Doss v. Tyack

THIS was an appeal from the District Court of the United States for the State of Texas.

A statement of the facts is contained in the opinion of the court.

It was argued by Mr. Allen and Mr. O. F. Johnson, with whom was Mr. Hale, for the appellant, and Mr. Sherwood, for the appellee.

The points, raised by the counsel for the appellant, were he following:

I. The complainants having utterly failed to make out their case, by proving the material allegations and charges contained in the original and amended bills of complaint, the defendants were entitled to a decree of dismissal.

II. The property of the copartnership confided to Newell, and especially the goods sold to Edgar, were not misapplied, but disposed of in conformity with the intendment of the copartnership agreement. By this it is manifest that the partnership was not intended as a pure mercantile establishment, but one for the transaction of a 'commission, general, and auction business.' Part. Agree't. Art. 1, P. R. 2; of a business 'new and experimental in its nature'-Id. Art. 9; a business connected with the operations of the 'Galveston Company,' which Newell, by more than two years' labor and great expense, had 'paved the way for;' and which the fifth article of the said agreement refers to (there being nothing else in the case to which it could by possibility refer,) in express terms, viz.: that, in consideration of 'the expense and labor heretofore incurred by Stewart Newell, in paving the way for the contemplated business, he shall be entitled to one quarter of the net profits, before division.'

III. The creditors, in their instructions, refer to 'agreements and understandings' of Newell, with his partners and themselves; thereby, admitting themselves to be privy to the said partnership agreement, and that they gave credit to the copartners, in the business thereby contemplated. The case contains no proof of any other agreement or understanding, to which they could pretend to refer.

IV. The creditors obtained, by a species of moral coercion, which their position enabled them to use, the primary concurrence of Tyack & Murray with themselves, in the appointment of William E. Warren as their mutual agent, and in their instructions, which Tyack approved, prescribing the management to be used by Warren, in his interviews with Newell, and in conducting the business confided to him, after his arrival in Texas. The suit was manifestly the result of a conspiracy between the creditors and complainants; the object being to obtain a dissolution of the partnership, a distribution of the assets in Newell's hands, or to cause him 'to place the merchandise in the hands' of Warren, 'as trustee for the creditors, or Captain Tyack;' the creditors, on their part, agreeing not to proceed against the firm of 'William Tyack & Co.,' in New York, for the space of sixty days; and, that the interests of Tyack should be protected, and his instructions, touching the suit against Newell, strictly followed.

V. The purchase of the goods by Doss, was for a valuable and adequate consideration, without notice of any intended fraud, on the part of Newell, made for the benefit of all the partners, and within the scope of the 'new, experimental, and general' business, described in the partnership agreement. The verdict does not find the purchaser guilty of any fraud, and the jurors depose that they did not intend to charge him with fraud. It declares the 'sale,' but not the purchase, fraudulent as to the complainants. Anderson & Wilkins v. Tompkins et al. 1 Brock. 456. This finding did not authorize the annulling of the sale.

VI. Referring to the direction of the creditors, requiring their agent to be governed by the instructions of Captain Tyack, the several letters of Tyack & Murray to Newell, advising and urging him to sell the goods; their subsequent approval of the sale, after ample time to judge, and referring to their confederacy against Newell, before mentioned; the sale was authorized before, sanctioned at the time, and confirmed, after it was consummated, in the most deliberate manner by both the complainants and the creditors.

VII. All matters of complaint, embraced in the bill in this cause, excepting the said sale, were included and adjudicated in the suit of these complainants against Newell, commenced and tried in the State Court. The judgment decides the merits of the cause, is conclusive of all the said matters, and remains in full force. It directed a restoration of the goods to Newell-they having been taken out of his hands by process in the cause. After such restoration, the said goods were sold to Doss, and this judgment was a full authority for him to purchase them.

