Kirkpatrick v. Corning

40 N.J. Eq. 241

Opinion

The opinion of the court was delivered by

Scuddek, J.

Of the power of the chancellor to strike out from the pleadings, matter that is impertinent, there can be no question. Such has been the constant practice of courts of equity, and rules have been made regulating the procedure for striking out all the matter that is irrelevant and calculated to hinder, delay or embarrass the cause. Express authority is also given in section 109 of the chancery act (Rev. 125), and the duty is thereby imposed on the chancellor, “ from time to time, to make such rules and orders to regulate pleadings and practice in the court of chancery as may, in his judgment, render the practice and proceedings therein more efficient, expeditious and simple, and prevent unnecessary cost and delay, and that, for that purpose, he shall have power to change ánd regulate such pleadings and practice.”

In accordance with this statute, rule 215 of the court of chancery was made “ that any objection to a bill or any answer or specific replication, or any part thereof, may be made and adjudicated upon, on motion, without the filing of a demurrer or exceptions ” &c. It gives the benefit of formal proceedings by demurrer and exceptions, on informal motions, promptly heard on eight days’ notice. It is useless, therefore, to discuss the point argued, whether this motion to strike out parts of the bill of complaint after a general demurrer, can now be entertained, and whether it is not in the nature of a special demurrer, after a general demurrer has been filed and hearing had thereon. If there was ever any want of power in the court to strike out prolix, irrelevant and embarrrassing statements and charges in a bill, on motion, there is certainly none now. In the modern practice, orders to amend and strike out are most frequently used instead of more formal objections to imperfect pleadings by demurrer.

The debatable question in this case is Avhether the judgment of the court has been correctly exercised in striking out matters in this bill which are not properly before the court for decision, at this stage of the suit. To decide this point it is necessary to consider whether the alleged objectionable parts of the bill have a tendency, or would be admissible in evidence to show the truth of any allegation in the bill that is material with reference to the relief sought. If so, they should stand; if not, they may be stricken out. Christie v. Christie, L. R. (8 Ch. App.) 499, 503; Story’s Eq. Pl. § 366.

This leads us to an examination of the scope and purpose of the bill and the relief that is sought.

This bill of complaint has been before this court, and the contents will be found stated in the reports. 11 Stew. Eq. 234, on appeal, and 10 Stew. Eq. 54, in the court of chancery. Its general purpose is, on the prayer of Andrew Kirkpatrick, the receiver, who has been appointed to supersede James Ludlum, the former receiver, to be allowed to redeem the lands of James Horner & Co., sold under decree of foreclosure at the suit of Erastus Corning, on the payment of the sum actually due him on his mortgages, crediting the value of the use and occupation since he has been in possession under the foreclosure sale, and also the actual value of the personal property of said James Horner & Co., bought by said Corning at a sale made by Ludlum, receiver; or, if this relief by redemption be not granted, that the sales of real and personal property may be set aside, the former resold, and the latter accounted for at its true value, and the proceeds applied to the payment of Mr. Coming’s mortgage after deducting the credits to which the complainant, as receiver, may be equitably entitled, and the balance, if any, to be paid to him as receiver. The grounds on which this relief is sought are, first, that the title to the lands being in James Ludlum, as receiver, he should have been made a party defendant in the foreclosure proceedings, and, as he was not, no title passed under such sale, and the complainant is entitled to redeem, or have the same set aside.

