Wheeler v. Sweet.

A judgment against a sheriff by collusion is not conclusive, in a suit upon an indemnity bond, of the liability of the indemnitors.

APPEAL from judgment of the General

The defendants received no

290; M. E. R. Co. v. M. R. Co., 14 Abb. (N. C.) 103; Webster v. Reid, 11 How. (U. S.) 437; Gaines v. Relf, 12 id. 539; Moses v. McDivitt 88 N. Y. 62; Coleman v. Burr, 93 id. 17; RobTerm of the Superior Court of Buffalo, executing the bond executed by them, and It consideration for entered upon an order made the second Mon- having been executed over a year after the sherday of October, 1891, which affirmed a judg-iff had levied on the property in question and ment in favor of defendants, entered upon a sold it, and over a year after the sheriff had been indemnified by other parties for so doing, verdict and affirmed an order denying a mo- and over a year after the sheriff had been sued tion for a new trial. by the Wheelers for this property, the lack of defendants on this bond is fatal to this action. consideration to support the undertaking of the Vanderbilt v. Schreyer, 91 N. Y. 392; Ayres v. C. R. I. & P. R. Co., 52 Iowa, 478; Webber v. 48 N. Y. 360; Morton v. Campbell, 14 Abb. Pr. Blunt, 19 Wend. 188; Richardson v. Crandall, 414; Tolles v. Adee, 84 N. Y. 222; 91 id. 562. the Jury as to the law bearing upon collusive The court fairly and fully charged [*438 judgments, and as to the facts of the Caldwell v. N. J. S. Co., 47 N. Y. 282; Lesee v. Buchanan, 51 id. 492; Bank v. Westcott, 118 id. 473; Loeb v. Kellman, 83 id. 601.

case.

This action was brought by plaintiffs as assignees of an indemnity bond given by defendants to William W. Lawson, as sheriff of Erie county, by its terms indemnifying him against any judgment obtained against him for levying upon and selling property under execution against one Edson D. Shoemaker, issued upon a judgment recovered against him by the Third National Bank of Buffalo. Plaintiffs claim under a chattel mortgage executed to them by Shoemaker. They obtained a judgment in an action for and the order refusing to grant a new trial Andrews, Ch. J. We think the judgment conversion against Lawson and his adminis-must be reversed for the reason that the trial trator. The bond in suit was thereupon as-judge, on the return of the jury into court signed to them by said administrator.

The further material facts are stated in the opinion.

Spencer Clinton, for appellants:

There was no evidence that this judgment was recovered by fraud. People v. Cook, 8 N. Y. 51: 1 Story's Eq. Juris. § 180; Verplanck v. Van Buren, 76 N. Y. 247; Ross v. Wood, 75 id. 8; Ward v. Town of Southfield. 102 id. 287. The court erred in instructing the jury erroneously in the absence of counsel for the partles. W. B. & L. Co. v. Mix, 51 N. Y. 558.

This case was tried by the judge upon a the ory incompatible with any known rule of law. It was that a judgment regularly obtained after a full and fair trial between the original parties might be set aside by a jury. If a series of acts, innocent in their nature and not effective as a means of fraud, should be by them adJudged to indicate that the parties had made a fraudulent compact to procure the judgment. Schultz v. Hoagland, 85 N. Y. 464; Bernheimer

v. Rindskopf, 116 id. 428.

*437] ents:

the absence of the plaintiffs and their coun-
for further instructions, erroneously and in
sel instructed them that the question as to
the validity of the chattel mortgage under
which the plaintiffs claimed title to the prop-
erty taken by the sheriff on the execution in
favor of the Third National Bank was not
material for their consideration in the dis-
position of the case. It obviously was a fact
of great importance as bearing upon the de-
fense that the judgment obtained by the
the administrator of the sheriff, was collu-
plaintiffs in the action against Bartholmy,
sive and fraudulent.

for the defendants, on the argument, that
It was properly conceded by the counsel
this instruction was erroneous.
urged that, in the absence of an exception,
But it was
the error was not available for the reversal
of the judgment. In the case of Watertown
Bank & Loan Co. v. Mix, 51 N. Y. 558, it ap-