VIII. The price paid by Doss for the goods, was near $2,000 more than their value as estimated by the complainants, and near $4,000 more than that estimated by the witnesses. It consisted of $4,000 equivalent to cash advanced, and the remainder in lands, amounting to 6,485 acres, and worth much more than $7,753, as testified by the witnesses. One of the tracts, containing 177 acres, is estimated by Mr. Thompson, a witness well qualified to judge, as worth $30 per acre. Newell, in the exercise of a sound discretion, arising from his business connections with the complainants, and expressly devolved upon him by their advice and directions, and acting in conformity with the professed desire of the creditors contained in this 5th instruction, declaring that they wished 'no wanton sacrifice of property for the immediate payment of the whole or a portion of their claims,' could not have made a sale of the goods more beneficial to all the parties interested, than the one negotiated with Mr. Doss.

IX. It is respectfully insisted, that the issue directed by the court 'to determine whether the sale of the goods was or was not fraudulent as to the complainants,' was defective and immaterial, and, for this cause, improperly granted.

The verdict must conform to, and correspond with, the issue that is, find its affirmative or negative, and nothing else. If the jury find the former, viz., that the sale was fraudulent as to the complainants, it would be incompetent for them, under this issue, to go further, and determine also which of the defendants perpetrated the fraud, or whether they combined together, and were jointly chargeable. Such a finding could not authorize a decree setting aside the sale, nor in any way properly influence the conscience of the court. Such a decree would have to rest on proof in the cause, dehors the verdict, that the purchaser was a party to the fraud; and whether such proof existed or not, the verdict could be of no possible service or utility to the court.

Hence the court will reverse or disregard the order directing the issue, and determine itself the character of the sale. Nichol v. Vaughan, 2 Dow & Clark, 420; Townsend v. Graves, 3 Paige, 457; Belknap v. Trimble, 3 Paige, 601; Gardiner v. Gardiner, 22 Wendell, 526.

X. The verdict, viz., 'In this case, we, the jury, find the sale fraudulent,' does not determine or satisfy the issue, and is for this cause void. It does not find as to whom the sale was fraudulent, and may as reasonably be construed to apply to the creditors or to one of the defendants as to the complainants.

XI. If the verdict could be so interpreted as to charge either or both of the defendants with fraud against the complainants, which we deem impossible, it would be contrary to the entire body of evidence adduced at the trial, and is void at law.

XII. No effect can be given to the verdict prejudicial to the interests of Mr. Doss, without disregarding or inverting what the jury solemnly intended its effect to be, as appears by their affidavit. An application and construction of a verdict, opposed to the intention and moral sense of the jurors who found it, cannot quiet the conscience of a court of equity.

XIII. The issue, as tried, does not answer the purpose for which it was intended. Indeed, it was so framed that the verdict throws no light upon the question for the determination of which it was directed. The whole matter is before the court with sufficient precision, and all the proofs to enable it to come to a decision, without another reference to a jury. The court, under these circumstances, will decide the matter at once, unless in its discretion some new issue or issues be deemed expedient in order to attain substantial justice. Armstrong v. Armstrong, 3 M. & K. 45; Blackbourn v. Gregson, 1 Bro. C. C. 423, 424; Dan. Chan. 1316.

XIV. The court below erred in setting aside the decree of the 3d of August, 1849, dismissing the cause. The decree was made by consent, and is not subject to appeal or review. Webb v. Webb, 3 Swanst. Ch. R. 658; French v. Shotwell, 5 Johns. Ch. 564; Atkinson v. Manks, 1 Cowen, 691; Kane v. Whittick, 8 Wend. 219.

1. Notwithstanding the position taken by counsel, viz., that the powers of attorney, by the complainants and creditors appointing William E. Warren their mutual agent, the agreement and expenditures of money by the creditors in the prosecution of the cause, were sufficient to prevent the complainants, without the assent of the creditors, from dismissing the bill; and whether the suit be treated as a creditor's suit or not, under the authority of Williamson v. Wilson, 1 Bland, 418; still the complainants, until the final decree, retained absolute dominion over the suit, and might dismiss the bill at pleasure. Handford v. Story, 2 Sim. & Stu. 196.

