Keighler v. Savage Manufacturing Co.

An appeal will not lie from an order granting or refusing to dissolve an injunction, until answer filed, and an insufficient answer is no answer for the purpose of an appeal, but it is for this court, and not the coux-t below, to judge of the sufficiency of the answer, it being for the appellate court alone to determine when an appeal will lie. A party submitting to answer must answer fully and frankly, and he who evidently and purposely holds back something, cannot complain if he find himself regarded with suspicion and distrust, and be refused that to which he may in truth be entitled, and under other appearances might have obtained. According to the chancery practice of this State, the motion to dissolve an injunction, and exceptions to tlxe answer, are heard and decided at the same time. Where an answer refers to a paper as showing the dates and amounts of receipts from certain collaterals in the defendants’ hands, to a correct and detailed statement of which the complainant was entitled, and such paper does not appear in the record, an exception for insufficiency in this particular must be sustained. It is the duty of a factor to keep books, in which shall be correctly entered the transactions on account of his principal, and the latter is entitled to a correct copy of the entries, including all mexnoraixda connected therewith. Where a factor has rendered his account-sales regularly, and the same were settled with full knowledge of all their items, and the names of purchasers • were not then required, it is unreasonable, at any considerable distance of time thereafter, to subject the factor to a demand for such names, if his conduct has been honest and faithful, and free from fraud or deceit. A judgment is the highest exercise of judicial power; prima facie it imports verity, and, as to the parties to it, is conclusive, unless mistake or fraud be shown, and the onus is on those who impeach it; it should be interfered with or questioned only with groat delicacy and circumspection. If a judgment is confessed with the agreement that it is not an ascertainment of so much actual indebtness, but only a security for so much qs thereafter might he ascertained to be due, equity will prevent any use of the judgment for a different purpose, hut the proof of such an agreement must be abundantly full and explicit, so as to leave no doubt on the mind of the court. Good faith is the paramount and vital principle of the law governing the relation of principal and factor; the latter cannot purchase for himself the property of his principal consigned to him for sale to others, except with the knowledge, consent and approbation of the principal, upon a free, full and frank disclosure of every circumstance connected with the transaction, and a total absence of all fraud and concealment.

Appeal from the Equity Side of the Superior Court of Baltimore city. This appeal was taken from an order of the court below (Lee, J.,) continuing till final hearing, or further order, an injunction which had been granted upon a bill filed by the appellee against the appellants, and sustaining certain exceptions filed by the .complainant to the answer of the defendants, for insufficiency. The bill alleges that the defendants, as partners under the co-partnership name of Duvall, Keighler & Co., were, from the 1st of January 1850, to the 1st of June 1851, agents and factors for the sale of cotton goods manufactured by the complainant; that becoming somewhat embarrassed, and being sued by other creditors, complainant, at the September term 1852 of the circuit court for Howard county, in accordance with previous assurances, confessed a judgment in favor of the defendants for the nominal sum of $10,000, as a collateral security to secure such amount of indebtedness to them as upon ® full and fair accounting, might thereafter be ascertained to be due, and that this judgment was confessed upon the express agreement and understanding that the same was but a collateral security, and designed to put the defendants in the same condition precisely, as to security, as were the other creditors who had sued; that at the time this judgment was rendered, the defendants had in their hands, as collaterals for any sum that might be due them, one-half of a debt of $15,000, due the complainant by Mason & Son, of Baltimore, on their notes, and amply secured by mortgage, and which has been paid to the defendants, except perhaps a small part, for which the Masons have given them additional bills receivable; that complainant still confiding in the friendship of the defendants, and still consigning to them as usual, they, on the 22nd of March 1853, when complainant’s chief officer or treasurer was, to their knowledge, lying dangerously ill, and when two of its corporators on whom, as the defendants well knew, complainant chiefly relied for the management of its affairs, were absent from Baltimore, and without any prior accounting with complainant, or applying and crediting to said judgment so much of said collaterals as had been realized, and the balance in process of being realized, and without any demand of any pretended indebtedness, and, in fact, without any notice or warning whatsoever to any stockholder or officer of complainant, issued a ft. fa. on the judgment so rendered merely as a collateral, and levied the same for the whole amount thereof upon all tlie lands and possessions of every kind and nature of the complainant; that, this act of bad faith on the part of the defendants, in reference to a judgment confessed merely as a collateral, induced the complainant to investigate the accounts and dealings between them, for the purpose of ascertaining whether, upon a fair accounting, any and what amount was due upon the defendants’ pretended claim, the great confidence which the complainant, through its agents, up to this time, had in the defendants, having lulled all suspicion as to the accuracy of their accounts. The bill then charges, that upon such examination, so far as could be ascertained from the face of the accounts, enough appears to show that the accounts, sales, and accounts current rendered complainant