The question in this case involves the construction and effect
of the decision of this Court in the case of
Baker v.
Cummings, 160 U. S. 189,
between the same parties, and growing out of the same transaction
which is the subject of the litigation in this case.
Matters which have been fully investigated between the parties
and determined by the court shall not be again contested, and the
judgment of the court upon matters thus determined shall be
conclusive on the parties, and never subject to further
inquiry.
This doctrine applies to this case.
The petitioner (plaintiff below) commenced this action at law in
the Supreme Court of the District of Columbia on December 19, 1889,
to recover from the defendant the sum of $2,712.81 with interest at
six percentum from July 31, 1889, and annexed to his declaration a
bill of particulars of his demand. Plaintiff claimed in his
declaration that the money was due, among other things, on an
account stated between the parties. The plaintiff obtained judgment
in the trial court for the amount of his claim, which was reversed
by the Court of Appeals of the District.
A case between the same parties and growing out of the same
transaction has already been before this Court and decided.
169 U. S. 169 U.S.
189. The question in this case involves the construction
Page 181 U. S. 118
and effect of that decision, and therefore a writ of certiorari
was applied for and granted, and the case brought here.
Soon after the commencement of this action, and before pleading
to the declaration filed therein, Cummings, the defendant,
commenced a suit on the equity side of the Supreme Court of the
District against Baker for the purpose of enjoining him from the
further prosecution of this action, and to obtain a full and
complete accounting under the order and direction of the court
between complainant and Baker in respect to the partnership
dealings alleged and set up in the bill, and he prayed that the
defendant should be decreed to pay to him the amount which should
be found due him and for other relief. In his bill, the complainant
alleged the formation of a copartnership on January 1, 1876,
between the parties, to prosecute the practice of the law in the
City of Washington, terminable by mutual consent, each to share
equally in all the profits and losses of the business, and it was
averred that the partnership continued until September 1, 1889,
when it was dissolved. It was then alleged that the terms of the
dissolution were agreed upon through false and fraudulent
representations of Baker as to the condition of the partnership
affairs in relation to what were called "the inspector cases," made
to the complainant, with the facts in regard to which the defendant
was, as the complainant alleged, much more familiar than the
complainant, and that, based upon the misrepresentations, terms of
agreement for dissolution were arrived at, and in carrying out the
same, the complainant assigned by a written assignment his claims
under the partnership to all moneys then due or that might
thereafter become due arising from those cases, and as
consideration therefor, the complainant received from the defendant
the sum of $15,000; that, instead of the amount stated by the
defendant to be due the partnership in relation to the cases
mentioned, a very much larger amount was due, and instead of there
being only a certain named amount of claims in cases where no
congressional appropriation had been made, as stated by the
defendant, a very much larger amount existed to his knowledge, of
which the complainant was ignorant, and upon the faith of these
untrue and fraudulent statements the complainant
Page 181 U. S. 119
assigned by a written assignment all his interest in the cases
for a sum largely below the amount actually belonging to him under
the terms of the partnership.
The complainant then alleged the commencement of an action at
law by Baker against him to recover $2,712.81, and stated that
appended to the declaration in that action was a bill of
particulars of Baker's claim, and that all of the items in that
bill of particulars originated in and grew out of the partnership
dealings of the parties, and not otherwise, and that only by a
full, proper, and complete accounting and discovery, under the
order and direction of a court of equity could a proper adjustment
be had of the rights of the complainant and defendant growing out
of their partnership dealings.
Complainant further alleged that the action at law was not yet
at issue, but that the time for pleading thereto had nearly
approached, and that the complainant could not, under the rules at
law, incorporate in his plea the equitable defenses herein set
forth, and which in a court of equity would avail against Baker's
demand, and especially that the equitable right of the complainant
to have discovery in the premises and to have the said assignment
cancelled and held for naught was not cognizable by a court of law,
and that, if the defendant (Baker) were therefore permitted to
prosecute his action at law against the complainant, the latter
would be deprived of his defenses to that suit which were set up in
the bill, and the complainant therefore alleged that he was
entitled to have the defendant enjoined from prosecuting his action
at law, and to have the court order and direct a full and complete
accounting between the complainant and defendant in respect to
their partnership dealings. An order was thereupon issued
restraining the further prosecution of this action, which order was
subsequently and about February 1, 1892, dissolved.
