Mason v. Jones

Mr. Justice Morsell

delivered the opinion of the Court:

The first question is, whether the defendant has violated the injunction issued in Barnes’ Case. The order of the judge was merely, “ not to negotiate or pass away the promissory notes,” although in the prayer for the injunction itself the words, “and not sue upon the same,” are interlined. The defense set up was fraud, which was available at law; and, therefore, the order properly prohibited the negotiation of the notes, and permitted the parties to proceed at law. To have restrained suits on the notes, might have involved the loss of testimony, of security, and other serious evils. 3 Bae. Ab., 651, Tit. Injunction Note ; Smith vs. Aykwell, 3 Atk., 566, Arab., 66. The defendant did not then violate Barnes’ injunction by suing and was not in contempt.

The reasons stated for the dissolution of the injunction go to the jurisdiction of the court. It is urged, first, that the circumstances of the fraud ought to bo stated in the charge of fraud in the bill, not in terms only, and that none are stated ; second, that the defense might have been made at law; and that it is now too late, there being no clear evidence of fraud or accident or the act of the opposite party nnmixed with any negligence or fault on the part of the complainant; third, that the answer denies the fraud as to complainant and Callan. Barnes’ bill is prayed to be made a part of this, and all its statements must be considered as repeated. Taking both together, the facts and circumstances of the fraud and the fraud itself are positively charged to have been practiced on the part of Callan and the defendant, as one of the members of the company. Then, what effect is to be given to the defendants answer ? It is objected that it does not fully respond to the charges in the bill; and that those which are not answered are to be taken as true. In 5 Cr., 51, the rule is stated to be, that “ if the answer neither admits nor denies the allegations of the bill, they must be proved on the final hearing, hut upon a question of dissolution of an inj unction, they are to be taken to be true.” The parts alleged not to be answered are, what office the defendant held; whether the proceeds of the note were for the use of himself and the other members of the company; and what he paid for the same ? The defendant has answered, that Callan was the agent of the company; that he was a member thereof and received the note without any knowledge of the consideration, bona fide, in the regular course of dealing, and gave full value therefor, within a few days after its date; and that he received the same from Callan as the property of the company and as any other person -would have done. This appears to me to answer all the material parts of those interrogatories. It is further objected, that a case of fraud is charged, which is not fully met by the answer. Besides the general denial, the defendant, on the information of Callan, positively denies' that there was any fraud in said sale. The defendant sufficiently denies it, as to himself, by showing his entire ignorance of all the circumstances. But what weight is due to his denial merely upon the information of Callan, and to his belief, without knowing f The charge is upon oath that Callan, as the agent of the company, was guilty of the fraud, which I do not think is repelled by a statement of the complainant’s belief of what Callan had informed him. The principal is stated in 9 Cr., 153, and 5 Peters, 111, in the last of which cases (which was a judgment bill) the judge says: “ It is to be borne in mind that the bill does not charge the agreement to have been made with the bank, but with their attorney. The denial by the bank is not therefore of any matter charged to have been within their own knowledge; they could therefore only speak of their belief or from information received from their attorney and not from their own knowledge of the transaction.”

It has been contended, however, that the defendant being the holder of an endorsed, negotiable note, before maturity, for a bona fide and valuable’ consideration, and without notice, cannot be affected by the fraud. This, as a general proposition is unquestionably true. But the defendant was a member of the company, and Callan was their authorized agent to make the contract ifor these cuttings; the notes were delivered to Callan, as such agent, for the benefit of the company; the note in question was delivered to the defendant a few days after its date, as the property of the company ; and, therefore, the defendant must be deemed to have had notice of the acts of Gallan, and to be affected by them as much as any other member, and as much so as if he had in fact known all the circumstances charged as fraudulent, and although he received the note under the circumstances stated.

The next question is one of more difficulty. Will a court sitting as a court of equity relieve, in a case which has been before it as a court of law, between the same parties, and where the defendant could have availed himself of liis defense at law, but failed to do so, and confessed the judgment.

The general rule is, that when a party has a good defense at law, and omits to make it, he cannot afterwards, upon the same ground, have relief in equity. In 6 G. & J., 312, the court says: “A court of equity will not relievo against a recovery in a trial at law, unless the justice of the verdict can be impeached by facts, or on grounds of which the party seeking the aid of chancery Could not have availed himself at law; or was prevented from doing it, by fraud or accident, or the act of the opposite party, unmixed with any negligence or fault on his own part; ” and the principle is the same on a confession of judgment at law. It is said that the complainant was' lulled into security by Barnes’ injunction ; and that Mr. Marbury confessed the judgment not knowing there was any defense.

As to the injunction, the complainant was no party in that suit; Ihe defendant was permitted to sue, and the Service of the writ ought to have put the complainant on his guard; he did give personal attention to the suits brought by Kinsman on the other notes; which shows that he understood it was necessary he should do so. As to the mistake, taking the complainant’s own statement, it appears that he gave no directions to his bail, what counsel to employ, or that the bail knew Brent & Brent were his counsel, nor that, he ever inquired of his bail who he had employed, or that he ever requested Brent & Brent to appear; the suit was brought in February, 1841; and stood for trial at March, 1842; he had made no preparation for trial by summoning witnesses; he must have known the regular trial term, and should have been present, and had Brent & Brent been his counsel, he must have produced his proof of the fraud; but instead of giving the proper attention to his case, which every party is bound to give, there was total indifference on his part. This is not a case of accident, unmixed with any negligence or fault; but a case of gross negligence on the part of the complainant.

But, although the court has no jurisdiction to try the question of fraud, for the reasons already stated, would it not be proper to continue the injunction, until the final decision of Barnes’ Case against the same defendant and others? The trial of the validity of the same contract is involved in that suit, and, although after judgment the endorser is considered as a principal, and is not entitled to the aid of a court of equity as a surety (5 How., 206; 3 Wh., 520); yet it would be unjust that the complainant should suffer, and not have the benefit of the rescission of the contract, if Barnes should succeed in his suit. That suit is still pending. Fraud is the ground of relief, of which courts of law and equity have concurrent jurisdiction, and the court which first obtains possession of the subject, must determine it conclusively, exclusive of the other. The court of chancery had first possession of the contract in connection with this note, through the Barnes’ Case. The injunction must be continued, until that case has been disposed of; or, at least, until the defendant has done everything in his power to bring it to a close.