from the 1st of January I860, to the 1st of June 1851, are untrue and fraudulent, and when properly restated, it will be found that defendants are indebted to the complainant; that many and large amounts of complainant’s fabrics consigned to the defendants for sale to others, have been returned as sold, when, in fact, they themselves have secretly and without complainant’s knowledge or consent, taken said goods to their own account, and have resold the same at great profits, for which they have not accounted; that from time to time they have sold complainant’s goods to purchasers at less-than their market value, as an inducement to such purchasers to buy defendants’ own goods; that from time to time they have sold, without authority, goods of the complainant so consigned to them, at prices lower than the rates fixed therefor by complainant’s agents, and, in violation of instructions given by such agents, have sold such goods, when such agents, anticipating an advance in prices, have directed them to be withheld from the market, and which anticipations have always been realized, and that at such times defendants have made large sales to themselves, on the eve pf such advances, or when such advances were actually taking place, or had taken place, there-' by realizing great profits to themselves, which ought to have enured to complainant, and have thereby deprived complainant of all benefit of the rise in value of said goods, when such rise took place; that they have also fraudulently returned sales of goods as having been sold as of certain dales, when, in point of fact, such sales were really made at dates long prior to those reported, and that such sales have, contrary to law and equity, been credited with interest, as if made on the last day of the months in which they were reported, and not from the actual dates on which they were really made; that by means of these devices and others unknown to complainant, and also by compounding interest on balances which included interest, the accounts rendered have included heavy charges for interest against complainant, whereas by a proper, statement of the accounts, according to the actual dates of the transactions, a large amount of interest would be found due complainant; that such accounts also contain charges additional to that of five per cent, for commission properly chargeable, and also charges of five per cent, for commission and guaranty on goods not sold, but secretly taken to defendants’ own account. The bill further charges, that since the rendition of the aforesaid judgment, many and large payments on account by collaterals of complainant held by the defendants, have been paid to them, and which were made prior to the issuing of the execution thereon, and which were not credited on the judgment; that said accounts are fraudulent and inaccurate in divers other respects, which complainant is now unable to specify, because the same alone appear in the account books of the defendants, and to which complainant, by means of its officers and agents, has not access, and each and all of which said books of account, so far as the same contain any entries whatever relating to the sales of complainant’s goods, are as much the books of the complainant, as principal, as they are the books of the defendants, as complainant’s agents and factors; that with a view to obtain the exact truth of the matters before stated, complainant, through Geo. H. Williams, its attorney, and one of its corporators and directors, applied to the defendants for leave to examine said books so far as the same related to the affairs of complainant, which proper and lawful application has been steadily and constantly refused by them; that after the execution aforesaid was issued, a proposition for arbitration was made and assented to, but after considerable negotiation failed, principally because defendants found that their books of account would be required to be produced, and which they allege the law will not coerce them to produce, and after countermanding the execution preparatory to such arbitration, the defendants now threaten to renew the same. The bill then prays an answer on oath, and that the defendants may exhibit an account with complainant, setting forth truly and accurately, from the 1st of January 1850, to the 1st of June 1851, the exact day and date of all the sales of complainant’s goods sold by them, the quantity thereof on each date, the persons to whom the same were sold, and the residence of such purchasers, the true prices and credits on which the same were sold respectively; that they may set forth a true and accurate account of the quantity of goods taken to tlieir own account, as aforesaid, and the times respectively wheh so taken, and their subsequent disposition of the same, the times and dates when* and the exact prices and credits at which, and the names and residences of the purchasers to whom the same were sold; also an exact statement of the times, prices, and names and residences of the purchasers, and the quantities of goods sold at less than the market price to induce sales of their own goods, and that the defendants may produce and discover each and all of the original books of account and entries containing any and every account whatsoever, relating to the sales of complainant’s goods, and that, upon such production and discovery thereof, complainant may be permitted to surcharge and falsify the same, as well in the particulars herein mentioned, as in all others which may be made apparent in the progress of the cause, and for an injunction restraining the defendants from all further proceedings upon the judgment aforesaid, and for general relief. The injunction was granted accordingly, upon bond in the penalty of $15,000 fixed and approved by the judge. The answer in reference to the judgment, explicitly denies that it was taken as a security merely for a nominal sum of $10,000, or as a collateral security to cover any balance that might thereafter be ascertained to be due, upon a full and fair accounting between the complainant and the defendants, but they state that it was given as a specific security for $10,000, parcel of an acknowledged