To this bill the defendant Baker filed an answer February 10,
1890, denying all allegations of fraud in the settlement between
the parties or in the procuring of the assignment, and also
alleging that he furnished the complainant with all needed data,
and all the data and information which existed in connection with
the facts within his control, and that the settlement was
Page 181 U. S. 120
made with full knowledge of all the facts on the part of the
complainant, and that, after such settlement was made, he left in
the possession of the complainant papers and accounts plainly
showing the whole transaction and all the facts in regard to the
case, an examination of which would give all necessary information
about the partnership affairs. He also alleged that the complainant
was endeavoring, after a lapse of more than three years and with a
full knowledge of all the facts, to attack this settlement as void,
and he alleged that the claim made by the complainant was old and
stale, and he pleaded the statute of limitations in his behalf, and
alleged that the claim did not accrue, nor was any demand made to
show whether error or otherwise were made within the period of
three years.
After the injunction restraining the further prosecution of this
action had been dissolved, and on February 10, 1892, the defendant
filed a plea to the declaration herein in which he denied (1) that
he was indebted to the plaintiff; (2) he alleged that he never
promised as set up in the declaration; (3) that the plaintiff's
cause of action did not accrue within three years; (4 and 5) a
set-off of $35,873.35. This set-off was alleged to have arisen out
of the dealings between the parties in the partnership already
mentioned.
The plaintiff Baker joined issue upon the plea on August 24,
1892. Further proceedings in this action were delayed by mutual
consent until the trial of the suit in equity. Upon that trial, the
complainant obtained a decree for thirty-odd thousand dollars,
after deducting the amount claimed to be due the plaintiff in this
action. That decree was affirmed by the Court of Appeals of the
District, and the case was taken by appeal to this Court, where the
decrees of the courts below were reversed and the case remanded
with instructions to the supreme court to dismiss the bill. The
dismissal was general, and not "without prejudice" or any similar
expression.
169 U. S. 169 U.S.
189. After the entry of the decree dismissing the bill on the
mandate of this Court in the equity suit, Baker, the plaintiff
herein, by leave of the court filed in this action a replication to
the plea of set-off, setting up the commencement of the equity suit
and stating the issues involved therein and the decree made upon
the decision
Page 181 U. S. 121
of this Court dismissing the bill, and claimed that judgment as
res judicata of the matters of set-off contained in the
fourth and fifth counts of the defendant's plea. Then, by a series
of pleadings too long and too technical for repetition, the final
question was raised by demurrer as to whether the plaintiff's
replication of
res judicata to the defendant's plea of
set-off was good or not. Upon the argument of the demurrer, the
supreme court held that the replication was good; that the merits
of the whole case had been decided in the equity suit, and that the
judgment in that suit was a bar to all claims of set-off on the
part of the defendant Cummings in the action at law. The parties
came to trial after the argument and decision upon the demurrer,
and, having waived a jury, the following stipulation was filed:
"It is hereby stipulated and agreed by and between the parties
to this cause by their respective attorneys that this cause may be
tried by the court without a jury, the parties hereby expressly
waiving the same, upon the following agreed statement of facts,
subject to the limitations herein contained:"
"That on the 31st day of July, A.D. 1889, and for a long time
prior thereto, the plaintiff and the defendant were copartners
engaged as attorneys in the prosecution of claims against the
United States, the net fees derived therefrom being under the
contract of partnership equally to be divided between them, the
said partners; that, on the 19th day of December, A.D. 1889, the
plaintiff instituted this action to recover the sum of $2,712.81,
with interest from the 31st day of July, A.D. 1889; that the said
sum is the identical sum referred to on pages 227 and 248 of the
record on appeal to the Supreme Court of the United States in the
equity cause hereinafter referred to; that, after the institution
of this suit, the defendant herein instituted a certain equity
proceeding against the plaintiff herein in the Supreme Court of the
District of Columbia, the same being known and numbered on the
dockets of said court as equity cause No. 12,263; the record,
decrees, and opinions of the respective courts therein, both in
this and the appellate courts, are hereby referred to and made part
hereof; that the several items of account set forth in the pleas of
set-off herein are respectively
Page 181 U. S. 122
the identical items set up, referred to, and claimed in said
equity cause."
