Opinion
(December Term, 1831.)
1. The irregularity of a judgment at law is no ground of relief in equity. To entitle himself to relief, the defendant at law must show that advantage was taken of him, to preclude him from a defense against an unconscious claim.
2. If a judgment has been iniquitiously [iniquitously] used, a court of equity will annul what has been done under it.
3. Where there is a confidential relation between the plaintiff and defendant at law, a court of equity will set aside a judgment by default unless some proof was offered.
4. Where a note is endorsed upon which nothing is due, it is a fraud, and notice is unnecessary to subject the endorser.
5. If the mortgagee obtains judgment and execution for the mortgage debt, and under the act of 1812 (Rev. ch. 830) sells the equity of redemption, and becomes the purchaser, how is the relation between him and the mortgagor affected thereby? Quere.
6. But where a mortgagee purchases at a sheriff's sale, and filed a bill to have his title confirmed, held that he thereby consented to open the estate for redemption.
7. If after foreclosure the mortgagee in any other way treats the debt as still due, the account will be opened.
THE original bill was filed in CHOWAN and charged that on 8 May, 1819, the plaintiff was indebted, upon a settlement with the defendant, in the sum of $1,975.50; for which he gave his bond, bearing interest from date; and to secure the same, mortgaged a house and lot in Edenton and a plantation in Chowan County, called New Sweden. This mortgage was not in the usual form, but by way of an absolute conveyance in fee, with a defeasance from the defendant. The bill further charged that a short time afterwards the State Bank obtained a judgment against the plaintiff and the defendant as his surety, under which two slaves, Mack and George, were sold by execution, and purchased by the defendant for $1,091, upon an agreement that the plaintiff might redeem them at any time upon payment of principal and interest, and that accordingly, the slaves remained in the possession of the plaintiff or his family.
Iredell and Kinney for plaintiff.
Gaston, contra.
The bill then charged that the plaintiff, a seaman by profession, went to sea and was absent from 1819 to 1824, but that his pursuits were well known to the defendants, and that his family continued to reside in Chowan; that on 10 November, 1819, he remitted to the defendant $800 to be applied to the first mortgage, and on the same account the sum of $1,025 in a draft, on 30 October, 1820. It also charged that the plaintiff while absent was obliged to pay M. Myers Son of Norfolk, Virginia, the sum of $499, besides interest, which had been disbursed in 1816, in repairs of a ship belonging to the defendant, of which the plaintiff was master, and which had gone into Norfolk, consigned, with the cargo, to the Messrs. Myers; and that such payment ought in this Court to extinguish so much of the debts to the defendant; and that the defendant had during his absence sold New Sweden without the plaintiff's (155) authority, permission, or knowledge, and received therefor $1,500.
The bill then alleged that the plaintiff was not bound to repay the sum advanced as the price of the slaves, but at his own election, as the defendant had an absolute sheriff's deed, and had never offered to reconvey; and upon this footing claimed to be the creditor of the defendant in the sum of $636, on 29 September, 1829; or if he was bound for the said sum of $1,091, that he only owed on the said day a balance of $675.
The bill further charged that in May, 1823, the defendant instituted an action on the bond, and had the writ returned "Not found," with the view of issuing a judicial attachment, although he knew that the plaintiff was then at sea in pursuit of his calling; that he did issue the attachment, and in December, 1823, took a judgment by default, and upon an inquiry had damages assessed to the amount of $1,959, without offering any evidence of the debt except the bond, but that he filed several statements and accounts in the suit, showing the particulars of his demand; that execution issued on the judgment, under which all the defendant's property was sold, including the negroes and the mortgaged house and lot in Edenton, at great sacrifice, viz., for the sum of $1,821, though worth $6,000, and except the slaves, was mostly bought by the defendant. It stated that the plaintiff returned home only a few days before the sale and had not time nor means for stopping it; and that the defendant, for the purpose of buying at an undervalue, dissuaded others from bidding, and gave out that he would purchase the property for the plaintiff's benefit, and let him redeem it.
There were annexed to the bill, as exhibits, the several accounts charged to have been filed by the defendant in his suit at law.
In Number 2 the plaintiff had credit for $1,500 as the price of New Sweden, and was charged with cash paid as per receipt $150, and with various sums amounting in all to $1,308, in discharge of judgments obtained against him — leaving a balance due him of $42. The bill (156) charged that the plaintiff never received directly or by agent the $150, and that he did not owe the judgments, or, if he did, gave the defendant no authority to pay them.