indebtedness of complainant to the defendants, then existing, of $14,862.36, and that it was in-» tended ¿o convert that amount of indebtedness into a judgment, so as to take it out of their account current, and that it was accordingly taken out, and has thenceforth been considered and treated as a judgment debt. They further show that this judgment was confessed by the complainant in the face of opposition, in open court, of Amos A. Williams, one of the corporators of the company, and at that time in litigation with it, and with the sanction of ail the parties then having the management and control of the corporate affairs of the complainant, They further show that they had advanced for the complainant, by payment, to another firm, with the concurrence of the complainant, a largo amount of money, and which furnished part of the indebtedness of complainant to the defendants at the time this judgment was given. The answer then denies all fraud of every kind imputed to the defendants, and proceeds to answer at length the several allegations of the bill, but for the purpose of this appeal, it is only necessary to state such parts thereof as the exceptions sustained by the order appealed from refer to. These respondents state, that after the rendition of said judgment, they, under the written instructions of their counsel, credited complainant in their account current, as of the 20th of September 1852, with the amount of the judgment, and opened a new account, termed judgment account of the Savage Manufacturing Company, and after applying the collaterals as received to the extinguishment, in the first instance, of the balance due respondents on the old account current, there was a balance remaining to the credit of the company- — -the proceeds of said collaterals — of $1(547.07 to be credited as of the 15th of February 1854, in part of the judgment for $10,000, bearing interest from the 31st of March 1853, to which last mentioned day interest thereon was paid by the complainant. In another part of the answer tiiey say, on this point, they admit they held as security one-half of certain collaterals, being a debt due the complainant by Mason & Son, and that from said collaterals they realized certain sums which paid the residue of the indebtedness of the complainant, over and above the amount of the judgment, and produced a balance in pay - ment pro tanto of said judgment as of the 15th of February 1855, of $1647.07, and they deny that they have received any further sum, in any way, on account of said judgment, except payment of the interest thereon up to the 31st of March 1853. They say it is not true that they took goods to their account secretly, and without the knowledge or consent of the complainant. They admit it is true that goods were taken to their account at several times, but always with the full knowledge, consent and approbation, and sometimes at the pressing solicitation of George Williams, the known and authorized agent of the company, and with whom chiefly, during his lifetime, respondents had intercourse in their dealings with the complainant. And in this connection they state that it frequently happened that purchasers desired to purchase in quantities less than a bale, and in order to supply them with complainant’s goods, respondents would take to account a bale at the then current rate, and that this course of dealing was well known to, acquiesced in, and approved of, by said George Williams, and was, in fact, beneficial to the complainant, and that it sometimes happened that the prices at which the goods were so taken to account, exceeded those at which respondents resold them. They further say they never took goods to their own account, unless in case of single bales, without the express previous sanction and knowledge of the agent of the complainant, and that sometimes, in fact, they so took goods to their account against their own wishes and interest, yielding to the urgent and importunate request of said George Williams, who desired, for the use of the complainant, occasionally to have a larger credit with respondents than the state of their accounts and the course of dealing between them would have justified unless such goods were so taken to account, and that when so taken, they were always taken at current prices, and ■ were sometimes sold at an actual loss. Further answering, respondents state that the allegation in the bill, that they sold complainant’s goods at any time at less than their market value, to induce purchasers to buy their own goods, is utterly untrue. They say that sometimes prices were limited at a rate higher than the market value, yet, with some few exceptions, they did not at any time sell under the limit, and whenever they did so, it never resulted in any loss to the complainant, and the fact was always made known to said George Williams, and the sale sanctioned, approved and ratified by him, and in any instance in which they may have omitted to comply strictly with instructions, they took on themselves the risk of loss, and bore if when any in fact occurred; and they expressly aver that sometimes they charged themselves bi account for goods as sold at certain prices, when in fact they received a less price, and did so uniformly whenever they sold at any price less than the limited pnce, and objection was made by said George Williams. All these matters were known to and understood by said Williams, and fully sanctioned and approved by him, and they deny that they made sales to themselves at any time, save with the sanction and knowledge, and sometimes at the urgent solicitation, of said Williams, whilst acting as treasurer of the complainant. They further deny that the accounts by them rendered are unreal or fraudulent, or made for the purpose of concealing from complainant the true and accurate result of their sales. The accounts were correct; sometimes it may have occurred, and most probably did occur, that the precise dates were not accurately given. This may have arisen from taking an average date of sales made in the course of several days, or of a week, or even of several weeks, where the sales may have been sparse, or by inadvertence sales may have