Sessions v. Johnson, 95 U.S. 347

Session s v . Johnso n .

On April 5, 1870, A., in order to secure B. as his indorser, made a mortgage of certain property. This mortgage the latter, on the thirteenth of that month, assigned to C., to secure a debt due him. Oct. 4, A. made a second mortgage of the same and additional property to D. for $4,000, which sum D. paid to B. as the agent of A.; whereupon B. paid certain notes of A. upon which he as well as D. was liable as indorser. On the 12th of October, A. sold the entire property covered by both mortgages to E. for $6,000, and received the latter’s notes in payment. Of them, $2,444.40 was delivered to C., and $3,555.60 to D., who thereupon released their respective mortgages. Proceedings in bankruptcy were commenced against A. Nov. 2,1870, and he was duly adjudicated a bankrupt. His assignees then sued D. for the value of the property covered by his mortgage, and obtained, by a compromise, a judgment for $4,000, which he satisfied. They subsequently sued him for the amount paid on the said notes whereon he was liable as indorser. This suit was compromised by his paying $2,000. The assignees thereupon released all claims and demands against him, and brought the present action to recover from C., who was not a creditor of A., the $2,444.40, on the ground that it was, in fraud of the Bankrupt Act, and within six months before the filing of the petition in bankruptcy, paid to him to secure him as indorser for B., he having reasonable cause for believing A. to be insolvent, and that he thereby prevented the property from coming to the assignees for distribution, and sought to impede the operation and evade the provisions of that act. Held, 1. That it was incumbent upon C. to show that B. took up the notes to secure the payment of which the mortgage to the latter had been executed. 2. That, in the absence of such proof, the amount received by C. was clearly a preference by way of indemnity. 3. That the action was not barred by the satisfaction of the judgment against D. 4. That the court having charged that, if the assignees had received from D. full satisfaction for the proceeds of the sale, there could be no recovery in this action, the verdict in favor of the assignees is upon that point conclusive against C. 5. That the inquiry whether C. had paid any thing for A. was properly submitted to the jury.

Err or to the Circuit Court of the United States for the District of Massachusetts.

The facts are fully stated, and the assignment of errors is set forth in the opinion of the court.

Benjamin F. Butler for the plaintiff in error.

Mr. George W. Morse and Mr. R. M. Morse, Jr., contra.

Judgment in such a case is a bar to a subsequent action against the other joint contractor, because, the contract being merely joint, there can be but one recovery; and consequently the plaintiff, if he proceeds against one only of two joint promisors, loses his security against the other, the rule being that by the recovery of the judgment the contract is merged and a higher security substituted for the debt. Robertson v. Smith, 18 Johns. (N. Y.) 477 ; Ward v. Johnson, 13 Mass. 149; Cowley v. Patch, 120 id. 138 ; Mason v. Eldred et al., 6 Wall. 231.

But the rule is otherwise where the contract or obligation is joint and several, to the extent that the promisee or obligee may elect to sue the promisors or obligors jointly or severally: but even in that case the rule is subject to the limitation, that, if the plaintiff obtains a joint judgment, he cannot afterwards sue them separately, for the reason that the contract or bond is merged in the judgment; nor can he maintain a joint action after he has recovered judgment against one of the parties in a separate action, as the prior judgment is a waiver of his right to pursue a joint remedy.

Different modifications of the rule also arise where the controversy grows out of the tortious acts of the defendants. Where a trespass is committed by several persons, the party injured may sue any or all of the wrong-doers, but he can have but one satisfaction for the same injury, any more than in an action of assumpsit for a breach of contract.

Courts everywhere in this country agree that the injure party in such a case may proceed against all the wrong-doers jointly, or he may sue them all or any one of them separate y» but if he sues them all jointly, and has judgment, he canno afterwards sue any one of them separately; or, if he sues any one of them separately, and has judgment, he cannot afterwar s seek his remedy in a joint action, because the prior ju against one is, in contemplation of law, an election on his par pursue his several remedy. • • 4 r

Sufficient appears to show that the bankrupts, Kane, Sprague, & Co., on April 5, 1870, mortgaged their stock, tools, fixtures, and machinery to W. W. Sprague, to secure him as their indorser ; that the mortgagee, on the 13th of the same month, assigned the mortgage to the defendant below as security for a debt due from the mortgagee to the assignee of the mortgage. On the 4th of October following, the bankrupts made a second mortgage, including the property described in the first mortgage, together with other property, to E. A. Goodnow, for $4,000, which sum the mortgagee paid to the mortgagee of the first mortgage, as the agent of the bankrupts, and which he, the agent, used in part to pay three notes given by the bankrupts, upon which the mortgagees in both mortgages were indorsers. Eight days later, the bankrupts sold to Nichols and Johnson the whole property covered by the mortgages, and received in payment their notes and those of Henry W. Snow, to the amount of $6,000, which they divided as follows : $2,444.40 to the assignee of the first mortgagee, and $3,555.60 to the second mortgagee, who thereupon released their respective mortgages.

