Wells v. Cochran

Root, J. The defendant Cochran, an attorney at law, negotiated a real estate trade for John P. Johnson, and subsequently recovered judgment against him in justice court upon his note given for services rendered. Johnson appealed to the district court. In both courts the defendant as a defense and counterclaim pleaded that Cochran was indebted to him in the sum of |500 for money had and — 368 — received for Johnson’s nse. While this suit was pending Johnson died, and Mr. Wells, an attorney at law, the plaintiff herein, as executor of the last will and testament of the deceased, was substituted as the defendant. While Mr. Wells was trying a case in one division of the district court, Mr. Cochran appeared in the division where his suit was pending, and, in the absence of any one representing the Johnson estate, caused judgment to be entered by default upon his note. The court refused to set aside the default, and thereupon Mr. Wells, as executor, commenced an original action against Cochran to recover $500 upon the cause of action theretofore pleaded as a set-off. This case has twice appeared in this court. Wells v. Cochran, 78 Neb. 612, 84 Neb. 278. In the meantime Cochran sued Mr. Moriarty, the surety upon the undertaking given by Johnson to appeal the suit, first referred to, to the district court, and after considerable litigation recovered judgment. Mr. Moriarty was indemnified by Johnson, and if the judgment is collected the assets of the Johnson estate will be depleted to that extent. Mr. Cochran is insolvent, ■ and this action is prosecuted to restrain the collection of that judgment until the suit prosecuted by Wells shall have been determined, and for equitable relief. After issue joined, but before trial, Mr. Cochran sold and assigned the judgment to his counsel, who intervened in the action. The court dismissed the plaintiff’s petition. The plaintiff appeals. The intervener moves to quash the bill of exceptions because it was not served upon him. The bill was served upon Cochran and he made no suggestions of amendment. The intervener was not substituted for Cochran as the defendant, but the action continued in the name of the original parties according to the provisions of section 45 of the code. The interests of the defendant and the intervener are identical and service of the bill upon either, in the circumstances of this case, binds both. Crane Bros. Mfg. Co. v. Keck, 35 Neb. 683. Upon the merits the defendant contends that, since the — 369 — district court refused to grant the executor a new trial in the law action, it conclusively appears that he was negligent in not appearing for trial, and, having failed to litigate his set-off-in that action, equity should not interfere in his behalf. The principle invoked is sound, but there are exceptions to all general rules. The executor’s remedy in trying the set-off in the action at law was not complete and adequate because the case had been appealed from justice court, and the district court could not render judgment for more than $200, although the executor’s demand, after deducting the amount of the Cochran note, would exceed that sum. Notwithstanding this fact Mr. Wells was willing to submit the set-off in the action at law, but was not heard because of his adversary’s unconscionable conduct. Judge Story says, in substance, that the equities which should move a court of equity to extend the doctrine of set-off are so various “as to admit of no comprehensive enumeration.” 2 Story, Equity Jurisprudence (13th ed.) sec. 1437a. In section 885, commenting upon the right and duty of a court of equity to enjoin the enforcement of a judgment recovered in an action at law, the learned author says: “Indeed the occasions on which an injunction may be used to stay proceedings at law are almost infinite in their nature and circumstances. In general it may be stated that in all cases where by accident, or mistake, or fraud, or otherwise a party has an unfair advantage in proceedings in a court of law, which must necessarily make that court an instrument of injustice, and it is therefore against conscience that he should use that advantage, a court of equity will interfere and restrain him from using the advantage which he has thus improperly gained. * * * If any such unfair advantage has been already obtained by proceedings at law to a judgment, it will in like manner control the judgment and restore the injured party to his original rights'.” In section 886 the author says: “The injunction is not confined to any one point of the proceedings at law; but it may, upon