Clapp v. Ely
Clapp v. Ely
Opinion of the Court
On the 4th of November, 1858, a judgment was entered by confession in the Supreme Court, in favor of Ely, Clapp and Bmveu against Benjamin Parkhurst, for §10,000, upon a promissory note, given on the day the judgment was confessed. At the time the judgment was confessed, there was due from the defendant to the plaintiffs in the judgment, according to the plaintiffs’ own claim, but §3052.94. For the balance of the judgment, $6917.08, the judgment was confessed, upon an agreement that (hat amount should be subsequently advanced by the plaintiffs to the defendant, and the design of the judgment was to cover and secure such future advances. The affidavit made by the plaintiffs on entering the judgment states the true consideration of the note on which the judgment was confessed to be goods sold and money lent by the plaintiffs to the defendant. There is no dispute as to these facts; they are admitted by the plaintiffs in the judgment.
The questions now presented for consideration are—1st. Is such judgment valid by the laws of this state, as against subsequent bona fide creditors of the defendant? 2d. If it is not, may the plaintiffs in error, who are bona fide creditors, have relief against that judgment.?
The answer to these questions depends upon the true construction and legal effect of a statute of this state, to be found in Nix. Dig. 59, § 5. The provision is now incorporated in the act directing the mode of entering judgments on bonds with warrants of attorney to confess judgments, but originally it constituted no part of that act. It was first passed on the 29th of January, 1817, (Pamph. L. 16) and was entitled “An act to prevent the fraudulent confession of judgments.”
By the first section of that act, it is enacted “that no judgment .shall be entered up in any court of record of this
By the second section it is enacted that when parties agree to enter without process any action before a justice of the peace, in the court for the trial of small causes, no judgment shall be entered against the defendant, unless an affidavit shall be made, as prescribed in the first section of the act, and filed with the justice.
In looking for the true interpretation of this statute, is is obvious to remark that the terms of the act are clear. Whatever doubts legal ingenuity may suggest—whatever difficulties common law learning and technical rules may interpose in carrying the act into execution—there can be no doubt as to the intent of the legislature. They intend that no judgment should be entered up by confession, even for a note or bond, unless founded on a real consideration and on a bona fide debt justly due and owing, untainted by fraud, and not prompted by a design to protect the defendant’s property from his honest creditors; and that those facts should be verified by oath before the judgment should be entered. They intended, as they have plainly declared, that no judgment should be entered up in any court of this state, unless the affidavit therein prescribed was made. They intended, moreover, that th-i facts required to be verified by affidavit should actually exist. They did not mean to suppress fraud, by offering
It is important to observe that this is not a practice act— not an act directing (bo mode of proceeding in civil actions, or the form of entering judgments by confession. It deals with substance, not with form—with the reality, and not with the shadow. It is, by its title, declared to be “An act to prevent the fraudulent confession of judgments.” Like every other act for the suppression of fraud, it is entitled to receive a liberal construction at the hands of the court, so as most effectually to suppress the mischief, and advance the remedy.
Again, the language of the act is not merely directory. It does not direct that, in entering judgments, an affidavit shall be made; but its terms are prohibitory: “ no judgment shall be entered,” unless such affidavit he made. Terms which are not regarded as directory, and which cannot be lightly disregarded or evaded.
If, upon the terms of the act, there be room for doubt as to its true meaning, we are then to look to the reason of the law, and to the mischief which it was designed to remedy. At common law, a judgment by confession was valid without an affidavit. It might be entered to secure future advances. It might be confessed without any consideration whatever, though no debt was due, or ever to become due. As between the parties, such judgments were valid'; and where they were fraudulent as against creditors, relief could ordinarily be had only by resort to the expensive and dilatory process of a bill in equity. These judgments by confession, therefore, afforded the most facile and effectual mode of perpetrating fraud. And in seasons of great financial embarrassment, like that which followed the close of the last war with Great Britain, and which existed at the passage of this act in 1817, resort was very extensively had to confessed judg
But the legislature not only prohibited the entry of any judgment by confession, except upon a real consideration and for a bona, fide debt, but they required that the plaintiff in the judgment should, under oath, disclose the true consideration of the judgment, and place it upon record, in order—1. That the court might judge whether there be a legal consideration for the judgment. An ignorant party might believe, or an ingenious or unscrupulous attorney might advise, that there was a legal consideration, when none existed in fact. 2. The true consideration was required to be disclosed upon oath, and to be placed upon record for the more important reason that the bona fide creditors of the defendant might see and know what the consideration of that judgment was, without being driven into a Court of Chancery for a discovery. Fraudulent judgment, designed to cover the defendant’s property, are ordinarily confessed to confidential creditors, friends, or relatives, under circumstances which render a discovery essential to the vindication of justice. The uncertainty, expense, and delay incident to a bill in equity for a discovery would naturally deter any small creditor from venturing upon the experiment. The legislature designed, therefore, by the act, to furnish, upon the face of the proceedings, that discovery to every creditor without a resort to equity. A judgment, therefore, entered by confession without the existence of a bona fide debt, or without an affidavit disclosing the true consideration of the
If there still be any doubt as to the true construction of the act, it is important to resort to cotemporaneous exposition. It is a dictate of common sense, as well as a sound rule of law, that in construing a statute, regard should he had to the light in which the statute was received and held at the time of its enactment. Great regard (says Lord Coke) ought, in construing a statute, to he paid to the construction put upon it by those who lived about the time the law was made, because they were best able to judge of the intention of the makers at the time of making it. Contemporánea expositio est fortissimo, in lege. Dwarris on Stat. 693.
Fortunately we are not left in doubt as to the construction put upon this act immediately after its passage. The act was passed in January, 1817. It contained two sections, the one applying to courts of record, the other to justices’ courts; but in other respects the sections are identical. It is material to call attention to this fact, because the two sections wore subsequently severed, the one being inserted in the act relative to the confession of judgments on bonds with warrants of attorney, and the other introduced, with alterations, into the act constituting courts for the trial of small causes.
The question upon the construction of the statute which we are now considering arose immediately after the act went into operation, and was decided by the Supreme Court, in Parker v. Griggs, 1 South. 161.
In October, 1817, a judgment was confessed in a justice’s court, the suit having been commenced without process, and no affidavit made, as prescribed by the act. A certiorari was brought to reverse the judgment, in the name of the defendant, but in reality for the benefit of the sureties on his bond for the prison limits.
Mr. Scott, arguing for the plaintiff in certiorari, objected that the plaintiff in the judgment had not made and filed
Mr. Wood, for the defendant in certiorari, said that the statute was made for the benefit of creditors only, and not of the party to the fraud, the debtor himself; that it was a mere enlargement of the law against fraudulént judgments, which operated only in favor of creditors; that it made a judgment entered in this way ipso facto fraudulent [not void); and that, having thus determined the character of the judgment, it left it to !the same construction and operation as every other of the same character ; that the design of the statute was proved by the affidavit being required ; that although there was evidently error in this proceeding, and error of which creditors might avail themselves, yet that the defendant in the judgment could not take advantage of his own wrong.
■ Chief Justice Kirkpatrick, in delivering his opinion, said—• “.The only question which presented itself upon this case being moved at the bar was, whether the party himself confessing the judgment could assign the want of the affidavit for error. But upon a little reflection, there can bo no doubt upon that head. The words of the statute arc peremptory. The judgment is fraudulent.
Rossell, J., was of the same opinion.
Southard, J., said the words of the statute are extremely- plain and explicit. No judgment by confession against the defendant shall be entered, unless an affidavit, &c. But one construction can be put upon it. The affidavit is absolutely necessary to give the justice the power to enter a judgment. His proceeding without it is a perfect nullity; it is altogether void. It is not merely void against creditors, &c.; * * * there is no right to enter a judgment; and if entered, it is valid against no one. If a proceeding thus void be presented to this court, it must - be set aside. But can the defendant himself, who has
One of the counsel agreed, and one of the judges held the judgment to be ipso jacto void. The other counsel and two judges agreed that the judgment, for want of the affidavit, was ipso facto fraudulent. No one pretended that the judgment was valid or effectual against a creditor.
The question next came before the court in Cliver v. Applegate, 2 South. 479. The parties were both constables; each had an execution against, the same defendant. Applegate held the eldest execution and levy; but the judgment on which it issued was entered by confession without affidavit. Oliver had the younger execution ; bnt ho seized and sold the goods. Applegate thereupon sued him, and recovered a verdict. The judgment was removed into the Supreme Court, and was there decided, in February, 1819. Mr. Justice Southard held, as he did in Parker v. Griggs, that the judgment, being entered without an affidavit, was directly opposed to the provisions of the act to prevent the fraudulent confession of judgments. It was, therefore, by virtue of that act, void, not a valid judgment.
