Summary
In Headley v. Leavitt, 65 N.J. Eq. 748, it was held that if the defense to the note be not good at law, the defendant at law may after judgment and without appeal of the judgment at law invoke the aid of a court of equity.
Summary of this case from Verdi v. Jefferson Trust Co.Opinion
02-26-1904
HEADLEY v. LEAVITT.
Linton Satterthwait, for complainant. John H. Backes, for defendant.
Bill for injunction by Charles M. Headley against Martha B. Leavitt On final hearing. Decree for defendant.
Linton Satterthwait, for complainant.
John H. Backes, for defendant.
REED, V. C. The facts upon which the complainant seeks relief are stated in detail in the opinion of Mr. Justice Hendrickson, delivered in this cause, and reported in 55 Atl. 732. Generally, the situation is this: The complainant owned one half of the stock of the Headley-Leavitt Company, the other half being held by William H. Leavitt, and his wife; William H. Leavitt being the son of the defendant, Martha B. Leavitt. The company became insolvent, and Andrew C. Reeves was appointed receiver. There were outstanding several thousand dollars of notes made for the accommodation of the company. Upon some of these notes Mr. Headley was accommodation indorser, and upon some he had procured third parties to indorse for thecompany's accommodation. Upon other notes William H. Leavitt was indorser, and had procured the indorsement of his mother and others for the accommodation of the company. Some of these notes had been discounted by the Mechanics' National Bank, and others in the Trenton Banking Company. The allegations are that Martha B. Leavitt agreed to pay all the notes in the Mechanics' National Bank, and Charles M. Headley agreed to pay all the notes in the Trenton Banking Company; that Mr. Headley gave a mortgage to the Trenton Banking Company to secure the payment of these notes, which mortgage was to be held until the Insolvency proceedings were wound up and a dividend declared; that thereafter Martha B. Leavitt began an action at law upon the notes which had been in the Mechanics' Bank. At the trial, under a plea of accord and satisfaction, Mr. Headley set up the agreement already mentioned, and the execution of the mortgage to the Trenton Banking Company, which defense, because the notes in the banking company had not actually been paid by Mr. Headley, was overruled. A bill was then filed in this court setting up the facts already displayed, with the additional facts that Headley had paid the notes in the Trenton Banking Company, and an injunction was prayed for restraining the collection of the Martha B. Leavitt judgment The injunction was refused in this court, but on appeal it was held that the bill disclosed grounds for an injunction. The case is now on final hearing. In the meantime, Mrs. Leavitt having died, her personal representative is the substituted defendant. Her death has deprived the court of her evidence, and shuts out that of the complainant in respect to transactions and conversations with her. The testimony in support of the alleged contact consists of a conversation between the parties, overheard by Andrew C. Reeves, who was the receiver of the company, and in whose office and in whose presence the conversation occurred. His account Is, in substance, as follows: Shortly after he was appointed receiver he was sitting in his office at the rear of the store of the insolvent company, when Mrs. Leavitt and Mr. Headley came in. They were engaged in a conversation concerning the affairs of the company, its failure, etc. He says that Mr. Headley asked for the bill-book, and then got it himself from the safe; that Mr. Headley placed the book on the top or at the back of a roller desk, and one of the parties stood at the end and the other at the back of the desk; that they went over the notes in the several banks, Mr. Headley reading them off; that after they had got through the list Mr. Headley got some paper, and a list was made up; that they went over the notes, Mr. Headley saying, "I will take care of these notes," and Mrs. Leavitt, "I will take care of these;" that one of them said, "Now, I will take care of this list, if you will take care of the other list, and it will relieve ah the parties of any responsibility," which remark was assented to. Mr. Reeves says that Mrs. Leavitt, after some remarks about the habits of her son, left the office. After she went out, he says, he saw the list which Mr. Headley had retained, and the notes thereon were those in the Trenton Banking Company. He did not see the list which Mrs. Leavitt took away. He only saw the paper. Mr. Reeves further says that afterwards Mrs. Leavitt presented a claim to him, as receiver, as holder of the notes which were in the Mechanics' National Bank, and received 8 per cent. dividend; and that Mr. Headley also presented a claim for the notes in the Trenton Banking Company, with two or three additional notes, and received a dividend of the same per cent No demand was made upon Mr. Reeves until the beginning of the action upon the notes, the judgment in which action is now sought to be enjoined. The action was brought after another action had been begun by the receiver against the daughter-in-law of Mrs. Leavitt for unpaid subscription. It appears in evidence that after this conversation Mr. Headley gave a mortgage to the Trenton Banking Company to secure it for the amount of the company's paper held by it, and that after the trial at law, already mentioned, he took up these notes. This conduct of Mr. Headley is not in any way evidential of the existence of the alleged agreement between himself and Mrs. Leavitt. It was not part of the res gestae, and is entirely self-serving.
