Case ID: miss_13/html/0017-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Clayton", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JANUARY TERM, 1845.
    Simeon Stovall vs. The Northern Bank of Mississippi.
    If a bill contain an allegation of fraud, it is a general rule that such allegation must be answered, and a general demurrer cannot be allowed.
    If a wrong-doer has obtained the advantage in a court of law, by hiding the real character of the transaction, under a trustee’s name, a court of equity will not refuse to lend its aid to place the party injured in the situation he would have been provided no fraud had been committed.
    S. filed his bill for an injunction under the'following circumstances : He applied to an unincorporated banking institution to have his note discounted; McE wen, King & C^n, the bankers, agreed to do so, but required the note to be made payable at the Northern Bank of Mississippi, to which institution it was said the note was to be transferred. Suit was brought against S. on the note.in the name of the Northern Bank; to this suit S. intended to plead payment, with notice of set-off, but was prevented by accident. S., after judgment against him, applied to the Northern Bank for a settlement and allowance of his claim against the bank as a credit, and was informed by the bank, that the suit had been brought without its knowledge or consent; that it had no interest in the note, and declined all interference in the matter. S., on subsequent inquiry, ascertained that the note was the property of McEwen, King & Co., although they were not parties to the suit ; and alleges that these facts have all come to his knowledge since the rendition of the judgment at law. The bill further charged that MoE. K. & Co. were insolvent and the note was so made and the suit so brought in order to defraud S. and defeat the defence of payment and set-off. To this bill a general demurrer was sustained by the court below: Held, that the bill contained good ground for equitable relief, and must be answered.
    In error, from the circuit court of Carroll county, from the chancery side of the court.
    The plaintiff in error filed his bill in the circuit court, alleging that on the 29th of March, 1839, he executed his note for the sum of two hundred and four dollars and sixty-six cents, and delivered it to the banking-house of McEwen, King & Co., in the town of Holly Springs, in this state, for discount; that by the direction of the bankers, the note was made payable to the Northern Bank of Mississippi, to which institution they stated it was to be assigned; that McEwen, King & Co. discounted the note; upon which, after its maturity, an action was instituted against the complainant to the October term, 1839, of the Carroll circuit court; at which term a judgment was rendered against him; the action was brought in the name and for the use of the Northern Bank; that when suit was brought, he directed a plea of offset to be filed to it, the bank being indebted to him in about the sum sued for; that the witness, by whom this indebtedness could be proved, was incapacitated, by severe illness, from attendance at the court, and his attorney, supposing the defence abandoned, withdrew his plea and suffered a judgment by default; that after the adjournment' of the court, the attorney of the plaintiffs in the action at law, assuring him that the Northern Bank would settle with him as well before as after judgment, he called upon the bank, when he wds for the first time informed that the bank had no interest in the judgment ; that the note sued on did not and never had belonged to it; that the suit was prosecuted without its authority, and that McEwen', King & Co. had never .assigned the note to them; upon further inquiry he ascertained that McEwen, King & Co. were still the owners of the note and judgment, though the suit was not brought for their use; that these facts have all come to his knowledge since the judgment, and that McEwen, King & Co. are largely insolvent. The bill prayed for injunction, that it might be made perpetual, and for general relief, &c.
    To this bill the Northern Bank was the only defendant; it filed a general demurrer, which was sustained by the decree of the court below, from which decree the plaintiff in error brought the case to this court.
    
      Sheppard, for plaintiff in error,
    contended that the demurrer to the bill should have been overruled; that the allegations of the bill would warrant relief, both on the ground of fraud and facts subsequently discovered.
   Mr. Justice Clayton

delivered the opinion of the court.

This was a bill of injunction filed by the complainant under the following circumstances : He applied to an unincorporated banking institution, styled the McEwen, King & Co. Bank, to have a note discounted, which they agreed to do, but required the note to be made payable to the Northern Bank of Mississippi, to which institution, it was said, the note was to be transferred. The note was made in the required form, and the money procured. A suit was afterwards brought in the circuit court of Carroll county against Stovall, in the name of the Northern Bank. To this suit Stovall intended to interpose a plea of payment with notice of set-off, but was prevented by accidental circumstances. He afterwards, and after judgment, applied to the Northern Bank for a settlement and allowance of the claim which he had against that bank as a credit. The bank then informed him that the suit had been brought without its knowledge or consent; that it had no interest in, or claim to the note upon which the suit had been brought, and declined all interference in the matter. On subsequent inquiry he ascertained that the note was the property of McEwen, King & Co., although they are not parties to the suit; and complainant alleges that these facts have all come to his knowledge since the rendition of the judgment at law. The bill charges that McEwen, King <fc Co. are insolvent, and the note was so made and the suit so brought “ in order to defraud the complainant and defeat the defence of payment and set-off, which complainant could have sustained, if the suit had been brought for the use of McEwen, King & Co.”

To this bill a demurrer was filed, which was sustained by the court below, and the bill dismissed.

This case resembles that of Niles et al. v. Anderson et al. 5 How. 365, in this, that in each, the defendant was charged with having obtained an advantage at law through fraud. The court there held that if the bill contain an allegation of fraud, it is a general rule that such allegation must be denied by answer; because fraud gives jurisdiction to the court and lays a foundation for relief — hence a general demurrer cannot be allowed.

Relief was given in a case very similar to the one under consideration by the court of appeals of Virginia. Snyder v. Daily, 1 Rand. 76. The bill there was filed after judgment at law. The counsel for the complainant, ip that case, placed the claim for relief upon proper grounds, when he asked “if the wrong-doer has obtained the advantage in a court of law by hiding the real character of the transaction under a trustee’s name, shall a court of equity refuse its aid, in vacating the contract 1

We think, therefore, that the demurrer should have been overruled, and the parties required to answer and proceed to trial.

This decision is not intended to conflict with the opinion in the case of Thomas v. Phillips, 4 S. & M. 358, delivered at the last sitting of the court, or to limit the rule there laid down. Here there are special circumstances, which did not exist in that case, to exempt the cause from the operation of the general rule.

Decree reversed and cause remanded for further proceedings.