2. The complainants, by their several powers of attorney, revocations, and other instruments under seal, emphatically required and obtained the dismissal of said cause, through solicitors specially employed and instructed for that purpose, and for reasons fully declared. The decree of dismissal was a mere execution of those powers. At the moment of its rendition it became a vested right of the defendants, granted and confirmed by the respective deeds of the complainants. A power executed by decree is no more revocable than one executed by grant or conveyance of land.

3. The decree was opened upon motion, founded on the application of Murray alone-it was error to open it as to Tyack. The order could not properly vacate the decree generally; besides, it was a regular decree on the merits, and could not be set aside by a motion. Radley v. Shaver, 1 Johns. Ch. 200.

4. Murray, excepting by his petitions, does not attempt to revoke his prior deeds. This is no revocation. He prays the court to restore the suit, and to declare those deeds null and void, alleging that the same were obtained by fraud practised by Newell and others.

We respectfully insist that the court could not, so long as those deeds remained in force as executed powers, vacate the decree of dismissal or restore the suit; and that the deeds themselves, and the manner in which they were obtained or executed, could not be inquired into or pronounced void by the court, except by regular suit against the parties charged, whereby the alleged frauds could be put in issue, and the whole matter fairly tried.

The petitions of Murray and Tyack, and the supposed revocation of the latter, filed on the 7th of January, 1850, cannot obviate any objections to the said order of the previous term vacating the decree of dismissal.

6. The affidavits of Messrs. McGreal and Andrews, filed by the defendants in opposition to the said petitions of Murray, contradict all the essential statements therein contained, and effectually impeach their veracity, showing them untrue and not entitled to credit.

XV. The effect of the solemn admissions and declarations, deliberately made by both of the complainants in their several letters and instruments under seal, before referred to as evidence in favor of the defendants, is not affected or weakened by the last-mentioned petitions of the same parties contradicting and garbling these said admissions and declarations.

1. Because their said admissions and statements were opposed to their interests as complainants; whereas the contents of their said petitions tend to aid their recovery in this cause, and are justly liable to the suspicion of having been manufactured in order to accomplish their own purposes.

2. Because they are disingenuous and prevaricating in their character, and were manifestly made under influence which they, in their former statement, pronounced compulsory, coercive, and such as they were unable to resist.

3. Because they are not entitled, in law, to any weight or credit, as evidence for the complainants, who are estopped from denying or averring any thing in contradiction to what they had before solemnly and deliberately acknowledged. Sprigg v. Bank of Mount Pleasant, 10 Peters, 257; Lajoye v. Priman, 3 Miss. 529.

XVI. By the master's report, $4,473.62 were allowed Tyack on account of capital paid in by him; whereas the amount he advanced did not exceed $2,200. Nothing was allowed Newell on account of the $7,000 standing to his credit on the books of William Tyack & Co. The report further finds him indebted to the firm on account of partnership property received and not accounted for by him. Exceptions filed by him for these causes were overruled, and in this and in the final decree in this behalf there are, as we conceive, error and injustice.

XVII. The master ought to have reported fully and correctly, the proof on which the several items contained in it are found, and the claims of the alleged creditors ascertained and allowed, as suggested in the exceptions taken by Mr. Doss. The items making up the amount found against Newell cannot be gathered from the report. There can be no doubt, however, although it does not definitely appear that Newell was charged with the $2,000 he paid in goods to Edgar under the authority of the complainants, and in due course of the partnership business. These errors affect the final decree, and render it fatally erroneous and unjust. Williamson v. Wilson, 1 Bland, 418.

XVIII. The bill contains no prayer for ascertaining the names of the creditors or the amounts due them severally. It prays merely that the receiver be directed by the final decree to apply the property to the payment of the said copartnership debts. This is deemed an insufficient basis for the specific provisions in favor of the alleged creditors embraced in the decree.

XIX. The decree annuls the sale made to Stephen W. Doss, as fraudulent against the complainants. But the restoration of the money and property paid by him for the goods, as sought by his motion, (P. R. 324,) is wholly denied. The copartners, by virtue of the decree, not only keep the goods they sold to Doss, but keep also the price or consideration they received for them, amounting to eleven thousand seven hundred and fifty-three dollars, ($11,753,) without the possibility of his obtaining the slightest compensation or reimbursement at their hands, if the decree be affirmed.

