Court Opinion

ID: 7943485
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:17:36.152906+00
Date Added: 2024-06-11T16:33:49.417799
License: Public Domain

Hooker, J.
I concur in the opinion of my Brother Grant in this cause.
My understanding of the bill is, that it alleges that the defendant and two former partners, conducting a business, desired to increase the capital employed, and did so. by selling preferred stock in a copartnership association, limited. That in selling the stock, of which a large amount was marketed, they made representations at variance with' a secret contract, made between themselves,, under which the defendant has since claimed, and appropriated royalties, upon the goods manufactured. It is. charged, that being treasurer of the company, he has paid himself alleged royalties, to the amount of $10,000 and more, and that he claims that said contract is a valid and subsisting obligation, under and by virtue of which he may hereafter become entitled to royalties upon future business of the concern. The bill prays a cancellation upon the ground of fraud. The defendant demurred, and. has appealed from an order overruling the demurrer.
The contention of the defendant’s counsel rests upon the proposition, that the complainant has a right to sue for the money heretofore appropriated, in a court of law, and that the decision in that case will settle the questions raised by the bill. I am of the opinion that the well-settled rule in chancery, throughout the country, is that it. has jurisdiction in all cases of fraud, where the complainant is entitled to relief specifically equitable, and that it does not in all cases depend upon an absence of legal remedy. Inasmuch as the question has been settled in this State, there is no occasion to cite cases from other courts. In the case of John Hancock Mut. Life-Ins. Co. v. Dick, *155114 Mich. 337 (43 L. R. A. 566), the doctrine was adhered to that an insurance policy, obtained by fraud, might be the subject of a bill to cancel, notwithstanding the fact that the company might successfully defend an action upon the policy upon the ground of fraud. In that case an action at law had been commenced and was restrained. It was shown that a different rule in the Federal courts rests upon a statute, and the cáse of Teft v. Stewart, 31 Mich. 367, cited and quoted from in the opinion of my Brother Grant, was commented upon. The complainant in that case made two points: (1) That courts of equity and of law have concurrent jurisdiction in cases of fraud. (2) That the former may grant more complete relief, where an instrument is fraudulently obtained, by compelling cancellation, or surrender, and other equitable relief.
The case of John Hancock Mut. Life-Ins. Co. v. Dick was followed in a later case, viz., Mactavish v. Kent Circuit Judge, 122 Mich. 242. It was very similar in its facts to John Hancock Mut. Life-Ins. Co. v. Dick, so much so that the opinion said that “the principal effort of counsel appears to be directed toward inducing us to overrule the case of John Hancock Mut. Life-Ins. Co. v. Dick, etc.” We placed our decision plainly upon the ground, that where one has obtained an executory writing by fraud, equity has jurisdiction to cancel it, and that such jurisdiction is not affected by any legal redress that might be obtained in an action at law whether it had been already commenced or not. ' We said:
“ The question there was not whether it was a hardship upon the plaintiff to be compelled to try the question of fraud in equity, rather than before a jury, but — First, whether equity has jurisdiction to cancel a contract obtained by fraud; and, second, whether such jurisdiction is cut off by the institution of á prior action at law upon the writing. There is but one answer to these questions. The jurisdiction of equity for cancellation is well settled, and courts cannot curtail such jurisdiction because the same evidence that would justify a decree of cancellation *156may constitute a defense to an action upon the instrument. The authority to restrain the pending action at law is based upon the equitable jurisdiction to prevent a multiplicity of suits, and this is as well established as any other jurisdiction of equity. Then, the fraternal society had a right to sue in equity, and the court must entertain the suit. It might or might not restrain the beneficiary from prosecuting the pending action at law. That was a matter for the discretion of that court, and not for us. These propositions are elementary, and, as shown in John Hancock Mut. Life-Ins. Co. v. Dick, are fortified by authorities. The briefs in this case furnish additional support to the claim of respondent.
