Litch v. Clinch (136 Ill. 410, 1891)

Mr. Justice Bailey

delivered the opinion of the Court:

The appellant insisted in the Appellate Court and insists with greater strenuousness here, that most of the material allegations of the cross-bill are either expressly or impliedly admitted by the answer to said bill, and that upon the facts thus admitted the decree can not be sustained. The admissions insisted upon are sought to be derived from the failure of the defendants to respond in their answer to certain allegations of the cross-bill, but chiefly from what the appellant conceives to be an express admission made by the concluding clause of the answer, usually.known as the absque hoe clause.

It is not true, in proceedings in chancery, that what is not expressly denied is to be taken as admitted, the rule being, that ,a matter which is neither admitted nor denied by the answer must be substantiated by proof. DeWolf v. Long, 2 Gilm. 679 ; Trenchard v. Warner, 18 Ill. 142. Nor is the appellant correct in his supposition that the concluding clause of the answer constitutes an express admission of the allegations of the bill not denied by the answer, it being in fact a technical traverse of all matters in the bill not well and sufficiently answered unto, confessed and avoided, traversed or denied, and is in no sense an admission of those matters. Anderson’s Law Dictionary, Title “Traverse;” Gould’s Pleadings, 350; Mitford’s Equity Pleadings, 406.

It is a matter about which no controversy can arise on this appeal, that the conveyance by Litch to. Clinch of the interest which the latter had in the land described in the original bill, and of the property at Ballston Spa, New York, though absolute in form, was in fact intended as a mortgage to secure certain indebtedness from Litch, part of which was owing to Clinch and part to Platt. That said property was conveyed only by way of mortgage is alleged in the cross-bill, and although the contrary was asserted by Platt, and after his death by his representatives, in their answers, the true nature of the transaction is established beyond controversy both by the oral testimony and by the written defeasance executed by Clinch at the time of the conveyance, and the decree of the court, to which the representatives of Platt are now taking no exception, having found that the conveyance was a mortgage, no dispute as to that proposition remains in the case.

It is also settled, both by the stipulation of the parties and by findings of the decree to which neither party is now taking exception, that the indebtedness for which said mortgage was .given is the same for which the suit was brought and the judgment recovered by the executors of Platt against Litch in the Marine Court of the city of New York. Whether a portion of said indebtedness was originally held by Clinch in his own right, as the recitals of said defeasance would seem to indicate, or whether he held the portion then owing to him as trustee or attorney for Platt, it can not now be questioned that at the time of the commencement of the suit in the Marine Court and at the time of the recovery of the judgment therein, all of said indebtedness belonged and was due and owing to the executors of Platt.

Litch is seeking, by bis cross-bill, to defeat the lien of the mortgagees by showing, 1. that the mortgage debt has been paid; 2. that the mortgage lien is barred by the Statute of Limitations; and, 3. that there is a claim existing in his favor against the estate of Platt, larger in amount than the mortgage lien, which ought to be applied as an equitable set-off to the extinguishment of the mortgage.

In determining the first of these propositions it becomes material to consider how far the judgment of the Marine Court is binding upon Litch as an estoppel. Upon the showing made by the record before us, it must be regarded as conclu-; sively established that said court had jurisdiction both of the subject matter of the suit and of the persons of the parties. The duly authenticated transcript of said proceedings. and judgment are entitled to full faith and credit here, and it appears from such transcript that the Marine Court of the city of New York is one of the courts of record of the State of New York having superior jurisdiction, and it must therefore be presumed, as there is nothing before us tending to a contrary conclusion, that, by the laws of that State, that court had jurisdiction of the subject matter of said suit. Jurisdiction of the person of Litch, the defendant, was obtained by due service of summons on him and by his voluntary appearance by his duly authorized attorney.

The complaint filed by the plaintiffs in said suit alleged the indebtedness in question, said indebtedness being evidenced by three promissory notes therein described, and demanded judgment against Litch for the amount of said indebtedness and costs. The defense set up hy Liteh’s answer was payment, and not a set-off or counter-claim as seems to be supposed. Said answer, after alleging the conveyances by which the land in question in this suit and the Ballston Spa property had become vested in Platt as mortgagee, further, alleges that Platt sold, conveyed and appropriated the Ballston Spa property in payment and extinguishment of said indebtedness, and also that he received certain rents arising from said land, " which was in full satisfaction of the notes mentioned in the complaint.” It can not for a moment be supposed, if the allegations of said answer were true, .that is, if the indebtedness sued for had been paid and extinguished by the rents received and an appropriation of a portion of the mortgaged property, Platt thereby became Pitch’s debtor for the amount of rents ^received and the value of the property appropriated. The payment of a debt simply extinguishes the obligation of the debtor, but raises no obligation on the part of the creditor to refund the money thus paid.

A set-off or counter-claim, at least in the sense in which those words are understood in this State, can be pleaded only where there is an indebtedness from the plaintiff to the defendant which might be made the subject of an independent suit, and filing a plea of set-off is tantamount to the institution of a cross-action by the defendant against the plaintiff in the same proceeding. One material difference between set-off and payment as a defense is, that it is optional with the defendant to plead his set-off as a defense or make it the subject of an (independent suit, while, ordinarily at least, the defense of pay-ment must be presented and litigated in the suit brought to recover the indebtedness alleged to have been paid or it will 'be barred and lost.

