Noble v. Moses Bros.

SOMEBYILLE, J. — The purpose of the present bill is to vacate and set aside a judgment for something over thirteen thousand dollars rendered in the City Court of Montgomery, on March 13, 1877, against the appellant as defendant, and in favor'of the appellees, Moses Brothers; and, furthermore, to bring the appellees to account as mortgagees, and to redeem the mortgaged property. The judgment in question was confessed in open court by an attorney, on the written authority of ap — 616 — pellant, who was then unmarried and of age; the debt being evidenced by her promissory note, which was at the time secured by a mortgage on her property, and which had been put in suit by regular issue of summons and complaint. The chief point of contention relates to vacating the judgment upon the alleged ground of fraud, accident and surprise; and the case involves the consideration of the circumstances under which this particular jurisdiction of equity can be invoked. There can be no controversy as to the general rule on the subject. It is settled to be, that the fraud which is imputed to the plaintiff in the judgment, and for which alone a court of equity will intervene to vacate or enjoin, must be fraud in the rendition or procurement of the judgment itself. Crommelin v. McCauley, 67 Ala. 542. Or, as expressed by Mr. Story, “the fraud must have been practiced in the very act of obtaining the judgment” — there must be “fraud in its concoction.” — 2 Story’s Eq. Jur. § 1575. Eraud as to transactions antecedent to the judgment, such as would merely have constituted a good defense to the action, and not connected with the proceedings by which it was obtained, is deemed insufficient. Freeman on Judgments, §§ 489-490; Story’s Eq. Jur. § 1574. The nature of the fraud, too, must be such as is utterly re-, pngnant to honest intentions. It must, in a sense, be shown to be actual and positive. To this end, there must exist the malus animus, “■ putting itself in motion, and acting in order to take an undue advantage, for the purpose of actually and knowingly committing a fraud.” — Kerr on Fraud and Mistake, 353. When this is clearly established by proper proof, as said in a former decision of this court, “it is honorable to our system of equity jurisprudence, that such infection of fraud' is made to vitiate every transaction, and the solemn judgments of courts are no exception to the salutary rule.” — Crommelin v. McCauley, 67 Ala. 547, supra. . If there be no fraud in the act of obtaining or procuring the judgment, and equitable relief be sought against the judgment on a ground which went to the merits, of the original suit at law, and which would have been available in that forum, the complainant is required, as a condition precedent to relief, to prove, as well as aver, three things: first, that he has a good and meritorious defense to the cause of action, or so much of it as he proposes to litigate; second, that his failure to defend at law was not attributable to his own omission, fault, or neglect; and, third, that it was attributable to fraud, surprise, accident, or some act of his adversary, the plaintiff in the judgment. Weems v. Weems, 73 Ala. 462; Collier v. Falk, 66 Ala. 223; Freeman on Judgments, § 486; "Willard’s Eq. Jur. 161-163. There will be, in other words, no interference with the judg — 617 — ment at law, or re-ópening of the litigation involved in its rendition, unless a defense at law was prevented “ because of. accident, or the fraud or act of his adversary, unmixed with fault or negligence on his part.”— Waring v. Lewis, 53 Ala. 615; Duckworth v. Duckworth, 35 Ala. 70; 2 Story’s Equity Jur. §§ 887-8. We can not see that the testimony in the present case authorizes us to grant the complainant the relief sought, under either of the principles above stated. The chancellor refused to allow the judgment to be vacated, on either of these grounds; and in this, we think, his decree must be sustained. It may be conceded, perhaps, that the facts disclosed in the record would entitle the complainant to relief against Micou, through whose operations and agency her large indebtedness to the defendants seems to have been contracted. He ?vas the father of the complainant, and had a few years ago been her guardian. She continued to reside in his household, and her transactions with him may not improbably have been affected by the pressure of their fiduciary l-elations. Transactions between a parent and child, under such circumstances, would be scrutinized with watchful jealousy by a coux’t of equity, and would not be permitted to stand, if it appeai’ed that a naked bounty had been conferred, or a large benefit derived by the pax-ent and late guax-dian through the instrumentality of undue influence. And certainly the rule in such ca'ses is, that the failure of one holding such afiduciaiy position to xnake an honest disclosure of every matei’ial fact, affecting his contracts or dealings with his child and late ward, would authorize such tx-ansactions to be'avoided, at the option of the injured cestui que trust, if seasonably expressed. — 1 Perry on Trusts, §§ 178, 200-201; Kerr on Fraud and Mistake, 177-181; Andrews v. Jones, 10 Ala. 400. It is insisted that tlxe defendants, Moses Brothers, in whose favor the judgment in controvei'sy 'was rendered, can reap no benefit from it, because it was procured thx-ough the influence of Micou, acting upon the daughter through the pressure of their fiduciary relations, which were known to defendants, and that the feature of Micou, to disclose to her the nature and detents of the indebtedness was a fraud for which the defendants were responsible. The exact relation of Micou and his daughter, the complainant, in these various transactions, in its legal aspect, is a matter of controversy. The theory of