134 F. 1 (8th Cir. 1904), 2,046, Williams v. Neely

Docket Nº:2,046.
Citation:134 F. 1
Party Name:WILLIAMS et al. v. NEELY et al. [1]
Case Date:November 18, 1904
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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134 F. 1 (8th Cir. 1904)



NEELY et al. 1

No. 2,046.

United States Court of Appeals, Eighth Circuit.

November 18, 1904

Syllabus by the Court

Any fact which renders it against conscience to enter or execute a judgment at law, and which was not available to the defendant at law, confers jurisdiction upon a court of equity to enjoin the proposed entry or execution.

A sound reason, inhering in the same transaction from which a promissory note springs, why the holder ought not, in equity and good conscience, to recover its face value, is a good equitable defense to it, although this defense constitutes neither an offset, a counterclaim, nor an affirmative cause of action against the holder of the note.

A partial failure of consideration which results from a defect of title is a good defense pro tanto to an action by the vendor upon a promissory note given for the purchase price of land which the vendor has conveyed with covenants of warranty and against incumbrances.

An injunction should issue to stay an action at law upon a promissory note for the purchase price of land until this equitable defense of reduction is allowed whenever the remedy at law is less certain, prompt, and efficient to attain the ends of justice, either because the interests of the parties require that the title to the land should be perfected, that their rights should be adjudicated, and that the litigation should be closed-- a result which no remedy at law is adequate to accomplish-- or because it entails circuity of action, or because there is imminent danger of unjustifiable loss or injury to the payee of the note, which a court of equity may, and a court of law cannot, prevent.

The adequate remedy at law which will deprive a court of equity of jurisdiction must be a remedy as certain, complete, prompt, and efficient to attain the ends of justice as the remedy in equity.

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The assignee of a chose in action takes it subject to all the defenses which could have been set up against it in the hands of the assignor at the time of the assignment.

One who purchases for value of a creditor the obligation of his debtor and obtains the latter's promissory note, payable to himself, as evidence of his obligation, with full knowledge of the consideration thereof, and of the facts which condition the inception of the original obligation, takes the note subject to all the defenses which existed against it in the hands of the original creditor.

The basis of waiver is estoppel, and where there is no estoppel there is no waiver.

The defense of reduction or recoupment, which arises out of the same transaction as the promissory note or claim, survives as long as a cause of action upon the promissory note or claim exists, although an affirmative action upon the subject of the defense may be barred by the statute of limitations.

The doctrine of laches is that courts of equity are not bound by, but usually act in analogy to, the statute of limitations governing actions at law of like character.

Under ordinary circumstances a suit in equity will not be stayed for laches before, and will be stayed after, the time fixed by the analogous statute of limitations at law; but if unusual conditions or extraordinary circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance after a longer, period than that fixed by the statute, the chancellor will not be bound by the statute, but will determine the extraordinary case in accordance with the equities which condition it.

It is not culpable laches for one who has an equitable defense of reduction to a promissory note, which has been and is the subject of pending litigation in another court, and which, if available at law, would survive as long as the cause of action upon the note existed, to wait until an affirmative action at law upon the subject of the defense is barred, and until the equitable defense is rejected in an action at law upon the note, before invoking the aid of a court of equity to enjoin the prosecution of the latter action until his equitable defense is allowed.

The court which first acquires jurisdiction of specific property by the issue and service of process in a suit to enforce a lien upon it, in which it may be necessary to take possession or control of it, retains jurisdiction until the end, free from the interference of any court of co-ordinate jurisdiction.

A subsequent suit involving rights in the same property in a court of co-ordinate jurisdiction should not be dismissed, but, before a seizure of the property under it, should be stayed until the proceedings in the earlier suit are terminated, or ample time for their termination has elapsed.