This court on appeal (11 Stew. Eq. 234) held that neither Ludlum nor the devisees of James Horner, deceased, who were made parties defendant in that case, and were the substantial parties in interest, could set up this objection, because, with full notice and opportunity, they were silent and made no mention of this informality until after the sale; nor could this complainant, who was the successor of Ludlam, as receiver, plead such defect of parties. This accorded with the view of the court below. But on the second ground for relief this court said, in effect, that the allegations of fraud contained in the bill, implicating both Ludlam and Corning, were sufficient to retain the bill, and that the extent of the relief to which the complainant might be entitled must be determined on final hearing. The general demurrer to the bill of complaint was therefore overruled in this court, with this result, that while the complainant, Kirkpatrick, as receiver, was not in a position to set up as a ground of relief against the foreclosure proceedings, the irregularity of not including Ludlum, then receiver, as a party in the cause, this court left all the charges of fraud contained in the bill to be met by answer, and determined on final hearing. These charges of fraud are made broad enough to cover all the dealings between the parties from the inception of the loans on which the inortgages were based, through the proceedings to foreclose; the weak defence of Ludlum, the sale of the personal property, which was bought by Ludlum, while receiver, acting as Coming’s agent in the purchase for an alleged inadequate price; the interference with the bidding at the sale of the real estate by giving notice of the Schuyler lease for water-rights of the mill, held in the name of Mrs. Ludlum, wife of the receiver, ending in the purchase of the mill property by Mr. Corning for the amount of the balance left due on his mortgage, and the establishment of the Pompton Steel and Iron Company, in which Ludlum and Corning have the largest interest. All the proceedings, it is alleged, were intended for the benefit of Ludlum after the balance due Corning on the mortgages was paid, and the result now reached is, that Ludlum, with the aid of Mr. Coming’s encumbrances, has exhausted all the assets of the late firm of James Horner & Co., at Pompton, to which firm, it is said, he is a debtor for about $70,000, and still remains in the substantial enjoyment of the plant and works with the consent and aid of Mr. Corning. The fiduciary relations of Mr. Ludlam to the devisees of James Homer, deceased, as surviving partner, and receiver appointed by the court for the settlement of the business of the firm, are stated in aggravation of these alleged fraudulent dealings. Upon this general statement of the character of the charges of fraud that are made in this bill, there is enough to entitle the complainant to a hearing on the question whether the decree for the foreclosure of the Corning mortgages should not be opened, and the sale of the real and personal property be set aside; or that the complainant should be allowed to redeem the real estate, and have the Schuyler lease assigned to him, on equitable terms. While,.therefore, the irregularity of obtaining the decree of foreclosure by failing to make Ludlum, as receiver, a party defendant in the proceeding, has been waived by the acts of Mr. and Mrs. Buckingham, who are the representatives of James Horner’s estate, neither their supineness nor acquiescence, after knowledge of the alleged frauds stated in this bill of complaint, can conclude the present receiver from inquiring into these alleged matters of fraud behind the decree of foreclosure, and following the decree and sale. There are some creditors left. It is true, they are few in number, and their claims not very great in amount, but, such as they are, this receiver represents them, and the court will protect them. The affairs of the late firm of James Horner & Co. are still unsettled, and the complainant is charged with the responsibility to collect assets and make such settlement under the order of the court that appointed him.

The order of the chancellor treats the decree of foreclosure of the Corning mortgage as conclusive for all purposes, and strikes out all parts of the bill relating to the loans, alleged usury, and true account for the amount equitably due on said mortgages, upon what he supposed was the judgment of this court, as reported in 11 Stew. Eq. 234. But this court there left all the allegations of fraud, which were the second branch of the complainant’s case, undetermined. While, therefore, the decree of foreclosure is conclusive as to the parties who were interested, at the time, in the lands foreclosed, so that they cannot attack it for informalities or want of proper partie \, yet the sale of the real and personal estate may be set aside, and the decree opened, if fraud be shown, and the prices paid for the land and personal estate may be inquired into, to ascertain how much is equitably due from one party to the other. On the assumption that the allegations of complicity in the fraud charged in the bill can be proved to the satisfaction of the court, the decree and sales should not stand in the way of the present receiver. The strong language applied to cases of fraud is that “ deeds, obligations, contracts, awards, judgments or decrees may be instruments to which parties may resort to cover fraud, and through which they may obtain the most unrighteous advantages, but none of such devices or instruments will be permitted, by a court of equity, to obstruct the requisitions of justice. If a case of fraud be established, a court of equity will set aside all transactions founded upon it, by whatever machinery they may have been effected, and notwithstanding any contrivance by which it may have been attempted to protect them. It is immaterial whether such machinery and contrivance consisted of a decree in equity and a purchase under it, or of a judgment at law, or of other transactions between the actors in the fraud.” Kerr on Fraud and Mistake 43, 44.

The allegations of fraud in this bill, consisting of successive acts, all affecting the assets of the partnership of James Horner & Co., and depending on each other, so as to control the amount that will be left for payment of debts, if azzy remaizi uzzpaid, are sufficient to hold the entire bill for hearing ozz such proofs as the complainant may be able to make, without striking out the parts which relate to matter’s prior to the decree of foreclosure, set out in the motion for the order appealed from.

The order will be reversed.

Order u/nanimously reversed.