complainant’s whole bill is that it was a mere agency, she being the principal, and conducting the entire farming operations, for her own benefit, through her father as her agent. The proof, in our judgment, fails entix’ely to sustain this view. It shows very clearly that Micou was the — 618 — chief, if not sole beneficiary of his own transactions. His assumed agency was entirely nominal, presenting only the outward form and appearance of reality. Its obvious purpose was to protect him and the fruits of his planting operations from the pursuit of creditors. He was in a state of ruinous insolvency, and this purpose of the pretended agency is not only transparent throughout the entire evidence, but was manifestly known to-the complainant herself, as disclosed in her own testimony. While for this reason the farming operations were ostensibly conducted in Micou’s name as agent, the clear design of both himself and complainant was that she would lend him the aid of her credit, which seems to have been good, but a secret trust of the profits wa$ reserved for his benefit, for the general support of the family, of which complainant was a member. It is not denied that every item constituting the judgment debt was a valid claim against Micou, who admits it to have been a debt, of just and honorable obligation. It is asserted, however, that more than half of the amount was incurred by Mm in farming operations carried on otherwise than in Ms capacity as “agent,” which is shown to be true, and that this fact was unknown to com plainant, either at the time she assumed to pay it, by executing her various obligations, or at the time she confessed the judgment. This is. in our opinion, entirely immaterial so far as the defendants, Moses Brothers, are concerned. As to them, it was a mere obligation on complainant’s part to stand as security for a claim due by her father, which, in the first instance, was thought by all parties concerned to have been amply secured by mortgage liens upon large crops which he contemplated raising. Though an absolute liability in form, it was in practical effect only conditional. The specific amount of the debt, too, was designated, so that she was aware of the exact liability. Though in form it was her debt, purporting to have been incurred by him as agent, it was really his debt for the extension of which she had loaned him her credit. We are unable to see that Micou’s conduct towards his daughter was characterized by any wrougful indentions. He evidently did not expect at first- even to financially involve her, but was sanguine of reaping large profits from his enterprises. Nor is he shown to have used any solicitation or undue-powers of persuasion to induce her co-operation in these enterprises. The law exacted of him, however, in view of his relations of confidence, the utmost good faith. It was not enough for him not to misrepresent, but he should have made a disclosure of every material fact, in his dealings with complainant, which would probably have affected the volition of any other adversary contracting party, dealing with him under circumstances — 619 — freed from the bias of fiduciary influences. — 1 Perry on Trusts, § 178. It was his unquestionable duty to have informed her fully of the nature of the debt for which he secured her several written obligations. It becomes important to inquire how far the defendants are chargeable with liability for this breach of legal duty on the part of Micou, which may have operated prima facie to render him a trustee, holding any of the fruits of his enterprise for the reimbursement of complainant as between themselves.. They are shown to have acted towards Micou, not only with the utmost fairness and good faith, but also with the most liberal indulgence. They knew that he had been the guardian of complainant, and that she was living with him in the same household as his daughter. They also knew that the relation of guardian and ward had ceased three or four years previous, that complainant had procured the removal of the disabilities of non-age by decree of the chancellor, that she has since attained her majority, and purported to have the full control and management of her property. It could not be considered unreasonable for them to indulge the belief that, under these circumstances, a sufficient time had elapsed for the complainant to have become measurably emancipated from all undue influences of the privious relationship, so that it would be highly meritorious and honorable for her to aid him in the support of his family, when nonther resource appears to have been left him. — Hylton v. Hylton, 2 Ves. 547; 1 Perry on Trusts, § 200. So, with a knowledge of the relation of parent and child existing between complainant and Micou, which must be admitted to be one of confidence, and often of controlling influence. Yet contracts between persons occupying this position can not be said, for this reason merely, to b & prima facie void, without some affirmative proof of undue influence.. The law recognizes the parental influence as a rightful and proper one, and it can not be presumed, in the first instance, that “a parent would make use of his authority and parental powers to coerce, deceive or defraud his child.” — 1 Perry on Trusts, § 201; Jenkins v. Rye, 12 Pet. 253. Hence, it has been adjudged, that the mere fact of a daughter, soon after coming of age, voluntarily giving securities to a creditor of her father in payment of his debts, is not of itself sufficient ground for imputing undue influence to the father. — Thomber v. Sheard, 12 Beav. 589. The defendants are shown to have had great confidence in the honesty and good faith of Micou, and seem never to have doubted the integrity of 'his purposes towards them until some four or-five years after the commencement of their