Outhwite v. Porter

Decision Date31 October 1865
Citation13 Mich. 533
CourtMichigan Supreme Court
PartiesJohn R. Outhwite v. Lewis Porter, Wm. W. Cantine and Aaron B. Miner

October 24, 1865; October 25, 1865, Heard [Syllabus Material] [Syllabus Material]

Appeal in chancery from Muskegon circuit.

The facts, so far as they are necessary to an understanding of the legal questions, are stated in the opinion.

Decree set aside, and the bill dismissed, with costs in both courts to the appellant.

Moore & Griffin, for complainant:

1. Porter did not give value for Outhwite's promise to pay either by way of harm to himself, or benefit to Outhwite. What he received from Outhwite was a mere promise to pay Cantine's debt, not yet due, at the same time and place and for the same amount; that which Porter parted with was not a security for Cantine's debt, but mere evidence of its existence. The debt still remained as effective and effectual from Cantine to Porter as if the notes had not been surrendered.

If Porter has not discharged his debt against Cantine, so that he has no right to sue Cantine for the goods sold, he cannot be considered a bona fide holder for value, within the purview of the law merchant, which he invokes to his aid.

On this subject we have eliminated a large number of cases, and present only those which are the more thoroughly considered, and bear on the particular features of this case.

We cite the New York authorities in the order in which the cases have been decided: Coddington v. Bay, 20 John. 637; Wardell v. Howell, 9 Wend. 86; Rosa v. Brotherson, 10 Wend. 86; Ontario Bank v. Worthington, 12 Wend. 593; Payne v. Cutler, 13 Wend. 605; Francis v. Joseph, 3 Edw. Ch., 182; Furniss v. Gilchrist et al., 1 Sandf. 53; Stewart v. Small et al., 2 Barb. 561; Farmington v. Frankfort Bank, 24 Barb. 554; Cardwell v. Hicks, 37 Barb. 458.

Citing and approving New York cases, see Nevitt v. Bank of Port Gibson, 1 Freeman's Ch., 438; Hugenin v. Basely, 14 Vesey, Jr., Ch., 287.

There can be no pretense that Porter has been injured by the laches of Outhwite, or by the confidence that Outhwite reposed in Cantine, so that thereby Porter has been induced to give credit, or delay in prosecution of his remedy against Cantine; for he was notified of the fraud, and of Outhwite's election to rescind his agreement with Cantine before maturity of Cantine's notes, and before Porter had a right to sue Cantine for the debt.

Thus, in no aspect of the case has Porter been injured, or Outhwite benefited by the promise of the latter to pay Cantine's debt.

2. The decree of the court below is erroneous, however, in two respects; and we ask the court here, in decreeing according to the very right of the matter, to correct these errors.

First. It was erroneous to grant a personal decree in favor of Outhwite against Cantine, as the very fraud had been effectual, which this bill is filed to prevent.

Second. It was erroneous to refuse relief as to the notes upon which Porter had obtained judgment.

The court below was undoubtedly led into these two errors, by giving effect to the two judgments as estoppels against questioning their equity or justice, and by not taking into consideration that other rule of law, that although a party may avail himself of an estoppel, yet he is not bound to do so; and if he pleads to the merits, he opens the estoppel and consents that the case be decided on its real merits. Estoppels are not favorites of law, because it is their peculiar office "to exclude the truth;" and this defendant, having joined issue upon the merits of the complainant's bill, and not having in any way insisted upon the estoppel of the judgments, but rather having relied solely upon his claim as to all the notes, indiscriminately, to come within the purview of the law merchant, has thereby opened the estoppel, and happily, thus relieved his conscience and character from the burden of effectuating to any extent the frauds of Cantine upon Outhwite: 1 Chitty on Plead., 590, 311; Stark. on Ev., notes by Sherwood, 311; Voogt v. Winch, 2 Barn. and Alderson, 657; Outram v. Morewood, 2 East. 364; American Common Law, vol. 5, 89-90-91-92; Ferguson v. Miller, 5 Ohio Cond. Rep. 291; Davis v. Tyler, 18 John. 489; Davoue v. Fanning, 4 John. Ch., 200; Rosse v. Rust, 4 John. Ch., 555; Young v. Rummell, 2 Hill 478; Miller v. Maniel, 6 Hill 114.

Hoyt Post, for defendant Porter:

1. Courts of equity will not interfere by injunction to restrain proceedings at law after judgment, unless special circumstances be shown--as that the party had no adequate remedy at law, or was ignorant of such defense during the suit, or was prevented from availing himself of such defense by fraud or accident, or by the act of the opposite party unmixed with negligence or fault on his part: Foster v. Wood, 6 Johns. Ch., 89; Wixon v. Davis, Walk. Ch., 15; Wingate v. Haywood, N. H., 437; 2 Story's Eq. Juris., 886, et seq.; 2 Lead. Cas. in Eq., part 2, 97, et seq.

2. Equity will not interfere to prevent a party from pursuing a legal remedy without some showing that the proceeding will be unjust and against equity. The only foundation alleged in this suit for the interference of equity to enjoin the foreclosure of said mortgage is the pretended fraud of Porter, and collusion and connivance on his part with said Cantine to defraud complainant. Of this there is a total want of proof of any kind.

Fraud will not be inferred from slight circumstances, but the proof of it must be so clear and conclusive as to leave no rational doubt of its existence, in the mind of the court: Buck v. Sherman, 2 Doug. Mich., 176; Hollister v. Lord, 2 Mich. 310.

As to what constitutes fraud, see 1 Story's Eq. Juris., § 190, et seq.; 2 Kent's Com., 484.

We submit, then, that under all circumstances of this case there were no such equities established as justified the court in enjoining Porter from collecting his note by foreclosing the mortgage collateral thereto.

3. Considering the transaction as a whole, Porter occupies really a position analogous to that of a bona fide holder of notes given by complainant to Cantine, and by Cantine transferred to him before due for a valuable consideration. In such case any fraud in Cantine in obtaining the notes does not affect the holder's rights without fraud in him or notice to him of Cantine's fraud, unless he received the notes under circumstances of such a strong and pointed character as necessarily to cast a shade upon the transaction, and put him on inquiry.

OPINION

Christiancy J.:

This was a bill to restrain the collection of three promissory notes and a mortgage made by complainant to the defendant Porter, upon two of which notes judgment had been...

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