Baxter v. Downer

The opinion of the court was delivered by

Redfield, Ch. J.

The question in this case is whether the contract of indemnity sued upon was - cancelled by the contract at the time the plaintiff gave his note for the receipt and took it up and surrendered it to the defendant. It is admitted that the contract sued upon is broad enough to cover the claim made in the action, if the note given by plaintiff had been given in order to relieve himself from the receipt, on the claim of the creditor, and without any new contract with the defendant.

But it seems to us that this new contract, if it is a binding contract between the parties, must be regarded as superseding the contract sued upon. The plaintiff gave a new contract, took security and a new contract for indemnity, and surrendered the receipt to which the contract sued upon refers, as the basis of the first indemnity. If then there was no mistake or fraud or illegality in this second contract, upon general principles, it must supersede and discharge the former one.

It has been held that if a party, by false and fraudulent representations, induce his creditor to give up his receipt upon part payment, he may still be sued upon it and compelled to pay the balance; Reynolds v. French, 8 Vt. 85. The representations in this case were in reference to the solvency of the debtor, and his means of paying his debts. Richards v. Hunt, 6 Vt. 251, is a case in chancery where a discharge is set aside upon similar grounds.

So too, where, under former usury laws in the state, the contract was void, if a valid contract was merged in a usurious one, and surrendered, it might still be sued, and a recovery be had upon it, the contract by which it was compounded being illegal; Edgell v. Sanford, 6 Vt. 551. So also where the mortgagor conveys absolutely to the mortgagee in payment of the mortgage; if such conveyance be avoided by the creditors of the mortgagor as fraudulent, it leaves the mortgage in force as to such creditors; Fish v. Clays and Morse, 10 Vt. 81. Many other cases of this kind might be stated.

But in the present case no such question was submitted to the jury; and although we are undoubtedly to take all the testimony detailed in the exceptions, as verified by the jury, the verdict being directed upon that basis, it seems rather difficult to make such a case of fraud out of it as to justify the disregard of the contract of substitution. It is not stated that Downer represented that the notes he deposited with Baxter were due and owing, unembarrassed, although-from the circumstances there can belittle doubt he intended to have the plaintiff so understand, and that is equivalent to a representation, especially when one obtains credit upon such understanding. But this is mere inference and should be made by the triers of the facts.

So, too, in regard to defendant’s knowledge of the falsity of these facts, it is neither stated or found. And, although rendered highly probable by the other facts in the case, it is quite supposable that this trustee process might not have been known or remembered by defendant at the time, or it might have been only for an insignificant portion of the debt.

If the fact were distinctly found that this was a deliberate fraud practiced by defendant upon plaintiff to iuduce him to give his note and take up the receipt and surrender it to him, very likely the plaintiff might be allowed to stand upon the original contract of indemnity the same as if he had not surrendered the receipt or made the new contract, which he was induced to enter into by the fraud.

Judgment reversed and case remanded.