"If the court, on inspection of said record and proceedings in
said equity cause and of the record and proceedings of this cause,
shall be of opinion that the defendant herein may not set up in bar
of the plaintiff's action any of said items of set-off and
counterclaim as pleaded in this action, but is concluded by the
proceedings and decree in said equity cause, then this court may
enter judgment for the plaintiff in this action for the sum of
$2,712.81, with interest thereon from the 31st day of July, A.D.
1889, as claimed in his declaration herein; but if the court shall
be of opinion that any of said items of set-off and counterclaim
may be set up in bar of the plaintiff's action herein, then this
cause shall be remanded to the docket for trial by jury. Both
parties hereto reserve the right of appeal or by writ of error from
the judgment of this court or of any court of review passing
hereon, and also any other remedy which they may by law be entitled
to."
Upon this stipulation in connection with the record in the
equity suit, the supreme court held that the defendant Cummings
could not in this action set up in bar to plaintiff's action any of
the items of set-off attached to his plea, and therefore judgment
was rendered for the plaintiff for the amount claimed by him. On
appeal to the Court of Appeals, the judgment was reversed, and a
new trial granted, Mr. Chief Justice Alvey dissenting.
MR. JUSTICE PECKHAM, after making the above statement of facts,
delivered the opinion of the Court.
A perusal of the record in this case demonstrates at least how
conservative Congress has heretofore been in relation to the
adoption of any amendment of the law relating to pleading
Page 181 U. S. 123
and procedure in the District of Columbia. The last of the
series of pleadings herein by which the question of the validity of
the defense of
res judicata was finally brought before the
court is denominated "defendant's joinder of issue on plaintiff's
second surrejoinder to defendant's fourth rejoinder to plaintiff's
third replication." Replications, rejoinders, surrejoinders,
rebutters, surrebutters, and demurrers abound, and they all seem to
have been regarded as properly filed for the purpose of presenting
the question whether the decree in the equity case was
res
judicata or not. In reading these pleadings, we seem to be
transported back to the days when the practice of the special
pleader had become a science by itself. In spite of the pleadings,
however, the question before us is a simple one.
The plaintiff brought this action to recover from the defendant
a certain amount of money alleged to be due on an account stated
between the parties. The defendant, before pleading in the action,
commenced a suit in equity for an accounting between himself as
complainant and the defendant in the equity suit in relation to all
partnership matters, and, as a part of the relief, prayed the
cancellation of a written assignment made by complainant of his
interest in the inspector cases of the partnership to the
defendant, procured, as complainant alleged, by fraud. It was
alleged that the items of the claim of Baker, the plaintiff in this
action, arose out of the partnership transactions, and they were
included in the issue made in the equity suit. There was a full
hearing in that suit in regard to all the matters between the
parties, including those arising in this action. At the end of the
hearing, the trial court entered a decree in favor of the
complainant for over $30,000, after deducting the amount claimed
against him by the plaintiff herein. That decree was affirmed by
the Court of Appeals, but, upon appeal here, both decrees were
reversed and the cause remanded to the lower court with
instructions to dismiss the bill. The court, upon the receipt of
the mandate, did dismiss the bill with costs. The plaintiff in this
action then proceeded with his case, and set up, by leave of the
court, the decree in the equity suit as an adjudication of all the
matters relating to the validity of the defendant's set-off to his
demand, and the question is shall
Page 181 U. S. 124
the adjudication be treated as conclusive upon those matters, or
shall the inquiry be again entered upon as to the facts upon which
the set-off rests?
Stated generally and without detail, the theory of the law is
that matters which have once been fully investigated between the
parties and determined by the court shall not be again contested,
and that the judgment of the court upon matters thus determined
shall be conclusive on the parties, and never subject to further
inquiry. The whole doctrine has been lately gone over in this Court
in
Southern Pacific Railroad Company v. United States,
168 U. S. 1, and the
law in regard to it is so well settled that other citations are not
required. The question is not what the doctrine is, but does it
apply to the particular case?
