Merrifield v. Bell

Prior to April 10, 1871, the plaintiff was the special partner in the firm of Merrifield & McDowell doing ■business in the city of New York, of which firm the general partners were Silas Merrifield, the brother of the plaintiff, and one William 0. McDowell.

On the 5th of February, 1871, John H. Do Bevoise made his certain bond and mortgage to John De Bevoise to secure the payment of $15,000 and interest, who on the 17th of February, 1871, assigned the same to the said firm of Merrifield & McDowell as security for an indebtedness of the said John De Bevoise to said firm. On the 28th of February, 1871, the firm of Merrifield &. McDowell assigned the said bond and mortgage, with $10,000 of the indebtedness owing to them by said John De Bevoise, to the plaintiff, who by agreement dated March, 1871, covenanted to reassign when his liability as endorser of the notes and commercial paper of Merrifield & McDowell and all other liabilities of himself as a member of the firm or incurred by reason of such endorsement should be extinguished and the amount of his interest in the firm should be paid. On the 10th of April, 1871, the firm of Merrifield & McDowell terminated and the plaintiff withdrew from the partnership the sum of $8,900, being $5,000 the special capital contributed by him, and $3,900 profits assumed to have been due to him

At this time the said firm of Merrifield & McDowell was indebted to the firm of Lawrence & Sons in the sum of $14,666.73.

In September, 1871, the plaintiff reassigned the said bond and mortgage to Merrifield & McDowell together with the said $10,-000 of indebtedness due to them from John De Bevoise. On the-same day Silas Merrifield, one of the general partners of Merrifield & McDowell, assigned to McDowell, the other general partner, for a nominal consideration of one dollar, all his right, title, interest and estate of, in and to the said bond and mortgage.. Upon the next day the said McDowell assigned the said bond and mortgage to one Samuel Lawrence, who in the transaction acted for the firm of Lawrence & Sons. No present consideration was paid for the assignment of said bond and mortgage ; and the same was received by Lawrence & Sons, under an agreement with McDowell that said McDowell individually and the firms of which he was a member subsequent to-that of Merrifield & McDowell were to be credited with the proceeds of such mortgage against any sums of money in which they might be indebted to said firm of Lawrence & Sons. This bond and mortgage were foerclosed in the name of Samuel Law

It was also found as a fact upon the trial that if the amount realized upon said bond and mortgage by Lawrence & Sons had been applied on account of the indebtedness to them of Merrifield & McDowell it would have paid such indebtedness.

In the year 1874 the firm of Lawrence & Sons commenced an action in the superior court of this city against the plaintiff and his two partners, Silas Merrifield and William 0. McDowell, as copartners, doing business under the firm name of Merrifield & McDowell to recover the said indebtedness alleged to be due from said firm of Merrifield & McDowell to Lawrence & Sons. The plaintiff herein defended said action upon the ground that he was a special partner, and also upon the ground that at or about the time of the dissolution of the firm of Merrifield & McDowell, and before the commencement of the action, the firm of De Bevoise, McDowell & Co., for a good and reasonable consideration, assumed and agreed to pay all the debts of the firm of Merrifield & McDowell, and were accepted and substituted by said firm of Lawrence & Sons as their debtors in lieu and place of said firm of Merrifield & McDowell for all demands held by the said Lawrence & Sons against Merrifield & McDowell; and that said De Bevoise, McDowell & Co. made and delivered their promissory notes for the demand of said firm of Lawrence & Sons, and that said firm of Lawrence & Sons accepted said notes in payment and satisfaction of said demand.

Upon the trial of said issues the plaintiff was present and heard Seabury Lawrence testify, amongst other things, in respect to the application by Lawrence & Sons of the proceeds of said bond and mortgage. The jury found that it was not understood or agreed by said Lawrence & Sons that the delivery to and acceptance by them of the notes of DeBevoise, McDowell & Co. should operate as a satisfaction and extinguishment of their claim against Merrifield & McDowell upon the notes and accounts upon which said action had been brought, and rendered a verdict against all the defendants. Exceptions having been directed to be heard in the first instance at the general term, upon a motion for a new trial the verdict against the plaintiff was set aside and judgment was entered upon such indebtedness against the other two defendants in February, 1877. The court of appeals affirmed this reversal, the judgment against the general partners remaining undisputed. Execution was issued thereon against Silas Merrifield and William 0. McDowell, the general partners, which execution was returned unsatisfied.

Subsequently Lawrence & Sons commenced an action in this court in the nature of a creditor’s bill founded upon the said judgment to recover the $8,900 alleged to have been withdrawn by the plaintiff from Merrifield & McDowell while that firm was in

The ground upon which the plaintiff brought this action is, that just prior to the commencement thereof and subsequent to the decision of the court of appeals in the action brought in this court, the plaintiff had learned that among the assets of Merrifield & McDowell was the said mortgage for $15,000, and that the interest of Silas Merrifield in that mortgage was assigned to McDowell,, and by the latter the mortgage was assigned to Lawrence & Sons, in pursuance of a corrupt and fraudulent agreement that no credit should be- given by Lawrence & Sons for the mortgage or for the amount received upon it in order that there might be an apparent indebtedness by Merrifield &■ McDowell to Lawrence & Sons, so that the plaintiff might be compelled to pay to- Lawrence & Sons for McDowell the sum of $8,900* received by him as aforesaid when it" was not due at all to Lawrence &. Sons, and there was no liability for it on the part of the plaintiff to said" McDowell. Upon the trial of this action, judgment was rendered dismissing-the plaintiff’s complaint, and from such judgment this appeal is taken.

