Miller v. Waldoborough Packing Co.

34 A. 527, 88 Me. 605, 1896 Me. LEXIS 60

• Court: Supreme Judicial Court of Maine
• Decided: March 25, 1896
• Status: Published

Opinion

Emery, J.

This is an action at law upon a promissory note, and was entered at the April Term, 1892. At the April Term, 1895, the counsel for the defendant filed the general issue plea denying the alleged promise. He further filed in the form of a brief statement, under the general issue, a written allegation of various matters of fact, all extraneous to the question of the defendant’s alleged indebtedness. Indeed, the counsel does not claim that the allegations in his brief statement show any matter in denial or avoidance of the plaintiff’s declaration. He practically concedes that they show no ground of defense. He does claim, however, that they show good grounds in equity why the plaintiff should not have the judgment she might be entitled to at law, or, at least, should not levy her execution upon certain specified property formerly of the defendant corporation. He prays, therefore, that she be restrained from taking such judgment and making such levy.

This anomalous procedure upon the part of the defendant is. now authorized by the Law and Equity Act of 1893, c. 217, § 4,, that act authorizing the defendant in an action at law to bring-to the notice of the court., by^pleading in the same action, anyr matters which would entitle him to relief in equity against the claims of the plaintiff, even though they'- constitute no defense at law. Without that statute, the defendant would have been obliged to bring such matters before the court by a separate suit in equity. With the statute, he can require the court to consider them and afford him in the same action the relief to which they entitle him. In this case, the plaintiff has demurred to the defendant’s brief statement of equitable matters ; and thus, by force of the act of 1893, the question whether the-defendant has any grounds for the equitable relief sought, can be determined in this action at law by a judgment that will conclude the parties finally both at law and in equity.

The gist of the matter alleged by the defendant seems to be-this : The defendant corporation before the date of the plaintiff’s, attachment had essayed to convey for an adequate consideration its entire property. Within four months after the attachment, the defendant corporation was adjudged an insolvent debtor upon proper proceedings, and an assignee appointed. The plaintiff proved against the insolvent estate, in the insolvent court, the same note sued upon in this action. The plaintiff, however, questions the validity of the prior conveyance by the corporation, and intends, if she can obtain judgment against the corporation, to levy her execution upon that property as well as to take her dividend from the estate in the insolvency court. Such avowed purpose of the plaintiff delays and embarrasses the settlement of the estate in insolvency, inasmuch as that estate consists almost entirely of the property so essayed to be conveyed, and hence no dividend can be safely paid so long as the plaintiff is at liberty to attempt a levy on that property.

The counsel for the defendant does not claim, in argument, :that the simple facts that the defendant corporation is an insolvent debtor in the insolvent court, and that the plaintiff has proved her note in that court against the insolvent estate, are or should be a bar even in equity to her proceeding to judgment in her action at law in this court. Insolvent corporations are upon a different footing from insolvent individuals in the insolvency court under our statute. The individual debtor may be discharged from his debts. The incorporated debtor cannot be discharged from its debts. 11. S., c. 70, § 61. The obligation of the corporation and its stockholders remains notwithstanding the sequestration of its property by the insolvency proceedings. The creditor’s right to a judgment against the corporation is essential to his enforcement of his rights against the stockholders. B. S., c. 46, § 47. Coburn v. Boston, &c., Company, 10 Gray, 243.

The defendant’s counsel insists, however, that the plaintiff’s declared purpose to obtain a judgment at law and levy her execution upon the property which the corporation had conveyed before her attachment, and the proceeds of which constitute the estate now being administered in the insolvency court, does show good cause why she should not be allowed to proceed to judgment, or at least should be restrained from levying her execution upon the property conveyed. The argument is that the plaintiff is evidently seeking by means of a judgment and levy to secure an advantage over the other creditors of the corporation, and hence the court should in the interests of equality, and consequent equity, restrain her from the use of those means. As showing both the purpose of the plaintiff and the duty of the court, we are cited to the case, Miller v. Kennislon, Judge, 86 Maine, 550. It is further argued that the assignee in insolvency cannot safely proceed to make division of the money in his hands, largely the proceeds of the conveyance, until the plaintiff is restrained from attacking that conveyance. Counsel apprehends that, if such attack should be successful, the grantee in the conveyance would recover the purchase money of the assignee, or at least fasten a lien therefor upon the proceeds.

