Freeman v. Wood
| Decision Date | 30 November 1901 |
| Citation | 88 N.W. 721,11 N.D. 1 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Grand Forks County; Cowan, J.
Action by Louis Freeman and others against W. B. Wood. Judgment for plaintiffs, and defendant appeals. Reversed.
Reversed and remanded.
John A Sorley and Geo. A. Bangs, for appellant.
The plaintiff has mistaken his remedy. He should have moved to set aside the judgment or order of which he complains. Section 5298, Rev. Codes. Where a court of law can do as full justice to the parties and to the matter in dispute as can be done in equity, a court of equity will not stay proceedings at law. 3 Pom. Eq. Jur. § 1361; Bateman v. Willowe 1 S. & R. 201; Headley v. Bell, 84 Ala. 346; Harding v. Hawkins, 141 Ill. 572, 31 N.E. 307, 33 Am. St. Rep. 347; Ratliff v. Stretch, 130 Ind. 282 30 N.E. 30; Whitaker v. Wickersham, 5 Del.Ch. 187; Luinger v. Glenn, 33 Neb. 187, 49 N.W. 1128; Procter v. Pettit, 25 Neb. 96, 41 N.W. 131; Phillips v. Pullen, 45 N.J.Eq. 5, 15 A. 9. Where the judgment may be set aside by a motion in the original action upon the grounds which would give jurisdiction to a court of equity, and the time within which such motion can be made has not expired, the remedy at law is adequate and a court of equity will refuse to take jurisdiction. Freeman, Judg. § 497; Logan v. Hillegas, 16 Cal. 21; Bibend v. Krentz, 20 Cal. 109; Lauches v. Carriaga, 31 Cal. 171; Luco v. Brown, 73 Cal. 3, 14 P. 366; Hollinger v. Reeme, 138 Ind. 363, 46 Am. St. Rep. 402; Whitehurst v. Transportation Co., 13 S.E. 937; Crocker v. Allen, 13 S.E. 650, 27 Am. St. Rep. 831; Dupratt v. James, 61 Cal. 360; Ketchum v. Crippen, 37 Cal. 223; Heller v. Mfg. Co., 47 P. 1016; Yorke v. Yorke, 3 N.D. 343; Kitzman v. Mfg. Co., 10 N.D. 26, 84 N.W. 585; Crandell v. Bacon 20 Wis. 639; 91 Am. Dec. 451; Buckley v. Hellbrunner, 7 Ind. 489; Grass v. Hess, 37 Ind. 193; March v. Best, 41 Mo. 493; Vilas v. Ry. Co., 23 N.E. 941. The complaint fails to show diligence on the part of the plaintiffs, either before or after judgment. A court of equity will therefore refuse to take jurisdiction. Freeman, Judg., § § 506, 493, 486; Burton v. Wiley, 26 Vt. 432; Story's Eq. Jur. 1574; Emerson v. Nuall, 13 Vt. 477; Pettes v. Bank, 17 Vt. 435; Carrington v. Holabird, 17 Conn. 530; S. C., 19 Conn. 84; Foster v. Wood, 6 Johns. Ch. 87. Where a judgment rendered is clearly inequitable and is obtained through accident, surprise, mistake, fraud, or wrongful conduct of the plaintiff, and where no relief can be obtained, except in equity, because of the persuasive character of the equities, relief is granted; but if the applicant's wilful negligence or inattention has contributed to his unfortunate position. equity will not interfere. Champion v. Woods, 76 Cal. 17, 17 P. 942; Stroup v. Sullivan, 46 Am. Dec. 389; Bellamy v. Woodson, 48 Am. Dec. 221; Ames v. Snider, 55 Ill. 498; Cairo Ry. Co. v. Holbrook, 92 Ill. 297; Ratliff v. Stretch, 130 Ind. 282, 30 N.E. 30; English v. Aldrich, 31 N.E. 456; Casey v. Gregory, 56 Am. Dec. 581; Kelleher v. Boden, 21 N.W. 346; Norwegian Co. v. Bollman, 66 N.W. 292; Brenner v. Alexander, 19 P. 9; Tompkins v. Brennen, 56 F. 694. The plaintiffs in this case should be required to set forth specifically the time when the fraud was discovered and the reasons for the delay in bringing this suit. March v. Whitmore, 88 U.S. 482; Badger v. Badger, 69 U.S. 836; Campair v. VanDyke, 15 Mich. 371. There has never been a rescission either by the creditors or by Jones. The creditors were the only ones who could rescind. They are the ones whose consent to the act was obtained by fraud. They alone can act, and not an assignee of their cause of action. Section 3931, Rev. Codes; 1 Bigelow on Frauds, 73, 214, 545; Bishop on Contracts, 671; Crocker v. Bellangee, 6 Wis. 645, 70 Am. Dec. 489; M. & M. Ry. Co. v. Ry. Co., 20 Wis. 144, 88 Am. Dec. 740. Cause of action is not assignable and Jones cannot maintain this action. Dayton v. Fargo, 45 Mich. 153; Brush v. Sweet, 38 Mich. 574; Norton v. Tuttle, 50 Ill. 130; Holmes v. Moore, 5 Pick. 257; Leggate v. Moulton, 115 Mass. 552; Murray v. Buell, 76 Wis. 657, 45 N.W. 667; Sanborn v. Doe, 28 P. 105; Whitney v. Kelley, 29 P. 624. No person will be permitted to proceed against a judgment to which he was not a party and which did not at its rendition affect any of his rights. 2 Freeman, Judg. 512, 15 Enc. Pl. & Pr. 249, 250.
