feoffor cannot at the time appointed pay a lesser sum in satisfaction of the whole, because it is apparent that a lesser sum of money cannot be a satisfaction of a greater;" adding (what is beyond controversy), that an acquittance under seal, in full (1) 5 Rep. 117 a. (2) Co. Litt. 212 b. (3) 1 Sm. L. C. 8th ed. 357. satisfaction of the whole, would (under like circumstances) be valid and binding. by no intendment the acceptance of parcel can be a satisfaction to the plaintiff; but in the case at bar it was resolved that the payment and acceptance of parcel before the day in satisfaction of the whole would be a good satisfaction in regard of circumstance of time; for peradventure parcel of it before the day would be more beneficial to him than the whole at the day, and the value of the satisfaction is not material; so if I am bound in £20 to pay you £10 at Westminster, and you request me to pay you £5 at the day at York, and you will accept it in full satisfaction for the whole £10, it is a good satisfaction for the whole, for the expenses to pay it at York is sufficient satisfaction." There are two things here resolved. First, that where a matter paid and accepted in satisfaction of a debt certain might by any possibility be more beneficial to the creditor than his debt, the Court will not inquire into the adequacy of the consideration. If the creditor, without any fraud, accepted it in satisfaction when it was not a sufficient satisfaction it was his own fault. And that payment before the day might be more beneficial, and consequently that the plea was in substance good, and this must have been decided in the case. There is a second point stated to have been resolved, viz.: "That payment of a lesser sum on the day cannot be any satisfaction of the whole, because it appears to the judges that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum." This was certainly not necessary for the decision of the case; but though the resolution of the Court of Common Pleas was only a dictum, it seems to me clear that Lord Coke deliberately adopted the dictum, and the great weight of his authority makes it necessary to be cautious before saying that what he deliberately adopted as law was a mistake, and though I cannot find that in any subsequent case this dictum has been made the ground of the decision, except in Fitch v. Sutton(1),as to which I shall make some remarks later, and in Down v. Hatcher(2), as to which Parke, B. in Cooper v. Parker(3),said, "Whenever the question may arise as to whether Down v. Hatcher(2) is good law, I should have a great deal to say against it," yet there certainly are cases in which great judges have treated the dictum in Pinnel's Case(4) as good law. For instance, in Sibree v. Tripp(5), Parke, B. says, "It is clear if the claim be a liquidated and ascertained sum, payment of part cannot be satisfaction of the whole, although it may, under certain circumstances, be evidence of a gift of the remainder." And Alderson, B. in the same case says, "It is undoubtedly true that payment of a portion of a liquidated demand, in the same manner as the whole liquidated demand which ought to be paid, is payment only in part, because it is not one bargain, but two; viz. payment of part, and an agreement without consideration to give up the residue. The Courts might very well have held the contrary, and have left the matter to the agreement of the parties, but undoubtedly the law is so settled." After such strong expressions of opinion, I doubt much whether any judge sitting in a Court of the first instance would be justified in treating the question as open. But as this hals very seldom, if at all, been the ground of the decision even in a Court of the first instance, and certainly never been the ground of a decision in the Court of Exchequer Chamber, still less in this House, I did think it open in your Lordships' House to reconsider this question. And, notwithstanding the very high authority of Lord (1) 5 East, 230. (2) 10 A. & E. 121. (3) 15 C. B. 828. (4) 5 Rep. 117 a. (5) 15 M. & W. 33, 37. Coke, I think it is not the fact that to accept prompt payment of a part only of a liquidated demand, can never be more beneficial than to insist on payment of the whole. And if it be not the fact, it cannot be apparent to the judges. I will first examine the authorities. If a defendant pleaded the general issue, the plaintiff could join issue at once, and if the case was not defended get his verdict at the next assizes. But by pleading a special plea, the plaintiff was obliged to reply, and the defendant often caused the plaintiff, merely by the delay occasioned by replying, to se an assize. If the replication was one to which he could demur he made this sure. Strangely enough it seems long to have been thought that if the defendant kept within reasonable bounds neither he nor his lawyers were to blame in getting time in this way by a sham plea - that a chattel was given and accepted in satisfaction of the debt. The recognised forms were giving and accepting in satisfaction a beaver hat: Young v. Rudd(1), or a pipe of wine(2). All this is now antiquated. But whilst it continued to be the practice, the pleas founded on the first part of the resolution in Pinnel's Case(3)were very common, and that law was perfectly trite. No one far a moment supposed that a beaver hat was really given and accepted; but every one knew that the law was that