Kirkpatrick, Ch. Just., said—I am not willing to go so far as my brother Southard has gone in this case, and to say that the judgment is void. The act to prevent the fraudulent confession of judgments does not say so. * * * But yet that judgment is not only irregularly and unlawfully entered, but, upon a fair construction of the act, it may be considered as fraudulent also, aud therefore in its very nature void as against bona fide creditors.
This case had been tried by a jury, who found in favor of the judgment, and that there was no fraud in fact. The Chief Justice says this verdict is founded in mistake; for the plaintiff, on the trial, having admitted that the
In this case, again, the court concur in holding the judgment inoperative against creditors. They differ only in this, that one holds the judgment, for want of the affidavit, ipso facto void ; the other, that it is fraudulent and void only as against bona fide creditors.
In one of these cases, it will be observed that a judgment by confession without affidavit was reversed at the instance of the defendant in the judgment; in the other case, the judgment was held inoperative and void as against a subsequent bona fide execution creditor.
' These cases of Parker v. Griggs, and of Oliver v. Applegate, ten years afterwards, wore cited with approbation by Mr. Justice Ford, -while delivering an opinion in the Supreme Court; and it was said by him. that they had fully settled the law that a judgment entered by confession without affidavit was, if not absolutely void, fraudulent and inoperative against creditors. Sheppard v. Sheppard, 5 Halst. 252.
It has been suggested that these decisions apply only to the court for the trial of small causes. But the same statute and the same provisions applied to all courts; and I am aware of no distinction, except that, in one case, the l.iw may operate upon a laborer wiLh a judgment for §50, and in the other upon a merchant with a judgment for $10,000. The question involved is precisely the same in both cases.
The judgments rendered in these cases were never reversed. The principle maintained by them, so far as relates to the rights of creditors, continued the unquestioned law of the state, recognized and constantly acted upon by bench and bar, for at least nineteen years after the passage of the law. The rights of creditors under the act of 1817, and the duty of the courts to maintain those rights, were in fact never doubted till learned judges, entangled in the meshes of technical difficulties, and apprehensive of violating the forms of the common law, were tempted to disregard the 1 plain injunctions of the statute.
Having thus examined the cotemporaneous judicial construction of the act, it is instructive to notice what interpretation the legislature themselves put upon it. Immediately after the passage of the act of 1817, judgments which were confessed in justices’ courts without affidavit were, as we have seen, set aside by the Supreme Court, at the instance of the defendants themselves, as being in violation of the act. The legislature, to avoid this result, on the 12th of February, 1818, repealed the 2d section of the act of 1817, which enacted, that no judgment should be entered without an affidavit first made and enacted, that unless the affidavit required by the act was first made, “a judgment by confession before a justice, on suit without process, shall not operate or have any effect against any person or persons not parties in the action, but shall
The act of 1817, requiring that the plaintiff, on entering the judgment, should make affidavit of the cause of action being evaded, and the design of the act defeated, by the plaintiff’s making -affidavit that the instrument on which the judgment was entered was the cause of action, (see Burroughs v. Condit, 1 Halst. 300,) in 1820 the act was repealed, and a new act passed requiring the party to swear to the true consideration of the bond or obligation. This act was limited in its operation to judgments confessed on bonds with warrants of attorney to confess judgment. It required no affidavit where judgment was
IVe have, then, the plain language of the act itself, the cotemporancous exposition of the statute by the Supreme Court, the legislative interpretation by the act of 1818, declaring that a judgment without the affidavit should be inoperative, except, as against the parties to the suit, and the act of 1829, reviving the act of 1817, in full view of the construction put upon it by the court—all concurring in the conclusion that a judgment entered without the affidavit prescribed by law is ipso facto fraudulent and void as against bona fide creditors.
And whether there be no affidavit, or the affidavit filed he substantially defective and variant from the requirement of the act, is totally immaterial. The ground of the objection is, that the judgment is entered in violation of
The learned judge by whom the opinion in this case was delivered in the court below, assents to the proposition that if there he no affidavit, ihe judgment is fraudulent and void as against creditors, hut holds that if the affidavit is defective, the same conclusion does not follow. And it is argued in this court, that the absence of the affidavit affords only presumptive evidence of fraud. But this is placing the objection on totally erroneous ground % neither a defective affidavit nor the absence of an affidavit affords the least evidence of fraud iu fact. In most of the reported eases there is no suggestion or pretence of actual fraud; the defect has arisen from inadvertence, ignorance, or accident. In the case of diver v. Applegate, the jury found there was no fraud ; but the court said the verdict was against law. The judgment was fraudulent as against creditors by force of the statute. The term fraudulent is in fact not strictly appropriate; the real objection is, that the judgment, being entered against the prohibition of the statute, is unlawful, and therefore inoperative against creditors. It may be reversed by the defendant himself, not because it is fraudulent, but because it is unlawful.
But, admitting the judgineut to be unlawful, can creditors of the defendant avail themselves of the objection? The statute was passed for the protection of bona fide creditors, and it seems a strange anomaly to assert that they cannot avail themselves of a statute passed expressly for their benefit. Iu the early exposition of the statute, it was, as we have seen, universally conceded that creditors could avail themselves of the provisions of the statute. The only doubt was, whether the defendant, who was himself a party to the fraud, against whose fraudulent act the statute was designed to guard, and who, if there he fraud, is necessarily a party to it, should be permitted to raise the objection. But, after the lapse of forty years,,
The courts of the slate, for a long period after the passage of the act, were in the constant practice of examining the validity of judgments by confession, at the instance of creditors, on the ground that the affidavit was defective,- or that the judgment was otherwise invalid. It, was a familiar and unquestioned exercise of power. The reported cases are numerous. Cliver v. Applegate, 2 South. 479; Woodward ads. Cook, 1 Halst. 322; Warwick v. Matlack, 2 Halst. 165; Scudder v. Coryell, 5 Halst. 340; Latham v. Lawrence, 6 Halst. 322. And the principle upon which the court interferes on behalf of the creditor was examined and sanctioned in Read v. Bainbridge, 1 South. 351; Milnor v. Milnor, 4 Halst. 93. But; it seems to have been considered by the court below that all the previous decisions upon the statute, and the settled course of practice under it, were overturned, and a contrary doctrine established by the two cases of Evans v. Adams and Hoyt v. Hoyt.
In Evans v. Adams, 3 Green 373, (decided at September Term, 1836, nearly twenty years after the statute had been in operation,) the doctrine was first formally announced, that a judgment creditor could not, upon motion, contest, the validity of a judgment entered up by confession in violation of the statute requiring an affidavit to be made. A judgment liad been entered upon bond and warrant of attorney to confess judgment in the Hunterdon Pleas in favor of Evans and against Adams. The Common Pleas, at the instance of subsequent judgment creditors of Adams, set aside the judgment, on the ground that the affidavit, upon which the judgment was entered was substantially defective. Ho objection was made in that court to the right of the creditor to test; that question. The plaintiff below, wlnse judgment had been set aside,
But the Chief Justice went further, and decided that the creditor had no right to be heard in the court below upon an objection to the validity of the affidavit. That Mr. Justice Ryerson did not concur in this opinion, is apparent from the clear expression of a directly contrary opinion in the subsequent case of Hoyt v. Hoyt. The view of the Chief Justice upon this point was but the individual opinion of a single judge, entitled, it is conceded, to very great respect, but not a determination of the court, and not, therefore, an authoritative adjudication upon the point.
