Where a bill in equity sought to enjoin a judgment, and charged
that the complainant had a good defense which he did not know of at
the time when judgment at law was rendered against him, and charged
also that he was entitle to
pay the debt in the depreciated notes of a particular bank, of
which advantage it was attempted to deprive him by fraud and
collusion, and this bill was demurred to, it was error in the court
below to sustain the demurrer.
In the year 1838, Thomas Davis, the plaintiff in error, received
three thousand dollars from the Aberdeen & Pontotoc Railroad
& Banking Company in the notes of that institution, and gave
his bond for the delivery of seventy-five bales of cotton at the
Town of Burlingham, on the Tallahatchie River, on or before the 1st
day of the ensuing March. According to his own statement in the
bill which he afterwards filed, he paid $1,685.50, and delivered
eighteen bales of cotton, subject to the order of the company. The
precise time of this payment and delivery was not stated.
On 12 December, 1839, William M. Tileston and Charles N.
Spofford, residing in New York and carrying on business under the
name of William M. Tileston & Co., obtained a judgment in the
District Court of the United States for the Northern District of
Mississippi against the Aberdeen & Pontotoc Railroad &
Banking Company, for a sum of money, the amount whereof is nowhere
stated in the record.
Upon this judgment, a writ, called a writ of garnishment, was
issued by way of execution and served upon Davis. This writ was
returned, duly executed, to June term, 1840.
At December term, 1840, judgment was rendered against Davis and
his securities as debtors to the Aberdeen & Pontotoc Railroad
& Banking Company for $1,861 and costs.
Page 47 U. S. 115
A
fieri facias was issued upon this judgment in favor
of Tileston & Co., returnable to June term, 1841.
On 10 June, 1841, Davis paid on account of the judgment $242.77,
which was duly credited.
At December term, 1841, a return was made of property levied
upon, with its valuation, but no further proceedings appear then to
have taken place.
In July, 1843, Davis filed a bill on the equity side of the
court against Tileston & Co., to enjoin the judgment obtained
against him at December term, 1840. The bill recited the above
facts, and then proceeded thus:
"Your orator further states unto your Honor that before the
rendition of the said judgment upon the said garnishment in favor
of William M. Tileston & Co. against your orator, he paid upon
the said cotton bond $1,685.50 or about that sum and delivered at
the Town of Burlingham, according to his contract, eighteen bales
of good cotton, averaging in weight about five hundred pounds and
subject to the order of the said Aberdeen & Pontotoc Railroad
& Banking Company, and which cotton was shipped on board of
steamer
Big Black, Steilling, master, without the orders
of or being subject to the control of your orator, and said cotton
was left by said steamer at the house of and in the care of Young
& Richards, Vicksburg, Miss., and by them twelve of said bales
were shipped to George Buckanan, of New Orleans, for the benefit of
and on account of the said Aberdeen & Pontotoc Railroad &
Banking Company. The remaining six bales were shipped and sold in
New Orleans, from the said house of Young & Richards in
Vicksburg, for the benefit of and in the name of one Dickens, for
between fourteen and fifteen cents per pound, and the said Dickens
was found by your orator on the western bank of the Mississippi
River in the State of Arkansas, about forty miles above Memphis,
Tennessee, and the proceeds of the sale of the said six bales of
cotton were collected from him by your orator, amounting to about
four hundred dollars, but not one cent has ever been collected for
the twelve bales shipped to Buckanan for and on account of the said
bank or applied by said bank to the credit of your orator's
bond."
"Your orator further states that, relying upon the statements of
the agents of the said bank, solemnly made and often reiterated,
that they knew nothing about the twelve bales of cotton or any
other part of the eighteen bales shipped as before stated, he did
not know of the shipment of said twelve bales of cotton from Young
& Richards, Vicksburg, to Buckanan, of New Orleans, for and on
account of the said Aberdeen & Pontotoc Railroad & Banking
Company, until long after the
Page 47 U. S. 116
rendition of said judgment in December, 1840, against your
orator as a debtor to said bank in favor of the said William M.
