Isham v. Cooper

Full title: ISHAM v. COOPER et al.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: May 19, 1897

56 N.J. Eq. 398 (Ch. Div. 1897)

56 N.J. Eq. 398

Opinion

05-19-1897

ISHAM v. COOPER et al.

Joseph Cross and G. L. Corbln, for the motion. R. V. Lindabury, opposed.

EMERY, V. C.

Bill by Henry H. Isham against John W. Cooper and another for injunction. On application for preliminary injunction. Denied.

Joseph Cross and G. L. Corbln, for the motion.

R. V. Lindabury, opposed.

EMERY, V. C. This is an application for a preliminary injunction to restrain further proceedings in an action at law in which defendants have obtained a verdict against complainant, and a rule to set aside the verdict has been discharged by the supreme court. The action at law was commenced by attachment proceedings against the complainant, in which he appeared and gave bonds, and a preliminary injunction against the prosecution of this bond is also applied for. The principal question involved on this application for injunction is whether the grounds now relied on by complainant to enjoin the collection of the judgment on the verdict were set up as defenses, and decided adversely to the complainant, in the action at law; and. In the view which I take of the case, the granting or refusal of the preliminary injunction depends upon the decision of this question. A statement of the proceedings in the action at law is necessary, in order to determine whether, after the verdict of the jury, the complainant still has a right to apply for equitable relief. The entire record in the suit at law, including the evidence taken at the trial, is made part of the record on this application, by complainant's filing it with thebill; and so far, therefore, as relates to the decision of the question of the effect of the verdict at law, the entire case of complainant and defendants seems to be presented as fully as it could be on final hearing. The action at law was one of contract, and was founded upon a letter dated February 8, 1894, written by the complainant, Henry H. Isham, to the defendants, Fowler and Cooper, signed by the complainant, proposing the terms upon which complainant would assume the management of the affairs of a corporation (the Fowler Company) of which Fowler and Cooper were officers, and which then needed financial and other assistance. By a letter of the same date written to Isham, and signed by Fowler and Cooper, the latter accepted the terms; and the complainant's letter and its acceptance constituted, or were claimed to constitute, a contract between the parties. At the time of the writing of the letter, certain notes for $20,000 of the Fowler Company, indorsed personally by Fowler and Cooper, were outstanding in the hands of a bank which had discounted them. The letter or contract, as sued on, contained a clause relating to these notes, and Fowler and Cooper claimed that this clause in the letter signed by Isham read as follows, viz.: "That the Fowler Co. notes now indorsed by you shall be renewed and reindorsed when they mature, and shall be cared for by the company and H. H. I. until the Co. Is able to care for them itself." They brought suit on the letter, as containing this clause, and to recover the amount they had been eventually obliged to pay on the Fowler Company notes or their renewals, being over $13,000. As appears by the pleadings, bill of particulars, and specification of defenses in the cause, the dispute between the parties, so far as relates to the form of the contract, was whether this clause of the letter Had been altered after its execution. Isham, in his specification of defenses, as to this point, claimed that this clause had been altered, and was not his contract, but was null and void. The clause in the letter as delivered, according to Isham's claim, was as follows, including the interlineations as actually made:

"That the Fowler Co. notes now indorsed by you to the extent of $20,000 shall be renewed and reindorsed when they mature and shall be cared for the Company and by (H. H. I.) by you until the company is able to care for A them itself." — And the alteration claimed consisted in the erasure of the word "you" after the carat. In this specification of defenses, it will be observed that the initials "H. H. I." were included in a parenthesis placed at the side of the sheet, and not immediately following the words "and by"; but there was no claim in the specification of defenses that the initials were intended to indicate an alteration, or that by mistake the initials were so placed in the letter as to admit of being read into the text as part of the letter or contract in the letter itself these initials in fact immediately followed the word "by." On the trial of the cause, it appeared by the undisputed evidence on both sides that the disputed clause of the letter, as originally written by Isham to Fowler and Cooper, read, the notes "shall be cared for by you," without any interlineation or erasure. It was also shown by the evidence on both sides that alterations were made in the letter at the interview held immediately after the receipt of it by Fowler and Cooper, at which interview Isham, Fowler, Cooper, and also Judge Gilhooly, the counsel of the company, and no others, were present. The main question of fact at the trial at law was as to the alterations which were then made in the letter in the presence of all these parties. Mr. Isham and Judge Gilhooly testified as to the conversation previous to the alterations, and as to the purpose of making the alterations, which were then declared, and as to the alterations actually made after these conversations for the purpose of carrying out the changes in the letter which were agreed on. Mr. Isham and Judge Gilhooly testified, substantially, that the alteration and the only alteration in the letter itself was the interlineation of the words "the Company and by" after the word "by" and before the word "you," so that the letter, as altered, read, the notes shall be cared for "by the Company and by you" (Fowler and Cooper). They both further stated that this alteration was actually made by Isham himself after the conversation between the four persons in reference to making alterations in the letter, and that the alteration thus testified to was the only alteration to be made in the letter itself. As to the initials "H. H. I.," these two witnesses stated that these were made after the alteration of the letter had been made as agreed on, and that the initials were added by Isham, at the suggestion of Judge Gilhooly, solely for the purpose of noting or identifying the interlineation. This suggestion, they stated, was made in the presence of both Fowler and Cooper, and Isham then, in their presence, added the initials immediately following the words "and by" in the interlineation previously made, and delivered the letter to Fowler and Cooper; the letter at the time of delivery, according to their statement, containing the word "you" after the carat, unerased. Fowler and Cooper, on the other hand, after having given a different account of the conversation preceding the actual alteration, and of the object of the alteration, said that the entire alteration, in its present form, including the initials, was written by Isham at once, who at the same time erased the word "you," and that the letter was delivered to them in the form in which it now appears. Cooper's statement in his direct evidence, as to the object of the alteration, was that he said to Isham, "I want something specified there to show that you are to take care of that paper when it comes due," and that then,after a question to Judge Gilhooly, Ishaim wrote in the interlineation, "to be cared for by the company and H. H. I.," and scratched jut the word "you." On cross-examination, being asked as to the language of his objection to the letter, he stated, "I wanted Mr. Isham to take care of that note, and wanted something put in that instrument so that he would take care of it," and that Judge Gilhooly did not, as he remembers, say anything after the alteration had been made by Isham, except that it was all right. Fowler's statement on this point is substantially similar. No objection was made on either side to the admission of the evidence relating to the circumstances under which the initials were written, or to the object of writing them. Nor does the attention of the court or counsel on either side seem to have been specially directed, during the taking of the evidence, to any supposed objection that in a court of law the initials "H. H. I." must be read into the contract, as a part of the contract, independent of the intention of all the parties in their insertion, or to any objection that for the correction of a mistake in so locating the initials that they might be read as part of the contract, instead of a mere notation of an interlineation, the remedy of the defendant was to apply to a court of equity to correct the mistake. On the contrary, the statements of the four witnesses were received as to the entire transaction relating to the alteration of the contract, and the intentions with which all the alterations were made and the initials were placed on the paper.