ankruptcy proceedings against the mortgagors in the two mortgages were commenced on the 2d of November in the same year, and the plaintiffs were duly appointed assignees of the ankrupts estate. Subsequently they sued the mortgagee in t e second mortgage to recover the value of the property covere by his mortgage; and judgment was, by agreement, entered m t eir favor for $4,000, interest and costs, and the evidence s ows that the judgment was satisfied by the judgment debtor.

ey, the assignees, also brought another suit against the same P^^y to recover for the preference he obtained when the agent fend6 ^a.n^ruP^s Pa^ three of their notes upon which the detl d t ^a8t"named suit was indorser, which suit was setagg. th® payment of $2,000 and a release given by the

^gnees of all their claims against the defendant in that suit.

Service was made; and the defendants appeared and pleaded the general issue, and that the plaintiffs previously recovered judgment against E. A. Goodnow for the value of the same property, and that the said judgment has been fully paid and satisfied.

Issue being thus raised, the parties went to trial; and the verdict and judgment were for the plaintiffs in the sum of 82,786.56 and costs of suit. Exceptions were filed by the defendant; and he removed the cause into the Circuit Court, where the parties were again heard, and the Circuit Court affirmed the judgment, and the defendant removed the cause into this court.

Separate mortgages were held by the defendant and the other mortgagee, of different dates, and it appears that they were given for entirely different considerations. Of course, the respective mortgagees held the property subject to an equity of redemption in the mortgagors; and the case shows that the mortgagors sold the respective equities of redemption, and distributed the proceeds of the sale between the respective mortgagees. Throughout, the relations of the mortgagees to the insolvent debtors were entirely separate. They never held any joint claim against the insolvent mortgagors, nor did the mortgagees ever receive any joint security from the insolvent debtors for their separate claims. Instead of that, the respective equities of redemption remained in the mortgagors, and the conceded facts show that they sold the equities and distributed the proceeds between the respective mortgagees, showing to a emonstration that there never was any joint contract relation between the mortgagees and the insolvent debtors.

Even the proceeds of the sale of the equities of redemption, as istributed between the respective mortgagees, were entirely separate; nor would it make any difference if the mortgagees, in receiving their respective portions of those proceeds, had acted jointly, as it is well-settled law that where the tort is joint the injured party may have a joint or several remedy, the rule being that a judgment- against one wrong-doer without satisfac]on is no bar to an action against any one of the other joint easors. Lovejoy v. Murray, supra.

Without more, these remarks are sufficient to show that the theory of estoppel cannot be maintained, and that the first two errors assigned must be overruled, for two reasons: 1. Because the relation of joint contractors never subsisted between the insolvent debtors and the mortgagees, to whom the proceeds of the equities of redemption were distributed by the insolvent mortgagors. 2. Because the mortgagees, acted separately in accepting certain portions of the proceeds of that sale; nor would it have made any difference if they had acted jointly, as it is settled by all the authorities that when several persons have been jointly concerned in the commission of a wrongful act they may all be charged jointly as principals, or the plaintiff may sue any one of the parties separately, torts being in their nature several, even when the wrongful act was jointly committed. Ad. Torts (3d ed.), 939.

Suppose that is so, still it is insisted by the defendant that the plaintiff cannot, in any proper view of the facts, recover more than the difference between the amount paid by the other mortgagee and the value of the property distributed. What the plaintiffs claim is the amount the defendant received from the insolvent debtors as part of the proceeds of the sale of the equities of redemption. Abundant proof is exhibited that he received $2,444.40, and it is conceded that the whole of that amount remains in the hands of the defendant.

Two sums, amounting in the whole to $6,000, were receive by the plaintiffs of the second mortgagee before the presen suit was instituted. $4,000 of the amount was recovered by judgment in favor of the plaintiffs. They also instituted a second suit against the same party, to recover the amoun re ceived by him in payment of the notes upon which he was i ble as indorser ; which action was compromised by the paym to the assignees of $2,000, as appears by the agreed state ment of facts. Such payment being made, the assignees ex^ cuted a release to the defendant in that suit of all claims a demands which they, as such assignees, had against im 0 that account.