Tileston & Co., and was kept from his legal and lawful defense
and credits on the trial of said garnishment by the false
assurances of the bank and its agents, so made to your orator as
aforesaid, and, as your orator fully believes, intended for and
made to lull him to sleep, and impose upon his general credulity
and confidence in his fellow-man where the least show of honesty is
to be discovered. Your orator further states unto your Honor that
he was not apprised of, but wholly ignorant of the fact, that the
said twelve bales of cotton were shipped by the agents of the said
bank from Vicksburg to New Orleans, as above stated, until by a
critical examination, about a year or thereabouts since, through
his agent, the facts were ascertained to be as before stated."
The bill then proceeded to charge a fraudulent combination
between the bank and Tileston & Co. by setting up a fictitious
claim against the bank for the purpose of depriving Davis of the
benefit of paying the bank in its own depreciated notes, and
finally averred that the only part of the debt still due was
$809.47, which he tendered in the notes of the bank.
An injunction was issued according to the prayer of the
bill.
In June, 1844, the defendants filed a demurrer, and assigned the
following causes:
"1st. The bill shows that the complainant had a full and
complete remedy at law, which he has neglected."
"2d. That the bill shows that complainant knew, at the time he
answered the garnishment against him, that no credit had been given
for said cotton, and having at that time acquiesced in the conduct
of the bank, and acknowledged himself indebted to the amount of
defendant's judgment, he cannot now reopen the judgment in this
Court to be heard to deny what he might and ought to have denied in
his said answer to said garnishment."
"3d. That it appears by complainant's own showing that judgment
was rendered against him on his answer at December term, 1840; that
he made a payment and satisfaction of said judgment by the
execution and forfeiture of a forthcoming bond in May, 1841; that
as late as between June and December, 1841, he took the benefit of
the valuation law on said execution, and postponed further action
by the said defendants for twelve months thereafter without ever
settling up the matter contained in his bill or claiming any
deduction or offset from the said judgment in favor of
defendants."
"4th. That the pretended charge of fraud is not specifically
stated, but is vague, uncertain, and indefinite in general. "
Page 47 U. S. 117
"5th. That the said bill seeks to offset the judgment of
defendants against said complainant on his answer, and to pay and
discharge the same with the bills and liabilities of the Aberdeen
& Pontotoc Railroad & Banking Company, obtained by him
after he has acknowledged himself indebted in his answer, and after
judgment has been rendered against him in favor of defendants, and
after he has executed a forthcoming bond, and the same has been
forfeited and become a new judgment against him in favor of
defendants, and after he has availed himself of the valuation law
on said judgment."
"6th. That the said bill shows no equity on its face."
There being a joinder in demurrer, the case was, on 11 June,
1844, set down for hearing on the bill and demurrer at the next
term of the court.
On 2 December, 1844, a rule for decree
pro confesso was
entered, and on 3 December the defendants Tileston & Co. filed
their answer, which it is not necessary to recite.
On 6 December, 1844, the final decision of the district court
was signed and ordered to be enrolled, as follows:
"This cause came on to be heard at this term and was argued by
counsel, and thereupon, upon consideration thereof, it was ordered,
adjudged, and decreed as follows,
viz., that the demurrer
of the defendants to the said bill of complaint of the complainants
be sustained, and the said bill dismissed."
"It is further ordered, adjudged, and decreed that the
defendants go hence and recover of the complainants the costs in
and about this cause expended, for which execution may issue."
The complainant appealed from this decree to this Court.
MR. JUSTICE WOODBURY delivered the opinion of the Court.
The judgment in this case below was founded entirely on the bill
in chancery and the general demurrer to it.
There is in the record an answer filed a few days previous to
the judgment. But the cause having before been set down for a
hearing on the bill and demurrer, the answer does not appear to
have been at all considered -- for that or some other reason -- and
is not referred to in the decision.
The only question for consideration by us, then, is whether the
judgment dismissing the bill on the demurrer was correct.
Upon a careful examination of the facts and principles
involved,
Page 47 U. S. 118
we feel constrained to come to the conclusion that it was not
correct. We are reluctant to form this conclusion because, on
examining the contents of the bill, it does not in some aspects of
it appear free from what is exceptionable, and the answer, if open
to consideration now, would show a denial of most of its material
allegations.