Mr. Justice Drake, who had just left the bench of the Supreme Court, and who heard and decided the cases of Scudder v. Coryell and of Latham v. Lawrence, was the attorney of the plaintiff in the case of Evans v. Adams, and argued the case both in the court below and in the Supreme Court. He did not, in either court, raise the point thus decided by the Chief Justice. No such ground was assigned for error, nor was the point alluded to in the brief of counsel upon either side. The point was raised upon the motion of the learned Chief Justice him
The opinion opens with this proposition: “One judgment creditor has no right, simply because he is such, to inquire into the regularity of another man’s judgment.” “The court below, simply on the ground of irregularity, sot aside the judgment at the instance of third persons, who, for aught that appears, had no interest in the matter. But admitting that it stood in the way of their execution, the creditors could not bring a writ of error upon that judgment; and for the same reason, they could not, on motion, inquire into the regularity of the judgment.” The whole opinion proceeds upon the assumption that the want of an affidavit is a mere irregularity, or technical error, of which, upon common law principles, only a party or privy to the record could avail himself. Admitting the premises, the conclusion may be perfectly sound. But the real question lay back of that. Was the want of the affidavit prescribed by the statute a mere irregularity? Tt had never been so regarded. Eighteen years before, immediately after the passing of the act, it had been held, as we have seen, by the Supreme Court, that the want of the affidavit rendered the judgment fraudulent. It had been decided, in the emphatic language of Chief Justice Kirkpatrick, that a judgment entered up in violation of that statute was not only irregular atid unlawful, but. fraudulent, and in its very nature void as against bona fide creditors. And though a jury had found there was no actual fraud, yet the verdict was set aside as against law, on the ground that the want of the affidavit rendered the judgment, in construction of law, fraudulent. These decisions are in no wise alluded to in the opinion of the learned Chief Justice. They liad been the recognized law of the state from 1818 till 1836. They had never been questioned by the bench, much less reversed. They bad been accepted, and acted upon by bench and bar as valid law. Both in the Supreme Court and in the
In Evans v. Adams, the opinion of Justice Ford in Scudder v. Coryell is cited as a full and lucid exposition of the law, that a creditor could not, upon motion, inquire into the regularity of a judgment entered by confession. But did Justice Ford decide that the want of an affidavit was a mere irregularity ? In the subsequent case of Latham v. Lawrence he concurred in holding that a judgment by confession was properly set aside at the instance of creditors, on the very ground of a defective affidavit.
In the case of Scudder v. Coryell, 5 Halst. 340, application was made, on behalf of subsequent judgment creditors, to set aside several judgments by confession entered on bond and warrant of attorney. A variety of exceptions were taken, principally to the form of the proceeding, as that the copy of the bond aud warrant was on two half sheets, and not on a whole one; that there were erasures and interlineations in the copies, and that the affidavit was not in all respects formal. The exceptions were examined in detail by the Chief Justice, and pronounced invalid. He treated the defects relied on as defects of form, which could not invalidate the judgment without questioning the creditor’s right to raise the objection.
In the case of Hoyt v. Hoyt, 1 Harr. 138, Chief Justice Hornblower reiterates the opinion, expressed by himself in Evans v. Adams, that a creditor will not be permitted, on motion, to assail a judgment by confession- for defect of affidavit. He takes another step,, and holds that although the judgment be entered in direct violation of the statute, yet if there be no actual fraud, the court will not interfere at the instance of the creditor, either by avoiding the judgment or by postponing the execution to the claims of subsequent execution creditors. Notwithstanding this opinion", he proceeds to examine the case upon the merits, and holds that the judgment of the Pleas must be reversed,
Neither of the cases upon which the court below rely decides the point now at issue, viz., that a judgment entered upon a defective affidavit will not be set aside at the instance of a creditor. In Evans v. Adams it is clearly the individual opinion of a single judge, and in Hoyt v. Hoyt it is doubtful whether Justice Ford assented; and it is certain that Justice Ryerson, in the strongest terms, dissented. Neither case was decided on that ground; neither case is a judicial determination of that question. In both eases the validity of the affidavit was looked into and decided by the court at the instance of a creditor, notwithstanding the individual views of the Chief Justice. In fact, since the passage of the apt, no reported case can be found where a court has refused to examine and decide upon the validity of the affidavit at the instance of a creditor.
The utmost that has ever been decided will be found in Black v. Kirgan, 3 Green 45, where it was held that a creditor cannot bring a writ of error; because, upon common law principles, no one but a party or privy to the record can bring error. The whole objection rested upon a mere technical difficulty at common law. And then, assuming that the act requiring the affidavit was merely directory, and consequently that its omission was a mere irregularity, the Chief Justice was led to the conclusion that the creditor had no right to complain, as his rights were
This court cannot overlook the extraordinary condition in which the law upon this point will stand if the judgment in this case be affirmed. It is clear that this provision was. made for the protection of creditors. The affidavit is required in all cases of entering judgment by confession. In the court for the trial of small causes, if the affidavit be defective, the judgment, by the express terms of -the statute, is valid against the 'defendant, but void as against creditors. In the higher courts, if the affidavit ‘be defective, the judgment, by judicial construction, is held void -against the defendant, but valid as against creditors.
And not only is there this direct antagonism in the law, as it is administered, but it is obvious that the law, as applied in the higher courts and to large claims, where protection against fraud is the more essential, is rendered a dead letter. It is totally inoperative for the suppression of fraud. The, law may be violated with impunity. All mode of enforcing it is denied. The doors of courts of justice are closed against the appeals of creditors. They are denied the right of availing themselves of the aid of a statute designed especially for their protection. The creditor has no other remedy than the common law ■affords, viz., to prove, that most difficult of all things, the ■existence iff actual fraud. The design of the legislature is as effectually defeated as if the law were erased from the ■statute book.
This case was' decided by the court below upon the supposed authority of previous''decisions. There was a misap'preheiision of what those decisions were. The clear weight Of authority is the other way.
In order to render the statute operative, and to carry into effect the clearly-expressed design of the legislature to prevent the fraudulent confession of judgments, it must be held—
That, under the laws of this state, no judgment by confession can be entered, except for a demand founded on a legal consideration, and for a debt justly and honestly due and owing at the time of the entry of the judgment.
That the affidavit required by the statute is a prerequisite to the entry of the judgment, and essential to its validity.
That, if no affidavit be made, or, if the affidavit do not in substance specify the true consideration of the instrument or demand for which the judgment is confessed, or in any other respect be not a substantial compliance with the requirement of the statute, the judgment is ipso facto fraudulent and inoperative against creditors.
That creditors whose rights are affected may contest the validity of the judgment, and to this end may show that the judgment has been entered in violation of the statute.
Upon this issue, it is immaterial whether the judgment be or be not fraudulent in fact. The simple inquiry is, do the facts exist which alone authorize the entry of the judgment? Have the requirements of the statute been substantially complied with ?
In the language of Justice Ogden, in Reading v. Reading, 4 Zab. 362, “ the judgment may have been confessed for an honest debt, and no actual injustice may have been done by it to the defendant or to his other creditors; yet, as the
Applying these principles to the present case, can this judgment be maintained ? Was the debt for which the judgment was confessed justly and honestly due and owing? Did the plaintiff’s affidavit state the true consideration of the instiument of writing or demand for which the judgment was confessed ?
According to the plaintiff’s own claim, (and in examining the case, I shall coniine myself exclusively to facts admitted by them,) they had a demand against Parkhurst, the defendant in the judgment, for about $3000. They came to Newark for the purpose of receiving that debt. An arrangement was made that a judgment should be confessed. It was a. subject of negotiation whether that judgment should be confessed for $10,000, or $15,000, or $20,000. .It- was finally settled that the judgment should be given for $10,000. Of that amount, $3000 was to secure the debt then due; the remaining $7000 was to stand as a security for future advances, in money or goods, to be made by the plaintiffs, as it should be needed or called for by the defendant. Was that $7000 then a subsisting debt? Was it a debt justly and honestly due and owing? Did the mere agreement to furnish goods, or advance money at a future day by the plaintiffs, create a subsisting debt on the part of the defendant?
It is said that a judgment at common law may be confessed to secure future advances. Admit it. A judgment, in other words, may be confessed to secure a debt to be subsequently created. It constitutes a valid consideration on which the judgment at common law may be founded, but does it create a subsisting debt, as required by llie
The mere formality of giving the note at the confession of the judgment does not in the least vary the case. It was the mere process of perfecting the security. It did not vary the transaction in substance. It was in fact immediately returned to, and held by the attorney of the plaintiffs. It is impossible to disguise the fact that when the judgment was confessed (as to the $7000) nothing was due.
The judgment was to stand as a mere security for future advances. The debt did not arise till the advances were made. Whether there would ever be an indebtedness or not, depended upon a future contingency. There was no subsisting debt due, or to become due, when the judgment was confessed.
The case does not fall within the principle of IToyt v. Hoyt, nor is at all supported by the authority of that case, admitting it to be sound law. In that case there was an actually subsisting debt. The consideration was executed. The plaintiff had given his note to a third party in actual payrueut of a debt of the defendant. It was held tantamount to money lent; and if the holder of the note accepted it as such, there was certainly no injustice in so treating it. The note was not made for the purpose of playing a part in the confession of the judgment, but was a valid bona fide transaction, by which the debt of the defendant was actually paid, and the liability of the plaintiff was absolutely fixed.
But, again, does the affidavit state the true considera
In this case the true consideration is not seated. The consideration was not money lent; it cannot be so held by the broadest and most liberal interpretation. The true consideration of flie judgment was a security for future advances. Had that been disclosed, the design of the judgment would have been defeated. It would have appeared upon its face that it was valid only to the amount of $3000. It is paltering with the statute to make the validity of the judgment depend upon the honesty of the party or the integrity of the attorney ; upon the question whether the failure to disclose the true consideration was honest or corrupt. It is totally immaterial whether it was the result of mistake, ignorance, or design. The simple inquiry is, was the requirement of the statute complied with ? To this inquiry there can be but one reply.
