Court Opinion

ID: 5185991
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:48:31.941309+00
Date Added: 2024-06-11T08:26:44.821143
License: Public Domain

O’Brien, J.:
The appellant does not question the well-settled principle of law that a note upon which a judgment has been obtained is merged in the judgment, so that thereafter an action cannot be maintained- on the note itself. The appellant is right, however, in contending that-where the judgment was entered without authority and fraudulently/ no merger takes place, and a suit may be maintained upon' the note.. The question, therefore, turns upon whether there was any such fraud practiced upon the plaintiff’s assignor, in inducing it to take-the judgment, as would entitle it, or the plaintiff, to bring an action on the note, regardless of the judgment entered.
. To have a judgment'instead of a simple claim, and thus to.become a judgment creditor instead of being a general creditor, is ordinarily regarded as preferable, and it would seem, at first, that it is anomalous to charge fraud after one has obtained something better than was originally possessed. It is a common occurrence to have a debtor, vigorously assail his creditor’s judgment, but it is. rather unusual for a creditor obtaining a judgment to complain of that, fact. We do not mean to imply that the court would not be justified *511in setting aside a judgment where the creditor was induced by fraud to take it, and was thereby deprived of some other right or remedy.' But such a case being exceptional, the facts upon which the charge of fraud is based must be carefully examined.
Here the fraud charged is said to consist of false representations made by the president of the defendant when the mortgage was given to secure the Allerton-Clarke Company claim, to the effect that the assets would realize enough to pay that claim in full, and that the defendant would see to it that the Allerton-Clarke Company was fully protected. It is not made to appear that this statement of the advantages to be derived under the mortgage was intentionally false,, but, rather, the inference is that it was the result of a too sanguine view of the value of the- assets, tad whether it was or not, being a statement, not of a present fact but of future expectations, it was not fraudulent.
. After the mortgage was given it was deemed advisable to have a receiver appointed, and in that connection the attorneys, who represented the creditors secured by the first and second mortgages, proceeded to enter judgments for them, first obtaining authority, among the others, from the Allerton-Clarke Company. Here, again, it is not made to appear that the action thus taken was detrimental or fraudulent; but, on the contrary, it appears that, to the extent that the assets would go in paying the claims in their order of preference, it was an advantage to the creditors. As there was, however, a deficiency of assets, and no advantage accrued to the plaintiff’s assignor, the argument, is made that had it been known that there would be such .a result, the authority to enter judgment would not have been given, and that the failure to fully inform the plaintiff’s assignor constituted the fraud. It is true that no direct benefit was derived by the plaintiff’s assignor from the judgment, but there is no evidence that the purpose or intention of the attorneys entering-it was to injure the Allerton-Clarke Company or to deprive it of any advantage which it otherwise might -have obtained. " The most that can be said is, that it was a question of propriety whether the same attorneys who had previously represented the defendant company, and who were charged with the interests of the bank which was secured by the first mortgage, should also appear and act for the creditors named in the second mortgage^ including the plaintiff’s *512assignor.. In the absence of other evidence tending to show that ■ the attorneys did. not act in good faith, and in view of the fact that when the interests and rights of the creditors became conflicting, the attorneys' immediately notified the plaintiff’s assignor of the necessity of having some one on the spot who would look after and represent its interests, the attorneys’ acts Aere relieved of the imputation of fraud or bad faith.
In compliance with the notification, the Allerton-Clarke Company sent a representative, to investigate the condition of affairs,' and this person, had he desired, could have ascertained all the facts connected • with the mortgage .and entry of judgment. He asserts, however, that he was not authorized to act for the Allerton-Clarke Company, and further states that he was npt fully informed of the situation, and insists that he in no way ratified the attorneys’ acts. In' these assertions, however, he is contradicted by two witnesses. If our conclusion depended Upon, what actually occurred after the' representative sent by the Allerton-Clarke Company arrived in Richmond,there might — as the testimony upon this point was conflicting — have been a question for the jury. Considering, however, the fact of his presence at the place and his access to sources of information, together with the further fact that the Allerton-Clarke Company had obtained a copy of the mortgage which clearly stated that they were not preferred equally with the other creditors, but were only ' fifth in the order of payment, our conclusion must be that a situation was presented which called upon tlm plaintiff’s assignor to put in some disclaimer or take some other positive action, if it intended to thereafter assert that it had been overreached or defrauded by the attorneys who induced it to enter judgment. . The AllertonClarke Company, as soon as it found out the facts, could have vacated the judgment, the power to do so being entirely in its own hands. It preferred, however, to wait and then isue on the note regardless of the judgment, and when confronted with the question of merger, to insist that, though it had received a copy of the mortgage, it had not observed its terms; that though it sent a representative it never knew the true state of affairs; and that the defendant and the •attorneys who represented -the creditors in Indiana were guilty of "fraud, the one in asserting that the assets were sufficient to pay all the claims, included in the mortgages, and the other by failing to *513firing home directly and fully every fact connected with the mortgage and judgment.
We agree with the court fielow that the effort to assail the Indiana judgment as .fraudulent was not successfully sustained; and, therefore, the judgment and order appealed from should fie affirmed, with costs.
Van Brunt, P. J., Barrett, Rumsey and Patterson, JJ., concurred.
Judgment and order affirmed, with costs.