Davis v. Tileston/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, 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 defence 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 defence 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 defence 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 defence 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 defence, and one not known at the judgment, and likewise the existence of fraud by those parties, but that the statement of the defence is not entitled to full credit, is contradictory, and develops culpable neglect to enforce the defence, and that the fraud is not set out with sufficient detail.

But so far as regards the credibility to be given to the statement of the further defence 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 defence 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 defence 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 defence was then known. But the bill avers he was ignorant of the existence of the defence 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 defence 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. Hamp. 83; 7 D. & E. 269; 1 Ld. Raym. 742; 9 Johns. 232; 2 N. Hamp. 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 defence 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 fulfil his promise to apply the money, and a separate action be then maintained to recover it back. Snow v. Prescott, 12 N. Hamp. 535; 7 N. Hamp. 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 defence 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 defence goes far, sometimes, to repel negligence, though standing alone it may not be a sufficient ground for such relief. See 1 Bibb, 173; Cook, 175; 4 Hayw. 7; 4 Mumford, 130; 6 Hammond, 82; Brown v. Swann, 10 Peters, 498, 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; 1 Wheat. 179; 2 Caines's 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 et al. v. Calvert, 1 Woodb. & Minot, 44; Smith v. Burnham, 2 Sumner, 612; and Jenkins v. Eldridge, 3 Story, R. 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's 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, p. 140.)

It seems generally allowable, even on common law principles, as a set-off. See the express declaration to that effect by this court in The United States v. Robertson, 5 Peters, 659; see also Planters' Bank v. Sharp et al., at this term.

Looking probably to a transaction much like the present, the court, in 5 Peters, say,-'So far as these notes were in possession of the debtor at the time he was summoned as a garnishee, they form a counter claim, which diminishes the debt to the bank to the extent of that counter claim.' But how the balance is to be paid in respect to notes, the court forbore to give any opinion (p. 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. But we do not decide on the extent at law to which such a defence 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.

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.