*Adelbert Moot, for respond-peared that the judge, after the jury had

The Judgment relled on by plaintiffs as a breach of defendants' bond, being founded on consent, where there was no legal liability, is not a breach of defendants' bond, and the plaintiffs cannot recover in this action. Ackin, 20 Wend. 605 Thompson v. Van VechPeck v. ten, 27 N. Y. 568; Stewart v. Beale, 7 Hun, 416; Dutcher v. Swartwood, 15 ld. 33; Stim son v. Wrigley. 86 N. Y. 332; Mandeville v. Avery, 124 id. 376. Allen, the general assignee, having recovered a judgment against Lawson for the conversion of the identical property the plaintiffs claimed under possession based on a vold mortgage, or possession which plaintiffs claim was given them by Allen, as assignee, plaintiffs could not buy this Allen judgment and then recover another Judgment against the sheriff for the same sale of the same goods, but the Allen judgment is a bar to any subsequent judgment in favor of the plaintiffs. Mandeville v. Avery, 124 N. Y. 382; Wheeler v. Lawson, 103 id. 40: Merritt v. Lyon, 3 Barb. 110; Demick v. Chapman, 11 Johns. 132; Hurd v. West, 7 Cow. 752.

been charged and had retired for consultation, returned an answer in writing to a written inquiry by the jury upon a material point, prejudicial to the plaintiff, and without the knowledge or consent of the plaintiff, or of its counsel. Subsequently, the plaintiff moved the judge at Special Term to set aside the verdict and grant a new trial for this error, which motion was granted. The defendant appealed to the General Term from the order of the Special Term, setting aside the verdict and granting a new trial, and the order was there reversed. The plaintiff thereupon appealed to this court from the order of reversal, and this court reversed the order of the General Term and affirmed the order of the Special Term, and upon the point of jurisdiction *determined that the[*439 order was appealable to this court on the ground that it affected a substantial right in

The judgment in question is no breach of de-a matter not resting in discretion. The opinfendants bond, because it is a collusive Judg. ion of Johnson, J., contains a clear and satment. Code Civ. Pro. § 765: Mandeville v. Reynolds, 68 N. Y. 528; i Black on Judgments, isfactory statement of the reasons upon

Wheeler v. Sweet.

which the court proceeded, and we entertain the orders made in such cases are regarded no doubt of the soundness of the conclusion as discretionary, and as not presenting reached. This case is decisive of the present strictly legal questions. Williams v. Montappeal upon the point taken, unless a distinc-gomery, 60 N. Y. 648; Livermore v. Baintion arises upon the form in which the ques- bridge, 56 N. Y. 72; Gale v. N. Y. C., etc., R. tion is presented. In the present case, a mo- R., 76 id. 594; Howell v. Mills, 53 id. 322. tion for a new trial was made before judg ment upon a case and exceptions, in which the proceeding in question was set out in full. What particular grounds were urged in support of the motion do not appear. An order was made denying the motion, and on judgment being entered on the verdict, the plaintiffs appealed both from the judgment and order to the General Term of the Superior Court of Buffalo, in which court the action was brought. The General Term affirmed the judgment and order and the appeal here is from both the judgment and order of affirmance.