been omitted to be entered at the proper time, and afterwards may have been entered as of the date when the error was discovered. They further say that they rendered regular accounts of sales made, and of goods taken to account, and by these accounts the dates from which interest was computed plainly appeared. These accounts were stated according to usage and general custom, and in accordance, moreover, with the known and established course of dealing between the complainant and these respondents, and if there had been any reasonable ground of objection on this score, the objection would have been, as it ought to have been, promptly made by the said George Williams, agent and treasurer as aforesaid. They further state that all the accounts were honestly and truly rendered, and that it is not true that any such alleged frauds or inaccuracies would appear by the account books of these respondents. No account books were ever kept in which complainant has, or ever had, any interest or property; full and accurate accounts being rendered regularly by respondents to the complainant of all the dealings and transactions between them. They admit that George H. Williams did apply to them for leave to examine their books with which request they declined to comply, and for the sufficient reason that he had no right to examine their private books, and because they bad no book or books in which he or the complainant had any interest or property whatever, and they state that they never kept any such book or such books concerning the business of the complainant as stated in said bill. Further answering, these respondents say that the complainant, in the accounts regularly rendered by them, has been furnished truly and accurately with the items of account from the 1st of January 1850, of all the dealings and transactions between them in every particular, and as far as they know and believe, the accounts so rendered are correct, although they will not aver that there may not be errors in date, but if such errors there be, they have not the information or means of now correcting them. That they are unable to give any other or further information than the accounts rendered by them furnish and afford; the said accounts were truly stated, and are substantially correct, if not exactly so. These respondents say that, if bound to do so, they can probably state the names and residences of many of the purchasers of goods, but they are advised, as no such requisition was made at the times the accounts were rendered and approved, they are not now bound to take this extra trouble; and they further state that, by the usage and custom of trade, the names or residences of purchasers are never stated in rendering account sales, where the. sales are guaranteed. They aver that the prices stated are the true prices at which sales were made, and the credits stated are the true credits at which the same were sold, although there may be instances in which, pending a limit, where persons were unwilling to purchase at so high a price as the limit, the goods were delivered upon the understanding that the same should afterwards be considered as sold at the then market price, when the limit should be taken off, or when the market price should attain the limit, whichever should first happen. They do not remember any case of this kind, nor do they know that there was certainly any such case, but it is possible such instances may have occurred, and hence the qualification here made. They further state it is impossible for them to say whether goods taken to account were sold at a profit or a loss, or to whom sold, or when; with great labor some of the bales could probably be traced, but they are advised that, as all goods taken to account were so taken with the knowledge and concurrence, and generally at the instance of said George Williams, it is of no concern to the complainant in what manner, to whom, when, or at what prices the same may have been disposed of by these respondents. They again deny all fraud and all allegations of fraud, in whatever terms, charged or insinuated in and by the bill, and as to any supposed or pretended mistakes, they say that the several monthly and all other accounts rendered by them were plainly stated, were unambiguous and clearly intelligible, even to the plainest understanding; that the quantities of goods sold, and the quantities on hand, were always distinctly stated; that the dates on which tlie sales wore reported to have been made, were always given, and it was in the power of arsy one who kept the run of the calendar, to ascertain whether the date was on the Sabbath, and to have pointed out the fact; that the prices at which the sales were made, were always distinctly and accurately stated; that the times of credit were always distinctly and plainly set forth; that the time from which interest was to be allowed, was always plainly stated, and It was, therefore, in the power of the agents and officers of the complainant to have made objection, if any objections existed, as the grounds of such objections were plainly and obviously apparent on the face of said accounts. To this answer the complainant filed exceptions, both for impertinency and insufficiency. All of the former were overruled by the court below, and also all of the latter, except the following, which were sustained: 7th. For that they have failed to answer the allegation that, prior to the issuing of said execution, and since the rendition of the judgment, many and large payments on account, by collaterals, had been paid to them, and which were not credited thereon prior to said execution. 8lh. For that while in said answer they have admitted their factorship, as alleged in the bill, they have failed and refused to discover and describe the books of account kept by said defendants, in which the accounts of sales of complainant’s fabrics are registered, and which, as factors, they were bound to keep, and in which, as the bill states, the frauds which are charged in the bill alone appeared. 