First National Bank v. Parker

101 A. 276, 87 N.J. Eq. 595, 2 Stock. 595, 1917 N.J. LEXIS 459

• Court: Supreme Court of New Jersey
• Decided: June 18, 1917
• Status: Published

Opinions

The opinion of the court was delivered by

Garrison, J.

The bill of complaint is exhibited to collect a judgment at law out of a fund placed in trust for his own use by the judgment debtor. Such a bill will lie to prevent a fraud upon tona fide creditors. Biat. Frauds § 11; Chancery aci § 70.

Upon three previous occasions similar bills were filed by the same complainant, who in each case obtained the relief prayed for. Upon the filing of this fourth bill the vice-chancellor who heard the cause and who had made the previous decrees became convinced that the statutes of this state were being used not to protect a bona fide creditor of the settler of the trust, but to unable such settler to -do what he could not lawfully do, viz., to regain the corpus of the trust fund. Some of the reasons that led the vice-chancellor to this conclusion were stated by him to counsel upon the argument as follows: “When on three successive occasions; namely, in 1910, 1912 and 1914, Mr. Parker has -borrowed on the dates named, respectively, ten thousand, twelve thousand and thirteen thousand dollars in the same manner, and on each occasion the bank has been obliged to resort for the collection of the loans to the same method now pursued, namely, a judgment in New Jersey, personal service upon Mr. Parker out of his own state, in the New Jersey law suit—service which it is reasonably apparent is made possible by Mr. Parker for the convenience of the bank—then a bill in equity in New Jersey identical with the present bill with personal service on Mr. Parker procured in the same way, is not the bank chargeable with knowledge of circumstances that make it impossible to escape the conclusion that when they make the fourth loan in the same manner they are simply making themselves the instrument for Mr. Parker to accomplish indirectly what he cannot accomplish directly?”

The fact that these remarks were made to counsel while the trial was still in progress has a marked significance upon the bona, fides of the complainant. Such a statement by the court while the case was still open afforded an opportunity, if it did not amount to an invitation, to the complainant to offer proof of any facts that would tend to rebut the impression the vice-chancellor had formed as to the collusive character of the suit. That no such proof was offered is practically tantamount to an admission that no such facts existed.

The vice-chancellor had, moreover, the advantages of the familiarity with the case gathered in previous litigations, and of the presence before him of the witnesses. Without these advantages we are in danger of dealing with the case upon more legal abstractions, whereas he dealt with it as the practical application of an equitable remedy to the given case.

In his final conclusions the vice-chancellor, referring to the ■previous litigation, said: “In that litigation complainants became fully apprised of the fact that the trust was void only as to bona fide creditors of Parker’s, and that Parker could not in his own behalf recover from the trust company, the principal of the trust funds. The three subsequent loans made by complainant to Parker, and the proceedings taken in each instance by complainant for recovery from the trust company of the money so loaned, render it impossible to escape tire conclusion that in making the loan here in question complainant deliberately and knowingly constituted itself an agency to enable Parker to regain control of his property. The circumstances that complainant actually advanced money and sought to make a profit for itself is immaterial; the practical status which complainant has deliberately assumed is that of a permanent conduit between Parker and the trust company from which Parker may draw funds at pleasure; complainant has constituted itself a creditor for the sole and definite, purpose of appropriating to itself the superior benefits of that status, creditors’ rights'which appeal to equitable protection are of an inherently different quality. * * * I am fully convinced’that this court cannot be properly made the involuntary machinery for carrying out an arrangement of that nature for the ultimate benefit of Parker.”

We fully concur in the conclusions thus reached by the learned vice-chancellor, and in the consequent dismissal of the complainants’ bill which may well be rested upon a well-grounded suspicion that a collusive deception was being systematically practiced upon the court of equity in order to obtain for one purpose the extraordinary aid it accords only for a totally different purpose.

A positive demonstration of actual fraud is not necessary. In the well-considered opinion in the case of Watts v. Worth, 76 N. J. Eq. 299, Mr. Justice Parker points out that when parties having a. right of action at' law seek the aid of a court of equRy, such court will examine not only the transaction in question, but the relations of the parties and all of the surrounding circum-stances, to the end that if “an atmosphere of suspicion surrounds and permeates the whole case,” a court of equity will refuse its extraordinary relief ' and leave the complainant to his legal remedy. That is this case.

The circumstance that in the ease just cited the same vice-chancellor sat below gives concrete emphasis to the -fact that “stare decisis” is only a more technical term for judicial consistency.

The decree of the court of chancery is affirmed.