We have to inquire, therefore, whether the decree in the equity
suit did cover and conclude the matters in difference regarding the
defendant's set-off in this action. It it did, that decree must be
treated as conclusive, and the judgment of the court below refusing
to give that character to it must be reversed.
It appears by the stipulation between the parties that the
several items of account set forth in the defendant's plea of
set-off in this action are respectively the identical items set up,
referred to, and claimed by complainant in the equity cause. The
record in the equity cause is made a part of the record herein, and
the facts upon which the complainant proceeded are set forth in the
report of that case in this Court already referred to. The mandate
from this Court in that case, which by stipulation of counsel has
been included in the record herein, sets forth our decree, which
reversed the decree of the Court of Appeals with costs and ordered
that the cause be remanded to that court with directions to set
aside the decree of the Supreme Court of the District of Columbia,
and to remand the cause to that court with instructions to dismiss
the bill. There was added the usual formula directing that such
further proceedings be had in the cause in conformity with the
opinion and decree of this Court as ought to be had, etc. The
proceedings, however, which were thus directed to be taken were
simply to reverse the judgment of the lower court and to dismiss
the
Page 181 U. S. 125
bill. It was not a conditional dismissal, without prejudice, or
words to that effect, but a general one. A dismissal of the bill
under such directions is presumed to be upon the merits unless it
be otherwise stated in the decree of dismissal.
Walden v.
Bodley, 14 Pet. 156,
39 U. S. 161;
Hughes v. United
States, 4 Wall. 232,
71 U. S. 237;
Durant v. Essex
Co., 7 Wall. 107;
Bigelow v. Winsor, 1
Gray 299, 301;
Foote v. Gibbs, 1 Gray 413; Coop.Eq.Pl.
270; 1 Herman on Estoppel, secs. 151, 152.
It cannot be disputed that, if the bill had been dismissed upon
the merits, it would be conclusive against the right of the
defendant in this action to set up in bar of plaintiff's recovery
any of the items of set-off and counterclaim pleaded by defendant.
He contends, however, that for the purpose of determining the
ground upon which the bill was dismissed, it is proper to resort to
the opinion of the court, even though the record show an absolute
dismissal, and that the opinion in this case shows the bill was not
dismissed upon merits, but only because of his (complainant's)
laches in seeking the aid of a court of equity to set aside and
cancel the written assignment made by the defendant herein to the
plaintiff, and which, as the defendant alleges, was procured by
fraud; that, when relief was denied on the ground of such laches,
the only effect of the denial and the consequent dismissal of the
bill was to leave the complainant at full liberty to fight out the
issue of fraud in this action.
We do not think this is a correct statement of the case.
Assuming that defendant is right in his contention that he can look
at the opinion for the ground of dismissal, we think it appears
therefrom that the bill was in truth dismissed upon its merits. The
court really went into an elaborate examination of the status of
the complainant in the equity case, with reference to his claim of
right to avail himself of the alleged fraud, not only in respect to
his laches, technically so called, but also with regard to his
affirmative treatment of the defendant after he had, as this Court
decided, acquired full knowledge of all the facts which constituted
what he claimed to be the fraud in the case. After he had acquired
such knowledge, the complainant deliberately decided to, and did,
procure the defendant's check
Page 181 U. S. 126
for $15,000 or substitutes therefor which he had himself taken
(the consideration given complainant for the sale) to be cashed,
and complainant used the money for his own purposes. Not only
laches on the part of the complainant formed the bar to the
maintenance of the equity suit, but, as the court held, it was his
whole conduct relative to the transaction after it had been
completed, and his affirmance of the contract, that precluded any
right on his part to recover for any alleged fraud. His right to
recover at all, upon the facts as found by the court from the
evidence, was passed upon and decided.