if it was really given and accepted it was a good satisfaction. But special pleas founded on the other resolution in Pinnel's Case(3), on what I have ventured to call the dictum, were certainly not common. I doubt if a real defence of this sort was ever specially pleaded. When there really was a question as to whether a debt was satisfied by a payment of a smaller sum the defendant pleaded the general issue, and if it was proved to the satisfaction of the jury that a smaller sum had been paid and accepted in satisfaction of a greater, if objection was raised the jury might perhaps, as suggested by Holroyd J. in Thomas v. Heathorn(4), find that the circumstances were such that the legal effect was to be as if the whole was paid down and a portion thrown back as a god's-penny. This, however, seems to me to be an unsatisfactory and (1) 5 Mod. 86. (2) 3 Chit. Plead. 7th Ed. 92. (3) 5 Rep. 117 a. (4) 2 B. & C. 482. artificial way of avoiding the effect of the dictum, and it could not be applied to such an agreement as that now before this House. For whatever reason it was, I know of no case in which the question was raised whether a payment of a lesser sum could be satisfaction of a liquidated demand from Pinnel's Case(1) down to Cumber v. Wane, 5 Geo. 1(2), a period of 115 years. In Adams v. Tapling(3) where the plea was bad for many other reasons, it is reported to have been said by the Court that: "In covenant where the damages are uncertain, and to be recovered, as in this case, a lesser thing may be done in satisfaction, and there 'accord and satisfaction' is a good plea." No doubt this was one of the cases which Parke, B. would have cited in support of his opinion that Down v. Hatcher(4) was not good law. The Court are said to have gone on to recognise the dictum in Pinnel's Case(1), or at least not to dissent from it, but it was not the ground of their decision. In every other reported case which I have seen the question arose on a demurrer to a replication to what was obviously a sham or dilatory plea. Some doubt has been made as to what the pleadings in Cumber v. Wane(5) really were. I have obtained the record(6). The plea is that after the promises aforesaid, and before the issuing of the writ, it was agreed between the said George and Edward Cumber that he, the said George, "daret eidem Edwardo Cumber quandm notam in script vocatam 'a promissory note' manu propria ipsius Georgii subscript pr. solucon eidem Edwardo Cumber vel ordiñi quinque librarum," fourteen days after date, in full satisfaction and exoneration of the premises and promises, which said note in writing the said George then gave to the said Edward Cumber, and the said Edward Cumber then and there received from the said George the said note in full satisfaction and discharge of the premises and promises. The replication is that, "the said George did not give to him Edward any note in writing called a promissory note with the (1) 5 Rep. 117 a. (2) 1 Sm. L. C. 8th Ed. 357. (3) 4 Mod. 88. (4) 10 A. & E. 121. (5) 1 Str. 426. (6) The reference is: Queen's Bench (Plea side) Plea Roll. 5 Geo. 1, Trinity, ro. 173. hand of him George subscribed for the payment to him Edward or his order of £5, fourteen days after date in full satisfaction and discharge of the premises and promises." To this there is a demurrer and judgment in the Common Pleas for the plaintiff "that the replication was good in law." The reporter, oddly enough, says there was an immaterial replication. The effect of the replication is to put in issue the substance of the defence, namely, the giving in satisfaction; Young v. Rudd(1), and certainly that was not immaterial. But for some reason, I do not stop to inquire what, Pratt C.J. prefers to base the judgment affirming that of the Common Pleas on the supposed badness of the plea rather than on the sufficiency of the replication. It is impossible to doubt that the note, which it is averred in the plea was given as satisfaction, was a negotiable note. And therefore this case is in direct conflict with Sibree v. Tripp(2). Two cases require to be carefully considered. The first is Heathcote v. Crookshanks(3). The plea there pleaded would, I think, now be held perfectly good, see Norman v. Thompson(4);but Buller J. seems to have thought otherwise. He says, "thirdly it was said that all the creditors were bound by this agreement 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, unless they had afterwards accepted it. In the case in which Cumber v. Wane(5) was denied to be law, Hardcastle v. Howard (26 Geo. 3, B.R.), the party actually accepted. But as the plaintiff in the present case refused to take less than the whole demand, the plea is clearly bad." That decision goes entirely on the ground that accord without satisfaction is not a plea. I do not think it can be fairly said that Buller J. meant by saying "that is a nudum pactum, unless they had afterwards accepted it," to express an opinion that if the dividend had been accepted it would have been a good satisfaction. But he certainly expresses no opinion the other way. In Fitch v. Sutton(6) not only did the plaintiff not accept (1) 5 Mod. 86. (2) 15 M. & W. 23. (3) 2 T. R. 24. (4) 4 Ex. 755. (5) 1 Str. 426. of the considerations which have led me to that result, seeing that I concur in the judgment of the Lord Chancellor, and also in the opinion about to be delivered by my noble and learned friend opposite (Lord FitzGerald), which I have had the advantage of reading. LORD FITZGERALD :- My Lords, the first question is as to the true construction of the memorandum of agreement of the 21st of December 1876, and I express my opinion on it with the greatest diffidence. My excuse for expressing any opinion upon it is that I feel rather strongly on the point. The memorandum is, it may be observed, unilateral, for Dr. Foakes by it assumes no obligation. The first recital is that Mrs. Beer had obtained a judgment against Dr. Foakes for a sum of £2090 19 s. The judgment would not per se, at common law, entitle the plaintiff to interest, but the statute 1 & 2 Vict. c. 110 s. 17 provides "that every judgment debt shall carry interest at 4 per cent. from the time of entering up until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment." This right to interest is different from interest arising on contract, or which a jury may give as damages or may withhold. It is a clear statutory right, arising immediately on entering up the judgment, and continuing until the judgment debt is fully paid. The position of the parties at the date of the agreement then was that Dr. Foakes owed Mrs. Beer the principal sum of £2090 19 s. , recovered by a judgment which carried interest at 4 per cent., arising de die in diem as a statutory right, and then (that is, at the time of the agreement) amounting to £113 16 s. 2 d. The agreement then contains this recital: "And whereas the said J. W. Foakes has requested the said Julia Beer te give him time in which to pay such judgment , which she has agreed to do on the following conditions." He does not ask for any remission (1) 1 Sm. L. C. 8th Ed. 357. (2) 5 Rep. 117 a. of any portion of his obligation, he solicits only time for payment, and she agrees to give him that time and no more. It seems to me clear and free from doubt that "such judgment" in this recital would, if there was no more to guide us, mean the judgment debt with its statutable interest at 4 per cent. The language of the recital and of the whole agreement seems to be that of Mr. Smith, the defendant's solicitor, as we find in Mackreth's evidence this statement: "The agreement was prepared by Smith and sent to me, and I approved of it on behalf of Mrs. Beer." Returning to the language of the agreement, it is remarkable that Dr. Foakes undertakes by it no obligation whatever; he does not bind himself to pay any instalment to her or to her "nominee;" and it was not necessary that he should, for I can entertain no doubt that if what is called the "condition" for payment of the instalments had not been fulfilled, then Mrs. Beer could have enforced the whole residue of her demand for principal and the interest that accrued, by execution on the judgment. Dr. Foakes enters into no obligation to pay to her "nominee," and this seems to displace in fact the foundation of the judgment of the Divisional Court, where Williams J. is reported to have said(1): "The doctrine is that an agreement to pay a less sum in satisfaction of a debt is without consideration. The English law forbids such an agreement. That is the law in its naked simplicity. But I think a very little departure from the mere agreement to pay a less sum will make the agreement good. If the creditor says, 'You owe me a large sum of money - I am willing to accede to your request for time, but you must enter into an agreement in writing, at your expense (as it would be) and you shall pay the money to me or to any person I may name at my election,' that, I think, is enough to make this agreement not a nudum pactum." (There is no such thing in the agreement here.) And Mathew J. adds, "It is noticeable that the agreement is framed so that it casts an obligation which would not otherwise have existed. The agreement to pay the creditor's nominee renders it a document available as a security." It would seem, to me at least, that the terms of the agreement (1) These quotations are from the printed papers before the House. had never been properly conveyed to the minds of the judges; for in fact Dr. Foakes assumed no greater obligation than the law imposed on him in respect of the judgment. The expressed consideration is the payment to Mrs. Beer "of the sum of £500 in part satisfaction of the said judgment debt of £2090 19 s. ," and again I should repeat here that the last words would mean the debt and the right to interest which it carried, if there is nothing subsequent to impose a different meaning. The term "satisfaction" is specially applicable to a judgment. You could not in former times plead payment simply to a scire facias on a judgment. The plea should shew satisfaction. The judgment would not be satisfied on payment of the £2090 19 s. but only by payment of that sum and the interest. The agreement then provides as a condition for the payment of the instalments of £150, "until the whole of the said sum of £2090 19 s. shall have been fully paid and satisfied ." The whole difficulty arises on this passage. If in place of using the word "sum" it had used "judgment" or "judgment debt," in my opinion there could have been but one construction, viz., that "judgment" or "judgment debt" meant the principal sum of £2090 19 s. with "interest at 4 per cent." Now, having regard to what the parties were at, why should we not read "the said sum of £2090 19 s. " by the light of the antecedent parts of the same agreement