Opinion
No. 324-D.
August 24, 1937.
Graham Spivey, of Danville, Ill., for petitioner Goddard.
H.A. Swallow, of Danville, Ill., and Wm. P. McCool, of New York City, for Shovel Coal Co.
Suit by the Illinois Printing Company and others against the Electric Shovel Coal Corporation, wherein a receiver was appointed and subsequently discharged. On intervening petition by the Electric Shovel Coal Corporation to vacate an order allowing a claim of the Mississippi Coal Corporation, resisted by one Goddard and by the United States.
Decree in accordance with opinion.
In May, 1932, in pursuance of the order of this court, entered in due course of administration in receivership of the assets of the Electric Shovel Coal Corporation, directing all claimants to file their claims, the Mississippi Coal Corporation filed its verified claim, wherein it asserted that the Electric Shovel Coal Corporation was indebted to it in the sum of $114,217.50, on a note for $56,217.50 and on two open accounts of $40,000 and $18,000. The claim was filed in the usual form, verified by the treasurer, but the note was not attached. One of the sworn statements was that the claim "is now owing the claimant and there has been no assignment of it and no person other than claimant has any interest in it."
The receiver objected to allowance, and the claim and the objections were referred to a special master in chancery, together with other claims. In his report upon all, the master reported concerning this matter that no one appeared in behalf of claimant and that the claim appeared to have been abandoned. He recommended that it be disallowed. He suggested further, however, that, if the claim were valid, the Electric Shovel Coal Corporation had, by way of set-off, a complete defense to all of same except $8,755.50. On April 24, 1933, the court approved the recommendation of the special master in all its terms, but included in its order a clause allowing the claim as to $8,755.50.
Obviously from the evidence this was the result of inadvertence in the drafting of the order and in entering same, as it was clearly the intent of the court to approve the master's report which recommended that the claim be dismissed and denied.
In the meantime Goddard had sued the Mississippi Coal Corporation, seeking judgment for $9,000. On May 3, 1934, supplemental to his proceedings, he obtained a writ of attachment or garnishment against the receiver. Interrogatories issued, and the receiver answered that he held in his hand money due the Mississippi Coal Corporation in the sum of $8,755.50. On June 13, 1934, Goddard obtained a judgment against the Mississippi Coal Corporation in the sum of $8,800. This court later restrained and enjoined Goddard from proceeding further in his garnishment suit.
In March, 1935, one Cook filed a creditor's bill in Perry county against the Electric Shovel Coal Corporation et al., and on April 12, 1935, the receiver filed in this court a petition in the nature of a bill of interpleader reciting the indebtedness of himself to the Mississippi Coal Corporation in the sum of $8,755.50, the proceedings taken by Goddard and Cook, and praying that the court order the several claimants to the fund to answer the interpleader and present their claims to the fund. Subsequently, in the month of May, both Cook and Goddard presented claims to the fund. On October 2, 1935, the United States intervened and filed its claim. On December 6, 1935, the court directed the receiver to pay the money owing the Mississippi Coal Corporation to the clerk of the court. On July 23, 1936, an order was entered finding Goddard's claim prior to that of Cook and reserving decision as to the respective priorities of Goddard and the United States. Subsequently the court discharged the receiver and returned to the Electric Shovel Coal Corporation all assets except said sum deposited with the clerk, over which it expressly retained jurisdiction.
On March 23, 1937, the Electric Shovel Coal Corporation, by leave of court, filed its intervening petition, setting up the foregoing facts, averring that the claim had been allowed by inadvertence and mutual mistake and as a result of fraud of an officer of the Mississippi Coal Corporation, in stating under oath that no part of the claim had been assigned to any third person but was still due and owing to the claimant. The intervening petition further alleged, and the evidence shows, that after the discharge of the receiver, the Electric Shovel Coal Corporation discovered that the claim of the Mississippi Coal Corporation had been allowed through fraud and misrepresentation by the Mississippi Coal Corporation to the effect that the note sued on was the property of the Mississippi Coal Corporation and had never been assigned to any one and that no one other than the claimant had any interest in it, whereas at the time the claim was filed the note for $56,217.50 theretofore issued to the Mississippi Coal Corporation had long prior thereto been transferred to one Moore and by him in turn to W.A. Harriman Co. and by it in turn to Harriman-Thirty, Inc., and there was at the time claim was filed and at all times thereafter nothing due the Mississippi Coal Corporation with respect to $58,000 claimed on open account, for the reason that offsets in Electric Shovel's favor on open account exceeded the demand and the Mississippi Coal did not then own, and did not at any time thereafter own, the said note, but it was then the property of Harriman-Thirty, Inc.