. It is impossible to conceive of a case which illustrates more strongly the wisdom, of the statute, and the importance of enforcing it, than the present; none which shows more clearly the facility with which, by means of confessed judgments, property may be covered up from the claims of honest creditors, and the plausible pretexts by which it may be defended.
The plaintiffs were wholesale merchants in the city of New York. The defendant, Parkhurst, was a retail merchant, carrying on business in Newark. At the time of the confession of . this judgment he was deeply embarrassed, and his creditors were pressing for payment. He owed, at the lowest estimate, between fifteen and twenty thousand dollars. Pie was a customer of the plaintiffs, and in their debt about $3000. In this state of things, the plaintiffs, Ely, Clapp, and Bo,ven, came to Nowaik, as
This, alone, has been the means of bringing this transaction to light. It is now fully before the court, and the question is, shall the judgment be sustained ? Is it a valid judgment, to defeat the claims of honest creditors? If it is, then the statute is a dead letter—a mere trap to men’s consciences—and the sooner it is swept from the statute book the better.
In my opinion, the judgment is entered in violation of the clear letter and spirit of the law. It contravenes thu manifest policy of the statute, and is therefore illegal, fraudulent, and .void as against creditors. I am therefore of opinion that the judgment below should be reversed; that the judgment of Ely, Clapp and Bowen, and the execution issued upon it, should be set aside, and the money in the hands of the sheriff should be ordered, to be paid to the other execution creditors, in the order of their priority; that the defendants in error should pay the costs of the proceedings below, as if the order had been there correctly made in the first instance, but not the costs in this court; and that the proceedings should be remitted to the Supreme Court, to be proceeded in accordingly.
It was suggested, upon the argument, that by overturning the law, as it was understood to be held in Hoyt v. Hoyt, we should endanger titles and affect vested rights acquired under the authority of that case. Admitting that the effect of our decision is to change the law, as it has been understood, how can it affect titles? Property sold by virtue of such judgment will vest in the pur
More than a year has elapsed since this case was first argued in this court. If an erroneous practice had previously prevailed, ample time has been afforded to correct it. The controversy in this ease, admitting that the plaintiffs have advanced every dollar they claim, is a mere struggle between two sets of creditors for priority. There never can be an opportunity of settling the principles involved more satisfactorily and with less prejudice to parties.
The contest- is between judgment creditors, as to the right to moneys raised by the sheriff of Essex upon executions i.-sued on said , judgments. Henry G. Ely, Dewitt C. Clapp and Edward E. Bowen, trading as Ely, Clapp & Bowen, claim the fund by virtue of the priority of their judgment. The subsequent judgment creditors deny the validity of the Ely, Clapp & Bowen judgment, and insist that they are entitled to have it set aside, as to them, on the ground of illegally and fraud.
The judgment complained of was entered by confession against Benjamin Parkhurst, on the second of November, 1853, under and by virtue of the provisions of an act directing the mode of entering judgments on bonds with warrants of attorney to confess judgments. Nix. Dig. 68.
The 5th section of the act provides that no judgment shall be entered, unless the plaintiff, or his attorney, shall produce, at the time of confessing such judgment, an affidavit of the true consideration of the bill, bond, deed, note, or other instrument of writing or demand for which the said judgment shall be confessed, which affidavit shall further set forth that the debt or demand for which the judgment is confessed is justly aud honestly due and ow-
The affidavit made in this case was, that judgment was about to be confessed “ upon a certain promissory note, made and delivered by said Benjamin Parkhurst to said firm of Ely, Clapp & Bowen, and bearing date the 2d November, 1853, and payable on demand to said firm, or order, for the sum of $10,000, for value received, without defalcation or discountand further, “that the true consideration of said promissory note, on or for which said judgment is about to be confessed as aforesaid, is goods, wares and merchandise, by said firm sold and delivered to said Benjamin Parkhurst, at his request, and money lent and advanced by said firm to said Benjamin Parkhurst, at said Park hurst's request;'' and further, “ that the debt for which said judgment is confessed is justly and honesty due and owing to this deponent and his said co-partners, as such firm as aforesaid, from said Benjamin Parkhurst, and that the said judgment is not confessed to answer any fraudulent intent or purpose,” &o..
The nole for $10,000, mentioned in the affidavit, and for' which the judgment was confessed, was given at the time of the confession, and for the purpose of the judgment. The actual indebtedness of Parkhurst to the firm of Ely, Clapp & Bowen, at the time, was but $3052.94, including a note of $1000, the bona Jides of which has been questioned. The remaining $6947.06 was the note of the firm, given to Parkhurst at the time, with the understanding that .they should 'subsequently advance to Parkhurst goods and cash to that amount, as he should require.
The controversy in this case does not grow out of any ambiguity in the statute. Its language is very plain. In (.lie 1st and 2d sections, it prescribes the mode of entering up judgments on bonds or other obligations for the payment of money only, with warrants of attorney. In the 4ih section, it enacts that judgments in such eases shall
Now it is true the plaintiffs made the affidavit required by the statute. But it is quite clear, indeed it is conceded, that, as to nearly $7000 of the sum, the note on which tho judgment was confessed was not given for goods sold or money advanced; the affidavit was therefore untrue in point of fact. Nor was the debt for which judgment was confessed justly due and owing by the defendant to the plaint,ills, in the sense contemplated by the statute. For, as to the $69-17.06, it was a mere exchange of notes between Ely, Clapp and Bowen and Parkhurst; and the note which Parkhorst received, he swears was given to him by Mr. Clapp, with the understanding that, it should be given up immediately after the judgment was confessed, and was to be considered void and without vitality. It was io be used merely as a matter of form to answer the law, so that he could make affidavit to the amount of the indebtedness. The note was delivered t,o him, and he kept it in his possession about half an hour, and returned it to Mr. Runyon, and never heard of it since. And although Mr. Runyon, who was the attorney for the plaintiffs in entering up the judgment, gives a somewhat different version of the transaction, says he did not get the note from Parkhurst until the next day, and then only as a matter of precaution, at Clapp’s suggestion, to prevent Parkhurst from using it before the judgment could be entered and the lien perfected; that Parkhurst eouid have had it any time afterwards; that he kept it but some
If A make his promissory note to B for $10,000, and B, at the same time, make his promissory note to A for $10,000, the transaction being a mere exchange of notes, while these notes are held by the respective parties, they stand to each other in the relation of mutual debtors. The demand of each is liable to be set off and liquidated by the demand of the other, and the debt due from each to the other is nominal, and not real. To give the statute a construction which will cover such.a case as this—to hold that a mere nominal and illusory indebtedness constitutes a debt or demand justly and honestly due and owing, for which-a judgment may be entered up which will put all real and bova fide subsequent judgment creditors at defiance, would effectually defeat the purpose of the legislature in introducing the affidavit, and make the statute itself the ready instrument of fraud.
If the judgment cannot be maintained upon the facts of the case, as they stood at the time it was entered, it cannot certainly derive any aid from the misrepresentations of the affidavit. If it cannot stand by the truth, it ought not to be supported by what is untrue. Then it comes to this. Suppose the affidavit had set out that the true consideration of the note on which judgment was confessed was, as to $3052.94, goods sold and delivered, and money loaned by the plaintiffs to Parkhurst, at his request, and as to $6947.06, an agreement to advance to said Park-burst that amount in goods or money, when he should thereafter request the same, for the •performance of which agreement they had given Parkhurst their promissory note for the same amount, to be held by him as security,
But. it is insisted that this judgment cannot be assailed by third parties; that the matters objected to it are mere irregularities, of which subsequent judgment creditors cannot take advantage; that the power of entering up these judgments existed at common law, is long anterior to the statute, and only regulated by it; that they are not void for want of conformity to the statute, but only voidable, and that by a direct proceeding by writ of error, which none but a party to the judgment can have. Scudder v. Coryell, 5 Halst. 340, per Ford, J.; Evans v. Adams, 3 Green 373; Hoyt v. Hoyt, 1 Harr. 138. In all these cases, however, it is distinctly admitted that if there be any fraud in the entry of the judgment, it may be assailed by creditors for that. Mr. Justice Ford, in Scudder v. Coryell, says: “Though courts never allow judgments to be impeached for irregularity or want of form by third persons, yet they allow them to be assailed for fraud or covin on the application of creditors.” Chief Justice Hornblower, in Evans v. Adams, says: “If the proceedings are regular, and the affidavit full and complete; yet, if the judgment is fraudulent, it is void as against purchasers and judgment creditors.” And the same judge, in Hoyt v. Hoyt, says: “They are common law judgments, and good and effectual as such, unless entered up contrary to the statute.” “The plaintiff in this case (says the Chief Justice) has submitted himself to the ordeal appointed by the statute. He has made the affidavit required, and his
Then, admitting the doctrine of the cases cited, the question of fraud remains. If this judgment is fraudulent, it may be set aside upon the application of subsequent judgment creditors, according to all the cases. Now here is a judgment entered up on an affidavit which complies with the form, of the statute; íipon (he face of the papers all is regular; and yet (he facts of the case show that the plaintiffs were not entitled to any such judgment; no such transaction had occurred as the sale of goods and the loan of money to the amount of $10,000 to the defendant; no such indebtedness existed at the time; if the affidavit had represented the facts truly, the judgment would not have been signed. But the affidavit is framed, not according to the facts, but so as to meet the exigencies of the statute; a fictitious caso is made out, the judge is misled by it, and the judgment obtained.
If the transaction had been such as Mr. Runyon, the attorney of the plaintiffs, understood it to be at the time, the case might have presented a different aspect. Mr. Runyon, as is evident from his testimony, was led to believe that, as to the $6947, the money was to be paid at once; that the only reason it was not, was that the plaintiffs kept their bank account in New York, and it being past bank hours the money could not be had that day; and that the note was given payable on demand, as cash, and to be promptly paid; that a real indebtedness was to be created simultaneously with the entering of the judgment; and he told the parties if this was so, if this arrangement was made bona fide it would be right. But the answer of the plaintiffs to the bill in chancery shows that such was not the real understanding upon which the note was given. The plaintiffs there say that “ the said
JSTo case has ever gone so far as to hold a judgment by confession entered up under the statute, upon an agreement for future advances, to bo unassailable by subsequent judgment creditors. The want, of consideration was held, in Reed v. Bainbridge, 1 South. 351, to be available to set aside the judgment on the application of a third party. That was anterior to the act of 1817, which required an affidavit. The cases immediately subsequent to that act treat judgments not entered in conformity with the acts of 1798 and 1817 as constructively fraudulent. Parker v. Griggs, 1 South. 161; Cliver v. Applegate, 2 South. 480. And so did the earlier cases under the act of 1820. Woodward v. Cook, 1 Halst. 160; and Sheppard v. Sheppard, 5 Halst. 250. Up to this time (lie court seems to
But none of the cases have held that it was a mere irregularity to enter a judgment by confession without a substantial existing bona fide debt due as the consideration for it. And all of them concur in admitting that fraud will always avoid a judgment on the application pf subsequent judgment creditors. In Scudder v. Coryell, there was no dispute as to the debt; the objection principally relied on was that judgment - was entered up one day before it became due; and the court held that tl)e word due signified, at times, a simple indebtedness, without reference to the time of payment, debitum in, presentí, solvendum in futuro, at other times that the day of payment pr render had passed; that the purpose of tile legislature, in-the clause referred to, was npt to delay the entry of judgments until after the day of payment, but to secure fairness, honesty, and good faith in the transaction. In Latham v. Lawrence, 6 Halst. 322, the court belt! that an affidavit that the true consideration of the bond was certain notes of hand, &c, without §tating what the cop
■ The object of the statute was to provide additional safeguards for creditors against fraudulent confessions of judgments.. It.was intended for'the protection of honest ■.bona fide creditors. It left to the debtor the power of making preferences among his actual creditors without limitation or restraint. It left to an embarrassed debtor the power of saying to an importunate creditor, .if you sue
To maintain this judgment, the court must go the length now, for the first time, of saying that an agreement for future advance's is a good consideration for a judgment by confession, and that subsequent judgment creditors cannot successfully assail it, provided the advances are made before other judgments are obtained. If that is established as law, the court will have to bold that it is sufficient if the affidavit state that the true consideration of the judgment about to be confessed is an agreement between the parties, that the plaintiff will hereafter make advances to the defendant to the amount of the judgment; for it will not surely be held that the validity of the judgment is to depend upon the question whether the plaintiff has the hardihood to swear to an actual present indebtedness, where none exists. If we hold such an affidavit sufficient, we must do so in the very face of the statute, which requires a present indebtedness to be sworn to; and it will certainly be taking a step in advance of what has heretofore been considered the
Looking through the forms in which this transaction has been wrapped up, there is nothing in it but an agreement between these parties, at the time of the judgment, that, as to the $6947, the one should make future advances to the other. The note given to Parkhurst was not to be used by him ; he could not have used it without violating the agreement upon which it was given. Then, as to the $6947, it was not an existing indebtedness, within the meaning of the statute, for winch a judgment could be legally entered. So far as that "sum is concerned, the judgment was entered upon a misrepresentation of facts in the affidavit, and was a fraud upon the law.
Another question has been made as to the bona jides of this judgment. It is urged that the plaintiffs had obtained a note from Parkhurst for $1000, which formed a part of the sum of $3052.94, by fraud. It appears that, in February, 1853, Parkhurst, being insolvent, called his creditors together, and proposed to compromise with them, by giving his notes for fifty per cent, of their claims, payable on time. That Ely, Clapp and Bowen agreed, with the other creditors, to the compromise, but being creditors to the amount of $4029.46, they privately exacted of Parkhurst a note for $1000, in addition to their fifty per cent., as the terms upon which, alone, they would enter into the compromise; and that this note constitutes $1000 of the $3052.94, part of the judgment confessed. But we cannot go into this question here. Independent of the compromise, there was a good consideration for' this note, a real existing indebtedness for which it was given. If it was exacted in bad faith, it was in bad faith to the other parties to the .compromise. They are not, as such parties, before the court. The omission to state the consideration of the note of $1000 was an irregularity. But it appearing that there was a consideration for the note, which was good as between the parties to it, the present applying judgment creditors cannot object to it.
The court will not infer that aclual fraud involving inoral turpitude was intended, if by any fair interpretation of the conduct of the party charged with it, a different conclusion can he reached. In this case there is no doubt the plaintiffs intended to make the advances according to their agreement with Parkhurst, and to hold the judgment for nothing more than might be actually due them when it came to be enforced. They may have sworn to the affidavit under a misconception of the law, and without any intention to practice a deception or obtain a judgment improperly; and although there is some testimony which would warrant a different conclusion as to the character of the transaction, it may be conceded that the Supreme Court was right in holding that no actual fraud was intended to be perpetrated. Taking this view of the case, as the judgment is divisible, and the amount actually due and owing to the plaintiffs at the time the judgment was confessed is ascertained, the order
Dissenting Opinion
(dissenting.) This proceeding involves the rights of contending judgment creditors to moneys which were raised upon executions issued against the property of their common debtor, and paid into the Supreme Court.
In the latter part of the year 1853 the sheriff of the county of Essex sold the stock of dry goods of one Benjamin Park.hurst, a merchant in the city of Newark, by virtue of sundry executions against, the said Park hurst, some issued out of the Supreme Court, and others out of the Circuit Court of that county. ,
The net avails of the sales, amounting to the sum of $7951.10, were directed, by the Supreme Court, to be paid to their clerk, to await a decision upon an application made to them to have those moneys distributed pro rata among certain specified judgment. creditors, to the exclusion of these defendants, who hold the first judgment.
In June Term, 1855, after hearing the matter debated, the court ordered and directed that the moneys thus raised should be paid over to these defendants, which order, with the proceedings connected therewith, has been removed by writ of error into this court.
All the judgments were entered by confession upon warrants of attorney without bonds; and as to (he form of the affidavit prescribed by the statute, all are full and corred.
The judgment in favor of Ely, Clapp, and Bowen, who are the defendants in this court, was signed, on the 2d day
The judgment in favor of Lord and Brown was confessed in the same court, on the 16lh of November, and the execution was levied on the 17th, upon the same property. Two judgments were confessed in the Circuit Court of the county of Essex, one in favor of Oliver-E. llosmer, for §2769.95, besides costs, and au execution issued thereon, was levied upon the same property, on the 17th of November, and the other, in favor of Norman Cutter, whose execution was levied on the 19lh of November. These junior executions, if entitled to priority in payment, will absorb all the moneys which are under the control of the Supreme Court. The dates of the respective judgments and levies have been thus particularly set out, because a reference to time will be material, in my view, for properly settling the rights of the parties.
Two reasons are assigned, by the plaintiffs in error, why the prior judgment of the defendants in error should be postponed to (heirs.
First. They say that the affidavit which was produced to tiie justice of the Supreme Court when he signed the/Li, and which was filed with the papers in the case, did not set forth the true consideration of the note on which the judgment was confessed; and lienee, that the judgment is voidable, whether the departure from the statute, which prescribes the form and character of the affidavit, arose from mistake or from intention.
Seooiul. They say that there was «dual fraud in the transaction on the part of Ely, Clapp and Bowen.
It is now well settled, by repeated adjudications in this state, that subsequent judgment creditors cannot, on motion, impeach a prior judgment for mere irregularity. Such irregularity does not necessarily make the judgment void, nor can it create aii equity in favor of other creditors; because, though irregular in form, the judgment may be honest in fact, and if the defendant sees proper to overlook the irregularity, the judgment is binding as to all others. Courts, however, will exercise a control over their judgments, and when successfully impeached for fraud or covin they may be postponed in favor of subsequent bona fide judgment creditors.
It should be borne in mind that applications for such relief are addressed to the equitable powers of courts, and are founded on facts showing that justice requires their interference. Evans v. Adams, 3 Green 373; Hoyt v. Hoyt, 1 Harr. 138, and the cases therein cited; Den, ex dem. of Vanderveer, v. Gaston, 1 Dutcher 615.
A suspicion of injustice, or doubts of a substantial compliance with the requirements of the law, should not destroy the security of a judgment. “ Its invalidity should clearly be established.” Caldwell v. Fifield and Matthews, 4 Zab. 154.
Hence it follows, that unless the case before us shows either actual fraud or legal fraud, by which the applying creditors were injured in their rights, the decision of the Supreme Court was correct.
The affidavit made by D. C. Clapp, one of the firm of Ely, Clapp and Bowen, seLs out that the judgment was confessed upon a promissory note, made and delivered by Park hurst to their firm, bearing date the 2d of November, 1853, payable on demand, to them or order, for the sum of $1.0,000, for valu.e received ; and that the true consideration of the note was goods, wares, and merchandise sold
The justice of the Supreme Court, to whom the papers were presented for hh fiat, could not look behind the affidavit, nor inquire into its truth ; the party was entitled ¡o his signature, and when it was affixed it created a judgment at common law. The object of the section requiring an affidavit was answered ; its force was spent when the conscience of the creditor was tested, and the inhibition against entering the judgment was fully taken off.
If, then, the testimony before us does not show a state of facts contradictory of the affidavit, and either necessarily tainting the transaction with legal fraud prejudicial to the rights of the subsequent judgment creditors, or with actual intentional fraud, the plaintiffs in error should not prevail before this court.
Properly to determine the just bearing of the depositions upon the truth of the affidavit, it is necessary' to collate the material facts, which it is insisted that they disclose. It is evident, from the testimony, that on the day the judgment for $10,000 was confessed to the defendants in error, Parkh.ur.st was certainly indebted to them in the sum of $3052.94, for goods theretofore sold and for money lent; and that such amount was then justly and honestly due and owing to them upon the most strict construction of the statute. This sum included a note of $ 1000, given to them by Parkhurst, when he made a composition with other creditors, in or about February, 1853,
This objection is sufficiently answered by the fact that when the $1000 note was given, Parkhurst owed Ely, Ciapp and Bowen more than the amount of it, in addition to the sum which they agreed to take in common With other creditors. He had a legal right subsequently to secure the payment of that note, without thereby committing a fraud upon his creditors; and the creditors now before this court, cannot justly object to bis having so done, or contend that the note did not form a bona fide debt, which could legally be included in a confessed judgment.
It is also established by the proofs, that, in October, 1853, Parkhurst was pressed for money to carry on his mercantile business,'and that Ely, Clapp and Bowen, who then wore his creditors to a large amount, agreed, at his request, to advance-to him for that purpose, in goods and iii cash, $6947.06, if he would confess a judgment to them for $10,000, which amount of $10,000 .would also cover the ‘then existing indebtedness; that such arrangement was entered into between ihem, and in fulfillment thereof, that Parkhurst gave his note for $10,000, upon which the judgment in question was confessed ; and that, at the same time, they gave their note, payable to him or his order on demand, for $6947.06, the amount then agreed to be advanced by them; and they delivered the same to him, which note Was to be available to Parkhurst in goods and money, as he might thereafter order or appoint, to meet the then emergencies of.his business; that the payment of the difference in cash, by giving a check upon their bank of deposit in New York, was talked of by Mr. Clapp, and that the mutual counsel of the parties advised them that a note payable on demand would be legal and right, if the transaction between them was bona fide; that
It appears, from the evidence, that the money for the check of $4965.73, given by the defendants to Parkhurst, went to pay his indebtedness to Carter, Quinan and Deforest, of the eiiy of New York, who, in August, 1853, had obtained a judgment by confession against him in the Supreme Court of this state, as security for the payment of that indebtedness ; which judgment then remained in full force, and was a lien upon the property sold by the sheriff, prior to any of the judgments held by the parties who are before this court. Aud if it had not been satisfied with the moneys so advanced by these defendants, it would have been entitled to priority in payment out of the moneys now in controversy.
The advance of that sum by the defendants expressly for that purpose, upon no consideration other than the supposed validity of their judgment for $10,000, created a strong claim in them to have an equitable interest, in that judgment, by an implied assignment of it, and to be subrogated to the rights ■ of Carter, Quinan & Co. in that security. These facts, which I have gathered from the mass of testimony taken under a rule of the Supreme Court, in my opinion, fully support two important conclusions'.
First. That no actual fraud, calling for an exercise of the equitable powers of the court, appears to have been meditated or committed agaiusjt the plain tiffs in error, or any of them, in the negotiations or transactions between Parkli.urst. and. Ely, Clapp and Bowen in the inception of the judgment of $10,000.
If the testimony upon which the argument before the court was founded had disclosed any facts tending to raise a fair presumption or well-grounded suspicion that the judgment of Ely, Clapp and Bowen was not based upon an actual honest indebtedness, but on the contrary, that it had been contrived to create a fictitious lien for the purpose of covering and protecting the property of the debtor, to the detriment of his honest creditors, the court would not here settle the fact of fraud or no fraud, but it would direct a feigned issue, whereby the important question could be settled by a jury. But while, in a liberal exercise of its equitable jurisdiction over confessed judgments, the court, on proper occasions, will lend its aid for the detection of alleged frauds, and will look behind the affidavit, it ought not, in a case like the present, to withhold from the defendants in error their remedy through their judgment, and subject them to the expenses incident to an investigation before a jury, when, upon the case made by the applicants, no fact has been established on which the suspicion of mala jides or of positive intentional fraud can justly rest.
The larger portion of the consideration for the note of $1000 being neither money actually lent nor goods- sold
It is manifest that the draftsmen of the affidavit supposed that the note for $6947.06, which was given by Ely, Clapp and Bowen to Parkhurst, in fulfillment of their agreement to aid him, was in legal contemplation equivalent to a loan and advance of so much money; because if he had not thus have viewed the transaction, ho might have stated the true consideration of that portion of the $10,000 note as the fact really was, namely, a negotiable note of the plaintiffs, payable on demand, transferable by the defendant, at his option.
Such, I think, would have been the more correct, mode of setting out the consideration, because it would have shown the case as it existed. To meet the requirements of the act, a statement of the manner in which the debtor .owes the debt is obviously called for, that is, the cause of the indebtedness, or “ the price of the debt,” a statement of •the manner in which it occurred, according to the facts made in terms sufficiently precise to disclose-the real nature of the .transaction.
, A minute' detail of sums and of dates, as in a bill of particulars under the practice act, is not.required ; but the true consideration should be intelligibly staled in general terms. Scudder v. Coryell, 5 Halst. 340; Latham v. Lawrence, 6 Halst 322.
It has been decided, in Den, ex dem. Vandervere, v. Gaston & Mason, 4 Zab. 818, and recognized in another suit between the same parties, in March Term, 1856, reported in 1 Dataller 615, (hat a judgment by confession without an affidavit is not absolutely void and fraudulent.
The power of allowing judgments to be signed at chambers, in this state, is not conferred upon the judge of a court of common law jurisdiction by the provisions of the statute under consideration. Such power is an incident to the nature and constitution of the court, and the statute can only regulate the exercise of an existing inherent jurisdiction. Judgments thus entered are not null and void simply for lack of compliance with the provisions of tiie act, but they can only be attacked for such mere irregularity by a party to the record, because they injure none others, and none other can have a writ of error. Iu this aspect of the case, the judgment in favor of Ely, Clapp and Bowen must be recognized as a valid subsisting judgment.
