Graver v. Faurot

Graver v. Faurot, (162 U.S. 435), is a case decided in 1896 by the United States Court of Appeals for the Seventh Circuit on the issues of _res judicata _ and fraud on the court . The Seventh Circuit had heard the case the preceding year but, like the district court that had previously heard it, was unable to decide which of two recent U.S. Supreme Court cases was controlling. After the Supreme Court denied _certiorari _ to resolve the issue, on procedural grounds, the Seventh Circuit resolved the case itself.

The case had arisen from an 1889 investment made by Graver in a company recommended by Faurot, a banker he was acquainted with. Represented to Graver as promising, the company was actually worthless. After learning this, he suspected Faurot and the company's owner, Bailey, of having concealed the company's true condition from him and sued the two in federal court for securities fraud . Both defendants denied any scheme when questioned under oath, and Graver and the two agreed to dismiss the case. Three years later , when Faurot's bank failed, documents introduced in the bankruptcy proceedings and on file with the federal government revealed not only that both he and Bailey knew the stock's true value but that Faurot had had an interest in the company and had concluded an agreement with Bailey to divide the proceeds of Graver's purchase between them. Graver filed a new action in federal court seeking, as equitable relief , to have the previous dismissal set aside since it had been obtained through perjured testimony.

Two recent decisions of the Supreme Court, _United States v. Throckmorton _ and _Marshall v. Holmes _, addressed the relevant question of whether Graver could reopen the suit, but with contrary interpretations. The district judge said that while the facts of the case showed that Graver had been defrauded he could not distinguish the two cases, and certified the case to the Seventh Circuit, which in turn sought guidance from the Supreme Court. In a unanimous opinion written by Chief Justice Melville Fuller , the Court denied _certiorari _, on the grounds that the appellate court had effectively certified the entire case to it, which the Judiciary Act of 1891 forbade them from accepting without a federal question to decide. Even though there was such a question, the Court preferred not to answer it without deciding a case whose facts might dictate a contrary conclusion. So later that year the Seventh Circuit held for Graver that the perjury constituted extrinsic fraud which had prevented him from having his case fairly heard and decided.

Since Graver the Supreme Court has considered some other cases where the factual question of whether a litigant's deception and misbehavior has constituted intrinsic fraud which under Throckmorton cannot be used as a basis for relief, cases in which observers hoped it would resolve the conflict they saw with Marshall, which suggested a court could grant relief from a prior judgement allegedly obtained by fraud if it was unconscionable not to. It has never reconsidered the question offered in Graver of which case controls. Lower federal, and state, courts that have done so have pointed to Graver as the reason they felt compelled to.

Contents

• 1 Background

  • 1.1 United States v. Throckmorton

  • 1.2 Marshall v. Holmes

• 2 Underlying dispute

• 3 District court

• 4 Supreme Court

• 5 Seventh Circuit

• 6 Subsequent jurisprudence

• 7 References

• 8 External links

Background

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Courts of equity , empowered to give orders as relief rather than award monetary judgements as courts of law do, in England and later the U.S., had long dealt with cases where unsuccessful litigants seeking to negate a judgement against them at law had come before alleged perjury or forgery by the other party during the original action, often supported by just the testimony of one witness. Since hearing these cases could easily ensure that the litigation continued for years, courts began requiring minimum standards to hear them. "New matter may in some cases be ground for relief ," wrote Lord Keeper Nathan Wright in Tovey v. Young, a 1702 English case, "but it must not be what was tried before; nor, when it consists in swearing only, will I ever grant a new trial, unless it appears by deeds, or writing, or that a witness on whose testimony the verdict was given was convicted of perjury, or the jury attainted."

In 1813 the U.S. Supreme Court decided _Marine Insurance Co. v. Hodgson _, a case where the petitioner appealed a federal court's finding in favor of the respondent, who they alleged had submitted documentation that overstated the value of a ship and her cargo, leading the insurer to pay out a much larger claim than it should properly have. Chief Justice John Marshall wrote for a unanimous Court that while a court of equity could consider an application for relief where a litigant alleged unconscionable conduct on an opposing party's part, "[o]n the other hand it may with equal safety be laid down as a general rule that a defence cannot be set up in equity which has been fully and fairly tried at law, although it may be the opinion of that Court that the defence ought to have been sustained at law." Since the insurer had decided to accept a certificate of the vessel's value from its captain even though Hodgson would not vouch for its accuracy, the Court held that they had lost their opportunity to make a case for fraud and seek an injunction against enforcement of the judgement against them.

United States v. Throckmorton

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Main article: United States v. Throckmorton

In 1878 the Supreme Court heard _United States v. Throckmorton _, in which the federal government appealed a California lower court decision that left undisturbed the government's acceptance of a settler's 1830s Mexican land claim two decades earlier. The government had later learned that a document filed with the claim had been falsely backdated and affidavits attesting to the document being signed on the supposed date were in fact perjured. It unanimously affirmed the lower court.

Justice Samuel Freeman Miller balanced two principles in his opinion. On the one hand, while he agreed that "there is no question of the general doctrine that fraud vitiates the most solemn contracts, documents, and even judgments", it became more difficult to prove a past fraud over time. It was also equally important that, per the legal Latin maxim interest rei publicae, ut sit finis litium, litigation not be allowed to continue indefinitely and that no one be punished or tried twice for the same offense .

Miller thus distinguished two types of fraud on the court for purposes of deciding whether equitable relief could be granted, if the fraud were proven, where the case was otherwise beyond reopening . Fraud such as that in the instant case, which "was founded on a fraudulent instrument, or perjured evidence, or for any matter which was actually presented and considered in the judgment assailed" (subsequently called intrinsic fraud ) would not be eligible for relief. But in cases where the fraud was "extrinsic ", where it never touched any of the evidence presented at trial, or where "there has never been a real contest in the trial or hearing of the case

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