In charging the jury the learned justice (whose charge is set out to full on the record) stated that the disputed question between the parties was what alteration was made; and after giving a statement from the plaintiff's evidence, substantially as above, he gave Judge Gilhooly's statement of the entire alteration, as follows: "Then Isham took his pen and interlined the words 'the Company and by,' making it read, 'by the Company and by you.' Judge Gilhooly then suggested that Isham should put his initials, 'H. H. I.,' to witness the alteration. Isham substantially testifies in the same way. Fowler and Cooper as positively assert that Isham agreed to be responsible for the note, and that Isham then wrote in the interlined words as they now appear, and also erased the word 'you.' The plaintiffs say Isham did alter it as it now is. Isham says he did not. The question is, which statement will you accept, under the evidence?" The justice, after calling attention to the special facts appearing in the case bearing upon the main issue, then said that all these and the other evidence in the cause must be considered, and that the jury must settle "whether you will accept the evidence on the part of the plaintiffs or that on the part of the defendant." The complainant's counsel do not claim that up to this point the rules of law, as laid down by the justice at the trial, required the jury to read the initials "H. H. I." Into the contract, as part of it, but they insist that this was the effect of a subsequent refusal to make a special charge which they requested him to make. The defendant requested the judge to charge "that if the jury shall be satisfied from the evidence that the initials 'H. H. 17 were inserted to the letter of February 8, 1894, for the purpose of noting an interlineation, then the plaintiffs are not entitled to recover in this action." This charge was refused, not in absolute terms, but refused "except as charged," and to this an exception was taken. On the application for a new trial, it was claimed to reference to this refusal that it was an error of law, for the reason that, whether the word "you" was crossed out by Isham or not, he could not be held unless the initials were written as part of the text. In reference to this, as well as the other legal points raised, no error was found by the supreme court, and the rule was discharged. The complainant claims formally by his bill that this refusal to charge, "in effect, declared that that purpose for which complainant's initials, H. H. I., were inserted, could not be considered in a court of law," and that by reason of this ruling, affirmed on application for new trial, complainant's defense arising out of this alleged mistake in placing his initials where they could be read into the contract was in fact overruled, as an equitable defense not admissible at law. This overruling of an equitable defense not available at law is the special equity upon which complainant applies to a court of equity, notwithstanding the verdict, for relief, and on the general jurisdiction of a court of equity to reform mistakes in written instruments. The affidavits to the bill, and the answer under oath, so far as relates to the circumstances of the alteration, and to the statements made as to the object of the insertion of the initials in the letter, present substantially the same case on each side, as presented at the trial at law, except possibly in the following particular: in the affidavits to the present bill it is stated by Isham that there was no margin to the paper in which to place the initials, and that they were underscored by him, with the object of parenthesizing them. In the evidence at the trial I have not found this statement of the reason of the location of the initials, or of the underscoring, given by either Mr. Isham or Judge Gilhooly. This is, however, a matter of detail, and, so far as relates to the facts at issue, the defendants here place themselves substantially upon the same ground taken by them to the suit at law; and they set up specially, by their answer, that the verdict and proceedings at law are conclusive upon the facts now in issue on this bill, and pray the same benefit thereof as if the verdict and judgment had been pleaded. In relation to obtaining the benefit of a former adjudication, our practice, as I understand it, permits the defense to be raised by answer as well as by a formal plea, following in this respect the general rule of the American courts.

Lyon v. Tallmadge, 14 Johns. 501, 511; Black, Judgm. § 783. And the defense of former adjudication being in its very nature a preliminary question in the cause, which should regularly be disposed of before proceeding to examine the evidence anew on the merits, the proper practice would seem to be that where this preliminary question on the record is ripe for decision, on the application for preliminary injunction, and no special reason appears for reserving the decision of the question until final hearing, the question should be disposed of as a preliminary question on the motion for preliminary injunction. This was the course taken by Chancellor Williamson in Brown v. Railroad Co. (1860) 13 N. J. Eq. 191. An injunction was here dissolved on motion upon the ground, among others, that the claims and issues involved in the cause had been virtually decided in a prior suit between the parties in another state. The judgment in that case was obtained in another state, and had not been formally pleaded as a bar, but it appeared on the record; and Williamson, Ch., says (page 196): "This court, sitting as a court of equity, ought not to permit a party who has had his rights fully investigated and decided in a court of equity in another state to avoid a final decision in that tribunal, and to raise the same questions upon the same facts, and to ask a reinvestigation at the hands of this court." He therefore considered the question of res adjudicata on motion to dissolve the injunction, and dissolved the injunction and dismissed the bill upon this ground. If a preliminary injunction in the present case would, under this practice, be dissolved on motion, and the bill dismissed, it would seem to be clear that no preliminary injunction should go, but that the application should be refused. So far as relates to the effect of the verdict, the case has been fully presented on both sides; and, in view of the fact that the entire proofs which would be relevant to this point on final hearing seem to be presented on this application as fully as they would be presented on final hearing, it is a case where, in the interest of all parties, this preliminary question should be disposed of on this application, instead of deferring decision upon it until final hearing, where it will still remain as the preliminary question after the taking of evidence on the issues. This course will also probably enable the parties, with the least delay, to obtain a decision on appeal on this preliminary question. I will therefore proceed to consider and dispose of this question on this application.