But as the answer in the present decision must be put out of the
question, and as the demurrer admits all facts duly alleged in the
bill, the plaintiff seems entitled to judgment on these admissions,
though, to prevent injustice by oversight or mistake, we shall take
care to render such an opinion that the respondents can be enabled
in the court below to avoid suffering, if they possess a real and
sufficient defense to the bill. The grounds of our judgment are as
follows.
The demurrer, by admitting the truth of the allegations in the
bill, admits these facts:
1st. That the complainant had a good defense to a large part of
the original judgment recovered against him, as garnishee of the
bank, and which he did not know at that time.
2d. That he was entitled to pay to the original creditor, the
bank, its own notes in discharge of any balance due to it, and
which were under par, and that, through fraud between the bank and
the respondents, and demand against him was assigned to them, and
he sued as garnishee of the bank, in order to exclude the payment
in its notes.
The former judgment having been in the district court of the
United States, these grounds for an injunction against the further
enforcement of it till the mistake as to the defense is corrected,
and the balance allowed to be satisfied in notes of the bank then
held, or an equivalent to their value at the time of the judgment,
seem equitable on these allegations, thus admitted.
The respondents can,
ex aequo et bono, claim to stand
in no better condition than the bank. If there was a further good
defense against the bank, there was against them. And if in any
material respect they and the bank fraudulently combined, by or in
that suit, to deprive the debtor of any legal advantage, the least
which can be done in equity is to restore him to it.
What is the answer to this view? Not that the demurrer does not
in law admit the goodness of a further defense, and one not known
at the judgment, and likewise the existence of fraud by those
parties, but that the statement of the defense is not entitled to
full credit, is contradictory, and develops culpable neglect to
enforce the defense, and that the fraud is not set out with
sufficient detail.
But so far as regards the credibility to be given to the
statement
Page 47 U. S. 119
of the further defense in the bill, that statement cannot be
impugned on a demurrer. The truth of it can be doubted only where a
denial of it is made in an answer, or proof is offered against it,
neither of which is now before us. The next objection, founded on
some supposed contradictions in the bill, as if not knowing the
existence of the defense when he delivered the cotton on which it
is founded, can be reconciled on various hypotheses which need not
here be detailed. For however this may be, we think the allegations
sufficiently distinct on a general demurrer.
The validity of the defense as alleged is resisted as the last
objection, and rests on the ground that he had an opportunity to
make it at law and omitted to improve it. This principle is
conceded to be correct if the defense was then known. But the bill
avers he was ignorant of the existence of the defense when the
judgment was recovered. This excuse in some instances might not
avail him at law. It has been settled that in an action at law, if
the party omits to make a defense which existed to a part or all of
the cause of action, he can afterwards have no redress in a
separate legal proceeding.
Tilton v. Gordon, 1 N.H. 83; 7
D. & E. 269; 1 Ld.Raym. 742; 9 Johns. 232; 2 N.H. 101; 12 Mass.
263. In such case, he can sometimes obtain relief by a petition for
a new trial, but seldom in any other manner.
In certain instances, if the defense arose out of something
subsequent to the original cause of action, such as a part payment
of money or a delivery of property to be applied in part payment,
and the creditor neglected to make the application, it has been
held that this may be treated even at law as a distinct
transaction, the creditor having thus rescinded or failed to
fulfill his promise to apply the money, and a separate action be
then maintained to recover it back.
Snow v. Prescott, 12
N.H. 535; 7 N.H. 535.
However this should be at law, there is strong equity and
substantial justice in it, and much more in cases where, as is
usual, the debtor is defaulted, having no defense to the original
cause of action, and supposes that the creditor, in making up
judgment, will deduct all payments and all promised allowance, and
does not discover the neglect to do it till after execution has
issued.
The present application being in equity and not at law, a party
in the former is clearly entitled to an injunction if there was
accident or mistake, or fraud in obtaining the judgment.
So ignorance of a defense goes far, sometimes, to repel
negligence, though standing alone it may not be a sufficient
ground
Page 47 U. S. 120
for such relief.