Number 3 was a statement of the debt secured on Mack and George, in which credit was given for the $800, showing a balance due thereon to the defendant of $384.
Number 4 was an account of the proceeds of the draft for $1,025. In it the plaintiff was charged with a bond of one Tarkinton for $421 (endorsed by him to the defendant before the settlement in May, 1819) and interest; and he was credited with the net proceeds of that draft, and with the sum of $199, received on Tarkinton's note, showing a balance due thereon to the plaintiff of $880.
Number 5 was an account current, in which the plaintiff was charged with the bond for $1,957 and interest thereon, and $384, the balance on Number 3, and credited by the above balances due on Numbers 3 and 4, showing thereby a general balance due the defendant of $1,959, for which judgment was taken.
The plaintiff next submitted to consider Mack and George as mortgaged, and that he was personally liable for that debt (though not bound so to do), provided the defendant would account with him for their value when sold under execution.
And he insisted that he was not liable upon his endorsement of Tarkinton's bond, because the debt mentioned in it was justly due, and he endorsed it in April, 1819, and never received notice of its dishonor, though payable on demand.
The prayer was that the defendant might come to a just account and restore and reconvey all the property bought by him under his execution, thus unjustly and fraudulently obtained, upon receiving what might be found due, if anything, and for general relief.
The answer admitted the bond and mortgage, and also the sale and purchase of the slaves, Mack and George, and exhibited a covenant of the plaintiff to pay their value if they died in his service, and an agreement for their redemption; and averred that they continued in the possession of the plaintiff and his family until resold under the (157) defendant's execution in 1824. It also admitted the payment of the $800, and the draft for $1,025, and averred that the former was applied to the mortgage on the slaves, and that a special receipt was taken from him therefor, and the latter to the bond debt as far as it would extend, deducting thereout the deficiency on Tarkinton's bond. And in relation to that bond, it was stated that it was endorsed in May, 1819, and immediately put in suit; that Tarkinton claimed and pleaded as set-offs mutual demands of his against the plaintiff, and had them allowed in the county court; that the defendant prosecuted the suit faithfully and diligently, and appealed to the Superior Court, where the same result took place. It was admitted that notice was not given to the plaintiff, and the reason was that he did not know where a notice would reach him abroad, and he was himself the plaintiff's agent here.
The answer denied any knowledge of the payment to Myers Son, charged in the bill, and alleged that he did not owe them, and that according to the plaintiff's own showing it was due in 1816, and therefore barred by the statute of limitations, which the defendant insisted on. It also denied that he gave the plaintiff any orders or authority to make such payment, or that he did make it before the judgment at law.
The defendant admitted the sale of New Sweden for $1,500, but exhibited the plaintiff's letter written at sea, and dated July, 1819, requesting him to sell it at that price and pay himself; and it stated that about that time many of the plaintiff's creditors obtained judgments against him, and were about selling his property by execution, which induced the defendant, as his friend, to apply the $1,500 to the discharge of those, instead of retaining it; and he did pay the debts mentioned in exhibit Number 2, appended to the bill; and as to the $150 therein charged, that he paid it to the plaintiff's wife for the support of her family, and gave it to Mr. Barney, who was her friend and relative, and lived (158) with her, to deliver to her, and took his receipt therefor, as defendant thought, but has since discovered that Mr. Barney wrote it, but did not sign it; but he averred the fact to be that he paid it.
The suit, attachment, and judgment were also admitted, and the answer stated that the long absence of the plaintiff, the large amount of the debt, and the reduction of his property formed the inducement to it. The defendant denied all the allegations of fraud in relation to the injustice of the recovery, his views in obtaining it, or the use of any unfair means; he averred that he stated the accounts and filed them to show to the plaintiff and to the world the fairness of the transaction; and that the suit was attended to, upon the trial, by the same Mr. Barney, who was an attorney of that court, and did not upon that occasion object to the $150 claimed upon his receipt. He denied expressly any unfairness in the sale, or that he induced any person not to bid, or wished to do so, or caused it to be understood that he would buy for the plaintiff, or that it was so understood; and he averred that when the plaintiff arrived at home he offered to stop the execution if his debt was secured to be paid in any reasonable time; but the plaintiff rejected the offer, and would do nothing; whereupon the sale took place, and he urged many persons to bid, as he was afraid his debt would not be satisfied, as turned out to be the fact, although the effects brought fair prices; and he averred that the whole debt recovered was just and true.
