French v. A. H. Rainey & Co.
French v. A. H. Rainey & Co.
Opinion of the Court
— In this case the complainant has excepted to the sufficiency of the answer of the defendant Rainey, and both parties have appealed from the rulings of the master on these exceptions. The point raised by one of these exceptions has been fought over in the courts for a hundred years, and cannot be said to have been yet determined. The question is whether a defendant who undertakes to defend by answering the bill, instead of demurring or pleading, can, by denying the complainant’s right to an account, protect himself from giving in his answer the account called for.
The bill discloses the following facts: On the 14th of October, 1869, the complainant commenced shipping to Rainey & Co., as factors, at New York, cotton for sale on his account. The complainant was to send samples of cotton, as purchased, to Rainey & Co., who were to contract in the market for the sale of the cotton at a future date to be met by the shipments. Rainey & Co. were to receive and sell the cotton, accept and pay drafts of complainant drawn on the faith thereof, and for such acceptances, and for the sale, storage, handling, etc., of said cotton, they were to
Another object of the bill is to get behind the settlement of May, 1873, and surcharge and falsify the accounts upon which it was based. To this extent the bill is purely an original bill, having no connection with that part of the bill
The bill, as an original bill, seeks to go behind the settlement of May; 1873, upon the ground of the discovery of facts, since the settlement, which show that false and erroneous charges were made against the complainant in the account furnished to him by Rainey & Co. Although the complainant charges that he refused to settle at the time because the amount claimed was, in his opinion, not correct, and that he afterwards gave his notes in settlement upon the promise of Rainey & Co. that a full account should be made out and sent him, and errors, if any, corrected, yet the bill repeatedly, in setting out the charges complained of, states that it appeared “in the accounts rendered” to complainant that he is charged thus and so. From which it sufficiently appears that accounts were rendered to the complainant, and that these accounts were before him in
1st. The complainant authorized Eainey & Co. to make contracts for the sale of cotton to be delivered at a future day, the cotton to be purchased at Nashville and shipped to New York to meet the engagement; yet Eainey & Co. would sell complainant’s cotton on receipt, using the proceeds for their own purposes, and afterwards go into the market and pretend to buy other cotton, charging commissions, storage, etc., when no cotton was actually bought, or intended to be delivered, but a wager was made on the price of cotton at a future time, and a margin “put up” to cover the difference between the actual price at the time and the agreed price; that these contracts were made with persons unknown to complainant, and sometimes not with outside parties, but with members or clerks of the firm of Eainey & Co.; that the said contracts were illegal, and the charges thus created against complainant amount to $10,000.
2d. Eainey & Co. made false and fraudulent charges for insurance on complainant’s cotton, and for storage, to the amount of several thousand dollars, when they had not in fact paid one dollar of these charges.
Upon these charges the complainant required Eainey & Co. to answer, “ and exhibit a detailed statement of the sales of cotton, made by defendants, belonging to complainant;” also to state whether the “future” or illegal contracts were not taken by defendant Eainey, or some of the members or clerks of the house, and the names of the contracting parties; also in what office or company the insurance on the cotton was taken, in what warehouses the cotton was stored, and to exhibit receipts for the payment of such charges. The exceptions to the answer are that these requirements have not been complied with.