Where the defense is clearly an equitable one, which could not be made available at law, it is entirely settled that a court of equity can relieve against a verdict obtained purely on the legal liability. Railroad Co. v. Titus, 27 N. J. Eq. 102, and cases cited page 106, approved on this point on appeal, 28 N. J. Eq. 269, 270; Holmes v. Steele, Id. 173, 176; Smalley v. Line (Runyon, Ch. 1877) Id. 348, 352. Borcherling v. Ruckelshaus (1892) 49 N. J. Eq. 342, 24 Atl. 547, also decides that where the defense offered at law is overruled at the trial as being in fact an equitable and not a legal defense, the verdict and judgment is not an estoppel to a bill, based on the equitable defense, to be relieved against the verdict, and that the ruling of the court of law at the trial may be accepted as final on the question of its admissibility at law, without taking the review of a higher court on exception and error. The ruling of the trial judge which is here relied on as having the effect of overruling the equitable defense offered by complainant was sustained on review by the higher court, and must therefore, undoubtedly, be taken as the law of the case. The crucial question in the case, however, is whether this refusal to charge, so sustained, can, under the circumstances of the trial, shown by the entire evidence and charge, be fairly construed to have been a ruling that in a court of law the initials must be read into the contract, as part of it, or to have overruled the defense set up, that the initials were so placed by mistake. This alleged mistake in the location of the initials is the only equitable defense or claim on which an injunction can now be based. For although a court of equity may have jurisdiction to declare an instrument forged, and to order it to be delivered up (Peake v. Highfield [Gifford, M. R., 1826] 1 Russ. 959, and cases cited), yet the issue of forgery is generally sent to a jury in such cases, and in this case the verdict of the jury is plainly final in favor of the plaintiffs on the question of forgery, which can, as it seems to me, no longer be controverted, either alone or in connection with the question of the mistake.

Proceeding, then, to the consideration of the question whether the equitable defense of mistake in locating the initials was overruled by the refusal to charge, it is clear, as a starting point, that it was not, in terms, a ruling to the effect that the initials must, in the court of law, be read into the contract as part of it, and that the question of the intention of placing them could not be admitted". No such claim is made, nor can it be claimed that any such rule of evidence was applied at all in this case, or that the complainant was prevented in the trial at law from giving as fully as he has here given on his affidavits to the bill his entire case as to the identity of the paper signed, and as to his intentions in placing his initials upon the paper, as well as in relation to the erasure; and, in refusing to charge, the justice did not refuse absolutely, but only refused "except as he had charged," thereby against giving to defendant the benefit of his evidence on this point. This refusal, as it seems to me, certainly was not intended by the justice as instructing them that they must read the initials into the contract notwithstanding the defendant's evidence. I do not think it could have been so interpreted by the jury, nor does it seem to have been presented by counsel to the supreme court as having that effect. The objection tothis ruling, as there taken by the briefs of counsel, which have also been submitted to me as part of the record to be considered on this application, was that by the refusal the justice failed to give to defendant the benefit of a ruling to which he was entitled, viz. that he could not be held unless the initials were read into the contract, whether the erasure of the word "you" was afterwards made or not, and that by this refusal the effect of the erasure was thereby magnified, and the jury misled. But it was not at all claimed by defendant's counsel in the briefs that the ruling had the effect now insisted on, of requiring the jury, in a court of law, to read the initials into the contract, without regard to the evidence of their intent and purpose. In reference to this refusal to charge, no error was found by the supreme court, but no opinion was filed, so that there was no express adjudication or ruling by the supreme court that the refusal to charge had the effect now contended for, or that, if so construed, it properly declared the law. There is therefore, on the record of the case at law, nothing to show that the rule of legal evidence now claimed to have been applied was expressly laid down, either at the trial or by the supreme court; and even on the assumption that this court is entitled in this case to infer or deduce such reading, in the absence of an express declaration to that effect by the court of law, it is certain, I think, that such deduction or inference must appear to be fairly warranted on a consideration of the whole case on the point in question as presented at the trial. Upon such consideration, I do not think the ruling in question, or its affirmance, can be considered as having the effect now claimed. Considering the present application in its entire scope appearing from the record, the complainant's situation, stated in its most favorable aspect, seems to be as follows: He was sued at law upon a written instrument in relation to which he had two defenses,— mistake in locating his initials in one portion of the contract, and alteration after execution of another portion. Without applying to a court of equity to take jurisdiction as to the defense of mistake, either alone, or as drawing to it also the jurisdiction to direct a delivery up of the altered instrument, he set up at law, on the record, the single defense of alteration. The case, as presented by both sides at the trial, was one in which the direct evidence on the two points of initials and erasure was necessarily intimately connected and interwoven; and defendant's evidence produced at the trial embraced all of his direct evidence relating to mistake as well as to alteration, which was received without objection, and the jury were clearly directed by the trial justice that, if the evidence for defendant was believed, no action at law was sustainable. The justice refused to direct the jury that defendant's evidence as to mistake, if believed, created a primary and separate cause of defense, independent of the defense of alteration, but did not withdraw the defense of mistake in connection with the defense of alteration, as one entire defense, from the jury, and, on the contrary, again expressly instructed them to find in favor of the defendant to the action if his statements as to the execution of the instrument (which included both mistake and alteration) were believed. The jury found a verdict against defendant, and, on review of this verdict, complainant claimed that the defense of mistake was a separate and primary defense, to the full benefit of which the defendant was entitled, and that the trial judge, by the refusal to charge, had deprived him of the benefit of this defense to this extent. The court on review found no error at law, or misdirection, in the manner of submission. The complainant now applies for equitable relief against the verdict, on the ground that the defense of mistake was overruled at law. The relief in equity must be granted, if at all, by the trial separately of the defense of mistake; for, as to the defense of alteration, the verdict of the jury is clearly final and conclusive. If this be the correct statement of the case, then, as it seems to me, it is clear that the present application to equity is really based, not on the fact that the defense of mistake was overruled at law, as being an equitable defense only, but that the trial court, after admitting the defense as a defense at law, failed to give it the full separate effect to which the defendant in the action claimed it was entitled in this particular case when once admitted as a defense in the court of law. The court, on review, held that this course was not erroneous at law, but did not declare that the evidence relating to mistake was not admissible at law, and, on the whole case, refused to disturb the verdict. To grant now, in equity, a retrial of the case solely upon the separate defense of mistake, would be, as it seems to me, a review of the correctness of the decision of the supreme court as to the manner in which the defense of mistake, when once admitted in a court of law, should be treated in connection with other detenses, rather than an instance of exercising the undoubted jurisdiction of a court of equity to sustain an equitable defense which is not admissible and has been overruled at law. The defense of mistake in this particular case has been, by the conclusive action of the court of law, substantially held to be a defense concurrent at law and in equity, and it has been admitted as such. The treatment of this defense by the court of law after admitting it as a legal defense may be ground of review upon writ of error, but cannot be ground of retrial of the defense in equity for the purpose of correcting this supposed error of the court of law. I am of opinion, therefore, that the only question of fact which can now be relied on as a basis of equity jurisdiction has been substantially tried in a court of law, and the verdict is final upon this court, so far as this question is concerned. The application for preliminary injunction is therefore refused, and the rule to show cause is discharged.