Putnam v. Day

APPEAL from the Circuit Court for the District of Indiana; the case being thus:

In January, 1868, Putnam and others, having obtained, in the Floyd County Circuit Court of the State of Indiana, a judgment against the New Albany and Sandusky City Junction Railroad Company, filed in the court below, the Circuit Court of the United States for the District of Indiana, a creditor's bill against the city of New Albany, Indiana, one Day, and several other defendants, for the purpose of compelling them as stockholders of the said railroad company, to pay certain amounts alleged in the bill to be due and unpaid by them on their stock subscriptions to the said company, so that the amount of the judgment due to the complainants might be paid and satisfied; it being alleged in the bill that the said company was insolvent, and that all its property had been exhausted in satisfying other claims.

The city of New Albany, in its answer, set up a defence peculiar to itself, to wit, a complete settlement and compromise with the railroad company in 1857, by which the bonds issued by the city in payment of its stock subscription were surrendered, upon its assuming and paying a large amount of debts due by the company; and the city insisted that this settlement was made in good faith, and was for the benefit of the railroad company and its creditors; and that the complainants had lain by and slept on their rights too long to be permitted to disturb what was alleged to be a most proper and just arrangement.

The other defendants, with the exception of Day, set up that they were not indebted on their subscriptions, for that their stock had been taken off their hands by the city of New Albany, under a provision in the original subscription, which, if the city did take their stock, relieved them.

Day did not join these other defendants in the defence set up by them, but filed a separate answer, and a cross-bill, in which he admitted that he had subscribed stock in the railroad company to the amount of $36,100, and that $3500 thereof remained unpaid. He then stated that the other defendants, including the city of New Albany, were subscribers to a large amount, which he set forth in a list; and he asserted that they had not paid as much in proportion on their subscriptions as he had paid on his; and prayed that they might be compelled to contribute until they had paid in equal proportion to himself; in which case, he alleged, there would be money due to him instead of money due from him. His cross-bill being demurred to, was dismissed.

A decree in the case was rendered in July, 1869, adjudging that there was due to the complainants on their judgment against the railroad company upwards of $70,000; and that there was due on the stock subscriptions of said company, from the city of New Albany, upwards of $100,000; from Day, $3500; from another defendant, $3026; which sums were directed to be paid and applied pro rata in satisfaction of the judgment. The decree against Day was made on the admissions of his answer, charging him with the $3500 admitted to be unpaid, with interest thereon. The bill was dismissed as to the rest of the defendants, it being found that the defence set up by them was true, and that they were not indebted on their subscriptions, as most of their stock had been taken off of their hands by the city of New Albany under provision for that purpose contained in the original subscription.

In January, 1870, Day filed in the court below a bill of review (the present bill) to have this decree set aside as to him. In this bill, which was a bill partly original and partly in review, he stated briefly the proceedings in the former suit; admitted the filing of the answer and cross-bill before referred to, but alleged that it was filed by his attorney, and was never seen or read or sworn to by himself; and that it did not set up truly the facts or the true grounds of his defence. He further stated that the truth was, that his stock was taken by the city of New Albany in the same manner as that of the other defendants as to whom the bill had been dismissed, except certain shares which he subscribed, payable in lands; and that he was not indebted to the railroad company for any unpaid portion of stock subscribed by him. He also insisted as a ground of review that the decree in the former suit was erroneous, and should be set aside for three reasons specified in the bill of review:

First. That the Floyd County Circuit Court, in which the judgment had been rendered, had exclusive jurisdiction of the matter.

Secondly. That the original bill did not set out sufficient facts to show a debt on his part.

Thirdly. That the complainants were guilty of gross laches and negligence in seeking equitable relief, having lain by and slept on their right to equitable relief (if they had any) for more than nine years.

Putnam and the others (complainants in the original bill) answered this bill of review, insisting upon the regularity and conclusiveness of the proceedings, and denying that Day had any defence to the original suit, or that he ever assigned his stock to the city of New Albany.

To this answer a general replication was put in.

Day was himself examined as a witness, and testified to the transfer of his stock to the city, except as stated in his bill, and to the payment of all dues thereon. He also testified as to his employment of an attorney to represent him in the original suit, and to the manner in which his answer and cross-bill were filed. His testimony on this point was to the effect that when the suit was instituted, he employed James Collins and his own nephew, Addison Day (who were partners in the practice of the law), to represent him as his counsel; and that they advised him 'to file under the bill' and ask for equitable relief, and claim a pro rata contribution among the stockholders; that he did not see the answer and cross-bill which they prepared, and had no knowledge of the allegations contained in them; that he was informed that the court had acted on his answer and cross-bill, and that he was out of court; that he relied principally on Collins, as Day was young and inexperienced; but that he never consulted Collins but once, though he saw him a second time; that he had no business in the case that needed any further explanation at the time; that Collins was sick much of the time and died in May, 1869, during the pendency of the suit; that he saw his attorney, Day, occasionally after the suit was brought, and consulted with him, and paid his expenses to Indianapolis when he went there to file the answer and cross-bill. This was all the material evidence in the case.

The Circuit Court set aside the decree against Day. It said, in its opinion—

'When this court can see by the answer of the association subscribers, and the evidence in the original case, that there was no just claim on the part of the railroad company against the Days; that they had been released from such claim, if any existed, years before the creditor's bill was filed, and even before the judgment was recovered on which it was founded, and that the court dismissed the bill as to persons equally liable with them, does the rule which has been pressed on the court by counsel,-that the proofs cannot be examined on a bill of review, apply? We think not.'

The case was now before this court on an appeal from this decision.

Messrs. S. Burke and J. A. Garfield, for the appellants, Putnam et al.; Mr. M. C. Kerr, contra.

Mr. Justice BRADLEY delivered the opinion of the court.