The bill shows a settlement of accounts, and the execution of notes in full of the balance due in May, 1873. It further shows that on the 14th of November, 1874, a bill
The allegation, that “ future ” contracts for the delivery of cotton were made without the authority of the complainant, is explicitly denied. There is also an explicit denial that any wagering contract for future delivery was made as charged, every contract being an “express agreement for delivery and receipt of cotton.” The charge, that some of these “ future ” contracts were taken by members or clerks of the house, is only responded to by a general denial of overy charge made on the page of the bill where it occurs as false. Such a general denial is not sufficient. The complainant is entitled to a specific answer to each specific charge. The defendant has, however, supplemented the general denial on this point by a statement, in another part of the answer, that the sales on account for complainant “ were all made ” to the following firms, naming them, and through the following brokers, naming them. This special answer, coupled with the general denial, is, I think, suffi
The answer denies that any false or fraudulent charges; for insurance and storage were made, and states positively that “ no charge of insurance or storage was ever made, at. any time, except when cotton was actually insured or stored. ’' Each' allegation of the bill on these p oints is, in turn, answered equally explicitly. The answer further states that sales of cotton are made in New York on the tables of brokers, and “they charged respondent the same rate that he charged complainant in his account.” “ Of course,” the answer adds, “ it is not possible now to furnish the receipts for payments of brokerage paid, or to tell the names of all the brokers employed. Respondent made sales through almost every prominent broker in New York.” It is obvious that these statements fully cover the equity of the charges, and the demand for the receipts mentioned. The case is, therefore, narrowed down to this : Is the complainant entitled to a detailed statement of the sales of cotton made by the defendant, and to the names of the insurance companies in which the cotton was insured, and of the warehouses in which it was stored ? Two points are involved in this query— the one, the general right of a complainant to demand of a defendant, who answers, a full answer in all respects, in every case ; the other, the right to enfore a technical rule to all its logical sequences, in all cases. It is obvious that, if it be true, as we have inferred from the bill, and as is sworn to in the answer, that the defendant has already furnished the complainant with all the accounts he calls for, the exhibiting of the account as required would be a useless labor and expense. So, if the answer fairly meets the equity of the bill, and is not evasive, the requirement of unnecessary details would be using the machinery of the court for no beneficial purpose. Neither point is free from difficulty, and
The general rule undoubtedly is that every objection to discovery which is founded upon a denial of the plaintiff’s right of suit, or of his right to proceed with it in its existing state, should regularly be taken by demuiTer, or plea, according to the circumstances of the case ; and where the objection is not so taken, and the defendant answers the bill, he will be held to have waived the objection, and will be obliged to answer the bill throughout. Mazerredo v. Maitland, 3 Madd. 66; Lancaster v. Evors, 1 Phil. 349; Swinborne v. Nelson, 16 Beav. 416; Elmer v. Creasy, L. R. 9 Ch. App. 69; Bank of Utica v. Messereau, 7 Paige, 517. The reason is that the complainant is entitled to a full discovery of all facts alleged in the bill which may be important to the complainant in case he. should succeed in showing that the particular defence attempted to be set up in the answer is false or unfounded. For, were it otherwise, the defendant, by putting in an answer denying some particular allegation which is necessary to the title of the complainant to relief, and putting every other allegation of the bill in issue by a general traverse m the usual form, might throw upon the complainant the burden of proving many things to which he was entitled to a discovery if the particular denial of the answer turned out to be. unfounded: There are exceptions to the general rule, about which there never has been any conflict; such, for instance, as privileged communications, and discovery which.might subject the defendant to penalties or forfeiture. Stratford v. Hogan, 2 B. & B. 164; Parkhurst v. Louton, 1 Mer. 400; Cooke v. Turner, 14 Sim. 218. The defendant is not bound to answer matter purely scandalous, impertinent, or immaterial. Agar v. Regent Canal Co., Coop. Eq. 212; Utica Ins. Co. v. Lynch, 3 Paige, 210. The reason for these exceptions is that, even if the defence had been made by demurrer or plea, and overruled, the complainant would
When we come to the direct question, whether a defendant who denies by answer the complainant’s right to an account is nevertheless required to give the account called for, the decisions are equally conflicting. Lord Macclesfield held, in Stephens v. Stephens, cited in Sel. Ca. 51, that he must discover; while Lord Hardwicke, in Gethin v. Gale, cited Amb. 353, reached the opposite conclusion. And Lord Thurlow, in Shepherd v. Roberts, 3 Bro. C. C. 239, which was a bill for a partnership account where the defendant denied the partnership, held, first, that the defendant must give the accounts called for, but afterwards, as we learn from Lord Loughborough, in Jerrard v. Saunders, 2 Ves. jr. 457, and from a note of the editor to Hall v. Noyes, 3 Bro. C. C. 483, reversed himself, and held the answer sufficient without the account. Lord Lough-borough’s views in favor of the latter ruling were strongly expressed in Marquis of Donegal v. Stewart, 3 Ves. 446, and Phelips v. Carey, 4 Ves. 107. The court of exchequer, on its equity side, has always ruled in the same way. Randall v. Head, Hard. 188; Sweet v. Young, Amb. 353;