Judgments bind parties and privies, but they do not bind strangers; and it is clear that the present defendant was neither a party nor privy to the action in the first suit, nor had he any thing to do with the compromise of the second suit between those parties.

Enough appears in the evidence to establish that theory ; but if any possible doubt could otherwise arise in respect to the conclusion, the matter is set entirely at rest by the verdict of the jury. They were told by the court that if the plaintiffs had once received full satisfaction for the proceeds of the sale from the other mortgagee, “ then they can recover nothing from the defendant; ” and it follows from the verdict that they did not recover in the suits against the other mortgagee any thing for the portion of notes taken for the sale of the equities which was distributed to the defendant in the present suit. All that he received remains in his hands; and inasmuch as the assignees are not estopped by the proceedings against the second mortgagee from prosecuting their claim against the defendant for the portion of the proceeds of the equities of redemption which was distributed to him by the insolvent debtors, it folows that the assignee may recover the whole amount of that portion without regard to the antecedent proceedings against the second mortgagee, which is all that need be said in response to the third assignment of error.

oth parties agree that the first mortgagee was not a creditor of the mortgagors, and that the mortgage was given merely secure future advances or future liabilities to be incurred by m orsing the paper of the mortgagors. Nothing had been paid y t e mortgagee; but the defendant insists that the portion of e notes distributed to him cannot be recovered back if any ^standing undischarged contingent liability of the kind re-

inT^76 d°U^s whether that proposition is well founded de f°r reasons : 1« Because it was the equities of reren $ mortgagors sold, and the notes distributed distin d Procee<^s that sale. 2. Because it does not the^ any suc^ contingent liability remained

bill of exceptions does not show that the district judge gave any instruction contrary to that construction of the mortgage to the defendant, nor does the record show what, if any, instructions he gave in that regard. Unsustained by the record, as the fourth assignment of error is, it must be overruled aa inapplicable to the questions presented for decision.

Evidence to show that the defendant had paid any paper which he had indorsed for the insolvent debtors, so far as appears, was entirely wanting; nor does the transcript show that any was introduced to prove that any indorsement made by the defendant was outstanding and undischarged. Assume the facts to be so, and it would be clear that the mortgage could not avail the defendant as a defence to the claim .of the assignees ; and it is equally clear, that, if there were no such outstanding indorsements, then it was important for the defendant to prove that he had advanced moneys to discharge such liability.

Viewed in that light, it is impossible to sustain the fifth assignment of error, for the reason that it is shown that the inquiry whether the defendant had made any payment for the insolvent debtors was an important inquiry, and one that was properly submitted to the jury. Proper instructions, it must be assumed, were given to the jury in respect to all the issues in the case not made the subject of complaint in the bill of exceptions, and that all questions involved in the pleadings, except those presented by the assignment of errors, are correctly settled by the verdict, from which it follows that there is no error in the record. Judgment affirmed.

Coch ran e v . Deener .

The court declines to vacate its decree rendered at the last term in Cochrane v. Deener, 94 U. S. 780, but holds that third parties, whose interests are opposed to the Cochrane patents which were in controversy in that suit, should not be concluded from having a further hearing upon them whenever a future case may be presented here for consideration.

Motion to set aside the decree rendered at the last term in Cochrane v. Deener, 94 U. S. 780, and to dismiss the appeal.

Mr. George Harding in support of the motion.

Mr . Justi ce Bradley delivered the opinion of the court.

After a careful examination of the evidence adduced on the motion to vacate the decree in this case, we see no ground to believe that the appellants are chargeable with any collusion with the appellees in reference to the argument of the appeal. On the contrary, the weight of the evidence is, that they repelled any arrangement or proposition which might look to that end. Whilst we would not hesitate to set aside a decree collusively obtained, the proof ought to be very clear to induce us to do this at the instance of strangers to the suit, though incidentally affected by the decision of the questions involved.

At the same time, as the decision in this case is made the basis o applications for injunctions against third parties in the Circuit ourt, it is right that we should say, that, in the argument of t e appeal before us, the case on the part of the appellees was, as it seemed to us, very imperfectly presented; and the evience laid before us on this motion demonstrates the fact that e appellees, in consequence of the conditional arrangement the appellants, which they secured before the argument as ad, or for some other cause, omitted to prosecute their ence with that degree of zeal and efficiency which the imP ance of the case would otherwise have demanded. The look W,aS5 ^a^Or cour^ and its liability to over-As th*011^ and imPortance, were greatly increased.