(264 Pa. 406) (107 A.) LANDELL v. LYBRAND et al. 1911. The appellant, plaintiff below, averred in his statement of claim that he had been induced to buy 11 shares of the capital stock (Supreme Court of Pennsylvania. April 21, of that company, at the price of $200 per 1919.) NEGLIGENCE 2 CERTIFIED PUBLIC AC- Trespass for negligence will not lie against certified public accountants by one having no contractual relation with them for loss by reliance upon their alleged untrue report, in purchasing stock of a corporation upon which they reported, where the report was shown to purchaser by one suggesting the purchase, and there was nothing to show that report was made with intent to deceive purchaser. Appeal from Court of Common Pleas, Philadelphia County. Trespass by Edwin A. Landell, Jr., against William M. Lybrand and others, copartners trading as Lybrand, Ross Bros. & Montgomery. From a judgment for defendants, plaintiff appeals. Affirmed. Argued before BROWN, C. J., and MOSCHZISKER, FRAZER, WALLING, and KEPHART, JJ. William T. Cooper and John W. Jennings, both of Philadelphia, for appellant. Ira Jewell Williams and Yale L. Schekter, both of Philadelphia, for appellees. PER CURIAM. Appellees, defendants below, are certified public accountants, and, as such, audited the books and accounts of the Employers' Indemnity Company for the year share, on the strength of the report made by the appellees as to its assets and liabilities at the close of the year 1911; the report having been shown to him by some one who suggested that he purchase the stock. A further averment was that the report was false and untrue, that the stock purchased by him on the strength of it is valueless, and for the loss he sustained he averred the defendants were liable. To enforce this liability an action in trespass was brought against them. In their affidavit of defense they averred that the statement of claim disclosed no cause of action, and asked that this be disposed of by the court below as a matter of law, under the provisions of section 20 of the Practice Act of May 14, 1915 (P. L. 483). It was so disposed of by the court below in entering judgment for the defendants. There were no contractual relations between the plaintiff and defendants, and, if there is any liability from them to him, it must arise out of some breach of duty, for there is no averment that they made the report with intent to deceive him. The averment in the statement of claim is that the defendants were careless and negligent in making their report; but the plaintiff was a stranger to them and to it, and, as no duty rested upon them to him, they cannot be guilty of any negligence of which he can complain. Schiffer v. Sauer Co. et al., 238 Pa. 550, 86 Atl. 479. This was the correct view of the court below, and the judgment is accordingly affirmed. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes (264 Pa. 424) and also any sum which may be recovered in GREEN & COATES STS. PHILADELPHIA any existing suit, or cause of suit against the PASSENGER RY. CO. v. PHILADEL- lessor, including all costs and counsel fees." PHIA RAPID TRANSIT CO. (Supreme Court of Pennsylvania. April 21, of this lease were assumed by defendant. 1919.) STREET RAILROADS 49-UNDER LEASE LES- Where lease of street railway provided that lessee should "pay all taxes, charges, and assessments now or hereafter lawfully imposed upon the lessor's existing bonds, capital stock, real and personal property, and future dividends," the lessee was not required to pay lessor's federal income tax assessed on rental paid under the lease. By subsequent assignment the obligations For the year 1917 the plaintiff was assessed an income tax amounting to $3,599.52 upon the rental paid by the defendant under the lease. After demand upon and refusal by defendant to pay the tax, plaintiff paid it, and brought this suit to recover the amount so paid. Defendant filed an affidavit of defense in the nature of a demurrer. Ferguson, J., filed the following opinion in the common pleas: The covenants in this case. which bind the defendant, provide that it, as agent for the lessor (the plaintiff), shall pay to and distribute among Appeal from Court of Common Pleas, Phil- the stockholders of the lessor entitled to receive adelphia County. Assumpsit for income taxes paid on rental by Green & Coates Streets Philadelphia Passenger Railway Company against the Philadelphia Rapid Transit Company. From a judgment for defendant on statutory demurrer, plaintiff appeals. Affirmed. Assumpsit for income taxes paid on rental. In 1881 the plaintiff leased to the People's Passenger Railway Company all its franchises and property, saving only the bare franchise to be a corporation, for a period of 999 years. As rental the lessee agreed to pay to the stockholders of the lessor a quarterly dividend of $1.50 on the outstanding stock of the lessor, to pay the interest on the lessor's bonds, to redeem the bonds at maturity, and to pay a specified sum each year for the maintenance of the lessor's corporate organization. By the sixth clause of the lease it was further agreed: "Sixth. That the lessee shall assume and pay all taxes, charges, and assessments, now or hereafter lawfully imposed upon the lessor's existing bonds, capital stock, real and personal property, and future dividends; also all license fees for each car run; also the interest, taxes, and principal of the existing mortgages on real estate of the lessor, according to the tenor of the same mortgages, and the accrued and the accruing ground rent issuing out of the said real estate; the same a certain amount per share in each year, and also to pay "all taxes, charges, and assessments now or hereafter lawfully imposed upon the lessor's existing bonds, capital stock, real and personal property, and future divi dends." ruling of Catawissa R. R. Co. v. Phila. & ReadIn our opinion this lease comes within the ing Ry. Co., 255 Pa. 269, 99 Atl. 807. In that case the covenant required the lessee to pay any taxes upon the capital stock of the lessor company or the dividends thereon. In the case at bar the only feature of the covenant on which an argument could be made which would bind the defendant would be that part requiring it to pay taxes assessed upon future dividends. As the Chief Justice pointed out in the Catawissa Case the tax levied by the federal government was not a tax upon dividends but a tax upon income. For these reasons, judgment must be entered for the defendant. Argued before BROWN, C. J., and MOSCHZISKER, FRAZER, WALLING, and KEPHART, JJ. Ralph B. Evans, of Philadelphia, for appellant. Ballard, both of Philadelphia, for appellee. PER CURIAM. This judgment is affirmed, on the opinion of the lower court directing it to be entered. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes (107 A.) Statement of the Case. The bill was filed on September 25, 1915, wherein it was alleged that on August 10, 1910, an action of trespass on the case was brought in the Superior Court for Sussex County by Elizabeth A. Layton against the Complainant, Parker H. Hudson, for damages by fire to growing timber on her land, and on October 14, 1910, judgment was entered for want of an appearance. It was further alleged, in substance, that at the time when the action was brought another suit was pending against the complainant, which had been brought by one Landreth L. Layton for damages caused by the same fire, and that when the summons in the second case was read by the sheriff to the complainant he (the complainant) was mistaken as to the name of the plaintiff, and believed that the summons related to the suit of Landreth L. Layton. The complainant also relied upon The superior court by statute had jurisdiction to determine the effect of a mistake as to the name of plaintiff, made by defendant when summons was read to him by the sheriff, and as to it the decision of the Superior Court was final, so far as concerned the Court of Chan-verbal statements made by Elizabeth A. Laycery hearing a suit to vacate default judgment against defendant entered, as he claimed, on account of his mistake as to plaintiff. 3. JUDGMENT 445-EQUITY HAS JURISDICTION TO DETERMINE MISTAKE OF DEFEND ANT IN SUIT TO VACATE. ton, the plaintiff in the suit at law, prior to the bringing of her suit, to the effect that she would notify him when she intended to sue him, and that he could disregard what anyone else said or did. Based on the accident and mistake so originating, as was claimed, It is a point of equitable cognizance wheth-through no neglect or fault of the complainer the statement or promise of plaintiff that she would not sue defendant until she notified him misled him to believe, when a summons was read to him, that he had been sued by another of the same last name as plaintiff, so that, whether the point was adjudicated in the Superior Court or not, the Court of Chancery, in defendant's suit to vacate default judgment, has jurisdiction to hear and decide the matter. 4. JUDGMENT 443(1)—EQUITY CAN VACATE JUDGMENT OBTAINED BY FRAUD OF PLAIN TIFF. ant, and relying upon the statements of the plaintiff in the suit of Elizabeth A. Layton, the complainant did not make the defense which he had to her suit, and asked that the judgment be set aside, and for injunctive relief, temporary and permanent, against the enforcement of the judgment by execution. An answer to the bill was filed by Elizabeth A. Layton, and later, by leave of the Chancellor, was withdrawn and a plea in bar substituted therefor. By the plea it was alleged that at the term of the Superior Court held after the judgment had been obtained, the complainant had filed in that court a petition for a rule against Elizabeth When, in a court of law, all the issues are legal, and the defense is legal, and not an equitable one, unavailable at law, a court of equity has jurisdiction to set aside judgment obtained in the suit, if there is some equitable ground arising out of or connected with the trial it-A. Layton to take off the judgment, based self, as where defendant, with defense on the upon accident and mistake. merits, was prevented by his adversary's fraud from maintaining it. 5. JUDGMENT 460(9)-SUIT TO VACATE PLEA IN SUIT TO