a proper case being pre — 370 — seated to the court, be granted at any stage of the suit * * * to stay trial; sometimes after verdict to stay judgment; sometimes after judgment to stay execution.” The affidavits used on the application to set aside the default were introduced in evidence in this case by the defendant and should be considered competent against him. They show, to say the least, that Mr. 1 Veils was under the impression that the case would not bé tried until a later day; that Mr. Cochran was swift to take judgment by default against his adversary, and tenacious in resisting inquiry into a charge involving his honor and integrity as a man and as an officer of the court. We think that Mr. Cochran thereby obtained an unfair advantage, and, while that fact in itself might not justify a court of equity in interfering with the execution of the judgment, yet, when we consider that Cochran is insolvent and to permit him to collect the judgment will forever dissipate and may misapply the trust funds in the executor’s hands, notwithstanding a money judgment may be rendered against Cochran, we think a peculiar equity intervenes to justify equity in assuming jurisdiction of this case. In Thrall v. Omaha Hotel Co., 5 Neb. 295, the insolvency of a party against whom a set-off was claimed is recognized as sufficient to justify the intervention of a court of equity. See, also, Richardson v. Doty, 44 Neb. 73; Stone v. Snell, 86 Neb. 581; Frye-Bruhn Co. v. Meyer, 58 C. C. A. 529; St. Paul & Minneapolis Trust Co. v. Leck, 57 Minn. 87. In Wright v. Salisbury, 46 Mo. 26, a set-off was allowed in equity although it had been pleaded in an action at law, but not prosecuted to judgment. In Allen v. Medill & Barret, 14 Ohio 445, a creditor promised while his suit was pending to credit the defendant, with the amount of an unliquidated claim after judgment, and for that reason the defendant did not appear. The creditor was insolvent, and after judgment refused to give the credit, and the court in an action in equity, while recognizing the general rule contended for by the defendant herein, held that, — 371 — since the one party was insolvent and the other was misled by the insolvent’s dishonest conduct, it should credit the unliquidated claim upon the judgment. See, also, Kelly v. Wiard, 49 Conn. 443; Levy v. Steinbach, 43 Md. 212; McDonald v. Mackenzie, 24 Or. 573; Wood & Houston v. Steele, 65 Ala. 436. What has been said does not discredit Norwegian Plow Co. v. Bollman, 47 Neb. 186. In that case an attempt was made to impeach a judgment fairly rendered upon the merits, while in this case the plaintiff seeks to restrain the collection of a judgment unfairly procured, until he can reduce his demand to judgment and use it to pay the other, to the end that he may adequately protect the trust funds in his hands. Nor does this opinion run counter to the general statements of law found in Knox County v. Harshman, 133 U. S. 152, and relied on by the defendant. In that case the plaintiff sought to enjoin the defendant from suing out a writ of mandamus theretofore awarded by the supreme court, something no court of last resort would tolerate. The statement was evidently copied from 2 Story, Equity Jurisprudence (13th ed.) sec. 887, wherein the learned author discusses a bill of review exhibited for the purpose of securing a new trial in an action at law, and is not in point in a case involving the doctrine of equitable set-off. What has been said concerning Mr. Cochran’s liability to the Johnson estate should not be considered as an opinion that the executor should prevail in his action at law, but merely that the evidence satisfies us that the executor is prosecuting his demand in good faith and that it should be submitted to a jury. The other propositions argued in the briefs do not in our judgment control this case, and the opinion will not be extended by further reference thereto. Upon the entire record, we find that the plaintiff has made out a case for equitable relief. The judgment of the district court, therefore, is reversed and the cause remanded, with instructions to enter a judgment restraining the defendant and the intervener — 372 — from collecting the judgment against Mr. Moriarty until the litigation between the executor of the (‘state of John P. Johnson and the defendant is finally determined, and, if in consequence thereof a judgment .shall be rendered against Herman E. Cochran, that subsequently, in so far as it will apply, the judgment shall be set off against the judgments recovered by him and referred to in this opinion. Reversed.