See 1 Bibb 173; Cook 175; 4 Hayw. 7; 4
Mumford 130; 6 Hammond 82;
Brown v.
Swann, 10 Pet. 498,
35 U. S. 502; 2
Swanston 227;
Thompson v. Berry, 3 Johns.Ch. 395.
On this point, however, we give no decisive opinion, because all
of us are not satisfied that a clear remedy can be given at law on
these facts by a separate action, and as we have jurisdiction of
this cause on the other ground of fraud, we advert to this merely
as being one of the plausible reasons in favor of an injunction
till the whole matters between the parties can be further
investigated.
See reasons for this course in
United
State v. Myers, 2 Brock. 516;
14 U. S. 1 Wheat.
179; 2 Caines' Cas. in Err. 1; 10 Johns. 587; 1 Paige Ch. 90.
The existence of fraud in obtaining the original judgment, which
is the other ground assigned for relief, is next to be considered.
It is not only alleged generally, but in the details, so far as
already specified, in this opinion. A general allegation of it in
the bill would have been sufficient if so certain as to render the
subject matter of it clear.
Nesmith v. Calvert, 1 Woodb.
& Minot 44;
Smith v. Burnham, 2 Sumner 612; and
Jenkins v. Eldridge, 3 Story 181. The demurrer admits the
fraud thus set out, and the law is undoubted that our jurisdiction
in equity extends over frauds generally, and in a special manner
one like this, to which it is doubtful whether any remedy existed
by law when defending the original action. 2 Caines' Cas. in Err.
1; 10 Johns. 587; 1 Paige Ch. 90; 2 Stuart 420.
The character of this fraud, as admitted by the demurrer to
exist, is one of great injustice to the community, it being
equitable, no less than legal, in Mississippi, by an express
statute, for debtors of a bank to make payment to it in its own
bills. Laws of Miss., A.D. 1842, 140.
It seems generally allowable, even on common law principles, as
a setoff.
See the express declaration to that effect by
this Court in
United States v.
Robertson, 5 Pet. 659;
See also Planters' Bank v.
Sharp at this term.
Looking probably to a transaction much like the present, the
Court, in 5 Peters, said
"So far as these notes were in possession of the debtor at the
time he was summoned as a garnishee, they form a counterclaim,
which diminishes the debt to the bank to the extent of that
counterclaim."
But how the balance is to be paid in respect to notes the Court
forbore to give any opinion, p.
30 U. S.
684.
Any assignment or other proceeding got up with the fraudulent
intent of preventing the exercise of that right, as is here alleged
and admitted, cannot receive the countenance of this Court.
Page 47 U. S. 121
But we do not decide on the extent at law to which such a
defense can be made in Mississippi or in respect to the manner of
paying the balance, as all our conclusions here rest entirely on
the averments and the admission of their correctness by the
demurrer.
In coming to our conclusions, we by no means would be
understood, as before intimated, to approve all the language or
forms of allegation adopted in this bill. But we are forced to
think that enough is stated in it, in substance, to give us
jurisdiction, and to entitle the complainant to relief, when the
statement is not denied by the respondents.
The judgment below in favor of the demurrer is therefore
Reversed. But in order that justice may be done between
these parties on the answer and any evidence either of them may
wish to file, final judgment is not rendered here for the
plaintiff, but the case is remanded in order that leave may be
given to the respondents to withdraw their demurrer and the cause
be heard on the bill and answer if no evidence is desired to be put
in, or on these and such evidence as the parties may wish to
offer.
Order
This cause came on to be heard on the transcript of the record
from the District Court of the United States for the Northern
District of Mississippi and was argued by counsel. On consideration
whereof it is now here ordered and decreed by this Court that the
decree of the said district court sustaining the demurrer to the
bill of complaint be and the same is hereby reversed with costs,
and that this cause be and the same is hereby remanded to the said
district court in order that leave may be given to the respondents
to withdraw their demurrer and that the cause may be heard on the
bill and answer, if the parties do not desire to put in any
evidence, or on the bill and answer and such evidence as the
parties may wish to offer.