9th. For while they admit in their answer that limits as to price were placed on complainant’s fabrics so consigned, and that they sometimes sold under said limit, and that said George Williams sanctioned such sales, yet they do not state how often, when, and to what amount such sales under limits were made, nor to whom such sales were made, nor do they say when and to what amount said George Williams sanctioned such sales. 10th. For that while they admit that they sometimes charged themselves with goods at certain prices, when in fact they sometimes received for them less prices, and did so uniformly when such sales were not sanctioned by said George Williams, yet they do not say when, or how many goods, or to what amount, they so took to account, nor their subsequent disposition of them. 11th. For that while they aver that they never made sales to themselves at any time of complainant’s goods, save with the sanction and knowledge, and usually at the solicitation of said George Williams, yet they do not state what amount of sales were so made to themselves, nor when, nor to what extent, nor the number of times. 12th. For that while the bill charges that the pretended dates in their accounts of sales are untrue, and not the real dates of sales, and various evasive suppositions are set forth by way of answer thereto, yet they do not say whether they ever made such sales on Sundays or not, nor whether they did or did not reader precise dates, nor whether such dates in such accounts correspond with the dates io their books of account, nor whether they believe the said dates to be the true dates of sale. 13th. For that they have failed to answer, and do not give the names and residence of the purchasers of complainant’s goods, as called on by the bill so to do. The defendants then filed answers to these exceptions, in which they say, in answer to the 7th exception, that after the rendition of said judgment for $10,000, they credited the complainant’s account with that sum, and opened a new and separate account in respect of the judgment, leaving the balance of their old account thus reduced under its former head. This was done in accordance with the directions of their counsel, whose letter of instructions, dated 1st of October 1852, herewith filed, marked X -3, was strictly followed. All receipts from collaterals, when and as received, were credited to the complainant, and the residue, after satisfying the balance not. embraced in the judgment, was credited upon the judgment. The paper herewith filed, marked X 4, shows the dates and amounts of the receipts from collaterals in their hands. [This paper does not appear in the record,] They however state, that in point of fact, some of the money was actually in hand (and interest is thereon allowed to the complainant, from the time it was so in hand) previous to the date at which it, is credited, but the same was paid by the trustee under the Mason deed only on condition that the firms receiving the same would give their notes therefor, so that such payment was not in fact a credit, or to the use of the complainant, inasmuch as respondents would have had to refund the same by payment of their notes, if the title of the complainant in the pending controversy had been pronounced invalid. In reply to the 8th exception, they say that the statement in their answer in this behalf is true. They have no such books as are supposed in the bill. Jn answer to the 9th exception, they say they are unable to give more definite answers than are contained in their answer already fded. The accounts from time to time rendered, embrace all such sales, and were and are just and true, and were fully examined, understood and approved. Tn reply to the 10th exception, they say they are unable to giye any further information than is contained in their answer, respecting the matters specified in this exception. To the 11th, they sajr they are unable to answer more definitely than as set forth in their answer. The accounts, as rendered, truly and fully embrace all the particulars specified in this exception, although it is now impossible to point out the items. In answer to the 12th, they say that they never made any sales on Sunday, and if any dates in any accounts rendered by them indicate Sundays, then such dates are erroneous. Sometimes average dates may have been taken, and in such cases, if any, the average date may have been inadvertently adopted, without noticing that the same fell on Sunday. They, however, are not aware, nor do they admit, that there were erroneous dates in their accounts, and the statement in this behalf in their answer was merely hypothetical. They believe that the true dates of sales are stated in their accounts as rendered, and that in cases, if any, of average dates, that the average dates are truly and accurately stated. In answer to the 13th exception, they insist, as stated in their answer, that they are not bouud to ascertain the names and residences of purchasers, and that it is not now, and was not at the time said accounts were rendered, the custom of Commission Merchants in Baltimore to render the names or residences of purchasers in case of such agencies, although if at the time said accounts were rendered, or within any reasonable time thereafter, the samé had been requested, these respondents would promptly and with great pleasure have furnished all desired information. At this period it would be a work of much labor to comply with the demand, even in a partial degree, and it would be now impossible to comply with the same to any considerable extent. A motion was made by the defendants to dissolve the injunction, and the complainant asked leave to take testimony in support of the allegations of the bill, and a mass of evidence' was taken, which need not be stated, inasmuch as the appeal was dismissed by this court, for the reasons stated in (heir opinion, and no final decision was pronounced on the merits of the case as disclosed by this testimony. The motion to dissolve and the exceptions were heard at the same time, and the court passed an order overruling all the exceptions, save those before stated, which were sustained, and the defendants required to make’ further answer thereto, and continuing (ho injunction till final bearing or further order. Prom tbis order the defendants appealed.