The defendant filed a cross-bill, seeking discovery from the plaintiff on many points, and charging various matters, in order that a final adjustment of all matters of controversy might be effected, the only parts of which it is material to state are that it recharged the matter stated in the original answer, touching the special receipt for $800; Tarkinton's bond; the payment of $150 to the wife of the plaintiff, or Mr. Barney for her, and the payment of the judgments against the plaintiff; and sought discovery whether the plaintiff had not appointed him, the defendant, his agent, or requested him to pay his debts; also whether the set-offs allowed to Tarkinton were not due; and whether the (159) plaintiff had not been informed by his wife, and did not believe, that she received the sum of $150 from him; and that he might deliver up the receipt and defeasance originally given for the plantation and lots, to be canceled; and prayed further a final settlement of all matters between the parties, and particularly that the defendant might be foreclosed from all power or right of redemption in the mortgaged premises, if he had any.
The original plaintiff, in his answer to the cross-bill, insisted that the whole of Tarkinton's note was due, and that he was discharged at law and in equity upon his endorsement, for want of notice, especially as he was once in Edenton while the bond was in suit, and conversed with the defendant, who did not inform him that he was looked to.
He admitted the authority given by him to sell New Sweden, but denied that he recollected requesting the plaintiff to pay any debts for him, and averred that he did not believe he had; and insisted that if he had, payment ought to have been made before the costs were incurred. He did not deny that he owed the debts paid by the defendant. He exhibited the defeasance and the receipt for $800, which was expressed to be on account of the redemption of the negroes; but he alleged that this was done by the defendant contrary to his orders. As to the $150, the answer was evasive and unsatisfactory, qualifying a general denial made upon the information of the wife, as at first drawn, by interlineation, so as to make it special and equivocal, the defendant saying "he had no knowledge of the payment to M. A. Bissell (by the hands of G. W. Barney), and had understood from her, and so believed, that he never did pay said money (to Barney aforesaid.)"
It is insisted for the original plaintiff, Bissell, that this is the case of a judgment obtained by fraud, where the defendant was precluded from his defense, and will be relieved in this Court. It is alleged, too, that it was irregular, and in a case not proper for a judicial attachment, and therefore this Court will put the party back into possession of the property bought under it by the plaintiff.
The first observation called for by these positions is that all matter of irregularity is out of the case here. This is a matter of legal jurisdiction, and not the foundation for coming into equity, except so far as it may be evidence with other things of a fraud — as where those proceedings denote an anxious hurry to put a demand, proved aliunde to be unfounded, through the forms of legal proceedings. The legal proceedings must be deemed right in this Court until the injustice of the recovery is shown by proof intrinsic of those proceedings themselves. If, therefore, the process of judicial attachment were not proper, that will, of itself, not avail the plaintiff. It was allowed by the proper tribunal, and the judgment founded on it must be taken to be conclusive here, although by it a recovery is made without having the party personally in court. It is not for us to say that it is iniquitous, when the court of law supports it; much less when the Legislature gives in certain cases that proceeding, and in others that by original attachment, in each of which personal defense is seldom made, though it is supposed that it may, and intended that it shall be at all. The plaintiff (161) must, therefore, further show that advantage was unduly taken of him by the use of this remedy in such a way as was intended and did preclude him from defense; and, secondly, that for want of such defense a recovery was effected, not merely of sums not duly proved on the trial, or of sums which could not upon defense be recovered from him in a court of law, but which the plaintiff at law could not recover, or, having recovered, cannot retain with a good conscience by the law of this Court. If, indeed, a judgment for a true debt be iniquitously used, the Court will annul what has been done under it. Such was the case of Lord Cranstown v. Johnston cited for the plaintiff from 3 Ves., 170, and 5 Ves., 277. The defendant was pretending to treat with the plaintiff in England for the purchase of the estate at private sale, and while he was thus amusing him, and putting him off his guard, and his propositions were made with that intent, he gave secret instructions to an agent to proceed according to some summary colonial method to bring the estate into market, and purchase it from him. It was brought to sale, and the proceeding so shocked those present that every one considered a good title would not be had under the sale, and nobody bid but the agent, and he purchased. No court could sustain such a transaction. The debtor was lulled to sleep, the creditor made the title doubtful, and under that disadvantage brought it to sale; competition was suppressed, and he bought at a great undervalue. His purchase was set aside on the score of fraud. Allegations are made in the bill of conduct on the part of Bozman at the sale, in some respects of the same character. But they are denied in the answer, and unsupported by proof.
He could not have held out the idea that he was buying for Bissell, and would allow him time to redeem; for the latter had just defied him, and given him distinct notice that he would not redeem, but seek to set the whole aside. And witnesses speak of facts which prove that Bozman urged bidders to give fair prices for all but the furniture, which he suffered to be bought in low by friends of Bissell.