Tracy R. Bangs and Cochrane & Corliss, for respondents.
It is conceded that before the tranfer to Jones of their rights, the creditors of Freeman & Co. had a right to call upon defendant to account and to escape the force of the order discharging him as assignee, by showing the fraud alleged. The transfer by the creditors of their rights to Jones in no manner operated to prejudice the defendant, and he was not thereby released from all liability for wholesale fraud and abuse of trust. Graham v. Ry. Co., 102 U.S. 148; Dickinson v. Burrell, L. R., 1 Eq. Cas. 337; McMahon v. Allen, 35 N.Y. 403; Cockell v. Taylor, 15 Beav. 103, 2 Am. & Eng. Enc. L. (2d Ed.) 1024, 1025; Whitney v. Roberts, 22 Ill. 381; Norton v. Tuttle, 60 Ill. 130. A mere right to complain of fraud is not assignable, fraud not being a vendible commodity. I Parson, Contracts, 226; Story, Eq. Jur. § 1040; Cross v. Bank, 66 Cal. 462, 6 P. 94; Whitney v. Kelley, 29 P. 624; Crocker v. Bellangee, 70 Am. Dec. 489. But the rule applies only to a case where the assignment does not carry anything which has itself a legal existence and value independent of the right to sue for fraud. The assignee of a creditor may maintain an action to set aside a fraudulent transfer made by the debtor before the claim was assigned to such assignee. 2 Bigelow on Fraud, 423; Billingsly v. Clelland, 23 S.E. 820; Waite's Fraud, Conv. 392; Warren v. Williams, 52 Me. 349; Lionberger v. Baker, 14 Mo.App. 353; Bump's Fraud. Conv. 506; Schlieman v. Bowlin, 36 Minn. 199. Fraud being charged against the defendant, if he allege laches in the plaintiff, it is for him to show when the plaintiff acquired knowledge of the truth, and that plaintiff knowingly forebore to assert his rights. 12 Am. & Eng. Enc. L. 603. The statute gives six years after discovery of fraud in which to sue. Section 5201, Subd. 6, Rev. Codes. Where a cause of action arises from fraud the statute of limitation will not begin to run, nor laches apply, until the discovery of the fraud. The failure to use diligence is excused where there is a relation of trust and confidence, rendering it the duty of the party committing the fraud to disclose the truth to the other. Farwell v. Telegraph Co., 44 N.E. 891; Penn v. Fogler, 55 N.E. 192; Kelly v. Boettcher, 85 F. 55; Williams v. Monroe, 101 F. 329; 18 Am. & Eng. Enc. L. (2d Ed.) 97, 105; Beaumont v. Boultbee, 5 Ves. 485; Boswell v. Coaks, L. R. 27 Ch. Div. 424, 457. In an action by a creditor to compel an accounting by the assignee and recover his share of the trust fund, such creditor can sue in his own behalf and in behalf of others who may choose to come in under the decree. Travis v. Myers, 67 N.Y. 542; Burrill on Assignments, § 443; Story's Eq. Pl. § 191; Piatt v. Oliver, 19 Fed. Cas. 563; § 5232, Rev. Codes. A final account and settlement may be set aside in equity for fraud in withholding property from the settlement. Griffith v. Godley, 113 U.S. 89, 5 S.Ct. 385; Williams v. Herrick, 25 A. 1100; Pratt. v. Northam, 19 Fed. Cas. 1254; Adair v. Cummin, 48 Mich. 375; Holden v. Meadows, 31 Wis. 284; McLachlan v. Staples, 13 Wis. 448; Pugh v. Hastings, 1 Barb. Ch. 452; Anderson v. Anderson, 52 N.E. 1038; 2 Leading Cases in Eq. 208, and note; Bruce v. Doolittle, 81 Ill. 103; 1 Woerner Admin. 1132, and note; West v. Waddill, 33 Ark. 575, 584; Clark v. Shelton, 16 Ark. 475; Penn v. Penn, 39 Mo.App. 282; Byerly v. Donlin, 72 Mo. 270; Houts v. Shepperd, 79 N.W. 141; Miller v. Steele, 64 Ind. 79; Ridenbaugh v. Burns, 14 F. 93; Greene v. Sargent, 23 Vt. 466, 11 Am. & Eng. Enc. L. (2d Ed.) 1315, 1316.
In this action defendant has appealed to this court from an order of the district court overruling a demurrer to the complaint. The grounds of the demurrer, among others, are that the complaint does not state facts sufficient to constitute a cause of action. The object of the action is to compel the defendant, as assignee, to account for a trust estate, and incidentally to such relief the plaintiffs ask that a certain order or decree of the district court hereinafter referred to, be annulled, and vacated of record. The controlling facts alleged in the complaint may be briefly stated as follows: That the firm of L. Freeman & Co. (consisting of Louis Freeman and Julius H. Burwell), on the 27th day of September, 1893, and prior thereto, was and had been engaged in the farm machinery business at the city of Grand Forks, in this state, and on said date said firm was insolvent in the sense that it was unable to meet its liabilities as they matured; that on account of said insolvency said firm made a formal and written assignment of all its property to the defendant, in trust for the benefit of the creditors of said firm; that said assignment was made and perfected under and pursuant to the statute (Comp. Laws 1887, § 4660) regulating assignments made for the benefit of creditors; that the defendant accepted said assignment and trusteeship, and, after giving a bond as required by the statute, and in the sum of $ 80,000, the defendant took into his possession and control all the property so assigned to him; that the property so assigned and delivered to the defendant consisted of merchandise, book accounts, bills receivable, notes, and mortgages; that in the month of July, 1895, the defendant presented his report and final...
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