Opinion
March Term, 1865
Matthews Swain, for the respondent.
The court admitted in evidence on the trial, the minutes of the testimony taken before the referee on the hearing of the matters referred to him, notwithstanding the objection and exception of plaintiff. I do not see any sound objection to their admissibility. They were taken from the files of the Supreme Court and were a part of the report of the referee upon which, with other documents and papers, that court based its final order of confirmation. They were a part of the record, and there was no reason for eliminating them from it. They showed that, in point of fact, the question of fraud in obtaining the receipt and covenant on which this action is based, was litigated before the referee and before the court, on the motion for confirmation, and passed upon by both tribunals. And they were the best evidence of that fact. The points of counsel used on the argument before the Supreme Court were not admissible in evidence for any purpose; but they were wholly immaterial and under the direction given to the case by the court, could by no possibility have worked any harm to the plaintiff. I think, therefore, there was no error in the admission of evidence, calling for our interference with the verdict.
The only other question for consideration is, whether the proceedings before the referee and in the Supreme Court, are to be regarded as res adjudicata of the right of the plaintiff to recover on the receipt and covenant in suit.
The Supreme Court, pending the litigation of the question whether John Darg died intestate, appointed the plaintiff's assignor special receiver of the note which Mrs. Darg, as administratrix of John Darg's estate, had received of Ira Burge. It was finally determined that John Darg did die intestate, and Mrs. Darg was reinstated to all her rights as administratrix. In that character she was undoubtedly entitled to receive, for distribution, the proceeds of the Burge note, then in plaintiff's hands. The proper course of getting them would, undoubtedly, have been through the action and order of the court, which appointed the special receiver, and to whom only, in strictness, he was liable to account. But the receiver and Mrs. Darg, as administratrix, undertook to settle the matter between themselves, and in so doing, instead of paying to her the money, he turned out the bonds of a coal company in which he claimed to have invested it, and took from her the receipt and bond of indemnity on which this suit is brought. It was subsequently discovered, as claimed by Mrs. Darg, that the coal company's bonds were worthless, and that the receiver's representations, by which she was induced to take them, were false and fraudulent, and, therefore, as she insisted, the accounting and settlement between the receiver and herself was wholly ineffective. By the proceedings in, and orders of the Supreme Court, the whole question of the plaintiff's accounting, both as receiver of the rents and profits of Darg's lands, and as special receiver of the Burge note, were referred to referee Hobart in such manner that all parties interested, including Mrs. Darg, the administratrix, were entitled to, and did appear and contest the rights and liabilities of the receiver before such referee. In respect to the Burge note it was not disputed by the plaintiff but that he had received the full amount of it in money, but he insisted that he had fully accounted for it to the administratrix, and taken her receipt in discharge of all liability with her obligation to indemnify him. On the part of the administratrix, Mrs. Darg, and of some other interested parties, the settlement and receipt were attacked for the alleged fraud. The finding of the referee was in their favor, and the Supreme Court, after a contested litigation before it based on the referee's report and the evidence taken before him, confirmed the report of the referee in toto, so far as it related to this question. Under that confirmation Mrs. Darg was entitled to receive for her distributive share a large portion of the proceeds of the Burge note. By a subsequent order made in proceedings to punish the receiver for contempt, her proportion was ordered to be paid into the trust company, to abide the result of any action in respect to it to be commenced within thirty days; but this order expressly declared that it was not to be treated or considered as an adjudication of the rights, either of the receiver or of Mrs. Darg.
To the action now brought upon the covenant of indemnity contained in her receipt, Mrs. Darg sets up in defense the same fraud which was litigated in the proceeding above mentioned, and also sets up those proceedings as res adjudicata of the question.
I am at a loss to see any ground upon which it can be held that the issues of this suit were not finally determined in the proceedings referred to. Those proceedings were clearly within the jurisdiction of the court; and ultimately they embraced all the parties and all the questions that should have been brought before it. The receiver was an officer of the court, entitled to its protection and under its direction, but not subject to be prosecuted by action without its leave, but, according to its regular practice, to be brought to an accounting by a summary proceeding, in which the court would adjudicate upon and protect the equities of all parties. The court had ample power to protect the receiver in the settlement with, and payment to, the administratrix, of the proceeds of the Burge note, because she was the proper channel through which the proceeds were to be distributed; and there is no room, I think, for question but that for the fraudulent practices of the receiver he would have been protected against any further claim, although his act of making the settlement was not in accordance with the technical mode of relieving himself from liability.
The point of controversy between the parties was the alleged fraud in obtaining the covenant and receipt now in suit. Upon that issue the parties contested the liability, and the receiver neither made nor had any other ground of contest. It may be true that the proceedings might have been so conducted as not to have involved that question, but they were not, and on the contrary they were so conducted as to involve no other so far as concerned the accounting for the Burge note. By this suit the same question is again put directly in issue.