Then the cause stands entirely as to the evidence of fraud, (162) upon the justice or injustice of the recovery. And upon that head I must repeat that in this Court the question is not whether the recovery was strictly proper by the rules of law, but whether it was against conscience to assert such a demand and to receive payment. Both the conscience and law of the case are in general presumed in favor of the judgment of the court of law — which is taken to be conclusive here as in another court of law, unless under particular circumstances. White v. Hall, 12 Ves., 324. The Court in an ordinary case would, therefore, not put the plaintiff at law to any reproof of his demand. But here, as there is some evidence of an express agency, and there certainly was a confidential relation to some extent between the parties, and the suit was actually undefended, some proof was necessary in this cause. And the defendant here has offered it of a kind entirely satisfactory, as far as it was necessary to repel the charge of fraud. He proves incontestably the payment of the several sums as and for debts from the plaintiff to other persons. There is no doubt he was out of pocket to the extent recovered for those items; and in answer to the cross-bill, Bissell will not deny either of those debts, nor that he requested Bozman to pay them, but only that he does not remember such a request, while two of the witnesses, one of them an officer who had some of the executions, prove that Bissell said Bozman was his agent, and referred the officer to him for payment. It is not certain that notice was required upon Tarkinton's bond. If one endorses a note upon which nothing is due, it is a fraud. Notice does no good, because the party already knew that payment had been made, and no further payment could be obtained. And if it clearly appeared here that the set-off was just, and that Bissell was aware of it, there would be an end of the question, even at law. But Tarkinton does not swear precisely that his demand was a true one. He proves, however, as the record of that suit does, that he pleaded and obtained the set-off; that Bozman contested both in the county court and upon appeal, and prosecuted the suit bona fide. It is to be recollected that our inquiry here is, Was there fraud? Had not Bozman a (163) right, then, to consider that Tarkinton's set-off was just? Was it dishonest in him who had lost the money by judgment of a court to treat that judgment as rightly given? The question carries its own answer. The remaining item contested in Bozman's account is that of $150 paid to Mrs. Bissell. This is positively sworn to by him in his answer. A witness, his son, says he counted out the money to carry to her, though the son did not see him pay it. Mr. Barney says he has no recollection of receiving that sum, but that the receipt for it was written by him, and he cannot account for the want of his signature; that he was not the general agent of Bissell, but often acted in his affair, at the request of himself or his wife, and sometimes without request, because he thought it for his benefit; and he states that Mr. Bissell talked of getting money from Bozman, but he does not know whether she did or not. The direct testimony of Bissell's wife cannot be had to the point. But he is interrogated in the cross-bill as to the information derived from her, and his belief, to which he answers, as if making a special avoidance, not by way of general denial, but qualifying that denial, as first framed, by restricting the statement made by her to this: that she did not receive that sum by the hands of Barney, and that he believes that Bozman did not pay the money to Barney aforesaid. This is special pleading on oath, and so plainly evasive as almost to amount to proof of itself that Mrs. Bissell did in some way receive the sum; and at all events, with the other evidence, establishes the fact to an extent so nearly amounting to a moral certainty as to leave no ground for impeaching the judgment upon the score of conscience.
The remaining ground on which Bissell contests the judgment at law is that of a mutual demand for money paid Myers Son for the disbursements of a vessel of the defendant. These disbursements occurred in February, 1816, when Messrs. Myers had effects of Bozman in their hands to a large amount. They several times rendered accounts (164) to Bozman, and paid the balances, in which, they say, this sum was omitted through haste and mistake. In July, 1820, they applied to Bissell, then in Norfolk, for payment, which he refused upon the ground that he was not liable and of length of time, and referred them to Bozman. Of this Bissell advised Bozman under date 18 July, and on the same day Myers forwarded the account to Bozman, who refused to pay it; whereupon it was put into an attorney's hands, but no proceedings of law seem to have been had. Bissell had effects in the hands of Messrs. Myers, and among them a bill on the West Indies, which they were to collect for him. They failed, and made an assignment, and up to that time had received payment from no quarter. But in May, 1824, they wrote to Bissell, that in 1822 their correspondent in Jamaica had given them credit for the bill, which they had not noticed until a late overhauling of their books and papers. They then advise him that they have given him credit for that sum, and to liquidate it have charged to him the brig William's disbursements. Whether Bissell was originally liable for that debt, or could pay it after eight years and his former refusal, and thereby charge Bozman upon the new contract to himself, after the latter had refused to pay Messrs. Myers themselves, or whether this charging by bankrupts in discharge of a debt from themselves be such a payment as renders Bozman a debtor therefor, are questions not necessary or proper now to be decided. They will come up more properly upon the accounts hereafter to be taken, on another branch of the cause. But taking Bozman to be now liable for that debt, it entirely fails as evidence of fraud in taking the judgment. In that point of view it is subject to this decisive observation: Bozman contested that claim as against the original claimants, and at the time of taking the judgment was not only ignorant that the debt was charged to Bissell, but the latter was also ignorant of it; for the judgment was in December, 1823, and the letter of Messrs. Myers to Bissell is dated 28 May, 1824.