The constitution of courts for the trial of small causes is entirely different. They are statutory tribunals of limited jurisdiction, having no powers excepting those conferred by tiie act constructing them, and no course of proceedings, excepting as it i's marked out in that act, and its supplements. The first statute, entitled “An act constituting courts for the trial of small causes,” was passed
If this contention of the plaintiffs in error be corrected, to wit, that proof df a material variauce between the facts, as set out in an affidavit, and those which really exist, makes a judgment confessed in a common law court, upon the production of such affidavit., void, although no actual fraud exists, then we have this anomaly in our judicial system, that a judgment in a statutory court of limited jurisdiction may be good for some purposes, and a judgment entered up in a qpmmon law tribunal of general jurisdiction, under the like circumstances, and tested by the policy of the same law, (whether it be directory or prohibitory,) shall be absolutely void and for nothing holden. I have always thought that, in enacting that a
In Parker v. Griggs, 1 South. 161, which was a case of confession of judgment in a justice’s court without the production of the affidavit, the judges said—“the words of the statute are peremptory; the justice had no authority: the judgment is fraudulent.” Again—“ the affidavit is absolutely necessary to give the justice power to enter a judgment. His proceeding without it isa perfect nullity.” So in Cliver v. Applegate, 2 South. 479, the court rnled that a judgment confessed before a justice without the affidavit, was void, and «oí a valid judgment.
The fact to which the attention of the court was directed in the case of Sheppard v. Sheppard, 5 Halst. 250, Was a levy made under an execution issued out of a justice’s court, where a judgment W'as entered on confession by an appearance without process, the affidavit produced being defective upon its face. The cases above cited are referred to in this case, and the ruling of the Supreme Court is placed on the Same ground as it was in those cases. "
The ease of Reading v. Reading, 4 Zab. 359, was relied Upon- by the plaintiffs in error as sustaining their proposition, that judgment creditors can prevail in. setting aside a judgment in a common law court ibr the non-conformity of the affidavit with ¿he provisions of the statute. In that case the court, was' called upon' to reverse an order of the' Court of Common Pleas, made upon- the application of the defendant ib the judgment, which order set aside a judgment- entered by confession in that court, because the
In the opinion of another justice, read in the same ease, this language is used in commenting upon the ease of Evans v. Adams: “The judgment in the Pleas was reversed, not upon the application of creditors, but upon that of the defendant himself, and this makes a very different case,” to wit, from that of Evans v. Adams. “ The question here is not whether creditors had a right to move for reversal of a judgment below on the ground of a defective affidavit, which was the case of Evans v. Adams, but whether, after the defendant himself had got a judg
At this point in the case a question presents itself, whether a common law judgment is such an entirety that in all instances it must be treated as indivisible, and, ex necessitate, be held as good or as bad in whole. In the case of Silvers and Brittin, ads. Reynolds, 2 Harr. 275, a judgment was entered by confession on warrant of attorney against two persons, and it was held, upon motion and cause shown, that it might be set aside, as to one of them, and stand good, as to the other. Justice Ford said, “ If’ the cause was before ns on a writ of error, I do not say that we could reverse the judgment as to one defendant, and affirm it as to the other; but courts of law have, immemorial ly, exercised an equitable power over judgments entered by their authority on warrants of attorney by confession.” Justice Dayton had some difficulty in his mind about the entirety of the judgment, and the propriety of relieving one of the defendants; but he finishes his opinion by saying: “As we have exercised a species of equity power over judgments entered on bond and warrant of attorney, and substantial justice will be best attained in this way, I concur, upon this point, in the view
Upon the principle recognized in that ease, it certainly would be equitable and just that the judgment of the defendants in error should be held to be valid, and entitled to priority in payment for at least the sum of $3052.94 and the interest, inasmuch as that amount was justly and honestly due to them from Parkhurst, for goods sold and delivered, before Mr. Clapp commenced the negotiation with Parkhurst which resulted in the confession of a judgment for $6947.0(1, additional to the debt then conceded to be due. If the court could so apply equity to a judgment by confession, as to declare it inoperative as to one of two defendants, and binding upon the other, by the exercise of the same power, it can direct that a judgment shall be divided as to the amount, and that such portion of it as is just and upright, and within the language of the statute directing the production of an affidavit, shall be good and available, and that the portion which is successfully impeached shall be postponed in favor of junior judgment creditors.
But the most important question that was involved in the discussion is yet to be examined—-can a judgment be confessed in New Jersey to secure future advances?
There is no doubt of the validity of such a judgment between the parties to it. A judgment contrived to defraud creditors is good between the parties. At common law, a judgment to secure such advances (if bona fide) would stand as firm as a morlgage. Lord. Cowper held, in Gordon v. Graham, 7 Viner’s Ab. 52, letter E, pl. 3, “that if a clause be inserted in a mortgage, making it a security for future loans, subsequent loans will be taken as parts of the original transaction, and will be paid before a second mortgage intervening, with notice of the clause.”
Chief Justice Marshall ruled, in the case of Shirrass v. Craig, 7 Cranch 34, “ that a mortgage given to secure future advances was a protection for all advances made prior to the receipt of actual notice of a subsequent title.”
In the case of Averill v. Loucks, 6 Barb. S. C. R. 19, it is said, by the court, “ that a judgment, or other security, may be taken and held for future responsibilities and advances, to the extent of the amount of the judgment or security ; but, to enable a creditor to hold a judgment or other security for future responsibilities or advances, it must be a part of the original agreement that the judgment or security should be a security for such responsibilities or advances.”
The same doctrine was held in Brinkerhoff v. Marvin, 5 Johns. Ch. 325; Monell v. Smith, 5 Cowen 441; Livingston v. McInlay, 16 Johns. R. 165. The court say, in the case last cited, “ If it was a part of the original agreement, a judgment may be entered as a security for future advances beyond the amount then actually due, in like manner as a mortgage may so be held.”
There is a limitation, however, to the preference which is given to such encumbrances. When a subsequent judgment or mortgage creditor intervenes before the whole advance agreed on is made, and notice thereof is given to the prior encumbrancer, advances made after that period will not be covered in preference to the claims of the subsequent creditor.
In Ter-Hoven v. Kern, 2 Barr 96, it is said, “A judgment or mortgage, taken to secure an existing debt, and debts or liabilities to'be created in future, has been held to be good and valid by numerous decisions.” The judge cites, among other cases, Gordon v. Graham, 7 Viner’s Ab.; Lyle v. Ducomb, 5 Binney 585; 4 Kent's Com. 175, anti he adds, “But if a prior encumbrancer makes future advances on the faith of his judgment with actual notice of a new intervening encumbrance, ho will be postponed as to such subsequent advauce¿.'
Did our statute alter the common law in regard to the validity of such judgments? The language used does not declare them to be void. Does the scope of the enactment show' that the legislature intended to prohibit the creating of such securities?
The section closes with a requirement that the affidavit shall state “ that the judgment is not confessed to answer any fraudulent intent or purpose, or to protect the property of the defendant from iiis other creditors.” This regulation is literally complied with when the friend of an honest debtor, who is embarrassed for money to meet his commercial engagements, agrees to advance him means, as he may require them, to a fixed amount, and within a limited time, to save him from failing, and to enable him to pay his creditors, and to protect his business standing in the community, and in good faith and for honest purposes takes a judgment by confession as security for their re-payment.
The object of the act of the legislature unquestionably was to secure fairness, honesty, and good faith; but I think it was not designed for preventing an honest debtor from providing, by means of the security of a judgment by confession, such pecuniary aid as lie foresees the exigencies of his business will require.
The question which must test the legality of such a judgment, is not whether, if it had not been entered, some other creditor might have obtained a legal preference, but it is whether the parties to the judgment have
It is manifest, from the testimony taken in this cause, that Parkhurst did not complain of Ely, Clapp and Bowen because there was not a full consideration for the judgment; but his antagonism to them was caused by their insisting upon the sheriff’s bringing the stock of goods to sale at an earlier day than Parkhurst had expected, and perhaps in violation of their stipulation to give more time.
After Ely Clapp and Bowen refused to delay the sale under their execution, Parkhurst confessed to the several plaintiffs in error their respective judgments,, as it would seem that they might aid him in attempting to defeat a recovery, by Ely, Clapp and Bowen, of the money secured by their judgment and levy, or to delay them in obtaining a sale. Those creditors filed their bill in chancery, not to set aside the judgment of Ely, Clapp and Bowen for irregularity, but to obtain ;i preference over them upon equitable grounds and for an injunction to stop the sale. As appears from the evidence, those judgments were given and taken for the purpose and intent of delaying and hindering these defendants in the recovery of their just demands.
There was still another objection taken, which is founded upon the remaining clause of the 5th section of the statute. It provides “ that the affidavit shall further set forth that the debt or demand for which the judgment is confessed is justly and honestly due and owing to the person to whom the judgment is confessed.”