It will thus be seen- that this action is brought in equity to set aside a judgment duly obtained in this court after atrial in which the present plaintiff had an opportunity to present any defense which he might have;

It is- the rule, which should not be departed from, in cases of this description, that the party should show, with reasonable certainty, that without any fault of his own, by fraud, by accident, by the wrongful- act of the other party, he has- been deprived of his defense; and that the use of diligence on his part would not-have made him acquainted with the facts out-of which it arose so that it might have been interposed in the action the judgment in which it is sought to set aside.

As is said in the case of Vilas & Bacon v. Jones & Piercy, 1 N. Y., 281 , when a party goes into chancery after a trial at law, he must be able to impeach the justice and equity of the verdict-, and-it must be upon grounds which either could not be made available to him at law, or which he was prevented from setting up by fraud, accident, or the wrongful act of the other party, without any negligence or other fault on his part.

And the question presented on this appeal is whether the proofs- offered by the plaintiff bring him within the rule.

It is true that he alleges and claims to have established upon this trial that he discovered the facts upon which he now rests

If this had been the fact, if the plaintiff had no means of knowing of the fraudulent application of the assets of the firm of Merrifield & McDowell, through an arrangement between McDowell and Lawrence, and he had discovered that fact after Lawrence & Sons, or their assignees, had obtained a judgment against him as creditors of the firm of Merrifield & McDowell, when in fact they had in their possession assets which they were bound to apply on account of such indebtedness, and which would have extinguished the same, it is probable that a cause of action would have been made out.

But although we may not agree with the learned judge who tried this action below in respect to some of the deductions which he drew from the evidence, there is one fact which is uncontested which is fatal to the plaintiff’s right to recover.

It is not true that he did not discover the misapplication of the proceeds of this bond and mortgage to debts other than those owed by Merrifield & McDowell to Lawrence & Sons until after the affirmance of the judgment of this court by the court of appeals.

It appears from the record in this case that he was present in the superior court when the suit in that court was being tried, and heard one of the Lawrences swear how they had applied the proceeds of this mortgage, which they had then collected, under the direction of McDowell

The plaintiff at that time knew that that mortgage had been assets in the hands of Merrifield & McDowell He knew that such assets had been assigned to him as collateral security for the indebtedness of that firm to him. He knew that he reassigned it to the firm; and it transpired during the course of that trial that all that Silas Merrifield had assigned to McDowell was his right, title and interest in that mortgage, which was nothing except that which might remain to him after the payment of the debts of Merrifield & McDowell; and that McDowell had assigned the mortgage to Lawrence & Sons, who had collected the same and applied the proceeds upon indebtedness other than that due from Merrifield & McDowell, namely indebtedness due from a succeeding firm to Lawrence & Sons, and the individual indebtedness of McDowell to said latter firm. He then was in possession of every fact necessary to defeat the action brought against him in the supreme court upon the basis of the judgment which had been obtained in the superior court He knew then that this bond and mortgage were assets of Merrifield & McDowell; he knew that McDowell had applied them to his individual uses, and he has not discovered anything else since.

The attention of the plaintiff’s counsel seems to have been exclusively engrossed with the defense that Lawrence & Sons had accepted the firm of De Bevoise & Co. as their debtors in the

We may agree with all the propositions advanced by the learned counsel for the plaintiff in respect to the rights of Merrifield & McDowell and Lawrence & Sons as far as the application of the proceeds of this bond and mortgage is concerned and we may concede that there was a misapplication of those proceeds. But the difficulty with the plaintiff’s case is that he was bound to set this up when he was sought to be charged with the indebtedness. He knew the facts, he, must have known the facts from the very nature of the case, and it is idle to say that he has just discovered them.

It is entirely immaterial what may have been the arrangement between McDowell and Lawrence & Sons by which this result was reached. The plaintiff knew that assets of Merrifield & McDowell had been disposed of by Lawrence & Sons for purposes other than the payment of the copartnership debts; and this knowledge was all that was necessary for the plaintiff to have when Lawrence & Sons were seeking to charge him in order to have defeated that claim if he had made the proper defense thereto.

The plaintiff may not have been properly advised of his rights, but that affords no ground for the setting aside of judgments duly obtained.

While not agreeing with the learned judge below in many of his conclusions of law and findings of fact, as above stated, yet still upon the findings which are established without contest we do not see how the plaintiff can maintain this action.

The judgment should be affirmed, with costs.

Daniels, J., concurs.