It must, therefore, be declared that the judgment was for a (165) just debt, which Bozman might in good conscience receive.
This would dispose of the original bill, as it is not framed on the foot of the mortgages and the right of redemption. Indeed, it denies the obligation at any time on Bissell to redeem the slaves. The gravamen of it is the fraud in getting, by an irregular proceeding, a judgment at law for a debt not due, and using the execution iniquitously. It sets out, indeed, the original debts and mortgage, but it is only to show that they had been discharged; and there is no question made in the bill upon the right of the mortgagee to sell the mortgaged estates for that debt; but the prayer is to set aside the execution sale. Upon the grounds relied on, there is no foundation in the facts to support the prayer; and the bill ought to be dismissed, and would be dismissed at once were the plaintiff not entitled to relief upon other parts of the pleadings. For which reason, both causes will be retained until the case shall be finally disposed of.
It has, however, been further insisted for Bissell that the sale under execution does not bar redemption, but, being for the mortgage debt, leaves that equity untouched, especially as to those parts purchased by the mortgagee. This depends upon the construction of the act of 1812. The question was touched in Cox v. Camp, 13 N.C. 502, and was then said to be a difficult one. Upon further consideration I think it extremely difficult — in reference as well to the case where a stranger purchases when the sale is made for the mortgage debt, known so to be, as where the mortgagee himself does. In this case, however, it does not arise. As to the purchases by others, they are not made parties to the original bill, if that were properly a bill to redeem; and consequently their titles are confirmed, and the price or the value taken as a substitute for the property. As to those made by Bozman himself: taking a sale under an execution to be a statute foreclosure, it must be admitted that it is, as yet, a doubtful and unsettled doctrine; and being so, the creditor has found himself under the necessity of coming here to ask that (166) his defeasance may be brought into court, his title confirmed, and the mortgagor foreclosed. Equity does not lean to foreclosure, especially at short hand. It is true that after what it deems reasonable time, it gives the mortgagee the benefit of the condition in law, and declares his estate absolute. Yet that is felt to be a case of hardship, and often to produce injustice. Hence any consent, express or implied, is seized as an occasion to open the estate to redemption upon payment of the debt, which is the real justice between the parties. If, therefore, upon a bill to redeem after any length of time, the defendant submit to redemption, it will be decreed. Proctor v. Oats, 2 Atk., 140. So if the mortgagee get a decree of the court of equity itself for foreclosure, and afterwards take out process upon any collateral security for the same debt, he waives the decree, if the mortgagor chooses. Dashwood v. Blythway, 1 Eq. Ca. Abr., 317. The reason is, he treats the debt as still due, and therefore his title as not absolute. Much more here, where the title is very doubtful in law, shall a bill for further foreclosure, if I may use the expression, remove that which I will not say has taken place, but may have taken place. It is true, the cross-bill does not unequivocally admit the right of redemption, but prays for foreclosure, in case the debtor has the right. For this purpose this is the same as a general prayer. The Court is asked to investigate the accounts, and settle the title. Upon the footing therefor of the cross-bill the case is open for redemption upon payment of principal and interest, allowing to the debtor, in the accounts, credit for the value or price of such parts of the mortgaged effects as third persons bought; and a reference will be ordered accordingly. No directions are given about the application of the payments of the proceeds of the sales to particular debts, as would have been necessary had the judgment at law been impeached by the decree; but as that stands untouched, and it is a common equity for mortgagees, as against the mortgagor himself, to tack judgments, the whole debt (167) must be considered as the encumbrance, subject to such reductions as the debtor can make appear before the master.
PER CURIAM. Decree accordingly.
Cited: S. c., post, 229; Mining Co. v. Fox, 39 N.C. 73; Battle v. Jones, 41 N.C. 573; Champion v. Miller, 55 N.C. 196; Grantham v. Kennedy, 91 N.C. 154.