The judgment of a court of competent jurisdiction upon a point litigated between the parties is conclusive in all subsequent controversies when the same matter comes directly in question. ( Embury v. Connor, 3 Comst., 522, and cases there cited; Doty v. Brown, 4 Comst., 71; White v. Coats-worth, 2 Seld., 137.) In the last cited case, EDMONDS, J., says: "I suppose it to be well settled that the judgment of a court of concurrent jurisdiction directly on the point is as a plea, a bar, or as evidence, conclusive between the same parties upon the same matter directly in question in another cause, or in other words, that the decision of a court of competent jurisdiction directly upon the same point is conclusive when the same point comes again in controversy between the same parties directly or collaterally." (See authorities cited by him at page 143.) There is no difference in the application of this rule whether the first adjudication be in a formal action or in a proceeding summary in its character. ( Supervisors of Onondaga v. Briggs, 2 Denio, 33, and cases there cited; St. John v. Dwight, Court of Appeals, not reported.) The judgment in this case ought to be affirmed.
I am of opinion that the defense of res adjudicata was a perfect answer to the action. Coleman, the plaintiff's assignor, having been appointed a receiver in respect to the moneys due from Burge, by the Supreme Court, in the action there pending to establish a will of John Darg, deceased, was liable to account according to the directions of the court, though the principal suit was ended. The account taken before Mr. Hobart embraced the moneys which Coleman had received on the note of Burge. Those moneys belonged to the defendant as administratrix, and she and Coleman were the only parties who were required to be known or recognized on the accounting. The court, however, determined to recognize the parties entitled to distributary interests as proper parties, and treated the referee as the proper person to administer this remnant of the assets. This was, perhaps, right enough, but it was at all events done without objection, and what is more important, it was so done by the judgment of a court of competent jurisdiction. But Mrs. Darg, the defendant, was one of these distributees, and in that character was entitled to one-half of whatever sum might be due from Coleman, if she was not precluded from claiming it by the receipt and covenant of indemnity which she had given to Coleman. The receipt and agreement to indemnify were parts of the same transaction and depended upon the same consideration. The defense against the covenant of indemnity was precisely the same with that which was set up against the part of the instrument which was intended to operate as a release. Indeed, the covenant was entered into in consideration of the alleged payment. If that payment was inoperative on account of the fraud or concealment of Coleman respecting the character of the coal company bonds, the covenant made in consideration of that payment was equally inoperative and void. Now, the report of the referee upon that accounting established that the payment or the delivery of the bonds as payment could not be availed of on account of the circumstances alleged against it. It was a payment which did not bind the parties interested in it, and there was no objection to it which I can discover except the alleged fraud and imposition.
It may be said that the defendant was competent to bind herself by taking a collateral thing as payment, and thereupon to release her own share as a distributee, and to covenant to indemnify against the claims of the other distributees. This is true, and if the others had alone been parties in the proceeding against Coleman, and had only claimed their own shares, an adjudication compelling them to pay their shares would not necessarily have determined anything against the validity of the arrangement between Coleman and the defendant. She might take such payment as was satisfactory to herself, and a valid consideration for her agreement to indemnify against the claims of the others. But this argument will not aid Coleman, or the plaintiff as his assignee, because the defendant was a party to the accounting, claiming her rights in the money collected of Burge's representatives, and repudiating as fraudulent and inoperative the whole arrangement. That issue was decided in her favor. She was awarded her portion of the money, and it was thus necessarily adjudged that the arrangement could not be supported in any of its parts. It was, therefore, a judgment of a tribunal having competent jurisdiction upon the very point in issue in the present case; and it necessarily estops the plaintiff from setting up the validity of the transaction upon which the covenant sued on arose.
The order made upon the attachment proceedings, by which the defendant's share of the money was to be withheld from her to await the event of a suit to be commenced on the indemnity bond, is of no legal consequence in this suit. The order itself disclaims any effect upon the rights of the present parties. The estoppel resulted from the order already made, and it was not intended to qualify the effect of that determination. It amounted to no more than the compelling the defendant to furnish security for any recovery which might be had against her. The parties probably differed as to the effect of the adjudication, and the court gave the plaintiff the advantage of retaining the money until that question should be determined.
The minutes of testimony which were admitted against the plaintiff's objection were immaterial, as the petitions, orders and other papers which constituted the record, were all which was required to constitute the estoppel. But they could do no possible harm, and did not prejudice the plaintiff in any way.
I am in favor of affirming the judgment appealed from.
Judgment affirmed.