Newman v. Gates

Jacob Newman, George Northrop, Jr., and S. O. Levinson commenced this action in the superior court of Marion county, Indiana, against the defendant in error, Harry B. Gates. Recovery of the sum of $1,400, was sought upon a judgment obtained by Newman and his coplaintiffs against Gates in the circuit court of Cook county, Illinois. The defendant filed an answer in two paragraphs, but, as the defenses therein asserted were ultimately abandoned, they need not be detailed. A counterclaim was also filed, in which it was alleged that the plaintiffs were, and for more than two years had been, attorneys at law engaged in the practice of their profession at Chicago, Illinois, under the firm name of Newman & Northrop; that the Illinois judgment sued upon was founded upon a claim for legal services rendered to the defendant; that the services had been rendered in advising the defendant, as trustee, in and about the management of the property and assets of a corporation known as the American Motor Company while in course of administration in insolvency proceedings, and that the defendant had sustained damage to the extent of $2,000 by reason of a breach of duty alleged to have been committed by the plaintiffs in the course of their employment in failing to obtain an order of the court in the insolvency proceedings relieving the defendant from personal liability for attorney's fees, and providing for payment of his compensation, etc. It was also charged that the plaintiffs had been guilty of a breach or neglect of duty in connection with a sale of the trust property in the insolvency proceedings, whereby defendant had sustained damages in the sum of $2,500. A reply was filed to the counterclaim, in two paragraphs, one embracing a general denial and the other setting up the Illinois judgment as res judicata as to all the matters embraced in the counterclaim.

In due course the case came on for trial and the plaintiffs recovered a judgment for the amount of their claim. The case was taken to the appellate court of Indiana. That court reversed the judgment and remanded the case for a new trial (18 Ind. App. 392, 46, N. E. 654), and far want of authority a petition for a writ of certiorari was denied by the supreme court of Indiana (150 Ind. 59, 49 N. E. 826). In the opinion of the appellate court, as also in a dissenting opinion, the character of the counterclaim and the question whether, as respects the matters therein set forth, the Illinois judgment was res judicata, were considered at great length. Following an inspection of the record of the Illinois action the court held that the counterclaim stated matters which constituted something more than a mere defense to the claim asserted in the Illinois action, that it could not be said that, under the plea of the general issue, interposed by the defendant in that action, the matters averred in the counterclaim were necessarily adjudicated, and that it was a question to be determined upon the trial whether in fact such matters had been theretofore litigated and determined. On the new trial the court held that certain of the issues made by the counterclaim and reply had been litigated in the Illinois action and that the Illinois judgment was res judicata as to such issues, but submitted to the jury the question of the alleged neglect of plaintiffs in failing in the insolvency proceedings to procure an order charging the trust estate with the fees in question and the compensation earned by defendant as trustee. And the court left it to the jury to determine, upon a preponderance of evidence, whether or not it was the law of Illinois that the failure of plaintiffs to procure such an order-if they did so fail-was a matter which was adjudicated in the Illinois action, whether evidence was introduced on such point or not, and the jury was instructed that, if such was the law of Illinois, recovery could not be had upon the counterclaim.

The second trial resulted in a verdict of $181.74 for the defendant Gates, that being the sum found to be due him in excess of the amount of the judgment sued upon. After the entry of judgment and before the taking of an appeal, George W. Northrop, Jr., one of the original plaintiffs, died. An appeal, however, was taken to the appellate court of Indiana by Jacob Newman and S. O. Levinson, describing themselves as surviving partners of the firm of Newman, Northrop, & Levinson. The personal representative of the deceased partner was not made a party to the appeal. The appellate court of Indiana overruled an objection to the sufficiency of the appeal and on the merits reversed the judgment and ordered the cause remanded for a new trial. On the petition of the defendant Gates the supreme court of Indiana removed the cause into that court for decision and subsequently dismissed the appeal, holding that, on account of the omission to make the personal representative of George W. Northrop, Jr., a coappellant, the appeal could not be determined upon the merits. 165 Ind. 171, 72 N. E. 638. A petition for a rehearing having been denied, the cause was brought here.

Messrs. Charles Martindale and S. S. Gregory for plaintiffs in error.

Messrs. Edward E. Gates, Albert Baker, Edward Daniels, and Lewis C. Walker for defendant in error.

Statement by Mr. Justice White:

Mr. Justice White, after making the foregoing statement, delivered the opinion of the court: