Bath South Carolina Paper Co. v. Langley

| S.C. | Jun 19, 1885

The opinion of the court was delivered by

Mr. Justice McIver.

On August 5, 1878, a tract of land, with the improvements thereon, consisting of a paper factory and its appurtenances, belonging to the plaintiffs, was offered for sale under various judgments against said company and bid off by the defendants through their agent, Mr. Henderson, and on the next day, titles having been made to them by the sheriff, they took possession of the property. A very short time after they went into possession of the property, to wit, August 20, 1878, the dam of the pond which furnished the water power necessary for running said factory was broken, and in consequence thereof, the property could not be and was not used by the defendants for the purposes for which it was intended.

On August 21, 1878, an action was commenced by Barrett and others against the plaintiffs herein and the defendants herein and the judgment creditors of the company with a double aspect. 1st. To obtain foreclosure of certain alleged mortgages which had been executed by the Bath Company on said property to the said Barrett and others, the validity of which was questioned; and, 2d. In the event that the court should determine that said mortgages were not valid liens as against the judgments, then for the purpose of setting aside the sale of the property to the defendants of August 5, 1878, upon the ground of fraud therein. The case was heard by Judge Kershaw, who rendered a decree that the mortgages were not valid liens, and that said sale be set aside upon the ground of constructive, not actual, fraud, and upon appeal his decree was affirmed. Thereupon the defendants, on March 30, 1880, surrendered the possession of the said property and the same was subsequently resold under the decree of Judge Kershaw. For a more full account of the proceedings in the case thus briefly referred to, reference may be had to Barrett v. Bath Paper Company, 13 S. C., 128.

On April 21, 1880, and on May 4, 1880, the plaintiffs commenced the two actions, in which this appeal is taken, against the defendants, which were heard and will be considered together. By the first they seek to recover damages for the illegal seizure and detention of the said property, for the loss of the dam and injury to the wood-work and machinery; and by the second they seek to recover damages for the destruction by fire of a building on the premises, and also the sum of $1,000 received by the defendants from an insurance company for the building so destroyed by fire during the time the defendants were in possession of the property, which insurance, it appears, was effected by the defendants.

By consent of all parties the issues in these two actions w.ere referred to a referee “for trial and determination.” The referee made his report, in which he found that, the claim of the plaintiffs in the first action for the use of the property was barred by “the plea of res adjudieata, or rather the principles of it as used in equity,” and the claim for damages by the breaking of the dam, and the consequent injury to the wood-work and machinery, could not be sustained, because there was no proof of negligence on the part of the defendants ; and in the second action he found that the plaintiffs could not recover the insurance money, as there was “no such privity between them and the defendants, or the insurers, as entitled them to recover from the defendants the insurance received.” Ho therefore found generally for the defendants in both of the cases.

This report, with the exceptions thereto, was heard by Judge Hudson, who held: 1st. That “the doctrine of res adjudieata, waiver, or estoppel, does not bar these actions.” 2d. That as to the claim for the use of the property, or the rents and profits thereof, it could not be sustained, as no rents and profits were, or could have been, realized by the defendants in the condition in which the property was, within a very few days after they took possession, which condition was not due to the fault of the defendants. 3d. That no damages could be claimed for the loss of the dam and the consequent injury to the wood-work and machinery, inasmuch as this was not a consequence of the negligence of the defendants, but resulted from causes for which they were not responsible. In the other action he heldthat the plaintiffs, not being in any way privy to the contract of insurance, could not recover the insurance money received by the defendants. He therefore rendered judgment dismissing the complaints in both of the actions.

From these judgments plaintiffs appeal upon numerous grounds, which need not be set out in detail here. Inasmuch as these arc law cases, and not cases in chancery, it is quite clear that we have no jurisdiction to review any findings of fact, but are confined solely to the correction of errors at law, assuming the facts to be as found below. Hence it will not be necessary, or even proper, for us to consider any of the questions of fact raised by the grounds of appeal. The defendants also, by the form of exceptions, seek to sustain the judgment below in the first action upon other grounds than those upon which it is placed by the Circuit Judge, and for this purpose contend that the plaintiffs could not recover anything for rents and profits, or for rental value, because the complaint was simply for negligence; and, 2d. That the plaintiffs were estopped from recovering any rents and profits, or rental value, by the proceedings in the former case of Barrett v. Bath Paper Company upon the principles of res adjudieata.

We do not propose to consider the various exceptions in detail, but simply to determine what we understand to be the fundamental and controlling questions, in the case. The fundamental idea upon which the argument for the plaintiffs rests is that the sheriff’s sale on August 5, 1878, was absolutely void, and that the defendants, in taking and holding possession of the property under that sale, were tort feasors, or trespassers in the same sense and to the same extent as if they had taken such possession vi et armis. This, we think, is not a proper view of the relations of the parties. The sale certainly was not absolutely void; for, if so, it would not have been binding on any of the parties, and might have been so treated whenever and wherever it was encountered. Now, it is quite clear that if the defendants had refused to comply with their bid, they could have been compelled to do so, and it is equally clear that the sale could not have been treated as a nullity in any collateral proceeding, but that it was necessary that it should be assailed and set aside in a direct proceeding, as was done. Nor do we think that the defendants could be regarded as trespassers, taking possession vi et armis. They went in peaceably, and with the acquiescence of plaintiffs, under a clear legal title; and it seems to us an entire misuse of terms to characterize them as trespassers. If the position taken by appellants be correct, then it would follow that the sale by the sheriff and his title might have been disregarded and the defendants might have been sued for trespass the moment they went into possession, and this surely would not be contended for.

It seems to us that the relations of the parties were more like that of trustees and cestui que trust. They had the legal title, and therefore the right to possession, but inasmuch as they had acquired such title under circumstances that a Court of Equity, from considerations of public policy, would not allow them to retain it, they could, by proper proceedings in that court, and only in that court, be required to surrender their title and account for the rents and profits while in possession. Upon the same principle, if one buys trust property with a knowledge of the trust, he will be declared in equity a trustee, and will be required to surrender the property, notwithstanding he may have the legal title, and account for the rents and profits. But certainly such a person could not be regarded as a trespasser, and as such liable for damages.

In this case it does.not appear that the defendants personally did or said anything which vitiated the sale: in fact, it does not even appear that any of them were present at the sale. What was done was the act of their agent, Mr. Henderson, and Judge Kershaw in his decree very properly exempted him from any charge of moral wrong, and it is manifest that the Supreme Court took the same view, for their opinion rests solely upon the ground that the arrangement made by Mr. Henderson necessarily tended to chill the biddings, inasmuch as by reason of such arrangement some of the judgment creditors lost that motive to bid at the sale which otherwise would naturally prompt them to do so in order to save their debts, and thus that competition, which is the life of such-sales, was prevented. The mere fact that the defendants desired to obtain, and did obtain, the property at a price less than its real value (and this is all that the defendants can be charged with having done personally), would not have vitiated the sale; the real vice was that their agent made such an arrangement as would necessarily tend to diminish the number of bidders and thus prevent that competition which might otherwise have been naturally expected, and this from considerations of public policy the law will not permit.

It not unfrequently happens that acts involving no moral wrong are set aside by a Court of Equity upon the ground of legal fraud, as contradistinguished from moral fraud, because they violate some settled principle of public policy. Thus a person who makes a voluntary conveyance with the most innocent, or even laudable, motives, may find such a conveyance declared fraudulent in law and set aside; or, as in Dudley v. Odom (5 S. C., 131), a contract, which it was conceded violated no moral rule, was declared fraudulent, because made in contravention of a well settled principle of public policy. In such cases it would be clearly a misuse, if not an abuse, of terms, to characterize the persons who made such conveyances or contracts as tortfeasors in the sense of those terms as used by the counsel for appellants. So here we think it is a mistake to suppose that the act of these defendants, through their agent, Mr. Henderson, was of such a character as would justify such a charge.

It seems to us, therefore, that the relation of the defendants to the plaintiffs was more like that of a trustee than a trespasser, and hence it has been argued with much force that the claim now made in the first action was a necessary incident to the former suit, and should have been there adjusted and not made the subject of a second action. It is undoubtedly true that the plaintiffs could, in the former action of Barrett v. Bath Payer Company and others, have required these defendants to account for the rents and profits, and such has been the usual practice in this State. Martin & Walter v. Evans, 2 Rich. Eq., 368, and again in 1 Strob. Eq., 350; Brown v. McDonald, 1 Hill Ch., 297; McDonald v. May, 1 Rich. Eq., 91, and other cases cited in the argument for respondents. And we see no reason why, in the same case, the defendants, by proper pleadings and proofs, might not also have been made to account for any damages done to the property by their fault or misconduct while the same was in their possession; for while it is true that a claim for damages is not ordinarily within the jurisdiction of the Court of Equity, yet where they are incidental to the other relief sought of which the court does have jurisdiction, then a Court of Equity may also proceed to award damages as ancillary to such relief, either by a reference to the master or by ordering an issue of quantum damnificatus to be tried by a jury. Bird v. Railroad Company, 8 Rich. Eq., 46, and the authorities therein cited; Lamar v. Railroad Company, 10 S. C., 476.

Courts do not try cases by piecemeal, and a Court of Equity especially delights to do full and complete justice. Thus a claim which is necessarily incident to one that has already been adjudicated cannot be made the ground of a second action, even though it may not have been considered or passed upon in the former action. A party cannot, after having obtained judgment for the principal of a note or other interest-bearing demand, bring a second action to recover the interest, even though he may have wholly omitted to claim interest in the first action, because the interest, being a necessary incident to the principal, should have been demanded in the first action, and therefore cannot be made the ground of another action. So, too, in the old action of trespass to try titles, which by the act of 1791 was substituted for the former action of ejectment, in which the party could only recover the land, and was put to his second action for the recovery of rents and profits, a party having recovered the land could not maintain a second action for rents and profits, although the act simply permitted, but did not require, such a claim to be embraced in the first action. Sumter v. Lehre, 1 Tread. Con. R., 102; Coleman v. Parrish, 1 McCord, 264; Lowrance v. Robertson, 10 S. C., 33.

It is contended, however, that in the former case the parties were different, and that the claim now sought to be set up was not a claim of the plaintiffs in that case against the defendants, but that it was a claim by one co-defendant against co-defendants. A Court of Equity takes but little note of how the parties are arrayed upon the record, whether as plaintiffs or defendants, but proceeds to determine the issues, whether they arise between plaintiff' and defendant, or between co-defendants, and nothing is better settled than that a Court of Equity may render a decree in favor of one defendant against his co-defendant upon an issue growing out of the pleadings and proofs between the plaintiff and such defendants. Such a decree was rendered in Motte v. Schultz (1 Hill Ch., 146), where the following language of Lord Redesdale, in Chamley v. Lord, Dunsany (2 Sch. & Lef., 710), is quoted with approval: “But it seems strange to object to a decree because it is between co-defendants, when it is grounded on evidence between the plaintiffs and the defendants. It is a jurisdiction long settled and acted on, and the constant practice of a Court of Equity; so much so that it is quite unnecessary to state any case in its support” — as well as the following words of Lord Eldon, in the same case: “When a case is made out between defendants by evidence, arising from pleadings and proofs between plaintiffs and defendants, a Court of Equity is entitled to make a decree between the defendants — further, my lords, a Court of Equity is bound to do so. The defendant chargeable has a right to insist that he shall not be made a defendant in another suit for the same matter that may then be decided between him and his co-defendant, and the co-defendant may insist that he shall not be obliged to institute another suit for a matter which may be then adjudicated between the defendants. And if a Court of Equity refused so to decree, it would be good cause of appeal by either defendant.”

This strong and decisive language of Lord Eldon might have been applicable to the present case, if the issue now presented had been raised by the pleadings and proofs in the former case. The real object of the former case, and the one which was effected, was to set aside the sale and restore the property to its original owner, and it may be that the claim for damages now made might have been asserted by proper pleadings and proofs in that case, but this does not seem to have been done, and, therefore, the court was not called upon to decide, and did not decide, anything in reference to the present controversy. It is true that the Bath Company were, in the former suit, nominally arrayed on the side of defendants, yet they were really plaintiffs, desiring the same relief as the plaintiffs. In their answer they plainly allied themselves with the plaintiffs, and expressly asked for such relief “as the nature of the case may demand, as fully and completely as if this defendant had instituted the said proceeding.”

But the “nature of the ease,” as made by the plaintiffs in the former suit, did not embrace the demand now made, and whether 'the Bath Company, by joining in the demand for the relief there asked as fully and completely as if they had instituted said proceeding, were bound so to shape their pleadings and proofs as to embrace the demand now made, is a question about which there may well be difference of opinion; and, therefore, we prefer to rest our decision in this case upon the ground upon which the judgment below was placed by the Circuit Judge, sustained, as it is, by the reasons which he has given, which need not be repeated here. The relations of the parties being such as we have indicated above, it is clear that the Circuit Judge was right as to . the degree of care which the defendants were bound to exercise; and as the findings below established the fact that such care was used, there is no ground upon which the defendants could be made liable for the injury, which the property sustained without fault on their part. So, too, as to the rents and profits; the Circuit Judge having found that none were received,- or could have been received, by reason of causes for which the defendants were in no wise responsible, there is no ground upon which plaintiffs can claim anything on that account.

As to the second action, we agree with the Circuit Judge in the views which he has presented, so far as the claim for damages for the destruction of the building by fire is concerned. Assuming, as we are bound to do, under the findings of fact below, that the destruction of the house by fire was not due to any negligence on the part of the defendants, they cannot be made liable for any damages occasioned thereby.

It seems to us, however, that the claim for the insurance money received by the defendants stands upon a different footing. If, as we have seen, the defendants stood in the relation of quasi trustees towards the plaintiffs, then the money received by them for the insurance on the house of the plaintiffs belonged, ex aequo et bono, to the plaintiffs. This money may be regarded as a compensation, in part, at least, for the loss of property which has been adjudged to be the property of the plaintiffs, and, therefore, in equity and good conscience, it belongs to the plaintiffs. An}* other view would, contrary to well established principle, enable the defendants to make profit for themselves out of the quasi trust property. It is, in effect, money had and received by the defendants to the use of the plaintiffs, and, as such, recoverable by the plaintiffs, subject, however, to a deduction of all amounts actually paid by the defendants, either by way of premiums or otherwise, in effecting or collecting such insurance.

The judgment of this court is that the judgment of the Circuit Court in the first action above considered be affirmed; and that the judgment of the Circuit Court in the second action be reversed, and that said second action be remanded to the Circuit Court for a new trial.