Taylor v. Nashville & C.R. Co.

• Decision Date: 07 December 1887
• Parties: TAYLOR v. NASHVILLE & C. R. CO. MAYOR, ETC., OF CITY OF NASHVILLE v. TAYLOR et al.
• Court: Tennessee Supreme Court

6 S.W. 393

86 Tenn. 228

TAYLOR v. NASHVILLE & C. R. CO.

MAYOR, ETC., OF CITY OF NASHVILLE v. TAYLOR et al.

Supreme Court of Tennessee.

December 7, 1887

Appeal from chancery court, Davidson county; A. G. MERRITT Chancellor.

Bill in equity filed by N. A. Taylor, for use of the Third National Bank, against the Nashville & Chattanooga Railroad Company to enforce the payment of a judgment on certain bonds of the city of Nashville, for which the railroad company was liable. By consent, the city of Nashville became a party defendant and filed its answer and cross-bill. A decree was entered perpetually enjoining the enforcement of the judgment. The bank appeals.

C. D Berry, R. McP. Smith, and Thos. J. Freeman, for appellants.

W. K. McAlister, for city of Nashville. East & Fogg, for Nashville & C. R. Co.

LURTON J.

On the twenty-sixth of July, 1878, a judgment was rendered in the circuit court of Davidson county in favor of N. A. Taylor, and against the mayor and city council of Nashville and the Nashville & Chattanooga Railroad Company, for $4,787 and costs. This recovery was upon four past-due bonds of $1,000 each, and accumulated interest, being a part of an issue of $500,000 issued by the city of Nashville in aid of the Nashville & Chattanooga Railroad Company; the payment of the bonds being guarantied by the latter corporation. On the twenty-first of August of same year this judgment was assigned by the attorney of Taylor to the Third National Bank of Nashville; the bank paying for same the sum of $4,164.69. Execution had issued, and been returned nulla bona before assignment. Thereupon, the bank having made application to the city council to have the judgment settled by issuance of new bonds, and this having been declined by the city, the original bill in this cause was filed against the Nashville & Chattanooga Railroad to prevent an alleged misapplication of its assets to the payment of a dividend to its stockholders, and to reach and subject money in hands of its treasurer about to be so misapplied, and compel its application to payment of this judgment. By consent of parties, the city of Nashville was permitted to become a party defendant, and to file answer and cross-bill. The questions to be determined in the litigation spring wholly from the cross-bill, which seeks to perpetually enjoin the collection of said judgment, upon the ground that it was procured by fraud, and was therefore void. In substance, it was alleged by the city that this judgment was rendered upon bonds which had already been reduced to judgment, in another case, in favor of the Pontotac Insurance Company, the true owners thereof; and that, after said judgment, the bonds, being a part of the file of papers in the other case, were stolen from the archives of the court by the plaintiff, Taylor, or by his procurement, and a second suit instituted upon them. It further charges that the nominal plaintiff, Taylor, and his attorney of record, I. C. Lanier, were both fictitious persons; that the city, and its agents and attorneys, at the time of judgment, were entirely ignorant of the fraud that was being practiced,--ignorant of the fact that the bonds sued on by Taylor had been before reduced to judgment, or that they had been abstracted from the files of the court, and of the fictitious character of the suit,--and that, having no knowledge of any defense to the suit, the bonds being genuine evidence of city indebtedness, and having no suspicion of the real state of the case, judgment had been permitted without the interposition of any defense; that knowledge of the fraud practiced had only been acquired when it was too late to be of avail at law. The bill further shows that the plaintiff, Taylor, did not personally appear in court, neither was he represented by the attorney whose name was signed to the declaration; but that, on the day that the cause was set for trial, Mr. Dillard, a regular practitioner at the Nashville bar, appeared in court, and exhibited the bonds sued upon to the city attorney, who, seeing them to be genuine, and suspecting no fraud, and knowing of no defense, suffered judgment to be taken; that the city has since learned that said Dillard had only been retained that day, and that by a letter purporting to come from said attorney of record, Lanier, and inclosing bonds, and instructing him to appear that day and take judgment; that said Dillard never had seen either Taylor or Lanier, and knew neither, and knew nothing more of the case than the information given in his letter of instruction. To this cross-bill a demurrer was filed by the bank raising the question that the bill did not show a judgment procured by fraud, accident, or mistake, wholly without negligence upon the part of the defendant. This demurrer was overruled; and as the question raised by it is the same as that raised by the facts proven, the proof essentially sustaining the allegations of the bill, the assignment of error upon the action of the court in overruling it will be considered hereafter. Publication was made for Taylor, who failing to defend, judgment pro confesso was taken against him. The answer of the bank denies, in general terms, all the allegations of the bill; and likewise relies upon the defense, as stated in their pleadings, "that, before buying the judgment, it got its attorney to inquire of complainant's attorney and its treasurer whether said judgment would be funded, and both of them gave the assurance that this would be done, and it was only on this answer that the purchase was made." There was a decree by the chancellor in favor of the city, and an appeal by the bank. As before stated, the proof sustains all of the material allegations of the bill. Are these facts sufficient to justify the interference of a court of equity to restrain the collection of so unconscionable a judgment?