The only question on the merits presented by this record of which we can take notice, aside from the one just considered, relates to the defense that the judgment obtained by the plaintiffs against Bartholmy, the administrator of Lawson, the sheriff, was collusive. The other defenses relied upon at the trial were either overruled by the court or were not considered, and we cannot consider them for the purpose of sustaining the judgment of the respondents. On the new trial these defenses will be open for litigation and may then be determined. The judgment recovered January 8, 1889, by the plaintiffs We are of the opinion the question may be against Bartholmy, Admr. of Lawson, was reviewed here either upon the appeal from relied upon by the plaintiffs in the complaint the order refusing to grant a new trial un- and on the trial as concluding the defendants der subdivision 2 of section 190 of the Code as to the existence and extent of their liaof Civil Procedure, or upon the appeal from bility on their bond of indemnity to the the judgment. We perceive no substantial sheriff. The bond bound them to indemnify distinction as to the appealability of the or- the sheriff against any judgment which der between the case cited and the case in 51 might be obtained against him by reason of N. Y. The fact that the motion in that case his levying upon and selling *the[*441 was confined to the specific ground of error property under the executions in favor of the of the trial judge in the particular matter, Third National Bank. The recovery of a makes no difference in principle. The same judgment against the sheriff by the plainquestion with others was presented upon the tiffs, for taking and selling the property case and exceptions, upon which the motion levied upon, obtained in due course, and for a new trial in this case was made, and it without fraud or collusion, would fix the liamust be assumed that it was passed upon by bility of the indemnitors, because by their the judge in denying the motion. But in- contract they made themselves privy to any dependently of the order we are of the opin-action brought against the sheriff for that ion that an appeal from the judgment pre-cause, although they were not parties in fact sents a reviewable question in this court, to the litigation, and even although they had founded upon the erroneous proceedings of the trial judge. There can be no doubt that the judge in assuming to further instruct the jury in the absence of the plaintiffs and their counsel, in a matter material to and adverse to their interests and plainly erroneous and *440] prejudicial, committed an *error of law. The proceeding appears upon the face of the record. It was a matter occurring in the course of the trial. The plaintiffs had no opportunity to interpose a formal exception. Under such circumstances we think the party injured may on appeal from the judgment raise the question, as though a formal exception had been interposed. The protection of an important right requires that the court in the interest of justice should take notice of the error. The cases in which it has been held that relief against the misconduct of jurors, or referees, or parties not appearing upon the record, in matters arising in pais and presented by affidavits, must be applied for and obtained in the court of original jurisdiction, and that orders made in such cases are not reviewable here, depend upon different considerations. The nature and extent of the misconduct, and how far it affected the proceedings, is examined by the court in which it occurred, and

no notice of the action, and on the recovery of the judgment they would become immediately liable to the sheriff on the bond for the amount of the judgment so recovered before satisfaction. Gilbert v. Wiman, 1 N. Y. 550, 49 Am. Dec. 359, and cases cited; Douglass v. Howland, 24 Wend. 53; Casoni v. Jerome, 58 N. Y. 315. The plaintiffs here, as assignees of the bond, stand in the place, and upon the right of the sheriff. Whatever defense the defendants would have had if the sheriff or his administrator had retained and sued upon the bond they have against the plaintiffs, who have merely succeeded to his right. If the judgment obtained by the plaintiffs against Bartholmy as administrator, would not have bound the indemnitors, if the action had been brought by the administrator, it does not bind them in the present action. It was an implied condition of this bond that the sheriff should act in good faith, and not permit or suffer a collusive judgment to be obtained against him, with a view to bring upon the indemnitors a liability within the words of the bond, when there was no rightful claim made against him, or any claim which would stand against an honest defense.

The only judgment to which the defense of

Wheeler v. Sweet-Madison Square Bank v. Pierce.

collusion properly relates, is the judgment of January 8, 1889. The prior judgment of January 3, 1888, was vacated before the commencement of the action. The circumstances connected with the obtaining of that judgment are unimportant, except so far as they tend to throw light upon the motives of the parties to the judgment of January 8, 1889. In other words, if the former judgment was collusive or fraudulent, that of itself does not affect the subsequent judgment and *442] make that collusive *also. The facts in respect to the prior judgment may give significance to the acts and transactions resulting in the later judgment, and only such prior facts as were relevant for this purpose were admissible. We express no opinion as to the alleged fraud or collusion in procuring the judgment of January 8, 1889, or in respect to the subsequent proceedings tending to prevent a review of the judgment. This will necessarily be the subject of another investigation by the court and jury.

It is claimed by the counsel for the plaintiffs that the plaintiffs were entitled to the charge requested by him, "that unless there was a good defense to the action brought by the plaintiffs against Lawson, the defendants were not entitled to recover." The court denied this request, but charged, in substance, that if the defense was made in good faith, and was meritorious, then if Lawson, by collusion with the plaintiffs, prevented the trial of the issues, and suffered judg ment, the judgment did not conclude or bind the indemnitors.