“ It is urged that the circuit court for the county of Bay first obtained jurisdiction, and that no other court could deprive it of such jurisdiction, or itself take jurisdiction of this controversy. What force there is in this contention applies to cases where two courts have concurrent jurisdiction. These courts have not concurrent jurisdiction, for the court of law has no power to cancel, as was shown in the case of John Hancock Mut. Life-Ins. Co. v. Dick, which is a case upon all fours with the present. * * *
‘ ‘ This attack upon a well-settled chancery jurisdiction has-as a foundation the proposition that a person claiming under an insurance policy has a right to try the question of fraud before a jury, and therefore equity should in all cases permit the case to be tried by jury. But counsel does not stop there; he would have us go further, and hold that a chancellor has no discretion, but must yield his own jurisdiction in all such cases, and that, if he does not, we will compel it. There, would be no more propriety in our curtailing equity jurisdiction than there would be in denying some legal jurisdiction. But suppose we were to do so, and hold that equity could not restrain the prosecution of an action of this sort; what should we do where the suit.for cancellation is begun first? Will the next step be the contention that we should deny the jurisdiction of chancery in such a case, because we may think the right to make a legal defense is remedy enough ? If so, and we yield to it, all concurrent jurisdiction would be taken from equity; and not only that, but the same would be true in all cases where, as in this case, equity has jurisdiction to give greater relief than a court of law can do. The right to equitable procedure and relief would not then depend upon established rules, but upon the ques*157tion whether the complainant ought to be satisfied with some lesser relief, which, in the opinion of an appellate court, would, or could be made to, answer his purpose. We understand that equitable rights are as sacred and as well guarded by the Constitution as the right of trial by jury, and we see neither the occasion nor the opportunity to increase the latter at the expense of the former.”
These two decisions do not leave the question in doubt. They clearly sustain inviolate, the jurisdiction of equity, where the equitable right to cancellation exists, and refuse to permit it to be swept aside upon the insistence of interested parties, that their preference and not that of the complainants be allowed to prevail. These cases were, however, questioned again in the case of Edwards v. Investment Co., 132 Mich. 1, where they were approved, Mr. Justice MOORE'writing the opinion.
The case of Northwestern Mut. Life-Ins. Co. v. Amos, 136 Mich. 210, was a case of a bill filed to cancel a policy, upon the ground that it was fraudulently stamped, either by the instigation of the beneficiary, or the representative of the assured. A demurrer was sustained to the bill, three of five judges being of the opinion that the bill did not allege fraud. The majority opinion said, after citing the Dick, Mactavish, and Edwards Cases, that:
“ Those cases have no application here. The basis of the equity jurisdiction there sustained was fraud — active fraud in the procurement of the policies, of the renewals thereof, after they had lapsed. The sole question in this case is one of fact, viz.: Were the policies delivered and the premiums paid, or their payment waived ? The doctrine in the Dick Case will not be extended to include cases of this character, where the questions involved are purely legal, no fraud is charged, and there is no possible reason for the interposition of a court of equity.”
It is obvious that those cases were not overruled. A dissenting opinion was filed in this case, indicating a contrary view of the question, of whether the bill stated a charge of fraud, and collecting the authorities applicable *158to the question of jurisdiction. The following language is pertinent here, especially as we do not understand that it was questioned in that case except as to the premises assumed:
“ Under such allegations chancery has jurisdiction and it does not depend upon what the proofs may show. The bill states a case of fraud, and jurisdiction must depend upon that. This question arises upon demurrer, whereby the allegations of the bill are admitted. Edwards v. Investment Co., 132 Mich. 1. It is possible that a hearing upon the merits may show these allegations to be unsupported by the evidence, as was the final result in John Hancock Mut. Life-Ins. Co. v. Dick.
