Westwater v. Murray

• Decision Date: 02 October 1917
• Docket Number: 3010.
• Citation: 245 F. 427
• Parties: WESTWATER v. MURRAY.
• Court: U.S. Court of Appeals — Sixth Circuit

245 F. 427

WESTWATER v. MURRAY.

No. 3010.

United States Court of Appeals, Sixth Circuit.

October 2, 1917

Murray Seasongood, of Cincinnati, Ohio, and Smith W. Bennett and J G. Westwater, both of Columbus, Ohio, for plaintiff in error.

L. F Sater and Vorys, Sater, Seymour & Pease, all of Columbus Ohio, for defendant in error.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

WARRINGTON Circuit Judge.

This was an action to recover upon a judgment rendered by the District Court of the United States for the Western District of Pennsylvania in a suit commenced January 2, 1909, wherein Robert Lyons, as receiver of the Cosmopolitan National Bank of Pittsburg, Pa., was plaintiff, and James Westwater defendant. That suit was brought upon a promissory note executed in Pittsburg, June 15, 1908, payable to the order of H. R. Bean, for $37,500, at the Cosmopolitan National Bank signed by James Westwater water and indorsed in blank by Bean. Among the defenses set up by Westwater was that the note was a renewal of another one made by him 'as an accommodation note' for the bank. A directed verdict was entered in favor of defendant. Lyons v. Westwater (C.C.) 173 F. 111, 114. On writ of error the judgment was reversed, and the record remanded, with instructions to award a venire de novo. Lyons v. Westwater, 181 F. 684, 104 C.C.A. 663 (C.C.A. 3). The second trial resulted in a verdict and judgment in favor of the receiver for $43,425. This judgment was also reversed with a venire de novo. Westwater v. Lyons, 193 F. 817, 818, 824, 113 C.C.A. 617 (C.C.A. 3). The issues and the facts developed on such hearings are sufficiently shown in the citations just made.

On June 20, 1912, shortly after the last-cited decision was rendered, an agreement under seal was executed in Pittsburg by the receiver of the bank and Westwater, in which Westwater agreed to pay the receiver $4,500 'in compromise and settlement' of the original suit, payable $1,500 on or before June 24, 1912, and $3,000 in four months from that date, with interest; the last payment being represented by a cognovit note likewise executed in Pittsburg on the same date, payable to the order of the receiver, and signed and sealed by Westwater. The agreement contained another provision to which allusion will be made later.

Meanwhile Charles C. Murray had been appointed and qualified as the successor of Lyons in the bank receivership, and, under an order of the court in which the original suit was pending, had been substituted as plaintiff in the place of Lyons; accordingly Murray signed this compromise agreement, and the cognovit note was made payable to his order. Westwater paid the $1,500, but failed to meet the note. Afterwards, on April 4, 1913, the receiver by his counsel gave written notice to Westwater, through the latter's counsel, that the plaintiff (the receiver in the original action) had presented a petition to the court praying for approval of the compromise agreement and for judgment against Westwater for the balance due under the agreement, $3,000, with interest from June 20, 1912, and also for an attorney's commission of ten per cent. and costs; that the court had thereupon granted a rule on Westwater, returnable April 18, 1913, to show cause why the prayer of the petition should not be granted and judgment entered against him. April 4th, service of this notice was accepted by Westwater's counsel; and on the 25th of the month action was taken on the rule so granted, the court finding that the rule had been 'duly served upon counsel for' Westwater, 'and no answer having been filed by' him 'or cause shown why the prayer of said petition (for approval of the compromise agreement, etc., as stated) should not be granted, on motion of * * * attorney for plaintiff, the prayer of said petition is granted'; whereupon the court entered an order approving and ratifying the agreement and also rendering judgment in favor of the receiver and against Westwater for $3,467.20, which included accrued interest, $152, and an attorney's commission, $315,20. This is the judgment upon which the present action is based; and an authenticated transcript of the proceedings had in the court rendering the judgment is attached as an exhibit to the petition in the action below. On June 29, 1916, recovery was allowed below for the full amount of the judgment sued on, with interest; reversal is sought under the present writ of error.

