Freeman v. Wood

• Decision Date: 16 February 1905
• Citation: 103 N.W. 392,14 N.D. 95
• Parties: FREEMAN et al. v. WOOD.
• Court: North Dakota Supreme Court

14 N.D. 95

103 N.W. 392

FREEMAN et al.

v.WOOD.

Supreme Court of North Dakota.

Feb. 16, 1905.

Syllabus by the Court.

1. An independent action to set aside a judgment is not maintainable when the remedy by motion provided by section 5298, Rev. Codes 1899, is available and adequate.

2. The order of discharge of an assignee for the benefit of creditors, which the court is authorized by section 4675, Comp. Laws 1887, to make after a hearing and upon notice, is, in effect, a final judgment, and as such is binding upon assignors and creditors, and is subject to attack only upon grounds upon which other judgments are assailable.

3. Where, in an action in equity to set aside a judgment, newly discovered evidence is presented as the ground therefor and for a new trial, it must appear that the failure to secure and present such evidence at the proper time was unmixed with the fault or negligence of the party asking relief.

4. The complaint in this case shows that the defendant was made assignee for the benefit of creditors September 27, 1893, and that he was regularly discharged in July, 1895; that within 30 days prior to the commencement of this action to set aside the judgment of discharge and to secure a new accounting, which was five years after such judgment was rendered, the plaintiff “accidentally” discovered that the account was not true in several particulars. It is held upon a general demurrer that the complaint does not state a cause of action for the following reasons: (1) It does not show that the remedy by motion is not available, or is inadequate. (2) It does not show that the evidence which plaintiffs seek to present on the new accounting could not have been secured and presented at the hearing, or within one year thereafter, when the remedy by motion was available by the exercise of reasonable diligence. (3) It does not set forth the nature and character of the newly discovered evidence. Whether equity will ever intervene to grant a new trial for newly discovered evidence under our statute is not determined.

Appeal from District Court, Grand Forks County; W. J. Kneeshaw, Judge.

Action by Louis Freeman and others against W. B. Wood. Judgment for defendant, and plaintiffs appeal. Affirmed.Tracy R. Bangs and Guy C. H. Corliss, for appellants. George A. Bangs and J. A. Sorley, for respondent.

YOUNG, J.

This is an action to vacate a judgment of the district court of Grand Forks county discharging the defendant, as assignee for the benefit of creditors of Freeman & Burwell, insolvents, and exonerating his bondsmen, and to secure a new accounting. The ground alleged as a basis for the relief sought is the fraud of the assignee in accounting. The action is prosecuted by the assignors and one Andy Jones, who, since the defendant was discharged, has purchased from a number of the creditors their claims against said insolvents. The case was before us upon the former appeal upon a general demurrer to the complaint, which was sustained. Freeman v. Wood, 11 N. D. 1, 88 N. W. 721. Thereafter the complaint was amended. The defendant again demurred. The demurrer was sustained, and this appeal is from the order sustaining the same.

