Harding v. Hawkins

• Decision Date: 12 May 1892
• Citation: 141 Ill. 572,31 N.E. 307
• Parties: HARDING v. HAWKINS et al.
• Court: Illinois Supreme Court

141 Ill. 572

31 N.E. 307

HARDING

v.HAWKINS et al.¹

Supreme Court of Illinois.

May 12, 1892.

Appeal from appellate court, first district.

Bill by Charles and Frederick Hawkins against George F. Harding and Rodney M. Whipple to enjoin the collection of a judgment. The bill was dismissed for want of equity, and that decree was reversed by the appellate court. Defendant Harding appeals. Reversed.

Wm. J. Ammen, for appellant.

D. Blackman, for appellees.

SHOPE, J.

This was a bill filed by Charles and Frederick Hawkins in the Cook circuit court against George F. Harding and R. M. Whipple, to enjoin the collection of a judgment recovered by Harding in the superior court of that county December 20, 1888, against the complainants on a prior judgment in favor of Harding against them, recovered in the superior court of Chicago, in May, 1867, for $3,530.31. The bill was taken as confessed as to Whipple. Harding answered under oath, the oath not being waived; and the cause was heard on the bill, answer, replication, exhibits, and the testimony of the parties and witnesses taken in open court. The circuit court dismissed the bill for want of equity. Complainants appealed from this decree to the appellate court, where the decree of the trial court was reversed.

A brief statement of the facts is necessary to an understanding of the points determined. December 19, 1866. Whipple gave to Harding five promissory notes, aggregating $32,150.47, two of which were signed ‘R. M. Whipple & Co.,’ and the others ‘R. M. Whipple.’ At the time of their execution Whipple delivered to Harding divers notes and obligations, as collateral security for the payment of said notes, among which was the note of Charles and Frederick Hawkins, upon which judgment was obtained by Harding, as before mentioned, in 1867. The note was for $3,500, payable to Whipple three months after date, and by Whipple assigned to Harding as collateral to said five principal notes. As between the Hawkinses and Whipple, it was accommodation paper. There is, however, no evidence charging Harding with notice thereof. Whipple gave to Harding power of attorney, authorizing him to sell so much of these collaterals as might be necessary to pay the principal debt, and Harding agreed in writing to return the residue to Whipple. As we understand the record, it is not claimed that more than $15,000 of the principal debt had been paid at the time Harding recovered judgment against the Hawkinses on said collateral note. Harding then had the right to reduce the collateral to judgment, and a defense by the makers, so far as appears, would have been wholly unavailing. The judgment took the place of the notes, and stood as security merely for the payment of the residue of the principal debt. On the 6th of April, 1887, Harding brought an action of debt in the superior court of Cook county, founded upon this judgment rendered against the Hawkinses upon said note. Appellees interposed the plea of nul tiel record only. The issue was found in favor of Harding, and judgment entered against appellees for $8,200.

This bill is filed upon the theory that before the entry of the last judgment the five promissory notes given to Harding by Whipple had been fully paid and discharged by Whipple. It is conceded that, if Harding had received full payment from Whipple, the Hawkins note would be released from pledge as collateral, and, under the contract between Harding and Whipple, should be returned to Whipple by Harding, unless he had acquired a right to retain the benefit of the judgment in some other way. Upon the return of the note to Whipple, it, being accommodation paper, as before stated, would cease to be binding upon the Hawkinses. It is conceded that the note in controversy originally came into the hands of Harding as collateral merely to said principal debt. Harding, in his amended answer, sets up that after the delivery and maturity of the said $3,500 note, by virtue of the transaction with Whipple he became the absolute and sole owner of said note. And by his amended answer, ‘that shortly after the said collateral was deposited with him by said Whipple, and before said notes upon which it was deposited as collateral became due, he bought the note of said complainants, described in said bill, of said Whipple, and paid in cash, or its equivalent, to the said Whipple, the value thereof at par in full. Both the original and amended answer deny notice, when purchasing of Whipple, of any defense to said collateral note. These allegations of the answer are not responsive to the bill, and, to be of avail as a defense to complainant's right of recovery, must be proved. 1 Daniell, Ch. Pl. & Pr. 844, and note.