The question came before Lord Eldon on several occasions, who, while he hesitated to overrule the current of decisions then prevailing, indicated a leaning to the contrary doctrine. Shaw v. Ching, 11 Ves. 283, and Rowe v. Teed, 15 Ves. 376. These doubts of their great chief were made certainties by Sir John Leach, in Mazeredo v. Maitland, 3 Madd. 72; and by Lord Manners, in Leonard v. Leonard, 2 Ball & B. 323. The conflict was, however, again renewed by Lord Cottenham, in Adams v. Fisher, 3 Myl. & Cr. 526, a decision tending towards the earlier cases ; and by Lord Lyndhurst, in Lancaster v. Evors, 1 Ph. 349, expressing himself strongly the other way. These cases were followed by Swinborne v. Nelson, 16 Beav. 416, in which Lord Romilly, master of the rolls, dissents from the ruling in Adams v. Fisher, and, upon a review of the authorities, lays down the doctrine, broadly, that a defendant who submits to answer must answer fully, and cannot escape by denying the complainant’s title. The bill was for the infringement of a patent, and called for an account of all articles manufactured and sold by defendant under a particular name, the quantities thereof, the names and addresses of the persons to whom sold, and the prices. The defendants denied all infringement, and yet, upon exceptions, were required to answer these sweeping interrogatories. The master of the rolls reiterated his rulings in Clegg v. Edmonson, 23 Beav. 125, where accounts were called for upon the ground of a partnership, and the partnership was denied. Both of these decisions were appealed from, and the result is thus told by Lord Selborne, in delivering the opinion of the court in Elmer v. Creasy, L. R. 9 Ch. App. 73: “What really happened in the court of appeal was that the lords justices succeeded in putting pressure upon the parties so as to obtain their consent to
In Saull v. Browne, L. R. 9 Ch. App. 364, the doctrine of Elmer v. Creasy, with its qualifications as therein expressed, was followed. But in Great Western Colliery Co. v. Tucker, during the same month, and reported in the same volume, p.376, the court refused to require the defen
In the meantime the English judges undertook, by the 38th order of the Orders in Chancery of 1841 (1 Ph. & Cr. 379), to remedy the evil in part. That rule provides that a defendant who answers may decline answering any interrogatory, or part of an interrogatory, from answering which he might have protected himself by demurrer. And the Supreme Court of the United States, by their equity rules of 1844, went further, and expressly provided that “ the Tule, that if a defendant submits to answer he shall fully answer to all the matters of the bill, shall no longer apply in cases where he might by plea protect himself from such answer and discovery.” Rule 39. Following in the same line of travel, our Code, §§ 4318, 4319, provides that a defendant need not demur or plead specially in any case, except to the jurisdiction of the court, but may have all the benefit of a demurrer by relying thereon in his answer, and may incorporate all matters of defence in his answer. And our supreme court had previously held that the defence of
In this view the settlement of accounts relied on by the-answer in this case, supported as it is by an answer denying-the withholding of accounts and the false and fraudulent, charges alleged in the bill, is a good plea in bar to all the discovery sought as merely consequential to setting aside the-settlement. This covers the requirement upon the defendant to “ exhibit a detailed statement of the sales of cotton,, made by defendants, belonging to complainant.” For this, detailed account is only necessary in the event the settlement is opened, and the complainant permitted to surcharge: and falsify its items. Moreover, the disclosures of the bill as to the accounts rendered to complainant, and upon which, his charges are based, and the positive assertions of the answer that the accounts of each transaction were rendered at the time, and general accounts from time to time, and a, full and final account previous to the settlement, bring this case within the exception to the general rule recognized by Elmer v. Creasy, if we concede the existence of the rule,, namely, of an attempt on the complainant’s part “to press, for discovery which would be vexatious and unreasonable.”
A more difficult question remains. The true key to the-, distinction between the discovery which a complainant is-entitled to demand as of right, where the title of the complainant to relief is denied, and the discovery which he is not entitled to in such case, is struck by Sir James Wigram, in the quotation made in Elmer v. Creasy. The right of '
The rights of the complainant to a discovery, if he shows himself entitled thereto on the hearing, will not be prejudiced. He will, in that event, be in the position of a complainant to whose bill a false plea has been put in, and issue thereon found in his favor. He may have an order that the defendant be examined on interrogatories before the master as to the matters in relation to which discovery is sought by the Bill. Astley v. Fountaine, Rep. temp.
The master’s ruling on the first exception will be reversed, and his rulings on the second and third exceptions sustained.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.