Relying upon the points suggested, the appellants respectfully ask for a reversal of the decree and a dismissal of the cause; or, instead of an absolute dismissal, that the cause may be restored to the same condition that it was placed in by the procuration of the complainants themselves, under the decree of the 3d of August, 1849, dismissing the same. If this be done, the appellees cannot be prejudiced, since they would retain the right to bring suit by original bill, as they might at first, to vacate their powers of attorney, and the decree obtained in execution of them, on account of the pretended mistakes and frauds averred in their petitions subsequently filed, in order to attain their object in a too summary manner.

The counsel for the appellee made the following points:

1. So far as the question of fraud is concerned, the answers of both defendants, and the depositions used on the trial, are replete with the evidence of it. After putting forth the matters stated and admitted in the defendants' answers, and the exhibits made a part of them, no proof would have availed them, on the hearing, to escape the conclusion of fraud. The bad complexion of the whole transactions between Newell and Doss's agent, McGreal, is only equalled by the recklessness with which they attempted to take the property of the firm, divert it from its proper direction, and to place the proceeds of it beyond the reach of the copartners and creditors. The property, as copartnership property, was in the nature of trust property, and the principles declared in the case of Wormley v. Wormley, (8 Wheat. 422,) apply fully to this case.

2. The contracts between Newell and McGreal were individual contracts. It was incompetent for them to vary them, as evidence, or their complexion by parol proof, or their sworn answers. They were estopped from setting up the pretence, that they fairly intended to create a bona fide trust in favor of complainants. The complainants might have brought the aspect of a trust over the property to be conveyed by McGreal, had they elected to take the lands agreed to be sold by McGreal to Newell. The character of the transactions, however, between Newell and McGreal, must be evidenced by the contracts they made. The same rule would hold in reference to the absolute assignment to Franklin, and the draft in favor of Knight. Under the circumstances, they will bear no other construction than intention, on the part of Newell and McGreal, to place the copartnership property beyond the reach of complainants and the creditors.

3. So far as Newell was concerned, the payment of his individual debt, of $1,400, to Edgar, out of the store of Stewart, Newell, & Co., and his offering to mortgage the whole of the goods to Edgar, as security for his individual indebtedness, would have been sufficient cause for dissolving the copartnership.

4. Should the question be raised, whether his Honor, the District Judge, erred in setting aside the decree dismissing the bill, and in reinstating the cause, it may be replied, that the court below had power over the decree at any time during the term at which it was entered. The order, entered on the suggestion of complainants, on motion, was a mere voluntary dismissal of the suit, under a delusion created by defendants, without trial on its merits, and without the effect of prejudicial laches. It was not in its nature res adjudicata, or final, as to the rights of the parties. No enrolment had taken place, nor had the minutes of the court been signed by the Judge, at the time he vacated the order of dismissal.

5. No decree can be regarded in its effect as final, that has been obtained by fraud, practised by one of the litigating parties on the other. Fraud will vitiate the judgment or decree of any court; and the court will set it aside, and allow a party to come in at any time, where the subject-matter has not passed beyond the reach or control of the court. The proper way of applying to the court is by motion, where the order sought to be vacated has been obtained on motion.

6. It was entirely evident, in this case, at the time of the order dismissing the bill, that the complainants had been imposed upon, or that they were in collusion with the defendants. In either case, it was proper for the court to vacate its order, and reinstate the cause the moment the complainants requested it.

7. Should it be urged, that the complainants and defendants were in collusion on the application to dismiss the bill, it may be answered, that it matters not as to the extent of collusion or degree of turpitude, between parties in pari delictu, where one comes in and asks the court to take jurisdiction for the protection of creditors or innocent persons. In such case, it has been well said, 'The fraudulent party is not entitled to a standing in court on his own account, but to subserve the purposes of justice towards those he has attempted to injure.'