The question has been asked, how an agreement to make a future advance can honestly be sworn to as a debt justly due and owing; and it was argued, that the legislature, in using those words, intended to prevent judgments being confessed by way of security, and to limit them to “debts absolutely due and payable.”
A satisfactory answer has been given to this question
This construction of the act was subsequently adopted bv Chief Justice Hornblower and Justice Ryerson in Hoyt v. Hoyt, 1 Harr. 138, and lias since been practised upon as the settled law of this slate.
In the case last cited, the Chief Justice concludes “ that, as the object of the statute was only to secure fairness, honesty, and good faith in the transaction, and not to abridge the common law right of securing a just debt by a judgment, we must not give it that effect by mere implication.”
lu the same case, Justice Ryerson says that promissory notes of bankers, under some circumstances, have long been treated as cash, not only in commerce, but in courts of justice; and ho adds, “ that he perceives no reason why the notes of other persons may not be treated in the same way, when such is the agreement and assent of the parties;” and I may add, when the transaction is beneficial to the parties, injurious at the time to no one, and is free from actual fraud.
The facts in the ease of Hoyt v. Hoyt, which were last cited, not fully appearing in the report in 1 Harrison, and being misapprehended on this argument, I have referred to the files in the office of the clerk of the Supreme Court, and find them to be as follows : The judgment was entered by confession in favor of Enos Hoyt v. Lorenzo Hoyt, in the Court of Common Pleas of the county of Essex, on the 15th day of July, 1835, for $1116.35, upon a promissory note, given by the defendant to the
It is stated itv the ease, that after the several judgments were obtained in the justices’ courts, E. Hoyt, on the 10th of November, 1885, paid to Price $200 on account of the note, on the 11th, $100, on the 26th, $80, and the balance before the argument upon the rule to show cause was made before the Court of Common Pleas, and that the judgment thus confessed before any of the money was paid absorbed all the property of L. Hoyt.
Upon the facts thus presented before them, the Supreme Court vacated the order which had been made by
, if in the present ease, Mr. Clapp, before this affidavit was made, had paid the money to Mr. Parklmrst, with an understanding that it was to be used by him for purchasing goods and paying his notes as they became due, and sustaining his credit, but on the day after the levy, Parklmrst had constituted Ely, Clapp and Bowen his bankers, by depositing the funds with them, and taking their negotiable note for the amount, payable on demand, could it be successfully maintained that the judgment would be constructively fraudulent? I think not.
Wherein does this ease substantially differ from the one now put? In each, we must recur to the intent, the animus which pervaded the transaction. If it was honest and pure, seeking to promote the benefit of the parties, and not to injure any one, and actual injustice has not been done, no sound principle of law, of morals, or of public policy can demand that such a construction should he given to an act of the legislature designed to place a cheek upon the conscience of a party, and to provide against the entries of improper and fraudulent judgments, as would require a mere form of proceeding to bo mechanioally observed for the purpose of saving the integrity of a judgment available at common law, and intended for honest purposes, from the invalidating effect of that statute.
Upon the literal construction contended for by the plaintiffs in error, how could a merchant secure and protect his confidential endorser? A’s notes for large amounts,, endorsed by B as accommodation,, payable at different times, have been put in circulation by A in the regular course of bis trade. Before any of the notes arrive at maturity, A, discovering that he must fail in business, wishes to indemnify and save B from loss through his
Such, I think, is.not the understanding of inerohanfs,.or of commercial lawyers ; and if it be the proper interpretation of our statute, further legislation is demanded-; because if will cheek and restrain that confidence which generally pervades a healthy business community, and will paralyze the laudable efforts of many young men who begin the world witli valuable business talents, but without sufficient capital to encourage and sustain their honest industry without the aid of their friends. '
If, in the language of Chief Justice Ewing in the case of Scudder v. Coryell, the design of the statute, in requiring the affidavit, was simply to prevent the entering up of judgment’s where no indebtedness existed really aiid in good faith, and to defeat fraudulent purposes, and, as he successfully argued before the Supreme Court in the case of Warwick v. Matlack, 2 Halst. 165, “ the fifth section of the act was merely meant to place a cheek upon the conscience of the party, and to provide against the entering-of improper and fraudulent judgments,” then the judgment in this case, embracing the moneys as well then due as the advances at the time agreed to be made, and after-wards made in good faith within a. reasonable period, and before any oilier creditors had acquired rights by judgments and levy, is no such departure from the statute,
It was also contended, upon the argument, that if one promissory note be a good consideration, within the meaning of the statute, for another promissory note, two parties might exchange notes of equal amounts, and each confess a judgment to the other, and thus cause their respective properties to be covered by executions and levies. Grant that they might, yet, cui bono, if neither of them had creditors “ with certain claims upon his property,” who could impeach the transaction? If in such a case judgment creditors of either or both of the parties should apply to a proper tribunal for a preference of lien, the court would unquestionably order that one judgment should bo set off against the other, thus paying the collusive parties in their own coin, and leaving the property of each to respond to the demands of his bono fide judgment creditors.
From the view which I have taken of the whole case, I conclude—
First. That a judgment good at common law cannot be attacked for a mere irregularity in the proceedings by any one not a party to the record.
Second. That a court should liberally exercise its equitable jurisdiction over confessed judgments for the detection of fraud and the promotion of fair dealing between debtors and creditors, and in a proper case they may award a feigned issue for a jury to try the fact of fraud.
Third. That a judgment by confession at common law without an affidavit is not absolutely void and fraudulent because of a non-compliance by either of the parties with the directions of the statute, but that the irregularity in the proceeding may be questioned by the defendant on a writ of error, and the absence of an affidavit may be looked upon as strong, if not a conclusive badge of fraud, in proceedings between contesting judgment creditors.
Fifth. That in the ease before the court, neither actual fraud nor legal fraud has been established against the senior judgment creditors, and that they are entitled to priority in payment to the amount of the pre-existing indebtedness and of the advances actually made before the other judgments were confessed, notwithstanding the manner in which the consideration of the note is set out in the affidavit.
These conclusions, I think, maintain the law, as it has been settled and received in New Jersey for upwards of twenty years past; and if it be the prevailing sentiment of the bar and of the community that judgments by confession, which do not literally conform to the provisions of the present act respecting affidavits, ought to be absolutely void as to’subsequent judgment creditors, and also that such creditors should be at liberty to attack judgments for irregularity in the proceedings, the legislature can pass a supplement to the statute in language which will put the question at rest for the futuro.-
In my judgment, the order and rule of the Supreme Court should be affirmed,, with costs-.
For Affirmance—The Chancellor, and Judges Ogden, VEEDENJ3ÜÉGH, CORNELISON and1 WOOD.
For Reversal-^The Chief Justice, and Judges POTTS, Ryerson, Ris'ley, Swain arid Valentine.
The tefn-t of office of Judge Arrowsmith, one of the judges who heard the argument, having expired February 6th, 1858, he was not present when the case was.decided.
“This cause having been re-argued at tiie last term of the court., in presence of the Chancellor, Chief Justice, Justices Ogden, Potts, Vredenburgh, and Ryerson, and Judges Arrowsmith, Cornelisou, Valentine, Risley, Swain, and Wood, (Justices Elmer and Haines having rendered the judgment of the Supreme Court in (he case), and the court having taken time to advise thereon until this term, and the question being now taken on motion to reverse the judgment of the Supreme Court, the vote was as follows: For reversal—Green (C, J.,) Ryerson, Risky, Swain, for reversal as to all except the sum of three thousand and fifty-two dollars and ninety-four cents, the amount due the defendants in error when their judgment was confessed, and for that amount affirmance, Potts and Valentine. For affirmance—Williamson (Chancellor,) Ogden, Vredenburgh, Cornelisou, and Wood; whereupon the court announced that the judgment of the Supreme Court stood in all things affirmed, according to the act of the legislature, which declares that no judgment, of the Supreme Court shall be reversed by this court, unless a majority of those members of the court who are competent to sit on the hearing and decision of the case shall concur in such reversal; and thereupon the counsel for the plaintiff in error moved for leave to discuss the construction and validity of said act, and the court ordered that counsel be heat'd thereon, in full court, at the next term of the court, the cause to have priority on the list of causes at that time.”
At June Term, the court decided that the above-mentioned law was unconstitutional, and that, even if it was constitutional, a majority of the judges competent to sit at the decision of the cause were in favor of reversal, and ordered that the judgment of the Supreme Court should be reversed except as to the sum of $3052.94.
Reference
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- Wellington Clapp v. Henry G. Ely
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