This is an appeal from a decree which dismissed a bill in equity exhibited by the complainants below, Joseph A. Williams and Annie Williams, to enjoin

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the prosecution of an action at law which the defendant Richard M. Neely had brought against them in the court below to enforce the payment of their promissory note for $3,500, dated March 1, 1893, and due March 1, 1898, and to obtain a decree adjudicating the claims of the defendants in this suit to three quarter sections of land in the state of Nebraska. The material facts disclosed at the final hearing were these: Under the will of Richard S. Malony, Sr., Richard S. Malony, Jr., and Annie H. Neely owned three quarter sections of land, subject to the liens of two legacies which were charged upon the lands by the will-- one of $200 per year payable to the defendant Hannah Blake, and one of $100 per year payable to the defendant Sarah Foss. They sold one of these tracts to the defendant Stanley B. Wilson, another to the defendant Wenzel Herdlichtka, and the third to the complainant Joseph A. Williams. Before the sale of the third tract, Richard S. Malony had conveyed his share in it to Annie H. Neely, who made the contract of sale and the deed to the complainants. Each sale was made for $6,000, the full value of a title to each tract free from all incumbrances, and Wilson and Herdlichtka have paid for their quarters in full. The facts and conclusions which have been recited are res adjudicate between the parties to this suit by virtue of a decree of the district court of Richardson county, in the state of Nebraska, in a suit to which they were parties, and that suit is still pending under an order of the Supreme Court of that state to the district court to ascertain the amount owing by the complainant Joseph A. Williams herein on account of the purchase of his tract, to take control thereof, and, in case the law and the facts should be found to justify that course, to apply that amount in payment of the amounts due to the annuitants, Hannah Blake and Sarah Foss.

On February 6, 1902, Annie H. Neely and Richard S. Malony, Jr., as principals, and the defendant Richard M. Neely and others as sureties, executed a bond in the penal sum of $1,000 to the county judge of Richardson county, conditioned, among other things, that they should pay and discharge all legacies chargeable upon the estate of Richard S. Malony, Sr., or such dividends thereon as should be decreed by the county court. The defendant Richard M. Neely was the agent of his mother, Annie H. Neely, to sell the quarter section of land which was purchased by the complainant Joseph A. Williams. In October, 1892, he made and signed a written contract, as the agent of his mother, to sell and convey this land to Williams for $6,000, $500 of which was then paid, and the remainder was to be paid $2,000 on March 1, 1893, and $3,500 on March 1, 1898. About March 1, 1893, in performance of this contract, Williams paid this $2,000, and he and his wife made a note and a mortgage upon the property for $3,500, and Annie H. Neely executed a warranty deed of it to him. These instruments were prepared by Annie H. Neely, or by one of her agents, and the note and mortgage were made payable to Richard M. Neely, but the only consideration for them was the land the complainant purchased. Richard M. Neely never paid them anything for the note or mortgage. What amount, if anything, he paid his mother for them, is left in grave doubt by the evidence, and, in our view of the case, is not material.

On April 18, 1902, Richard M. Neely brought an action at law against the complainants on the note, and they answered the facts which have been recited. The court held at the trial of that action that these facts constituted no defense to the note at law, and this suit was instituted, and the action at law was stayed to abide its determination. The same court has now held that these facts present no reason for relief in equity, and this conclusion is challenged by the appeal.

J. H. Broady, for appellants.

William Baird (John C. Wharton, Edgar A. Baird, and Clair J. Baird, on the brief), for appellees.

Before SANBORN, VAN DEVANTER, and HOOK, Circuit Judges.

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SANBORN, Circuit Judge, after stating the case as above, .

This is a suit in chancery. The theory upon which counsel for the complainants seeks to maintain it is this: In equity and good conscience, Richard M. Neely ought not to be permitted to recover upon the complainants' note the full amount of the unpaid purchase price of the land which they bought of his mother, Mrs. Annie H. Neely, through him as her agent, but the amount of his recovery should be reduced by the diminution of the value of the title which resulted from the liens upon the land which they bought. The purchase price which the complainants agreed to pay was the full value of a perfect title to the property, free from all incumbrances. The vendor agreed to give them such a title. They have not received it, but have obtained one of much less value, since the incumbrances upon it are about equal to the unpaid purchase price evidenced by their note. Neely, the payee of this note, knew of these...

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