On the hearing the five principal notes mentioned were produced by Whipple, who testified that Harding had surrendered the notes to him in May, 1873. Harding testifies that according to his recollection they were surrendered in July, 1869. But under what circumstances, why they were surrendered, and what took place, the testimony of Whipple and Harding, who alone have knowledge upon the subject, is wholly irreconcilable. Their interests in the result are equal. If Harding recovers, Whipple will be liable over to the Hawkinses. Whipple testifies that the notes were paid. Harding insists that in some way (how he is not definite or certain) there was a mere change in the form of the indebtedness. The notes having originally come to the hands of Harding as collateral merely, the presumption would be that he still held them in that capacity. 1 Greenl. Ev. § 41. The principal notes being produced by Whipple from his possession, the presumption was that they were paid. Walker v. Douglas, 70 Ill. 445;Sutphen v. Cushman, 35 Ill. 186. The burden being upon Harding to establish his ownership of the Hawkins note, it is apparent he must fail if his evidence and that of Whipple are to be regarded as of equal credit, unless other evidence can be found to overcome the presumptions arising from the possession of the original notes by Whipple, and the original possession of the note as collateral by Harding. There are in this record some circumstances tending to corroborate Harding. If the original notes were paid in 1869, at the time Harding says they were surrendered, or in 1873, when Whipple says they were paid, it is at least strange that neither Whipple nor appellees procured an assignment or satisfaction of the judgment then standing of record against appellees. The note upon which it was rendered having been accommodation paper, it was the duty of Whipple to have had satisfaction entered.

But it is unnecessary to determine the case on the merits. The real question presented is whether, conceding the complainants' case, they have a standing in a court of equity. The general rule is that, if the complainants had a defense at law, they cannot be relieved from the judgment entered in the common-law suit by application to a court of equity. Where a party neglects to make a defense at law which is known to him, or might have been known by the exercise of proper diligence, the judgment will not be enjoined, or the party relieved in equity from the result of his own want of proper care and diligence, unless he was prevented from discovering and availing himself of such defense by the fraud of the opposite party, or by other cause beyond his control. 1 Black, Judgm. § 387; Moore v. Bagley, Breese, 94; Beaugenon v. Turcotte, Id. 167; Palmer v. Bethard, 66 Ill. 529;Ames v. Snider, 55 Ill. 498;Winchester v. Grosvenor, 48 Ill. 517; Railroad Co. v. Ennor, 116 Ill. 55, 4 N. E. Rep. 762; Warren v. Cook, 116 Ill. 199, 5 N. E. Rep. 538; Tone v. Wilson, 81 Ill. 529. It is here insisted that complainants' case is taken out of the rule- First, because they were ignorant of the defense to the entry of the judgment in favor of Harding; and, second, that the plea of payment could not be interposed in the action of debt upon the former judgment, and therefore the defense was unavailing at law. A judgment at law may be enjoined when the defense is an equitable one, and not available in an action at law. If the matter relied upon by the complainants could not have been received as a defense in the action at law, equity may relieve, notwithstanding an ineffectual attempt to defend at law. 1 Black, Judgm. § 388; Vennum v. Davis, 35 Ill. 568;Crim v. Handley, 94 U. S. 652. A party will also be excused from failing to interpose a legal defense under certain circumstances where he is ignorant of such defense at the time of the trial of the common-law action in which the judgment was rendered. It is said: ‘It may be regarded as well settled upon the authorities that equity will grant relief against a judgment at law when it is shown that there is a good and valid defense to the action on the merits, of which the defendant was ignorant at the time of the trial, and which he could not have discovered by the exercise of reasonable and proper diligence in time to set it up at law. But it is an important corollary to the above rule-or, indeed, an integral part of the rule-that mere ignorance of the defense is not sufficient. It must be shown that the party is guilty of no negligence, and that he could not possibly have ascertained it by the exercise of careful and reasonable diligence. It must appear that the defendant's ignorance was not due to any lack of...