The People of Michigan v. The Phoenix Bank. extent in favor of the State of Michigan, as if these were the acts of the Phoenix Bank itself. I am, therefore, constrained to dissent from some of the views of my brethren on this appeal. I am of opinion, upon an examination of all the evidence, that the finding of the court at special term that the judg ment was obtained by what in a court of equity should be deemed fraud, is sustained by the evidence; That the Phoenix Bank, from the position in which they stood, owed a duty to the State of Michigan in relation to the trust fund with which they had been dealing, which bound them to apprise the State that $2,000 had been collected, and that all the securities and property received from the River Raisin Bank had been relinquished, and Stewart released by themselves from all liability, the lands, &c., received from the Michigan State Bank alone being saved from the trust fund for the ultimate indemnity of the State; facts, all of them material, unknown to the State-known to be so-concealed by the Phoenix Bank (as proved and properly found upon the evidence,) with design and intent to mislead, and with a conscious belief that if disclosed their recovery would be defeated; That the suggestion that the State of Michigan has not been prejudiced, but have still full recourse to Stewart, the trustee, will not avail the defendants, for two reasons: 1. If the facts had been disclosed the State would (if Stewart be regarded as mere trustee, alike under the control of either party and not capable of being effectually discharged by either,) have had an option to charge Stewart, as trustee, notwithstanding the release by the defendants, or to charge the defendants with the trust fund so lost or converted by their assent in exoneration pro tanto of the responsibility of the State. 2. The relations of the Phoenix Bank to Stewart, their agent, who had been constituted trustee, were such (not only as principals but as creditors and parties beneficially interested,) that they had power (as between him and them,) to settle with him. and discharge him from his trust; The People of Michigan v. The Phoenix Bank. That by their settlement with him and their release of him, they have voluntarily deprived the State of Michigan. of any recourse to him in respect of the security and property held for the debt originally due by the Bank of the River Raisin and the $2,000 collected by him from the same, and such settlement operated as between the State of Michigan and the Phoenix Bank as a satisfaction of that debt and an extinguishment of all claim against the State on account thereof, as effectually as if Stewart had collected the whole of it and paid the amount to the Phoenix Bank. And if it were even conceded that Stewart might be liable to the State, notwithstanding such release, the State have nevertheless the right to regard the transaction as it was intended by the Phoenix Bank to operate as to Stewart, viz.: as a release, and then the result is as before; it is as to the Phoenix Bank satisfaction of the debt due by the Bank of the River Raisin and pro tanto an extinguishment of the claim upon the State. And it was the clear duty of the Phoenix Bank, who thus assumed to deal with the trustee and the trust property, to disclose such dealing and the settlement so made, to the State of Michigan. The situation of the Phoenix Bank was analogous to, or perhaps identical with, that of a creditor for whose benefit a mortgage is held by a third person (his agent,) as collateral security, but which the debtor will be entitled to have and collect for his own use on payment of the debt, and the creditor, without the knowledge of the debtor, obtains an assignment of the mortgage from his agent (the trustee,) and releases or cancels it, and concealing the facts from his debtor obtains judgment against him for the original debt, which by the appropriation and conversion of the security had in equity been satisfied. Can it be doubted that, on making discovery of the facts, such debtor could obtain relief in equity against the judgment? I think not. The court would not entertain the suggestion from such creditor to the debtor: "You ought to have suspected my fraud and found it out before judgment." On The People of Michigan v. The Phoenix Bank. the contrary, such debtor had a right to rest in confidence that the trust would be faithfully observed. So that, assuming the award of the Board of State Auditors to have been correct upon all the other facts, and to be conclusive as a final determination of a competent judicial tribunal, and that by it all inquiry into the origin and primary validity of the claim against the State is precluded, still the withholding from the State of all knowledge of the settlement with Stewart was a breach of the duty of the bank and a fraud upon the State of Michigan, which entitled the latter to be relieved in equity from that judgment so far as that settlement affected the State to its prejudice, and that is to the extent of the debt originally due from the Bank of the River Raisin. But the relief to be granted does not, in my opinion, extend beyond the amount of the debt last named. In relieving against fraud it is unnecessary to go further than to redress the injury which was effected by the fraud, and the fraud complained of should be material and have manifestly affected the judgment. If a judgment were recovered against the endorser or the administrator of the maker of two notes, and it is afterwards shown by the debtor to a court of equity that one of the notes had been paid, but that by such a fraud as justified the interference of that court the creditor had succeeded in so deceiving his adversary that the judgment was recovered upon both, the interposition of the court would be confined to the amount of the note so paid. That is all that the debtor could equitably ask, and as to the amount of the other note the judgment and payment thereof should stand. So here, in respect of the claim of the Phoenix Bank to the amount originally due from the Michigan State Bank, the State of Michigan has not been injured; it has not only suffered no prejudice but presumptively has been benefited. It was not the settlement with Stewart alone, but the concealment of that settlement that constituted the injurious fraud in obtaining the judgment in question. The act of the Phoenix Bank, in making that settlement, and obtaining from The People of Michigan v. The Phoenix Bank. him the conveyance of the property held as security for the debt of the Michigan State Bank, was, upon the evidence, discreet, and was done with proper motives and in the belief that it was for the best interests of all parties. The security last named is still (so far as the proof in this case discloses, and so far as it was conveyed by Stewart to the bank,) within the control of the bank and subject to the call of the State. The conveyance was taken by the bank as a measure of safety and precaution, and the mere fact that the property was thus taken out of the hands of an absent trustee, who had removed from the jurisdiction of the two States (New York and Michigan,) should furnish no reason for charging the Phoenix Bank, against their assent or intention, with satisfaction of that debt. It would not only, in my opinion, be inequitable, but would be giving effect to the concealment of this fact which is not warranted. So far as relates to this debt, the concealment of the transfer to the bank, as a precautionary measure, was an immaterial concealment. It is not agreeable to good sense nor just views of equity to suppose that had this fact been known to the Board of Auditors it could have affected their decision, and the fraud, which alone can justify the impeachment of a judgment, must be one without which it appears the judgment would not have been rendered. The State of Michigan is entitled to the security so transferred to the Phoenix Bank but have been in no wise prejudiced by the transfer. In my opinion, therefore, the State of Michigan is entitled to their judgment to the amount of the claim against the Bank of the River Raisin but to no greater amount, and that as to the excess the judgment should be reversed. New trial ordered, with costs to abide the event. Bagley v. Clarke. ALBERT G. BAGLEY, Plaintiff and Appellant v. WM. CLARKE and Jos. G. GURNEY, Defendants and Respondents. 1. Where, by a sealed contract between two persons, one is to serve the other (Before HOFFMAN, PIERREPONT and ROBERTSON, J. J.) APPEAL by the plaintiff from a judgment against him, and from an order denying a motion made by him for a new trial. The action was commenced Nov. 30, 1848, and tried Jan. 19, 1859, before Mr. Justice WOODRUFF and a jury. The complaint alleges the making of a written and sealed contract between the plaintiff and the defendant Clarke,dated Dec. 8, 1845, by which the latter agreed to render services for the former, as hereinafter stated, and sets forth a copy of the contract; and also alleges that the defendants, Clarke and Gurney, executed their penal bond to the plaintiff, also dated Dec. 8, 1845, conditioned as hereinafter stated, for the performance by Clarke of his new contract; sets forth a copy of the bond; alleges a breach of its condition, and prays judgment for $1,000. By the terms of the contract between Bagley and Clarke, of the date of December 8, 1845, Clarke covenanted to |