as meaning "the said judgment for £2090 19 s. ," and thus do full and complete justice, and not deprive Mrs. Beer of about £350 as justly due to her as the £2090 19 s. , and which, it is to me manifest, she never intended and was never asked to relinquish? There is a special recital indicating what the parties intended, viz., "time on certain conditions" but without a word as to relinquishing any part of the plaintiff's demand, and if the subsequent words are more general, we should limit and qualify them by the special language of the recital. Dr. Foakes did not ask for any remission, he asked for time and for time alone, and we ought to assume that when his solicitor prepared and furnished the memorandum of agreement he did not intend by its language that any part of Mrs. Beer's demand was to be released. Mackreth says that in the course of the negociation "interest was never mentioned at all in reference to that agreement." She adopted the language of the memorandum, and it became hers, but was it such as to lead Dr. Foakes to understand that Mrs. Beer agreed on performance of the condition to give up her claim to interest? I think that we ought not to adopt such a conclusion. There are many authorities for the proposition that you may limit the general words of release by the antecedent recitals, so as to effectuate that alone which was within the intention of the parties. I might refer to a number of cases, for example Thorpe v. Thorpe(1), where it is said per Cur : "Where there are general words only in a release they shall be taken most strongly against the releasor, but where there is a particular recital and general words follow, there the general words shall be qualified by the special words." Applying that rule to the present case, you may limit the general words at the conclusion of the memorandum to the giving of time alone, that is to say, if "judgment debt of £2090 19 s. " means the sum of £2090 19 s. and nothing more, then that Mrs. Beer agrees to give time for payment of the principal debt of £2090 19 s. by the instalments and at the times indicated, and that pending that arrangement she would not "take any proceedings whatever on the said judgment." This would give effect to every word and leave the "interest" untouched, which, if the principal is to be paid by instalments, could not well be ascertained until the time had been reached for the payment of the last instalment. There is nothing in the memorandum, it should be observed, to prevent Dr. Foakes from coming in at any time and discharging the whole principal before the instalments became payable. Upon the construction of the memorandum I am of opinion that the decision of the Court of Appeal should be affirmed. The second question now presents itself, but with my view on the first it is not actually necessary for me to express any opinion on it, but it seems more satisfactory that I should do so. Assuming that I have fallen into error in interpreting the agreement, and that it is to be read that if Dr. Foakes should pay the actual sum of £2090 19 s. by instalments according to the condition (1) 1 Ld. Raym. 235. she would relinquish her statutable debt for interest and not issue execution on the judgment to recover it, is such an agreement nudum pactum, and therefore incapable of being enforced? I have listened with much interest, and I may add, with no small instruction, to the judgment of my noble and learned friend Lord Blackburn. He has as usual gone to the very foundation, and I regret that I have been unable to assist him in overturning the resolution of the Court of Common Pleas as reported by Lord Coke in Pinnel's Case(1), or in expunging from the books the infinitesimal remains of Cumber v. Wane(2). It seems to me doubtful whether the question arises which my noble and learned friend has presented, viz.: whether payment of a part of a debt ascertained by judgment can be a satisfaction of the whole? In the case before us the whole of the £2090 19 s. , the principal of the judgment, has been paid to the last farthing. The interpretation put by the judges of the Courts below, and adopted by the Lord Chancellor, and my noble and learned friend Lord Blackburn, on the memorandum, seems to me to divide it in effect into two stipulations, the first being that if Dr. Foakes, should pay down £500, and the remainder of the actual sum of £2090 19 s. in the manner prescribed, Mrs. Beer would so accept it, and pending the payments, would take no proceeding on the judgment; and the second being that if the £2090 19 s. should be paid in the manner indicated, she would relinquish her claim for interest, and would not take any proceedings whatever on the judgment to enforce that interest. The question is whether there is any sufficient legal consideration for the relinquishment of the debt for interest. I am clearly of opinion that there is not. My noble and learned friend Lord Blackburn has shewn us very clearly that the resolution in Pinnel's Case(1) was not necessary for the decision of that case, and that the principle on which it seems to rest does not appear to have been made the foundation of any subsequent decision of the Exchequer Chamber or of this House, and further, that some of the distinctions which have been engrafted on it, make the rule itself absurd. But it seems to me that it is not the rule which is absurd, but some of (1) 5 Rep. 117 a. (2) 1 Str. 426.