dealings with him, and-several years after the creation of the judgment debt in controversy. He had been clothed by the complainant — 620 — with the power of using her credit in his farming transactions. She had repeatedly signed, in her own person, the various notes, bills of exchange, mortgages and other securities relating to this business. These papers contain numberless recitals sufficient to have excited her inquiry as to the nature of at least some of her obligations. The defendants were personally unacquainted with complainant, and had all their dealings with Micou, who was intrusted with the entire authority of management. They rendered to him full and accurate statements of the accounts between them from time to time, including the various items to which objection is taken. These accounts they had every reason to expect that Micou would exhibit to her, and in fact that he had done so, in as much as she repeatedly executed her written obligations for the balances shown against her, which were returned by Micou, as her reputed agent, to the hands of the defendants. The complainant can not be heard to assert, under these circumstances, that notice to Micou, acquired by him through the very medium of this assumed agency, was not notice to her. It is a general principle of equity, that “ wherever one of two innocent parties must suffer by the acts of a third, he who has enabled the third party to occasion the loss must sustain it.” — Taylor v. Great Indian &c. Co., 4 D. & J. 594; Allen v. Maury, 66 Ala. 10. We place no great stress upon the fact that the judgment sought to be vacated was one obtained by confession. This confession was obtained on a written power of attorney signed by complainant, and directed to her own counsel. 'It specified the exact amount for which it was to be taken, which was evidenced by complainant’s promissory note, secured by mortgage, and upon this written evidence of indebtedness a regular suit had been instituted, and would have authorized a judgment by default in favor of the payees, had there been no defense.. The putting of‘ the claim in judgment was an act of ordinary prudence under the peculiar circumstances, and in it we discern nothing pregnant with suspicion of unfairness or disbelief of its validity on the part of the claimants. It is very clear to our mind, that the evidence in this case fails to show that there was any fraud whatever on the part of Moses Brothers in procuring or obtaining the judgment, nor does their knowledge of the particular facts of which they are shown to be informed impute to them constructively any actual or positive fraud, such as would authorize the vacating of the judgmeut. They are entirely guiltless, throughout their whole dealings, so far as we can see, of any art, contrivance or device by which an unconscionable advantage has been sought to be gained by any one. Nor are they chargeable with any complicity in the alleged fraud of Micou, in concealing the nature — 621 — and character of the debt in controversy from the complainant. Moog v. Strang, 69 Ala. 98; Holt v. Agnew, 67 Ala. 360. We are equally clear in the conviction that, if the complainant had any meritorious defense in the action at law, she was prevented from making it by her own negligence, and not because of accident, or the fraud, or other act of the plaintiff in the judgment. We are not disposed to disturb the conclusions of the chancellor as to the credit of five thousand dollars ordered to be allowed on the judgment in taking the account. This amount, which was received from Lehman, Durr & Co., appears sufficiently to have been intended as an unconditional credit, and not dependent on a mere executory agreement to constitute it a payment. The instruction of the chancellor as to the matter of usury, however, we deem to be erroneous. The statute not only provides that usurious contracts “shall not be enforced, except as to the principal,” but further prescribes that “ if any interest has been paid, the same must be deducted from the principal, and judgment rendered for the balance only.” — Code, 1876, § 2092. This statutory provision does not, of course, forbid the exaction by a court of equity of lawful interest, as a condition precedent to the granting of relief to any complainant invoking its jurisdiction. Nor does it authorize the recovery of usurious interest as to contracts entirely executed by the full payment of principal and interest. But, where any portion of a debt remains unpaid, this balance may be abated by deducting from it the usurious interest. So, if such balance, remaining over from an old usurious transaction, is carried forward and incorporated as a portion of the consideration of a new obligation, the super-added part of which is free from' the taint of usury, the question of usury may be investigated as to such balance, which is alone affected by it, without imparting any taint to the super-added debt. It is manifest, and has often been decided, that the legal effect of the statute is to render such contracts void-, able merely, and not void. — Bradford v. Daniel, 65 Ala. 133. No inquiry can, of course, be made as any usurious interest which was included in the note of the complainant which was reduced to judgment. As to that transaction, the defense must be considered as waived, and such inquiry as precluded. The credit of five thousand dollars, however, which it is held that complainant was entitled to have entered on the judgment, will authorize a corresponding abatement of the credits on her other indebtedness, and therefore will result in an increase of such indebtedness in precisely the same amount. The decree of the chancellor is reversed, and the cause remanded, that'further proceedings may be had, on reference to the register, in accordance with the foregoing opinion.