The complaint alleges, in substance, that on September 27, 1893, Julius H. Burwell and Louis Freeman, who had theretofore been engaged in selling farm machinery in the city of Grand Forks under the firm name of L. Freeman & Co. were insolvent; that on said date they made a written assignment to the defendant, as assignee, of all their property, for the benefit of their creditors, under the provisions of sections 4660 to 4680, inclusive, Comp. Laws 1887; that the defendant duly filed his written acceptance of the trust, gave the bond required by statute, and entered upon the discharge of his duties; that the assignors delivered to him all of their property; that, as required by statute, they made and filed with the register of deeds of Grand Forks county, the county in which the assignors resided, a true inventory, verified by their oaths, showing the names and residences of all their creditors and the amounts due to each, and also a list of “all the assignors' property at the date of the assignment, * * * and all vouchers and securities relating thereto, and the value of such property according to the best knowledge of said assignors”; that there was transferred to the actual possession of the defendant, by the deed of assignment, notes, accounts, and merchandise of the actual value of $40,362.90, and an equity in certain other notes, which had been pledged as collateral, of the value of $4,305.82; that at said date the assignors were indebted upon their promissory notes to five certain creditors, who are named, in various amounts, aggregating $15,262.97, all of which notes have, since the defendant's discharge, for a valuable consideration, been assigned and transferred to the plaintiff Andy Jones; that, in addition thereto, the assignors were indebted to various other creditors in the sum of $15,225.55; that no part of said liabilities has been paid except a payment of 19 per cent., which was made by the defendant upon his final accounting and discharge. It is alleged that in May, 1895, the defendant represented to the various creditors that all of the assets had been realized upon, and the proceeds distributed, except notes and accounts of the face value of $13,000, which were represented to be of little or no value; that the creditors, relying upon such representations, consented to a private sale thereof; that in June, 1895, the defendant represented that he had made a sale of said remaining assets for sufficient to pay a dividend of 5 per cent., which dividend was received by the creditors in reliance upon said representations; that in truth and in fact the defendant had notes and accounts of the actual value of $30,000, and that no sale was in fact made; that the defendant personally advanced the money which was paid as dividends. Further, that in July, 1895, the defendant made a report in writing to the judge of the district court, and an “alleged account of his proceedings as assignee and of the discharge of the duties of his trust, and of the moneys and property of said estate which came into his hands for distribution,” in which he reported that he had realized only $13,674.18, and that the expenses of administration of his said trust were $5,720.95; that at the time said final account and report was presented “to the court and plaintiffs and their predecessors in interest,” all of the creditors, “because of the false representations hereinbefore set forth, and trusting and believing that said estate had been fully, fairly and honestly administered, and the assets thereof realized upon and fairly accounted for, failed to appear and make any objection to said account, and the court, by reason of such false report was misled and deceived, and induced by the false representations of said assignee, hereinafter referred to, to make and enter an order allowing the final account of the assignee, and a final order was made and entered allowing said final account and discharging said assignee and his bondsmen from all future liability in said case; that said account was not a true and just account and report of the transactions of the defendant as assignee, and was not a true report of the amount realized from the assets of said estate or the disposition thereof, but was fraudulently made with intent to deceive both the court and creditors of said estate”; and “upon information and belief” it is alleged that the report was false in this: that the defendant had realized a much greater sum in cash than he reported, and that the notes reported to have been sold at private sale were also of greater value than represented; further, that a certain credit which was allowed to defendant for commissions should not have been allowed because of his alleged maladministration; further, that he falsely claimed and was allowed credit for moneys alleged to have been paid for attorney's fees, which it is alleged upon information and belief were not paid, and a similar allegation is made as to certain credits for moneys disbursed to pay the expenses of collection.

The foregoing allegations are the same as those contained in the original complaint, which was held insufficient upon the former appeal upon the ground that an independent action will not lie where the remedy at law by motion, provided for by section 5298, Rev. Codes 1899, is available, and that a complaint which does not show that such motion is not available, or that it is inadequate, does not state a cause of action. Section 5298 confers upon the district court the power “at any time within one year after notice thereof to relieve a party from a judgment, order or other proceeding taken against him through his mistake, inadvertence, surprise or excusable neglect.” Thus far in their complaint the plaintiffs have offered no excuse for not having availed themselves of the remedy provided by the section just referred to; neither have they alleged any facts to show that such remedy is not now available or adequate. For the purpose of meeting these defects, two paragraphs have been added to the present complaint, in which it is alleged: (1) That neither of the assignors nor any of the creditors knew of any of the acts of fraud or violation of trust until March, 1900, when L. Freeman “was accidentally apprised of the fact that the defendant, Wood, claimed to be the owner of a certain claim,” which prior to the assignment belonged to the assignors; that thereafter the said L. Freeman “caused certain investigations to be made,” from which investigation the facts were “slowly and laboriously developed.” (2) That the accounting by the defendant involves so many details and facts that they cannot be set out in the form of affidavits, and for that reason it is, and has been at all times, impracticable to present these matters to the...