Some expressions may be found in the opinion tending to show
that the court was proceeding upon the ground merely of the
complainant's laches in failing to resort early enough to the court
for relief. But an examination of the whole of the opinion will
show that the court was not confining itself to any such narrow
ground, and, on the contrary, was examining the whole conduct of
complainant, both his omissions and his affirmative and positive
acts, for the purpose of determining whether the complainant had
any cause of action against the defendant. For the purpose of such
examination, we make copious extracts from that opinion. After a
full statement of the case, the opinion, as reported in 169 U.S. at
page
169 U. S. 196,
proceeds as follows:
"The controverted issue arising from the foregoing unquestioned
facts is this:"
"Cummings claims that he did not derive knowledge of the fraud
he complains of from the matters just stated, while Baker asserts
that, if the fraud in the purchase complained of by Cummings had
existed, full knowledge thereof was conveyed to Cummings by the
facts above stated, and that the silence of the latter and his
inaction for years, and until Baker had made claim for money and
stated his intention to dissolve partnership, not only establishes
the want of foundation for Cummings' assertion that there was
misrepresentation and fraud in the sale, but also makes clear the
fact that the right to make such claim was barred, both by
limitations and laches, when the demand of Cummings was actually
preferred."
"It results from the foregoing that the facts as to the
controverted matters are embraced in a narrow compass, and that
Page 181 U. S. 127
the whole case really resolves itself into two issues: 1st. Does
the proof establish that the purchase and sale in question was as
claimed by Cummings, or as asserted by Baker? In that question is
necessarily embraced the further one of whether Cummings, at the
time of the sale, had actual knowledge of the fraudulent
representations claimed to have been made by Baker. This is in
terms included, because it would be impossible in reason to declare
that one had been deluded or deceived by misrepresentations into
entering into a contract if he had actual knowledge when the
contract was made that the alleged inducing representations were
false. 2d. Conceding that Cummings was misled by the fraudulent
representations of Baker as alleged, did he, immediately after the
sale and before the collection by him of the cash consideration of
the sale, discover that the representations were untrue, and
thereby become aware that he had been grossly deceived and
defrauded, and did he, with such knowledge, say nothing about the
matter, collect the cash consideration, remain silent, and continue
in partnership with Baker, occupying the same office for years, and
only assert that he had been deceived when a dissolution of the
partnership was threatened and he was pressed to pay a sum which
Baker claimed Cummings owed him? This latter inquiry assumes a
two-fold aspect, for although in the bill, in the opinions below,
and in the argument at bar, the efficient misrepresentation, which
it is asserted rendered the assignment void, was the fraudulent
statement as to the sum of the fees on the claims then allowed and
appropriated for, nevertheless it is also, as we have seen,
asserted in the bill and contended in argument that there was a
misrepresentation as to the pending claims not yet acted upon by
the department, and which were then unappropriated for by
Congress."
"We will defer an examination of the testimony as to the
existence of the fraud and misrepresentation complained of until we
have passed on the charge that, if there was fraud and
misrepresentation, Cummings had full knowledge thereof immediately
after the sale. We adopt this order of consideration because if it
be found that such was the case, the question whether the fraud
originally existed will become immaterial
Page 181 U. S. 128
in view of the defenses of limitation and laches. Moreover, in
reviewing the question of knowledge, we will do so in the order
stated -- that is, first, discovery of the alleged fraud and
misrepresentation as to the amount of fees collected and in process
of collection from claims appropriated for at the time of the sale,
and second, discovery of the misrepresentation as to the amount of
pending claims from which further fees were expected. Here also it
is to be premised that, if the first proposition be found to be
well taken, an examination of the second will be wholly
unnecessary. This, obviously, is the case, for as the statute of
limitations began to run from the time when suit might have been
brought to annul the sale, it results that the discovery of the
falsity of any material and fraudulent representation by which the
sale had been induced gave rise to the right to commence an action
to rescind, and therefore fixed the period when the statute of
limitations commenced its course."
And again on p.
169 U. S.
206:
"Our conclusion is that the evidence not only clearly, but
beyond all question or dispute, overwhelmingly shows that if the
false representations as to the earned fees were made as alleged,
there was entire knowledge thereof by Cummings. And, for reasons
heretofore stated, this conclusion renders unnecessary any inquiry
into the question of when Cummings discovered the falsity of the
alleged representations as to the amount of pending claims. . . .