It seems to me that upon a mind uninfluenced by the previous discussions which have arisen in the case, based entirely upon the sufficiency of the allegations in the bill?which allegations were necessarily assumed to be true—the evidence falls short of establishing a contract between Mr. Headley and Mrs. Leavitt by which the latter was to pay and release all other parties, including Mr. Headley, from liability to pay all notes other than those in the Trenton Banking Company. The conversation detailed by Mr. Reeves was obviously the continuation of a previous talk entered into before entering the office. What notes each were to take care of was only to be inferred from the fact that Mr. Headley retained a list of notes' which were in the Trenton Banking Company. What if any, list Mrs. Leavitt took away with her, does not appear, and therefore whether the notes in suit were in that list is not apparent. But if she were to take care of the notes including the ones in suit, it does not appear, aside from the remark "that it would relieve all the parties of any responsibility," how she was to take care of them. Such conversation may have alluded to an arrangement by which she was to take care of these notes so as to prevent action against the parties for a time, possibly until Mr. Headley could turn himself, or until the insolvency proceedings could be concluded, and a dividend ascertained, which dividend, it was then supposed,would nearly pay all claims against the company. Such remark did not necessarily mean that she was to relieve Mr. Headley of all liability upon the notes forever. Nor is it certain that the concluding remarks made were exactly as stated. We all know the difficulty of reproducing the exact words of a conversation that occurred some time previous; and the force of the alleged contract depends upon the exact reproduction of what was said. Mr. Reeves frankly admits that he, after this lapse of time, cannot be exact as to the words used; and upon the trial at law he gave the words as follows: "Now, these notes I will assume, if you will assume the others, and relieve me of all responsibility." Mr. Reeves was sitting about 15 feet from the speaker, engaged at work upon the inventory of the insolvent estate. Nor do I discover any proof of a contract from the fact that Mrs. Leavitt claimed a dividend upon the group of notes upon which the action at law was brought This act was an assumption on her part that she held the title to this paper, and that the right to receive payment of any dividends belonged to her, instead of the Mechanics' National Bank, who had discounted the notes. This was entirely consistent with her taking up these notes to relieve other parties from a present liability to actions at law, without leading to the conclusion that she had foregone all right to assert a title against Mr. Headley, or in fact eventually against any of the other parties. Her action in taking up the paper in no way discharged the parties responsible as makers or previous indorsers. I am constrained to the conclusion that the contract set up in the bill is not proved.
The counsel for the complainant, however, insists that, although the contract may not be proved to my satisfaction, nevertheless the testimony presents a question which should be submitted to a jury. If the suit can be regarded as one for a new trial merely, I could dispose of the merits of the cause finally here, or I could advise an injunction restraining the defendant from enforcing his judgment unless and until he consents to a new trial in the action at law in which the judgment was obtained. But I do not regard the suit as one for a new trial. It is neither claimed that any evidence has been newly discovered nor that the complainant was deprived of any defense through the conduct of the defendant The ground upon which the complainant was held to be entitled to relief was that assuming the facts stated in this bill to be true, he had an equitable defense at the time the action at law was tried.
The contract displayed in the bill, as construed by the appellate court, was this: If Headley would within a reasonable time take up the notes in the Trenton Bank, then Mrs. Leavitt would take up the notes in the Mechanics' Bank; and it was held that Mrs. Leavitt, in suing Headley upon the note which she had so promised to pay before the reasonable time given to Headley had expired, violated her contract. This action of Mrs. Leavitt, coupled with the conduct of Headley after the contract, and induced by it was held to constitute an equitable defense to the action. It is quite clear that the equitable defense could not rest upon the ground that Mrs. Leavitt had promised not to sue within a limited period, for the remedy of Headley for the violation of such an agreement was by cross-action at law. This remedy was adequate unless it were shown —which it is not—that Mrs. Leavitt was financially irresponsible. The equitable defense must have been found in the other facts, namely, that Headley, relying upon the promise of Mrs. Leavitt, had given a mortgage to secure the Trenton Bank, and had delayed taking measures to indemnify himself against the note of William H. Leavitt during the lifetime of the latter. The defense rested upon an estoppel in pais. This places this cause in a position similar to that of Ruckelshaus v. Borcherling, 54 N. J. Eq. 344, 39 Atl. 977, on appeal 55 N. J. Eq. 589, 39 Atl. 1113. In that case the court held the cause, and finally determined it.
I am constrained to the conclusion that the bill should be dismissed.