■ It appears that when the suit in the Marine Court was called for trial Litch was not present, nor was there any attorney in attendance to answer for him, and the trial was accordingly had and the judgment rendered against him in his absence, and without his having an opportunity to establish his defense by proof. The transcript of the proceedings may, we think, be regarded as showing affirmatively that" no evidence was offered or heard in support of the defendant’s answer.

It may be observed here in passing, that none of the charges made by Litch in his cross-bill of fraudulent collusion and conspiracy between the attorney retained by him and Clinch, acting as the attorney for Platt’s executors, to mislead and deceive Litch and prevent his attending the trial and presenting his defense, are sustained by the evidence, and they therefore must be dismissed without further comment. So far as appears, no undue advantage was taken of Litch, but the judgment seems to have been rendered against him in due course according to the practice of the court in which the suit was pending.

The question then is, whether said judgment, recovered, as it was, in the defendant’s absence, no evidence being offered by him or in his behalf, must be held to be res judicata as to the defense of payment set up in his answer. The general doctrine on this subject is stated by the Vice Chancellor in Henderson v. Henderson, 3 Hare, 115, as follows: “In trying this question I believe I state the rule of the court correctly, that where a given matter becomes the subject matter of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to bring forward their whole case, and will not, except under special circumstances, permit the same parties to open the same subject of litigation in respect to a matter which might have been brought forwaras a part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted a part of their case. The plea of res judicata applies not only to the point upon which the court was required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising a reasonable diligence, might have brought forward in time.” The foregoing language is quoted by the Supreme Court of the United States as a proper statement of the established doctrine of res judicata, in Beloit v. Morgan, 7 Wall. 617.

This court has repeatedly announced the same rule. Thus, in Bennitt v. Star Mining Co. 119 Ill. 9, it is said: “The doctrine of res judicata embraces not only what has actually been determined in the former suit, but also extends to any other matter properly involved, and which might have been raised and determined in it.” In the same case, as also in Kelly v. Donlin, 70 Ill. 378, the following statement from a note in Bigelow on Estoppel is quoted with approval: “It follows, also, from the authorities considered, that a valid judgment for the plaintiff, sweeps away every defense that could have been raised against the action; and this, too, for the purposes of every subsequent suit, whether founded on the same or a different cause.” See also, Riverside Co. v. Townshend, 120 Ill. 9; Harmon v. Auditor of Public Accounts, 123 id. 122; Neff v. Smyth, 111 id. 100; Toion of Lyons v. Cooledge, 89 id. 529; Hamilton v. Quimby, 46 id. 90; Rogers v. Higgins, 51 id. 244.

It may be admitted that the defense of set-off, which a party is not bound to litigate in a pending suit, constitutes an exception to the general rule. If he does not see fit to insist upon his set-off as a defense, he will not be precluded from afterward bringing a separate suit upon it. And even if the set-off should be pleaded, and no testimony is given in support of it and it is not submitted to the court or jury, it may be that the mere pleading of the set-off might be so "far regarded as in the nature of bringing a cross-action as to place the defendant, so far as such cross-action is concerned, in the position of any other plaintiff whose suit is discontinued or.dismissed for want of prosecution. But - if the claim or defense is one which the party is bound to present and litigate in the pending suit, the rule is imperative that it should be submitted or it will be concluded by the judgment. Wells on Res Adjudicata, sec. 250.

That the defense of payment is of the latter class can not well admit of doubt. Payment works an extinguishment or obliteration of the indebtedness paid, and a judgment which establishes the existence of the debt directly and necessarily negatives the fact of payment.

There are. some decisions, it is true, which hold that under certain circumstances, where a debtor has made payments and the creditor takes judgment for the entire debt without applying such payments, the debtor may, in a subsequent suit, recover back the money paid. Thus, in Smith v. Weeks, 26 Barb. 463, a plaintiff obtained judgment for the full amount of his debt without giving credit for certain payments made thereon by the defendant, and the defendant was allowed to recover back the payments thus made in a separate action, on the ground that the creditor having received the money in trust and confidence to apply it in a specific manner, and having failed to do so, it was inequitable that he should retain it; that the debtor had a right to expect his creditor to perform his duty, and that when he came to take judgment for his debt, he would credit the payments made, and that to hold that the debtor was bound to appear in the action and employ counsel at his own expense, merely to see that his creditor did what he had agreed to do, would be unreasonable. Much the same rule was announced in Massachusetts and New Hampshire in Rowe v. Smith, 16 Mass. 307, and Snow v. Prescott, 12 N. H. 535, but it has been repudiated in New York in the later case of Binck v. Wood, 43 Barb. 315, in which the contrary view is held, and in which it is pertinently remarked: " The justice that conflicts with well settled principles of law, settled and declared by enlightened men from broad views of public welfare, may be regarded as of a very doubtful character. It is usually the offspring of negligence and the parent