As to the first argument, it is difficult to see what concern the defendant corporation has with the attempt or hope of the plaintiff to obtain an advantage over other creditors by the means indicated. The corporation has now no property whatever. It has all been conveyed away or assigned in insolvency. The creditors now have control over its administration, and have ample remedies to enforce its equal distribution among themselves. The defendant is interested, perhaps, in its speedy and economical administration, but not in its ratio of distribution. Its indebtedness is reduced to the same extent however the assets are divided among the creditors. If one creditor is seeking to get more than his proportional share, and is using means likely to accomplish that end, it is at the expense, not of the insolvent corporation, but of the other creditors. It is for them to interpose to defeat that purpose, if they desire. The plaintiff’s efforts do not seem to have alarmed the other creditors so far.

As to the second argument, there is no statement in the equitable plea that the grantee under the conveyance would have any remedy against the corporation, or any lien upon its assets in the event of the conveyance being declared inoperative ; nor is there any statement of facts which tend to show any such remedy or lien. No color of light is shown in the plaintiff to levy successfully on the property so conveyed; nor does it appear that such a levy could by any possibility prevail against the conveyance. The allegation is positive that the entire property and estate of the corporation were sold and conveyed in good faith, and for an adequate consideration, long before the plaintiff’s attempted attachment. According to the allegations in the equitable plea, the plaintiff is pursuing a will-o-the-wisp, which pursuit may amuse, but cannot possibly harm the defendant.

But aside from all allegations, or lack of allegations in the plea, ought the plaintiff’ at the sole instance of her debtor to be restrained from trying to collect her debt out of what she believes to be still her debtor’s property, but which both the debtor and the assignee refuse to recognize as such property ? As already said, the plaintiff is not attempting to levy on property to which the assignee is asserting any claim. Apparently it is precisely because the assignee will not make any claim to the property, that the plaintiff seeks to secure it for her debt. In this effort she may become involved in law suits with other parties, but in these suits the defendant, her debtor, has no occasion to interpose. It may, indeed, be pertinently questioned whether a creditor should be enjoined at the instance of anybody from attempting to show that certain property is subject to seizure upon execution for his debt. There is nothing inequitable in vigorous and persistent efforts to subject all of a debtor’s property (except what is exempt by law) to the payment of his debts. The other claimants of the same property can ordinarily fully assert their rights in defense to any attack by the creditor. In this case, however, it is safe to say that until the assignee claims the property, or those claiming under the alleged conveyance seek an injunction, no reason is shown why the plaintiff should be hindered in her pursuit. It follows that the demurrer must be sustained and the relief prayed for be denied.

Having adjudicated as above upon the merits of the offered defense, it may be serviceable to consider some points in practice, suggested by counsel under the Law and Equity Act of 1893, chapter 217. The plaintiff’s counsel has made three points against the defendant’s procedure : (1) that the defendant could not properly allege such purely equitable matter in defense, until it had obtained an order of court requiring the parties to strike out their pleadings at law and to plead anew inequity; (2) that, inasmuch as the matters alleged by the defendant are purely equitable, the}' should be alleged in the form prescribed by the chancery rules, and the equity practice ; (3) that, inasmuch as the relief prayed for is an order or decree against the further prosecution of the action (or practically an injunction), the pleading should be verified by the affidavit required by the chancery rules in bills praying for an injunction.

There does not seem to be any occasion for changing the suit from one at law to one in equity. An action at law is prima facie a plain, adequate and complete remedy for the collection of a promissory note. The plaintiff is only asking for a judgment for money. It does not yet appear that the rights of these parties "can be better determined and enforced by a judgment and decree in equity.” By section 4 of the act of 1893, any matter which would be ground of relief in equity against the plaintiff in an action at law, may be pleaded in the action at law. This the defendant did. As to the form of pleading such matter, the same section provides that the pleading shall be in the form of a brief statement under the general issue. This form the defendant observed. The chancery rule requiring verification applies to pleadings in an equity suit, not to statute equitable pleadings in an action at law. Through all the pleadings in this case, the action remains one at law in which usually no verification of pleadings by affidavit is required.-

It is urged, however, that by section 6 of the act of 1893, the court in granting restraining orders and injunctions in actions at law under equitable pleas, must proceed "according to the usual practice, of courts of equity,” and that, according to that practice no such order or injunction is ever granted except upon a bill or petition supported by affidavit. Section 6 seems limited in its application to actions at law in the superior courts in which equitable defenses are pleaded. Section 4 seems to sufficiently declare the power of the court in such actions in the supreme judicial court. Both sections, however, seem designed to declare the enlarged powers of the court, rather than to prescribe a limited procedure.