That Cummings might at his election have pursued a remedy for the
alleged fraud in a court of law is obvious. And it is equally clear
that such remedy at law, by action on the case predicated on the
facts as to deceit and fraud, which are alleged in the bill now
before us, would have been barred in three years from the discovery
of the fraud under the statute of limitations of Maryland of 1715,
c. 23, s. 2, in force in the District of Columbia. 1 Kilty's
Statutes 111; Comp.Laws D.C. c. 42, s. 6, p. 360. It hence follows,
irrespective of the equitable doctrine of laches, that the relief
which the bill seeks to obtain ought not to be allowed by a court
of equity."
"Apart, however, from the bar of the statute of limitations,
Page 181 U. S. 129
the facts as to the full knowledge of the fraud, if any existed,
by Cummings, more than three years before the filing of his bill,
and his conduct after he obtained it, his permitting Baker to go on
and prosecute the claims as if they were his own, debars Cummings
from invoking a court of conscience to put him in a much better
position than he could possibly have occupied if he had spoken and
asserted his rights in due season."
"There cannot a doubt that the right existed in Baker to have
dissolved the partnership at any time. If this right on his part
had been exercised, Cummings would not have been in a position to
have availed himself of the labors of Baker in prosecuting the
future claims to a successful culmination, and would not,
therefore, have been a participant in the profits arising
therefrom. If, with a full knowledge of the fraud, Cummings chose
to remain silent, to permit Baker to go on with the prosecution of
the claims, to incur the expenditure of time and labor not only in
the cases in which he was successful, but in the cases in which he
failed, Cummings cannot in conscience be allowed to reap the
rewards which he could not possibly have obtained had he spoken
with reasonable promptness, when the knowledge of the fraud, if it
existed, was brought home to him in the most pointed and
unequivocal way."
And the Court winds up the opinion with the following
remark:
"Because we rest our conclusions upon the application of the bar
of the statute and the laches of Cummings, we must not be
considered as intimating that we conclude that there was either
clear and convincing proof, or even a preponderance of proof, that
the sale was as claimed by Cummings."
From this last extract, it seems to be clear that the Court had
in fact examined the evidence as to the alleged fraud and had
concluded it was not proved. The result of the whole opinion is to
say in substance that, while we have read the evidence in the case,
and do not think there is even a preponderance of it in favor of a
finding of fraud, yet, notwithstanding that fact, we will place our
judgment upon the ground that the evidence shows the complainant
has himself so acted in the case, both by his neglect and, among
other things, by his drawing the money
Page 181 U. S. 130
on the check, that he has affirmed the contract after he knew
all the facts upon which he now founds his allegation of fraud;
that he has waived the fraud and all benefit that he might
otherwise have urged by reason of it. A waiver of all right to
question the validity of a contract may be founded upon the
claiming and acceptance of a benefit under it after full knowledge
of all the facts. 2 Pom.Eq.Juris., 2d ed., sec. 897, and cases
cited in note 1. From all this, we think no other conclusion is
accurate than to say the decision of this Court was based upon the
merits of the case within the meaning of that expression when used
to distinguish a decision of the court upon the merits from a
decision based upon a lack of jurisdiction or defect of parties or
anything of that nature. Here, there was no lack of jurisdiction,
the parties were before the court, and full power to grant relief
entirely commensurate with the plaintiff's rights existed in the
court. It is therefore incorrect to say that, by the dismissal of
the complainant's bill, he has simply been remitted to his less
effective remedy at law. This is to ignore the weight and effect of
the opinion upon the matters just discussed and to open for another
contention a subject which we think the decree in the equity case
has closed for all time. It cannot be that, after the determination
of an investigation such as has been had in the equity case, and
the entry of a decree thereon dismissing the bill, that the matter
can again be opened for contest in this action at law.
For these reasons, we think the judgment of the Court of Appeals
of the District of Columbia should be reversed and the case
remanded to that court with instructions to reinstate the judgment
of the Supreme Court of the District in favor of the plaintiff.
So ordered.
MR. JUSTICE BREWER did not hear the argument, and took no part
in the decision of this case.
