Elder v. National Bank

New Triae; Action to Set aside Judgment; Pretermitted Defense. When, in an action regularly commenced and prosecuted, without any fraud or fraudulent representations, judgment is rendered by consent against the defendants, they cannot thereafter have the judgments set aside and a new trial granted, on the ground of the existence of a complete legal defense to the action, the nature and extent of which they were aware of at the time of the entry of judgment.

Error from Douglas District Court. On the 16th of December 1872 the National Bank of Lawrence as plaintiff recovered two judgments in the Douglas district court against P. P. Elder and John Walruff, defendants, on certain promissory notes given by Elder and Walruff to the First National Bank of Ottawa, and by said Ottawa Bank transferred to the Lawrence Bank. On the 27th of February 1873 Elder and Walruff, as plaintiffs, commenced this action in said district court, (under §§ 568, 570. of the civil code,) to vacate and set aside said judgments, and for a new trial in each of said actions. They also prayed that the collection of said judgments and the notes on which said judgments were recovered, be forever enjoined. Alleging a conspiracy to defraud, they made the Lawrence Bank and Ottawa Bank both defendants. The petition for a new trial alleges that they (Elder and Walruff) had a good and valid defense to said notes as against the Ottawa Bank, and should have interposed said defense to the actions brought by the Lawrence Bank had not both banks falsely and fraudulently represented that the notes were transferred to the Lawrence Bank in good faith, and for value, before the maturity thereof. Upon this petition, duly verified, a temporary injunction was granted. The defendants (the two banks) moved to dissolve said injunction, and said motion was heard before the district judge at chambers. ' Evidence was taken, and the motion to dissolve the injunction was sustained, and the injunction dissolved on the 15th of March 1873. From this order Elder and Walruff appeal, and bring the case here on error. The judge below erred in dissolving the temporary in-' junction, previously allowed by him, in this case. The bill prays for a new trial and for general relief; and the plaintiffs are clearly entitled to the new trials prayed for, or to an absolute and perpetual injunction of the judgments, described in their petition. The notes ,on which those judgments are founded are illegal, being in violation of §§ 8, 28, 29 of the National Currency Act, are void; and the judgments based upon them are no better. Nor is the National Bank of Lawrence a bona fide holder of these obligations, because they show their invalidity upon their face. They show that they were given by two individuals to a national bank without “personal security.” This was enough to affect the National Bank of Lawrence with notice of their illegality. It is no answer to the plaintiffs to -say that their petition for relief comes too late. In cases like this, equity will give relief, although the defense might have been made at law. Lucas v. Ward, 12 S. & M., 157; Story’s Eq. Jur., §§298, 299, 694, 695 to 701. 1. The first question to be disposed of is this: Have plaintiffs in error shown any valid legal reason why they did not defend against the original actions, and why the judgments entered in those actions should be set aside and new trials granted? There were two actions, and two judgments. The first is readily disposed of, for it is admitted that the petition in the case disclosed the fact that the Lawrence Bank received the note sued on after maturity. Hence, as the record itself apprised plaintiffs in error of the fact that any defense they might have to the note could be interposed — and as a matter of fact they did answer in the case, and finally in person, as well as by attorney, in open court, consented that 'judgment should be against them. As to the second note, plaintiffs in error rely upon what they claim was fraud in the defendants in error in obtaining judgment thereon, whereby they were '“induced” not to defend against it,' but allowed judgment to go against them; but this pretense is disproved by plaintiffs’ own testimony on the hearing. 2. Both of the plaintiffs in error were officers of the Ottawa Bank when all this indebtedness mentioned in the petition occurred, and Elder was president of the bank — its chief executive officer — when the notes were executed and delivered. The plea the plaintiffs in error set up, is this: That bank officers may loan the money of the corporation to themselves in violation of law, and make this fraud on the stockholders, as well as their own disobedience of their official oath, the basis of affirmative relief in a court of equity! On such a plea the law frowns with severity. It would not be listened to as a defense, and never as the foundation of an action. Ex dolo mcdo non oritur actio.” “Nemo ex proprio dolo consequitur actionem.” “Frustra legis av/xilium qúcerit, qui in legem committit.” These are a. few of the maxims wherewith ancient justice, not yet obsolete, speaks of such a plea.