In an equity suit, the party seeking equitable relief first invokes the power of the court and brings the defendant into litigation. If he desire an injunction upon the defendant, he should support his petition by affidavit, and such is the rule in equity suits. In an action at law, the party seeking equitable relief has already been brought before the court by his adversary. The relief sought is solely against that adversary and from some claim in, or from some consequence of, that action. The adversary initiated the litigation and thereby, under the act of 1893, opened up the whole matter legal and equitable, and hence should be prepared for any phase it may assume. There seems to be no great reason for imposing upon the other party, thus brought into court, the restrictions and requirements imposed upon the originator of the litigation. The court has for years summarily exercised certain equity powers in actions at law, without the forms and restrictions of equity procedure, as where the justice of the court assesses the damages in certain actions without the intervention of a jury, and thus affords equitable relief from the penalty of a bond or other covenant. Philbrook v. Burgess, 52 Maine, 271. Our view of the act of 1893 is that, in permitting equitable pleas and equitable orders and decrees in an action at law, the legislature did not intend to change the character of the action, or to import into it the peculiar formalities and technicalities of a suit in equity. The general purpose of the act is to simplify and speed procedure.

The defendant’s counsel in turn has suggested that the plaintiff’s counsel erred in demurring to his equitable plea, since technical demurrers to pleas in equity are not used. But the defendant’s pleading is not in equity. It is a pleading in an action at law now expressly authorised by statute, and can be met like any other pleading at law by a demurrer, traverse or replication, and can be further met under the statute with a counter brief statement of matter of equitable relief against the defense thus set up.

Both parties appear to have proceeded correctly and without difficulty or hesitation. They have now received an authoritative adjudication, without being remitted to another suit or to another gate of justice.

The result of this adjudication is that judgment must now be ordered for the plaintiff. This result of invoking the statute of 1893, is perhaps unexpected, but it is logical and just. The sole foundation of a suit in equity to enjoin the prosecution of an action at law, or the enforcement of a judgment at law, is the absence of any adequate defense at law. In a suit in equity to obtain such relief, it must be made to appear that the complainant is obliged to resort to the equity jurisdiction of the court,— that without relief in equity, he must suffer judgment and execution at law. By thus asking the court to consider the facts upon its equity side, he submits whether they entitle him to any relief from the action or judgment. If these facts show a legal defense, or do not show any defense at all, the relief in equity will be denied. It is only when the facts show an equitable defense, and further show that there is no adequate defense at law, that relief will be granted in equity. Bachelder v. Bean, 76 Maine, 370; Hapgood v. Hewitt, 119 U. S. 226; Grand Chute v. Winegar, 15 Wall. 373; Worthington v. Lee, 61 Md. 530.

If, instead of resorting to a bill in equity, a defendant pleads the same equitable matter in the action at law under the act of 1893, the same inferences should generally be drawn. The defendant thereby usually admits that he has no defense at law.

He has, indeed, asserted by his plea of the general issue, that he has a complete defense at law in that he never made the promise declared on ; but a plea of the general issue may be waived by pleading other matter inconsistent with that plea, as in the case of a plea puis darrein continuance. Morse v. Small, 73 Maine, 565. So the seeking equitable relief against the action or the judgment by pleading equitable matters inconsistent with the general issue, may be held to be a waiver of that plea.

It does not necessarily follow that every equitable plea filed under the statute of 1893, is a waiver of the general issue; or that it is always to be inferred from such a plea, that there is no legal defense. The inference should be from the matter of the plea, rather than from its form. If the circumstances alleged in the defendant’s equitable plea do consitute a legal defense and he has only mistaken the proper form of pleading, then his plea may be reformed, or treated as a plea of legal matter in bar; but if those circumstances do not show any defense, either legal or equitable, the plain inference usually is that there is no defense. The act of 1893 was not enacted to permit defendants to delay actions at law by withholding legal defenses until supposed equitable defenses were disposed of. Successive adjudications upon equitable and legal defenses were not contemplated. The purpose of section four of that act was to permit a defendant, who otherwise would be obliged to resort to a suit in equity for a defense, to interpose the facts constituting that defense directly in bar of the action. It gives him no other privilege or advantage. Since the statute, he must, as before, rely upon his legal defenses if he have any, and it is only when he has no adequate legal defense, that he can properly ask the court to consider his equitable defenses. If he be in doubt whether the facts constitute a legal or equitable defense, or any defense, he may set them out in full under the statute and submit them to the court. If it then appear to the court that the matters so set out constitute no defense, either at law or in equity, then the defendant should submit to judgment. He must be supposed to have stated his whole case. He cannot afterward be heard to say that there are other facts which he has not stated and which are a legal bar to the action. To permit him to do so, would pervert the act of 1893 from an act to facilitate the more speedy adminstration of justice as intended, to one more obstructive of justice.

In this case we infer, we think rightfully, that the defendant in its equitable plea has stated its entire defense. That state-, ment, as we have seen, is insufficient both at law and in equity. The result is that the plaintiff should now have judgment.

Exceptions sustained. Plea adjudged insufficient. Judgment for plaintiff.