ity on the bond. They simply insist that a judgment so obtained does not establish a breach of the bond. It is certainly reasonable that a sheriff who has taken a bond of indemnity should not by his collusive act deprive the indemnitors of the opportunity to present, and have tried and determined in the ordinary course of judicial proceeding, his liability when sued by third persons for an act to which the indemnity extends, and where the sheriff intentionally and in bad faith prevents the indemnitors from presenting a defense interposed in good faith, and which is not frivolous, we are of opinion that he cannot afterwards avail himself of a judgment obtained in that action, as a ground of recovery on the bond. The law is extremely jealous of the rights of all who are not parties to an action, where it is sought to bind them by the judgment therein. Cowen, J., Douglas v. Howland, supra. The proper time to try the question of the sheriff's liability is in the action brought against him. The investigation of the question collaterally in an action on the bond would be attended with difficulties. We think good faith and fair dealing require that a sheriff, if requested, should give the indemnitors a right to present any defense in the action against the sheriff, and that if this is refused or prevented by his act, he cannot say that the indemnitors have not been injured or that the judgment determines their liability.

The judgment should be reversed and a new trial granted, with costs to abide the

event.

All concur.

Judgment reversed.

stinguishing Williams v. Montgomery, 60 NY. 648; Livermore v. Bainbridge, 56 N. Y. Y. 594; Howell v. Mills, 53 N. Y. 322. 72: Gale v. New York C. & H. R. R. Co. 76 N.

Cited, upon the question of communications between the Judge and jury, Kehrley v. Shafer,

92 Hun, 198.

Distinguished in Jung v. Keuffel, 144 N. Y.

381.

*MADISON SQUARE BANK v.[*444 PIERCE.

(Aff'g 62 Hun, 493.)

Bills and notes-amount of recovery.

It is to be observed that this action is not brought to set aside the judgment against the estate of Lawson. The validity of that judgment between the parties to it is not assailed. The indemnitors had been permitted by the sheriff to defend the action brought by the plaintiffs against him, and their attorneys had interposed several defenses, and the questions were stoutly litigated before the referee, and although judgment passed for the plaintiffs, an appeal was taken by the indemnitors in the name of the sheriff. The questions raised by the defenses were not frivolous. While the matter was in this situation, by arrangement between the plaintiffs and Bartholmy, the administrator of Lawson, the judgment of February 3, 1888, was vacated, a new attorney was appointed by Bartholmy, the case was referred to the same referee to hear and determine the case An indorsee of a promissory note given and transferred for value may recover the whole on the evidence taken on the former trial, such amount has been paid by the receiver in amount from the maker, although a portion of and a new report and judgment entered for insolvency of the indorser, and hold the judg the plaintiffs. The vacation of the judgment pro tanto as trustee for the indorser, since ment and all the subsequent proceedings reupon the merger of the note in judgment the ferred to, took place on one day, January 8, ment or against its proceeds, and such judg indorser can only proceed through the judg 1889. It is doubtless true that it is the gen- the note utterly. ment and payment thereunder will discharge *443]eral rule that *acts which work a discharge of a surety must be legally injurious or inconsistent with his legal rights. Clark APPEAL from judgment of the General v. Sickler, 64 N. Y. 231, 21 Am. Rep. 606. judicial department, entered upon an order Term of the Supreme Court in the first But here the indemnitors do not rely upon made December 31, 1891, which affirmed a the acts relating to the manner of obtaining judgment in favor of plaintiff entered upon the judgment, as a discharge of their liabil-a decision of the court on trial at Circuit.

Madison Square Bank v. Pierce.

This was an action upon a promissory ly warrants their conclusion. The question does not seem ever before to have arisen in this country, and we are left at liberty to examine the English rule, and to follow it or not as we approve or disapprove its logic and its consequences.

Madison Square Bank v. Pierce.

