Henderson v. Towle

FLANIGAN, J.

(After Stating the Facts as Above.) — The former action, brought by plaintiff to recover the 35,327 shares of the Gibson Copper Company’s stock from defendants, was compromised by the stipulation and agreement of the parties under which plaintiff relinquished to the defendants all claim to the stock, suffered judgment of dismissal, and received from defendants the sum of $44,157. The present action is brought to recover an additional sum in money to compensate plaintiff for the damages he alleges he sustained in parting with the stock at an inadequate price, under the agreement as executed, all of which he was induced to do by the fraudulent misrepresentations of the defendants of certain facts concerning the value of the stock.

Stated as strongly as the case allows, plaintiff’s contentions are, substantially, that “as one injured by a fraudulent compromise may, instead of restoring the benefit received and suing at law or in equity to rescind and for equitable relief, retain what he has received and sue whoever may be liable for the consequences of the deceit, by which the compromise was obtained, and recover whatever damages resulted therefrom” (12 C. J. 357, and cases cited), that he may recover herein by treating the former proceedings as void so far as they execute the fraudulent scheme, and that this action is a permissible attack in law upon the entire and executed transaction, including the judgment, without restoration of benefits received, or offer to restore such benefits.

If we were dealing with an agreement of compromise and settlement inter partes, of which a judgment of dismissal on the merits were not a component part, it may be that it would now be open to plaintiff in an action for the deceit to recover the amount of money which would, in the language of the court in Gould v. Cayuga County Bank, 99 N. Y. 333, 2 N. E. 16, make the compromise stand as “an honest compromise” by recovery of the excess value of the stock, being that portion of plaintiff’s loss put upon him by tbe fraud of the defendants, and due solely to such fraud. But the case here is different. The plaintiff does not undertake to have set aside or impeached the judgment of dismissal as such; in fact, its force and effect, as precluding him of any further right to the recovery of the stock sued for in that case, is fully recognized.

We think that the effect of the transaction, including the judgment, is to debar the plaintiff of any further claim or right to the stock, or its value, inconsistent with .the terms of the compromise agreement, and the cause of action, if any theretofore existed, is merged in the agreement and judgment. The compromise agreement upon which the judgment was rendered fixed the value of the surrendered claim to the stock at the sum of $44,157, and it was executed accordingly by payment of that value to plaintiff and the rendition of judgment. Plaintiff had his opportunity to contest all issues tendered by his complaint in the action brought to recover the stock, for a part of the value of which he now sues, and having thus consented to this determination of the value of his claim, is barred and estopped from asserting the contrary, in any collateral proceeding.

As the action is not brought for the sole purpose of impeaching or overturning the former judgment, but has also for its object an independent relief or result, the attack made herein upon the former judgment is a collateral one. Tube City Mining etc. Co. v. Otterson, 16 Ariz. 305, L. R. A. 1916E, 303, 146 Pac. 203; 23 Cyc. 1062.

It is the general rule that it is not permissible for a party or privy to attack a judgment in a collateral proceeding on account of fraud. Black on Judgments, § 290. This rule is but a particular application of the more comprehensive one that — ;

“A judgment rendered by a court having jurisdiction of the parties and the subject matter, unless reversed or annulled in some proper proceeding, is not open to contradiction or impeachment in respect to its validity, verity, or binding effect by parties or privies in any collateral action or proceeding.” 23 Cyc. 1055.

As the law recognizes no distinction between the effect of a judgment entered upon the agreement, consent, or compromise of the parties in its effect as a bar or estoppel, and the effect of one rendered upon., contest and trial (23 Cyc. 1134, 728, 729; Black on Judgments, § 706; Crossman v. Davis, 79 Cal. 603, 21 Pac. 963; Merritt v. Campbell, 47 Cal. 542), so likewise it recognizes no distinction between such judgments when the attempt is made to impeach or contradict them on collateral attack.

“The rule against collateral impeachment applies to every judgment, order, decree or judicial proceeding, of whatever species, that is not absolutely void.” Black on Judgments, § 246.

And it is established by the weight of authority that judgments, such as the one here in question, are not subject to collateral attack for fraud (Clark v. Southern Can Co., 116 Md. 85, 36 L. R. A. (N. S.) 980, 81 Atl. 271; Morris v. Travelers’ Ins. Co. (C. C.), 189 Fed. 211; Costello v. Cunningham, 16 Ariz. 447, 147 Pac. 701; Black on Judgments, § 290 et seq. [and cases cited]), or for any other reason than a lack of jurisdiction over the person or subject matter which is apparent on an inspection of the record itself. Tube City Mining etc. Co. v. Otterson, supra.

The facts apparent in this case, and such as may well be the facts entirely consistent with the case pleaded, go far to illustrate the wisdom of the rules just enunciated. If the former judgment may be the subject of the attack attempted in this proceeding, then it follows that it would be proper to grant the relief prayed for, not only when it áppears that the benefits received under the compromise agreement were neither'restored, nor offered to be restored, but that such relief would be proper were the actual fact to be that the plaintiff, very shortly'after making such agreement, obtained full knowledge of the falsity of the representations made to him and thereafter took no steps in any direct proceeding to vacate or annul the judgment. It also follows that the plaintiff, without resorting to any proceeding to vacate said judgment or to restore the status quo, or to submit himself or the cause to the court to fulfill the legal or equitable obligations or conditions which might rest or be properly imposed upon him on the annulment or vacation of the judgment, might nevertheless, regardless of all other legal or equitable considerations and the defenses which might have been interposed to the first action, retain the money paid him, approving the agreement so far as it was favorable to him and rejecting and repudiating it so far as it was unfavorable to him. While it is true that fraud vitiates all transactions, we think that it was unquestionably necessary for plaintiff to have submitted his plaint, alleging the fraud, to the proper court, in some proceeding wherein the compromise settlement and judgment could be revised, or vacated, in its entirety, and the equitable and legal rights of the parties examined into, established, and conserved by the appropriate orders and judgment of the court under all the facts.

“That fraud vitiates everything tainted by it, even the most solemn determinations of the courts of justice, is an axiom of universal application, but, like every other subject of judicial inquiry, fraud must be investigated in the proper forum and by appropriate methods of procedure.” Clark v. Southern Can Co., supra.

For these reasons it is manifest to us that the court below committed no error in sustaining the demurrer to the complaint, and the judgment must be affirmed.

BOSS, C. J., and McALISTEB, J., concur.