1. A general demurrer to the petition was interposed in the court below and overruled. Westwater thereupon filed an answer and cross-petition admitting in the first defense the appointment of a receiver of the Cosmopolitan National Bank and the bringing of the original action by the receiver in the federal court of Pennsylvania, but alleging that the judgment herein sued on was rendered by that court upon a cognovit note, and that no notice of the judgment was given to Westwater and no appearance made by him or by his counsel when the judgment was rendered; and still another defense was set up and also made the subject of the cross-petition. To this pleading the defendant in error filed a demurrer, which was sustained. Assignments of error are made to the rulings upon the two demurrers; and it is contended that these rulings present an important question: Whether the District Court of Pennsylvania had jurisdiction to enter the judgment sued on herein. While it does not appear that any such question was raised in the court below, we are disposed to consider the matter. It is of course a general rule that in an action to recover upon a judgment rendered by a court of another state, inquiry may be made into the jurisdiction of the court over the person of the defendant against whom the judgment was rendered; but such an inquiry involves all the usual tests for determining such jurisdiction. Chicago Life Ins. Co. v. Cherry, 244 U.S. 25, 29, 37 Sup.Ct. 492, 61 L.Ed. 966. Here Westwater was already a party to the suit in which the judgment was rendered. He had become a party to that suit upon service of summons accepted for him by the same attorney who accepted service of notice of the fact that in that suit a petition had been presented to the court praying for approval of the compromise agreement and for judgment on the note given by Westwater to carry out such compromise and settlement, as already stated; he had empowered any attorney and of course his own attorney to appear for him and to confess judgment against him on the note, and this seemingly was done to put an end to the suit which had been tried four times-- twice in the court of first instance and twice in the Circuit Court of Appeals. It is said, however, that the ultimate action so taken was in violation of the compromise agreement. The agreement in substance gave to the receiver the right of election, in effect an option, to treat the compromise agreement as null and void and to forfeit the first payment made under it in case Westwater failed to meet both the payments called for, and then to prosecute the original suit to final judgment. True, in case both payments were made the receiver was required to apply to the court for ratification and approval of the agreement and, if approved, to have the case marked 'Settled and discontinued,' or, if not approved, to refund any money paid; but there was nothing in terms to prevent him from taking the course here complained of. Surely it was not to violate any provision of the agreement to apply for its ratification and approval upon Westwater's failure to pay the note for $3,000; and it was simply to surrender a privilege of the receiver when he chose to waive forfeiture of Westwater's payment of $1,500 and to rely on the enforcement of the unpaid note; in other words, instead of resuming the litigation upon the old note for $37,500, the receiver sought the court's approval of the compromise and settlement of the suit and the enforcement of Westwater's promise to pay the $3,000. Stated in still another way, the receiver had the right under the compromise agreement either to treat it as void or to enforce its performance; no other inference can fairly be drawn from the right of election vested in the receiver by the agreement. Further, it is not alleged or claimed that Westwater ever revoked the power he had given to his attorney, as well as any other attorney, to appear for him and confess judgment upon the note; and it is not perceived how Westwater can question the course in fact taken by the attorney any more than he could be heard to say that the attorney exceeded his power in accepting service of summons in the original suit. Still further, the court's approval of the compromise agreement and allowance of the judgment entered in pursuance of it would seem to have been a proper step in the original suit and, sanctioned as it seems to have been by Westwater's attorney in that suit, was a proceeding of which Westwater cannot rightfully complain. Eden v. Naish, 7 Ch.D. 781, 782, 786; Ward v. Wilson, 92 Tex. 22, 27, 45 S.W. 8; Smythe v. Smythe, 18 Q.B.D. 544, 546. The objection then to the jurisdiction of the District Court of Pennsylvania must fail.

2. Another objection is urged under one of the assignments of error concerning a matter which does not appear to have been presented in the court below, and as to which no exception was specifically reserved. It is contended that the provision made in the cognovit note for allowance of an attorney's fee is contrary to public policy and void. As respects the state of Ohio, this would be true if the note had been purely an Ohio contract (Miller v. Kyle, 85 Ohio St. 186 192, 97 N.E. 372, and citations); but it will be recalled that the note was executed and made payable at Pittsburg, and so was exclusively a...