“ If there is jurisdiction in equity on the ground of cancellation, it is not limited to cases where a defense might not be made in a court of law. * * *
“ The remedy is a concurrent one, and to hold that it depends upon the inadequacy of the legal remedy, is to abridge the equity jurisdiction, which our Constitution and laws guarantee, as unqualifiedly and effectively as they do legal remedies, and the right to trial by jury, as we held in John Hancock Mut. Life-Ins. Co. v. Dick, supra. The court should as carefully guard and protect this jurisdiction as any other.”
The case of Mack v. Village of Frankfort, 123 Mich. 421, again discussed the Dick Case, and distinguished it. It was not a cancellation case, and while all concurred in sustaining the demurrer, but two of the members of the court assented to the opinion filed.
Another case written by Mr. Justice Moore is Edwards v. Investment Co., 132 Mich. 5. That was a case of a fraudulent contract. Undoubtedly an action at law would have been proper, and perhaps in a sense adequate, certainly as nearly adequate as in the present case. But the concurrent jurisdiction was sustained as follows:
“ The second important ground for demurrer is that complainant has a complete and adequate remedy at law; counsel citing,among others, the two cases mentioned above. [Rehberg v. Surety Co., 131 Mich. 135, and Barney v. Surety Co., 131 Mich. 192.] It is not always true that, because a remedy might be pursued upon the law side of *159the court, the chancery side may not also have jurisdiction. The bill alleges that complainant’s money was obtained from her by means of fraud; that defendants conspired together, and were parties to the fraud; that a large business was done by the corporation; that it is insolvent ; that defendants have converted the money taken in by the corporation, including the complainant’s money, to their own use; that dn accounting is necessary, and an examination of the books of the corporation. If the case stated in the bill is true — and it must, on demurrer, be deemed to be true — under the repeated decisions of this court the chancery side of the court has jurisdiction. Wheeler v. Clinton Canal Bank, Har. Ch. (Mich.) 449; Wallace v. Harris, 32 Mich. 380; Wyckoff v. Machine Co., 43 Mich. 309; Tompkins v. Hollister, 60 Mich. 470; Sherman v. Stove Co., 85 Mich. 169; Cogswell v. Mitts, 90 Mich. 353; Warren v. Holbrook, 95 Mich. 185; John Hancock Mut. Life-Ins. Co. v. Dick, 114 Mich. 337 (43 L. R. A.566); Blodgett v. Foster, 114 Mich. 688; Lieberman v. Sloman, 118 Mich. 355; Mactavish v. Kent Circuit Judge, 122 Mich. 242; Noble v. Grandin, 125 Mich. 383.”
It must be apparent that we are “threshing old straw” in a further discussion of this question. We will, however, refer to some of the earlier cases which vindicate the jurisdiction of equity, in those classes of cases clearly within the several branches of equity jurisdiction, where there is an equitable right involved, whether there may or may not also be a legal remedy, which we may think practically adequate. There are many such cases. Suit upon a note might be - an adequate remedy, yet it is no reason for denying a foreclosure of a mortgage or suit to enforce a lien securing it. As in the Edwards Case an action for damages is many times adequate to enforce a right growing out of a fraud. And a suit for money had and received might answer every purpose, yet circumstances may justify an accounting or an injunction. In Wheeler v. Clinton Canal Bank, Har. Ch. (Mich.) 457, it was said, “Courts of chancery have also concurrent jurisdiction in cases of fraud.” In Wales v. Newbould, 9 Mich. 45, a bill to restrain a pending suit at law, on a *160promissory note, and for the surrender of the same and other personal property for fraud, was demurred to, upon the ground that complainant had an adequate remedy at law. The court held that notwithstanding the remedy at law was adequate, as respected the personal property, the bill for surrender would be sustained, and that as to the note, the remedy was not adequate, because complainant was entitled also to have the note surrendered, and not simply to defeat the action. In Wright v. Hake, 38 Mich. 525, a bill was filed to restrain an action at law on a replevin bond, on the ground of fraud. . The court sustained the jurisdiction, Judge Cooley saying:
“We have only to notice further the objection taken to the remedy in equity. It is urged in defense that the equities here insisted upon were available to the parties at law, and might have been relied upon in defense to the suit on the bond. This may be true, but it does not follow that equity could not take jurisdiction of the case. Equity has general jurisdiction in cases of fraud, and sureties have often been relieved under circumstances analogous to the present.”
