Barnes v. Cady

• Decision Date: 05 May 1916
• Docket Number: 2660.
• Citation: 232 F. 318
• Parties: BARNES et al. v. CADY.
• Court: U.S. Court of Appeals — Sixth Circuit

232 F. 318

BARNES et al. v. CADY.

No. 2660.

United States Court of Appeals, Sixth Circuit.

May 5, 1916

See also, 208 F. 359.

This is an appeal from a decree ordering a foreclosure of a mortgage on certain land and the sale of such land to satisfy such mortgage. The material facts and questions involved are stated in the opinion of the District Court as follows 'About April 1, 1908, the Barnes Grain & Commission Company, of which one Charles W. Barnes was president and manager, was indebted to the Ohio Savings Bank & Trust Company, in the sum of about $2,900, on several promissory notes. In order to secure his indebtedness and such further advances as the bank might make said Charles W. Barnes, his wife joining him, and his father executed and delivered to Edward H. Cady in trust for the bank a deed conveying the property involved in this litigation, it being understood that the deed, although absolute in form, should be treated as a mortgage. At this time the land in question had already been conveyed by mortgage still subsisting to the Fremont Savings Bank Company, of Fremont, Ohio, and whatever rights then were acquired by Cady as trustee were subject to said mortgage. * * *

'All the parties in interest prior to December 18, 1911, were residents of Ohio and within the jurisdiction of this court. The Fremont Savings Bank Company brought an action in the court of common pleas of Sandusky county to foreclose its mortgage, making Charles W. Barnes and wife and Cady and wife parties defendant. Cady entered his appearance, but defaulted by answer. Barnes answered, taking issue solely with the plaintiff in the action and raising no issue between himself and Cady. Plaintiff's petition in the case, touching the Cady interest, simply alleged: 'That the defendants Edward H. Cady and Emma W. Cady have or claim to have some lien or interest in or to said premises, and plaintiff asks that they be compelled to set the same up or be forever shut off from asserting the same.' A decree of foreclosure was entered in favor of the plaintiff bank, in which a finding was had against the Cadys in these terms: 'And the court further finds that the said defendant Edward H. Cady and the defendant Emma W. Cady have no interest in or lien on or claim to said premises or any part thereof.'

'An order of sale was allowed and issued and the property advertised to be sold December 19, 1911. * * * With his interest thus subsisting in the property, on the 18th of December Barnes effected a sale of this property to his brother, John E. Barnes, of Chicago, one of the defendants in the case here. Having agreed upon the terms of sale, the two brothers visited Fremont, consulted an attorney, who assured them that the record effectually shut out as to all persons the Cady interest, and consummated their business by paying up and causing to be entered as satisfied on the court records the judgment in behalf of the bank, and having the action, after payment of the costs by them, dismissed without further procedure and obtaining a release and discharge of the mortgage from the bank and causing the same to be entered of record in the office of the county recorder. Thereupon a conveyance was made of this property by Charles W. Barnes and wife to John E. Barnes.

'There can be no question whatever upon the record before us but that the payment of the bank's judgment and court costs by John E. Barnes was part of the consideration for the conveyance of this property to him. A small balance remaining after the payment of these claims was paid to Charles W Barnes. Cady, as trustee, thereafter commenced in this court the action now being determined to foreclose the lien in the nature of a mortgage held by him upon this property by virtue of the deed to him above referred to, and the facts we have just recited are set up by way of defense by John E. Barnes and wife, with the further claim that out of these transactions grew a right of subrogation to Barnes of the lien of the Fremont Savings Bank Company.

'Three questions were presented on the hearing. The first one of fact the court has already disposed of. The other two are (1) Were the rights of Cady under his deed foreclosed by the proceedings in the Sandusky common pleas court in favor of the defendant John E. Barnes, as a successor in interest to Charles W. Barnes? (2) Is John E. Barnes, under the circumstances, subrogated to the rights of the Fremont Savings Bank Company in its decree foreclosing its mortgage? * * * '

B. W. Johnson, of Toledo, Ohio, for of Toledo, Ohio, for appellants.

H. W. Isenberg, of Toledo, Ohio, for appellee.

Before KNAPPEN and DENISON, Circuit Judges, and TUTTLE, District judge.

TUTTLE District Judge (after stating the facts as above).

We have carefully examined the record and are satisfied that it supports the statement of facts just quoted. It should, however, be added that defendant John Barnes testified that he 'understood that lien had been wiped out' and that he 'didn't want to take it under any condition unless everything was absolutely clear,' and that there was no evidence to the contrary. The court below decided both of the questions referred to in favor of the plaintiff, holding that the decree foreclosing the first mortgage was not decisive of any right of the holder of the second mortgage, except that of priority of lien, and that defendant, in paying the first mortgage, paid his own debt and therefore extinguished such mortgage, thereby promoting the second mortgage to the rank of the first, and that under these circumstances he was not entitled to be subrogated to the previously existing rights of the senior mortgagee as against the junior mortgagee.

1. We agree with the conclusion of the trial court that the present plaintiff is not precluded from maintaining this suit by the decree in the former foreclosure suit. The principles governing the application to such a case of the doctrine of res judicata have been stated by the Supreme Court as follows:

'In considering the operation of this judgment, it should be borne in mind, as stated by counsel, that there is a difference between the effect of a judgment as a bar or estoppel against the prosecution of a second action upon the same claim or demand, and its effect as an estoppel in another action between the same parties upon a different claim or cause of action. In the former case, the judgment, if rendered upon the merits, constitutes an absolute bar to a subsequent action. It is a finality as to the claim or demand in controversy, concluding parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. Thus, for example, a judgment rendered upon a promissory note is conclusive as to the validity of the instrument and the amount due upon it, although it be subsequently alleged that perfect defenses actually existed, of which no proof was offered, such as forgery, want of consideration, or payment. If such defenses were not presented in the action, and established by competent evidence, the subsequent allegation of their existence is of no legal consequence. The judgment is as conclusive, so far as future proceedings at law are concerned, as though the defenses never existed. The language, therefore, which is so often used, that a judgment estops not only as to every ground of recovery or defense actually presented in the action, but also as to every ground which might have been presented, is strictly accurate, when applied to the demand or claim in controversy. Such demand or claim, having passed into judgment, cannot again be brought into litigation between the parties in proceedings at law upon any ground whatever. But where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or verdict is rendered. In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action, * * * the inquiry must always be as to the point or question actually litigated and determined in the original action, not what might have been thus litigated and determined. Only upon such matters is the judgment conclusive in another action. ' Cromwell v. County of Sac, 94 U.S. 351, 24 L.Ed. 195.

'It is undoubtedly settled law that a judgment of a court of competent jurisdiction, upon a question directly involved in one suit, is conclusive as to that question in another suit between the same parties. But to this operation of the judgment it must appear, either upon the face of the record or be shown by extrinsic evidence, that the precise question was raised and determined in the former suit. If there be any uncertainty on this head in the record-- as, for example, if it appear that several distinct matters may have been litigated, upon one or more of which the judgment may have passed, without indicating which of them was thus litigated, and upon which the judgment was rendered-- the whole subject-matter of the action will be at large, and open to a new contention, unless this uncertainty be removed by extrinsic evidence showing the precise point involved and determined. To apply the judgment, and give effect to the adjudication actually made, when the record leaves the matter in doubt, such evidence is admissible. ' Russell v. Place, 94 U.S. 606, 24 L.Ed. 214.

'Is this a case of estoppel by judgment? The law in respect to such estoppel was fully considered and determined by this court in the case of Cromwell v. County of Sac, 94 U.S. 351 (24

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