VACATE INSUFFICIENT TO In suit to vacate a judgment by default because plaintiff, defendant in the prior action, when summons was read to him, on account of prior assurances of the other party, had believed it was process in another person's action, plea filed by defendants, former plaintiff and the sheriff, held not to show a prior adjudication in the Superior Court of the equitable grounds set up for vacation of judgment. Action by Parker H. Hudson against Elizabeth A. Layton and Jacob West, wherein defendants filed a plea in bar. Plea overruled, and defendants required to answer. This petition of the complainant and the proceedings thereunder were made a part of the plea. The petition was not essentially different from the bill of complaint filed in the cause in this court, except that in paragraph 5 of the petition it was stated that the summons in the action of Elizabeth A. Layton against the complainant "was regularly issued, served and returned." From the record of the Superior Court it appears that interrogatories directed to Elizabeth A. Layton were filed and a commission to take depositions for use at the hearing of the rule was executed and returned. By the record it simply appears that the rule was discharged. The plea further avers that the matters decided by the Superior Court on the rule were the same matters set out in the bill, and that the discharge of the rule bound the parties. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 107 A.-50 A replication to the plea was filed denying that the Superior Court had heard any evidence on the rule, or considered the merits, and averring that it decided the rule solely upon the allegation of the petition to the effect that the summons had been regularly issued, served and returned. in the Superior Court, or not, this court still has jurisdiction to hear and decide the matter, viz: whether the complainant was then entitled to have annulled the judgment obtained against him by default and be let into a defense because he was misled by the statements or promises of Elizabeth A. Layton. On April 4, 1919, the plea was heard by the Chancellor upon exhibits and oral testi- To support the view that even if the Sumony produced before him. The only testi-perior Court did have, and take, jurisdiction mony outside the record of the Superior of the second ground, the equitable one, still Court, which record included the interroga- a court of equity may hear and determine tories and deposition of Elizabeth A. Lay- the same matter, it is urged that being a sumton, was a transcript of some notes taken at mary proceeding the decision there would the hearing of the rule by the court stenog- not be binding here. For this several forcirapher, who as a witness stated that they ble decisions are cited. Simson v. Hart, 14 were such notes as he usually takes of argu- Johns. (N. Y.) 63; Arden v. Patterson, 5 ments before the court, in order to properly Johns, Ch. (N. Y.) 44; Fanning v. Dunham, report any question of law raised at the 5 Johns. Ch. (N. Y.) 122, 9 Am. Dec. 283; hearing which could be deemed proper to be Murray v. Murray, 5 Johns. Ch. (N. Y.) 73; reported by the court; but the court stenog- Pollock v. Gilbert, 16 Ga. 398, 60 Am. Dec. rapher expressly stated that they were not a 732; Hughes v. Nelson, 29 N. J. Eq. 547; verbatim report of what was said, and did not Ferriday v. Selcer, 1 Freem. Ch. (Miss.) 258; include all that was said by the court or Buchanan v. Banks, 203 Pa. 599, 53 Atl. 500; counsel at the hearing of the rule. These Jobnson v. Stockham, 89 Md. 368, 43 Atl. notes were, by agreement of counsel, admit- 943. But it is not necessary to take this ted in evidence subject to be stricken out if view, even if it be a sound one. after further argument they were held to be inadmissible, and if not admissible were not to be considered by the court. Woodburn Martin, of Georgetown, and Levin Irving Handy, of Wilmington, for complainant. David J. Reinhardt, of Wilmington, for defendant, Elizabeth A. Layton. THE CHANCELLOR. [1] The issue before this court is whether the plea of res adjudicata has been proved. In general a plea that another court having jurisdiction of the parties and subject matter had determined the issues between the parties is, if sustained, a bar to any judicial determination of the same matters by another court other than an appellate court. Worknot v. Milen's Adm'r, 1 Har. 139; Cochran v. Couper, 2 Del. Ch. 27; Jones v. Warner, 2 Boyce, 567, 83 Atl. 181; Sill v. Kentucky, etc., Co. (Del. Ch.) 97 Atl. 617. [2, 3] It is urged for the complainant that there were two grounds urged before the Superior Court for setting aside the judgment by default: (1) The mistake made by the complainant when the summons was read to him by the sheriff; and (2) the statement, or promise, of Elizabeth A. Layton made to the complainant which misled him to believe that he had been sued by Landreth L. Layton, when in fact he had been sued by her. That the Superior Court had by statute jurisdiction to decide the first ground, and as to it the decision of the Superior Court was final, so