In Wyckoff v. Machine Co., 43 Mich. 309:
“It is objected that complainant had ample.remedy at law; and this is probably true. There has nevertheless always been a concurrent remedy in equity in cases of fraud; Wheeler v. Clinton Canal Bank, Har. Ch. (Mich.) 449; Edsell v. Briggs, 20 Mich. 433; and as equity in this case could require the surrender of the agreement and the machines on just terms, its remedies would be more complete and ample than any which a court of law could afford.”
In Tompkins v. Hollister, 60 Mich. 479, Morse, J., wrote:
“ And it makes no difference that she may have an adequate remedy at law. Equity has concurrent jurisdiction in cases of fraud, and she can enforce her rights in this suit.”
In Brown v. Kalamazoo Circuit Judge, 75 Mich. 274 (5 L. R. A. 226), a question of fact was decided by a *161jury, by direction of the judge in a chancery cause, under a then recent statute. This court said:
“The cognizance of equitable questions belongs to the judiciary as a part of the judicial power, and under our Constitution must remain vested where it always has been vested heretofore.”
Sherman v. Stove Co., 85 Mich. 169, was a bill to cancel a subscription. The objection that there was an adequate remedy at law was overruled. In Cogswell v. Mitts, 90 Mich. 355, Montgomery, J., said:
“It is contended, however, that jurisdiction in equity to cancel a writing does not exist if it appear that the complainant has a complete remedy at law, except in cases where fraud is shown. But we think the evidence in this case shows that there was an actual fraud.”
That was a bill to cancel a promissory note. Obviously the fraud could have been shown as a defense at law. Chicago, etc., R. Co. v. Miller, 91 Mich. 166. In Warren v. Holbrook, 95 Mich. 185, Grant, J., said:
“ It is first contended that complainant’s remedy at law is adequate and complete, and that, therefore, this bill cannot be maintained. Complainant might have maintained an action at law, and either attached or garnished the fund- in the hands of Sweet. It requires no citation of authorities, however, to show that courts of equity have in many cases concurrent jurisdiction with courts of law. The general rule is that courts of equity have jurisdiction to compel an accounting where fiduciary relations exist, or fraud is charged. * * * In such case choice of remedies is with the party aggrieved, and he may proceed in equity for an accounting, and pursue the fund.”
See, also, Wallace v. Harris, 32 Mich. 380, 389, where it is said:
“ When the cause is only colorably one for partition, and the true end and purpose is evidently to obtain a determination of rights respecting title and possession which are purely legal, and no matters appear to create obstacles to a. full, fair and final disposal of the controversy in a court of common law, there is solid ground for claiming *162that the litigation ought to be carried on in such a tribunal. But the reason for remitting the investigation to a common law court is one of policy and fitness, rather than of any inherent want of power in a court of equity; and hence, if chancery decides, and there is no reversal in a proceeding directed to that end, the result is not void, but must stand and be respected.”
It is not too much'to say that these cases show that there is a concurrent remedy in cases of fraud, where there is an equitable right. It would not be much of a “ concurrent remedy ” which would be allowed only when there was no other. In view of these cases and the more recent ones of John Hancock Mut. Life-Ins. Co. v. Dick, Mactavish v. Kent Circuit Judge, and those in which they have been distinguished, and not in any way disapproved, the right of the complainant to this remedy should not be denied.
The cases relied on by counsel for the defendant are Left v. Stewart which was cited and distinguished in the Dick Case; Mack v. Village of Frankfort, the opinion in which did not meet the approval of a majority of the court; and some Federal cases, which, as shown in the Dick Case, involve a Federal statute which has no bearing here. The decree of the learned circuit judge should be affirmed.
McAlvay and Montgomery, JJ., concurred with Hooker, J.