The general rule concerning the interposition of the court of chancery, after a judgment at law, is that when the party had a valid legal defense on the merits, and was prevented in any manner from maintaining it, by fraud, mistake, or accident, and there has been no negligence, laches, or other fault on his part, or on the part of his agents, then a court of equity will interpose, enforced. 3 Pom. Eq. Jur. 400; Kearney v. Smith, 3 Yerg. 127; Stone and restrain proceedings on the judgment which cannot be conscientiously v. Moody, 6 Yerg. 36; Rice v. Bank, 7 Humph. 42; Schwab v. Mount, 4 Cold. 62; Rowland v. Jones, 2 Heisk. 323; Hickerson v. Raignel, Id. 333; Turley v. Taylor, 6 Baxt. 377. No branch of the jurisdiction of a court of equity presents less difficulty in the statement of the general rule applicable, and none, perhaps, more in its application to the facts of a particular case. When the plaintiff presented himself in the character of a suitor in a court of law, and asked that judgment be pronounced in his favor upon the bonds he based his suit upon, he must be taken to represent that they are his own property, and that they have not been satisfied. He must also be taken to represent himself as being the person he holds himself out as being, and not a fictitious John Doe or Richard Roe. Now, the proof in this case makes it clear that none of these representations were true, and that the party who instituted suit on these bonds, and called himself N. A. Taylor, knew at the time that he was not entitled to any judgment whatever, and that the solemn verdict in his favor was contrary to truth and right. This judgment was therefore unconscionable, and obtained through an unblushing fraud. If this litigation was between the fraudulent judgment creditor and the victim of his practices, would he be suffered to reap the fruits of his villainy?

The first line of defense offered by the present owner of the judgment necessarily answers in the affirmative this question; and this, upon the proposition, well and ably argued, that the defense of the city to the suit on these bonds was a plain legal defense, as easily made at law as in equity, and that the failure to make it before judgment was due to negligence, as the proof was as accessible then as now. The reply of the city to this otherwise sound proposition is that its agents and attorney were ignorant of the very facts which make the judgment unconscionable, and that this ignorance was not attributable to any negligence upon its part, or upon the part of its agents or attorney. It is undoubtedly true that if the city attorney, who was charged with the duty of representing the city in this litigation had compared the bonds sued on with the bonds already paid by the city, and with those before reduced to judgment, he would have discovered the fact that the bonds upon which the Pontotac Insurance Company had recovered judgment in the same court were missing. By an examination of the declaration in that case, he would have learned that the numbers upon the bonds in the insurance company case corresponded with the numbers upon the bonds sued upon by Taylor. The city attorney did not do this because he did not suspect the honesty of the suit, and was misled by the bonds being genuine on their faces, and being presented by an attorney against whom no suspicion attached. Nothing appeared upon the face of the transaction to put him upon guard against fraud, or to suggest any line of defense whatever.

This brings us to the question as to whether ignorance of the existence of a defense, and the absence of all circumstances of suspicion, will not, as against a plaintiff guilty of conscious mala fides in the obtention of any judgment, excuse any effort to present a defense of which the defendant is totally unaware, by reason of the artfulness with which the fraud of the plaintiff was concocted and concerted. In the case of ...