far as this court is concerned. But that the second ground was not properly cognizable in a court of law, being purely an equitable right enforceable only in an No It certainly is not clear from the record that the Superior Court in discharging the rule passed on the equitable question. reason was in fact stated in the order discharging the rule, and no opinion, or official statement by the court, was filed. There was produced in this court notes taken by the offi cial stenographer of some of the statements of the judges and of the attorneys at the hearing of the rule. But it is admittedly intative as to what reasons the court had for complete and, therefore, not entirely authoridischarging the rule. It may safely be assumed that if the jurisdiction to vacate the judgment be vested in the Court of Chancery, then it may also be assumed that the Superior Court did not decide the equitable question raised, even though depositions were taken and presented at the hearing on the equitable grounds alleged, for if it did not have jurisdiction the depositions would not be considered by it. [4] The line between the powers which a court of law has to relieve against the misuse of its processes by litigants and the powers of a court of equity for the same purpose is very clearly defined and established, so far as this case is concerned. The rule is this: When in a court of law all the issues are legal, and the defense is legal and not an equitable one unavailable at law, still a court of equity has jurisdiction to set aside a judgment obtained in the suit in case there be some equitable ground arising out of, or connected with, the trial itself. A typical instance is where the defendant having a valid legal defense on the merits was prevented from maintaining it by fraud on the part of the adversary, or by mistake result (107 A.) tionale of this doctrine is stated in 5 Pom- This statement is supported by many au- history." "The officers of the corporation. It was declared that the subject-matter was cognizable in equity. On the other hand, in Townsend v. Townsend, 5 Har. 20, the court of law refused to open a judgment entered on a bond, though it was alleged that fraud and imposition were practiced on the obligor in the making of the bond, and said it was ground for relief in equity. So also in Duncan v. Richardson, 1 Marvel, 372, 41 Atl. 75, the Superior Court held that the Court of Chancery had jurisdiction to give relief against a judgment entered on a bond obtained by fraudulent representations. The Chancellors of Delaware have kept within the limits of their powers to vacate a judgment at law (Conner v. Pennington, 1 Del. Ch. 177; Kersey v. Rash, 3 Del. Ch. 321; and Plunkett v. Dillon, 3 Del. Ch. 496); but not so clearly so in Whitaker v. Wickersham, 5 Del. Ch. 187. In the case of Kersey v. Rash, 3 Del. Ch. 321, Chancellor Bates, after a full consideration of numerous decisions, pointed out the difference between the powers and duties of the Court of Chancery to relieve a defendant in an action at law against whom there has been entered a judgment at law, (1) where a defendant has an equitable defense not cognizable at law, and (2) where he has a defense available at law. In the former case he found that equity will always give relief against the judgment, but in the latter case will not grant relief unless it appear that the grounds of defense or evidence cognizable at law were not used at the trial there because the defendant was prevented from availing himself of such grounds of defense or evidence either by fraud, or sur Applied to this case, this principle gives to the Court of Chancery jurisdiction to vacate the judgment based on the conduct of the plaintiff in the action at law, whereby, as is alleged, the complainant here, the defendant there, failed to make his defense there, rely-prise, or what in the sense of courts of equiing on the representations or promises of the plaintiff. The fraud was related not to the subject-matter of the action at law, but was extrinsic thereto, and was related to the procuring of the judgment in that action. The law courts in Delaware have not uniformly observed the line of demarkation be tween their powers and those of the Court of Chancery. It was done in Woodward v. Arlington, etc., Co., 2 Pennewill, 188, 44 Atl. 620, where the Superior Court refused to vacate a judgment against a corporation, though it had been alleged that the suit was not defended because of fraudulent collusion between the plaintiff in the suit and other ty is termed accident, and without any neglect or default on the part of himself, or his agents. Whatever may have been the deviations therefrom, it is well to stand firmly by a long established rule, clearly defined and easily applicable. [5] Applying this rule here, the conclusion is that the plea does not show a prior adjudication in the Superior Court of the equitable ground alleged in the bill for vacating the judgment. Of course, no opinion is expressed as to the sufficiency of the ground. Therefore the plea will be overruled, and the defendants required to answer the bill. |