Court Opinion

ID: 6517774
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:28:16.091925+00
Date Added: 2024-06-11T15:55:04.251296
License: Public Domain

COLEMAN, J.
In stating tlie case made by complainants’ bill we deem it unnecessary to repeat the various means and purposes resorted to by respondents .in order to accomplish certain proposed results. Stated in short, the case made by the bill is substantially as follows: The Terminal & Improvement Company, a corporation, engaged in building railroads, became financially embarrassed and insolvent.. Among others, it owed a large debt, amounting to some forty thousand dollars, to the Farmers and Merchants Bank, a partnership. The members of this partnership, a majority of them at least, were stockholders and officers of the Terpiinal'&Improvement Company, and were advised of its financial condition. The Terminal & Improvement Company, through its president and general manager, and the Farmers and Merchants Bank, entered into a combination and conspiracy by which the Ter.minal • & Improvement Company was to obtain large sums of money from the Farley National Bank, so much of which as was necessary to be used in discharging the large debt of the Imiirovement Company to the Farmers and'Merchants.Bank, and thereby substituting the Farley Bank a,s its creditor for this debt. The plan was successfully carried out by the Terminal and Improvement Company, through what is denominated in the pleadings as “kiting operations,” the modus operandi being specifically stated in the pleadings. The Farley National Bank being ignorant of the condition of the .Terminal & Improvement Company, and supposing that the transactions between it and the Terminal & Improvement Company were in good faith and founded on real transactions, advanced large sums of money to the Terminal & Improvement Company, until there was a balance due for over one hundred thousand dollars. The consequence was, the Farley National Bank was forced to suspension, and its assets and control passed into the hands of a receiver. The receiver instituted suit against the Terminal & Improvement Company, and recovered judgment for over one hundred and seventeen thousand dollars. Execution issued on the judgmént, which was returned “No property found.” A short time thereafter, the receiver was discharged, and the Farley Bank resumed business. *19The Farley Bank, we presume, for a valuable consideration, assigned the judgment agailrst the Terminal & Improvement Company to Hall and Farley, the complainants in the present bill. Up to this period, neither the Farley Bank nor the receiver, nor the assignees of the judgment, had any notice or information of the combination or fraud which had been so successfully planned and accomplished by the Terminal & Improvement Company and the Farmers and Merchants Bank. Upon discovering the fraud, the assignees of the judgment filed the present bill; the purpose of which is to hokl the partnership, the Farmers and Merchants Bank, and its members, responsible for the money received by it, which had been obtained by the Terminal & Improvement Company, in pursuance of the scheme entered into and carried out for this purpose. The question raised by the demurrer to the bill and the motion to dismiss for want of equity is, whether under the foregoing state of facts, complainants are entitled to relief in a court of equity.
The rule which declares that when a party has a remedy by proceedings in tort, or ex contractu, and elects to proceed ex contractu, he can not. afterwards proceed in tort, does not arise, and has no application. The assignees purchased the debt as such, and received and now hold what they purchased, and by their purchase of the debt, did not acquire the right to rescind the contract, the foundation of the judgment, so as to author? ize them to recover back the money in an action for money had and received, or to maintain an action for deceit. They can only enforce collection of the demand as a debt. The fact that the Farley Bank prosecuted the claim, ex contractu, to judgment against the Terminal & Improvement Company, in ignorance of the part that the partnership bank and its members had taken in the commercial transactions between the Farley Bank and the Terminal & Improvement Company, will not operate as a release of the partnership . bank and- its members, or as an estoppel upon the-Farley Bank, or, its assignees, if the part it secretly performed in combination with the Terminal & Improvement Company was such as to render it a debtor to the- extent of the money secured by it. The transfer of the judgment by the *20Parley Bank transferred-the debt, not only as against the Terminal & Improvement Company, but as against any others who may have been, in fact, such debtors, but were unknown at the time of the rendition of the judgment.
The -question then is, whether, if the Parley Bank had not assigned the judgment, could it maintain an .action against the partnership bank and its partners in assumpsit? Could it waive the tort and proceed against the bank upon the contract for money- paid at its request for its use and benefit, or as for a loan of so much money, procured by the Terminal & Improvement Company, at the instance of the bank for. its use and benefit? If the' Farley Bank could maintain this action,_ the assignees of the judgment succeeded to the same right. We think it clear the assignees can maintain no action, other than for money loaned, or for money paid at the instance and request and for the benefit and use of the bank-partnership. It can not maintain the action for money had and received, for such a cause of action could -arise in favor of plaintiffs only on the theory of a rescission of the contract, a right the assignees did not acquire by the purchase of the debt. A majority of the court are of opinion that the legal proposition, involving the right of complainant to maintain the! action, is not presented by the present appeal. The writer is’ of opinion, that the transfer of the judgment operated only as an equitable transfer of the claim, against the bank partnership and its members, and that if their claim is such as to entitle them to hold the bank liable, the right is equitable and cognizable in a court of equity as well as in a court of law. Section 2594 of the Code applies only to courts of law, and does not take away the equitable rights of any person. The majority of the court are of opinion, that, conceding that complainant has a cause of action, a question not decided, their remedy is in a court of law, and not in a court of equity. This leads to the conclusion, that the bill is without equity.
Reversed and remanded.