and, striking off the indorsements of Taylor *I think this result is clearly indi-[*449 and Barnett, transferred the bill to Callow, cated by our own decisions. In Mechanic's who sued the acceptor upon it. The latter Bank v. Hazard, 13 John. 353, the maker of claimed that the bill was paid and extin- the note had been arrested in an action upon guished, which the court denied, saying that it and his bail sought to relieve themselves the drawer "became the purchaser of the by force of a payment made by the indorser bill" when he paid and took it up out of to the holder, but such effect was denied to Barnett's hands; that it was not paid by the it; the court saying that it was not a paydrawer, animo solvendi, in order to extin- ment by or on behalf of the maker, or of guish it, but only to redeem himself from which he or his bail could avail themselves. the situation in which he stood. That must And in Guernsey v. Burns, 25 Wend. 411, always be true of payment by indorser to where the suit was by the holder, representholder, where the maker is the ultimate debt-ing the legal title and interest, it was said to or. To the extent of the money paid, the indorser becomes equitably entitled to be substituted to the rights and remedies of the *448] holder, and becomes, pro tanto, the beneficial owner of the debt; so that the maker's obligation to pay the note in full, at first due to the holder solely in his own right, becomes, after the part payment by the indorser, still wholly due to the holder, but partly in his own right and partly as trustee for the indorser. A court of law cannot split the note into parts, and must act upon the legal interest and ownership.

be no defense to the maker and no concern of his that some property in the note was in another.

It thus becomes apparent that there is no very great importance in the question which method of securing payment from the maker is adopted since the same result follows from each, and that it narrows down to the inquiry whether, as matter of correct doctrine and of convenience in practice, the holder may recover the whole debt against maker or acceptor for himself and as trustee for the indorser to the extent of his acquired interest; or whether he shall take judgment only for the balance, leaving the indorser to sue in some way and on some theory, which apparently could not be upon the note because already merged in the judgment, but might be for money paid for the use of the maker since he gets the benefit of it in the reduc tion of the judgment, as was held in Pownal v. Ferrand, 6 B. & Cress. 439, where the holder deducted the indorser's payment from the levy against the maker. The former seems to me to be the logical and convenient method and so I think we should follow the English doctrine.

In the present case there was no privity between maker and indorser as it respects the action of the latter. He paid, not as the agent of the maker, not at his request, not for his benefit, and under no duty to relieve him, but independently, upon his own obligation, to lessen his own responsibility, and not at all to discharge the ultimate debt which it was the maker's duty to pay. It seems very clear, therefore, that the maker cannot utilize for his own benefit a payment which, as to him, is not a payment upon the debt. It becomes as I have said, merely a question to whom he shall pay, and who may sue for and collect the whole unpaid sum. I have not underrated the assault made In that question the maker has no concern upon it by the appellant. He asserts that beyond the inquiry whether he may become Jones v. Broadhurst is contrary to the earliable to different persons for the same debt lier cases and has been criticised and shaken and encounter the danger of paying it twice. by the later ones. I have examined them I can discover no such peril. The judgment all, with some wonder at the amount of in favor of the holder is a bar to any other learning and ingenuity expended upon the suit on the same note, and payment to the Walwun v. St. Quintin, 1 Bos. & P. 652; subject. Pierson v. Dunlop, Cowper, 571; holder discharges the note utterly. Ordina- Bacon v. Searles, 1 H. Bl. 88; Hemming v. rily, the indorser cannot recover except upon Brook, 1 Car. & M. 57; Randall v. Moon, 12 the note and as holder and in accordance C. B. 261; Cook v. Lister, 13 C. B. N. S. 543; with the law merchant. If he ever has any Solomon v. Davis, 1 *Cababe & Ellis. [*450 other right of action against the maker, it 83; Thornton v. Maynard, 10 Com. Pl. L. R. is either in equity or by force of some facts 695. The prior cases were very fully and beyond the mere relation established by the carefully reviewed by Baron Cresswell in the paper. And where the note is merged in the opinion rendered in Jones v. Broadhurst, and holder's judgment or paid in full to him by of the subsequent cases I deem it only necesthe maker, the indorser's only right is sary to say that, along with some criticism through the judgment or against the pro-and occasional doubt, the doctrine has receeds, if he has made a partial payment to mained substantially unshaken, and the case the holder. That does the indorser no last cited was declared by Lord Coleridge to wrong. If he is not content that the holder be the accepted law. shall collect to some extent as his trustee, he may prevent it by payment in full to the holder and so entitle himself to the possession of the note on which to sue, or if judgment has been obtained, to be subrogated to all of the rights of the plaintiff therein.

It must not be forgotten, however, and I may prudently repeat, that the doctrine has no application to accommodation paper, and rests wholly upon the actual and ultimate indebtedness of maker or acceptor as the party who ought to pay. In such a case as