Discovering this mistake, the Mississippi Coal Corporation and Electric Shovel Coal Corporation entered into a stipulation, agreeing that the Mississippi Coal Corporation was not entitled to recover upon its claim any sum of money whatsoever and that an order should be entered by the District Court vacating the order of April 24, 1933, directing that the sum of $8,755.50 be paid to the Electric Shovel Coal Corporation.
Since its property has been returned to it, the Electric Shovel Coal Corporation has settled the note held by the Harriman-Thirty, Inc.,
Both Goddard and the United States filed answers to the intervening petition. The latter prays that the order allowing the claim be vacated and that the money in the hands of the clerk be paid to the Electric Shovel Coal Corporation. The issues were set for hearing, and evidence was taken substantiating the facts mentioned.
The Electric Shovel Coal Corporation contends that the order allowing the claim and all other orders with reference to the same should be vacated, for the reason that the same was the result of fraud and deception upon the court and of mutual mistake of the parties, resulting in a wrongful allowance. Goddard and the United States contend that the order was one finally adjudicating the rights of the parties, and that, the term at which it was entered having expired, the court is without power to vacate the same.
It is obvious that the order was final in one sense of that word, for the reason that it was a final adjudication of the court as to validity of the claim and an appeal would have lain. In another sense, however, the order was interlocutory, for the reason that it was one of many of similar character entered in the course of an extended voluminous administrative proceeding, which in itself was not finally terminated until the entry of the order discharging the receiver and returning the property to the Electric Shovel Coal Corporation. Even then the court reserved jurisdiction over the sum represented by the amount of this claim.
I take it that Equity Rule 69 (28 U.S.C.A. following section 723) has to do with the allowance of rehearings of final decrees disposing finally of the subject matter after the term has expired and not to orders entered in the course of proceedings before termination thereof, all of which remain in the jurisdiction of the court, subject to modification or vacation until the court loses jurisdiction by final decree. As said by the Supreme Court in the case of Wayne United Gas Co. v. Owens-Illinois Glass Co., 300 U.S. 131, 57 S.Ct. 382, 81 L. Ed. ___, decided February 1, 1937, the court has the power for good reason to revise its orders upon seasonable application and before rights have vested upon the faith of its action, and it may vacate any order before the final termination of the cause upon application diligently made, and rehear the subject matter upon its merits, if no intervening rights will be prejudiced by its action. The doctrine has full applicability here. Indeed, it is most dubious, in the absence of any prejudice of either's rights, whether either Goddard or the United States is in position to protest against the vacation of an order, which the parties in interest have stipulated may be vacated and to which neither objector was party.
Every court has power to control, vacate, or correct its own decrees in the interests of justice. It may do so in the furtherance of justice and its power does not depend upon statute but is inherent. Freeman on Judgments, §§ 200 and 220. Such relief must be granted in the case of fraud, misrepresentation, and mistake. Any order due to inadvertence working an inequitable conclusion should be vacated. True it is that orders of court may not be attacked collaterally, but in the present instance the Electric Shovel Coal Corporation is the owner of the assets; it has succeeded to all of rights of the receivers and has all of the title which it originally had. It comes into court as the successor to the receiver in the proceedings in which an allowance order was entered and makes a direct attack upon such order, saying that the court was misled by inadvertence, fraud, and mutual mistake; that relief should not have been granted. Such is not a collateral but a direct attack. It is a direct application to the court which entered the order to correct its own decree. Freeman on Judgments, § 307.
The jurisdiction of the court over the assets persists until final surrender or other disposition thereof. Such final disposition has not been had; hence the application does not come too late.
The respondents assert that to permit the relief prayed for would be to allow the Electric Shovel Coal Corporation to benefit by its own wrong; namely, that it has, by the action of the court in entering the order, received benefit therefrom in that it received credit for an offset. But this is fallacious reasoning. The Electric Shovel Coal Corporation was not helped but rather was injured by the result of applying the offset. It had a valid claim against the Mississippi Coal Corporation. It surrendered that claim for credit upon an invalid counterclaim. This did not help; it injured.
The respondents urge also that the Electric Shovel Coal Corporation is guilty of laches. I do not so construe the fact. No injury has accrued to the respondents. Rather the parties occupy the same position they held at the time the claim was allowed.
I conclude that equity demands that the order allowing the claim of the Mississippi Coal Corporation be vacated; that all orders of the court, to the extent that they supplement or provide for enforcement of said order, should be vacated; that the funds in question are the property of the Electric Shovel Coal Corporation and should be paid to that company. Such will be the order of the court.
The foregoing includes my findings of fact and conclusions of law.